1 Report of the Directors and Audited Financial Statement Ernsts Young HI ERNST &YOUNG
CONTENTS Pages REPORT OF THE DIRECTORS 1-2 INDEPENDENT AUDITORS1 REPORT 3-4 AUDITED FINANCIAL STATEMENTS Statement of comprehensive income 5 Statement of financial position 6 Statement of changes in equity Statement of cash flows 8 Notes to financial statements 9-20
REPORT OF THE DIRECTORS The directors present their report and the audited financial statements of The Actuarial Society of Hong Kong (the "Society") for the year ended. Principal activities The principal activities of the Society have not changed during the year and are to represent and further the interests of the actuarial profession, to uphold the standards of professional conduct and to regulate the practice of its members. Results and dividends The Society's surplus for the year ended and its state of affairs at that date are set out in the financial statements on pages 5 to 20. The directors do not recommend the payment of any dividend in respect of the year. Share capital The Society was incorporated under the laws of Hong Kong as a company limited by guarantee and does not have a share capital. The details of the liability of its members are set out in note 1 to the financial statements. Directors The directors of the Society during the year were: Chan, Wai Sum Cheng, Kin Shun Tony Duran, J Peter Foong, Sai Cheong Leckie, Stuart Hamilton Walpole, Simon Robert Wong, Ka Man Porter, Jeremy Robert Mak, Tze Kei Jacky Ke, Wing Siu Nigel Hui, Kin Ling Queenie Luk, Kin Yu Peter (resigned on 31 December 2010) Ng, Sim Kheng (resigned on 31 December 2010) Anderson, Roderick Stuart (appointed on 1 January 2011) Ng, Fat Kwong Louis (appointed on 1 January 2011) In accordance with the Society's articles of association, all remaining directors continue in office for two years from the first day of the calendar year following the annual general meeting in which they are elected. Directors' interests At no time during the year was the Society a party to any arrangement to enable the Society's directors to acquire benefits by means of the acquisition of debentures of the Society or any other body corporate. Directors' interests in contracts No director had a significant beneficial interest in any contract of significance to the business of the Society to which the Society was a party during the year.
REPORT OF THE DIRECTORS (continued) Honorary auditors Ernst & Young retire and a resolution for their reappointment as the honorary auditors of the Society will be proposed at the forthcoming annual general meeting. ON BEHALF OF THE BOARD Director Hong Kong 2 November 2011
Ernst & Young 18th Floor it*ii l$ j85«two International Finance Centre SJ^^ni^'L-^ffllStl 8 Finance Street, Central Hong Kong *«:+852 2846 9888 if H: +852 2868 4432 Tel: +852 2846 9888 Fax: +852 2868 4432 www.ey.com INDEPENDENT AUDITORS' REPORT To the members of The Actuarial Society of Hong Kong (Incorporated in Hong Kong with limited liability) We have audited the financial statements of The Actuarial Society of Hong Kong (the "Society") set out on pages 5 to 20, which comprise the statement of financial position as at, and the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Directors' responsibility for the financial statements The directors of the Society are responsible for the preparation of financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' responsibility Our responsibility is to express an opinion on these financial statements based on our audit. Our report is made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors'judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. A member 'irm of Ernst 8 Young Global Limited
HI ERNST &YOUNG INDEPENDENT AUDITORS' REPORT (continued) To the members of The Actuarial Society of Hong Kong (Incorporated in Hong Kong with limited liability) Opinion In our opinion, the financial statements give a true and fair view of the state of the Society's affairs as at 30 September 2011 and of its surplus and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the Hong Kong Companies Ordinance. Certified Public Accountants Hong Kong 2 November 2011
STATEMENT OF COMPREHENSIVE INCOME Year ended Notes 2011 2010 INCOME Other revenue Administrative expenses Other operating expenses SURPLUS BEFORE TAX Income tax expense 997,260 716,181 (1,027,758) ( 97,147) 588,536 854,410 1,365,834 (1,348,672) ( 93,521) 778,051 SURPLUS FOR THE YEAR AND TOTAL COMPREHENSIVE INCOME FOR THE YEAR 588,536 778,051
STATEMENT OF FINANCIAL POSITION otes 2011 2010 CURRENT ASSETS Prepayments and other receivables Amount due from a related entity Cash and cash equivalents Time deposits Total current assets S 10 9 9 159,533 492,952 2,603,402 1,552,098 4,807,985 158,847 253,775 2,259,121 1,549,000 4,220,743 CURRENT LIABILITIES Other payables and accruals 4,826 6,120 NET CURRENT ASSETS 4,803,159 4,214,623 Net assets 4,803,159 4,214,623 Represented by: GENERAL FUND ACCOUNT 4,803,159 4,214,623 Director
STATEMENT OF CHANGES IN EQUITY Year ended General fund account All October2009 Total comprehensive income for the year At 30 September 2010 and 1 October 2010 Total comprehensive income for the year At 3,436,572 778,051 4,214,623 588,536 4,803,159
