# 46. FINANCIAL INSTRUMENTS (continued)

# b. Financial risk management objectives and policies (continued)

# Credit risk and impairment assessment (continued)

The Group invests in rated and unrated debt securities as well as investment grade debt securities. The management regularly reviews and monitors the portfolio of debt securities. Summary of the fair value and principal amount of debt securities at FVTPL are set out below.

# Debt securities at FVTPL

<table><tr><td rowspan="3"></td><td colspan="2">2021</td><td colspan="2">2020</td></tr><tr><td>Fair value</td><td>Principal 
amount</td><td>Fair value</td><td>Principal
amount</td></tr><tr><td>HK$’000</td><td>HK$’000</td><td>HK$’000</td><td>HK$’000</td></tr><tr><td>AA- to BBB-</td><td>166,806</td><td>163,726</td><td>422,637</td><td>455,245</td></tr><tr><td>BB+ to B</td><td>129,350</td><td>130,523</td><td>51,997</td><td>52,308</td></tr><tr><td>Unrated</td><td>89,139</td><td>87,291</td><td>242,602</td><td>242,602</td></tr><tr><td></td><td>385,295</td><td>381,540</td><td>717,236</td><td>750,155</td></tr></table>

# 46. FINANCIAL INSTRUMENTS (continued)

# b. Financial risk management objectives and policies (continued)

# Credit risk and impairment assessment (continued)

# Trade debtors and contract assets arising from contracts with customers as well as lease receivables

In order to minimise the credit risk, the management of the Group has policies in place to ensure the sales of properties are made to purchasers with an appropriate financial strength and appropriate percentage of down payments. Monitoring procedures are in place to ensure that follow-up action is taken to recover overdue debts. In addition, the Group performs impairment assessment under ECL model on trade debtors including lease receivables individually or collectively based on the Group’s internet credit rating. Contract assets are assessed on an individual basis for impairment purpose.

# Loan receivables/amounts due from associates, joint ventures, a shareholder of a non-wholly owned subsidiary and an investee company/bank balances and deposits

The credit risk of loan receivables and amounts due from associates, joint ventures, a shareholder of non-wholly owned subsidiary and an investee company is managed through an internal process. The Group actively monitors the outstanding amounts owed by each debtor and uses past due information to assess whether credit risk has increased significantly since initial recognition. The directors of the Company consider that the probability of default is minimal after assessing the counter-parties financial background and underlying assets held by the related parties.

Loan receivables represent mortgage loans secured by the properties of the borrowers.

In determining the recoverability of loan receivables, the Group considers any change in the credit quality of the borrowers, the value of the underlying properties under mortgage, historical settlements of loan interests and other forward-looking information.

# Debt instruments at FVTOCI

The Group only invests in debt securities with credit rating of B or above issued by Moody’s or Standard & Poor’s. The directors of the Company focus on the investment diversification and their credit ratings changes. The directors of the Company assess ECL on the debt instruments at FVTOCI based on the default rates published by major international credit rating agencies that are applicable to the respective debts instruments credit grades. As a result of this assessment, the directors of the Company are of the opinion that the ECL on these debt instruments is insignificant.

Summary of the fair value and principal amount of debt securities at FVTOCI are set out below.

<table><tr><td rowspan="3"></td><td colspan="2">2021</td><td colspan="2">2020</td></tr><tr><td>Fair value</td><td>Principal 
amount</td><td>Fair value</td><td>Principal
amount</td></tr><tr><td>HK$’000</td><td>HK$’000</td><td>HK$’000</td><td>HK$’000</td></tr><tr><td>AA- to BBB-</td><td>435,537</td><td>425,445</td><td>787,918</td><td>813,302</td></tr><tr><td>BB+ to B</td><td>1,259,538</td><td>1,274,442</td><td>647,113</td><td>906,070</td></tr><tr><td>Unrated</td><td>333,769</td><td>354,277</td><td>146,189</td><td>146,189</td></tr><tr><td></td><td>2,028,844</td><td>2,054,164</td><td>1,581,220</td><td>1,865,561</td></tr></table>

The credit risks on pledged deposits, restricted bank deposits, deposit in a financial institution, bank balances and deposits are limited because the counterparties are banks/financial institutions with high credit ratings assigned by international credit-rating agencies.