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100 United Microelectronics Corporation Annual Report 2004<br />
b. The details of forward contracts entered into by the Company and its subsidiaries, <strong>UMC</strong>i and <strong>UMC</strong>J, are summarized as follows:<br />
As of December 31, 2004 Notional Amount Contract Period<br />
The Company<br />
Forward contracts Sell USD 77 million December 23,2004 to January 20, 2005<br />
<strong>UMC</strong>J<br />
Forward contracts Sell USD 10 million December 30, 2004 to January 4, 2005<br />
As of December 31, 2003 Notional Amount Contract Period<br />
<strong>UMC</strong>i<br />
Forward contracts<br />
Buy EUR 67 million<br />
Sell USD 84 million<br />
December 31, 2003 to January 26, 2004<br />
c. Transaction risk<br />
a) Credit risk<br />
There is no significant credit risk exposure with respect<br />
to the above transactions because the counterparties<br />
are reputable financial institutions with good global<br />
standing.<br />
b) Liquidity and cash flow risk<br />
The cash flow requirements on the interest rate swap<br />
agreements are limited to the net interest payables or<br />
receivables arising from the differences in the swap<br />
rates. The cash flow requirements on forward contracts<br />
are limited to the net difference between the forward<br />
and spot rates at the settlement date. Therefore, no significant<br />
cash flow risk is anticipated since the working<br />
capital is sufficient to meet the cash flow requirements.<br />
c) Market risk<br />
Interest rate swap agreements and forward contracts<br />
are intended for hedging purposes. Gains or losses arising<br />
from the fluctuations in interest rates and exchange<br />
rates are likely to be offset against the gains or losses<br />
from the hedged items. As a result, no significant exposure<br />
to market risk is anticipated.<br />
d. The presentation of derivative financial instruments on<br />
financial statements<br />
The net receivables or payables resulting from interest<br />
rate swap and forward contracts were recorded under current<br />
assets or current liabilities.<br />
As of December 31, 2004 and 2003, the balances of current<br />
assets arising from interest rate swap were NTD 36<br />
million and NTD 129 million, respectively.<br />
As of December 31, 2004, the balance of current assets<br />
arising from forward contracts was NTD 39 million and related<br />
exchange loss in NTD 260 million was recorded under<br />
non-operating expenses for the year ended December 31,<br />
2004.<br />
Note 10
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