2006 - TCL Communication Technology Holdings Limited

TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED
Notes to Financial Statements
31 December 2006
38. RELATED PARTIES TRANSACTONS (continued)
(d)
Compensation of key management personnel of the Group
2006 2005
HK$’000
HK$’000
Short term employee benefits 13,553 12,709
Post-employment benefits 61 498
Share-based payment 5,266 3,045
Total compensation paid to key management personnel 18,880 16,252
Further details of directors’ emoluments are included in note 11 to the financial statements.
39. FINANCIAL RISKS MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk
and liquidity risk. Generally, the Group introduces conservative strategies on its risk management. The Group also
enters into forward currency contracts so as to manage the currency risks arising from the Group’s operations and
its sources of finance. The Group does not hold or issue derivative financial instruments for trading purposes. The
board of directors reviews and agrees policies for managing each of these risks and they are summarised as follows:
Interest rate risk
At 31 December 2006, the bank loans of the Group and the Company are a combination of fixed and floating rate
debts. The Group and the Company have no significant concentration of interest rate risk.
Foreign currency risk
The Group has transactional currency exposures. Such exposures arise from sales or purchases by operating units in
currencies other than the units’ functional currency, where the revenue is predominately in Euro, USD and RMB.
It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to
maximise hedge effectiveness.
Credit risk
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash
equivalents, and trade receivables, the Group’s exposure to credit risk arises from default of the counterparty, with
a maximum exposure equal to the carrying amount of these instruments.
In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination
of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to
recover overdue debts. In addition, the Group reviews regularly the recoverable amount of each individual trade
receivables to ensure that adequate impairment losses are made for irrecoverable amounts. Besides, the Group also
utilises non-resoures factoring facilities and credit insurance to minimise the credit risk. In this regard, the directors
of the Company consider that the Group’s credit risk is minimal.
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank
loans and other interest bearing loans.
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Annual Report 2006