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GROUP RISKS<br />
MARKET RISKS<br />
Interest rate risk<br />
Group consolidated debt, whether in the form of shortterm<br />
drawdowns on confirmed long-term credit lines, or<br />
financial leases and long-term mortgages, the two usual<br />
methods of funding fixed assets, is mainly variable-rate.<br />
To cover itself against rate increases, the Group implements<br />
interest rate derivative instruments: either swaps,<br />
options or combinations of the two.<br />
At 31 December <strong>2008</strong>, the Group had five instruments<br />
in France, subscribed in 2007, representing a notional<br />
amount of €280 million, covering almost all the variable<br />
rate financing lines, excluding overdrafts and other<br />
financial debt.<br />
Their main features are outlined below:<br />
Two caps with a notional value of €100 million cover<br />
at each term the difference between the 3 month Euribor<br />
and 4%, when the 3 month Euribor is higher than 4%.<br />
Finally, there are three swaps with lower notional values,<br />
of between €20 million and €40 million. All instruments<br />
mature during the first quarter of 2009.<br />
The Group did not apply any new hedging instruments in<br />
<strong>2008</strong> in order to prevent excessive cover.<br />
There are three hedging instruments in Spain, in place<br />
since 2006, covering the rate risk involved in variable<br />
rate leasing contracts. These instruments represent a<br />
consolidated notional amount of €36 million. A swap<br />
with a notional value of €25 million, subscribed for three<br />
years in July 2006 and amortisable monthly, to give the<br />
option of swapping the 6 month Euribor for a fixed rate<br />
of 3.82%. A non-amortisable swap representing a<br />
notional amount of €6 million, subscribed in January<br />
2006 for a period of 5 years, to cover at each yearly<br />
term the 12 month Euribor and to pay a fixed rate of<br />
between a minimum of 2.75% and a maximum of<br />
4.75%, depending on the change in the 12 month<br />
Euribor.<br />
ANNUAL REPORT <strong>2008</strong><br />
A non-amortizable deactivating swap subscribed in<br />
March 2006 and valid for four years and nine months,<br />
representing a notional amount of €5 million, to cover at<br />
each quarterly term the 3 month Euribor and to pay<br />
annually a rate of between a minimum of 2.90% and a<br />
maximum of 3.50%, depending on the change in the<br />
12-month Euribor if the barrier is deactivated.<br />
Client credit risk<br />
No client represents more than 10% of Group revenues,<br />
which limits the risk of a client default having a significant<br />
effect on Group results. To cover itself against the risk<br />
of its clients defaulting, STEF-TFE has signed credit<br />
insurance contracts.<br />
Exchange rate risk<br />
Non-euro currency flows to the eurozone remain fairly<br />
well-balanced, so there is no foreign exchange risk. It is<br />
worth highlighting, however, a foreign exchange loss on<br />
an advance on current account at one of our United<br />
Kingdom subsidiaries which was unable to refinance its<br />
debt locally in sterling, because of the difficulties in this<br />
field beginning in <strong>2008</strong>. Sterling lost 30% against the<br />
euro in <strong>2008</strong>, including a 14.5% fall in December alone.<br />
Diesel fuel risk<br />
As a major consumer of diesel fuel, STEF-TFE, which is<br />
exposed to the variations in the price of this fuel, is not<br />
at present envisaging the purchase of hedging instruments.<br />
In addition to the mechanisms for passing on<br />
this expense, the Group relies above all on procurement<br />
optimisation with specialised purchasers, as well as the<br />
implementation of measures that aim to reduce fuel<br />
consumption. ●<br />
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