2007 / 2008 Annual Report - Eastern Cape Development Corporation

More documents

Recommendations

Info

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200834 Financial risk managementOverviewA comprehensive Investment Policy is used to ensure that all the market risks to which the group is exposed areunderstood and managed. Governance structures are in place to achieve effective independent monitoring andmanagement of market risks through:• The Board and Audit Committee, which is responsible for the overall risk management oversight of the Group.• The Executive Management Committee through setting up subcommittees to deal with specific financial risks.• The Development Investment Committee, which is responsible for ensuring that the impact of risks in the loan andequity investments is being effectively managed and reported and that all policy, risk limits and relevant market riskissues are reported to the Group’s Board and Audit committee.• The Investment Committee which is responsible for managing risk associated with the investment of cash and cashequivalents.ObjectivesThe group market risks are managed by the Board and Audit Committee through a number of executive managementcommittees. These risks include fair value interest rate risk, currency risk, credit risk, liquidity risk and cash flow interestrate risk.The Group seeks to minimize the effects of the negative impact of these risks by ensuring compliance with Boardapproved policies and benchmarks with regard to the following:• Proposed money market investment strategies do not result in the breach of asset/liability mismatch gap limit.• Ensuring that the net interest income volatility is within approved benchmark• Adequate overnight liquidity limit is complied with by having sufficient call balances• Credit risk is controlled by entering into money market transactions with high quality counterparty financialinstitutions.• Instrument limits are set to avoid excess concentration in any given financial investment instrument.Overall the Group’s main financial risk management objective is to ensure enhanced return within very conservative riskprofiles or parameters approved by the board.Capital managementThe Group manages its capital to ensure that entities in the Group will be able to continue as a going concern whilemaximising the return to stakeholders through the optimisation of capital levels. The Group’s overall strategy remainsunchanged from 2007.The capital structure of the Group consists of cash and cash equivalents, disclosed in note 11, and equity attributable toequity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 12 and 13,respectively. The Group is not subject to externally imposed capital requirements and does not routinely make use ofborrowings.Risk exposure arising from financial instrumentsLiquidity riskThe Group is exposed to liquidity risk through its operational and banking activities. Liquidity risk is measured in termsof a Board approved Investment Policy with appropriate dashboard liquidity risk measures on the basis of which the riskis managed by the Finance function.Interest rate riskThe Group’s exposure to interest rate risk arises from primarily the following:• Investment in development loans.• Investment of surplus operational cash.The interest rate risk is managed in terms of the Board approved investment and development investment policies. TheGroup monitors and ensures that the interest rate risk profiles are in line with limits and benchmarks stipulated in thepolicy.100
EASTERN CAPE DEVELOPMENT CORPORATION 2007/0834 Financial risk management (continued)The cash resources of the group are invested mainly with large money market funds and South African banks.Development investments are also made in line with Board policy and would be less profitable as interest rates drop.At year end, financial instruments exposed to interest rate risk were interest-bearing borrowings, held to maturityinvestments and loans advanced. A 1% decrease in the interest rate applicable to these financial instruments wouldresult in a R 1,841 million decrease in net interest income with an equivalent decrease in retained earnings.Credit riskCredit risk consists mainly of cash deposits, cash equivalents and trade debtors. The corporation only deposits cashwith major banks with high quality credit standing and limits exposure to any one counter-party. Trade receivablescomprise a widespread customer base. Management evaluated credit risk relating to customers on an ongoing basis.Foreign exchange riskThe Group has no material exposure to foreign exchange risk.Equity price riskThe Group is exposed to equity risk through its investment in a number of entities as disclosed in note 7.Concentration riskThe Group’s exposure to concentration risk arises primarily from over exposure to any one given investment instrument.Concentration risk is managed in terms of the Board approved Development Investment Policy, which in turn specifies apercentage exposure in any approved investment instrument or economic sector.The aim of the policy is to protect the Group from any over exposure in any investment instrument where the Groupcould be exposed to liquidity risk in the event of an over exposure in non - tradable instruments like held to maturityassets. The Group could also be exposed to interest rate risk due to over exposure in any investment cluster.35 Categories and fair value of financial instruments35.1 Categories of financial instrumentsFinancial assets by category - Group - 2008InvestmentsLoans advancedTrade and other receivablesCash and cash equivalentsDesignatedat fair valuethroughprofit or loss---435,290Held tomaturity60,680---Loans andreceivables-108,26934,733-Available forsale financialassets83,493---Total CarryingAmount144,173108,26934,733435,290Total 435,290 60,680 143,002 83,493 722,465Financial assets by category - Group - 2007InvestmentsLoans advancedTrade and other receivablesCash and cash equivalentsDesignatedat fair valuethroughprofit or loss---347,053Held tomaturity54,389---Loans andreceivables-101,90029,178-Available forsale financialassets5,430---Total CarryingAmount59,819101,90029,178347,053Total 347,053 54,389 131,078 5,430 537,950101
Page 1 and 2:
EASTERN CAPE DEVELOPMENT CORPORATIO
Page 3:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
HUMAN RESOURCES MANAGEMENT2007/08 A
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25:
Page 28 and 29:
PHOTOGRAPH: Alicedale, home to the
Page 30 and 31:
Page 33 and 34:
INVESTMENT PROMOTION2007/08 ANNUAL
Page 35 and 36:
Page 37:
Page 40 and 41:
PHOTOGRAPH: The Mercedes Benz South
Page 42 and 43:
Page 44 and 45:
PHOTOGRAPH: Citrus, chicory, vegeta
Page 46 and 47:
Page 49 and 50:
DEVELOPMENT SUPPORT SERVICES2007/08
Page 51 and 52: EASTERN CAPE DEVELOPMENT CORPORATIO
Page 53: EASTERN CAPE DEVELOPMENT CORPORATIO
Page 56 and 57: PHOTOGRAPH: The Automotive Supplier
Page 60 and 61: PHOTOGRAPH: The deepwater port of N
Page 114: www.ecdc.co.za
show all

2007 / 2008 Annual Report - Eastern Cape Development Corporation

Create successful ePaper yourself

Delete template?

Save as template?