Eurazeo / 2019 Universal Registration Document

Risk management Risk factors

Other financial risks 4.2.3.3 Foreign exchange risk 4.2.3.3.1 MODERATE

Due toits internationaloperations,Eurazeois naturallyexposedto fluctuations in foreign currency rates(excludingeuros, itsfunctional and reporting currency) - mainly(i) forthe resultof portfolio companies with activities incurrencies other than the euro and (ii) investments paid ina currencyotherthanthe euro. The exposure of the performance of Eurazeo’sinvestmentsto foreignexchange riskmainly concerns the activitiesof the USinvestments (which contributed approximately 12% of2019 economic revenue), the controlled subsidiaries based outside the Eurozone andthe operations of equity-accounted groups outside the Eurozone. These subsidiaries operate exclusively in localcurrencies. The implementation of efficientforeign exchange hedges can prove difficult in certain geographic areas (Brazil).As regardsBrexit,Eurazeo’sexposure to the pound sterling remains limited. When Eurazeo performs investments in non-euro currencies, it may enter into standard hedging transactions (currency forwards,contingency hedges or options)to reduce the foreign exchange exposure between signingandclosing.Beyond closing, the implementation of this typeof hedge significantlyupstreamof the planned exit is liable to substantially increase the cost ofthe investment. Analyses are therefore conducted on a case-by-case basis to identify whether adapted options enable an effectivehedge offoreignexchangerisk for these foreign-currency denominated investments and/or the related debt. At the end of2019,investments made in a currency other than the euro account for nearly 21% ofNAV. Potentialeffects Unfavorable translation of portfolio company resultswhosefunctional • currencyis notthe euro Negativeexchangerate impact onthebusinessplan ofa portfolio • company(impacton expected rateof return) Unrealized loss ofvalueon investments in foreign currencies • (impact onNAV) Examples of risk mitigation measures Classic exchange rate hedges: period from signingto closing • a transaction Hedging anticipating an imminent exit via classicexchange • rate products MODERATE Risk that a long-term increase in ratesnegatively affectsEurazeo’s performance, and the valuationof certain assets The exposure ofEurazeo andits consolidated investments to interest rate risk mainly concernsmedium-and long-term floating-rate loans.The Group has a policyof managing its interest rate risk bycombiningfixed-andfloating-rateloans,benefitingin part from interest rate hedges. In orderto limit exposure to interest rate fluctuations, hedging derivatives are generally used to hedge investment financing. As of December 31, 2019, out oftotal consolidated borrowings of €4,223.2 million,over78% ofthe nominal amount is at fixed rates or hedged by interest rate hedging derivatives.For accountingpurposes, these derivatives do not alwaysqualify for hedge accounting pursuant to IFRS. Note 9.5.2 ofthe Notes to the consolidated financial statements (see Chapter 6, Section6.1) presents asensitivityanalysis on interest rate fluctuations. The valueof certain ofEurazeo'sassets andnotably realestateassets(Patrimoine division) is also indirectly exposed to an increase in interest rates. Potentialeffects Increasein net finance cost • Unfavorable impact on the value of certain realestateassets • (particularly the Patrimoine division) Examples of risk mitigation measures Use ofhedging derivatives from the implementation f acquisition • finance Mix offixed-rateand floatingrate debt • Interest rate risk 4.2.3.3.2

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