2001 2000
Notes to the Consolidated Balance Sheet
Off-balance-sheet commitments
Tenancy and operating leases 56 52
Capital expenditure commitments, unless already
included in tangible fixed assets 84 68
Long-term raw material purchase contracts 186 32
Declarations of joint and several liability 286 261
Other off-balance-sheet commitments 12 14
Financial instruments
Contract value as at 31 December
Currency hedging instruments in US dollars 1,321 1,061
Currency hedging instruments in other currencies 206 246
Interest-hedging instruments 925 945
Financial instruments are used in the normal course of
business to hedge the effects on results of fluctuations in
exchange rates and interest rates. The most important
foreign currency inflow is denominated in US dollars and is
generated by export activities. The expected net cash flow
in US dollars, which amounts to around USD 760 million
per annum, is hedged well in advance by means of a com
bination of forward contracts and options. This policy
reduces the volatility of export sales proceeds and results
due to short-term fluctuations in the value of the US dollar
against the euro and delays the impact of long-term fluctu
ations on results.
As far as possible, temporary cash surpluses are held cen
trally and invested in bank deposits in euros with maximum
terms of one year. Approximately 60% of the risk of a
reduction in interest income on these deposits due to a fall
in the interest rate or an increase in interest charges due
to a rise in the interest rate on interest-bearing liabilities is
hedged with interest rate instruments.
These interest-hedging instruments include interest rate
swaps, forward rate agreements and caps and floors.
Currency and interest rate risk management is governed
by a stringently defined policy and strict rules. Only a limi
ted number of counterparties are used, all with excellent
credit ratings. The activities are closely monitored, inde
pendently of implementation.
FINANCIAL STATEMENTS 2001
61