2008 Annual Report - Kenford Group Holdings Limited

Notes to the Financial Statements
For the year ended 31 March 2008
30. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
The Group is exposed through its operations to the following risks from its use of fi nancial instruments:
– Market risks (Interest rate risk and Foreign exchange risk)
– Liquidity risk
– Credit risk
Policies for managing these risks are set by the Board and implemented centrally by the management. The policy for each
of the above risks is described in more detail below.
(a)
Market risks
(i)
Interest rate risk
The Group currently does not have an interest rate hedging policy. However, the management monitors
interest rate exposure and will consider hedging signifi cant interest rate exposure should the need arises.
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fi xed interest rates
and floating interest rates. The Group manages the risk by maintaining an appropriate mix between fixed and
floating rate borrowings. Although the board accepts that this policy neither protects the Group entirely from
the risk of paying rates in excess of current market rates nor eliminates fully cash fl ow risk associated with
interest payments, it considers that it achieves an appropriate balance of exposure to these risks. This policy
is managed centrally.
The following table details interest rates analysis that the management of the Group evaluates their interest
rate risk.
2008 2007
Weighted
Weighted
average
average
effective
effective
interest rate
interest rate
(%) HK$’000 (%) HK$’000
Financial assets
Floating rate deposit
– Cash and bank 0.02% 24,429 0.01% 35,636
Financial liabilities
Floating rate borrowings
– Trust receipt loans 4.21% 76,029 6.16% 78,539
– Bank advances from
discounted bills 4.21% 7,461 6.16% 31,466
– Obligations under
finance leases 3.96% 5,155 6.01% 5,474
– Other bank loans 2.60% 39,217 5.78% 14,607
Annual Report 2008
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