STATEMENT OF CASH FLOWS Year ended Notes 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES Surplus for the year Adjustment for interest income 588,536 ( 5,691) 582,845 778,051 ( 6,051) 772,000 (Increase)/decrease in prepayments and other receivables Decrease in other payables and accruals (Increase)/decrease in amount due from a related entity 10 ( 183) ( 1,294) ( 239,177) 119,967 ( 128,122) 69,091 Net cash flows from operating activities 342,191 832,936 CASH FLOWS FROM INVESTING ACTIVITIES Interest received Increase in a time deposit with original maturity of more than three months when acquired 5,188 ( 3,098) 9,258 ( 7,707) Net cash flows from investing activities 2,090 1,551 NET INCREASE IN CASH AND CASH EQUIVALENTS 344,281 834,487 Cash and cash equivalents at beginning of year 2,259,121 1,424,634 CASH AND CASH EQUIVALENTS AT END OF YEAR 2,603,402 2,259,121 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Bank balance Time deposit with original maturity of less than three months when acquired 1,572,212 1,031,190 1,229,771 1,029,350 2,603,402 2,259,121
1. CORPORATE INFORMATION The registered office of the Society is located at Unit 2202, 22/F, Tower Two, Lippo Centre, 89 Queensway, Hong Kong. The principal activities of the Society have not changed during the year and are to represent and further the interests of the actuarial profession, to uphold the standards of professional conduct and to regulate the practice of its members. The Society is a company limited by guarantee. The liability of each member is limited to the extent of an amount not exceeding HKS100 in the event of the Society being wound up while he/she is a member, or within one year after he/she ceases to be a member. For the year ended 30 September 2011, there are 844 members in total in the Society and the total liability of the members is limited to the extent of an amount not exceeding 84,400 in the event of the Society being wound up. 2.1. STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKASs") and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the Hong Kong Companies Ordinance. The Society presents its statement of financial position broadly in order of liquidity, with a distinction based on expectations regarding recovery or settlement within twelve months after the financial reporting date (current) and more than twelve months after the financial reporting date (non-current). These financial statements have been prepared under the historical cost convention. The financial statements are presented in Hong Kong dollars which is also the Society's functional currency. 2.2. CHANGES IN ACCOUNTING POLICY AND DISCLOSURES HKFRS 1 Amendments Amendments to HKFRS 1 First-time Adoption of Hong Kong Financial Reporting Standards - Additional Exemptions for Firsttime Adopters HKFRS 1 Amendment Amendment to HKFRS 1 First-time adoption of Hong Kong Financial Reporting Standards - Limited exemption from Comparative HKFRS 7 Disclosures for First Time Adopters HKFRS 2 Amendments Amendments to HKFRS 2 Share-based Payment - Group Cashsettled Share-based Payment Transactions HKAS 32 Amendment Amendment to HKAS 32 Financial Instruments: Presentation - Classification of Rights Issues HKAS 39 Amendment Amendment to HKAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items HK(IFRIC)-Int 17 Distributions of Non-cash Assets to Owners HK(IFRIC)-Int 19 Extinguishing Financial Liabilities with Equity Instruments Improvements to HKFRSs 2009 Amendments to a number of HKFRSs issued in May 2009
2.2. CHANGES IN ACCOUNTING POLICY AND DISCLOSURES (continued) HK Interpretation 4 Amendment HK Interpretation 5 Amendment to HK Interpretation 4 Leases - Determination of the Length of Lease Term in respect of Hong Kong Land Leases Presentation of Financial Statements - Classification by the Borrower of Term Loan that Contains a Repayment on Demand Clause The Society considers that the adoption of these new and revised HKFRSs has had no significant financial effect on these financial statements and there have been no significant changes to the accounting policies applied in these financial statements. 2.3. ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS The Society has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements. HKFRS 7 Amendments HKFRS 9 HKAS 24 (Revised) HK(IFRIC)-Int 14 Amendments Amendments to HKFRS 7 Financial Instrument: Disclosure - Transfer of Financial Assets Financial Instruments^1 Related Party Disclosures ' Amendments to HK(IFRIC)-Int 14 Prepayments of a Minimum Funding Requirement' Apart from the above, the HKICPA has issued Improvements to HKFRSs 2010 which sets out amendments to a number of HKFRSs primarily with a view to removing inconsistencies and clarifying wording. The amendments to HKFRS 3 and HKAS 27 are effective for annual periods beginning on or after 1 July 2010 whereas the amendments to HKFRS 1, HKFRS 7, HKAS 1, HKAS 34 and HK(IFRIC)-Int 13 are effective for annual periods beginning on or after 1 January 2011 although there are separate transitional provisions for each standard or interpretation. Effective for annual periods beginning on or after 1 January 2011 Effective for annual periods beginning on or after 1 July 2011 Effective for annual periods beginning on or after 1 January 2013 The Society is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, the Society considers that except for the adoption of HKFRS 9 and HKAS 24 (Revised) as further explained below, these new and revised HKFRSs are unlikely to have a significant impact on the Society's results of operations and financial position. 10
