32. Additional Financial Instruments Disclosure (a) Foreign exchange risk exposure NOTES TO THE FINANCIAL STA TEMENTS for the year ended 31 December 2004 The Santos Group is exposed to foreign exchange risk principally through the sale of liquid petroleum products denominated in US dollars, US dollar borrowings and US dollar expenditure. In order to hedge this for eign exchange risk, the Santos Group has from time to time entered into forward foreign exchange, foreign currency swap and foreign curren cy option contracts. At 31 December 2004 the Santos Group has one open forward foreign curr ency exchange contract which has expired in January 2005. If closed out at balance date a loss of $0.2 million would have resulted. US dollar denominated borrowings are either swapped into Australian d ollar exposure (2004: US$321.4 million; 2003: US$115.0 million) or designated as a hedge of US dollar denominated investments in self-sustaining overseas controlled entities (2004: US$313.0 million; 2003: US$323.6 million) or as a hedge of future US denominated sales r evenues (2004: US$146.4 million; 2003: US$219.4 million). As a result, there were no net foreign currency gains or losses arising from translati on of US denominated dollar borrowings recognised in the statements of financial performance in 2004. Accordingly, $37.4 million of unrealised foreign currency gains were deferred as at 31 December 2004 (2003: gains of $66.3 million). The ultimate foreign currency gain or losses will be included in the measurement of the specific hedged US dollar denominated sales revenues to be realised in the years 2005 through 2006. The Australian dollar equivalents of foreign currency monetary items inclu ded in the statements of financial position to the extent that they are not effectively hedged are: Consolidated Santos Ltd 2004 2003 2004 2003 $million $million $million $million Current assets – United States dollars 126.4 82.7 32.9 41.3 Current liabilities – United States dollars 60.5 35.4 6.5 8.5 Non-current liabilities – United States dollars 26.5 – – – 84 Annual Report 2004