HYFLUX LTD AND SUBSIDIARIES

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2002
36. FINANCIAL INSTRUMENTS
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Group’s financial instruments are interest rate, liquidity, foreign exchange and credit risks.
The management reviews, manages and monitors each of these risks and will recommend necessary actions to the Board
as appropriate.
INTEREST RATE RISK
The Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy is to obtain
the most favourable interest rates available without increasing its foreign currency exposure.
Surplus funds are placed with reputable banks.
Information relating to the Group’s interest rate exposure is also disclosed in the notes on the Group’s borrowings, including
leasing obligations.
LIQUIDITY RISK
The Group’s main exposure to liquidity risk is in respect of funding of its project costs and other operating expense.
The Group monitors and maintains cash and cash equivalents deemed adequate by the management to finance the Group’s
operations. Short-term credit facilities are available for contingency purposes.
FOREIGN EXCHANGE RISK
The Group’s income is mainly in Singapore Dollar (S$), United States Dollar (US$) and China Renminbi (RMB). Any significant
fluctuation in US$ and RMB against the Group’s base currency, S$, will result in fluctuation in the Group’s income.
Currently, the Group does not have a foreign currency hedging policy. However, the management monitors foreign exchange
exposure and will consider hedging material foreign exposure should the need arise. It is the Group’s policy not to trade in
derivative contracts.
CREDIT RISK
For project contracts, management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.
The carrying amount of cash and cash equivalents, trade debtors, other debtors and intercompany balances represent the
Group’s maximum exposure to credit risk in relation to financial assets. No other financial asset carries a significant exposure
to credit risk.
Geographical concentrations of the Group’s significant financial assets as at 31 December 2002 are as follows:
PEOPLE’S
REPUBLIC
SINGAPORE OF CHINA OTHERS GROUP
$’000 $’000 $’000 $’000
Trade debtors 6,559 6,233 21 12,813
Fixed deposits 13,338 – – 13,338
Cash and bank balances 929 2,839 2 3,770
Sundry debtors 1,095 1,284 – 2,379