Cathay Pacific 2007 Annual Report Download - page 86

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Notes to the Accounts
Supplementary Information
28. Financial risk management (continued)
Sensitivity analysis for foreign currency exposure
A five percent appreciation of Hong Kong dollar against the following currencies at 31st December 2007
would have increased equity and profit and loss by the amounts shown below. This represents the translation
of financial assets and liabilities and the change in fair value of currency derivatives at the balance sheet date.
It assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on
the same basis for 2006.
2007 2006
Equity
HK$M
Profit and loss
HK$M
Equity
HK$M
Profit and loss
HK$M
US dollars (453) 378 (352) 232
Euros 226 (87) 198 (20)
New Taiwan dollars 90 (15) 135 (15)
Singapore dollars 74 7 72 28
Renminbi 195 (124) 51 (55)
Japanese yen 55 (14) 89 (7)
Increase 187 145 193 163
(ii) Interest rate risk
The Group’s interest rate risk arises primarily from long-term borrowings at floating rates. Interest rate swaps
are used to manage the interest rate profile of interest-bearing financial liabilities on a currency by currency
basis to maintain an appropriate fixed rate and floating rate ratio. Interest rate risk is measured by using
sensitivity analysis on variable rate instruments.
At the reporting date the interest rate profile of the interest-bearing financial instruments was as below:
Group Company
2007
HK$M
2006
HK$M
2007
HK$M
2006
HK$M
Fixed rate instruments
Liquid funds 501 180 501 180
Long-term loans (2,034) (1,902) (2,034) (1,902)
Obligations under finance leases (10,348) (6,506) (17,213) (11,313)
Interest rate and currency swaps (756) (3,946) 142 (3,566)
Net exposure (12,637) (12,174) (18,604) (16,601)
Cathay Pacific Airways Limited Annual Report 2007
84