2.3. ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (continued) (a) HKFRS 9 Financial Instruments HKFRS 9 issued in November 2009 is the first part of phase 1 of a comprehensive project to entirely replace HKAS 39 Financial Instruments: Recognition and Measurement. This phase focuses on the classification and measurement of financial assets. Instead of classifying financial assets into four categories, an entity shall classify financial assets as subsequently measured at either amortised cost or fair value, on the basis of both the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. This aims to improve and simplify the approach for the classification and measurement of financial assets compared with the requirements of HKAS 39. In November 2010, the HKICPA issued additions to HKFRS 9 to address financial liabilities (the "Additions") and incorporated in HKFRS 9 the current derecognition principles of financial instruments of HKAS 39. Most of the Additions were carried forward unchanged from HKAS 39, while changes were made to the measurement of financial liabilities designated at fair value through profit or loss using the fair value option ("FVO"). For these FVO liabilities, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in other comprehensive income ("OCI"). The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability's credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. However, loan commitments and financial guarantee contracts which have been designated under the FVO are scoped out of the Additions. HKAS 39 is aimed to be replaced by HKFRS 9 in its entirety. Before this entire replacement, the guidance in HKAS 39 on hedge accounting and impairment of financial assets continues to apply. The Society expects to adopt HKFRS 9 from 1 October 2013. (b) HKAS 24 (Revised) Related Party Disclosures HKAS 24 (Revised) clarifies and simplifies the definition of related parties. It also provides for a partial exemption of related party disclosure to government-related entities for transactions with the same government or entities that are controlled, jointly controlled or significantly influenced by the same government. While the adoption of the revised standard will result in changes in the accounting policy, the revised standard is unlikely to have any impact on the related party disclosures as the Society currently does not have any significant transactions with government related entities. II
2.4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Related parties A party is considered to be related to the Society if: (a) (b) (c) (d) (e) (f) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the Society; (ii) has an interest in the Society that gives it significant influence over the Society; or (iii) has joint control over the Society; the party is an associate; the party is ajointly-controlled entity; the party is a member of the key management personnel of the Society; the party is a close member of the family of any individual referred to in (a) or (d); or the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e). Financial instruments (a) Financial assets Initial recognition and measurement Financial assets within the scope of HKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, heid-to-maturity investments, and availablefor-sale financial investments, as appropriate. The Society determines the classification of its financial assets at initial recognition. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Society commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace. The Society's financial assets include other receivables, amount due from a related entity, cash and cash equivalents and time deposits. They are classified and accounted for as loans and receivables. Financial assets are recognised on the trade date. Subsequent measurement Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortization and the loss arising from impairment are included in investment income in the statement of comprehensive income. 12
2.4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial instruments (continued) (a) Financial assets (continued) Derecognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when: the rights to receive cash flows from the asset have expired; or the Society has transferred its rights to receive cash flows from the asset, or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass-through" arrangement; and either (a) the Society has transferred substantially all the risks and rewards of the asset, or (b) the Society has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Society has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Society's continuing involvement in the asset. In that case, the Society also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Society has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Society could be required to repay. Impairment of financial assets The Society assesses at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and observable data indicating that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. (b) Financial liabilities Initial recognition and measurement Financial liabilities within the scope of HKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Society determines the classification of its financial liabilities at initial recognition. 13
