Olympus 2004 Annual Report Download - page 47

O LYMPUS 2 0 0 4 4 5
15. DERIVATIVE FINAN CIAL IN STRUMEN TS
The Co mpany and its co nsolidated subsidiaries use derivative financial instruments in the normal co urse of their business to manage the expo-
sure to fluctuations in foreign exchange rates and interest rates. The primary classes of derivatives used by the Co mpany and its co nsolidated
subsidiaries are fo reign exchange forward co ntracts, currency options, and interest rate swaps. Almost all-derivative transactions are used to
hedge interest rates and foreign currency po sitio ns in co nnectio n with their business. Acco rdingly, market risk in these derivatives is largely
o ffset by opposite movements in the underlying po sitions. Management assesses derivative transactions and market risks surrounding these
transactions according to the Co mpany’s policy regarding derivative transactions. Contracts o f derivative financial instruments are executed
by finance departments o f the Co mpany or foreign subsidiaries in accordance with the internal rules appro ved by the Co mpany’s bo ard o f
directo rs o r with the approval and under the directions of a respo nsible directo r o f foreign subsidiaries.
The co unter-parties to the derivative financial instruments o f the Co mpany and its co nsolidated subsidiaries are substantial a nd creditwor-
thy multi-internatio nal commercial banks o r o ther financial institutions that are reco g nized market makers. Neither the risks o f counter-party
non-performance nor the eco no mic co nsequences of co unter-party non-performance associated with these contracts are considered by the
Co mpany to be material.
The follo wing table summarizes the underlying no tio nal transaction amo unts, bo o k values and fair values for o utstanding derivative finan-
cial instruments by risk categ ory and instrument type as o f March 3 1 , 2004 and 2 0 0 3:
(as o f March 31 , 2 00 4) M illions of yen Thousands of U.S. dollars
No tional amo unt Bo ok value Fair value N otional amount Bo o k value Fair value
Fo reign exchange forward co ntracts:
To buy U.S. do llars ................................... ¥ 1 ,2 4 9 ¥ — ¥ 1 ,214 ¥ 1 1 ,355 $ — $ 1 1 ,036
To sell U.S. dollars.................................... 3 7 — 37 3 36 — 3 3 6
To sell British pounds................................. 579 — 5 79 5 ,2 6 4 — 5 ,2 64
To sell other currencies .............................. 2,26 1 — 2 ,2 43 2 0 ,555 — 2 0 ,3 9 1
Fo reign exchange option co ntracts
Put option of other currencies ..................... 1 ,5 6 7 29 3 4 1 4 ,245 2 6 4 3 0 9
(as of M arch 31 , 2 00 3) M illions of yen
N otional amount Book value Fair value
Fo reign exchange forward co ntracts:
To buy U.S. dollars ............................................................................................. ¥ 1 1 1 ¥ — ¥ 13 1
To sell British pounds........................................................................................... 3 ,0 7 2 — 2 ,9 9 7
To sell other currencies ........................................................................................ 3 ,0 2 3 — 2 ,9 8 0
The forward co ntracts on the fo reign currency receivable and payable translated into Japanese yen at the forward exchange rates in the
accompanying consolidated financial statements are not included in the above amo unts.
The fair value o f currency o ption ag reements is estimated by obtaining quo tes fro m financial institutio ns. The fair value o f fo reign
exchange forward co ntracts is estimated based o n market prices for co ntracts with simila r terms.
A swap co ntract co ncluded by a subsidiary of the Co mpany was settled in fiscal 2 0 04. As a result o f the settlement, the subsidiary
recorded lo sses amounting to ¥ 5 ,4 4 7 millio ns ($49 ,5 1 8 tho usand). This contract fixes stable inco me fo r the subsidiary and requires addi-
tio nal payments determined by a certain portio n of difference between the fair market value and strike price of shares, when the fair market
value o f shares surpasses the strike price.
16. SUBSEQ UENT EVEN TS
(a) At the general meeting held o n June 29, 20 0 4 , the shareho lders approved a cash dividend totaling ¥1,97 6 millio n ($1 7 ,9 6 4 tho usand)
o r ¥ 7 .5 0 ($0 .0 7 ) per share and payment o f bo nuses to directo rs totaling ¥65 million ($ 5 91 thousand). In accordance with the
Co mmercial Co de o f Japan, the declaration o f this dividend and the payment o f these bo nuses have no t been reflected in the acco mpa ny-
ing consolidated financial statements as o f March 3 1 , 2004 .
(b) At the bo ard o f directo rs’ meeting held on May 12, 200 3 , a proposal was appro ved that the Co mpany can acquire treasury sto ck
(¥10,0 0 0 ,0 0 0 tho usand, co mmo n share 5 ,0 0 0 tho usand are the maximum) on the Code No.2 1 0 for the 1 3 5 th Co mpany’s annual share-
holder’s meeting o n June 27, 200 3 .
The pro po sal was approved and the Company can acquire treasury stock fro m the end o f the 1 35th Co mpany’s annual share-
holder’s meeting to the end o f the 1 36th. The Co mpany did no t acquire any treasury sto ck in fiscal 2 0 04, because the Co mpany had not
met any specific conditio n to be required to execute it.
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