Risk management (hedging) instruments and off-balance sheet risks. Clariant uses forward foreign exchange rate and option contracts, currency options as well as other financial instruments to hedge the Group’s risk exposure to volatility in interest rates, currencies and prices and to manage the return on cash and cash equivalents. Risk exposures from existing assets and liabilities as well as anticipated transactions are managed centrally.

Interest rate management. It is the Group’s policy to manage the costs of interest using fixed and variable rate debt and interest-related derivatives.

Foreign exchange management. To manage the exposure to the fluctuations in foreign currency exchange rates, the Group follows a strategy of hedging both balance sheet and revenue risk, partially through the use of forward contracts and currency swaps in various currencies. In order to contain costs, the Group does not hedge the entire exposure.

The following tables show the contract or underlying principal amounts and the respective fair value of derivative financial instruments by type at year-end.

The contract or underlying principal amounts indicate the volume of business outstanding at the balance sheet date and do not represent the amount at risk.

The fair value of these derivative financial instruments is recorded in Other current assets in the balance sheet in the case of a positive value or as Current financial debts in the case of a negative value and if the instruments expire within the next twelve months.

If the remaining lifetime exceeds twelve months, the value is recorded in Financial assets in case it is positive and in Non-current financial debts in case it is negative.

On 24 January 2012, Clariant issued a bond in the amount of EUR 500 million (see note 16), which on 1 June 2012 was designated as a hedge of a net investment in some of Clariant’s European subsidiaries. The unrealized foreign exchange rate gain resulting from the translation of the bond into Swiss francs amounting to CHF 60 million for 2015 (2014: CHF 12 million loss) is recorded in the cumulative translation difference in shareholders’ equity.

In October 2011, Clariant issued a certificate of indebtedness amounting to EUR 123 million (see note 20), which was designated as a hedge of a net investment in some of Clariant’s European subsidiaries. In April 2015, four new certificates of indebtedness amounting to EUR 300 million (see note 16) were issued by Clariant and designated as a hedge of net investment in some of Clariant’s European subsidiaries, whereas the certificate of indebtedness issued in October 2011 was de-designated at the same time. The unrealized foreign exchange rate loss resulting from the translation of the new certificates of indebtedness into Swiss francs amounted to CHF 15 million for 2015 and is recorded in the cumulative translation difference in shareholders’ equity. The unrealized foreign exchange rate gain resulting from the translation of the older certificate of indebtedness into Swiss francs as per de-designation date amounted to CHF 21 Mio for 2015 (2014: CHF 3 million gain) and is frozen in the cumulative translation difference in shareholder’s equity.