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NOTES TO FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 200737. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)(c)Cash flow and fair value interest rate risksCash flow interest rate risk is the risk that the future cash flows of financial instrument will fluctuate because of changesin market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due tochanges in market interest rates. The Group’s borrowings are predominantly variable rate loans and are expected to repricein less than one year from the financial year end.The financial assets and liabilities of the Group are non-interest bearing except for cash and bank balances and borrowingsas set out in the table below, categorised by the earlier of contractual repricing or maturity date.Group Variable rates Fixed ratesLess than6 months6 to 12months1 to 5yearsLess than6 months6 to 12months1 to 5yearsOver 5yearsNoninterestbearingTotal$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000At 31 December 2007AssetsCash and bank balances 90,539 - - 219,263 - - - 25,280 335,082LiabilitiesBorrowings 24,266 5,375 16,142 1,496 24,263 - 188 220 71,950At 31 December 2006(Restated)AssetsCash and bank balances 209,436 - - 76,703 - - - 9,647 295,786LiabilitiesBorrowings 15,670 3,931 15,723 56,211 22,406 - - 220 114,161The Group’s borrowings at variable rates are denominated in RMB and USD as disclosed in Note 30(d).Company Variable rates Fixed ratesLess than6 months6 to 12months1 to 5yearsLess than6 months6 to 12months1 to 5yearsOver 5yearsNoninterestbearingTotal$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000At 31 December 2007AssetsCash and bank balances 7,564 - - 219,128 - - - 25,277 251,969LiabilitiesBorrowings 24,266 - - - 36 - 188 - 24,490At 31 December 2006(Restated)AssetsCash and bank balances 108,611 - - 76,703 - - - 9,638 194,952LiabilitiesBorrowings 15 - - - - - - - 15The Group’s and Company’s borrowings at variable rates are denominated in RMB and USD as disclosed in Note 30(d).98 YANTAI RAFFLES SHIPYARD LIMITED
NOTES TO FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 200737. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)(d)Credit riskCredit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to theGroup. For trade receivables, the Group adopts the policy of assessing credit worthiness and credit history of customersand obtaining sufficient security where appropriate to mitigate credit risk.The Group’s major classes of financial assets are bank deposits and trade and other receivables.As at 31 December 2007, 96% (2006: 73%) of trade receivables relate to 3 major customers of the Group. The Group haspolicies in place to ensure its dealings are with customers with an acceptable credit history.(e)Liquidity riskThe Group monitors its risks to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturityof its financial assets and liabilities and projected cash flows from operations. The Group’s objective is to maintain a balancebetween continuity of funding and flexibility through the use of stand-by credit facilities.(f)Fair valuesThe fair value of a financial instrument is the amount at which the instrument could be exchanged or settled betweenknowledgeable and willing parties in an arm’s length transaction, other than in a forced or liquidation sale.Management has determined that the carrying amounts of cash and short term deposits, current trade and otherreceivables, bank overdrafts, current trade and other payables, other liabilities, current bank loans and non-current floatingrate loans based on their notional amounts, reasonably approximate their fair values because these are mostly short termin nature or are repriced frequently.(g)Derivative financial instrumentsCash flow hedges – Embedded foreign currency forward contractsThe Group closely monitors exchange rate movements and cash flows for the various currencies in which the Grouptransacts its business. The Group seeks to enter into contracts with customers where progress payments are made ina mix of various currencies (such as USD, EUR, NOK and RMB) which the Group requires to pay for its purchases andoperating costs. Whereas the Group has not entered into any traditional foreign currency forward contracts or options tohedge these foreign exchange exposures with its bankers, contractual payments due from customers and denominated incurrencies other than the currency in which the ship-building contracts are routinely expressed are deemed to be contractswith embedded derivatives which are required to be accounted for separately under FRS 39 as if the Group had enteredinto foreign currency forward contracts.Under these arrangements, as of balance sheet date, the fair value and notional amount of derivative financial instruments(namely net embedded foreign currency forward contracts) of the Group as at 31 December are as follows:Group and Company2007 2006$’000 $’000(Restated)Fair value of net foreign currency forward contracts 24,400 2,600Notional amount of net foreign currency forward contracts (2007: EUR, RMB andNOK; 2006: EUR, RMB and NOK) 693,789 922,107ANNUAL REPORT 2007 99
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21 August 2007“Taisun” reaches
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AT A GLANCECORPORATE HIGHLIGHTS IN
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AT A GLANCEFINANCIAL REVIEWReview o
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CHAIRMAN’ S MESSAGEDear Sharehold
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OPERATIONS REVIEWBY THE CEODear Sha
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30,000 DWTSelf Unloading Bulk Carri
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56 7 85 86MR FRANCIS JAMES REIDYInd
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CORPORATE STRUCTURE100%Raffles Yach
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Yantai Raffles Shipyard LimitedSing
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SUPPORT INFRASTRUCTUREHUMAN RESOURC
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SUPPORT INFRASTRUCTUREQUALITY ASSUR
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FINANCIAL CONTENTSCORPORATE GOVERNA
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CORPORATE GOVERNANCE REPORTFOR THE
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CORPORATE GOVERNANCE REPORTFOR THE
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DIRECTORS’ REPORTFOR THE FINANCIA
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DIRECTORS’ REPORTFOR THE FINANCIA
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INDEPENDENT AUDITORS’ REPORTFOR T
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CONSOLIDATED INCOME STATEMENTFOR TH
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STATEMENTS OF CHANGES IN EQUITYFOR
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