(13) Cash and cash equivalents, Restricted Cash and Investments

Cash and cash equivalents, Restricted Cash and Investments as at December 31 consisted of the following: 

Restricted Cash

Funds classified as Restricted cash as at December 31, 2007 related to a security deposit that served as collateral for SAP’s credit facility entered into in connection with the acquisition of Business Objects S.A., as described in Note 4 and Note 18. 

Debt Securities and Marketable Equity Securities

Proceeds from sales of available-for-sale securities in 2007 were €45 million (2006: €199 million; 2005: €0 million). Gross gains realized from sales of available-for-sale securities in 2007 were €2 million (2006: €0 million; 2005: €0 million). Gross losses realized from sales of available-for-sale securities in 2007 were €1 million (2006: €2 million; 2005: €0 million). Due to these sales of available-for-sale securities we recognized gains of €2 million (2006: €0 million; 2005: €0 million) and losses of €1 million (2006: €2 million; 2005: €0 million) which had previously been included in Accumulated other comprehensive income.

None of our Investments were past due as at December 31, 2007 or 2006, although some of our equity investments at cost were impaired as at those dates as discussed below.

Amounts pertaining to debt and available-for-sale equity securities as at December 31 were as follows: 

For the securities in a loss position, the fair values were categorized according to the duration of the loss position as follows:

For the year ending December 31, 2007, we recorded other-than-temporary impairment charges related to Marketable equity securities of €1 million (2006: €0 million; 2005: €0 million) and therefore removed unrealized losses recorded directly in equity up to that point of €1 million (2006: €0 million; 2005: €0 million).

The marketable debt securities as at December 31, 2007, consisted of investment grade bonds. The impairments of marketable debt securities in 2007 resulted from changes in market interest rates and not from changes in the creditworthiness of the underlying debtor. We determine these impairments to be temporary given the short duration of the respective declines in value and the Company’s intention and ability to hold these investments for a reasonable period of time sufficient for a forecasted recovery. 

The estimated year-end fair values of auction rate securities, variable rate demand notes and other debt securities (excluding debt-based funds), are presented by contractual maturity below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.

Equity Securities at Cost

The carrying value of all equity securities at cost was €69 million and €58 million as at December 31, 2007, and 2006, respectively. Equity securities at cost, which primarily include venture capital investments, are not included in the table above, because market values for those securities are generally not readily obtainable. In 2007, we sold two (2006: two; 2005: three) investments with a carrying value at the time of sale of €3 million (2006: €2 million; 2005: €1 million) and realized a gain of €0 million (2006: €0 million; 2005: €1 million). As at December 31, 2007 we intend to dispose of two equity securities at cost.

During 2007, 2006, and 2005, the Company recorded €6 million, €1 million, and €4 million, respectively, in charges related to other-than-temporary impairments of equity securities at cost.

Equity Method Investments

The excess of our initial investment in equity method companies over our ownership percentage in the underlying net assets of those companies amounts to €11 million as at December 31, 2007 (2006: €15 million) and is attributed to certain fair value adjustments with the remaining portion recognized as goodwill. Although we own less than 20% of the voting stock of the investee company, we account for our investments in (“Procurement Negócios Electronicos S/A”, Rio de Janeiro, Brazil and “ArisGlobal Holdings, LLC”, Stamford, Connecticut, USA) using the equity method, because we can exercise significant influence over the operating and financial policies of these entities through holding seats on their boards. 

We recorded no impairment losses or reversals thereof on equity method investments during 2007, 2006 and 2005. Therefore, no allocation to our reportable segments was necessary.

Our equity method investment Procurement Negócios Electronicos S/A, with a carrying amount of €2 million has been pledged in 2007 in order to serve as a guarantee for an ongoing lawsuit with the Brazilian tax authorities. In case of an unfavourable outcome of the lawsuit for SAP, for which probability is considered remote, the Brazilian tax authorities are allowed to make use of the collateral.