ANNUAL REPORT Pargesa E 2016 Holding SA Pargesa Holding SA 11, Grand-Rue Pargesa Holding SA CH – 1204 Genève T +41 (0) 22 817 77 77 [email protected]

2016

PARGESA HOLDING SA PARGESA

Pargesa Holding SA

ANNUAL REPORT Pargesa E 2016 Holding SA Pargesa Holding SA 11, Grand-Rue www.pargesa.ch Pargesa Holding SA CH – 1204 Genève T +41 (0) 22 817 77 77 [email protected]

Pargesa Holding SA

Annual Report 2016 Pargesa Holding SA Annual Reportreport 20152016

2 Pargesa Holding SA Annual Report 2016 Contents

Contents

Structure and key data 4

Board of Directors, Committees, Auditor and Management 6

Letter from the Chairman 8

01 Business report 11

Introduction 12

Highlights 12

2016 consolidated results 15

Adjusted net asset value 19

Proposals at the Annual General Meeting of 4 May 2017 22

02 Group portfolio 25

GBL 26

Imerys 28

LafargeHolcim 30

SGS 32 adidas 34

Pernod Ricard 36

Umicore 38

Total 40

Other GBL assets 42

03 Corporate Governance report 49

04 Compensation report 61

05 Consolidated financial statements 67

06 Parent company financial statements 145

3 Pargesa Holding SA Annual Report 2016 Structure and key data

Structure and key data

Organisation chart at 31 December 2016 (1) Pargesa Holding SA

50.0% (2)

Sienna Capital Other (5) 53.9% 9.4% 16.2% 7.5% 7.5% 17.0% 0.7% Incubator Strategic investments (3) investments (4) EUR 14’615 (6) EUR 730 (6) EUR 955 (7)

(1) Shareholdings are expressed as a percentage of the capital held. (2) 51.9% of voting rights, taking into account the suspended voting rights relating to treasury shares. (3) Investments generally larger than EUR 1 billion, primarily in listed companies in which the Group can exercise clear influence. These represent the bulk of the portfolio. (4) Comprising a selection of listed or unlisted shareholdings that range in size from CHF 250 million to EUR 1 billion and have the potential to become strategic over time. (5) Comprising significant investments in private equity, debt or specific thematic funds. (6) Market value in EUR millions of the investments held by GBL at 31 December 2016. (7) Estimated value in EUR millions at 31 December 2016. Group portfolio key data at 31 December 2016

% of % flow- 2016 31.12.2016 Direct Total voting through net profit shareholders equity Company interest % interest % rights interest (1) Currency (CHF millions) (2) (CHF millions) (2) GBL 50.0 50.0 51.9 (3) 50.0 EUR (499) 15’966 Imerys 53.9 69.7 27.0 EUR 319 3’074 LafargeHolcim 9.4 9.4 4.7 CHF 1’791 30’822 SGS 16.2 16.2 8.1 CHF 543 1’773 adidas 7.5 7.5 3.8 EUR 1’109 6’950 Pernod Ricard (4) 7.5 6.8 3.8 EUR 1’346 14’323 Umicore 17.0 17.0 8.5 EUR 143 1’964 Total 0.7 1.3 0.4 EUR 6’104 100’535 Ontex (5) 19.98 19.98 10.0 EUR 131 1’073 Burberry (5) (6) 2.95 2.95 1.5 GBP 414 1’963 Exchange rate EUR / CHF 1.090 1.074 Exchange rate GBP / CHF 1.335 1.254

(1) Flow-through interest assessed at the level of Pargesa. (2) Attributable to Group shareholders. (3) Taking into account the suspended voting rights relating to treasury shares. (4) Financial year ending on 30 June ; net profit is that of the 2015/2016 financial year ; shareholders’ equity is the figure at 30 June 2016. (5) Portfolio of incubator-type investments. (6) Financial year ending on 31 March ; the net income is that of the 2015/2016 financial year ; shareholders’ equity is the figure at 31 March 2016. 4 Pargesa Holding SA Annual Report 2016 Structure and key data

Global and per-share data

CHF millions 2012 (1) 2013 2014 2015 2016

Consolidated shareholders’ equity, Group share 7’230 7’545 7’725 7’011 7’863 Operating income 346.0 250.5 339.5 308.4 320.9 Non-operating income 59.2 143.4 297.4 329.8 (352.9) Consolidated net profit, Group share 405.2 393.9 636.9 638.2 (32.0) Gross dividend 217.5 223.5 192.2 201.5 206.6 (2) Shares entitled to dividend 84’640’770 84’643’980 84’659’190 84’659’190 84’659’190 Market capitalisation at year-end 5’303 6’086 6’523 5’376 5’613 Adjusted net asset value at year-end 7’648 8’820 8’876 7’970 8’884

CHF per share 2012 (1) 2013 2014 2015 2016 Share price year-end 62.65 71.90 77.0 5 63.50 66.30 high 68.20 72.25 82.90 76.95 68.25 low 51.20 61.10 70.60 55.95 54.50 average 61.66 67.07 76.55 65.11 63.90 Consolidated shareholders’ equity, Group share 85.42 89.14 91.25 82.81 92.88 Adjusted net asset value at year-end 90.36 104.20 104.85 94.14 104.93 Operating income (3) 4.09 2.96 4.01 3.64 3.79 Non-operating income (3) 0.70 1.69 3.51 3.90 (4.17) Consolidated net profit, Group share (3) 4.79 4.65 7.52 7.54 (0.38) Total dividend 2.57 2.64 2.27 2.38 2.44 (2) (Average) total return 4.2% 3.9% 3.0% 3.7% 3.8%

(1) Certain amounts have been adjusted to take account of the amendments to IAS 19 concerning the reporting of employee benefits and the correction of an error concerning the tax bases of Imerys tangible assets. (2) Recommendation at the Annual General Meeting on 4 May 2017.

