Porsche 2009 Annual Report Download - page 91

ognized on the significant investments in Porsche
Zwischenholding GmbH and Volkswagen AG recog-
nized in Porsche SE’s consolidated financial state-
ments and could reduce the profit or loss reported by
the Porsche SE group. In order to ascertain any need
to record an impairment, the company’s own evalua-
tions are prepared regularly and the assessments
made by analysts are monitored with regard to the
investment in Volkswagen AG.
Under the basic agreement Porsche SE and
Volkswagen AG granted each other put and call op-
tions for the remaining 50.1 percent share held by
Porsche SE in Porsche Zwischenholding GmbH. Re-
garding 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. For further details, we refer to our disclosures
on related parties in note [37] of the consolidated fi-
nancial statements of Porsche SE as of 31 July 2010.
The exercise price for the options is 3,883 million
euro in each case and is subject to minor adjustments.
In order to hedge 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.
The remaining cash-settled options Porsche
SE still holds as of the end of the reporting period
relating to about two percent of Volkswagen AG’s or-
dinary shares are subject to fluctuations in value that
could have a negative impact on the profit/loss and
liquidity of Porsche SE. In addition, similarly to the
other financial instruments held by Porsche SE, there
is a counterparty risk in that the counterparty might
fail to meet its obligations or fail to do so when due.
Please refer in this regard to our comments in the sec-
tion “Risks from cash-settled stock options” in the
management report.
A large portion of Porsche SE’s financial li-
abilities 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
company’s liquidity situation. Porsche SE partially lim-
its this risk by using interest rate hedges (cap struc-
tures). The amounts capitalized in connection with
interest rate hedges are also exposed to fluctuations
in value depending on the development of interest
rate levels. Interest rate hedges are also exposed to
counterparty risks.
For the risks from financial covenant rules
regarding the syndicated loan concluded in 2009,
please refer to “Risks originating from financial cove-
nants” in this section of the management report.
Overall, Porsche SE’s executive board con-
siders the risks arising from the use of financial in-
struments to be low.
For further information on financial risk man-
agement, financial instruments used and the associ-
ated risks, please also refer to note [31] of the con-
solidated financial statements of Porsche SE as of
31 July 2010.
Further risks relating to the basic agreement
and the associated corporate restructuring
As part of the basic agreement and the asso-
ciated agreements implementing it, Porsche SE en-
tered into a number of agreements with Volkswagen
AG and entities of the Porsche Zwischenholding GmbH
group. For further details, we refer to our disclosures
on related parties in note [37] of the consolidated fi-
nancial statements of Porsche SE as of 31 July 2010.
The company’s executive board considers the risk
that the agreements made could have a significant
adverse effect on the net assets, financial position
and results of operations of the Porsche SE group to
be low.
Litigation risk
Porsche SE and the entities in which it holds
a direct or indirect investment are involved in legal
disputes and administrative proceedings both nation-
ally and internationally within the framework of their
operating activities. Where such risks are foreseeable,
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