36Ambrian Capital plc<strong>Annual</strong> <strong>Report</strong> & Accounts <strong>2009</strong>Notes <strong>for</strong>ming part of the consolidated financial statements (continued)<strong>for</strong> the year ended 31 December <strong>2009</strong>26 Financial instruments – Risk managementPrincipal financial instrumentsA summary of the financial instruments held by category is provided below :Loans andreceivables<strong>2009</strong>£At fair value through profit or lossHeld <strong>for</strong>trading<strong>2009</strong>£Designatedat fairvalue throughprofit or loss<strong>2009</strong>£Financial assetsCash and cash equivalents 37,432,137 – – 37,432,137Trade receivables – current 38,754,267 – – 38,754,267Other receivables – current 2,636,589 – – 2,636,589Financial assets at fair value through the profit or loss–equities – 3,942,926 – 3,942,926–derivatives – – 755,808 755,808Total 78,822,993 3,942,926 755,808 83,521,727Total<strong>2009</strong>£Financial assetsCash and cash equivalents 47,123,092 – – 47,123,092Trade receivables – current 25,548,633 – – 25,548,633Other receivables – current 1,781,208 – – 1,781,208Financial assets at fair value through the profit or loss–equities – 2,329,995 – 2,329,995–derivatives – – 7,747 7,747– other – – 298,393 298,393Total 74,452,933 2,329,995 306,140 77,089,068A certain amount of the cash and cash equivalents is held as collateral by third party banks as disclosed in note 15. Trade receivables, current,of £27,038,339 (2008:£14,731,645) were pledged as collateral against short term trade finance liabilities as disclosed in note 17.2008£Trade and otherpayables<strong>2009</strong>£2008£2008£At fair value through profit or lossLoans andborrowings<strong>2009</strong>£Designatedat fairvalue throughprofit or loss<strong>2009</strong>£Financial liabilitiesTrade payables 21,455,280 – – 21,455,280Other payables – current 1,567,324 – – 1,567,324Short-term trade finance – 85,590,071 – 85,590,071Financial liabilities at fair value through the profit or loss–derivatives – – 7,709,922 7,709,922Total 23,022,604 85,590,071 7,709,922 116,322,5972008£Total<strong>2009</strong>£Financial liabilitiesTrade payables 17,536,143 – – 17,536,143Other payables – current 29,072 – – 29,072Short-term trade finance – 23,740,404 – 23,740,404Financial liabilities at fair value through the profit or loss–derivatives – – 19,981,091 19,981,091Total 17,565,215 23,740,404 19,981,091 61,286,7102008£2008£2008£2008£
Ambrian Capital plc<strong>Annual</strong> <strong>Report</strong> & Accounts <strong>2009</strong>OverviewBusiness reviewGovernanceFinancial statements 37Shareholder in<strong>for</strong>mation26 Financial instruments – Risk management (continued)Financial instruments are measured at fair value as follows:Level 1£Fair value measurements at 31 December <strong>2009</strong>Financial assetsEquity investments 3,358,510 – 584,416 3,942,926Options in listed entities – 755,808 – 755,808Total 3,358,510 755,808 584,416 4,698,734Level 2£Level 3£Total££ £ £ £Financial liabilitiesFinancial liabilities at fair value through the profit or loss– derivatives – 7,709,922 – 7,709,922Derivatives – 7,709,922 – 7,709,922There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes <strong>for</strong>managing those risks or the methods used to measure them from the previous periods unless otherwise stated in this note.Effective risk management is a fundamental aspect of the Group’s business operations. In the ordinary c<strong>our</strong>se of the Group’s business it isexposed to a number of financial risks: market risk, credit risk and liquidity risk. The principal risks and the policies <strong>for</strong> managing them aresummarised below:Market riskThe principal market risks the Group is exposed to are interest rate, <strong>for</strong>eign currency, commodity and equity risk.Interest rate riskThe Group is exposed to interest rate risk on cash it holds and trade finance credit facilities.Interest rate risk is derived from interest bearing deposits in which the Group invests cash. Due to the Group’s liquidity requirements, cashis generally deposited at interest rates set on a daily basis. Interest income included within revenue in the year was £83,101 (2008: £765,000).The Group’s interest bearing assets are held as cash or cash equivalents at floating interest rates as follows:Sterling 21,011,267 24,461,649Canadian dollars 135,170 36,663US dollars 11,863,738 18,200,679Euros 3,940,955 3,715,758Swiss francs 477,972 708,200Other denominations 3,035 143Cash or cash equivalents 37,432,137 47,123,092The Group is also exposed to interest rate risk in respect of the interest rate charged by trade finance providers <strong>for</strong> its physical metals activities.Interest rates charged by the banks are typically set at a margin over US$ LIBOR calculated on the total US dollar value of a shipment at thetime of shipping.The Group typically enters into arrangements to purchase and sell specific tonnages of metal up to 12 months in advance of shipment andestimates its profit margin per tonne of metal sold after all costs, including an estimate <strong>for</strong> the expected rate of interest. As the actual interestrate is not known until the time of shipping there is the risk if interest rates rise that the actual interest charge would adversely affect theprofitability of the transaction.To mitigate against this interest rate risk the Group has a policy of estimating its per tonne profit margin using interest rates that are aboveprevailing interest rates.Finally, the Group holds LME metal warrants as part of its normal trading activities. The interest rate risk associated with LME warrantpositions is limited as the Group is able to pass through a variation in interest rates to its clients due to the short trade cycle.A change of 100 basis points upwards or downwards in interest rates at the year end would have (decreased)/increased pre-tax profit and netassets by £(139,219)/ £430,439 (2008: £328,788/ £(328,788). This analysis assumes that all other variables, in particular <strong>for</strong>eign currency rates,remain constant. During <strong>2009</strong>, overnight US dollar LIBOR averaged only 0.23% compared to 2.33% in 2008.<strong>2009</strong>£2008£
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