Mitsubishi 2007 Annual Report Download - page 72

Download and view the complete annual report

Please find page 72 of the 2007 Mitsubishi annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 90

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90

70
MITSUBISHI MOTORS CORPORATION Annual Report 2007
16. Derivative Financial Instruments
(a) Nature of and policy for derivative transactions
MMC and its consolidated subsidiaries utilize derivative financial instruments, including forward foreign exchange
contracts, currency options, currency swaps, interest rate swaps and cross currency swaps to manage their exposure to
fluctuations in foreign currencies and interest rates. MMC and its consolidated subsidiaries do not utilize derivatives
for speculation or trading purposes.
(b) Risk
MMC and its 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 and its
consolidated subsidiaries enter 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. MMC and its consoli-
dated 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 managing directors in charge of finance
group headquarters. MMC approves derivative transactions of consolidated subsidiaries as appropriate, and in accor-
dance with policies established for each subsidiary, which require the appropriate approval of managing directors in
charge of finance group headquarters.
Summarized below are the notional amounts and the estimated fair values (based on the prices provided by
counterparty financial institutions) of the derivative positions, other than those accounted under the special hedge
provisions, at March 31, 2007 and 2006:
[Forward foreign exchange contracts]
In millions of yen
2007 2006
Notional Unrealized Notional Unrealized
amount Fair value gain (loss) amount Fair value gain (loss)
Forward foreign exchange contracts:
Sell:
U.S. $ ¥14,330 ¥13,787 ¥ 543 ¥18,596 ¥19,523 ¥ (927)
Euro 59,951 57,008 2,943 48,999 47,676 1,323
£ stg ———1,420 1,518 (98)
Canadian $ ——————
Australian $ ———9,704 9,845 (141)
Japanese ¥ 13,880 13,095 785 19,812 17,023 2,789
Buy:
Japanese ¥ 11,630 11,628 (1) 12,714 12,392 (322)
Total ¥4,270 ¥2,623