DES GB2012 E

FINANCING AND INTEREST RATE RISKS We minimise the interest rate risk for new property financing as far as possible by entering into long-term loans with fixed-interest periods of up to 20 years. It cannot be ruled out that refinancing may only be possible at higher interest rates than before. The interest rate level is materially determined by the underlying macroeconomic condi- tions and therefore cannot be predicted by us. The possibility cannot be completely excluded that, owing for exam- ple to a deterioration in the Company’s results of operations, banks may not be prepared to provide refinancing or to extend credit lines. We monitor the interest rate environment closely so as to be able to react appropriately to interest rate changes with alternative financ- ing concepts or hedging if necessary. At an average interest rate of 4.23% (2011: 4.59%), this does not currently present a significant risk within the Group, particularly as the most recent refinancing was concluded at lower interest rates than the original financing and the present average interest rate. Deutsche EuroShop AG uses derivatives that qualify for hedge accounting to hedge interest rate risks. These interest rate swap transactions transform variable interest rates into fixed interest rates. An interest rate swap is an effective hedge if the principal amounts, maturities, repricing or repayment dates, dates for interest payments and principal repayments, and basis of calculation used to determine the interest rates for the hedge are identical to those of the under- lying transaction and the party to the contract fulfils the contract. Financial instruments are not subject to liquidity or other risks. The Group counters the risk of default by stringently examining its con- tract partners. A test of effectiveness for the hedges described is imple- mented regularly. RISK OF DAMAGE The property companies bear the risk of total or partial destruction of the properties. The insurance payouts due in such a case might be insufficient to compensate fully for the damage. It is conceivable that insurance cover is not sufficient for all theoretically possible losses or that the insurers may refuse to provide compensation. IT RISK Deutsche EuroShop’s information system is based on a centrally man- aged network solution. Corrective and preventive maintenance of the system is carried out by an external service provider. A virus protec- tion concept and permanent monitoring of data traffic with respect to hidden and dangerous content are designed to protect against external attacks. All data relevant to operations is backed up on a daily basis. In the event of a hardware or software failure in our system, all data can be reproduced at short notice. PERSONNEL RISK Given the small number of employees of Deutsche EuroShop AG, the Company is dependent on individual persons in key positions. The departure of these key staff would lead to a loss of expertise, and the recruitment and induction of new replacement personnel could temporarily impair ongoing day-to-day business. LEGAL RISK The concept for our business model is based on the current legal situ- ation, administrative opinion and court decisions, all of which may, however, change at any time. EVALUATION OF THE OVERALL RISK POSITION On the basis of the monitoring system described, Deutsche EuroShop has taken appropriate steps to identify developments jeopardising its continued existence at an early stage and to counteract them. The Executive Board is not aware of any risks that could jeopardise the continued existence of the Company. GROUP MANAGEMENT REPORT { 136 } DES ANNUAL REPORT 2012 Risks and opportunities management, internal control system

DES GB2012 E

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