Coca Cola

Foreign Exchange Our international operations are subject to certain opportunities and risks,

including currency fluctuations and governmental actions. We closely monitor our operations in

each country and seek to adopt appropriate strategies that are responsive to changing economic

and political environments, and to fluctuations in foreign currencies. 69 In 2015, we used 72

functional currencies. Due to the geographic diversity of our operations, weakness in some of

these currencies might be offset by strength in others. In 2015, 2014 and 2013, the weighted-

average exchange rates for foreign currencies in which the Company conducted operations (all

operating currencies), and for certain individual currencies, strengthened (weakened) against the

U.S. dollar as follows

These percentages do not include the effects of our hedging activities and, therefore, do not

reflect the actual impact of fluctuations in foreign currency exchange rates on our operating

results. Our foreign currency management program is designed to mitigate, over time, a portion

of the impact of exchange rate changes on our net income and earnings per share. The total

currency impacts on net operating revenues, including the effect of our hedging activities, were

decreases of 7 percent and 2 percent in 2015 and 2014, respectively. The total currency impacts

on income before income taxes, including the effect of our hedging activities, were decreases of
6 percent in 2015 and 9 percent in 2014. Foreign currency exchange gains and losses are

primarily the result of the remeasurement of monetary assets and liabilities from certain

currencies into functional currencies. The effects of the remeasurement of these assets and

liabilities are partially offset by the impact of our economic hedging program for certain

exposures on our consolidated balance sheets. Refer to Note 5 of Notes to Consolidated

Financial Statements. Foreign currency exchange gains and losses are included as a component

of other income (loss) net in our consolidated financial statements. Refer to the heading

Operations Review Other Income (Loss) Net above. The Company recorded foreign

currency exchange gains of $149 million in 2015 and foreign currency losses of $569 million

and $162 million in 2014 and 2013, respectively

Foreign Currency Exchange Rates We manage most of our foreign currency exposures on a

consolidated basis, which allows us to net certain exposures and take advantage of any natural

offsets. In 2015, we used 72 functional currencies and generated $23,934 million of our net

operating revenues from operations outside the United States; therefore, weaknesses in some

currencies might be offset by strengths in other currencies over time. We use derivative financial

instruments to further reduce our net exposure to foreign currency fluctuations. Our Company

enters into forward exchange contracts and purchases currency options (principally euros and

Japanese yen) and collars to hedge certain portions of forecasted cash flows denominated in

foreign currencies. Additionally, we enter into forward exchange contracts to offset the earnings

impact related to foreign currency fluctuations on certain monetary assets and liabilities. We also

enter into forward exchange contracts as hedges of net investments in international operations.

The total notional values of our foreign currency derivatives were $18,060 million and $23,553

million as of December 31, 2015 and 2014, respectively. This total includes derivative
instruments that are designated and qualify for hedge accounting as well as economic hedges.

The fair value of the contracts that qualify for hedge accounting resulted in a net unrealized gain

of $692 million as of December 31, 2015. At the end of 2015, we estimate that a 10 percent

weakening of the U.S. dollar would have eliminated the net unrealized gain and created an

unrealized loss of $486 million. The fair value of the contracts that do not qualify for hedge

accounting resulted in a net unrealized gain of $278 million, and we estimate that a 10 percent

weakening of the U.S. dollar would have decreased the net unrealized gain to $238 million.

Dalmer

Transaction risk and currency risk management. The global nature of Daimlers businesses

exposes cash flows and earnings to risks arising from fluctuations in exchange rates. These risks

primarily relate to fluctuations between the euro and the US dollar, the Chinese renminbi, and the

British pound. In the operating vehicle business, the Groups exchange rate risk primarily arises

when revenue is generated in a currency that is different from the currency in which the costs of

generating the revenue are incurred (transaction risk). When the revenue is converted into the

currency in which the costs are incurred, it may be inadequate to cover the costs if the value of

the currency in which the revenue is generated declined in the interim relative to the value of the

currency in which the costs were incurred. This risk exposure primarily affects the Mercedes-

Benz Cars segment, which generates a major portion of its revenue in foreign currencies and

incurs manufacturing costs primarily in euros. The Daimler Trucks segment is also subject to

transaction risk, but to a lesser extent because of its global production network. The Mercedes-

