annrep 1011 1 to 148.qxp - Department of Defence

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D E P A R T M E N T O F D E F E N C ESOUTH AFRICAN NATIONAL DEFENCE FORCE FUNDNOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2011Note2010/11R2009/10RAccountant feesOpening balanceAdditionsUsedClosing balance5. Other operating revenueInvestment income on held to maturity investmentsSA National Defence Force FundSA National Defence Force Welfare FundInterest earned on investment is capitalised5 000.6 000.(5 000)6 000.693 702.4.130.693 836.5 000.5 000.(5 000)5 000.780 698.18.1 175.781 891.6. Profit for the yearProfit for the year includes expenditure for:Audit fees7. Cash flow from operating activitiesSurplus for the yearAdjusted for:Interest received on investmentsInterest paidInterest paidIncrease in payables26 816.26 816.654 874.(693 702)(134)233.804.(37 925)25 258.25 258.747 019.(781 891)--613.(34 259)8. Financial instruments8.1 Financial risk factors8.1.1 Market riskMarket risk is the risk that changes in market prices. Interest rates will affect the SANDF Fund. The objective ofmarket risk management is to manage and control market risk exposure within acceptable parameters while optimisingreturn. The SANDF Fund does not manage this risk aggressively as the investments of funds are determinedby the Minister of Defence and the Minister of Finance. Within these parameters, funds are invested withreputable commercial banks.8.1.2 Credit riskCredit risk is the risk of financial loss to the SANDF Fund if a financial institution to a financial instrument fails tomeet its contractual obligations.The SANDF Fund's exposure to credit risk is influenced only by the individual characteristics of the financial institutionswhere funds are deposited or invested. Reputable financial institutions are used for investing and cashhandling purposes.290ANNUAL REPORT FY 2010/2011
D E P A R T M E N T O F D E F E N C ESOUTH AFRICAN NATIONAL DEFENCE FORCE FUNDNOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2011Note2010/11R2009/10RABSA BankRand Merchant Bank (RMB)2324 97612 021 03512 046 01147 00011 343 33311 390 333The investment contractual maturities for all borrowings and payables outstanding at 31 March 2011 are12 months or less.8.1.3 Liquidity riskLiquidity risk is the risk that the SANDF Fund will not be able to meet its financial obligations as they fall due. TheSANDF Fund’s approach to managing liquidity is to ensure that investment terms chosen will ensure that it willalways have sufficient liquidity to meet it’s liabilities when due.The liquidity risk is considered being low, because the SANDF Fund has adequate funds at their disposal.Cash and cash equivalentsInvestmentsCurrent liabilities24 976.12 021 035.12 046 011.(6 418)12 039 593.47 000.11 343 333.11 390 333.(5 614)11 384 719.8.1.4 Interest riskThe SANDF Fund's exposure to changes in interest rates is limited to that of the reputable financial institutions.Interest earned on cash and cash equivalents are not material and does not pose a risk. Investment funds areinvested for short terms.Investment2010/11Effective Rate%2009/10Effective Rate%Change5.97 7.39(1.42)8.1.5 Interest risk sensitivity analysis2010/11R2009/10RInvestments1% interest fluctuation impact12 021 035120 21011 343 333113 433ANNUAL REPORT FY 2010/2011 291
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annrep 1011 1 to 148.qxp - Department of Defence

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