1.

Financial Risk Management

Overview
The Company has exposure to the following risks from its use of financial instruments:

Credit risk
Liquidity risk
Market risk

This note presents information about the Companys exposure to each of the above risks, the Companys
objectives, policies and processes for the measuring and managing risk, and the Companys management
of capital. Further quantitative disclosures are included throughout these financial statements.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Companys receivables
from customers and other financial instruments.
Trade and other receivables
The Companys exposure to credit risk is influenced mainly by the individual characteristics of each
customer. The demographics of the Companys customer base, including the default risk of the industry in
which the customers operate, has less of an influence on credit risk. Approximately .001 percent of the
Companys revenue is attributable to sales transactions with a single customer. However, geographically
there is no concentration of credit risk.
The Credit Committee has established a credit policy under which each new customer is analyzed
individually for creditworthiness before the Companys standard payment and conditions are offered. The
Companys review includes external ratings, where available, and in some cases bank references. Credit
limits are established for each customer, which represents the maximum open amount without requiring
approval from the Credit Committee; these limits are reviewed quarterly. Customers that fail to meet the
Companys benchmark creditworthiness may transact with the Company only on a prepayment basis.
More than 30 percent of the Companys customers have been transacting with the Company for over 20
years, and losses have occurred infrequently. In monitoring customer credit risk, customers are group
according to their credit characteristics, including whether they are an individual or legal entity, industry,
aging profile, maturity and existence of previous financial difficulties. Trade and other receivables relate
mainly to the Companys valued clients. Customers that are graded as high risk are placed on a
restricted customer list, and future sales are made on a prepayment basis.
The Company establishes an allowance for credit losses that represents its estimate of incurred losses in
respect of trade and other receivables. The main components of this allowance are specific loss
component that relates to individually significant exposures. The allowance is determined based on
historical data or aging of accounts.
The maximum exposure of the Company to credit risk as of December 31, 2012 and 2011 is equal to the
carrying values of the financial assets.
Credit quality of financial assets
The tables below summarize the credit quality of the Companys financial assets as of December 31.

High grade accounts, other than cash are accounts considered to be of high value. The counterparties have
a very remote likelihood of default and have consistently exhibited good paying habits. Standard grade
accounts are active accounts with propensity of deteriorating to mid-range age buckets. These accounts are
typically not impaired as the counterparties generally respond to credit actions and update their payments
accordingly. Substandard grade accounts are accounts which have probability of impairment based on
historical trend. These accounts show propensity to default in payment despite regular follow up actions
and extended payment terms.
Financial assets that are past due but not impaired
The tables below summarize the aging analysis of past due but not impaired financial assets as of
December 31, 2012 and 2011.

Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Companys approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when they due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Companys reputation.
The Company focuses on its cash sales transactions, which assists it in monitoring cash flow requirements
and optimizing its cash returns on investments, specifically on modern machineries. Typically the
Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period
of 30days, including the servicing of financial obligation; this excludes the potential impact of extreme
circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the Company
maintains the lines of credit with certain local bank.
The Company manages liquidity risk by continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities.
The key measure used by the Company for managing liquidity risk is the net liquidity gaps between assets
and liabilities as to maturity. The details of the reported net liquidity gaps at the reporting date shown
below:

The table above summarizes the maturity profile of the companys financial assets and liabilities as of
December 31, 2011 and 2010, based on undiscounted cash flows, including interest due:

Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimizing the return on risk.
Foreign exchange risk
Foreign exchange risk arises on financial instruments that are denominated in a foreign currency other than
the functional currency in which they are measured.
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar rate, with
all variables held constant, of the Companys profit before tax (due to change in the fair value of monetary
asset) and the Companys equity.

Interest rate risk

Interest rate risk arises on interest-bearing financial instruments recognized in the statement of financial
position.

The Companys exposure to market risk for changes in interest rates relates primarily to the Companys
short-term and long-term debt obligations. The Companys policy is to manage its interest cost using a
mix of fixed and variable rate debt.
The following table demonstrates the sensitivity to the Companys profit before tax and equity to a
reasonably possible change in interest rates on December 31, 2011, with all variable held constant.

The terms and maturity profile of the interest-bearing financial assets and liabilities that are exposed to
interest rate risks, together with the corresponding nominal amounts and carrying values, are shown below:

4.

Related Party Transactions

Transactions between related parties are based on terms similar to those offered to nonrelated parties. Related
party transactions are made under the normal course of business. Parties are considered to be related if one party
has the ability, directly or indirectly, to control the other party or exercise significant influence over the other
party in making financial and operating decisions; and the parties are subject to common control or common
significant influence. Related parties may be individuals or corporate entities.
The Companys related parties include key management personnel and retirement benefit plan for the benefit of
the Companys employees.
The amounts and balance arising from significant related party transactions of the Company are as follows:

Key management personnel are those having authority and responsibility for planning, directing, controlling the
activities of the Company, directly or indirectly. No provision and allowance for loan losses was recognized by
the Company for loans to its key management personnel.

Compensation of Directors and other key management personnel:

The short-term benefits as of December 31, 2011 are as follows: