On 19 December 2007, Fortis Bank nv-sa issued undated floating rate convertible and subordinated hybrid equity-linked securities (‘CASHES’) with a nominal amount of EUR 3 billion and a denomination of EUR 250,000 each. Coupons on the securities are payable quarterly, in arrears, at a variable rate of 3 month Euribor + 2.0%.

For regulatory purposes, the CASHES is treated as part of Tier 1 capital. The CASHES constitutes direct and subordinated obligations of each of Fortis Bank nv-sa, Fortis SA/NV and Fortis N.V. as Co-obligors, jointly and severally.

The CASHES is subordinated to all other loans, subordinated loans and preference shares, but ranks senior to ordinary shares. The principal amount of the securities will not be repaid in cash. The sole recourse of the holders of the CASHES securities against any of the co-obligors with respect to the principal amount is equal to 125,313,283 Fortis shares that Fortis Bank nv-sa has pledged in favour of such holders.

The CASHES has no maturity date, but may be exchanged into Fortis shares at a price of EUR 23.94 per share at the discretion of the holder.

From 19 December 2014 on, the bonds will be automatically exchanged into Fortis shares if the price of the Fortis share is equal to or higher than EUR 35.91 on twenty consecutive stock exchange business days.

The CASHES is recorded in the balance sheet as at 31 December as follows:

The net amounts collected were separated into a liability and an equity component at the date of issuance of the CASHES. The equity component is related to the embedded derivative included in the CASHES. The liability component was calculated based on the net discounted value of the expected cash flows related to the instrument. The difference between the amounts collected and the liability component forms the equity component and is reported net of deferred tax.