FINANCIAL STATEMENTS 3Consolidated financial statements as of December 31, 2017 8.3 Currency risk 8.4 Counterparty risk The bulk of Klépierre’s business was conducted within the Eurozone Counterparty risk is limited by the fact that Klépierre is structurally a with the exception of Norway, Sweden, Denmark, Czech Republic, borrower. This risk is therefore limited essentially to investments made Hungary, Poland and Turkey. by the Group and the Group’s derivative transactions counterparties. Except Scandinavia and Turkey, the currency risk in these countries 8.4.1 Counterparty risk on marketable securities has not been assessed sufficiently high to warrant derivative hedging, since the acquisitions and the acquisition financing were denominated The counterparty risk on investments is limited by the type of in euros. products used: Generally, rents are invoiced to lessees in euros and converted into the > monetary UCITS managed by recognized institutions, and local currency on the billing date. Lessees have the choice of paying therefore carrying a range of signatures; their rents in local currency or in euros. The currency risk on minimum guaranteed rents is therefore limited to any variance between the rent > government debt (loans or borrowings) of countries in which as invoiced and the rent actually collected if the currency should fall Klépierre operates; in value against the euro between the invoice date and the date of > occasionally, deposit certificates issued by leading banks. payment in local currency by the lessee. At the same time, Klépierre ensures that rent payments from tenants 8.4.2 Counterparty risk on hedging instruments do not represent an excessively high proportion of their revenue in order to avoid any worsening of their financial position in the event Klépierre conducts derivative instrument transactions only with of a sharp increase in the value of the euro, which could increase the financial institutions recognized as financially sound. risk of their defaulting on payments due to Klépierre. In Scandinavia though, leases are denominated in local currency. 8.5 Equity risk Funding is therefore also raised in local currency. The principal As of December 31, 2017, Klépierre holds no equities shares quoted on exposure of the Klépierre Group to Scandinavian currency risk is an exchange market other than its own shares (12,256,688 shares at therefore limited essentially to the funds invested in the Company December 31, 2017), which are recognized in equity at their historical (share in equity of Steen & Strøm), which were financed in euros. cost. In Turkey, the leases are denominated either in euros or USD. Turkish investments with USD denominated leases are fully hedged by selling forward contracts in USD against euros. Note 9 Finance and guarantee commitments 9.1 Commitments given In €m 12/31/2017 12/31/2016 Commitments related to the Group’s consolidated scope 3.0 3.0 Purchase commitments 3.0 3.0 Commitments related to Group financing 861.0 1,170.3 Financial guarantees given 861.0 1,170.3 Commitments related to the Group’s operating activities 93.7 97.8 Commitments under conditions precedent 11.9 7.5 Work completion commitments 41.9 59.6 Rental guarantees and deposits 7.7 4.1 Other commitments given 32.3 26.7 TOTAL 957.7 1,271.1 9.1.1 Commitments related to the Group’s 9.1.2 Commitments related to Group financing consolidated scope Financial guarantees given Purchase commitments The Group finances its assets with equity or debt mostly contracted At December 31, 2017, this item includes a possible earn-out payment by Klépierre SA. In some cases, especially in Scandinavian countries, related to the acquisition of a project in France, contractually limited Steen & Strøm mainly relies on local currency mortgages to fund its to €3 million excluding duties. activities. 110 KLÉPIERRE 2017 REGISTRATION DOCUMENT