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					Financial Statements


                                                                    1 Independent Auditor's Report


                                                                    2 Balance Sheet


                                                                    3 Income Statement


                                                                    4 Statement of Comprehensive Income


                                                                    5 Statement of Changes in Equity


                                                                    6 Cash Flow Statement


                                                                    7 Notes to the Financial Statements




 Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
    Independent Auditor’s Report



    To
    Hong Kong Export Credit Insurance Corporation (the “Corporation”)
    (Incorporated under the Hong Kong Export Credit Insurance Corporation Ordinance)

    We have audited the financial statements of Hong Kong Export Credit Insurance Corporation (the “Corporation”) set out
    on pages 2 to 31, which comprise the Corporation’s balance sheet as at 31 March 2010, and the income statement, the
    statement of comprehensive income, the statement of changes in equity and the cash flow statement for the year then
    ended, and a summary of significant accounting policies and other explanatory notes.

    Corporation’s responsibility for the financial statements
    The Corporation is responsible for the preparation and the true and fair presentation of these financial statements
    in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public
    Accountants. This responsibility includes designing, implementing and maintaining internal control relevant to the
    preparation and the true and fair presentation of financial statements that are free from material misstatement, whether
    due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are
    reasonable in the circumstances.

    Auditor’s responsibility
    Our responsibility is to express an opinion on these financial statements based on our audit. This report is made to you, as
    a body, in accordance with our agreed terms of engagement, 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 as to 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 auditor’s judgment, 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 auditor
    considers internal control relevant to the entity’s preparation and true and fair presentation of the financial statements
    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 Corporation, 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.

    Opinion
    In our opinion, the financial statements give a true and fair view of the state of affairs of the Corporation as at
    31 March 2010 and of the profit and cash flows for the year then ended in accordance with Hong Kong Financial
    Reporting Standards.




    KPMG
    Certified Public Accountants
    8th Floor, Prince’s Building
    10 Chater Road
    Central, Hong Kong
    14 May 2010



1        Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
    Balance Sheet
    As at 31 March 2010
    (Expressed in Hong Kong dollars)




                                                                                Note        2010 ($)        2009 ($)

     Assets


     Fixed assets                                                                (9)     13,516,008      15,326,120
     Investments                                                                (10)   1,222,311,685   1,080,102,954
     Insurance and other receivables                                            (11)     31,003,815      29,537,092
     Reinsurers’ share of unearned premiums                                     (15)      6,901,000       5,073,000
     Reinsurers’ share of provision for claims                                  (13)     50,315,253      49,912,952
     Bank deposits maturing in more than three months                                    78,000,000      48,000,000
     Cash and cash equivalents                                                  (17)     27,477,932      20,193,567

     Total assets                                                                      1,429,525,693   1,248,145,685


     Equity and liabilities


     Capital and reserves


     Capital                                                                     (5)     20,000,000      20,000,000
     Contingency reserve                                                         (6)   1,039,470,000    687,333,500
     Non-insurance reserve                                                       (6)     70,911,648      67,313,108
     Fair value reserve                                                          (6)     54,616,174       5,357,989
     Retained earnings                                                                   71,771,929     311,275,383

     Total capital and reserves                                                        1,256,769,751   1,091,279,980


     Liabilities


     Provision for claims                                                       (13)    115,811,673     113,917,671
     Insurance and other payables                                               (12)     38,241,269      29,685,034
     Unearned premiums                                                          (15)     18,703,000      13,263,000

     Total liabilities                                                                  172,755,942     156,865,705

     Total equity and liabilities                                                      1,429,525,693   1,248,145,685



    Approved by:



    Ralph Lai
    Commissioner
    14 May 2010


    The notes on pages 7 to 31 form part of these financial statements.




2       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
    Income Statement
    For the year ended 31 March 2010
    (Expressed in Hong Kong dollars)




                                                                                Note      2010 ($)       2009 ($)

     Turnover                                                                    (7)   233,832,228    186,064,416


     Premiums ceded to reinsurers                                                      (89,420,744)   (69,466,663)

                                                                                       144,411,484    116,597,753


     Increase in unearned premiums                                                      (3,612,000)      (638,000)

                                                                                       140,799,484    115,959,753


     Other income
     Net investment income / (loss)                                             (16)    90,315,524    (29,598,569)
     Reinsurers’ commission                                                             27,898,586     26,636,959
     Policy fees                                                                         3,526,850      5,755,056
     Gain on disposal of fixed assets                                                      19,297           1,800
     Sundry income                                                                         90,483         56,108
                                                                                       121,850,740      2,851,354


     Less:    Gross claims                                                             141,427,406    145,426,184
              Reinsurers’ share                                                        (63,192,333)   (64,991,783)

                                                                                        78,235,073     80,434,401


              Gross recoveries                                                         (11,443,140)    (8,817,920)
              Reinsurers’ share                                                          5,078,428      3,967,707

                                                                                        (6,364,712)    (4,850,213)
                                                                                        71,870,361     75,584,188

                                                                                       190,779,863     43,226,919


     Less:    Operating expenses
              Staff costs                                                        (8)    40,030,853     36,219,492
              Economic and status information                                           12,810,915     11,967,891
              Professional fees                                                          4,715,801      6,883,829
              Depreciation of fixed assets                                       (9)     6,741,216      7,649,574
              Office management                                                          5,046,587      4,738,790
              Marketing expenses                                                         5,202,905      5,666,497

                                                                                        74,548,277     73,126,073


     Profit / (loss) for the year                                                      116,231,586    (29,899,154)


    The notes on pages 7 to 31 form part of these financial statements.




3       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
    Statement of Comprehensive Income
    For the year ended 31 March 2010
    (Expressed in Hong Kong dollars)




                                                                                     2010 ($)      2009 ($)

     Profit / (loss) for the year                                                 116,231,586   (29,899,154)


     Other comprehensive income / (loss) for the year


     Avaliable-for-sale securities:
     Changes in fair value recognised during the year                              32,118,743   (50,388,746)


     Reclassification adjustments for amounts transferred to income statement:


        Impairment loss                                                             2,301,979   38,914,336


        Gain / (loss) on disposal                                                  14,837,463   (30,464,172)
     Net movement in the fair value reserve during the year recognised in other    49,258,185   (41,938,582)
       comprehensive income


     Total comprehensive income / (loss) for the year                             165,489,771   (71,837,736)


    The notes on pages 7 to 31 form part of these financial statements.




4       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
    Statement of Changes in Equity
    For the year ended 31 March 2010
    (Expressed in Hong Kong dollars)




                                                           Fair value     Contingency     Non-insurance       Retained
                                            Capital          reserve           reserve          reserve       earnings             Total
                                                ($)                ($)              ($)              ($)            ($)              ($)

     Balance at 1 April 2009           20,000,000          5,357,989      687,333,500        67,313,108    311,275,383     1,091,279,980
     Total comprehensive                          -      49,258,185                   -                -   116,231,586      165,489,771
       income for the year
     Transfer from retained                       -                  -    352,136,500         3,598,540    (355,735,040)               -
        earnings

     Balance at 31 March 2010          20,000,000        54,616,174      1,039,470,000       70,911,648     71,771,929     1,256,769,751


     Balance at 1 April 2008           20,000,000        47,296,571       637,680,000        61,879,535    396,261,610     1,163,117,716
     Total comprehensive                          -      (41,938,582)                 -                -    (29,899,154)     (71,837,736)
       loss for the year
     Transfer from retained                       -                  -     49,653,500         5,433,573     (55,087,073)               -
        earnings

     Balance at 31 March 2009          20,000,000          5,357,989      687,333,500        67,313,108    311,275,383     1,091,279,980


    The notes on pages 7 to 31 form part of these financial statements.