(3) Calculated on the weighted average number of shares outstanding during the year.

Market Data

10 10 10 10 120 120 110 110 100 100 0 0 0 0 0 0 60 60 0 0 0 0 2012 201 201 201 2016

Market price CHF Flow-through adjusted net asset value CHF SPI relative to market price (CHF)

5 Pargesa Holding SA Annual Report 2016 Board of Directors

Board of Directors

Chairman

Paul DESMARAIS Jr Chairman of the Board and Co-Chief Executive Officer, Power Corporation of Canada

Vice-Chairmen

Gérald FRÈRE Executive Director, Frère-Bourgeois SA

André DESMARAIS Deputy Chairman, President and Co-Chief Executive Officer, Power Corporation of Canada

Directors

Bernard DANIEL Member of the International Committee of the Red Cross (ICRC)

Victor DELLOYE Director and Secretary General, Frère-Bourgeois SA and its subsidiary Compagnie Nationale à Portefeuille SA (CNP)

Paul DESMARAIS III Senior Vice President, Power Corporation of Canada

Cedric FRÈRE Director, Frère-Bourgeois SA

Ségolène GALLIENNE Director, Frère-Bourgeois SA

Jean-Luc HERBEZ Attorney-at-Law

Barbara KUX Company Director

Jocelyn LEFEBVRE* Member of the Management Board, Power Financial Europe BV

Michel PÉBEREAU Honorary Chairman of the Board of Directors, BNP Paribas

Michel PLESSIS-BÉLAIR** Vice-Chairman, Power Corporation of Canada

Gilles SAMYN Chairman of the Board, Compagnie Nationale à Portefeuille SA (CNP)

Amaury de SÈZE Vice-Chairman, Power Financial Corporation

Arnaud VIAL Senior Vice-President, Power Corporation of Canada

* Appointment to be proposed at the Annual General Meeting on 4 May 2017.

** Not seeking another term of office.

6 Committees, Auditor, Pargesa Holding SA Annual Report 2016 Management

Committees, Auditor, Management

Audit Committee

Chairman Jean-Luc HERBEZ

Members Bernard DANIEL*

Barbara KUX

Jocelyn LEFEBVRE*

Michel PLESSIS-BÉLAIR**

Gilles SAMYN

Amaury de SÈZE**

Compensation Committee

Chairman Bernard DANIEL

Members Jean-Luc HERBEZ*

Barbara KUX

Michel PLESSIS-BÉLAIR**

Gilles SAMYN

Amaury de SÈZE

Auditor

Deloitte SA

Management

Paul DESMARAIS Jr Executive Director

Gérald FRÈRE Executive Director

Pierre HAAS Advisor to the Chairman

Arnaud VIAL Managing Director

Mark KELLER Financial Director

Fabienne RUDAZ BOVARD Treasurer

* As of the Annual General Meeting on 4 May 2017, subject to his election as Director. ** Up to the Annual General Meeting on 4 May 2017.

7 Pargesa Holding SA Annual Report 2016 Letter from the Chairman

Letter from the Chairman

Dear Shareholders,

In an environment marked by macroeconomic and political uncertainties, which sparked periods of significant volatility on the financial markets, the Pargesa Group pressed ahead with the portfolio rotation strategy first adopted five years ago. We once again reduced our exposure to the energy sector, which now accounts for only 5% of our portfolio.

Overall, we have made disposals amounting to nearly EUR 6.7 billion from within our portfolio of strategic holdings since 2012, including EUR 2.5 billion in 2016 and early 2017. Most of the proceeds from these sales have been reinvested in new strategic shareholdings such as SGS, adidas and Umicore. The rest has been used to expand our Incubator investments, grow Sienna Capital and reduce the Group’s net debt.

This portfolio restructuring, which is perfectly in keeping with the Group’s investment philosophy, has enabled us to achieve greater diversification and improve our sector allocation, while at the same time keeping our portfolio focussed on a limited number of shareholdings. At 31 December 2016, none of our seven strategic shareholdings, which had a combined value of EUR 14.6 billion, accounted for more than 19% of the portfolio, whereas at end-2011 the two largest shareholdings alone accounted for 50%. Our portfolio is built around three asset categories – strategic shareholdings, incubator-type investments and Sienna Capital – and we feel that it now strikes the right balance between growth and returns. It should create value for our shareholders over the long term and prove resilient to external headwinds.

Our main holdings performed well in 2016, and LafargeHolcim saw the first positive effects of the merger. In addition, less than two years after Imerys acquired S&B, we supported our subsidiary in another large-scale project : the contemplated acquisition of Kerneos. This deal will allow Imerys to expand its specialty minerals offering for industry in complementary growth markets.

8 Pargesa Holding SA Annual Report 2016 Letter from the Chairman

These solid operating performances resulted in share price rises for most of our holdings in 2016. As a result, Pargesa’s adjusted net asset value was up 11.4% over the year, in line with GBL’s adjusted net asset value per share.

