IBERSOL Annual Report and Consolidated Accounts 2017

ANNUAL REPORT 2017 With several international brands in the franchise business, the group celebrates long term franchise contracts (20 years or 10+10 years), which have been renewed when the lease is up, although this is not man- datory. The group does try to keep all its obligations under the contracts and to cultivate a good relationship with the franchisees, so as to mini- mise the risk of non-renewal. Consumption evolution and the devaluing of the AKZ represent the main uncertainties in the Angolan market, despite the group’s limited pres- ence in that country. Additionally, limits to currency made available by the Angolan National Bank for foreign payment have significantly in- creased the currency exchange risks for operations in Angola. As the main activity of the Group is carried out with sales paid in cash or debit card, the Group does not have relevant credit risk concentrations. Deposits and other financial investments are dispersed by several credit institutions, so there is no concentration of these financial assets. The Group’s main interest rate risk arises from liabilities, particular- ly long-term loans. Loans issued at variable rates expose the Group to the risk of cash flows associated with the interest rate. Loans issued at fixed rates expose the Group to the fair value risk associated with the interest rate. At the current level of interest rates, the group policy is, in longer-maturity financing, to fix interest rates of at least 50% of the outstanding amount. Remunerated debt pays interest at a floating rate and a portion has been subject to interest rate fixing through a derivative interest rate swap with interest maturities and repayment plans identical to the terms of the loans. 117