Eurazeo / 2018 Registration document

GOVERNANCE Risk management, internal control and main risk factors

Depending, in particular, on changes in the economic environment and market conditions, exposure to a risk factor and the magnitude of related risks are likely to vary. Accordingly, only those risks considered liable to call into question business continuity or material with respect to activity (financial impact, particularly, on Net Asset Value) and/or the development of the Company (impact, particularly, on its reputation and the human factor) are presented below. Information on financial risks is also presented pursuant to the French Commercial Code (Article L. 225-100). Other risks, not known or not considered material by Eurazeo at the date of this Registration Document, could also impact its activities. In addition, this presentation is supplemented by an overview of disputes and litigation involving the Company (Section 3.4.2.11). Identification of risks Listed investments represented 28% of the NAV as of December 31, 2017 and 16% as of December 31, 2018. The decrease in the weight of listed investments in the NAV in fiscal year 2018 was due to the partial or total sale of securities (mainly Accor) and the fall in the share price of Elis and Europcar. In the accounts, Eurazeo is directly exposed to equity market risk in the amount of the consolidated net acquisition cost of its portfolio of listed investments (IFRS), i.e. €702.8 million as of December 31, 2018 (see table below). Risks relating to the exposure 3.4.2.1 of the portfolio to the equity markets

The Company may also be indirectly affected by a downturn in equity markets. Market fluctuations have an impact on the listed peers used to value unlisted assets, and could therefore have a negative impact on the Company's Net Asset Value. Risk management In addressing this direct exposure to equity market risk of its listed securities, Eurazeo has no time constraints and can therefore sell its investments when market conditions are most favorable. In addition, if necessary, Eurazeo can implement hedging strategies. Unlisted securities are valued primarily on the basis of comparable multiples. Such multiples can be based on market capitalization or on recent transactions, which by definition are sensitive to changes in the financial markets and economic conditions. The establishment of a panel of comparable companies necessarily involves estimates and assumptions, insofar as it requires reliance on pertinent comparability criteria. As part of the valuation of the Company's Net Asset Value (NAV), the fair value of these unlisted securities is measured twice annually (using the methodology presented on page 70), in accordance with the IPEV (International Private Equity Valuation) guidelines. Accordingly, by their very nature, and however much caution is used in determining them, valuations may prove to be very different from the exit price. To reduce this risk to an acceptable level, a number of internal and external diligences have been defined. Valuations are based on a rigorous internal process, the results of which are reviewed by independent appraisers on the basis of a multi-criteria approach, at the close of each year and half-year.

Change in value (cumulative)

Pre-tax impact of a 10% fall in the share price

Value in the consolidated balance sheet as of 12/31/2018

Value based on share price as of 12/31/2018

(In millions of euros)

(In millions of euros)

Acquisition cost, net of impairment

%

Comment

(In millions of euros)

186.7 166.3 89% (35.3) All fair value movements are recognized directly in profit or loss. 22.2 44.4 200% (6.7)

Moncler

352.9

352.9

Farfetch

66.6

66.6

Financial assets at FV through P&L

419.5 182.2 385.3

419.5 177.3 391.7

208.8 210.7 101% (42.0)

Elis

161.0 16.3 10% No direct impact on the financial statements apart from the need

Europcar

333.0 58.7 18%

to conduct impairment tests when the share price is below the consolidated value

Equity-accounted investments

567.5 987.1

568.9 988.5

494.0 75.0 15% 702.8 285.7 41%

TOTAL LISTED ASSETS

Restated for non-controlling interests

(0.1)

TOTAL LISTED ASSETS EXCLUDING NON-CONTROLLING INTERESTS (1)

987.0 In the NAV, listed investments are valued based on the average, over the 20 days preceding the valuation date, of average daily share prices weighted by (1) traded volumes. As of December 31, 2018, total listed investments are valued in the NAV at €969.3 million. The difference compared with “Listed Assets excluding non-controlling interests” in the above table is due to the valuation method: closing share price vs. volume weighted average share price over the last 20 trading days.

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Eurazeo

2018 Registration Document