The significant impairment recorded on the Group’s holding in LafargeHolcim in the first half of the year weighed on our bottom line. This impairment, which is the result of strict application of accounting standards, did not have any impact on our adjusted net asset value and has no bearing on LafargeHolcim’s growth potential. And while the impairment brought down our non-operating economic income for the year, this was partially offset by the gains realised on the reduction of our stake in Total.

We believe that the evolution of the economic operating income, which excludes non-recurring and exceptional items, is more important than that of net income. As part of the portfolio restructuring mentioned above, the Group has significantly reduced its stakes in Total and ENGIE in recent years. These companies offer high dividend yields and therefore made a major contribution to Pargesa’s economic operating income. Although the proceeds from these sales is gradually reinvested, the contribution from shareholdings to operating income could level off or even decrease slightly in the short term. This will depend on the pace of reinvestment and the return offered by the newly acquired assets.

Such a situation would be temporary and does not dent our confidence in the quality and solidity of our portfolio. I am therefore pleased to announce that at the Annual General Meeting to be held on 4 May 2017, the Board will recommend a dividend for the 2016 financial year of CHF 2.44 per bearer share, representing a 2.5% increase on the previous year.

I would like to close by paying tribute to Michel Plessis-Bélair, a member of the Board of Directors of Pargesa Holding SA since 1999 and also a member of the Audit Committee and the Compensation Committee, who informed the Board that he regretfully would not seek another term as Director. On behalf of the Board of Directors, I would like to thank Mr Plessis-Bélair for his invaluable contribution to the Board’s work over the years.

Geneva, March 2017

Paul Desmarais Jr

01 BUSINESS REPORT

Mont Blanc mountain range – Haute Savoie – France – Gouache – F.E. Kastin – 1811 11 Pargesa Holding SA Annual Report 2016 Business report

1. Introduction

Pargesa Holding SA, which has its registered office in Geneva, is the parent company of Pargesa Group, which is active in various industry and service sectors through its holdings in a number of operating companies.

Pargesa Group’s main business strategy is built around the following key principles :

• focus the portfolio primarily on a limited number of major strategic holdings, with a view to creating value over the long term ;

• hold positions that enable the Group to fulfil its role as a professional, long-term shareholder ;

• work continuously as a strategic shareholder in the companies in which the Group invests, through its representatives on the boards of directors and board committees, particularly with regard to :

– discussing and approving the business development strategies put forward by senior management ;

– regularly monitoring the course of business and taking part in important decision-making ;

– being involved in defining financial policy.

On the basis of these principles, the Group’s portfolio is composed primarily of the strategic holdings, of which there were seven at 31 December 2016 : Imerys, LafargeHolcim, SGS, adidas, Pernod Ricard, Umicore and Total. Details of these companies’ operations and financial results in 2016 are provided in chapter 2 “Group portfolio” of this Annual Report.

These investments are held through the subsidiary Groupe Bruxelles Lambert (GBL), which is listed on Euronext Brussels. At 31 December 2016, Pargesa held 50.0% of the share capital and 51.9% of the voting rights of GBL, taking into account the suspended voting rights relating to GBL treasury shares.

In addition to the large strategic holdings that make up the majority of its portfolio, GBL began to diversify into two areas in 2012 :

• a portfolio of “Incubator” investments, made up of a limited selection of smaller listed and unlisted holdings – each representing an investment of between EUR 250 million and EUR 1 billion – that have the potential to become strategic assets over time. GBL aims to become a core shareholder in these companies and, for mid-sized enterprises, to possibly hold a majority stake. This type of investment may eventually account for 10-15% of the portfolio;

• the “Financial Pillar”, comprising major stakes in private equity funds, debt funds and theme-based funds, grouped under Sienna Capital. These investments may eventually account for up to 10% of the portfolio.

These two investment arms are presented on pages 42 to 47 of this Annual Report.

At 31 December 2016, the breakdown of the Group’s portfolio was as follows : strategic holdings : 89% ; Incubator investments : 5% ; Financial Pillar : 6%.

The breakdown and analysis of Pargesa’s financial results are provided in section 3 of this Business Report, while information on the adjusted net asset value can be found in section 4. 2. Highlights of 2016 and early 2017

2.1 The Group’s portfolio

• In 2016, GBL continued to gradually reduce its stake in Total. In Q1 2016, GBL sold an additional 27.5 million Total shares, representing 1.1% of the company’s capital, both in the market and through a private placement by way of an accelerated bookbuilding process for institutional investors. These transactions represented a total amount of EUR 1.1 billion and generated a capital gain of EUR 428 million for GBL. GBL also sold an additional 16.0 million Total shares, representing 0.7% of that company’s capital, through forward sales contracts that matured in December 2016. The net proceeds from these sales amounted to EUR 666 million, generating an additional capital gain of EUR 304 million for GBL. Following these transactions, GBL’s stake in Total’s share capital was reduced from 2.4% at 31 December 2015 to 0.7% at 31 December 2016.

12 Pargesa Holding SA Annual Report 2016 Business report

Given the high dividend yield on this holding, these disposals have a significant impact on Total’s contribution to Pargesa’s economic operating income. However, the proceeds from the sales will be used over time to make investments that will gradually contribute to income depending on when the proceeds are reinvested and the level of return on the new investments.