2.4, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial instruments (continued) (b) Financial liabilities Initial recognition and measurement (continued) All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs. The Society's financial liabilities include other payables and accruals. Subsequent measurement After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised as well as through the effective interest rate method amortisation process. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Impairment of non-financial assets Where an indication of impairment exists, or when annual impairment testing for an asset is required, the asset's recoverable amount is estimated. An asset's recoverable amount is calculated as the higher of the asset's or cash-generating unit's value in use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the statement of comprehensive income in the period in which it arises in those expense categories consistent with the function of the impaired asset. An assessment is made at the end of each reporting period as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation), had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the statement of comprehensive income in the period in which it arises. 14
2.4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue recognition Revenue is recognised when it is probable that the economic benefits will flow to the Society and when the revenue can be measured reliably, on the following bases: (a) (b) (c) subscription income, in the period for which membership is granted. The underlying nature of membership in the Society is that membership is granted only once the subscription has been received by the Society; advertising and luncheon income, when services are rendered; and interest income, on an accrual basis using the effective interest method by applying the rate that discounts the eliminated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset. Cash and cash equivalents For the purpose of the statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Society's cash management. For the purpose of the statement of financial position, cash and cash equivalents comprise cash at banks, including term deposits, which are not restricted as to use. Employee benefits Paid leave carried forward The Society provides paid annual leave to its employees under their employment contracts on a calendar year basis. Under certain circumstances, such leave which remains untaken as at the end of the reporting period is permitted to be carried forward and utilised by the respective employees in the following year or will be paid to the employees upon termination of employment. An accrual is made at the end of the reporting period for the expected future cost of such paid leave earned but untaken during the year by the employees and carried forward. Pension scheme The Society operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the "MPF Scheme") under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the Scheme. Contributions are made based on a percentage of the employees' basic salaries and are charged to the statement of comprehensive income as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Society in an independently administered fund. The Society's employer contributions vest fully with the employees when contributed into the MPF Scheme. Foreign currency transactions Transactions in foreign currencies are translated into the functional currency of the Society using the exchange rates prevailing at the dates of the transactions. Exchange differences arising from the settlement of such transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. 15
3. RELATED PARTY TRANSACTIONS (a) Outstanding balance with related parties: The Society is one of the five participating organisations of the Actuaries Office in Hong Kong ("AOHK"). During the year, the Society paid contribution expenses of 390,823 (2010: 349,406) to AOHK for the sharing of the operating costs. The charge was based on a certain percentage of budgeted expenses as agreed among the participating organisations. (b) Compensation of key management personnel of the Society: No key management personnel received any compensation in respect of their services rendered to the Society during the year (2010: Nil). 4. INCOME AND OTHER REVENUE Income and other revenue represent membership subscriptions, luncheon and advertising income earned during the year as follows: Income - membership subscription income 2011 997,260 2010 854,410 Other revenue: Luncheon and seminar income Advertising income Interest income Others 462,040 247,445 5,691 1,005 716,181 1,075,485 282,185 6,051 2,113 1,365,834 16