5       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
    Cash Flow Statement
    For the year ended 31 March 2010
    (Expressed in Hong Kong dollars)




                                                                                Note      2010 ($)       2009 ($)

     Operating activities
     Profit / (loss) for the year                                                      116,231,586    (29,899,154)
     Adjustments for:
         Net investment (income) / loss                                                (90,315,524)   29,598,569
         Fund management fees                                                           (3,739,622)    (3,515,564)
         Depreciation of fixed assets                                                    6,741,216     7,649,574
         Bad debts written off                                                            126,684        138,357
         Gain on disposal of fixed assets                                                  (19,297)        (1,800)

     Operating result before changes in working capital                                 29,025,043     3,969,982


         Increase in insurance and other receivables                                    (1,590,766)    (2,322,973)
         Increase in reinsurers’ share of unearned premiums                             (1,828,000)     (673,000)
         Increase in reinsurers’ share of provision for claims                            (402,301)   (16,122,772)
         Increase / (decrease) in insurance and other payables                           8,556,235     (3,686,480)
         Increase in provision for claims                                                1,894,002    36,828,382
         Increase in unearned premiums                                                   5,440,000     1,311,000

     Net cash generated from operating activities                                       41,094,213    19,304,139


     Investing activities
         Placement of time deposits                                                    (94,000,000)   (89,000,000)
         Maturity of time deposits                                                      64,000,000    61,000,000
         Purchase of fixed assets                                                       (4,941,807)    (5,666,496)
         Proceeds on disposal of fixed assets                                              30,000          1,800
         Interest received from short term deposits                                       849,780      1,070,722
         Interest and dividends received from investments                                  22,072               -
         Stamp duty refund                                                                230,107        206,055

     Net cash used in investing activities                                             (33,809,848)   (32,387,919)


     Net increase / (decrease) in cash and cash equivalents                              7,284,365    (13,083,780)


     Cash and cash equivalents at beginning of the year                                 20,193,567    33,277,347

     Cash and cash equivalents at end of the year                               (17)    27,477,932    20,193,567


    The notes on pages 7 to 31 form part of these financial statements.




6       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
    Notes to the Financial Statements
    (Expressed in Hong Kong dollars)




    1. Significant accounting policies

         a. Statement of compliance
              These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting
              Standards (HKFRSs) which collective term includes all applicable individual Hong Kong Financial Reporting
              Standards, Hong Kong Accounting Standards (HKASs) and Interpretations issued by the Hong Kong Institute
              of Certified Public Accountants (HKICPA), accounting principles generally accepted in Hong Kong and the
              requirements of the Hong Kong Export Credit Insurance Corporation Ordinance (Chapter 1115). A summary of
              the significant accounting policies adopted by the Corporation is set out below.

              The HKICPA has issued a number of new and revised HKFRSs and Interpretations that are first effective
              or available for early adoption for the current accounting period of the Corporation. Of these, the following
              developments are relevant to the Corporation’s financial statements:

              •     HKAS 1 (Revised 2007), Presentation of financial statements
              •     Amendments to HKFRS 7, Financial instruments: Disclosures - improving disclosures about financial
                    instruments

              The impact of these developments is as follows:

              •     As a result of the adoption of HKAS 1 (Revised 2007), details of changes in equity during the period arising
                    from transactions with equity shareholders in their capacity as such have been presented separately from
                    all other income and expenses in a statement of changes in equity. All other items of income and expense
                    are presented in the income statement, if they are recognised as part of profit or loss for the period, or
                    otherwise in a new primary statement, the statement of comprehensive income. Corresponding amounts
                    have been restated to conform to the new presentation. This change in presentation has no effect on
                    reported profit or loss, total income and expense or net assets for any period presented.

              •     As a result of the adoption of the amendments to HKFRS 7, the financial statements included disclosures
                    about the fair value measurements of the Corporation’s financial instruments, categorising these fair value
                    measurements into a three-level fair value hierarchy according to the extent to which they are based on
                    observable market data. The Corporation has taken advantage of the transitional provisions set out in
                    the amendments to HKFRS 7, under which comparative information for the newly required disclosures
                    about the fair value measurements of financial instruments has not been provided. Revised disclosures in
                    respect of fair values of financial instruments are included in note 3.

                    Further, the definition of liquidity risk has been amended and it is now defined as the risk that an entity
                    will encounter difficulty in meeting obligations associated with financial liabilities that are settled by
                    delivering cash or another financial asset. The amendments require disclosure of a maturity analysis for
                    non-derivative and derivative financial liabilities, but contractual maturities are required to be disclosed for
                    derivative financial liabilities only when contractual maturities are essential for an understanding of the
                    timing of cash flows. Revised disclosures in respect of liquidity risk are included in note 10.

              The Corporation has not applied any new standards or interpretations that are not yet effective for the current
              accounting year (see note 22).




7       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
    Notes to the Financial Statements
    (Expressed in Hong Kong dollars)




         b. Basis of preparation of the financial statements
              The measurement basis used in the preparation of the financial statements is historical cost except for certain
              financial assets which are stated at fair value as explained in the accounting policies set out below.

              The preparation of the financial statements in conformity with HKFRSs requires management to make
              judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets,
              liabilities, income and expenses. The estimates and associated assumptions are based on historical experience
              and various other factors that are believed to be reasonable under the circumstances, the results of which form
              the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent
              from other sources. Actual results may differ from these estimates.

              The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
              are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of
              the revision and future years if the revision affects both current and future years.

              Judgments made by management in the application of HKFRSs that have significant effect on the financial
              statements and estimates with a significant risk of material adjustment in the next year are discussed in note 2.


         c. Insurance contracts
            (i) Classification of contracts
                    Contracts under which the Corporation accepts significant insurance risk from another party (the
                    policyholder) by agreeing to compensate the policyholder or other beneficiary if a specified uncertain future
                    event (the insured event) adversely affects the policyholder or other beneficiary are classified as insurance
                    contracts. Insurance risk is risk other than financial risk. Insurance contracts may also transfer some
                    financial risk.

                    The Corporation has elected to treat all credit insurance contracts as insurance contracts and to account for
                    them in accordance with HKFRS 4: Insurance contracts.

              (ii) Recognition and measurement of contracts
                    • Premiums
                    Gross premiums written reflect business written during the year.

                    The earned proportion of premiums is recognised as revenue. Premiums are earned from the date of
                    attachment of risk over the indemnity period based on the pattern of the risks underwritten.

                    • Unearned premium provision
                    The provision for unearned premiums comprises the proportion of gross premiums written which is
                    estimated to be earned in the following or subsequent financial years according to the payment terms of
                    each shipment.




8       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
    Notes to the Financial Statements
    (Expressed in Hong Kong dollars)




                    • Claims
                    Claims incurred comprise the settlement and handling costs of paid and outstanding claims arising from
                    events occurring during the financial year together with adjustments to prior year claims provisions.

                    Claims outstanding comprise provisions for the Corporation’s estimate of the ultimate cost of settling all
                    claims incurred but unpaid at the balance sheet date whether intimated or not, and related external claims
                    handling expenses.

                    Claims outstanding are assessed by reviewing individual claims and making allowance for claims incurred
                    but not yet intimated. Estimates of salvage and subrogation recoveries are presented separately as assets.
                    Recoveries are assessed in a manner similar to the assessment of claims outstanding.

