Notes to the Accounts

1. In accordance with article 3:26 of the Belgian Code on Companies and Associations, Cobepa has been exempted from the requirement to draw up or submit consolidated accounts. However, for the sake of completeness, the company is submitting restricted consolidated accounts, which are not drawn up according to Book III, Title II, Chapter II of the Royal Decree of 29 April 2019 on consolidated financial statements. These restricted consolidated accounts include in the consolidation scope only the subsidiaries operating in the same field as Cobepa and in which Cobepa’s participation exceeds 50%. To date, according to this definition, the consolidation scope includes only the companies that belong to the internal structure of the Cobepa group and not the companies operating in other fields. The Board of Directors has consequently decided to refer to these accounts as “restricted consolidated accounts”, since the decision has been made not to apply the equity method or proportional consolidation. The reason for this approach is that, given the diversity of the sectors covered by the companies in the Cobepa’s portfolio, the Board of Directors believes that consolidation of the results of these companies would be inappropriate in terms of information and would reveal little in economic terms.
2. Full consolidation entails aggregating on a line-by-line basis the individual balance sheets and income statements of consolidated subsidiaries, after making adjusting entries to bring them into line with group valuation rules and accounting practices, and after eliminating intra-group balances and intra-group transactions.
3. As a general rule, special purpose vehicles are not consolidated when they are created to finance investments according to a funding agreement without recourse. On the contrary, occasionally, special vehicles may be set-up to pool instruments used to finance our investments and owned by the Cobepa group and co-investors. By way of exception these vehicles will be consolidated with the equity method, their contribution through the caption "net result of companies at equity" being aimed at replacing the income from financial assets that should have been booked, if those instruments had been directly held.

List of companies other than those referred to in notes II and III, in which the companies included in the restricted consolidation and those which are excluded from it, hold at least 10% of the capital, either directly or through parties acting in their own names but on behalf of these companies.

A corporate expense will be accounted for as a tangible fixed asset if its purchase price, aggregated with any directly related expenditure of accessories, exceeds €1,000. If the amount is lower, the expense will not be considered a tangible fixed asset, but will instead be accounted for as an operating cost item.

Tangible fixed assets are valued at acquisition cost including ancillary expenses incurred at
the time of acquisition. Depreciation rates are as follows:

• 20% for office equipment;
• 10% for furniture;
• 20% for vehicles;
• 0% for works of art.

These rates may, however, be brought up to levels allowed by the Ministry of Finance in respect of ancillary costs as well as in the context of the regulations permitting use of the declining balance method. 

Where appropriate, exceptional depreciation will be applied to bring the net book value of a tangible fixed asset down to the lower of its economic value and book value.

Investments and other securities held in portfolio are booked at their acquisition cost including the commissions paid to intermediaries. At the balance sheet date, the acquisition cost of each investment or security held in portfolio is compared to its estimated realisable value in accordance with the evaluation method set out below. If the estimated realizable value is lower than the acquisition cost, write-downs are recorded in the income statement to the extent that the impairment in value is deemed to be permanent. Appropriate write-backs are recorded in respect of write-downs on securities on which capital gains are subsequently realised. More specifically, a position may be “hedged” by the purchase of put options, covering the risk of share price going down.

The paid premiums are booked on the assets side of the balance sheet in treasury investments. If the shares covered by these options are sold at due date, the premiums will be booked against the sale proceeds. If they are not sold, the premiums will be booked as a cost. Received premiums (sale Restricted Consolidated Accounts of put or call options) are booked on the liabilities’ side of the balance sheet in “deferred charges and accrued income” until due date of the operations after which they will be booked in revenue. At closing date of each period, the global position (all share option contracts and shares covered) will be examined to determine the possible adjustment to be booked.

Investments are valued on the basis of the underlying net asset value (i.e. net asset value corrected for gains and losses prudently estimated on the basis of the financial position, profitability or prospects of the enterprise concerned). The book value is taken from the most recent balance sheet or the last known financial position.

