Annual Report 2016/17

THE AMERICAN CLUB

NOTES TO FINANCIAL STATEMENTS 30 June 2017

4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (cont’d)

(i) Foreign exchange risk management

The Club is exposed to the effects of foreign currency exchange rate fluctuations primarily because of its foreign currency denominated investments in the Global Access Balanced Plus Asia Portfolio (“GAP”). The currency giving rise to this risk is primarily United States dollars. The Club uses derivative financial instruments to hedge exposure to foreign currency risk. A currency hedge maintains the GAP’s exposure to no more than 30% in non- Singapore dollars. As at the end of the reporting period, the carrying amounts of significant monetary assets and monetary liabilities denominated in currencies other than the Club’s functional currencies are as follows:

2017

2016

Assets

Liabilities

Assets

Liabilities

$

$

$

$

United States dollars

-

- 2,625,246 -

Foreign currency sensitivity

The following table details the sensitivity to a 3% increase and decrease in the foreign currency against the functional currency of the Club. 3% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 3% change in foreign currency rates.

If the relevant foreign currency strengthens by 3% against the functional currency of the Club, loss for the year will decrease by:

2017

2016

$

$

United States dollars

-

78,757

If the relevant foreign currency weakens by 3% against the functional currency of the Club, the effect will be vice versa.

44 2016/17 ANNUAL REPORT