5. SURPLUS BEFORE TAX Surplus before tax is arrived at after charging/(crediting): Auditors' remuneration Staff costs (excluding directors' remuneration (note 6))*: Wages and salaries Pension scheme contributions Interest income 2011 229,963 7,751 237,714 ( 5,691) 2010 208,505 5,460 213,965 ( 6,051) * All staff costs are recharged to AOHK and represent the proportional cost sharing borne by the Society only. DIRECTORS' REMUNERATION No director received any fees or emoluments in respect of their services rendered to the Society during the year (2010: Nil). 7. INCOME TAX The Society is exempt from Hong Kong profits tax under Section 24(2) of the Inland Revenue Ordinance. 8 PREPAYMENTS AND OTHER RECEIVABLES Prepayments Other receivables 2011 113,974 45,559 159,533 2010 126,781 32,066 158,847 None of the above assets is either past due or impaired. The financial assets included in the above balances relate to receivables for which there was no recent history of default. The carrying amounts of the prepayments and other receivables approximate to their fair values. 17
9. CASH AND CASH EQUIVALENTS 2011 2010 Bank balance 1,572,212 1,229,771 Non-pledged time deposit with original maturity of less than three months when acquired 1,031,190 1,029,350 Non-pledged time deposit with original maturity of more than three months when acquired 1,552,098 1,549,000 4,155,500 3,808,121 Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Society, and earn interest at the respective short term time deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default. 10. BALANCE WITH A RELATED ORGANISATION Particulars of an amount due from AOHK, disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance, are as follows: Name 2011 Maximum amount 2010 outstanding during the year AOHK 492,952 692,924 253,775 The Society is one of the five participation organizations of AOHK. The balance is unsecured, interest-free and has no fixed terms of repayment. 18
11. FINANCIAL INSTRUMENTS BY CATEGORY The carrying amounts of each of the categories of financial instruments of the Society as at the end of the reporting period are as follows: Financial assets Prepayments and other receivables Amount due from a related party Cash and cash equivalent Time deposits Financial liabilities Other payabies and accruals Loans and receivables 159,533 492,952 2,603,402 1,552,098 4,807,985 Financial liabilities at amortised cost 4,826 Total 159,533 492,952 2,603,402 1,552,098 4,807,985 Total HKS 4,826 30 September 2010 Financial assets Prepayments and other receivables Amount due from a related party Cash and cash equivalent Time deposits Financial liabilities Loans and receivables 158,847 253,775 2,259,121 1,549,000 4,220,743 Financial liabilities at amortised cost Total HKS 158,847 253,775 2,259,121 1,549,000 4,220,743 Total HKS Other payabies and accruals 6,120 6,120
12. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Society's principal financial instruments comprise cash and cash equivalents. The main purposes of these financial instruments are to provide finance for the Society's operations and to earn interest income. It is, and has been, throughout the year under review, the Society's policy that no trading in financial instruments shall be undertaken. The main risks arising from the Society's financial instruments are credit risk and liquidity risk. The board reviews and agrees policies for managing these risks and as set out below. Credit risk With respect to credit risk arising from the financial assets of the Society, which comprise mainly of cash and cash equivalents, the Society's exposure to credit risk arises from default of the counterparty (which refers to licensed banks in case of bank deposits), with a maximum exposure equal to the carrying amount of these instruments. The Society considers that the bank with which it has kept deposits is recognised as highly creditworthy and that the risk of default by the bank is considered remote and minimal. For other receivable balances, they are monitored on an ongoing basis and the Society's exposure to bad debts is considered not significant. Liquidity risk The Society had a solid financial position and maintained a strong and steady cash inflow from its operating activities. As at, cash and cash equivalents and time deposits of the Society amounted to 4,155,500 (2010: 3,808,121). The Society had not entered into any bank overdrafts, bank loans, convertible bonds, other interestbearing loans or finance leases during the year. The maturity of the Society's financial liabilities as at the end of the reporting period, including other payablesand accruals amounting to 4,826 (2010: 6,120), was within one year. Capital management The primary objective of the Society's capital management is to safeguard the Society's ability to continue as a going concern and to maintain healthy capital ratios in order to support its operation. No changes were made to the capital base, objectives, policies and processes of the Society from the previous year. 13. APPROVAL OF THE FINANCIAL STATEMENTS The financial statements were approved and authorised for issue by the board of directors on 2 November 2011. 20