                    Adjustments to claims provisions established in prior years are reflected in the financial statements of the
                    period in which the adjustments are made and disclosed separately if material.

                    • Reinsurance
                    The Corporation cedes reinsurance in the normal course of business for the purpose of limiting its net loss
                    potential through the diversification of its risks. Assets, liabilities, income and expenses arising from ceded
                    reinsurance contracts are presented separately from the related assets, liabilities, income and expenses
                    from the related insurance contracts because the reinsurance arrangements do not relieve the Corporation
                    from its direct obligations to its policyholders.

                    Only rights under contracts that give rise to a significant transfer of insurance risk are accounted for as
                    reinsurance assets. Rights under contracts that do not transfer significant insurance risk are accounted for as
                    financial instruments.

                    Reinsurance premiums for ceded reinsurance are recognised as an expense on a basis that is consistent
                    with the recognition basis for the premiums on the related insurance contracts. Reinsurance premiums
                    are expensed over the period that the reinsurance cover is provided based on the expected pattern of the
                    reinsured risks. The unexpensed portion of ceded reinsurance premiums is included in reinsurance assets.

                    Reinsurance assets are assessed for impairment at each balance sheet date. An asset is deemed impaired
                    if there is objective evidence, as a result of an event that occurred after its initial recognition, that the
                    Corporation may not recover all amounts due, and that the event has a reliably measurable impact on the
                    amounts that the Corporation will receive from the reinsurers.

                    • Liability adequacy test
                    At each balance sheet date, insurance contract liabilities are tested for adequacy by discounting current
                    estimates of all future contractual cash flows and comparing this amount to the carrying value of the
                    liability and any related assets. Where a shortfall is identified, an additional provision is made and the
                    Corporation recognises the deficiency in the income statement for the year.




9       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




          d. Fixed assets
               Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment
               (see note 1(g)). Depreciation is calculated to write off the cost of fixed assets over their anticipated useful lives
               on a straight line basis as follows:

               Leasehold land and building held for own use                       40 years
               Leasehold improvements                                              5 years
               Computer equipment                                                  3 years
               Motor vehicle                                                       3 years
               Office machinery and furniture                                      5 years


          e. Investments
               Investments in listed and unlisted debt and equity securities are classified as available-for-sale investments.
               When available-for-sale investments are recognised initially, they are measured at fair value, plus directly
               attributable transaction costs.

               All regular way purchases and sales of available-for-sale investments are recognised on the trade date, i.e., the
               date that the Corporation commits to purchase the asset. Regular way purchases or sales are purchases or
               sales of available-for-sale investments that require delivery of assets within the period generally established by
               regulation or convention in the market place.

               After initial recognition, available-for-sale investments are measured at fair value, with any gains or losses
               recognised directly in the fair value reserve, which is a separate component of equity, until the investment is
               derecognised or until the investment is determined to be impaired, at which time the cumulative gains or losses
               previously reported in the fair value reserve is included in the income statement. In the case of monetary items
               such as debt securities, foreign exchange gains and losses are directly recognised in the income statement.
               Where these investments are interest-bearing, interest calculated using effective interest method is recognised
               in the income statement.

               (i) Fair value
                     The fair value of investments that are actively traded in organised financial markets is determined by
                     reference to quoted market bid prices at the close of business at the balance sheet date. For investments
                     where there is no active market, fair value is determined using valuation techniques that provide a reliable
                     estimate of prices which could be obtained in actual market transactions. Such techniques include using
                     recent arm’s length market transactions; reference to the current market value of another instrument
                     which is substantially the same; a discounted cash flow analysis; and option pricing models.




10       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




               (ii) Impairment
                     The Corporation assesses at each balance sheet date whether there is any objective evidence that an
                     available-for-sale investment is impaired. Objective evidence of impairment includes observable data that
                     comes to the attention of the Corporation about one or more of the following loss events:

                     • significant financial difficulty of the debtor;
                     • a breach of contract, such as a default or delinquency in interest or principal payments;
                     • it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
                     • significant changes in the technological, market, economic or legal environment that have an adverse
                       effect on the debtor; and
                     • a significant or prolonged decline in the fair value of an investment in an equity instrument below
                       its cost.

                     For available-for-sale securities, the cumulative losses that have been recognised in the fair value reserve
                     are reclassified to the income statement. The amount of the cumulative losses that is recognised in the
                     income statement is the difference between the acquisition cost (net of any principal repayment and
                     amortisation) and current fair value, less any impairment losses on that asset previously recognised in the
                     income statement.

                     Impairment losses recognised in the income statement in respect of available-for-sale equity securities
                     are not reversed through income statement. Any subsequent increase in the fair value of such assets is
                     recognised in other comprehensive income.

                     Impairment losses in respect of available-for-sale debt securities are reversed if the subsequent increase
                     in fair value can be objectively related to an event occurring after the impairment loss was recognised.
                     Reversals of impairment losses in such circumstances are recognised in the income statement.

               (iii) Derecognition
                     An available-for-sale investment is derecognised where:

                     • the right to receive cash flows from the investment has expired;
                     • the Corporation retains the rights to receive cash flows from the investment, but has assumed an
                       obligation to pay them in full without material delay to a third party under a “pass-through” arrangement;
                       or
                     • the Corporation has transferred its rights to receive cash flows from the investment and either (a)
                       has transferred substantially all the risks and rewards of the investment, or (b) has neither transferred
                       nor retained substantially all the risks and rewards of the investment, but has transferred control of
                       the investment.

                     Where these investments are derecognised, the cumulative gains or losses previously recognised directly
                     in the fair value reserve are recognised in the income statement.


          f.   Forward foreign exchange contracts
               Forward foreign exchange contracts are recognised initially at fair value. At each balance sheet date the
               value is remeasured. The gains or losses on remeasurement to fair value are charged immediately to the
               income statement.




11       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




          g. Impairment of assets
               Where an indication of impairment exists, or when annual impairment testing for an asset is required (other
               than available-for-sale investments), 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 each 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 from 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 the 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 income statement in the period in which it arises.

               An assessment is made at each reporting date 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 is reversed only if there has been a
               change in the estimates used to determine the recoverable amount of that asset, however, not to an amount
               higher than the carrying amount that would have been determined (net of any depreciation/amortisation), had no
               impairment loss been recognised for the asset in prior years. A reversal of such impairment loss is credited to
               the income statement in the period in which it arises.


          h. Insurance and other receivables
               Insurance and other receivables are initially recognised at fair value and thereafter stated at amortised cost
               less impairment losses for bad and doubtful debts (see note 1(g)), except the effect of discounting would be
               immaterial. In such cases, the receivables are stated at cost less impairment losses for bad and doubtful debts
               (see note 1(g)).


          i.   Cash and cash equivalents
               Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial
               institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash
               and which are subject to an insignificant risk of changes in value, having been within three months of maturity
               at acquisition.


          j.   Insurance and other payables
               Insurance and other payables are initially recognised at fair value and thereafter stated at amortised cost unless
               the effect of discounting would be immaterial, in which case they are stated at cost.


          k. Translation of foreign currencies
               Foreign currency transactions during the year are translated into Hong Kong dollars at the exchange rates ruling
               at the transaction dates. Monetary assets and liabilities denominated in foreign currencies have been translated
               into Hong Kong dollars at the approximate market rates of exchange ruling at the balance sheet date. Exchange
               gains and losses, whether realised or unrealised, are dealt with in the income statement.




