Annual report 2008 - Altarea Cogedim

SUPERVISORY BOARD CHAIRMAN’S REPORT ON INTERNAL CONTROL
216
Tax risks related to SIIC status
ALTAREA is subject to SIIC tax rules, which means that
it is exempt from French corporate income tax if it meets
certain criteria regarding dividend distributions and share
ownership. More specifically, the criteria stipulate that no
single shareholder or group of shareholders acting in concert
can own more than 60% of ALTAREA’s shares or voting
rights – which is why ALTAREA’s Articles of Association cap
voting right ownership at 60%. If ALTAREA fails to meet
these criteria it will be required to pay corporate income tax
under French common law for the fiscal years in which it
does not meet these criteria, which would have a negative
impact on its earnings.
ALTAREA could be liable for an additional income tax
charge if it pays an exempt dividend to a shareholder not
subject to French corporate income tax (or an equivalent
tax) and which owns at least 10% of ALTAREA’s shares, and
if ALTAREA cannot pass the charge on to this shareholder.
ALTAREA’s Articles of Association state explicitly that
shareholders must pay this charge, but ALTAREA may have
difficulty collecting the payment if it cannot be deducted
from the dividend, or if the shareholder becomes insolvent
before the payment is made. Finally, ALTAREA is subject to
changes in existing tax laws.
Risk related to the cost and availability of insurance
coverage
ALTAREA feels that the type and amount of insurance coverage
it has is consistent with the practices in its industry.
Nevertheless, the Company could experience losses that are
not fully covered by its insurance policies, or the cost of its
insurance policies could go up. The Company could be faced
with insufficient insurance or an inability to cover some or
all of its risks, which could result from capacity limitations
in the insurance market. The cost or unavailability of
appropriate coverage in the case of damages could have a
negative impact on the Company’s asset values, earnings,
operations, and financial position.
Health and environmental risks (asbestos, Legionella,
lead, classified facilities, etc.) and the risk of flood or
building collapse
ALTAREA’s assets could be exposed to health and safety
risks such as those related to asbestos, Legionella, termites,
or lead. As the owner of buildings, facilities, and land,
ALTAREA could be formally accused of failure to adequately
monitor and maintain its property against these risks. Any
proceedings invoking the Company’s liability could have a
negative impact on its operations, outlook, and reputation.
Therefore, ALTAREA closely follows all applicable regulations
in this area, and has a preventative approach to carrying
out property inspections and carrying out any building work
needed to come into compliance.
ALTAREA’s property is exposed to natural and technological
risks. One or more of its properties may receive an unfavourable
inspection report from a safety commission, which could
require the full or partial closure of the premises. This could
make the Company’s assets less attractive, and have a negative
impact on the Company’s operations and earnings.
Risk of conflicts of interest
ALTAREA has entered into partnerships or protocol
agreements with other organisations, mostly for the purposes
of carrying out joint property development projects. In the
future, conflicts of interest could arise in one or more of
these partnerships or agreements.
Financing risks
Borrowing capacity and liquidity risks
ALTAREA finances some of its investments through fixedor
floating-rate loans and through the capital markets.
The Company may not always have the desired access to
the capital markets or be able to obtain financing under
favourable conditions. This situation could result from a
crisis in the bond or equity markets, deterioration in the
property market, or any change in ALTAREA’s businesses,
financial position, or shareholder structure which affects
investors’ perception of ALTAREA’s credit quality or
attractiveness as an investment.
ALTAREA manages its liquidity risk by keeping track of its
debt maturity and available lines of credit, and diversifying
its sources of financing.
ALTAREA does not feel it has a significant exposure to
liquidity risk as of the date of this Registration Document.
Risk of changes in the share prices of other companies
ALTAREA does not feel it has a significant exposure to the
risk of changes in the share prices of other companies as of
31 December 2008.
Currency risk
ALTAREA generates almost all of its revenue in the
Eurozone and pays almost all of its expenses (investments
and capital expenditures) in euros. ALTAREA’s operations
in non-Eurozone countries, such as Russia, are still minor.
Therefore, ALTAREA does not feel it has a significant
exposure to currency risk as of 31 December 2008.
Interest rate risk
ALTAREA has adopted a prudent approach to managing
interest rate risk. The Company uses fixed/floating rate
swaps as hedging instruments to cover the interest rates on
mortgages backing its property and therefore preserve the
cash flow generated by its operating assets.