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Notes to the Financial Statements (cont’d)
For the financial year ended 31 December 2011
38. Financial risk management objectives and policies (cont’d)
152
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments
will fluctuate because of changes in market interest rates.
The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s cash deposits and debt
obligations.
The Group’s policy is to manage its exposure to interest rate risk using floating rate for bank borrowings which can
be swapped to fixed interest rate to mitigate its exposure where appropriate. The Group seeks to obtain the most
favourable interest rates available without increasing its foreign currency exposure. The Group also enters into interest
rate swap contract to mitigate its exposure to interest rate risk for long term debts where appropriate.
The Group places its cash deposits with reputable banks and financial institutions with a good mix of maturity periods to
obtain the most favourable interest rates and ensure funds are available when required.
The following tables set out the carrying amounts, the range of interest rates as at the reporting date and the remaining
maturities of the financial instruments of the Group that are exposed to interest rate risk:
Range of
interest
rates Within 1 - 2 2 - 3 3 - 4 4 - 5
% per 1 year years years years years Total
Group Note annum RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 31 December 2011
Fixed rate
Amount due from a
jointly controlled
entity 24 4.00 – – 4,523 – – 4,523
Floating rate
Cash and bank
balances 26 0.10 - 3.50 185,357 – – – – 185,357
Short term trade
financing 28 1.25 - 2.20 73,919 – – – – 73,919
Bankers’ acceptances 28 3.48 - 4.05 376,403 – – – – 376,403
Revolving credits 28 2.72 - 3.70 44,416 15,863 7,931 – – 68,210
Term loans 28 2.65 - 3.82 30,645 14,276 – – – 44,921
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