12       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




          l.   Related parties
               For the purposes of these financial statements, a party is considered to be related to the Corporation if:

               (i)   the party has the ability, directly or indirectly through one or more intermediaries, to control the Corporation
                     or exercise significant influence over the Corporation in making financial and operating policy decisions, or
                     has a joint control over the Corporation;

               (ii) the Corporation and the party are subject to common control;

               (iii) the party is an associate of the Corporation or a joint venture in which the Corporation is a venturer;

               (iv) the party is a member of key management personnel of the Corporation or the Corporation’s parent, or
                    a close family member of such an individual, or is an entity under the control, joint control or significant
                    influence of such individuals;

               (v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control
                   or significant influence of such individuals; or

               (vi) the party is a post-employment benefit plan which is for the benefit of employees of the Corporation or of
                    any entity that is related party of the Corporation.

               Close family members of an individual are those family members who may be expected to influence, or be
               influenced by, that individual in their dealings with the entity.


          m. Revenue recognition
             (i) Premiums
                     The accounting policy in relation to revenue from insurance contracts is disclosed in note 1c(ii).

               (ii) Reinsurers’ commission
                     Reinsurers’ commission is recognised when the reinsurance premiums are accounted for and is based on
                     the contractual commission rates and the expected ultimate loss ratios at the financial year end.

               (iii) Dividend income
                     Dividend income from unlisted investments is recognised when the shareholder’s right to receive payment
                     is established.

                     Dividend income from listed equities is recognised when the share price of the investment goes
                     ex-dividend.

               (iv) Interest income
                     Interest income is recognised as it accrues using the effective interest method.


          n. Employee benefits
               (i)   Salaries and paid annual leave are accrued in the year in which the associated services are rendered by
                     employees of the Corporation.

               (ii) Obligations for contributions to the defined contribution retirement plans, including contributions payable
                    under the Hong Kong Mandatory Provident Fund Schemes Ordinance, are recognised as an expense in the
                    income statement as incurred.




13       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     2. Accounting estimates and judgments
          The preparation of these financial statements in conformity with HKFRSs requires management to make estimates
          and assumptions that affect the reported amounts of assets and liabilities at the date of these financial statements
          and the reported amounts of revenues and expenses during the year then ended. While management believes that
          the amounts included in these financial statements reflect its best estimates and assumptions, actual results could
          differ from those estimates. The Corporation’s principal estimates include:

          •     fair value and impairment of available-for-sale securities; and
          •     provision for claims.

          Key sources of estimation uncertainty, including assumptions and key risk factors, and critical judgments in relation
          to these accounting policies are set out in notes 4 and 14.


     3. Insurance and financial risk management
          Exposure to insurance and financial risks arises in the normal course of the Corporation’s business. This section
          summarises these risks and the way the Corporation manages them.


          a. Insurance risk
               The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of
               the amount of the resulting claim. The Corporation manages its insurance risk mainly through its underwriting
               and reinsurance strategy.

               The Corporation’s insurance business covers non-payment risks arising from:

               (i) Buyer risks – insolvency and bankruptcy, default and contract repudiation
               (ii) Country risks – blockage or delay in foreign exchange remittance, cancellation of import licences, import
                    bans, payment moratorium, war, revolution, riot and natural disaster.

               For the assessment and monitoring of buyer risks, the Corporation takes into consideration both qualitative and
               quantitative factors and conducts regular reviews on the buyers’ credit standing and payment performance. As
               regards country risks, the Corporation periodically reviews the economic and political conditions of the insured
               markets so as to revise its underwriting guidelines, wherever appropriate.




14       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




               As the bulk of the insured exports are for the developed markets, the risks underwritten concentrate on the
               buyer risks in the developed markets. Insured business by major market is shown as below:


                                                                     2010                                   2009
                                                         $ million   % of total sum insured     $ million    % of total sum insured

                 USA                                       22,726                      35.4       17,432                      36.9
                 UK                                         8,285                      12.9        6,841                      14.5
                 Mainland China                             4,708                       7.3        3,134                       6.7
                 Germany                                    3,622                       5.7        2,981                       6.3
                 Australia                                  2,080                       3.3        1,732                       3.7
                 Other Markets                             22,727                      35.4       15,060                      31.9

                 Total sum insured                         64,148                    100.0        47,180                     100.0


               (i) Underwriting strategy
                      The Corporation’s underwriting strategy seeks diversity to ensure a balanced portfolio of risks. As such, it
                      is believed that this reduces the variability of the outcome. The Corporation also aims to achieve accurate,
                      objective and prompt assessment of risks to support exporters with professional credit management
                      services to help them expand business.

                      Underwriters are delegated with underwriting authorities that set out the limits that they can issue
                      according to their rank and experience. The Corporation has established procedures and internal credit
                      committees to underwrite risks and review large exposure on a regular basis.

               (ii) Reinsurance strategy
                      The Corporation reinsures its risks to limit its exposure to underwriting losses with a quota share treaty
                      with annual renewal. To manage the risks and to ensure the reinsurers have the capability to honour their
                      shares of insurance liabilities, the Corporation has carefully selected reinsurers with good credit standing
                      to join the programmes and regularly reviewed their credibility, with reference to the advice from a
                      professional and reputable broker.




15       Hong Kong Export Credit Insurance Corporation    Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




          b. Financial risk
             (i) Credit risk
                     The Corporation is exposed to credit risk that its policyholders or counterparties become incapable to pay
                     amounts in full when due. Key areas where the Corporation is exposed to credit risk are its insurance and
                     other receivables, debt securities, bank balances and through its reinsurance assets.

                     • Insurance and other receivables
                     The Corporation has no significant concentration of credit risk, with exposure spreading over a number
                     of policyholders and counterparties. The receivables from policyholders are due within 14 days from the
                     date of billing. Reminders will be sent to policyholders in respect of those long outstanding invoices.
                     Management reviews the recoverable amount of each individual debt regularly to ensure that adequate
                     impairment losses are recognised for irrecoverable debts.

                     • Debt securities
                     Debt securities are normally only in liquid securities and with high credit ratings assigned by leading
                     international credit ratings agencies. To reduce the credit risk associated with debt securities, the
                     Corporation restricts the fund managers to invest in debt securities with credit ratings not below the “AA”
                     investment grade (2009: “AA” or higher) and government bonds with “A-” or higher ratings (2009: “A-” or
                     higher) of Standard and Poor’s.

                     • Bank balances
                     The Corporation’s credit risk is attributable to bank balances. To reduce the credit risk associated with
                     bank balances, the Corporation is restricted to placing deposits with approved banks which should be local
                     licensed banks under the Banking Ordinance with good financial strength and credit rating.

                     • Reinsurance assets
                     To reduce the credit risk with insurance debtors, the Corporation takes into account, among other factors,
                     ratings and evaluation by recognised credit ratings agencies, their claims payment and underwriting track
                     record, as well as the Corporation’s past transaction experience with them. The Corporation manages the
                     risks through careful selection of reinsurers and regularly reviews their credibility. The Standard and Poor’s
                     credit ratings of the reinsurers for the 2010 reinsurance treaties are “A-”or higher (2009: “A-”or higher).




16       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




               (ii) Liquidity risk
                     Liquidity management is essential to ensure the Corporation has the ability to meet its obligations as they
                     fall due. The Corporation’s policy is to regularly monitor current and expected liquidity requirements to
                     ensure that it maintains sufficient reserves of cash and readily realisable marketable securities to meet its
                     liquidity requirements in the short and longer terms.

