2011 Report.pdf - Fortress Fund Managers

Fortress Caribbean High Interest Fund Limited
Notes to Financial Statements
September 30, 2011
(expressed in Barbados dollars)
4 Financial risk management…continued
Market risk…continued
ii)
Interest rate risk
The Fund’s significant interest-bearing financial assets earn interest at fixed rates and therefore the cash
flow of the Fund is not affected by fluctuations in the prevailing levels of market interest rates. The Fund
therefore has no significant interest rate risk on its cash flows. The effective interest rates on cash and
cash equivalents are disclosed in note 7. All of the other financial assets and liabilities of the Fund are
non-interest bearing. The Fund would be impacted by movement in the market interest rates on the
maturity of short term fixed rate instruments which would have to be reinvested at different rates of return.
iii) Currency risk
The Fund holds financial assets denominated mainly in currencies fixed to the Barbados dollar, the
functional currency of the Fund. Consequently, the Fund is exposed to minimal currency risk.
Credit risk
Credit risk is the risk that an issuer or counterparty to a financial instrument will be unable or unwilling to meet
a commitment thereby causing a financial loss to the Fund.
The maximum exposure to the Fund to credit risk is set out in the following table.
2011
$
2010
$
Investments 48,121,842 78,444,053
Due from brokers 633,787 –
Accounts receivable 58,788 47,376
Cash and cash equivalents 49,839,457 15,046,674
Total financial assets 98,653,874 93,538,103
Credit risk from financial instruments is minimised through holding a diversified portfolio of investments and
purchasing securities after careful assessment of the borrower and placing deposits with financial institutions
with a strong capital base. The Fund seeks to minimise credit risk by holding investments with strong credit
ratings and low risk of default.
(7)