ANNUAL REPORT 2004 - ELMOS Semiconductor AG

GROUP STATUS REPORT FINANCIAL STATEMENTS GROUP STRUCTURE GLOSSARY
Business and economic framework
Future of automotive electronics
Profit, financial and assets situation
ÿ Supplementary report
ÿ Risk report
Outlook report
Demand for ASICs is
relatively robust
ÿ Risk report
RISK MANAGEMENT SYSTEM
In the year under report, ELMOS Semiconductor AG applied its comprehensive risk
management system, in accordance with § 91 (2) AktG and implemented in 2002, to
the Group companies step by step and further refined it. The risk management sys-
tem of ELMOS and its application were duly examined of accordance with the regula-
tions of the German Commercial Code (HGB) and the Corporations Act (AktG) at the
end of the year and found effective by Ernst & Young AG, Wirtschaftsprüfungsgesell-
schaft, Dortmund. It provides for the regular recording and assessment of new and
known risks by the employees responsible and establishes a closed-loop reporting
system. The company departments of the ELMOS Group report on a monthly basis on
the development of finances and operations. In the year 2004 the risk management
reporting was changed over to intranet based input. Thus an easier and more reliable
collection of data and distribution of information is made possible. By these devices
Management Board and Supervisory Board are informed regularly and timely of the
risk situation and are enabled to take appropriate action for risk minimization or de-
fense, respectively. This risk management system will be continuously expanded and
refined in 2005 according to changing prevailing conditions.
It is the strategy of ELMOS to cover interest and currency risks by suitable instru-
ments, such as corresponding derivative products. ELMOS enters from time to time
into forward exchange contracts to hedge foreign currency transactions on a con-
tinuing basis for periods consistent with its committed exposures. These hedging ac-
tivities minimize the impact of foreign exchange rate movements on the company’s
profit situation. ELMOS does not engage in speculation.
DEPENDENCE ON THE AUTOMOBILE INDUSTRY
The ELMOS core business is directly connected to the automobile industry’s demand
for ASICs. Roughly 90 percent of sales are made with ASICs for automotive electro-
nics. On the one hand this demand depends on the units of cars produced, on the
other hand it is subject to the continuing trend towards more electronics in auto-
mobiles. Owing to the increase of electronic applications in cars, unit numbers of
ASICs sold even rise if the number of cars produced stagnates or declines.
It can be observed that in times of slack markets the automobile industry often
offers cars at standard prices with higher-value fittings. As a result the number of
ASICs sold does not necessarily decrease even though car production stagnates or
decreases. Demand for ASICs turns out to be relatively robust in consequence and to
be subjected to the fluctuations of vehicle units to a lesser extent.
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