Asian Growth Properties Limited Final Results -17-

Certain subsidiaries of the Company have foreign currency denominated monetary assets, which expose the Group to foreign currency risk. The Group currently does not have a policy to hedge the foreign currency exposure. However, the management monitors the related foreign currency fluctuation closely and will consider entering into foreign exchange forward contracts to hedge significant portion of the foreign currency risk should the need arise.

The carrying amounts of the foreign currency denominated monetary assets at the end of the reporting period in the respective group entities are as follows:

 
                             2014      2013 
                          HK$'000   HK$'000 
 
Hong Kong dollars              23        23 
United States dollars      63,948    70,273 
Renminbi                  226,682   184,118 
                         ========  ======== 
 
   33.     FINANCIAL INSTRUMENTS - continued 
   (b)     Financial risk management objectives and policies - continued 

Market risk - continued

   (i)      Foreign currency risk - continued 

The loans for foreign operations within the Group that form part of the Group's net investment in foreign operations, and are denominated in foreign currency, other than the functional currency of the respective foreign entities, the Hong Kong dollars and United States dollars, at the end of the reporting period amounted to HK$208,897,000 (2013: HK$208,904,000) and HK$92,441,000 (2013: HK$92,420,000) respectively.

Sensitivity analysis

The following table details the Group's sensitivity to a 5% (2013: 5%) appreciation in the functional currencies of the relevant subsidiaries, (i.e., Renminbi and Hong Kong dollars, relative to the foreign currencies of the relevant subsidiaries, (i.e. Hong Kong dollars), United States dollars and Renminbi). There would be an equal and opposite impact where Renminbi and Hong Kong dollars weaken 5% (2013: 5%) against the relevant currencies.

 
                       Decrease in 
                      profit for the     Increase in 
                           year             equity 
                        2014     2013     2014     2013 
                     HK$'000  HK$'000  HK$'000  HK$'000 
 
Hong Kong dollars          1        1   10,445   10,445 
United States 
 dollars               3,197    3,514    4,622    4,621 
Renminbi              11,334    9,206        -        - 
                     =======  =======  =======  ======= 
 

In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign currency risk as the year end exposure does not reflect the exposure during the year.

Since the Hong Kong dollar is pegged to the United States dollar under the Linked Exchange Rate System, management does not expect any significant foreign currency exposure in relation to the exchange rate fluctuations between the Hong Kong dollar and the United States dollar.

   33.     FINANCIAL INSTRUMENTS - continued 
   (b)     Financial risk management objectives and policies - continued 

Market risk - continued

   (ii)     Interest rate risk 

The Group is exposed to cash flow interest rate risk in relation to variable-rate borrowings, loan receivables, bank balances and deposits. The directors consider that the interest rate risk on bank balances and deposits are insignificant as they are subject to minimal interest rate fluctuation, accordingly, no sensitivity analysis is presented. The Group's cash flow interest rate risk is mainly concentrated on the fluctuation of HIBOR and the PBOC Prescribed Interest Rates on the bank borrowings, and Hong Kong Prime Rate on the loan receivables.

The Group currently does not have an interest rate swap hedging policy. However, management monitors the interest exposure and will consider hedging interest rate risk exposure should the need arise.

Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest rates in relation to the Group's variable-rate bank borrowings and loan receivables at the end of the reporting period. The analysis is prepared assuming the amount of asset and liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis points increase or decrease represents management's assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group's profit for the year ended 31 December 2014 would decrease/increase by HK$18,487,000 (2013: HK$15,095,000).

Credit risk

The Group's maximum exposure to credit risk in the event of the counterparties' failure to perform their obligations at the end of the reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated statement of financial position, which is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position; and the amount of contingent liabilities in relation to the financial guarantees provided by the Group as disclosed in note 39. In order to minimise the credit risk, management of the Group has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group's credit risk is significantly reduced.

At 31 December 2014, the Group has concentration of credit risk on other receivables from two counterparties. The management of the Group has periodic communication with the counterparties and has monitored the progress of the project as set out in note 22, continuously.

Although the placing of deposits and notes subscribed are concentrated on certain banks, the credit risk on these financial assets is limited because the counterparties are licensed banks.

                     33.     FINANCIAL INSTRUMENTS - continued 
   (b)     Financial risk management objectives and policies - continued 

Credit risk - continued

The Group has no other significant concentration of credit risk with exposure spread over a number of counterparties and customers.

For properties under development which are held for sales, subject to pre-sales agreements, the Group generally provides guarantees to banks in connection with the purchasers' borrowing of mortgage loans to finance their purchase of the properties. Pursuant to the guarantees, upon default in mortgage payments by these property purchasers, the Group is responsible to repay the outstanding mortgage principals together with the accrued interest thereon. Under such circumstances, the Group is entitled to retain the purchasers' deposit and to take over the legal title and possession of the relevant property. In this regard, the directors of the Company consider that the Group's credit risk is significantly reduced.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the directors of the Company, which have built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities, and by continuously monitoring forecast and actual cash flows. As at 31 December 2014, the Group has available unutilised bank loan facilities of approximately HK$845,000,000 (2013: HK$855,000,000).

The following table details the Group's remaining contractual maturity for its financial liabilities based on the agreed repayment terms. The table has been drawn up based on the undiscounted cash flows of financial liabilities and on the earliest date on which the Group can be required to pay. The table includes both interest, estimated based on interest rate at the end of the reporting period, and principal cash flows.

 
                   Weighted 
                    average                    3 months      6 months      9 months                       Total 
                  effective        Within            to            to            to          Over  undiscounted      Carrying 
                   interest      3 months      6 months      9 months            12        1 year          cash        amount 
                       rate                                                  months                       flows 
                          %       HK$'000       HK$'000       HK$'000       HK$'000       HK$'000       HK$'000       HK$'000 
At 31.12.2014 
 
Payables and 
 rental deposits 
  received                -       157,284         3,707         4,906        27,257        71,151       264,305       264,305 
Amounts due 
to 
non-controlling 
 interests                -        99,505             -             -             -             -        99,505        99,505 
Variable rates 
 bank borrowings        2.9       327,781        77,774        59,562        81,766     3,915,321     4,462,204     4,019,734 
Financial 
 guarantees 
 liabilities                       17,432             -             -             -             -        17,432             - 
                             ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
                                  602,002        81,481        64,468       109,023     3,986,472     4,843,446     4,383,544 
                                  =======       =======       =======       =======       =======       =======       ======= 
At 31.12.2013 
 
Payables and 
 rental deposits 
 Received                 -       167,597         8,478         3,743         3,364        87,302       270,484       270,484 
Amounts due 
to 
non-controlling 
 interests                -        96,985             -             -             -             -        96,985        96,985 
Variable rates