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13. Derivatives
The Group enters into foreign currency forward contracts and currency option contracts to hedge foreign exchange risk associated
with certain assets and liabilities denominated in foreign currencies. The Group also enters into interest rate swap contracts to
manage its interest rate exposures on certain liabilities.
All derivative transactions are entered into to hedge interest and foreign currency exposures incorporated within the Group’s busi-
ness. Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged assets or liabili-
ties. The Group does not hold or issue derivatives for trading purposes.
Because the counterparties to these derivatives are limited to major international financial institutions with high credit ratings, the
Group does not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the authori-
zation and credit limit amount.
The contract or notional amounts of derivatives which are shown in the following table do not represent the amounts exchanged
by the parties and do not measure the Group’s exposure to credit or market risk.
The Group had the following derivative contracts outstanding at March 31, 2009 and 2008:
March 31, 2009
Millions of Yen
Contract or Notional
Amount Fair Value
Unrealized
Gain (Loss)
Forward exchange contracts:
Selling:
U.S. Dollars ¥ 773 ¥ 778 ¥ (5)
Euro 39,955 33,636 6,319
Pound Sterling 3,778 3,793 (15)
Thailand Baht 69 71 (2)
Yen 10,832 10,898 (66)
Mexican Peso 388 397 (9)
Buying:
U.S. Dollars ¥ 539 ¥ 539 ¥ 0
Euro 6,443 6,333 (110)
Pound Sterling 2,554 2,528 (26)
Currency option contracts
Selling:
Call
Euro ¥ 30,383 ¥ 1,458 ¥ (524)
(Option fee) (934)
Swiss Franc 1,909 13 28
(Option fee) (41)
Buying:
Call
Euro ¥ 1,272 ¥ 45 ¥ 4
(Option fee) (41)
U.S. Dollars 48 1 (3)
(Option fee) (4)
Yen 30,383 678 (256)
(Option fee) (934)
Interest rate swaps: ¥ 14,368 ¥ (584) ¥ (584)
(fixed rate payment, floating rate receipt)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Brother Industries, Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2009 and 2008
36 Brother Annual Report 2009