notes to the financial statements - Far East Orchard Limited

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NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2008 32. Commitments (continued) (c) Operating lease commitments 72 The Group leases out its investment properties under non-cancellable operating leases. The leases have varying terms, escalation clauses and renewal rights. The future minimum lease receivables under non-cancellable operating leases contracted for at the balance sheet date but not recognised as receivables, are as follows: The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Not later than one year - third parties 6,964 5,231 5,175 3,761 - related parties [Note 35(a)] 781 1,015 334 336 7,745 6,246 5,509 4,097 Between one and five years - third parties 4,002 2,861 3,399 2,239 - related parties [Note 35(a)] 53 369 - 95 33. Financial risk management 4,055 3,230 3,399 2,334 11,800 9,476 8,908 6,431 The Group’s activities expose it to market risk (including interest rate risk, currency risk and price risk), credit risk and liquidity risk. The Group’s overall risk management objective is to effectively manage these risks and minimise potential adverse effects on the financial performance of the Group. The financial risk management is carried out by a team within the management of the Group. (a) Market risk (i) Cash flow and fair value interest rate risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interestbearing assets other than fixed deposits with banks, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s exposure to cash flow interest rate risks arises mainly from variable-rate borrowings. The Company’s exposure to cash flow interest rate risks arises mainly from borrowings, and advances and loans from/to subsidiaries at variable rates. The Group’s policy is to obtain the most favourable interest rates available without increasing its foreign currency exposure. ANNUAL REPORT 2008 ORCHARD PARADE HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2008 33. Financial risk management (continued) (a) Market risk (continued) (i) Cash flow and fair value interest rate risk (continued) The Group’s and the Company’s borrowings at variable rates are denominated in Singapore Dollars. If the interest rates increase/decrease by 1% (2007: 1%) with all other variables including tax rate being held constant, the profit after tax will be lower/higher by $4,340,000 (2007: $4,231,000) and $3,067,000 (2007: $3,383,000) as a result of higher/lower interest expense on these borrowings. (ii) Currency risk The Group’s currency exposure to foreign exchange risk is not significant as most of its transactions are denominated in Singapore Dollars, except for the activities undertaken by its Malaysian subsidiary, which are mainly denominated in Malaysia Ringgit. The Malaysian subsidiary mainly owns an investment property in Kuala Lumpur [Note 21(c)] and does not have significant financial assets and liabilities as the property is currently vacant awaiting redevelopment to commence. The Company’s business is not exposed to any significant foreign exchange risk as majority of its financial assets and liabilities are denominated in Singapore Dollars. (iii) Price risk The Group is exposed to equity securities price risk because of the investments held by the Group which are classified on the consolidated balance sheet as financial assets at fair value through profit or loss. These securities are listed in Singapore. The investment decisions are undertaken by a team, which comprises certain directors of the Company. If prices for equity securities listed in Singapore change by 10% (2007: 10%) with all other variables including tax rate being held constant, the profit after tax will be: Increase/(Decrease) Profit Profit after tax after tax 2008 2007 $’000 $’000 The Group Listed in Singapore - increased by 778 1,418 - decreased by (778) (1,418) ORCHARD PARADE HOLDINGS LIMITED ANNUAL REPORT 2008 73
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Orchard Parade Holdings Limited Ann
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Corporate Information BOARD OF DIRE
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The Group sold 12 units of The Flor
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Profile of the Board of Directors &
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Organisation Chart as at 27 March 2
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Corporate Governance Statement as a
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DIRECTORS’ REPORT For the financi
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notes to the financial statements - Far East Orchard Limited

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