Investment Mandate issued by the Australian Government. The Investment Mandate requires the Board to maximise returns above a benchmark rate whilst taking acceptable but not excessive risk. The benchmark rate has been set at CPI + 4.5 per cent to 5.5 per cent per annum over the long term. Section 39 of the FMA Act does not apply to investments of the fund. As at 30 June 2012, the Future Fund’s exposure to interest rates consisted of $11,406 million in floating interest rate securities (2011: $13,929 million) and $11,439 million in fixed interest rate securities (2011: $7,651 million). The following table demonstrates the impact on the net operating balance and net worth of a 140 basis point (2011: 175 basis point) change in Future Fund interest rate bond yields with all other variables held constant. Effect on Effect on Interest rate risk Change in Operating Net worth Operating Net balance worth risk variable balance 2012 2012 2011 2011 $m $m $m $m Asset portfolios (including derivatives) +140bp (213) (213) n/a n/a -140bp 310 310 n/a n/a +175bp n/a n/a (67) (67) -175bp n/a n/a 171 171 Exchange traded interest rate futures are used by the Future Fund’s investment managers to manage the exposure to interest rates and to ensure it remains within approved limits. At 30 June 2012, the notional value of open futures contracts and swaps totalled $176 million (2011: $903 million). The Building Australia Fund (BAF), Education Investment Fund (EIF) and Health and Hospitals Fund (HHF) were established by the Nationbuilding Funds Act 2008 on 1 January 2009 and their investments are also managed by the Future Fund Board of Guardians. The Funds were established to provide financing sources to meet the Government’s commitment to Australia’s future by investment in critical areas of infrastructure. The objective of each Fund is as follows: BAF — to make payments in relation to the creation or development of transport, communications, eligible national broadband network matters, energy and water infrastructure; EIF — to make payments in relation to the creation or development of higher education infrastructure, vocational education and training infrastructure, eligible education and research infrastructure; and
Investment Mandate issued by the Australian Government. The Investment Mandate requires the Board to maximise returns above a benchmark rate whilst taking acceptable but not excessive risk. The benchmark rate has been set at CPI + 4.5 per cent to 5.5 per cent per annum over the long term. Section 39 of the FMA Act does not apply to investments of the fund. As at 30 June 2012, the Future Fund’s exposure to interest rates consisted of $11,406 million in floating interest rate securities (2011: $13,929 million) and $11,439 million in fixed interest rate securities (2011: $7,651 million). The following table demonstrates the impact on the net operating balance and net worth of a 140 basis point (2011: 175 basis point) change in Future Fund interest rate bond yields with all other variables held constant. Effect on Effect on Interest rate risk Change in risk variable Operating balance Net worth Operating balance Net worth 2012 2012 2011 2011 $m $m $m $m Asset portfolios (including derivatives) +140bp (213) (213) n/a n/a -140bp 310 310 n/a n/a +175bp n/a n/a (67) (67) -175bp n/a n/a 171 171 Exchange traded interest rate futures are used by the Future Fund’s investment managers to manage the exposure to interest rates and to ensure it remains within approved limits. At 30 June 2012, the notional value of open futures contracts and swaps totalled $176 million (2011: $903 million). The Building Australia Fund (BAF), Education Investment Fund (EIF) and Health and Hospitals Fund (HHF) were established by the Nationbuilding Funds Act 2008 on 1 January 2009 and their investments are also managed by the Future Fund Board of Guardians. The Funds were established to provide financing sources to meet the Government’s commitment to Australia’s future by investment in critical areas of infrastructure. The objective of each Fund is as follows: BAF — to make payments in relation to the creation or development of transport, communications, eligible national broadband network matters, energy and water infrastructure; EIF — to make payments in relation to the creation or development of higher education infrastructure, vocational education and training infrastructure, eligible education and research infrastructure; and
12-notes-34-to-36.docx