22. Trade and other payables
In millions of EUR
2005
2004
Trade payables due to associates and joint ventures
7
7
Other trade payables
1,042
797
Packaging deposits
334
318
Taxation and social security contributions
281
307
Dividend
31
14
Interest
41
38
Fair value derivatives
62
0 her payables
208
214
Ai cruals and deferred income
445
330
2,451
2,025
2 Financial instruments
E> posure to credit, interest rate and currency risks arise in the normal course of Heineken's business.
D rivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates
ai d interest rates.
F dging policy
H ineken is exposed to interest rate-, foreign currency- and credit risks on financial instruments. To limit
the risks use is made of interest rate derivatives, such as interest rate swaps, forward rate agreements,
c; ps and floors, minimising the effects of interest rate fluctuations on results. In addition, forward
e change contracts and options are used to limit the effects of foreign currency movements on results.
Tr msactions are entered into with a limited number of counter parties with strong credit ratings. Foreign
c rrency and interest rate hedging operations are governed by an internal policy and rules approved
a d monitored by the Executive Board.
C edit risk
U inagement has credit policies in place and the exposure to credit risk is monitored on an ongoing basis.
C edit evaluations are performed on all customers requiring credit over a certain amount. Heineken does
n t require collateral in respect of financial assets.
Ti insactions involving hedging instruments and investments, only allowed in liquid securities, are conducted
o ly with counter parties that have a credit rating of minimal single A or equivalent. Given their high credit
r; ings, management does not expect any counter party to fail to meet its obligations.
A balance sheet date there were no significant concentrations of credit risk. The maximum exposure
tc credit risk is represented by the carrying amount of each financial asset, including derivative financial
in truments, in the balance sheet.
It erest rate risk
lr principle, Heineken opts for a 50/50 mix of fixed and variable interest rates in its financing operations,
p ssibly combined with the use of interest rate instruments. The interest rate instruments used are
ir erest rate swaps, forward rate agreements, caps and floors.
S aps mature over the next years following the maturity of the related loans (refer following table)
a d have swap rates ranging from 2.1 percent to 5.5 percent.
H ineken classifies interest rate swaps as cash flow hedges and states them at fair value. The fair value
o swaps at 1 January 2005 was adjusted against the hedging and fair value reserve at that date.
Heineken N.V. - Annual Report 2005