Eng - IOI Group

Notes To The Financial Statements cont’d44. CONTINGENT LIABILITIES - UNSECURED cont’dMaterial litigations - subsidiariesThe Directors are of the opinion that the possibility of any outflow in settlement arising from the following litigations are remotebased on legal opinion obtained. Nevertheless, disclosures are made in view of their materiality.i. Unipamol Malaysia Sdn Bhd (“Unipamol”), a subsidiary of IOI Oleochemical Industries Berhad (“IOI Oleo”), has obtainedsummary judgement against Unitangkob (Malaysia) Berhad (“Unitangkob”) in 2001 for the principal sum of approximatelyRM5 million. Unitangkob’s appeal against the summary judgement was dismissed with costs and it has filed further appealto the Court of Appeal. Meanwhile Unipamol has commenced winding-up proceedings against Unitangkob to recover theamount due under the summary judgement. Other applications pending disposal in court are Unitangkob’s application tostay the execution of summary judgement and an application to amend their Defence and include a Counter-claim againstUnipamol for a sum of RM208 million for special and general damages.ii.Legal suit instituted by the shareholders of Unitangkob against Unipamol, Pamol Plantations Sdn Bhd (“PPSB”), Unileverplc and its subsidiary Pamol (Sabah) Ltd in which the Plaintiffs claimed for inter-alia special damages of RM43.47 million,general damages of RM136.85 million or such amount as may be assessed by the court. Unipamol and PPSB have filed aDefence to the claim as well as Counter-claim against the Plaintiffs. The next case management is fixed on 12 September2007.The relevant subsidiaries have obtained favourable legal opinions on the merits of their respective cases which existed prior to thembecoming IOI Oleo’s subsidiaries.45. FINANCIAL INSTRUMENTSFinancial risk management objectives and policiesThe Group’s activities expose it to a variety of financial risks, including foreign currency risk, interest rate risk, market risk, creditrisk, liquidity and cashflow risk. The Group’s overall financial risk management objective is to ensure that the Group creates valuefor its shareholders whilst minimising potential adverse effects on its financial performance and positions. The Group operateswithin established risk management framework and clearly defined guidelines that are approved by the Board.45.1 Foreign currency riskThe Group operates internationally and is exposed to various currencies, mainly US Dollar, Euro, Canadian Dollar, JapaneseYen and Singapore Dollar. Foreign currency denominated assets and liabilities together with expected cash flows fromcommitted purchases and sales give rise to foreign currency exposures.The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country in which the propertyor investment is located or by borrowing in currencies that match the future revenue stream to be generated from itsinvestments.IOI Corporation BerhadANNUAL REPORT 2007 224