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Investor Presentaiton

128 A.P. Møller-Mærsk A/S Annual Report 2020 Financials Parent company financial statements Notes index Note 12 Financial instruments and risks - continued Table 12.5 2020 Fair value, asset Fair value, liability Nominal amount of derivative 0-1 years Maturity 2-4 years 5-years Gain/loss on hedged item Gain/loss on hedging instrument Average hedge rate Amounts in USD million == Table 12.5 Sensitivity table The sensitivities are based only on the impact of financial instruments that are outstanding at the balance sheet date and are thus not an expression of the company's total currency risk. Combined fair value hedge, hedge of borrowings EUR 45 559 559 -61 GBP 7 95 95 JPY 17 121 121 NOK 11 256 256 7835 44 -8 -3 -5 1522 1.8% 2.5% -2 -2 1.8% 2.5% Fair value hedge, hedge of borrowings USD 80 Cash flow hedge, hedge of borrowings EUR GBP NOK Total 2019 Combined fair value hedge, hedge of borrowings 900 500 400 -79 80 80 3.1% 35 461 461 -34 4.2% 49 313 313 -11 4.6% 4 81 51 30 -1 2.4% 142 106 2,786 51 1,059 1,676 -156 79 17 35 733 14 92 10 11 206 92 34 250 EUR GBP JPY NOK Fair value hedge, hedge of borrowings USD 14 900 3.5% 224 509 -47 92 -5 114 -3 250 10 -18 12300 4.2% -3 3.6% 4.2% 900 -9 14 4.0% Cash flow hedge, hedge of borrowings EUR 23 60 867 447 420 -17 3.9% GBP 52 302 302 -1 4.6% NOK 27 341 341 -4 3.5% Total 64 233 3,691 92 1,012 2,587 -54 -4 Interest rate risk The company has most of its debt denominated in USD, but part of the debt (e.g. issued bonds) is in other curren- cies such as EUR, NOK, GBP and JPY. The company strives to maintain a combination of fixed and floating interest rates on its net debt, reflecting expectations and risks. The hedging of the interest rate risk is governed by a du- ration range and is primarily obtained using interest rate swaps. The duration of the company's debt portfolio is 2.1 years (2.2 years) excluding IFRS 16 leases. A general increase in interest rates by one percentage point is estimated, all else being equal, to affect profit before tax and equity, excluding tax effect, positively by approx. USD 151m and positively by approx. USD 96m, re- spectively (positively by approx. USD 192m and positively by approx. USD 127m, respectively). This analysis assumes that all other variables, in particu- lar foreign currency rates, remain constant. The hedging of the interest rate risk is done by cross- currency swaps and interest rate swaps. The hedging is a mix of fair value hedging, combined fair value hedging and cash flow hedging. Due to buy-back of issued bonds in 2020, ineffectiveness from cash flow hedges is recognised in the income state- ment with a loss of USD 12m (loss of USD 4m). The hedges are expected to be highly effective due to the nature of the economic relationship between the expo- sure and the hedge. The source of ineffectiveness is the credit risk of the hedging instruments. For hedges where the cost of hedging is applied, the change in basis spread is recognised in other comprehensive income and is a time effect during the lifetime of the swap and at maturity amounts to 0.
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