Annual financial report 2013

Risk Factors /

Financial Management

FINANCIAL MANAGEMENT

Cofinimmo’s financial policy aims to optimise the financing cost and to limit the Group’s liquidity risk and counterparty risk.

See also the chapter “Management of Financial Resources” of this Annual Financial Report.

Interest rate derivatives being measured at market value.

DESCRIPTION OF THE RISK

POTENTIAL IMPACT

MITIGATING FACTORS AND MEASURES

Financial and banking

markets unfavourable to

real estate and/or

to Cofinimmo

1. Access to credit impeded and more expensive.

2. Reduced liquidity.

Rigorous financial policy (1,2):

• diversification of financing sources between the banking

market (47%) and various capital market segments (47%);

• stable, well-spread banking pool;

• well-balanced spread of maturities over time. Full cover of the

treasury bills programme. (1)

Sufficient reserve of undrawn portions of confirmed credit lines

to cover medium-term operational/acquisition/construction

expenditures and short-term refinancing. (1,2)

Insolvency of financial or

banking counterparties

Negative impact on the results.

Diversified number of banking counterparties with good

financial ratings.

Changes in (future)

market interest rates

1. Revaluation of the financial instruments

2. Negative impact on the financial charges.

3. Negative impact on the net asset value and the

result of the period.

4. (Negative) change of the Group’s rating, with a

negative impact on the financing cost and the

liquidity (see “Change of the Group’s rating”).

Part of the debt is contracted at floating rate or immediate

conversion from fixed to floating rate.

Interest rates locked in over a period of minimum three years for

at least 50% of the debt.

Use of derivative instruments (Interest Rate Swaps and CAP and

FLOOR options) to lock the interest rate into a corridor between a

minimum and a maximum rate. (1,2,3)

In 2014, assuming the debt structure and level remain identical

to those at 31.12.2013, and taking into account the hedging

instruments put in place for 2014, a 0.5% increase or decrease

in interest rates would result in no significant change of the

financial cost.

At 31.12.2013, 27.52% of the debt is financed at a fixed rate, while

72.48% is financed at a floating rate.

In the absence of hedging, an interest rate increase of ten basis

points would increase charges by €1.2 million.

Approximately 90% of the floating rate debt is hedged using

derivatives until 2015.

Increase in credit margins

Increase in financial charges.

Diversification of the sources of borrowed capital to optimise

the average credit margins. Capital raised for the medium or

long term at fixed margins.

Non-renewal or

termination of the

financing contracts

Negative impact on liquidity.

Nine renowned banks.

Various financing forms: bank debt, convertible and non-

convertible bond issues, etc.

Refinancing performed at least 12 months in advance in order to

optimise the conditions and the liquidity.

Change in the fair value of

hedging instruments

Positive or negative impact on shareholders’ equity

and the intrinsic value per share.

If Cofinimmo had closed its positions at 31.12.2013,

the settlement amount would have stood at

€-105.44 million (vs. €-177.2 million at 31.12.2012).

The cost of closing the positions if the interest

rates had been 1% above or below the reference

rates, would have stood at €-28.21 million (vs.

€-157.09 million at 31.12.2012) and €-185.26 million

(vs. €-198.87 million at 31.12.2012) respectively.

Cofinimmo uses hedging for its entire portfolio, not for specific

credit lines.