                     The following table details the insurance and financial liabilities at the balance sheet date:


                                                                                     Carrying                      Total
                                                                                        value                contractual   Within one year
                                                                                 at 31 March     undiscounted cashflows     or on demand
                                                                                           ($)                       ($)               ($)

                       At 31 March 2010


                       Policy deposits                                           22,630,000                  22,630,000        22,630,000
                       Amounts due to reinsurers                                   8,368,388                  8,368,388         8,368,388
                       Other creditors and accrued charges                         7,242,881                  7,242,881         7,242,881
                       Unearned premiums                                         18,703,000                  18,703,000        18,703,000

                                                                                 56,944,269                  56,944,269        56,944,269


                       At 31 March 2009


                       Policy deposits                                           19,023,400                  19,023,400        19,023,400
                       Amounts due to reinsurers                                   3,118,849                  3,118,849         3,118,849
                       Other creditors and accrued charges                         7,542,785                  7,542,785         7,542,785
                       Unearned premiums                                         13,263,000                  13,263,000        13,263,000

                                                                                 42,948,034                  42,948,034        42,948,034




17       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




               (iii) Interest rate risk
                     Interest rate risk is the risk that interest rates will move and result in profits or losses to the Corporation.
                     The Corporation’s interest rate risk is concentrated in its investment portfolio and cash at bank. The
                     effective interest rates at the balance sheet date and the maturities are set out in notes 10 and 17 to the
                     financial statements.

                     A sensitivity analysis of fixed rate debt securities and cash deposits at bank at the balance sheet date is
                     performed. The following details the effect of change in interest rate with all other variables held constant.


                                                                                     2010                                  2009
                                                                     Effect on profit Effect on other       Effect on profit   Effect on other
                                                        Increase/      and retained components of              and retained    components of
                                                    (decrease) in           earnings           equity              earnings             equity
                                                     interest rate          $ million        $ million             $ million          $ million


                       Fixed rate debt securities          0.50%                     -           (9.35)                    -              (7.91)
                                                          (0.50%)                    -           9.35                      -               7.91


                       Cash deposits at banks              0.50%                 0.49                -                 0.28                    -
                                                          (0.50%)                (0.49)              -                (0.28)                   -


               (iv) Equity price risk
                     The Corporation is exposed to equity price changes arising from equity investments classified as available-
                     for-sale equity securities. To reduce the equity price risk associated with equity securities, the Corporation
                     restricts the fund managers to invest no more than 30% of the total value of portfolio in equities and to
                     invest in approved stock markets with minimum market capitalisation requirement.

                     The following table indicates the approximate change in the Corporation’s equity in response to reasonably
                     possible changes in the relevant stock market indices in respect of listed investments with all other
                     variables held constant.


                                                                                                           2010                           2009
                                                                                             Effect on equity                  Effect on equity
                                                         Change in market indices                    $ million                         $ million

                       Stock market indices                               10.00%                          35.52                          15.59
                                                                         (10.00%)                         (35.52)                        (15.59)




18       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




               (v) Fair values
                     Financial instruments carried at fair value

                     The following table presents the carrying value of financial instruments measured at fair value at the
                     balance sheet date across the three levels of the fair value hierarchy defined in HKFRS 7, Financial
                     Instruments: Disclosures, with the fair value of each financial instrument categorised in its entirety based
                     on the lowest level of input that is significant to that fair value measurement. The levels are defined
                     as follows:

                     • Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for
                       identical financial instruments

                     • Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or
                       using valuation techniques in which all significant inputs are directly or indirectly based on observable
                       market data

                     • Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is
                       not based on observable market data


                                                                                                   2010
                                                                   Level 1 ($)       Level 2 ($)          Level 3 ($)        Total ($)

                       Assets


                       Available-for-sale securities:
                          - Listed                               979,849,355         35,339,589                     -   1,015,188,944
                          - Unlisted                             109,650,032                   -                    -    109,650,032


                       Forward exchange contracts                                -     849,123                      -        849,123


                       Deposits with fund managers                 96,623,586                  -                    -     96,623,586

                                                               1,186,122,973         36,188,712                     -   1,222,311,685




19       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




               (vi) Foreign exchange risk
                     At 31 March 2010 and 2009, respectively, approximately 78.2% and 78.5% of the Corporation’s financial
                     assets were denominated in foreign currencies. There were no financial liabilities denominated in
                     foreign currencies.

                     The following table indicates the approximate change in the Corporation’s profit for the year, retained
                     earnings and other components of equity in response to reasonably possible changes in the foreign
                     exchange rates to which the Corporation had exposure at the balance sheet date.


                                                                                            2010
                                                                                                                          Effect on other
                                                                                                 Effect on profit and     components of
                                                                           Change in foreign       retained earnings               equity
                       Currency                 $ million            %        exchange rate                 $ million            $ million

                       Asia – excl. HKD            56.72            4.6                  9.0%                     0.50               4.51
                                                                                        (9.0%)                   (0.50)             (4.51)
                       AUD                         37.41            3.1                24.0%                      1.73               7.25
                                                                                       (24.0%)                   (1.73)             (7.25)
                       EUR                         30.94            2.5                12.0%                      0.36               3.36
                                                                                       (12.0%)                   (0.36)             (3.36)
                       GBP                         27.24            2.2                12.0%                      0.09               3.17
                                                                                       (12.0%)                   (0.09)             (3.17)



                                                                                            2009
                                                                                                                          Effect on other
                                                                                                   Effect on profit and   components of
                                                                             Change in foreign       retained earnings             equity
                       Currency                  $ million           %          exchange rate                 $ million          $ million

                       Asia – excl. HKD            29.91            2.4                10.0%                      0.07               2.92
                                                                                       (10.0%)                   (0.07)              (2.92)
                       EUR                         21.85            1.8                10.0%                      0.22               1.97
                                                                                       (10.0%)                   (0.22)              (1.97)
                       AUD                         21.93            1.8                10.0%                      0.44               1.75
                                                                                       (10.0%)                   (0.44)              (1.75)
                       GBP                         10.15            0.8                10.0%                     (0.07)              1.08
                                                                                       (10.0%)                    0.07               (1.08)
                       CAD                           0.76           0.1                10.0%                      0.08                   -
                                                                                       (10.0%)                   (0.08)                  -




20       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




                     The Hong Kong dollar is pegged to the US dollar. As a result, management considers the foreign
                     exchange risk of holding the US dollar to be minimal. Furthermore, the Corporation also entered into
                     forward exchange contracts to mitigate the risk of certain investments denominated in foreign currencies,
                     principally Euro, Sterling and Australian dollar.

                     The Corporation enters into forward exchange contracts to offset the foreign exchange risks relating to
                     certain investments denominated in foreign currencies (principally Euro, Sterling and Australian dollar). The
                     Hong Kong dollar equivalent amount of forward exchange contracts entered into by the Corporation at
                     31 March 2010 is $849,123 (2009: outstanding at $2,346,413).


     4. Provision for claims not yet intimated
          The provision for claims not yet intimated is calculated based on the historical average ratio of claims incurred but
          not yet reported and the aggregate amount of the outstanding shipments that were at risk at the financial year
          end. The provision is normally kept open for two accounting years. The historical average ratio is derived using
          the Corporation’s “average” methodology adjusted for management judgement by making reference to other
          methodologies such as the Bornhuetter-Ferguson method to ascertain the reasonableness of the historical average
          ratio. This process remains unchanged from prior years.

          The Corporation believes that the provision for outstanding claims is adequate. However, an increase of 5% in
          the expected loss ratio in the latest accident year would decrease both profit and net assets by $2.73 million
          (2009: $1.72 million).


     5. Capital
          The capital of the Corporation is wholly provided by the Government of the Hong Kong Special Administrative Region
          under section 19 of the Hong Kong Export Credit Insurance Corporation Ordinance (Chapter 1115). Its capital
          totalling $1,256.77 million (2009: $1,091.28 million) includes capital and other components of equity.