It is also worth noting that the forward sales of Total shares initiated and completed in 2016 allowed GBL to continue to record the interim dividends related to the underlying shares. This was also the case for the forward sales of ENGIE shares initiated and completed in 2016 (see below). Had all these transactions been executed through straight sales, Pargesa’s 2016 economic operating income (see section 3.2) would have been lower by CHF 21.5 million.

• In 2016, GBL repurchased EUR 233 million of principal amount in bonds exchangeable for ENGIE shares. In Q2, GBL also launched a competitive tender offer for the bonds exchangeable for ENGIE shares ; at offer closing, EUR 458 million in principal amount had been repurchased. Taking into account the early redemption requests representing EUR 3 million in principal amount, around 31% of the initial EUR 1 billion issue was still outstanding at 31 December 2016. The outstanding amount (EUR 306 million) was redeemed in cash at maturity on 7 February 2017.

• During 2016, GBL sold 42.7 million ENGIE shares, representing approximately 1.8% of that company’s capital, through forward sales contracts which matured in Q4. The net proceeds from these sales amounted to EUR 572 million, generating a loss of EUR 11 million for GBL. Further forward sales contracts on 4.5 million ENGIE shares (around 0.2% of the company’s share capital) were entered into in Q4 2016 and matured in January 2017, for a net amount of EUR 55 million.

Excluding the forward sales contracts that matured in January 2017, GBL’s stake in ENGIE stood at 0.6% at 31 December 2016, compared with 2.3% at 31 December 2015 (1).

In addition to the forward sales of ENGIE shares entered into in December 2016 and completed in January 2017, a further 7.4 million shares, representing 0.3% of ENGIE’s capital, were sold in early 2017. As a result, including the forward sales completed in January, GBL has sold 11.9 million ENGIE shares (or 0.5% of the company’s capital out of the 0.6% held at 31 December 2016) since the beginning of 2017, representing a net amount of EUR 145 million and generating an accounting gain of EUR 1 million for GBL. As a result of these transactions, GBL now holds 0.1% of ENGIE’s share capital.

• As previously mentioned, in 2016 GBL continued to increase its stake in adidas, which is now considered a strategic shareholding. At 31 December 2016, GBL held 7.5% of the company’s capital (4.7% at 31 December 2015), representing a market value of EUR 2.4 billion. GBL has a representative on adidas’ Supervisory Board.

• GBL increased its stake in SGS in 2016 and held 16.2% of that company’s capital at end-2016, compared with 15.0% at end-2015. At 31 December 2016, the market value of this holding was EUR 2.4 billion.

• In 2016, GBL also slightly increased its stake in Umicore, a group specialized in materials technology and recycling. At 31 December 2016, it held 17.0% of the company’s capital (16.6% at 31 December 2015), representing a market value of EUR 1.0 billion. Given the value of this shareholding and GBL’s presence on the company’s Board of Directors, the stake in Umicore is considered a strategic shareholding.

• Within the portfolio of incubator-type investments, GBL’s investment in Ontex, a world leader in hygienic consumables, stood at 19.98% at 31 December 2016 (7.6% at 31 December 2015). At end-2016, the market value of this investment amounted to EUR 423 million.

The Incubator portfolio also includes a stake in Burberry, which is listed on the London Stock Exchange. At 31 December 2016, GBL held 2.95% of Burberry’s capital, representing a market value of EUR 230 million on that same date. On 28 February 2017, Burberry announced that GBL had reached the threshold of 3% of its voting rights.

• On 11 December 2016, Imerys announced the contemplated acquisition of Kerneos, world leader in calcium-aluminate-based high- performance binders, for an estimated enterprise value of EUR 880 million. The transaction, which would be fully funded by Imerys’ available resources, is subject to relevant workers’ council consultation, as well as approval by the relevant regulatory authorities.

(1) Given the value of the remaining stake in ENGIE (which is also a high dividend yield investment), this shareholding was no longer considered a strategic shareholding as of 31 December 2016.

13 Pargesa Holding SA Annual Report 2016 Business report

• Within Sienna Capital (GBL’s “Financial Pillar”):

- In Q1 2016, Ergon Capital Partners III (ECP III) acquired an indirect majority stake in Financière Looping S.A.S., a European theme-park operator. In Q2 2016, ECP III sold its interests in De Boeck Education SA, De Boeck Digital SA and Larcier Holding SA, generating a total capital gain of EUR 51 million for GBL, with Pargesa’s share amounting to CHF 29.1 million. In July 2016, the fund increased its size from EUR 350 million to EUR 500 million. New funds were committed by Sienna Capital and by European institutional investors active in private equity. Following this funding round, the interest of Sienna Capital in ECP III, which was previously 100%, was slightly diluted. Finally, in December 2016, ECP III acquired a majority stake in Deutsche Intensivpflege Holding GmbH, a company involved in intensive care services.

In March 2017, ECP III sold its majority stake in Golden Goose, an Italian designer of shoes, clothes and contemporary accessories. This transaction generated a consolidated capital gain of around EUR 110 million for GBL, which will be booked in 2017.

- The Sagard funds : in March 2016, a group of investors led by Sagard 3 announced that they had signed an agreement with the founder and majority shareholder of Prosol to acquire a minority stake in that company, the parent company of Grand Frais, a chain of French supermarkets that specializes in fresh food. In October 2016, Sagard II and Equistone sold their stake in FläktWoods, a leading provider of critical air functions for HVAC systems. Pargesa’s share of the capital gain generated by this transaction amounted to CHF 9.1 million. In Q4 2016, the size of Sagard 3 was increased by EUR 404 million and nine new investors made commitments to the fund. More recently, in February 2017, Sagard 3 announced that it had taken a majority stake in Ipackchem, a leading global manufacturer of “barrier” packaging whose products are mainly used in the transport and storage of aromas, fragrances and agrochemical products, for which permeability, contamination and evaporation constraints are critical.

