A Stronger <strong>Leeden</strong> in Asia.Notes to the Financial Statementsfor the Financial Year ended 31 December <strong>2010</strong>36. Significant related party disclosuresIn addition to the related party information disclosed elsewhere in the financial statements, the following significanttransactions between the Group and related parties took place at terms agreed between the parties during the financialyear:Group<strong>2010</strong> 2009$’000 $’000Rental and service charges to a related party 898 861Rental fee charge to a related party 100 97Administrative fees charged to an associated company 58 62Purchases from associated companies 56 963Sales to associated companies 2,285 2,313Interest paid to a related company – 83Interest received from an associated company 723 512Purchase from related companies 9,571 8,630Sales to related companies 4,813 7,234Related companiesThese are associated companies and entities owned by the minority shareholders.Directors’ and key executives’ remunerationGroup<strong>2010</strong> 2009$’000 $’000Short-term employee benefits 3,187 3,117Central Provident Fund contributions 59 723,246 3,189Comprise amounts paid to:Directors of the Company 2,210 2,231Other key management personnel 1,036 9583,246 3,18937. Financial risk management objectives and policiesThe Group and the Company are exposed to financial risks arising from its operations and the use of financial instruments.The key financial risks include interest rate risk, foreign currency risk, credit risk, liquidity risk and market price risk. Theboard of directors reviews and agrees on policies and procedures for the management of these risks.The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financialrisks and the objectives, policies and processes for the management of these risks.(a)Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financialinstruments will fluctuate because of changes in market interest rates. The Group’s and the Company’s exposureto interest rate risk arises primarily from their loans and borrowings.92
Notes to the Financial Statementsfor the Financial Year ended 31 December <strong>2010</strong><strong>Leeden</strong> <strong>Limited</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>37. Financial risk management objectives and policies (cont’d)(a)Interest rate risk (cont’d)The Group’s exposure to changes in interest rates relates primarily to the Group’s bank borrowings and hirepurchase creditor. The Group’s policy is to obtain the most favourable interest rates available without increasing itsforeign currency exposure.To manage this risk, the Group also enters into interest rate swap to minimise the fluctuation of interest costs dueto floating rate debts. The Group manages interest costs in alignment with the market expectation of future ratesmovement. The Group does not enter into interest rate swap in a decreasing rate environment.Sensitivity analysis for interest rate riskAt the balance sheet date, if SGD and MYR interest rates had been 2 (2009: 31) and 75 (2009: 125) basis pointsrespectively lower/higher with all other variables held constant, the Group’s profit net of tax would have been$7,000 (2009: $114,000) and $97,000 (2009: $121,000) respectively higher/lower, arising mainly as a result oflower/higher interest expense on floating rate loans and borrowings. The assumed movement in basis points forinterest rate sensitivity analysis is based on the currently observable market environment, showing a significantlyhigher volatility as in prior years.Surplus funds are placed with major financial institutions.(b)Foreign currency riskThe Group has transactional currency exposures arising from sales or purchases that are denominated in acurrency other than the respective functional currencies of Group entities, primarily SGD and Malaysian Ringgit(MYR). The foreign currencies in which these transactions are denominated are mainly United States Dollars (USD).Approximately 18% (2009: 17%) of the Group’s sales are denominated in foreign currencies, whilst approximately41% (2009: 61%) of costs are denominated in the respective functional currencies of the Group entities. TheGroup enters into forward currency contracts to minimise the currency exposures.The Group seeks to maintain a natural hedge through the matching of liabilities against assets in the samecurrency. Where appropriate, the Group enters into short term forward contracts and foreign exchange derivativeinstruments to hedge against expected foreign currency exposure.The Group is also exposed to currency translation risk arising from its net investments in foreign operations,including Malaysia, People’s Republic of China (“PRC”) and Thailand. The Group’s net investments in Malaysia, PRCand Thailand are not hedged as currency positions in MYR, RMB and Thai Baht are considered to be long-term innature.Included in trade debtors of the Group are amounts of approximately $7,110,000 (2009: $4,629,000) denominatedin USD.Included in trade creditors of the Group are amounts of approximately $7,329,000 (2009: $6,397,000), $783,000(2009: $1,542,000) and $210,000 (2009: $410,000) denominated in USD, EUR and AUD respectively.The Group also holds cash and cash equivalent denominated in foreign currencies for working capital purposes. Atthe balance sheet date, such foreign currency balances (mainly in USD) amount to $6,934,000 (2009: $5,223,000)for the Group.93
Change language