2012 Annual Report - ZTE

ZTE CORPORATIONNotes to Financial Statements (continued)(Prepared in accordance with PRC ASBEs)(All amounts in RMB’000 unless otherwise stated)(English translation for reference only)XI.OTHER SIGNIFICANT MATTERS (continued)4. Financial instruments and risk analysis (continued)Capital managementThe primary objective of the Group’s capital management is to safeguard the Group’s ability to continueas a going concern and to maintain healthy capital ratios in order to support its business and maximizeshareholders’ value.The Group manages its capital structure and makes adjustments, in the light of changes in economicconditions. To maintain or adjust the capital structure, the Group may adjust the dividend paymentto shareholders, return capital to shareholders or issue new shares. The Group is not subject to anyexternally imposed capital requirements. No changes were made in the objectives, policies or processesfor managing capital during the years ended 31 December 2012.The Group monitors capital using a gearing ratio, which is interest-bearing liabilities divided by the sumof total equity and interest-bearing liabilities. The gearing ratios as at the ends of the reporting periodswere as follows:2012 2011RMB’000RMB’000Interest-bearing bank borrowings 19,419,883 18,817,150Interest-bearing bonds 10,126,127 3,884,198Bank advances on factored trade receivables and long-term tradereceivables 8,187,416 7,945,814Total interest-bearing liabilities 37,733,426 30,647,162Total equity 22,638,730 26,288,775Total equity and interest-bearing liabilities 60,372,156 56,935,937Gearing ratio 62.5% 53.8%Market riskMarket risk refers to the risk of changes in the fair value or future cash flow of financial instruments.Market risks include mainly interest rate risks and exchange rate risks.Interest rate riskInterest rate risk is the risk that the fair value or future cash flow of a financial instrument will fluctuatebecause of changes in market interest rate. The Group’s risk exposure to movements in market interestrates is mainly related to the Group’s long-term liabilities bearing interest at floating rates.On 31 December 2012, the bank loans of the Group and the Company including fixed rate debtsand floating debts based on LIBOR. The Group and the Company had no significant concentration ofinterest rate risk.290