2020 UEM Edgenta Annual Report

39. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) d. Interest rate risk I nterest 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. A s the Group has no significant interest-bearing financial assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest-bearing financial assets are mainly short term in nature and have been mostly placed in fixed deposits or occasionally, in short term commercial papers. T he Group’s interest rate risk arises primarily from interest-bearing borrowings. Borrowings at floating rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group’s policy is to manage interest cost using a mix of fixed and floating rate debts. Sensitivity analysis for interest rate risk A sensitivity analysis had been performed to determine the sensitivity of the Group’s profit net of tax to a reasonably possible change in the interest rate at the reporting date. This analysis assumes that all other variables, in particular foreign currency rate, remain constant. Based on the analysis, there is no material impact to the Group’s profit net of tax. T he following tables set out the carrying amounts, the weighted average effective interest rates (“WAEIR”) as at the reporting date and the remaining maturities of the Group’s and of the Company’s financial instruments that are exposed to interest rate risk: RM’000 Note WAEIR % Within 1 year 1-2 years 2-5 years > 5 years Total At 31 December 2020 Group Fixed rate Deposits with licensed banks and other financial institutions 23 1.67 326,771 – – – 326,771 ICPs 27 3.40 (50,000) – – – (50,000) IMTNs 27 4.85 (2,101) (249,958) – – (252,059) Lease liabilities 34 4.00 (9,807) (6,707) (20,344) (717) (37,575) Floating rate Murabahah Term Facility 27 2.80 (38,089) – – – (38,089) Revolving credit 27 1.78 (64,057) – – – (64,057) Term loans 27 3.98 (10,203) (10,650) (33,887) (24,209) (78,949) Company Fixed rate Deposits with licensed banks and other financial institutions 23 1.70 9,500 – – – 9,500 ICPs 27 3.40 (50,000) – – – (50,000) IMTNs 27 4.85 (2,101) (249,958) – – (252,059) Lease liabilities 34 4.00 (6,030) (5,990) (19,263) (274) (31,557) ANNUAL REPORT 2020 293 1 2 3 4 5 6 7 8