Porsche 2011 Annual Report Download - page 101

Due to the hedges recognized in the separate
financial statements of Porsche SE pertaining to the
investment in Porsche Zwischenholding GmbH and the
put and call options that Porsche SE and Volkswagen
AG granted each other for the remaining 50.1 percent
share held by Porsche SE in Porsche Zwischenholding
GmbH, changes in the value of this equity investment
have no impact on the Porsche SE’s separate financial
statements.
Risk arising from the use of financial
instruments
In its business activities Porsche SE is ex-
posed to risks arising from the non-derivative or
derivative financial instruments used.
The principles and responsibilities for manag-
ing and controlling these risks are defined by the
executive board and monitored by the supervisory
board. The risk controlling processes implemented in
particular govern the ongoing monitoring of the
liquidity situation in the Porsche SE group, the devel-
opment of interest levels on the capital markets and
monitoring of the financial indicators. Porsche SE’s
risk controlling ensures that risks are identified,
analyzed and monitored using suitable information
systems. Moreover, transactions may only be con-
cluded in permitted financial instruments, only with
approved counterparties and to the admissible extent.
Derivative financial instruments used by Por-
sche SE were entered into mainly to manage interest
rate risks as well as in relation to the sale of the
remaining shares in Porsche Zwischenholding GmbH.
Any default on Porsche SE’s receivables,
most of which are due to companies of the Porsche
Zwischenholding GmbH group, could have a negative
impact on Porsche SE’s liquidity situation. In addition,
the investment of cash also gives rise to counter-
party risks. Regarding the term and call money in-
vestments at Porsche SE, however, they are hedged
using hedging systems customary in the banking
business. Cash investments are also exposed to
interest rate risks.
Under the basic agreement Porsche SE and
Volkswagen AG granted each other put and call
options for the remaining 50.1 percent share held by
Porsche SE in Porsche Zwischenholding GmbH.
Regarding valuation of these options there is a risk of
future changes in value that could have a negative
impact on the Porsche SE group’s results of opera-
tions. Following the failure of the merger of Porsche
SE into Volkswagen AG within the framework and
timeframe of the basic agreement, the options can
now theoretically be exercised. The theoretical prob-
ability of exercise of the put and call options, on
which the evaluation is based, is therefore 100 per-
cent. Changes in value can primarily arise from
changes in the valuation of the underlying enterprise
value of Porsche Zwischenholding GmbH, which in
turn depends to a large extent on the underlying
planning and the cost of capital derived as of the
respective valuation date. The exercise price for the
options is 3,883 million euro in each case and is
subject to certain adjustments. In order to secure
any remaining claims of Volkswagen AG from the
agreement between Porsche SE and Volkswagen AG
on the investment held by Volkswagen AG in Porsche
Zwischenholding GmbH, a retention mechanism was
agreed in favor of Volkswagen AG for the purchase
price payable in the event of the put or call options
being exercised. If any retained amount has not been
used to fulfill claims of Volkswagen AG, the retained
amount must be paid to Porsche SE on 30 June
2016, unless it is likely that claims for indemnity will
be made against the company as of that date.
Due to the hedges recognized in the sepa-
rate financial statements of Porsche SE pertaining to
the investment in Porsche Zwischenholding GmbH
and the put and call options that Porsche SE and
Volkswagen AG granted each other for the remaining
50.1 percent share held by Porsche SE in Porsche
Zwischenholding GmbH, changes in the value of
these options have no impact on the Porsche SE’s
separate financial statements.
A portion of Porsche SE’s financial liabilities
is subject to floating interest rates and, as a result,
interest payments are exposed to fluctuation over
time that cannot be foreseen. Should interest rates
rise, this would have an adverse effect on the com-
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