- At 31 December 2016, debt fund Kartesia had invested EUR 468 million in primary and secondary financing transactions. Kartesia also launched in 2016 a new investment fund, to which Sienna Capital committed EUR 150 million.

- In March 2016, a group of investors, including BDT Capital Partners, a fund to which Sienna Capital committed EUR 113 million in 2015, finalized the acquisition of Keurig Green Mountain, Inc., a group active in personal beverage systems. In October 2016, BDT Capital Partners II acquired a stake in Lou Malnati’s Pizzeria, and in December 2016, the fund made an investment in Athletico Physical Therapy, one of the largest providers of orthopaedic rehabilitation services in the USA.

- In 2016, through its fund Mérieux Participations II (MPII), Mérieux Développement, an investment manager specialized in growth and venture capital investments in the healthcare sector, acquired minority stakes in Novacap, an international player in the chemical field (June 2016), and in Le Noble Age, a French company that operates in the healthcare sector (November 2016).

- Finally, PrimeStone, a fund in which Sienna Capital invested EUR 150 million in February 2015 and whose strategy consists of making medium to long-term investments in medium-sized listed companies in Europe, completed six new investments in 2016.

At 31 December 2016, GBL’s commitments under its Financial Pillar amounted to EUR 601 million (EUR 413 million at 31 December 2015).

2.2 Company organisation

Michel Plessis-Bélair, a member of the Board of Directors of Pargesa Holding SA since 1999 and also a member of the Audit Committee and the Compensation Committee, informed the Chairman of the Board of Directors that he regretfully would not seek another term as Director at the Annual General Meeting on 4 May 2017. The Board of Directors wishes to thank Mr Plessis-Bélair for his loyalty and invaluable contribution to the Board’s work over the years.

At the Annual General Meeting on 4 May 2017, the Board of Directors will submit a proposal to elect Jocelyn Lefebvre as Director for a one-year term that will expire at the end of the 2018 Annual General Meeting.

14 Pargesa Holding SA Annual Report 2016 Business report

3. 2016 consolidated financial results

3.1 Presentation of results in accordance with IFRS

The simplified income statement in accordance with IFRS is as follows :

CHF millions 2016 2015 Operating income 5’011.1 4’774.4 Operating expenses (4’500.4) (4’478.8) Other income and expenses (579.4) 820.3 Operating profit (68.7) 1’115.9 Dividends and interest from long-term investments 368.9 345.2 Other financial income and expenses (48.8) (31.1) Taxes (163.2) (69.8) Income from associates and joint ventures 31.2 ( 77.6) Consolidated net profit (before minority interests) 119.4 1’282.6 Attributable to minority interests (151.4) (644.4) Attributable to Pargesa shareholders (Group share) (32.0) 638.2

Basic earnings per share attributable to Pargesa shareholders (CHF) (0.38) 7.54

Average number of shares in circulation (in thousands) 84’659 84’659

Average EUR/CHF exchange rate 1.090 1.067

Operating income and expenses are primarily the revenues and operating expenses of Imerys, whose accounts are fully consolidated.

Other income and expenses includes net capital gains and losses as well as impairments and reversals of previous impairments on Group shareholdings and operations. In 2016, this figure mainly comprised the impairments recorded by GBL on its holdings in LafargeHolcim and ENGIE, for a total net amount of CHF −1’914 million (of which CHF −1’848 million related to LafargeHolcim), as well as the capital gain realized by GBL on the sale of 1.8% of Total’s share capital (CHF +1’288 million, including an historical exchange rate gain of CHF 490 million) and the accounting loss recorded on the sale of ENGIE shares (CHF −12.2 million). At 31 December 2015, this figure included the net accounting impact of the deconsolidation of Lafarge on 10 July 2015, for an amount of CHF +469 million. It also included the capital gain recorded on GBL’s sale of 0.5% of Total’s share capital, together with the capital gain recorded during the period by GBL following the delivery of Suez shares to holders of bonds exchangeable for Suez shares who had exercised their right to exchange the bonds, for a net amount of CHF 491 million, including an historical exchange rate gain of CHF 150 million.

The dividends and interest from long-term investments item comprises the net dividends recorded by the Group from its non-consolidated investments, mainly LafargeHolcim, SGS, Total, ENGIE, Pernod Ricard, adidas, Umicore, Ontex and Burberry.

The other financial income and expenses and taxes items provide consolidated figures for Pargesa, GBL and Imerys. Other financial income and expenses includes the non-cash impact of GBL’s derivative financial instruments being marked to market.

Income from associates and joint ventures represents the share of the consolidated net profit contributed by shareholdings accounted for in the Pargesa financial statements using the equity method. In 2015, this item included GBL’s CHF −107 million share of the net loss recorded in H1 2015 by Lafarge, which was accounted for using the equity method until 30 June 2015.

The item minority interests mainly relates to the share of income due to the minority shareholders of GBL and Imerys, these two companies being fully consolidated into the Pargesa Group financial statements.

