2003 - KNM Steel Sdn Bhd

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003Interest rate riskThe Group’s exposure to interest rate risk mainly arises through its fixed deposits and borrowings. The Groupdoes not hedge its interest rate risk.Effective interest rates and repricing analysisIn respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicatestheir effective interest rates at the balance sheet date and the periods in which they reprice or mature, whicheveris earlier.Effectiveinterest Within 1 – 5Group rates Total 1 year years2003 % RM RM RMFinancial assetFixed deposits 2.76 2,862 2,862 –Financial liabilitiesBank overdrafts 7.48 15,865 15,865 –Bills payable 7.60 40,173 40,173 –Term loan 5.18 16,515 16,515 –Foreign currency riskThe Group’s exposure to foreign currency risk is mainly from contract revenue, purchases and borrowingsdenominated in US Dollars. The Group does not view the exposure to US Dollars to be significant given thecurrent peg.A subsidiary’s financial statements are denominated exclusively in Chinese Renminbi. The Group does not viewthe exposure to Chinese Renminbi to be significant.Exposure to foreign currency risk is monitored on an ongoing basis. The Group hedges its foreign currency riskof its trade balances denominated in foreign currency.Liquidity riskPrudent liquid risk management implies maintaining sufficient cash and the availability of funding through anadequate amount of committed credit facilities.Fair valuesRecognised financial instrumentsAt balance sheet date, the carrying amounts of trade and other receivables, short term borrowings, trade andother payables approximate fair value due to the relatively short term nature of these financial instruments. Inrespect of amount due from subsidiary companies, a reasonable estimate of fair value could not be made as thefinancial instrument has an unspecified period of repayment. The carrying amounts of the long term loansapproximate fair values as they are subject to variable interest rates which in turn approximate the current marketinterest rates for similar loans at balance sheet date.522003 ANNUAL REPORT