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Quantitative and Qualitative Disclosures about Market Risk
24 Cisco Systems, Inc. 2002 Annual Report
Derivative Instruments
We enter into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on certain
foreign currency receivables, investments, and payables primarily denominated in Australian, Canadian, Japanese, Korean, and
several European currencies, including the euro and British pound. We also periodically hedge foreign currency forecasted
transactions related to certain operating expenses with currency options. Foreign exchange forward and option contracts as
of July 27, 2002 are summarized as follows (in millions):
Notional Amount Fair Value
Forward contracts:
Purchased $561 $ 2
Sold $712 $ (4)
Option contracts:
Purchased $752 $24
Sold $675 $ (3)
Our foreign exchange forward contracts related to current assets and liabilities generally range from one to three months in original
maturity. Additionally, we have entered into foreign exchange forward contracts related to long-term customer financings with
maturities of up to two years. The foreign exchange contracts related to investments generally have maturities of less than one
year. Currency option contracts generally have maturities of less than one year. We do not enter into foreign exchange forward and
option contracts for trading purposes. We do not expect gains or losses on these derivative instruments to have a material impact
on our financial results or financial condition (see Note 8 to the Consolidated Financial Statements).