15 Pargesa Holding SA Annual Report 2016 Business report

3.2 Economic presentation of Pargesa financial results

In addition to the accounts drawn up in accordance with IFRS, Pargesa continues to publish an economic presentation of its results, in order to provide continuous information over the long term about the contribution of each of its major shareholdings to its results. IFRS require different accounting treatments depending on the Group’s percentage holding in each of its investments (full integration for Imerys, equity method for Lafarge up to 30 June 2015, with other major Group holdings being booked as financial investments), so this continuous view would be interrupted without this additional economic presentation of the Group’s results.

The economic presentation shows, in terms of Pargesa’s share of results, the operating contribution of the main shareholdings to Pargesa’s consolidated income, together with the operating income from the holding companies (Pargesa and GBL), which highlight in particular the income from private equity activities and other investment funds (combined under Sienna Capital at GBL) and the impact of net financial income. The analysis also draws a distinction between the operating and non-operating items in the income, the non-operating part being composed of net capital gains and losses in connection with disposals and any restructuring costs and impairments or reversals of previous impairments.

According to this approach, the economic results for 2016 were as follows :

CHF millions 2016 2015 Operating contribution of the main shareholdings - Consolidated (Imerys) or equity-accounted (Lafarge) (1) : Imerys share of operating income 111.7 102.3 Lafarge share of operating income – 12.5

- Non-consolidated : LafargeHolcim net dividend 44.3 – SGS net dividend 41.5 37.3 Total net dividend 28.0 85.0 ENGIE net dividend 26.4 25.5 Pernod Ricard net dividend 21.2 19.7 Umicore net dividend 14.1 8.4 adidas net dividend 10.7 1.7 Suez net dividend – 0.3 Operating contribution of the main shareholdings 297.9 292.7 per share (CHF) 3.52 3.46

Contribution from private-equity activities and other funds 38.2 13.7 Net financial income and expenses 8.1 34.1 Other operating income from holding company activities 6.2 0.6 General expenses and taxes (29.5) (32.7) Economic operating income 320.9 308.4 per share (CHF) 3.79 3.64

Non-operating income (loss) from consolidated or equity-accounted companies (21.4) (150.0) Non-operating income (loss) from holding company activities (331.5) 479.8 Net income (loss) (32.0) 638.2 per share (CHF) (0.38) 7.54

Average number of shares in circulation (thousands) 84’659 84’659

Average EUR/CHF exchange rate 1.090 1.067

(1) Up to 30 June 2015.

Most income comes from GBL, whose results are denominated in euros. In 2016, the average EUR/CHF exchange rate was 1.090, compared with 1.067 in 2015, a rise of +2.1%.

16 Pargesa Holding SA Annual Report 2016 Business report

Economic operating income:

Consolidated and equity-accounted holdings :

Pargesa’s share of Imerys’ net income from current operations, in Swiss-franc terms, was CHF 111.7 million, compared with CHF 102.3 million a year earlier.

Imerys’ 2016 net income from current operations was EUR 362.1 million, a rise of 6.0% on 2015 (EUR 341.5 million). Net income stood at EUR 292.8 million in 2016 after non-recurring items of EUR −69.3 million (1) relating to restructuring operations (including an impairment of EUR −25 million relating to Minerals Refractories in China) as well as transaction costs. In 2015, net income stood at EUR 68.4 million, after non-recurring items of EUR −273.1 million net of taxes, made up of restructuring costs amounting to EUR −64.1 million and a non-cash impairment charge of EUR −209.0 million in the Oilfield Solutions division of the Energy Solutions & Specialties business group (half of the amount representing the total impairment of goodwill and the remainder the impairment on part of the assets).

As already indicated, the holding in Lafarge was deconsolidated in 2015 and has not contributed to income since 30 June 2015. As of 2016, it was replaced by the contribution, in the form of a dividend, from LafargeHolcim (see below). In 2015, the contribution from Lafarge (accounted for using the equity method for six months of that year) to Pargesa’s operating income amounted to CHF 12.5 million.

Non-consolidated holdings :

The non-consolidated holdings (LafargeHolcim, SGS, Total, ENGIE, Pernod Ricard, Umicore and adidas) contribute to operating income through the net dividends recorded at GBL.

The contribution from LafargeHolcim, which corresponded to Pargesa’s share of the dividend received by GBL for the first time in Q2 2016 (CHF 1.50 per share), amounted to CHF 44.3 million.

The contribution from SGS, which corresponds to Pargesa’s share of the annual dividend received by GBL, stood at CHF 41.5 million, compared with CHF 37.3 million in 2015. In 2016, SGS paid a dividend of CHF 68 per share, the same as the year-earlier dividend. The increase in SGS’ contribution relative to 2015 is due to exchange rate effects.

Total’s contribution was CHF 28.0 million in 2016, versus CHF 85.0 million in 2015. The four quarterly dividends booked in 2016 each amounted to EUR 0.61 per share, the same as those booked in 2015. The smaller contribution from this holding resulted from GBL’s sales of Total shares in 2015 and in Q1 2016 (2).

In 2016, ENGIE paid the final 2015 dividend of EUR 0.50 per share, and the interim 2016 dividend, also EUR 0.50 per share. These amounts were the same as those paid in 2015. ENGIE’s contribution was CHF 26.4 million (2) in 2016, versus CHF 25.5 million in 2015.

Pernod Ricard’s 2015-2016 dividend amounted to EUR 1.88 per share (made up of an interim dividend of EUR 0.90 and a final dividend of EUR 0.98), compared with EUR 1.80 for the previous period (made up of an interim dividend of EUR 0.82 and a final dividend of EUR 0.98). Pernod Ricard’s contribution was CHF 21.2 million 2016, versus CHF 19.7 million in 2015.

