Annual Report 2010

r 2010 ANNUAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FORTHE YEARENDED 31 DECEMBER2010 (in euros) lnterest rate risk The Group's operating income and operating cash flows are relatively independent of changes in market interes! rates. Interes\ rate risk arises on long-term borrowings, which are issued at fixed rates and expose the Group to fair value interes! rate risk. The sensitivity analysis (see below) has been determined based on the exposure to interes! rates for both derivative and non– derivative instruments at the reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the reporting date was outstanding for the whole year. lf interes! rates had been 50 basis points higher/lower and all other variables were held constant, the Group's profit for the year ended 31 December 2010 would increase/decrease by EUR 435 thousand (2009: increase/decrease by EUR 455 thousand). This is mainly attributable to the Group's exposure to interes! rates for variable rate borrowings. Foreign currency risk The Group incurs foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than euros. The Group uses currency swaps, forward exchange contracts and options to hedge its foreign currency risk. Most of the derivatives have maturities of less than one year after the reporting date. The Group has a number of financial investments in foreign subsidiaries whose net assets are exposed to currency translation risk. The Group records currency derivatives as trading instruments with fair value adjustments recorded in the statement of comprehensive income, and as instruments designed as cash flows hedges where changes in fair value are recorded in equity. The carrying amount of cash assets and cash liabilities of the Company denominated in a foreign currency as at the reporti ng date is as follows: USD CZK PLN CHF Liabilities 31 Dec 2010 31 Dec 2009 947 605 312 005 23 700 960 29 057 947 22 139 2 624 498 345 Assets 31 Dec2010 31 Dec2009 2 491 189 1 994 644 19 661147 30 215 211 6 523 051 5 535 246 192 546 17 504 The following table presents the Group's sensitivity to a 25% increase/decrease in the euro against the US dollar, a 20% increase/decrease in the euro against the Czech crown and Polish zloty, and a 10% increase/decrease in the euro against the Swiss franc. The sensitivity analysis includes monetary items denominated in foreign currencies and adjusts their translation at the end of the reporting period for the aforementioned change in foreign currency rates. Positive balances indicate an increase in profit and other equity items upon decrease of the euro against the respective currency. Appreciation of the euro against the respective currency would result in similar, however opposite impact on profit and other equity items, while data presented below would be negative. Profit or loss (-) 31 Dec 2010 USD 385 896 31 Dec 2009 420 660 31 Dec 2010 CZK -807 963 PLN CHF 31 Dec 2009 231 453 Profit or loss (-) 1 300 183 1 106 524 -30 580 1 750 To decrease risks resulting trom fluctuations in foreign currency exchange rates, the Company uses the financial derivatives. See Note 28. Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash with adequate due date and marketable securities, the availability of funding through an adequate amount of committed credit Iines and the ability to close out market positions. The following tables summarise the residual maturity period of the Company's non-derivative financial liabilities. The tables have been prepared based on undiscounted cash flows trom financial liabilities assuming the earliest possible date on which the Company can be required to settle the liabilities. The table includes cash flows trom both interes\ and principal during the term ot a loan agreement. 2010 lnterest-free liabilities Floating interes! rate instruments (loans) Fixed interest rate instruments (loans) Finance lease obligations 2009 lnterest-free liabilities Floating interes\ rate instruments (loans) Fixed interes\ rate instruments (interest-bearing liability to the parent company) Fixed interes\ rate instruments (loans) Finance lease obligations Weighted average effective interes\ rate 2.37% 2.72% 2.42% 3.00% 4.25% Up to 1 year 55 165 903 47024413 10222214 339 516 112 752 046 43 968 587 59 371 266 6 591 494 8 089 752 1 107 079 119 128 178 1-5 years 1 271 505 27 879 293 454 466 29 605 264 501 037 25 064 255 603 098 26 168 390 5+ years 1 229 167 1 982 278 3 211 445 191 1 093 043 2 241100 3 334 334 Total 56 437 408 76 132 873 12 204 492 793 982 145 568 755 44 469 815 85 528 564 6 591 494 10 330 852 1710177 148 630 902 The following table summarises the Company's liquidity analysis with respect to financial derivatives. The table has been prepared based on undiscounted net cash inflows/outflows (-) from financial derivatives which can be settled by the Company either net or gross. 1