Mitsubishi 2004 Annual Report Download - page 51

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49
(b)Risk
MMC and consolidated subsidiaries are exposed to the risk of credit loss in the event of nonperformance by the counterparties
to the derivatives, but any such loss would not be expected to be material because MMC enters into derivative transactions only
with financial institutions with high credit ratings. The notional amounts of the derivative financial instruments do not
necessarily represent the amounts exchanged by the parties and, therefore, are not a direct measure of MMC’s risk exposure in
connection with derivatives.
All the transactions related to derivative financial instruments are for the purpose of hedging, however, certain interest rate
swaps which are receive-fixed/pay-floating are exposed to risk of future interest rate fluctuations. MMC and consolidated
subsidiaries do not enter into derivative contracts for which significant volatility would have any significant influence on its
operations.
(c) Control
MMC does not enter into derivative contracts for trading purposes or on the anticipation of gains from short-term market
movements. Derivative transactions are appropriately pre-approved by the Chief Financial Officer. MMC approves derivative
transactions of consolidated subsidiaries as appropriate, and in accordance with policies established for each subsidiary which
require the appropriate approval of the Board of Directors and the Chief Financial Officer of each subsidiary.
Summarized below are the notional amounts and the estimated fair values of the derivative positions, except for those accounted
for under the special hedge provision, outstanding at March 31, 2004 and 2003:
In millions of yen
2004 2003
Notional Fair Unrealized Notional Fair Unrealized
amount value gain (loss) amount value gain (loss)
Forward foreign exchange contracts:
Sell:
US $ ¥ 7,042 ¥ 6,825 ¥ 216 ¥ 6,024 ¥ 6,072 ¥ (47)
Euro 7,897 7,721 175 18,728 20,049 (1,321)
£ stg 12,478 12,604 (126) 154 155 0
Canadian $ 5,705 5,677 28 1,976 2,117 (141)
Japanese ¥ 10,105 10,104 0 ———
Buy:
Japanese ¥ 2,474 2,491 17 ———
Total ¥ 311 ¥(1,509)
In thousands of U.S. dollars
2004
Notional Fair Unrealized
amount value gain (loss)
Forward foreign exchange contracts:
Sell:
US $ $ 66,628 $ 64,576 $ 2,052
Euro 74,721 73,061 1,660
£ stg 118,064 119,257 (1,193)
Canadian $ 53,986 53,718 267
Japanese ¥ 95,613 95,608 5
Buy:
Japanese ¥ 23,408 23,571 162
Total $ 2,949