The contribution from Umicore, which is now a strategic holding, amounted to CHF 14.1 million for Pargesa in 2016, versus CHF 8.4 million in 2015. This increase resulted from GBL’s increased stake in the company’s capital, as well as from the higher dividends paid by Umicore (EUR 1.30 per share in 2016, made up of the final 2015 dividend of EUR 0.70 per share paid in Q2 2016 and the interim 2016 dividend of EUR 0.60 per share in Q3). In 2015, Umicore paid a total of EUR 1.00 per share in dividends (EUR 0.50 per share for the final 2014 dividend, and EUR 0.50 per share for the interim 2015 dividend).

The contribution from adidas, which is also a strategic holding since 2016, amounted to CHF 10.7 million for Pargesa in 2016, versus CHF 1.7 million in 2015. This increase primarily reflects GBL’s larger stake in the company and, to a lesser extent, the increase in the dividend paid by adidas (EUR 1.60, up from EUR 1.50 in 2015).

(1) In the economic presentation of results, Pargesa’s share of non-recurring items of consolidated holdings or equity-accounted holdings appears under “non-operating income (loss) from consolidated or equity-accounted companies”. (2) For the Total and ENGIE shares subject to forward sales contracts that matured in 2016, GBL continued to receive the interim dividends paid before maturity of the contracts. Over 2016, this represented a total amount of CHF 21.5 million at the level of Pargesa.

17 Pargesa Holding SA Annual Report 2016 Business report

Contributions from holding company activities :

Contributions from private equity activities and other investment funds come primarily from investments held by GBL through Sienna Capital, and also includes general expenses and management fees. In 2016, the net contribution from these activities came in at CHF 38.2 million and mainly included Pargesa’s share of the gains realized by ECP III on the sale of its interests in the De Boeck Group in H1 2016 (CHF 29.1 million) and by Sagard II on the sale of its stake in FläktWoods in Q4 2016 (CHF 9.1 million), as well as Kartesia’s contribution (CHF 12.6 million, including the impact from the revaluation of certain assets). In 2015, the net contribution of CHF 13.7 million included Pargesa’s share of the gain realized by ECP II on the disposal of its majority holding in Joris Ide (CHF 7.9 million), of the gain realized by Sagard II on the disposal of Cérélia (CHF 12.4 million), and of the gain realized by Sagard 3 on the disposal of the Santiane Group (CHF 3.7 million).

Net financial income and expenses includes interest income and expenses as well as other financial income and expenses. It amounted to CHF 8.1 million in 2016, compared with CHF 34.1 million in 2015. In 2016 this line item included :

• the CHF +40.8 million impact of GBL’s marking to market, at the end of each period, of the derivative instruments implicitly embedded in the exchangeable and convertible bonds issued by GBL, reflecting in particular the evolution in the prices of the underlying shares over the period ;

• the net CHF −9.8 million impact resulting from the cancellation of the derivatives embedded in the bonds exchangeable for ENGIE shares repurchased by GBL during the year ;

• Pargesa’s share of the realized and unrealized results recorded by GBL from trading activities (including dividends) and derivatives that GBL uses to manage its portfolio. Pargesa’s share of the income from these activities was CHF 3.1 million in 2016.

In 2015, this line item included the CHF +48.6 million impact of the marking to market of the embedded derivatives, together with an amount of CHF +7.2 million representing the reversal of the cumulative value adjustments previously recorded on the derivatives implicitly embedded in the bonds exchangeable for Suez shares that were converted during the period or redeemed at maturity in September 2015. It also included an amount of CHF +11.6 million, corresponding to Pargesa’s share of the gains realized by GBL from trading activities and derivatives.

Other operating income from holding company activities represents Pargesa’s share of net dividends booked by GBL on its incubator-type investments. The figure for 2015 has been adjusted (by CHF 10.1 million), as the holdings in adidas and Umicore are now considered strategic investments. The year-on-year increase mainly reflects GBL’s investments in Ontex and Burberry in 2016.

The general expenses and taxes line item represents Pargesa’s own general expenses and taxes as well as its share of those of GBL.

Non-operating income (loss) :

Non-operating income (loss) from consolidated or equity-accounted shareholdings represents in 2016 Pargesa’s share of Imerys’ non-operating items. In 2015, it reflected Pargesa’s share of Imerys’ non-operating items of EUR −273.1 million (see above), as well as Pargesa’s share of the impairments, restructuring costs and other costs related to the merger with Holcim booked by Lafarge in H1 2015, before this holding was deconsolidated.

The net non-operating loss from holding company activities was CHF −331.5 million in 2016 and consisted primarily of :

• Pargesa’s CHF −959.4 million share of the EUR 1’682 million impairment charge booked by GBL on its holding in LafargeHolcim in H1 2016, based on LafargeHolcim’s share price of EUR 37.1 (1). Even though the share price had risen to EUR 49.9 by 31 December 2016, since this holding is classified as an “available-for-sale financial asset” and has already been impaired, any subsequent rise in the share price must be recorded directly in equity and not in the income statement (unless the asset is sold), while any further decline from the price used for the impairment in 2016 (EUR 37.1) leads to an additional impairment being recognised in the income statement ;

• Pargesa’s CHF 666.8 million share of the capital gain recorded by GBL on the sale of 1.8% of Total’s share capital, including an historical exchange-rate gain of CHF 252.6 million at the level of Pargesa ;

• the CHF −40.6 million impact of a further impairment charge on ENGIE shares as well as the accounting loss on the sale of shares of that company ;

• Pargesa’s CHF 2.7 million share of the net impact of the repurchase of around 69% of the bonds exchangeable for ENGIE shares and their subsequent cancellation.