Quoted or publicly traded shares are generally valued at the closing rate on the balance sheet date, provided that the market in the shares is active. Unquoted shares and shares where the market is not considered to be active are valued by reference to their net asset value as defined above. If their net asset value cannot be calculated, shares are valued by reference to their net book value.

They are recorded at nominal value, adjusted, where appropriate, in respect of amounts receivable bearing no interest or granted at exceptionally low interest rates. Where recoverability is considered to be unlikely, notably in the light of the financial position of the debtor, an appropriate write-down is recorded.

Trading securities are valued using the same principles set out above for other securities held in portfolio. Appropriate write-downs are recorded in respect of unrealised losses, which are written back, where securities are subsequently realised for a gain.

Other amounts receivable, short-term investments and cash at bank and in hand are stated at acquisition cost or nominal value. Write-offs and write-backs are recorded on the basis of the criteria applied to other financial fixed assets – amounts receivable above.

At the close of each financial year, the Board of Directors examines prudently, sincerely and in good faith the provisions required to cover anticipated liabilities and possible charges which have arisen in the course of the year under review and previous financial years. The provisions which relate to previous financial years are subject to continuous reappraisal and released to the income statement where they are found to be no longer justified.

Such liabilities are recorded at their nominal value, adjusted, where appropriate, in respect of non-interest bearing long-term debts or debts bearing an abnormally low rate of interest.

Accrued and deferred income, and deferred and accrued charges are calculated at the balance sheet date and stated in the appropriate accounts on the assets and liabilities sides of the balance sheet.

As a general rule, all amounts payable and receivable are shown in the accounts at the middle free market price quoted on the balance sheet date. Disparities over and against historical value are grouped by currency.  Where the net difference by currency shows an unrealised loss, it is recorded as a charge in the income statement.

Unrealised exchange gains are recorded in the balance sheet account “accrued charges and deferred income”. Where the financing of an investment is hedged in the same currency as the investment, the exchange rate of the financing is maintained at its historical rate.

Balance sheet accounts which are not in Euro are translated into Euro at the exchange rate end of the year. 

The annual mean exchange rate is used for income statements. Shareholders’ equity is translated at historical rates. The difference thus created by using the year end rate is booked under the caption “Foreign currency translation adjustment” in the equity caption.

The difference between applying the mean and year end exchange rate for income statements is recorded under the same caption.

Earnings impact:

• profits are eliminated in Group’s share;
• losses are accounted for, but shown as write-downs.

Balance sheet impact:

The cost of the asset is maintained and adjusted, where appropriate, for that part of the profit or loss which relates to the minority interests in the companies concerned. Prior to 1989, and only in respect of unconsolidated companies, the sales price is the carrying value but:

• gains on sale of fixed assets are shown under the caption “Revaluation surpluses” on the liabilities side of the balance sheet;
• subsequent losses are first applied against the revaluation surpluses.

Any difference between the acquisition price of shares in a consolidated company and the corresponding prorated share in that company’s net assets on the date of acquisition must be adjusted to fair value to the extent possible. 

Where the acquisition price is in excess of the adjusted net assets, the difference is amortised in accordance with the principles described below. Positive differences between the acquisition cost and adjusted net assets (goodwill) are capitalised and amortised over a period of maximum 20 years depending on the nature of the goodwill. Exceptional amortisation will be recorded where the estimated value of the investment no longer warrants the carrying of goodwill amounts at their current net amounts. 

Negative differences between acquisition cost and adjusted net assets are carried on the liabilities’ side of the balance sheet, where it remains as long as the investment remains.

In the case of the companies included in the restricted consolidation, all commitments are recorded after proportional elimination of intra-group commitments or double recording. The minorities’ share of commitments represents only their share in the commitments undertaken by subsidiaries. 

These same rules will apply in the foreseeable future. The valuation rules will, however, be modified in cases where continued application of one or more of the rules is no longer appropriate; reasons for any changes in valuation rules will be explained and justified in the notes to the accounts as well as the impact of the change on the financial statements.