30. Financial instruments

Exposure to credit, foreign exchange and interest rate risks arises in the normal course of the Consolidated Entity’s business. Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates.

Credit risk

At the balance sheet date, there was no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.

Foreign exchange risk

The Consolidated Entity and the Company are exposed to changes in foreign exchange rates from their activities. It is the Consolidated Entity’s and the Company’s policy to use forward exchange contracts to hedge these risks. The Consolidated Entity and the Company do not enter, hold or issue derivative financial instruments for trading purposes.

The Company enters into forward exchange contracts to hedge anticipated sales and purchases in US dollars, euro, Japanese yen, Hong Kong dollars and Swedish kroner.

The amounts of forward cover taken are in accordance with approved policy and internal forecasts.

The following table sets out the gross value to be received under forward exchange contracts and the weighted average contracted exchange rates of outstanding contracts:

		Foreign exchange rates		Consolidated
		2006	2005	2006	2005
	Note			$000	$000
Sell United States dollar
Not later than one year				95,937	67,346
Later than one year but not later than two years				45,802	37,842
Later than two years but not later than three years				5,956	4,052
Weighted average exchange rates contracted		0.72	0.67
Sell euro
Not later than one year				104,656	62,031
Later than one year but not later than two years				56,251	37,496
Later than two years but not later than three years				6,070	3,479
Weighted average exchange rates contracted		0.57	0.56
Sell Japanese yen
Not later than one year				8,962	9,204
Later than one year but not later than two years				3,893	4,536
Later than two years but not later than three years				503	-
Weighted average exchange rates contracted		68.43	50.03
Sell Hong Kong dollar
Not later than one year				-	10,160
Later than one year but not later than two years				-	5,107
Later than two years but not later than three years				-	-
Weighted average exchange rates contracted		-	4.87
Buy Sweden kroner
Not later than one year				24,986	-
Later than one year but not later than two years				36,056	-
Later than two years but not later than three years				-	-
Weighted average exchange rates contracted		5.29	-

Forecast transactions

The Consolidated Entity classifies its forward exchange contracts hedging forecast transactions as cash flow hedges and states them at fair value. The fair value of forward exchange contracts at 1 July 2005 was adjusted against the opening balance of the hedging reserve at that date.

The net fair value of forward exchange contracts used as hedges of forecast transactions at 30 June 2006 was $5.1 million (2005: $27.3 million).

Interest rate risk

Effective interest rates, repayment and repricing analysis

In respect of interest bearing financial liabilities, the following table indicates their effective interest rates at the reporting date. As the liabilities are subject to variable interest rates, they reprice within six months. The repayment schedule is as follows:

Consolidated	2006						2005
Amounts $000	Effective interest rate per annum	12 months or less	1 - 2 years	2 - 5 years	More than 5 years	Total	Effective interest rate per annum	12 months or less	1 - 2 years	2 - 5 years	More than 5 years	Total
Secured bank loans:
GBP floating rate loan	5.1%	17,511	-	-	-	17,511	3.9%	15,060	-	-	-	15,060
SEK floating rate loan	3.2%	34,902	34,902	90,591	-	160,395	2.6%	32,361	31,439	107,512	-	171,312
USD floating rate loan	5.7%	16,387	-	-	-	16,387	3.5%	14,236	-	-	-	14,236
JPY bank overdraft	1.7%	1,747	-	-	-	1,747	1.7%	1,177	-	-	-	1,177
AUD bank overdraft	-	-	-	-	-	-	8.8%	1,273	-	-	-	1,273
		70,547	34,902	90,591	-	196,040		64,107	31,439	107,512	-	203,058

Company	2006						2005
Amounts $000	Effective interest rate per annum	12 months or less	1 - 2 years	2 - 5 years	More than 5 years	Total	Effective interest rate per annum	12 months or less	1 - 2 years	2 - 5 years	More than 5 years	Total
AUD bank overdraft	-	-	-	-	-	-	8.8%	1,273	-	-	-	1,273

Trade receivables and trade payables are not interest bearing and the related cash flows are not subject to interest rate risk.