To manage the risks arising from fluctuations in currency exchange rates and bunker prices, the Group enters into a variety of derivative financial instruments.

Foreign exchange forward contracts

Foreign exchange forward contracts are agreements to buy or sell fixed amounts of currency at agreed exchange rates to be settled in the future. The Group enters into various foreign exchange forward contracts to reduce its exposure on anticipated transactions and firm commitments, primarily for payables denominated in currencies other than the Group's functional currency. These anticipated transactions are primarily denominated in Euro, Japanese Yen and Singapore Dollar. Consistent with the Group's policy on covering transactional exposures, the purpose of the hedges is to eliminate the impact of movements in foreign currency exchange rates on identified transactions. These foreign exchange forward contracts generally have maturity dates of less than one year.

At 31 December 2002, there is one outstanding forward contract to be settled on 31 January 2003, details of which are set out below :

Bunker swap contracts are agreements to change the underlying bunker exposure from floating to fixed price (or vice-versa) with reference to a fixed price index, for example, PLATTS. The Group enters into bunker swap agreements with the objective of hedging a portion of its bunker purchases to reduce its risk to price volatility. Bunker swaps allow the Group to purchase bunker fuel oil at variable price and swap them into fixed price. As at 31 December 2002, the notional amount of the outstanding bunker swap agreements is US$22.77 million (2001: US$64.14 million), with maturity dates of less than one year.

Net fair values

The net fair values of the foreign exchange forward contracts and bunker swaps at the balance sheet date are as follows :

The above net fair values are for information purposes only and are not recognised in the financial statements.