NOTES TO THE FINANCIAL STATEMENTS (CONT’D) FRONTKEN CORPORATION BERHAD 200401012517 (651020-T) ANNUAL REPORT 2025 134 28. FINANCIAL INSTRUMENTS (CONT’D) (a) Financial Risk Management Policies (Cont’d) Market Risk (Cont’d) (ii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The exposure to interest rate risk arises mainly from investments in fixed rate debt securities and long-term borrowing with variable rate. The Group adopts a policy of obtaining the most favourable interest rates available and by maintaining a balanced portfolio mix of fixed and floating rate borrowings. The fixed rate debt instruments of the Group are not subject to interest rate risk since neither carrying amounts nor the future cash flows will fluctuate because of a change in market interest rates. Interest Rate Risk Sensitivity Analysis The Group does not have any floating rate borrowings and hence, no sensitivity analysis is presented. (iii) Equity price risk The exposure to equity price risk arises mainly from changes in quoted investment prices of the Group. The Group manages its exposure to equity price risk by maintaining a portfolio of equities with different risk profiles. Equity Price Risk Sensitivity Analysis If prices for quoted investments at the end of the reporting period strengthened by 10% (2024: 10%) with all other variables being held constant, the Group’s and the Company’s profit after taxation would have increased by RM29,348,937 and RM27,362,580 (2024: RM4,214,365 and RM3,005,986) respectively. A 10% (2024: 10%) weakening in the quoted prices would have had an equal but opposite effect on the Group’s and the Company’s profit after taxation. Credit Risk The exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade and other receivables. The Group and the Company manage their exposures to credit risk by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. For other financial assets (including quoted investments, cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. Also, the Company’s exposure to credit risk includes loans and advances to subsidiaries, and corporate guarantee given to financial institutions for credit facilities granted to certain subsidiaries. The Company monitors the ability of the subsidiaries to serve their loans on an individual basis. (i) Credit risk concentration profile At the end of the reporting period, the Group’s major concentration of credit risk relates to the amounts owing by 2 (2024: 2) customers which constituted approximately 39% (2024: 39%) of its total trade receivables (including related parties), net of loss allowance. (ii) Maximum exposure to credit risk At the end of the reporting period, the maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statement of financial position of the Group and of the Company after deducting any allowance for impairment losses (where applicable).
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