Creative 2010 Annual Report Download - page 54

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54
CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
(c) Operating lease commitments – where the Group is a lessor
The Group leases out ofce space to non-related parties under non-cancellable operating leases.
The future minimum lease receivables under non-cancellable operating leases contracted for at the balance sheet date but
not recognised as receivables, are as follows:
Group
2010 2009
US$’000 US$’000
Not later than one year 209 145
Between one and ve years – 537
209 682
29. FINANCIAL RISK MANAGEMENT
The Group is exposed to nancial risks arising from its operations and the use of nancial instruments. The Group’s
principal nancial instruments, other than foreign exchange contracts, comprise bank loans, investments, cash at bank and
short-term bank deposits. All nancial transactions with the banks are governed by banking facilities duly accepted with
Board of Directors’ resolutions, with banking mandates, which dene the permitted nancial instruments and facility limits,
approved by the Board of Directors. The Group has various other nancial assets and liabilities such as trade receivables
and trade payables, which arise directly from its operations.
It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation or trading or enters into any complex foreign
exchange or derivatives transactions. It is not in the interest of the Group to speculate or trade in treasury instruments. From time
to time, the Group enters into forward exchange contracts to reduce its exposure to currency translation gains and losses.
The main nancial risks arising from the Group’s operations and the use of nancial instruments are market risk (including
price risk, interest rate risk and currency risk), credit risk and liquidity risk. Management does not view the Company on a
standalone basis and therefore all risks relevant to the Group are considered and managed at the Group level. The policies
for managing each of these risks at the Group level are summarised below.
(a) Market risk
(i) Price risk
As part of its long-term business strategy, from time to time, the Group makes strategic equity investments in companies
that can provide the Group with technologies or products that management believes will give the Group a competitive
advantage in the markets in which the Group competes. The Group has strategic investments in quoted equity shares. The
Group manages the risk of unfavourable changes by cautious review of the investments before investing and continuous
monitoring of the performance of investments held and assessing market risk relevant to which the investments operate.
The market value of these investments will uctuate with market conditions. The table below summarises the impact to
the Group’s fair value reserve in equity arising as a result of a 10% increase/decrease in prices of quoted equity securities.
This analysis assumes that all other variables remain constant.
notes to tHe fInAncIAl stAteMents
– For the nancial year ended 30 June 2010
Equity
10% increase 10% decrease
US$’000 US$’000
Group
2010
Quoted equity securities 2,253 (2,253)
2009
Quoted equity securities 1,547 (1,547)
28. COMMITMENTS (cont’d)