Ricoh 2003 Annual Report Download - page 25

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Millions of yen
23
areas for fiscal 2003, and there were no material quantitative changes in market risk
exposure at March 31, 2003.
In the normal course of business, Ricoh also faces risks that are either nonfi-
nancial or unquantifiable. Such risks principally include credit and legal risk,
and are not represented in the tables.
FOREIGN CURRENCY RISK
In the ordinary course of business, Ricoh uses foreign exchange forward contracts to
manage the effects of foreign currency exchange risk on monetary assets and liabili -
ties denom inated in foreign currencies.
Contracts related to operating activities generally have m aturities of less than six
months, while the contracts related to financing activities have the sam e maturities
as the underlying assets and liabilities.
The table above provides inform ation about Ricoh’s m aterial derivative
financial instrum ents that are sensitive to foreign currency exchange rates.
The table relating to foreign exchange forward contracts presents the notional
amounts, weighted average exchange rates and estimated fair value. These notional
amounts generally are used to calculate the contractual paym ents to be exchanged
under the contracts.
INTEREST RATE RISK
In the ordinary course of business, Ricoh enters into interest rate swap agree-
ments to reduce interest rate risk and to m odify the interest rate characteristics of
its outstanding debt. These agreem ents prim arily involve the exchange of fixed
and floating rate interest paym ents over the life of the agreem ent without the
exchange of the underlying principal am ounts. The table on page 21 provides
inform ation about Ricoh’s m aj or derivative and other financial instrum ents that
are sensitive to changes in interest rates, including interest rate swaps and debt
obligations. For debt obligations, the table presents principal cash flows by
expected m aturity date, related weighted average interest rates and estim ated fair
value. For interest rate swaps, the table presents notional am ounts by expected
maturity date, weighted average interest rates and estim ated fair value. Notional
amounts are generally used to calculate the contractual payments to be
exchanged under the contract.
CREDIT RISK
Ricoh is also exposed to credit-related losses in the event of nonperformance by
counterparties to financial instrum ents. However, credit risk arising from the fail-
ure of counterparties to m eet the term s of financial instrument contracts is gener-
ally lim ited to the am ounts by which the counterparties’ obligations exceed the
obligations of Ricoh. It is Ricoh’s policy only to enter into financial instrum ent
contracts with a diversified group of financial institutions having credit ratings
satisfactory to Ricoh to minim ize the concentration of credit risk. Therefore,
Ricoh does not expect to incur m aterial credit losses on its financial instruments.
EQUITY PRICE RISK
A relatively small portion of Ricoh’s m arketable securities is subject to equity price
risk arising from changes in their m arket prices. Marketable securities consist of a
diversified pool of Japanese equities. Ricoh’s overall investment policy is to invest
in highly-liquid, low risk investments.
The table below provides information about contractual m aturities for avail-
able-for-sale securities and the fair values for market risk sensitive securities as of
March 31, 2003.
US$/¥
EUR/¥
Contract
am ounts
Estimated
fair value
Average contractual
rates
Estimated
fair value
Contract
am ounts
FOREIGN EXCHANGE FORWARD CONTRACTS
Thousands of U.S. dollars
$ 25
( 3,542)
$ 10,203
120,661
¥ 3
( 418)
¥ 1,204
14,238
120.41
125.67
Debt securities
Due within one year
Due within one year
through five years
Equity securities
Investm ent trusts*
Total
Millions of yen
Fair
value
Thousands of U.S. dollars
Cost
Fair
valueCost
$ 907
379,915
92,856
74,704
$548,382
$ 907
381,525
53,628
80,161
$516,221
¥ 107
44,830
10,957
8,815
¥64,709
¥ 107
45,020
6,328
9,459
¥60,914
* Investm ent trusts consist of investments in m arketable debt and equity securities.