Notes to the Financial Statements (continued) for the year ended 30 September 2011
23. Financial risk management (continued) (c) Market risk – price, currency and interest rate risks (continued) (ii) Currency risk Currency risk is the risk that the value of an asset or liability will fluctuate due to changes to foreign currency exchange rates. The currency of the majority of the Group’s expenditure and the functional currency of the Group is Sterling. However, the Group has investment assets denominated in currencies other than Sterling and is impacted by fluctuations in foreign currency exchange rates.
The Group has no significant financial liabilities denominated in currencies other than Sterling. However, the Group has outstanding commitments for private equity funds and property funds of $1,871.9 million and €384.6 million as at 30 September 2011 (2010: $1,991.4 million and €520.3 million).
Currency risk exposure
As at 30 September 2011, 69.8% (2010: 67%) of the Group’s investment assets were non-Sterling denominated, after including the impact of the currency overlay.
The following table details the asset value exposed to currency risk as at 30 September: Value as at
Currency
Traded investments assets US Dollar Euro
Japanese Yen Other
Other investment debtors balances US Dollar Euro
Japanese Yen Other
Other investment creditors balances US Dollar Euro
Japanese Yen Other
Forward currency contracts US Dollar Euro
Japanese Yen Other
Total exposed to currency risk (currency, m)
$12,369.4 €1,690.5 ¥37,105.7
$231.1 €45.0
¥3,035.7
($9.2) (€1.1)
(¥328.9)
($1,280.8) (€1,629.8) (¥36,784.5)
30 September 30 September 30 September 30 September 2011
Value as at 2011
7,940.3 1,456.1 309.0
1,789.8
148.4 38.8 25.3
111.0
(5.9) (1.0) (2.7)
(14.1) (822.3)
(1,404.0) (306.2) 516.5
9,779.0
Impact on gain/loss for the
financial year 2011 £m
10% US Dollar appreciation 10% Euro appreciation
10% Japanese Yen appreciation A 10% depreciation in currencies would have an equal but opposite impact.
726.0 9.0 2.5
($1,356.0) (€1,487.4) (¥39,628.5)
($13.7) (€5.8)
(¥712.9)
$358.8 €27.1
¥2,697.0
Value as at 2010
£m (currency, m)
$12,475.0 €1,544.0 ¥39,917.4
7,916.6 1,337.7 303.2
1,518.2 227.7
23.5 20.5
270.7
(8.7) (5.0) (5.4)
(43.9) (861.1)
(1,288.6) (301.3) 237.6
9,341.7
Impact on gain/loss for the
financial year 2010 £m
727.5 6.8 1.7
Value as at 2010
£m
72 | Annual Report 2011
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