FFP_REGISTRATION_DOCUMENT_2017

ACTIVITY AND PROFIT FOR THE PERIOD Risk factors – Risk management and insurance

In emerging-market countries, investments are mainly intended to finance the growth of companies that are smaller and riskier, but which have greater potential than European companies that have undergone LBOs. Private equity funds in those countries use little or no leverage, which limits the financing problems experienced by some companies that have undergone LBOs in Europe. FFP seeks to work with well known management teams consisting of investment professionals. Emerging markets continue to represent a limited proportion of FFP’s assets (4.1% of gross asset value at 31 December 2017). Identification of risks The building in Gennevilliers that is the sole asset of FFP-Les Grésillons is being let to logistics firm Gefco. If the lessee vacates the building, FFP could suffer a loss of rent. FFP also has a stake in Immobilière Dassault, which is a listed real-estate investment company that is also exposed to real-estate risks. However, FFP is a shareholder in this listed company, and so the risk is managed in a similar way to that of other shareholdings (see above). In 2016, FFP invested in the OPCI Lapillus Ii real-estate fund, which has purchased the Tour Marchand in the La Défense business district of Paris. The tower has floorspace of almost 16,000 m2 and is let to a single tenant. The fund is managed by the real-estate team of LBO France and is governed by a Board of Directors on which FFP is represented. If the tenant vacates the building, FFP could suffer a loss of rent. FFP has joined forces with several families in Europe to support the development of several real-estate projects in the USA, which are being devised and managed by a US team of professionals within ELV Associates, which was founded in 1991. The projects mainly involve residential developments, but also office and retail developments. Risk management As regards the Les Grésillons building, a new lease was negotiated and signed in January 2014, with retroactive effect from 1 July 2013. In return for a reduction in rent, FFP-Les Grésillons granted a 12-year lease, including a fixed 6-year period, protecting FFP from a change in tenant until 2019. FFP maintains regular contact with its tenant, and the building is appraised every year. As regards the real-estate investments in La Défense and the USA, FFP has been careful to invest in partnership with professional teams specialising in the real-estate sector and with a significant track record in terms of performance. RISKS RELATED TO REAL-ESTATE ASSETS

unlisted companies, FFP ensures that shareholder agreements ensure eventual liquidity. However, those arrangements do not guarantee liquidity for FFP, particularly if an IPO is not possible or if no private, trade or financial buyer can be found.

RISKS RELATING TO PRIVATE EQUITY TRANSACTIONS

Identification of risks As regards private equity, FFP’s risks relate to a fall in the value of private equity funds’ investments. LBO funds invest using leverage, which increases the scope for both creating and losing value. A decline in business levels or margins can cause investee companies to breach covenants, often leading to changes in their financing structure and in some cases a partial or total loss of equity investments in them. There is an immediate liquidity risk, because private equity funds are not listed and do not provide periodic liquidity. In emerging- market countries, the legal environment is generally less secure. By investing in those countries, FFP is exposed to political and currency risks. Risk management Given these risks, and before making any private equity investment, FFP’s Executive Management carries out checks relating mainly to the competitive environment in which the fund will operate, the reputation of the fund’s management and its historical returns. Executive Management also meets fund management teams on a regular basis, including in emerging-market countries, to assess the quality of their investments. It may arise that some of the investee companies of private equity funds in which FFP has invested are unable to comply with their covenants. Discussions then take place with banks. Fund management teams take into account such events in valuing their shareholdings. Fund valuations reported to FFP therefore include a reduction in the value of companies in that situation, which may give rise to provisions in FFP’s financial statements. FFP’s commitments to private equity funds are illiquid on a short-term view, although a secondary market has developed to allow investors to exchange fund units before maturity. However, illiquidity is limited on a long-term view to the extent that funds seek to sell their investments after a few years, and then distribute to unit holders their corresponding share of the proceeds. In addition, the life of a fund is limited to around 10 years.

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2017 REGISTRATION DOCUMENT