Letter To Shareholders - Mitac

(c) Short-term financial instruments: Maturities of these financial instruments are
within one year. Therefore, the Group expects to have no significant market risk.
(d) Derivative financial instruments: The forward contract was entered into for
hedging the fluctuation of exchange rate. Gains or losses on this contract is likely
to be offset from the hedged items. Therefore, the market risk is low.
(e) Long-term liabilities of financial instruments: The Group borrows loans, with
floating interest rate. Thus, the Group expects to have no significant market risk.
B. Credit risk
(a) Equity financial instruments: The Group trades with reputable counter-parties.
Thus, there is no significant credit risk.
(b) There are no credit risks in the Group’s bonds payable.
(c) Short-term financial instruments: The Group has established control procedures
over the credit management on counter-parties, and the counter-parties are
reputable companies and financial institutions with high credit ratings. The Group
believes its exposure to potential default risk is low.
(d) Derivative financial instruments: The Group believes its exposure to potential
default risk is low due to the counter-parties being reputable institutions, and the
Group diversifies the credit risks by entering into transactions with multiple
counter-parties.
(e) Long-term liabilities of financial instruments: No credit risk is expected to arise
from the debt instruments.
C. Liquidity risk
(a) Equity financial instruments:
The Group invests in available-for-sale financial assets, which are traded in
active markets and can be readily converted into certain amount of cash
approximate to their fair vaules. The liquidity risk exposure is low.
The Group is exposed to a higher liquidity risk since its investments in financial
assets carried at cost have no active market. However, the Group has no intention
to hold these financial assets for trading and does not expect to sell those
financial assets frequently. Therefore, the exposure to liquidity risk would be
effectively reduced.
(b) Bonds payable:
The Group manages its financing and investing activities based on its operating
capital requirements and capital expenditure budgets, thus, the liquidity risk is
expected to be low.
(c) Short-term financial instruments: Maturities of these financial instruments are
within one year. And the Group has set operating plans to deal with future cash
needs. Thus, liquidity risk is believed to be minimal.
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