DuPont 2012 Annual Report Download - page 88

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

(Dollars in millions, except per share)

Cash awards under the EIP plan may be granted to employees who have contributed most to the company's success, with consideration being given to the
ability to succeed to more important managerial responsibility. Such awards were $60, $85 and $112 for 2012, 2011 and 2010, respectively. The amounts of
the awards are dependent on company earnings and are subject to maximum limits as defined under the governing plans.
In addition, the company has other variable compensation plans under which cash awards may be granted. These plans include the company's regional and
local variable compensation plans and Pioneer's Annual Reward Program. Such awards were $379, $386 and $422 for 2012, 2011 and 2010, respectively.


In the ordinary course of business, the company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency, interest rate and
commodity price risks. The company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect
varying levels of exposure coverage and time horizons based on an assessment of risk.
Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the company's
financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps. The company has not designated
any nonderivatives as hedging instruments.
The company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The
counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The company is exposed to credit loss in the
event of nonperformance by these counterparties. The company utilizes collateral support annex agreements with certain counterparties to limit its exposure to
credit losses. The company's derivative assets and liabilities are reported on a gross basis in the Consolidated Balance Sheets. The company anticipates
performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these
instruments are regularly reported to management.
The notional amounts of the company's derivative instruments were as follows:
  
Derivatives designated as hedging instruments:
Interest rate swaps $1,000 $1,000
Foreign currency contracts 1,083 2,032
Commodity contracts 753 553
Derivatives not designated as hedging instruments:
Foreign currency contracts 6,733 6,444
Commodity contracts 242 437
Foreign Currency Risk
The company's objective in managing exposure to foreign currency fluctuations is to reduce earnings and cash flow volatility associated with foreign currency
rate changes. Accordingly, the company enters into various contracts that change in value as foreign exchange rates change to protect the value of its existing
foreign currency-denominated assets, liabilities, commitments and cash flows.
The company routinely uses forward exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets
and liabilities of its operations. The primary business objective of this hedging program is to maintain an approximately balanced position in foreign
currencies so that exchange gains and losses resulting from exchange rate changes, net of related tax effects, are minimized. The company also uses foreign
currency exchange contracts to offset a portion of the company's exposure to certain foreign currency-denominated revenues so that gains and losses on these
contracts offset changes in the USD value of the related foreign currency-denominated revenues. The objective of the hedge program is to reduce earnings and
cash flow volatility related to changes in foreign currency exchange rates.
F-40