          The Corporation aims to encourage and support export trade through the provision of insurance protection for Hong
          Kong exporters against non-payment risks arising from commercial and political events.

          In managing its capital, the Corporation will determine the total amount of the capital and reserves required by the
          Corporation by taking into account the sums at risk under contracts of insurance entered into by the Corporation
          (see note 6). In addition, the maximum liability the Corporation is permitted to undertake should not at any time
          exceed the Statutory Maximum Liabilities (“SML”), which is guaranteed by the Government under section 23 of the
          Hong Kong Export Credit Insurance Corporation Ordinance (Chapter 1115). The Corporation’s overall capital
          management strategy remains unchanged from prior years.




21       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     6. Nature and purpose of reserves

          a. Contingency reserve and non-insurance reserve
               The Corporation is required to have adequate reserves to meet its obligations stipulated under section 12(3) of
               the Hong Kong Export Credit Insurance Corporation Ordinance (Chapter 1115), including the contingent liability
               to any unknown catastrophic claims that may arise from unexpired risks on contracts of insurance entered
               into by the Corporation. In addition, the Corporation considers it prudent to set aside an additional reserve for
               “non-insurance” purposes, to safeguard against exceptional fluctuation in the operating expenses or investment
               performance. Appropriate amounts, set aside for the above purposes, are disclosed as “contingency reserve”
               and “non-insurance reserve” respectively. Transfers to or from these reserves represent appropriations from
               retained earnings, determined on the basis of criteria recommended by independent consultants.


          b. Fair value reserve
               The fair value reserve comprises the cumulative net change in the fair value of available-for-sale securities held
               at the balance sheet date and is dealt with in accordance with the accounting policies in notes 1(e) and 1(g).


     7. Turnover
          The principal activity of the Corporation is the transaction of export credit insurance.

          Turnover represents gross premiums written during the year in the ordinary course of business, net of discounts and
          returns.


     8. Staff costs

                                                                                               2010 ($)                 2009 ($)

            Salaries, wages and other benefits                                               37,050,558              33,342,775
            Contributions to defined contribution plans                                       2,980,295               2,876,717

                                                                                             40,030,853              36,219,492




22       Hong Kong Export Credit Insurance Corporation    Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     9. Fixed assets

                                             Leasehold
                                               land and                                                                  Office
                                          building held           Leasehold           Computer                       machinery
                                           for own use        improvements           equipment     Motor vehicle   and furniture         Total
                                                     ($)                ($)                 ($)              ($)              ($)          ($)

            Cost:
            Balance at 1 April 2009        26,100,000              8,032,024         40,194,808         359,580       2,149,710     76,836,122
            Additions                                    -           113,750          4,273,447                -        554,610      4,941,807
            Disposals                                    -           (60,300)        (6,458,175)               -       (356,100)    (6,874,575)

            Balance at 31 March 2010       26,100,000              8,085,474         38,010,080         359,580       2,348,220     74,903,354


            Accumulated depreciation:
            Balance at 1 April 2009        17,617,500              7,492,363         34,300,299         359,580       1,740,260     61,510,002
            Charge for the year                652,500               230,242          5,577,125                -        281,349      6,741,216
            Written back on disposals                    -           (60,300)        (6,458,175)               -       (345,397)    (6,863,872)

            Balance at 31 March 2010       18,270,000              7,662,305         33,419,249         359,580       1,676,212     61,387,346


            Net book value:

            At 31 March 2010                 7,830,000               423,169          4,590,831                -        672,008     13,516,008




            Cost:
            Balance at 1 April 2008        26,100,000              7,824,501         34,969,210         359,580       1,942,545     71,195,836
            Additions                                    -           222,123          5,225,598                -        218,775      5,666,496
            Disposals                                    -           (14,600)                 -                -        (11,610)       (26,210)

            Balance at 31 March 2009       26,100,000              8,032,024         40,194,808         359,580       2,149,710     76,836,122


            Accumulated depreciation:
            Balance at 1 April 2008        16,965,000              6,520,871         28,531,134         359,580       1,510,053     53,886,638
            Charge for the year                652,500               986,092          5,769,165                -        241,817      7,649,574
            Written back on disposals                    -           (14,600)                 -                -        (11,610)       (26,210)

            Balance at 31 March 2009       17,617,500              7,492,363         34,300,299         359,580       1,740,260     61,510,002


            Net book value:

            At 31 March 2009                 8,482,500               539,661          5,894,509                -        409,450     15,326,120


          Note: The leasehold office premises are situated in Hong Kong and held under a long-term lease.




23       Hong Kong Export Credit Insurance Corporation       Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     10. Investments

                                                                                      2010 ($)                                   2009 ($)
                                                  Effective interest rates                       Effective interest rates

            (a) Available-for-sale securities             0.75% - 6.03%                                  1.59% - 7.52%
                - debt securities


                Listed
                    In Hong Kong                                                   33,723,670                                 21,962,540
                    Outside Hong Kong                                             652,078,890                                677,188,535

                                                                                  685,802,560                                699,151,075


                Unlisted
                    In Hong Kong                                                             -                                          -
                    Outside Hong Kong                                             109,650,032                                 80,192,451

                                                                                  109,650,032                                 80,192,451


            (b) Available-for-sale securities
                - equity securities


                Listed
                    In Hong Kong                                                   82,934,336                                 59,657,156
                    Outside Hong Kong                                             246,452,048                                141,420,459

                                                                                  329,386,384                                201,077,615


            (c) Trading - foreign exchange                                            849,123                                  (2,346,413)
                forward contracts


            (d) Deposits with fund managers               0.00% - 0.10%            96,623,586         0.0001% - 0.25%        102,028,226

            Total                                                                1,222,311,685                              1,080,102,954




24       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




          In respect of income-earning financial assets, the following table indicates the periods in which they reprice or the
          maturity dates, if earlier:


                                                           Less than            One to           Two to       More than
                                                            one year          two years       five years      five years            Total
                                                                  ($)               ($)              ($)             ($)              ($)

            Available-for-sale securities             149,089,230          153,560,349      398,508,188      94,294,825      795,452,592
              - debt securities
            Trading - foreign exchange forward              849,123                     -              -               -         849,123
              contracts
            Deposits with fund managers                  96,623,586                     -              -               -      96,623,586

            As at 31 March 2010                       246,561,939          153,560,349      398,508,188      94,294,825      892,925,301


            Maturity analysis for financial assets:

                                                            Carrying      Gross nominal       Less than          One to    Three months
                                                            amount      inflow/(outflow)     one month     three months      to one year
                                                                  ($)                 ($)            ($)             ($)             ($)

            Derivative assets                               849,123
            Outflows                                                      (115,044,874)     (18,994,791)    (96,050,083)                -
            Inflows                                                        115,893,997       18,786,767      97,107,230                 -

            As at 31 March 2010                             849,123             849,123        (208,024)      1,057,147                 -


                                                           Less than            One to           Two to       More than
                                                            one year          two years       five years      five years            Total
                                                                  ($)               ($)              ($)             ($)              ($)

            Available-for-sale securities             151,385,318          237,073,025      293,329,843      97,555,340      779,343,526
              - debt securities
            Trading - foreign exchange forward           (2,346,413)                    -              -               -      (2,346,413)
              contracts
            Deposits with fund managers               102,028,226                       -              -               -     102,028,226

            As at 31 March 2009                       251,067,131          237,073,025      293,329,843      97,555,340      879,025,339


            Maturity analysis for financial liabilities:

                                                            Carrying      Gross nominal       Less than          One to    Three months
                                                            amount      inflow/(outflow)     one month     three months      to one year
                                                                  ($)                 ($)            ($)             ($)             ($)

            Derivative liabilities                       (2,346,413)
            Outflows                                                      (171,380,722)     (61,730,519)   (109,650,203)                -
            Inflows                                                        169,034,309       61,492,700    107,541,609                  -

            As at 31 March 2009                          (2,346,413)         (2,346,413)       (237,819)     (2,108,594)                -


          Note: The fair value of the investments is $1,222,311,685 (2009: $1,080,102,954). The fair value is based on quoted market prices
                at the balance sheet date without any deduction for transaction costs.




