Konica Minolta 2004 Annual Report Download - page 53

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KONICA MINOLTA HOLDINGS, INC. 2004
(1) Currency-Related Derivatives
Millions of yen Thousands of U.S. dollars
2004 2003 2004
Contract value Contract value Contract value
(notional (notional (notional
principal Fair Unrealized principal Fair Unrealized principal Fair Unrealized
amount) value gain (loss) amount) value gain (loss) amount) value gain (loss)
Forward foreign currency
exchange contracts:
To sell foreign currencies:
US$ ¥20,091 ¥19,664 ¥ 426 ¥ 8,167 ¥ 8,235 ¥ (68) $190,094 $186,054 $ 4,031
EURO 29,709 28,505 1,204 5,869 6,013 (143) 281,096 269,704 11,392
Other 489 483 5 1,278 1,299 (21) 4,627 4,570 47
Total ¥50,289 ¥48,652 ¥1,635 ¥15,314 ¥15,547 ¥(232) $475,816 $460,327 $15,470
To buy foreign currencies:
US$ ¥ 3 ¥ 3 ¥ 0 ¥ 137 ¥ 147 ¥ 10 $ 28 $ 28 $ 0
EURO 671 679 7 ———6,349 6,424 66
Other 967 886 (81) ———9,149 8,383 (766)
Total ¥ 1,641 ¥ 1,568 ¥ (74) ¥ 137 ¥ 147 ¥ 10 $ 15,527 $ 14,836 $ (700)
Notes:1. Market rate represents the forward foreign currency exchange rate prevailing as of March 31, 2004.
2. Derivative transactions with hedge accounting applied are excluded from the above table.
13. Derivatives
The Companies enter into derivative transactions including forward
foreign currency exchange contracts, interest rate swaps and commodity
swaps to hedge against the adverse effects of fluctuations in foreign cur-
rency exchange rates, interest rates and material prices. The Companies
utilize these derivatives as hedges to effectively reduce the risks inherent
in their assets and liabilities. These transactions are not likely to have a
material impact on the performance of the Companies. Additionally, the
Companies have a policy of limiting the purpose to hedging identified
exposures only and not for speculative or trading purposes.
Risks associated with derivative transactions
Although the Companies are exposed to credit-related risks and risks
associated with the changes in interest rates and foreign exchange rates,
such derivative transactions are limited to hedging purposes only and the
risks associated with these transactions are limited. All derivative contracts
entered into by the Companies are with selected major financial institu-
tions based upon their credit ratings and other factors. Such credit related
risks are not anticipated and would not be expected to have a significant
impact on the Companies.
Risk control system on derivative transactions
In order to control the market and credit risks, the Finance Division of the
Company is responsible for setting or managing the position limits and
credit limits under the Company’s internal policies for derivative transac-
tions. The resources are principally assigned to the functions including
transaction execution, administration, and risk management, indepen-
dently, in order to clarify the responsibility and the role of each function.
The principal policies on foreign currency exchange transactions and
other derivative transactions at the Company and its major subsidiaries
are approved by the Management Committee of the Company.
Additionally, the Expert Committee, which consists of management from
the Company and its major subsidiaries meets regularly, at which time the
principal policies on foreign currency exchange transactions and other
derivative transactions are reaffirmed and the market risks are assessed.
All derivative transactions are reported monthly to the respective officers.
Market risks and credit risks for other subsidiaries are controlled and
assessed based on the internal rules, and the derivative transactions are
approved by the respective President of each subsidiary.
Interest rate swap or swaption contracts are approved by the Finance
Manager of the President of the Company and other subsidiaries,
respectively.
Commodity swap contracts are approved by the respective President
of each subsidiary based on internal rules.
The derivative transactions as of March 31, 2004 and 2003 are
summarized as follows: