FORGING AHEAD - Tradewinds Plantation Berhad

37. FINANCIAL RISk MANAGEMENT OBJECTIVES AND POLICIES (continued)
(i) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of the Group’s and of the Company’s financial
instruments will fluctuate because of changes in market interest rates.
The Group’s exposure to changes in interest rates relates primarily to the Group’s deposits with banks and interest
bearing debt obligations. The Group does not use derivative financial instruments to hedge its risk but regularly
reviews its debt portfolio to enable it to source low interest funding. The Group’s deposits are placed at fixed rates and
management endeavours to obtain the best rate available in the market.
Sensitivity analysis for interest rate risk
At 31 December 2010, if interest rates had been 50 basis points lower/higher, with all other variables held constant,
the Group’s and the Company’s post-tax profit for the year would have been RM1,504,000 and RM626,000 higher/
lower respectively, arising mainly as a result of lower/higher finance costs on floating rate borrowings and higher/
lower finance income on deposits. The assumed movement in basis points for interest rate sensitivity analysis is based
on a prudent estimate of the current market environment.
Effective interest rates and repricing analysis
The following tables set out the carrying amounts, the weighted average effective interest rates as at the end of the
reporting period and the remaining maturities of the Group’s and the Company’s financial instruments that are exposed
to interest rate risk:
Weighted
average
effective Within 1 - 2 2 - 3 3 - 4 4 - 5 More than
interest rate 1 year years years years years 5 years Total
Group Note (per annum) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
%
At 31 December 2010
FINANCIAL STATEMENTS
Fixed rates
Deposits with licensed banks 16 2.69 66,279 - - - - - 66,279
Term loans 23 5.81 (39,462) (24,270) (43,550) - - - (107,282)
Sukuk Ijarah 25 5.23 (35,000) (30,000) (30,000) (30,000) (45,000) (15,000) (185,000)
Murabahah CP/MTN 25 4.50 - (100,000) - - - - (100,000)
ICULS (liability component) 24 3.00 (3,553) (3,766) (3,992) (4,232) (4,485) (755) (20,783)
Floating rates
Revolving credits 22 3.83 (231,000) - - - - - (231,000)
Term loans 23 4.32 (229,500) - - - - - (229,500)
TRADEWINDS PLANTATION BERHAD
Annual Report 2010
205