Authority

Foreign Exchange RiskThe Economic Entity has a policy of avoiding foreign currency risk and has limits in place to protect against movements in foreigncurrency exchange rates.(i) Currency SwapsA cross currency swap is a financial contract between two parties agreeing to exchange interest obligations in two differentcurrencies over a fixed term on fixed dates. Interest amounts are calculated on currency principals which are usually exchangedat the start of the transaction.The Economic Entity utilises cross currency swaps to eliminate foreign currency exposures associated with foreign currencyborrowings.(ii) Foreign Exchange and Forward Exchange ContractsA foreign exchange contract is an agreement between two parties to buy and sell one currency against another currency eitheron a spot basis or on a specified future date.The Economic Entity utilises foreign exchange contracts (spot and forward) to manage foreign exchange risk associated withforeign currency borrowings and to manage exposures arising from the Foreign Exchange Hedging Service provided to SouthAustralian public sector agencies and to hedge profits from overseas subsidiaries.The Economic Entity has entered into forward foreign exchange contracts to hedge exposures arising from the Foreign ExchangeHedging Service provided to Public Sector Clients. These transactions totalled $3 million in face value as at 30 June 2001.(iii) Currency ExposuresThe following table summarises the Economic Entity’s exposure to exchange risk. The value to be received under the currencycontracts is designed to hedge the exposure to the net foreign currency liabilities.USD GBP JPY EUR CADA$M A$M A$M A$M A$MLess than 1 yearNet Foreign Currency Assets 14.9 0.7 (133.3) 0.1 -Currency Swaps - - 133.3 - -Net Forward Exchange Contracts (7.5) - - (0.1) -NET 7.4 0.7 - - -Greater than 1 yearNet Foreign Currency Assets - - (329.7) - (113.4)Currency Swaps - - 329.7 - 113.6Net Forward Exchange Contracts - - - - -NET - - - - 0.2TOTAL NET 7.4 0.7 - - 0.249