Eng - IOI Group

Financial Risk Management cont’d• The Group’s overall financial risk management objective is to ensure that the Group creates value for itsshareholders whilst minimising potential adverse effects on its financial performance and positions.• The Group addresses the various financial risks exposure by taking pro-active measures within our established riskmanagement framework and clearly defined guidelines that are approved by the Board. In this respect, the Groupenters into forward contracts and exchange-traded agricultural commodity futures to hedge our inventories, saleand purchase commitments.• Besides, the Group also enters into interest rates swaps with the objective of minimising overall cost of borrowings.As at 30 June 2003, the Group has entered into an interest rate swap contract to swap the interest reference rate ofthe Company’s 230 million Euro loan from EURIBOR to USD LIBOR to take advantage of the lower USD LIBOR ratewithout incurring foreign exchange exposure. The fair value of this arrangement as at 30 June 2003 is a favourableEuro1.1 million.• Whenever possible, the Group favours taking a “natural hedge” approach as for instance, to have the same currencybase in the risk management of its foreign currency denominated assets and liabilities and in respect of income andexpenditure.• When more appropriate, we also enter into forward foreign currency contracts to limit the Group exposure tofluctuation in foreign exchange rates with respect to our foreign currency denominated assets and liabilities as wellas committed sales and purchases of commodity and other products.For more disclosures on the Group’s financial risk management, refer to Note 39 to the financial statementsincluded in this Annual Report.47IOI Corporation BerhadAnnual Report 2003