Page 152 - ar2011

150 TRANS FORMATION
NOTES TO THE FINANCIAL STATEMENTS
For the Financial Year Ended 31 December 2011
39 FINANCIAL RISK MANAGEMENT (cont’d)
(e) Equity price risk
Changes in the market value of investment securities can affect the net income and financial position of
the Group. The Group diversifies its investments by business sector and by country. It manages the risk of
unfavourable changes by prudent review of the investments before investing and continuous monitoring of
their performance and risk profiles.
The investment securities are classified as held-for-trading or available-for-sale (AFS).
At the end of the reporting period, 100 per cent (2010: 100 per cent) of the Group’s held-for-trading equity
portfolio consist of shares of companies in Malaysia. If the Malaysia equity prices had been 5 per cent higher/
lower with all other variables held constant, the Group’s profit after tax would have been $1,000 (2010: $1,000)
higher/lower, arising as a result of higher/lower fair value gains.
At the end of the reporting period, 100 per cent (2010: 100 per cent) of the Group’s AFS equity portfolio
consist of shares of companies in Singapore. If the Singapore equity prices had been 5 per cent higher/lower
with all other variables held constant, the Group’s AFS reserve in equity would have been $6,413,000 (2010:
$9,965,000) higher/lower, arising as a result of higher/lower fair value gains.
(f) Commodity price risk
Commodity price risk is the risk of financial loss resulting frommovements in the price of the Group’s commodity
inputs and outputs. The Group is exposed to commodity price risk arising from revenue derived from sales of
tin as well as to the impact of crude oil prices on the cost of fuel consumed in the mining and processing of tin.
The tin price risk is managed through contractual arrangements with customers and derivative instruments
such as forward sales contracts.
Fuel is purchased at the spot rate available at time of purchase, which exposes the Group to the impact of
changes to world prices for crude oil. However, the Group continues to assess the potential financial risk
associated with rising crude oil prices and whether the risk requires the use of derivative instruments.
At the end of reporting period, there was no outstanding forward tin sales contract (2010: Nil).
(g) Capital Management
The Group’s objective is to provide a reasonable return to shareholders by investing and developing into
businesses that commensurate with the level of risks. This also takes into account synergies with other
operations and activities, the availability of management and other resources, and the fit of the activities with
the Group’s longer strategic objectives.