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DESCRIPTION OF THE RISK
POTENTIAL IMPACT
MITIGATING FACTORS AND MEASURES
Conflict of interest with
Cofinimmo’s investment activities
Cofinimmo passes up an
opportunity to invest in certain
assets itself.
The investments concerned are different from those of
Cofinimmo. Cofinimmo does not want to or cannot purchase
these assets, either because it feels that it already holds
sufficient similar assets or because it does not have the
necessary financial means to acquire them. In the case of co-
investments (MAAF insurance agencies, for example), sharing
the risk may also be a desirable option.
Reclassification of the Asset
Management business as a
non-ancillary activity in the event
where the share of profits earned
exceeds 10% of the profits of
Cofinimmo Investissements et
Services (CIS)
1. If this limit is exceeded, the
regulatory authorities may
impose a penalty/fine and
demand the reduction/sale of
the business.
2. Loss of the RREC status.
The Asset Management activities will be deliberately restricted
so as not to reach this limit.
Liability proceedings in relation to
losses incurred on the portfolio
managed for third parties
Deterioration of the business
relationship with the investor
who may accuse Cofinimmo of
not having sufficiently analysed
the investment products
offered. Potential payment of
damages.
Cofinimmo Investissements et Services (CIS) only does business
with institutional investors which are aware of the risks related
to the investment products offered. The investment policy is
clearly defined with and approved by the investor. This policy
is part of a contract between Cofinimmo Investissements et
Services (CIS) and the client. The client’s decision to invest is
based on the products offered by Cofinimmo Investissements et
Services (CIS), which criteria are defined in the contract.
The above-mentioned mitigating factors and measures do not necessarily dissolve the entire potential impact of the identified risk. Hence,
the impact remains partially or entirely the company’s and, indirectly, its shareholders’ liability.
DESCRIPTION OF THE RISK
POTENTIAL IMPACT
MITIGATING FACTORS AND MEASURES
Risk of debt
1
Cancellation/termination of loan
agreements or early repayment.
Non-compliance with the RREC
legislation and resulting penalties.
Prudent financial and debt policy and ongoing monitoring.
At 31.12.2014, Cofinimmo’s legal debt stood at 48.1%, in compliance
with the maximum ratio of 65% according to the RREC legislation.
This ratio applies to borrowing agreements and credit lines (max.
60%).
Financial charges (excluding impact of IAS 39) amounted to
€-54.70 million at 31.12.2014 (vs. €-66.67 million at 31.12.2013).
Exchange risk
Loss of value of the investments
and cash flows.
All investments are denominated in Euros, as are income and
expenditure.
Volatility in the share price
More difficult access to new
capital.
Monitoring of any in-house factor which may have a negative
impact on the market price.
Frequent communication with shareholders and publication of
financial information forecasts.
Change in the Group's public
rating
Cost of financing and liquidity.
Close relationship with rating agency which recommendations
are taken into account regarding financial ratios to be reached
for the various rating levels and regarding sources of financing,
liquidity and interest rate hedging.
The company is also in contact with another rating agency, which
rating is private.
Management for third parties and co-investments
In 2013, Cofinimmo Investissements et Services (CIS)
2
launched
an asset management activity for third parties. It constitutes an
ancillary activity within the Group.
In addition, Cofinimmo also joins forces with third parties on some
of its investments. It materialises in the form of a share, on their
behalf, in the capital of subsidiary companies or other types of
economic interests, such as the issue by these subsidiaries of
mandatory convertible bonds.
1
In accordance with Article 13 of the Royal Decree of 13.07.2014, where the debt
ratio exceeds 50%, Cofinimmo will draw up a financial plan accompanied by an
execution schedule, detailing the measures taken to prevent this debt ratio from
exceeding 65% of the consolidated assets (see Note 24).
2
Formerly Cofinimmo France.
7