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    • J. Financial Instruments
      • a. Risk Management
      • b. Liquidity Risks
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      • d. Interest Risk
      • e. Sensitivity analyses
      • f. Fair Value of Financial Instruments
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e. Sensitivity analyses

The Group’s activities expose it primarily to the financial risks of changes in foreign currency, changes in fair value and changes in interest rates. The Group enters into financial derivatives to manage its exposure to foreign currency risk and the risk of changes in fair values. These market risk exposures are measured using sensitivity analyses.

Foreign currency sensitivity

Sensitivity analyses provide an approximate quantification of the exposure in the event that certain specified parameters were to be met under a specific set of assumptions. The Group is mainly exposed to the U.S. dollar.

The following explanations detail the Group’s sensitivity to an increase and decrease in USD-Dollar against the Euro. The change represents the amount applied on internal reporting of foreign currency risk and represents the Executive Board’s assessment of the possible change in foreign exchange rates.

The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a change in foreign currency rates.

With an increase of the U.S. dollar against the Euro of 10% Net income for the year 2007 would be decreased by TEUR 5,171 compared to the Net income reported now (2006: decrease of Net income for the year 2006 of TEUR 495). With a 10% decrease of the U.S. dollar against the Euro Net income for the year 2007 would be increased by TEUR 2,650 (2006: increase of Net income by TEUR 39). These changes are mostly due to the fair value adjustment of forward contracts for U.S. dollar according to new exchange rates.

Interest rate sensitivity

The sensitivity analyses have been determined based on the exposure to interest rates of the bonds. There is no risk of a changing interest rate concerning the cash flows for the company as the issuer of the fixed-interest bearing bonds, although there is the risk of changes in the fair value of the bonds. The Company entered into swaps to hedge against this risk of changes in the fair value, so that on a net basis, the Group has the liability to pay a variable interest rate based on 1 month’s Euribor.

A 100 basis point change in interest rate is used when reporting interest rate risk internally to key management personnel and represents the Executive Board’s assessment of the possible change in interest rates.

If interest rates had been 100 basis points higher and all other variables were held constant, this would have caused a change of the fair value of the swaps in the amount of TEUR -9,398 (2006: TEUR -11,562). This change would be offset by a basis adjustment of the bonds in the same amount.

If interest rates had been 100 basis points lower and all other variables were held constant, this would have caused a change of the fair value of the swaps in the amount of TEUR 9,375 (2006: TEUR 12,428). This change would be offset by a basis adjustment of the bonds in the same amount.