25       Hong Kong Export Credit Insurance Corporation     Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     11. Insurance and other receivables
                                                                                                 2010 ($)               2009 ($)
            Insurance receivables                                                             18,084,715             16,440,561
            Other debtors and prepayments                                                      1,592,323              1,772,395
            Interest and dividends receivables                                                11,326,777             11,324,136
                                                                                              31,003,815             29,537,092

            Insurance and other receivables expected to be recovered
            - within one year                                                                 30,710,912             28,750,188
            - more than one year                                                                 292,903                786,904
                                                                                              31,003,815             29,537,092


          (a) Insurance and other receivables that are not impaired
               Insurance receivables are due within 14 days from the date of billing. Further details on the Corporation’s credit
               policy is set out in note 3(b)(i).

               The ageing analysis of insurance receivables that are neither individually nor collectively considered to be
               impaired is as follows:

                                                                                                 2010 ($)               2009 ($)
                 Neither past due nor impaired                                                14,659,791             13,152,597

                 Zero to three months past due                                                 3,399,788              2,428,059
                 Three to twelve months past due                                                  25,136                859,905
                                                                                              18,084,715             16,440,561


               Receivables that were neither past due nor impaired relate to a wide range of policyholders for whom there was
               no recent history of default.

               Receivables that were past due but not impaired relate to a number of independent policyholders that have
               a good track record with the Corporation. Based on experience, management believes that no impairment
               allowance is necessary in respect of these balances as there has not been a significant change in credit quality
               and the balances are still considered fully recoverable. The Corporation does not hold any collateral over
               these balances.


     12. Insurance and other payables
                                                                                                 2010 ($)               2009 ($)
            Policy deposits                                                                   22,630,000             19,023,400
            Amounts due to reinsurers                                                          8,368,388              3,118,849
            Other creditors and accrued charges                                                7,242,881              7,542,785
            Policy fees received in advance                                                             -                      -
                                                                                              38,241,269             29,685,034

            Insurance and other payables expected to be settled
            - within one year                                                                 16,034,869             10,797,834
            - more than one year                                                              22,206,400             18,887,200
                                                                                              38,241,269             29,685,034




26       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     13. Provision for claims
                                                                                      Gross Provision    Reinsurers’ Share    Net Provision
                                                                                                   ($)                  ($)              ($)
            At 1 April 2009
            Provision for claims intimated                                                58,667,671          (26,400,452)      32,267,219
            Provision for claims not yet intimated                                        55,250,000          (23,512,500)      31,737,500
                                                                                         113,917,671          (49,912,952)      64,004,719

            Claims paid during the year                                                 (139,533,404)          62,790,032      (76,743,372)
            Claims incurred during the year                                              141,427,406          (63,192,333)      78,235,073
            At 31 March 2010                                                             115,811,673          (50,315,253)      65,496,420

            Provision for claims intimated                                                40,561,673          (18,252,753)      22,308,920
            Provision for claims not yet intimated                                        75,250,000          (32,062,500)      43,187,500
                                                                                         115,811,673          (50,315,253)      65,496,420

                                                                                             2010 ($)             2009 ($)

            (a) Provision for claims intimated

            Gross provision at 1 April                                                    58,667,671           39,302,122
            Claims paid against provision                                                (40,328,690)         (26,942,232)
                                                                                          18,338,981           12,359,890

            Provision written back                                                       (14,545,856)           (9,182,508)
                                                                                           3,793,125             3,177,382

            Transfer from provision for claims not yet intimated                                   -            1,613,131
                                                                                           3,793,125            4,790,513

            Provision made during the year                                                36,768,548           53,877,158
            Gross provision at 31 March (A)                                               40,561,673           58,667,671

            Reinsurers’ share (B)                                                        (18,252,753)         (26,400,452)
            Net provision at 31 March (C)                                                 22,308,920           32,267,219

            (b) Provision for claims not yet intimated

            Gross provision at 1 April                                                    55,250,000           37,787,167
            Claims paid against provision                                                (52,250,000)         (34,174,036)
                                                                                           3,000,000            3,613,131

            Provision written back                                                        (2,750,000)           (1,750,000)
                                                                                             250,000             1,863,131

            Transfer to provision for claims intimated                                             -            (1,613,131)
                                                                                             250,000               250,000

            Provision made during the year                                                75,000,000           55,000,000
            Gross provision at 31 March (D)                                               75,250,000           55,250,000

            Reinsurers’ share (E)                                                        (32,062,500)         (23,512,500)
            Net provision at 31 March (F)                                                 43,187,500           31,737,500

            (c) Total gross provision at 31 March (A) + (D)                              115,811,673          113,917,671

            (d) Total reinsurers’ share (B) + (E)                                        (50,315,253)         (49,912,952)

            (e) Total net provision at 31 March (C) + (F)                                 65,496,420           64,004,719

            (f) Amounts of provision expected to be settled after more than
                1 year

            Gross provision                                                               26,500,086           27,440,000
            Reinsurers’ share                                                            (10,237,539)         (11,110,500)
            Net provision expected to be settled after more than one year                 16,262,547           16,329,500




27       Hong Kong Export Credit Insurance Corporation        Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     14. Analysis of claims development
            Gross of reinsurance – 2010
                                                                                      Underwriting year
                                                      2006 ($)         2007 ($)       2008 ($)        2009 ($)        2010 ($)         Total ($)
            Estimate of cumulative claims
            At end of underwriting year            54,037,763       66,708,307     72,010,575     148,441,827     138,352,725
            - one year later                       44,576,617       64,745,819     70,454,219     152,479,846
            - two years later                      41,170,729       63,545,348     68,597,433
            - three years later                    40,906,398       63,397,496
            - four years later                     40,910,893

            Estimate of cumulative claims           40,910,893       63,397,496     68,597,433     152,479,846    138,352,725      463,738,393
            Cumulative payments to date            (40,907,851)     (61,891,358)   (68,244,388)   (136,419,484)    (40,463,639)   (347,926,720)
            Gross outstanding claims liabilities         3,042        1,506,138        353,045      16,060,362      97,889,086     115,811,673

            Net of reinsurance – 2010
                                                                                      Underwriting year
                                                      2006 ($)         2007 ($)       2008 ($)        2009 ($)        2010 ($)         Total ($)
            Estimate of cumulative claims
            At end of underwriting year            30,283,270       37,364,569     40,393,316      82,880,505      77,781,498
            - one year later                       24,629,639       35,722,701     38,862,321      83,976,414
            - two years later                      22,643,901       34,949,941     37,728,590
            - three years later                    22,498,519       34,868,622
            - four years later                     22,500,992

            Estimate of cumulative claims           22,500,992       34,868,622     37,728,590      83,976,414     77,781,498      256,856,116
            Cumulative payments to date            (22,499,318)     (34,040,247)   (37,534,414)    (75,030,716)   (22,255,001)    (191,359,696)
            Net outstanding claims liabilities           1,674          828,375        194,176       8,945,698     55,526,497       65,496,420

