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Notes to the Consolidated Financial Statements

31st March 2016

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.25 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s
and the Company’s financial statements in the period in which the dividends are approved by the
Company’s shareholders or directors, where appropriate.

3 FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange
risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.

Risk management is carried out by the Group’s treasury function. The Group adopts a conservative and
balanced treasury policy which focuses on the financial risks factors as below and seeks to minimise
potential adverse effects on the Group’s financial performance.

3.1 Financial risk factors

(a) Market risk

(i) Foreign exchange risk

The Group’s transactions are mainly denominated in HKD, United States dollars (“USD”)
and Renminbi (“RMB”). The majority of assets and liabilities are denominated in HKD,
USD and RMB, and there are no significant assets and liabilities denominated in other
currencies.

Since HKD is pegged to USD, the Group does not have significant currency risks and it
is the Group’s policy not to engage in speculative activities. The Group has not entered
into any contracts to hedge its exposure for foreign exchange risk.

At 31st March 2016, if RMB had strengthened/weakened by 10% against HKD
with all other variables held constant, post-tax profit for the year would have been
approximately HK$13,551,000 (2015: HK$43,054,000) higher/lower, mainly as a result
of the foreign exchange differences on translation of RMB denominated cash and bank
balances and other payables.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2016 51