Letter To Shareholders - Mitac

2) As of December 31, 2009 and 2008, the financial assets and the financial liabilities with
fair value risk due to the change of interest amounted to $1,324,702 and $1,458,992;
$240,500 and $1,240,500, respectively, and the financial assets and the financial
liabilities with cash flow risk due to the change of interest amounted to $3,928,742 and
$5,015,906; $2,892,031 and $2,653,444, respectively.
3) For the years ended December 31, 2009 and 2008, total interest income and total
interest expense for financial assets and financial liabilities that are not at fair value
through profit or loss amounted to $38,614 and $248,416; $53,452 and $141,168,
respectively.
4) Financial risk management
In order to identify, evaluate and manage market risk, credit risk, liquidity risk and cash
flow risk, the Group has established a risk management program and carries out
procedures to monitor the fluctuations in exchange rate and interest rate, as well as
implement credit controls over its transaction counterparties.
By considering factors such as changes in industrial environment, competitive position,
and market risks, the Group adjusts related positions of financial assets and liabilities in
order to optimize its risk exposure, maintain liquidity and centrally manage all market
risks. The Group mainly use derivative financial instruments to hedge the operating risk.
To meet its risk management objectives, the Group adopts the following strategies to
control financial risk:
A. Interest rate risk
The Group undertakes derivative financial instruments such as interest rate swaps, to
hedge cash flow risk and fair value risk arising from fluctuations in interest rates.
B. Foreign exchange risk
To hedge cash flow fair value risk arising from fluctuations in exchange rates, the
Group undertakes derivative financial instruments such as forward exchange
contracts to hedge recognized assets and liabilities denominated in foreign
currencies and highly probable forecast transactions.
C. Credit risk
The Group has a stringent credit policy in place. Transactions are conducted only
with counterparties with good credit conditions. Appropriate measures are also
undertaken where necessary to protect the Group’s credit rights and thereby mitigate
credit risk.
5) Information of financial risk
A. Market risk
(a) Equity financial instruments: The investment in these financial instruments is
influenced by market price. The Group evaluates the investment performance
periodically. Thus, the market risk is low.
(b) The Group issues secured and unsecured bonds payable. Although the fair value
of bonds payable would be changed due to changes in market interest rate and
market price, the Group evaluates the market risk periodically. Thus, the Group
expects to have no significant market risk.
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