ANNUAL REPORT 2017/18 47
NOTES TO THE FINANCIAL STATEMENTS
31 March 2018
24. RELATED PARTIES TRANSACTIONS
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party in making financial and
operating decisions.
The University receives grants from the Ministry of
Education (“MOE”) to fund its operations and is subject to
certain controls set by MOE and considers MOE a related
party. Hence, other government-controlled entities are
considered related parties of the University. The University
has applied the exemption from disclosure requirements
of FRS 24 in relation to related party transactions and
outstanding balances (including commitments) with
MOE and other government-controlled entities.
The University has significant transactions with MOE
and other government-controlled entities in the form of
purchase of goods and services and rendering of services.
Such purchases and sales are collectively approximate to
$181,000 (2017: $1,986,000) and $138,000 (2017: $ 61,000).
25. FINANCIAL RISKMANAGEMENT
Financial risk factors
The University’s activities expose it to market risk
(including currency risk, interest rate risk and price risk),
liquidity risk and credit risk.
The Board of Trustees has the Finance and Investment
Committees to assist the Board in setting the objectives
and underlying principles of financial risk management
for the University. Financial risk is reviewed by the Finance
and Investment Committees. The Investment Office
assists in the implementation and management of the
investment portfolio within the prescribed investment
guidelines and mandates. The information presented
below is based on information received by the Finance
and Investment Committees.
(a) Market risk
(i) Currency risk
The University’s operations are not exposed to
significant currency risk as most of its transactions
are transacted or invested in Singapore Dollar (“SGD”)
except for its investment portfolio. The currency risk
related to the United States Dollar payments to MIT
under the SUTD-MIT Collaboration Agreement is
borne by the Ministry of Education (“MOE”).
2018
2017
$’000
$’000
Net financial assets at fair
value through income
and expenditure
- SGD
486,887 524,042
- Non-SGD
493,273 292,690
Total
980,160 816,732
The University’s currency profile from its investment
portfolio is as follows:
Currency derivatives are entered into by the fund
manager to manage the foreign currency risk exposure
of the University’s investment portfolio. The currency
profile above has taken into consideration the effects of
currency forwards.
At 31March 2018, if foreign currencies (i.e. currencies other
than those denominated in SGD) had strengthened/
weakened by 3% (2017: 3%) against the SGD with all
other variables being held constant, it will result in a
$14,798,000 increase/decrease in the net surplus (2017:
$8,781,000 increase/decrease in the net surplus).
(ii) Interest rate risk
The University has interest-bearing assets in cash and
cash equivalents. These financial assets are short-term
in nature, therefore, any future variations in interest
rates will not have a material impact on the income of
the University.
The University’s borrowings as at 31 March 2018 include
non-fixed rates loans amounting to $6,442,000 (2017:
$1,291,000), which are exposed to interest rate risk.
If interest rate had increased/decreased by 50 basis
points, it will result in a $32,210 decrease/increase in the
net surplus (2017: $6,460 decrease/increase in the net
surplus). The University’s investments in financial assets
at fair value through income and expenditure as at 31
March 2018 include interest-bearing debt instruments
amounting to $325,606,000 (2017: $218,206,000) which
are exposed to interest rate risk. Changes in interest rates
will have impact on the fair values of these investments.
With all other variables held constant, 50 (2017: 50) basis
points increase/decrease in interest rates will result in
approximately $7,582,000 (2017: $9,195,000) decrease/
increase in the fair value of financial assets at fair value
through income and expenditure and the net surplus.