Benz Vans and Daimler Buses segments are also directly exposed to transaction risk, but only to
a minor degree compared to the Mercedes-Benz Cars and Daimler Trucks segments. In addition,

the Group is indirectly exposed to transaction risk from its equity-method investments. Cash

inflows and outflows of the business segments are offset if they are denominated in the same

currency. This means that the exchange rate risk resulting from revenue generated in a particular

currency can be offset by costs in the same currency, even if the revenue arises from a

transaction independent of that in which the costs are incurred. As a result, only the net exposure

is subject to transaction risk. In addition, natural hedging opportunities exist to the extent that

currency exposures of the operating businesses of individual segments offset each other partially

at Group level, thereby reducing overall currency exposure. These natural hedges eliminate the

need for hedging to the extent of the matched exposures. To provide an additional natural hedge

against any remaining transaction risk exposure, Daimler generally strives to increase cash

outflows in the same currencies in which the Group has a net excess inflow. In order to mitigate

the impact of currency exchange rate fluctuations for the operating business (future transactions),

Daimler continually assesses its exposure to exchange rate risks and hedges a portion of those

risks by using derivative financial instruments. Daimlers Foreign Exchange Committee (FXCo)

manages the Groups exchange rate risk and its hedging transactions through currency

derivatives. The FXCo consists of representatives of the relevant segments and central functions.

The Corporate Treasury department aggregates foreign currency exposures from Daimlers

subsidiaries and operative units and carries out the FXCos decisions concerning foreign

currency hedging through transactions with international financial institutions. Risk Controlling

regularly informs the Board of Management of the actions taken by Corporate Treasury based on

the FXCos decisions. The Groups targeted hedge ratios for forecasted operating cash flows in

foreign currency are indicated by a reference model. On the one hand, the hedging horizon is
naturally limited by uncertainty related to cash flows that lie far in the future; on the other hand,

it may also be limited by the fact that appropriate currency contracts are not available. This

reference model aims to protect the Group from unfavorable movements in exchange rates while

preserving some flexibility to participate in favorable developments. Based on this reference

model and depending on the market outlook, the FXCo determines the hedging horizon, which

usually varies from one to five years, as well as the average hedge ratios. Reflecting the character

of the underlying risks, the hedge ratios decrease with increasing maturities. At year-end 2015,

foreign exchange management showed an unhedged position in the automotive business for the

underlying forecasted cash flows in US dollars in calendar year 2016 of 20%, for the underlying

forecasted cash flows in Chinese renminbi in calendar year 2016 of 22%, as well as for the

underlying forecasted cash flows in British pounds in calendar year 2016 of 29%. The hedged

position of the operating vehicle businesses is influenced by the amount of derivative currency

contracts held. The derivative financial instruments used to cover foreign currency exposure are

primarily forward foreign exchange contracts and currency options. Daimlers guidelines call for

a mixture of these instruments depending on the assessment of market conditions. Value at risk is

used to measure the exchange rate risk inherent in these derivative financial instruments. Table

E.83 shows the period-end, high, low and average value at risk figures of the exchange rate risk

for the 2015 and 2014 portfolios of derivative financial instruments, which were entered into

primarily in connection with the operative vehicle businesses. Average exposure has been

computed on an end-of-quarter basis. The offsetting transactions underlying the derivative

financial instruments are not included in the following value at risk presentation. See also table

E.80 for the nominal volumes on the balance sheet date of derivative currency instruments

entered into to hedge the currency risk from forecasted transactions. In 2015, the development of
the value at risk from foreign currency hedging was mainly driven by changes in the nominal

volume and by the increased foreign currency volatilities. The Groups investments in liquid

assets or refinancing activities generally are not allowed to result in currency risk. Transaction

risks arising from liquid assets or payables in foreign currencies that result from the Groups

investment or refinancing on money and capital markets are generally hedged against currency

risks at the time of investing or refinancing in accordance with Daimlers internal guidelines. The

Group uses appropriate derivative financial instruments (e.g. cross currency interest rate swaps)

to hedge against currency risk. Since currency risks arising from the Groups investment or

refinancing in foreign currencies and the respective hedging transactions principally offset each

other, these financial instruments are not included in the value at risk calculation presented.

Effects of currency translation. For purposes of Daimlers consolidated financial statements, the

income and expenses and the assets and liabilities of subsidiaries located outside the euro zone

are converted into euros. Therefore, period-toperiod changes in average exchange rates may

cause translation effects that have a significant impact on, for example, revenue, segment results

(EBIT) and assets and liabilities of the Group. Unlike exchange rate transaction risk, exchange

rate translation risk does not necessarily affect future cash flows. The Groups equity position

reflects changes in book values caused by exchange rates. In general, Daimler does not hedge

against exchange rate translation risk.