            Gross of reinsurance – 2009
                                                                                      Underwriting year
                                                      2005 ($)         2006 ($)       2007 ($)        2008 ($)        2009 ($)         Total ($)
            Estimate of cumulative claims
            At end of underwriting year            75,665,107       54,037,763     66,708,307      72,010,575     148,441,827
            - one year later                       45,071,134       44,576,617     64,745,819      70,454,219
            - two years later                      42,124,304       41,170,729     63,545,349
            - three years later                    41,292,054       40,906,398
            - four years later                     41,297,566

            Estimate of cumulative claims           41,297,566       40,906,398     63,545,349      70,454,219    148,441,827      364,645,359
            Cumulative payments to date            (41,297,566)     (40,903,356)   (60,824,942)    (62,146,847)    (45,554,977)   (250,727,688)
            Gross outstanding claims liabilities              -           3,042      2,720,407       8,307,372    102,886,850      113,917,671

            Net of reinsurance – 2009
                                                                                      Underwriting year
                                                      2005 ($)         2006 ($)       2007 ($)        2008 ($)        2009 ($)         Total ($)
            Estimate of cumulative claims
            At end of underwriting year            42,403,309       30,283,270     37,364,569      40,393,316      82,880,505
            - one year later                       24,942,124       24,629,639     35,722,701      38,862,321
            - two years later                      23,168,367       22,643,901     34,949,941
            - three years later                    22,710,629       22,498,520
            - four years later                     22,713,662

            Estimate of cumulative claims           22,713,662       22,498,520     34,949,941      38,862,321     82,880,505      201,904,949
            Cumulative payments to date            (22,713,662)     (22,496,846)   (33,453,718)    (34,180,766)   (25,055,238)    (137,900,230)
            Net outstanding claims liabilities                -           1,674      1,496,223       4,681,555     57,825,267       64,004,719


          Note: The 2009 claim development triangle has been restated to reflect the claims payment for each development year.




28       Hong Kong Export Credit Insurance Corporation     Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     15. Unearned premiums

                                                                          Gross unearned                                        Net unearned
                                                                               premiums          Reinsurers’ share                 premiums
                                                                                      ($)                       ($)                       ($)
            Balance at 1 April 2009                                            13,263,000               (5,073,000)                 8,190,000
            Premiums written during the year                                  233,832,228             (89,420,744)               144,411,484
            Premiums earned during the year                                  (228,392,228)             87,592,744               (140,799,484)
            Balance at 31 March 2010                                           18,703,000              (6,901,000)                11,802,000


            Balance at 1 April 2008                                            11,952,000               (4,400,000)                 7,552,000
            Premiums written during the year                                  186,064,416             (69,466,663)               116,597,753
            Premiums earned during the year                                  (184,753,416)             68,793,663               (115,959,753)
            Balance at 31 March 2009                                           13,263,000               (5,073,000)                 8,190,000

          Note: All of the unearned premiums of $11,802,000 (2009: $8,190,000) are expected to be earned within one year.


     16. Net investment income / (loss)

                                                                                                          2010 ($)                   2009 ($)
            Investment income / (loss):


            Interest on bonds                                                                          24,852,170                 30,230,149
            Interest on deposits                                                                          536,940                   2,493,901
            Net realised gain / (loss) on disposal of avaliable-for-sale securities                    47,143,367                 (16,719,852)
            Impairment loss                                                                            (2,301,979)                (38,914,336)
            Net exchange gain / (loss)                                                                 17,287,841                  (8,711,662)
            Dividend income                                                                             6,659,956                   5,456,892
            Sundry income                                                                                 230,107                    202,267
                                                                                                       94,408,402                 (25,962,641)


            Less: Investment expenses:


            Fund management fees                                                                        3,739,622                   3,515,564
            Sundry expenses                                                                               353,256                    120,364
                                                                                                        4,092,878                   3,635,928
            Net investment income / (loss)                                                             90,315,524                 (29,598,569)

          Note: Included in the net realised gain / (loss) on disposal of available-for-sale securities is an amount of $14,837,463
                (2009: loss of $30,464,172) which was previously recorded as unrealised gain / loss on available-for-sale securities in the fair
                value reserve.


     17. Cash and cash equivalents

                                                                                                          2010 ($)                   2009 ($)
            Cash at bank and in hand                                                                    8,477,932                 12,193,567
            Deposits with original maturity within 3 months                                            19,000,000                   8,000,000
                                                                                                       27,477,932                 20,193,567


          Note: The effective interest rates for cash and cash equivalents ranged from 0% to 0.58% (2009: 0% to 3.40%)



29       Hong Kong Export Credit Insurance Corporation    Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     18. Taxation
          The results of the Corporation are not subject to taxation by virtue of section 27 of the Hong Kong Export Credit
          Insurance Corporation Ordinance (Chapter 1115).


     19. Commitments
          Capital commitment outstanding at 31 March 2010 not provided for in the financial statements amounted to $230,597
          (2009: $0 ).


     20. Maximum liability
          The maximum liability of the Corporation in respect of the policies in force as at 31 March 2010 amounted to
          $22,739,600,000 (2009: $18,211,150,000). The maximum liability the Corporation is permitted to undertake as
          determined by the Legislative Council under section 23 of the Hong Kong Export Credit Insurance Corporation
          Ordinance (Chapter 1115) at 31 March 2010 is $30,000,000,000 (2009: $30,000,000,000).


     21. Material related party transactions
          The Corporation entered into the following material related party transactions.

          Key management personnel remuneration


                                                                                             2010 ($)             2009 ($)

            Short-term employee benefits                                                    6,396,129           5,524,640
            Post-employment benefits                                                         797,419              814,427

                                                                                            7,193,548           6,339,067


          Total remuneration is included in “staff costs” (see note 8)




30       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Notes to the Financial Statements
     (Expressed in Hong Kong dollars)




     22. Possible impact of amendments, new standards and interpretations issued but not
         yet effective for the annual accounting period ended 31 March 2010
          Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new
          standards and interpretations which are not yet effective for the accounting year ended 31 March 2010 and which
          have not been adopted in these financial statements.

                                                                           Effective for accounting periods
                                                                                       beginning on or after

          Improvements to HKFRSs 2009                                        1 July 2009 or 1 January 2010

          HKFRS9 Financial instruments                                                    1 Janauary 2013

          The Corporation is in the process of making an assessment of what the impact of these amendments, new
          standards and new interpretations is expected to be in the period of initial application. So far it has concluded
          that the adoption of them is unlikely to have a significant impact on the Corporation’s results of operations and
          financial position.




31       Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10
     Section 28(1) of the Hong Kong Export Credit Insurance Corporation Ordinance. Chapter 1115 of the Laws of Hong
     Kong, requires the Corporation to furnish to the Chief Executive within a period of six months after the end of each
     financial year a report of its operations during that financial year together with the audited financial statements in respect
     of the year. In accordance with this requirement, this report on the Corporation’s operations and financial results for
     2009-2010 has been submitted to the Chief Executive, the Honourable Donald Tsang.




     Hong Kong Export Credit Insurance Corporation
     2/F., Tower 1, South Seas Centre, 75 Mody Road, Tsimshatsui East, Hong Kong
     Telephone: (852) 2732 9988
     Facsimile:    (852) 2722 6277
     E-mail: info@hkecic.com
     Website: www.hkecic.com




32      Hong Kong Export Credit Insurance Corporation   Annual Report 2009-10

				
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