(1) Share price at 30 June 2016. An impairment was recognised on the holding in LafargeHolcim at 31 March 2016, followed by an additional impairment at 30 June 2016, as the share price had dropped below the 31 March 2016 figure.

18 Pargesa Holding SA Annual Report 2016 Business report

As a reminder, 2015 non-operating income from holding company activities was CHF 479.8 million and mainly consisted of :

• Pargesa’s CHF 243.7 million share of the net impact of the accounting entries related to the deconsolidation of Lafarge on 10 July 2015 ;

• Pargesa’s CHF 225.2 million share of the gain from GBL’s sale of 0.5% of Total’s share capital, including an historical exchange-rate gain of CHF 68.9 million at the level of Pargesa ;

• Pargesa’s CHF 14.3 million share of the net gain recorded on the delivery by GBL of Suez shares to bondholders who exercised their exchange rights early or at maturity (including an historical exchange-rate gain of CHF 8.4 million at the level of Pargesa). 4. Adjusted net asset value Pargesa’s flow-through adjusted net asset value amounted to CHF 8’884 million at 31 December 2016, or CHF 104.9 per share, representing a rise of 11.4% on the year-earlier figure of CHF 94.1. The adjusted net asset value is calculated based on the following principles :

• listed shareholdings are valued based on current market prices and exchange rates ;

• u nlisted investments are valued on the basis of the book value of shareholders’ equity and current exchange rates, or based on their fair value if this is used by GBL to calculate its adjusted net asset value ;

• v alues per share are shown in relation to one bearer share with a par value of CHF 20, with one tenth of the CHF 2 registered shares being retained.

31.12.15 31.12.16 Amount Weighting Amount Weighting Share price and in CHF as a % Share price and in CHF as a % currency millions of total currency millions of total Imerys EUR 64.4 1’499 19% EUR 72.1 1’658 19% LafargeHolcim EUR 46.7 1’453 18% EUR 49.9 1’534 17% SGS CHF 1’911 1’123 14% CHF 2’072 1’313 15% adidas (1) – – EUR 150.2 1’265 14% Pernod Ricard EUR 105.2 1’137 14% EUR 103.0 1’100 12% Umicore (1) – – EUR 54.2 554 6% Total EUR 41.3 1’338 17% EUR 48.7 424 5% ENGIE (2) EUR 16.3 485 6% – – Other shareholdings Incubator adidas (1) 484 6% – – Umicore (1) 391 5% – – Ontex 98 1% EUR 28.3 227 3% Burberry 1 0% GBP 15.0 124 1% Other – – 42 1% Financial Pillar 388 5% 513 6% Other Pargesa 24 1% 26 0% Total portfolio 8’421 106% 8’780 99% GBL treasury shares 256 3% 251 3% Net cash (debt) (3) (707) (9)% (147) (2)% Adjusted net asset value 7’970 100% 8’884 100% per Pargesa share CHF 63.5 94.1 CHF 66.3 104.9 EUR/CHF exchange rate 1.086 1.074

(1) The investments in adidas and Umicore became strategic holdings in 2016. (2) The remaining investment in ENGIE was no longer a strategic holding at 31 December 2016. (3) This item includes Pargesa’s share in the market value of GBL’s trading portfolio. At 31 December 2016, it also includes Pargesa’s CHF 90.8 million share of the market value of the remaining 0.6% stake in ENGIE (including the 0.2% stake corresponding to the shares sold forward at the end of 2016 and delivered in 2017).

19 Pargesa Holding SA Annual Report 2016 Business report

The rise in Pargesa’s adjusted net asset value in 2016 (+11.4%) was in line with that of GBL’s adjusted net asset value over the period (+11.9%). This increase reflects the share price rises of the holdings. They all recorded gains in 2016, with the exception of Pernod Ricard and Ontex (Incubator investment), which saw their share prices drop 2.1% and 13.7%, respectively. The charts below show the effects of the portfolio restructuring begun in 2012. There has been a gradual reduction in Pargesa’s exposure to the energy sector, with increased exposure in the industry, services and consumer goods sectors. In addition the “Financial Pillar” has been expanded. Over the last five years, GBL has made disposals amounting to EUR 6.7 billion, including EUR 2.5 billion in 2016 and early 2017. GBL has reinvested a total of EUR 5.7 billion, primarily in its new strategic holdings (SGS, adidas and Umicore).

Portfolio composition at end-2011

Value / Cyclicals 28%

Growth 15%

Sienna Capital 3%

Yield 54%

Value / Cyclicals : Imerys, Lafarge, Arkema Growth : Pernod Ricard Yield : Total, ENGIE, Suez, Iberdrola

Energy/Utilities 54%

Other (incl. Sienna Capital) 6%

Construction materials 13%

Minerals 12%

Consumer goods 15%

Energy / Utilities : Total, ENGIE, Suez, Iberdrola Other : includes Sienna Capital, Arkema Construction materials : Lafarge Minerals : Imerys Consumer goods : Pernod Ricard

20 Pargesa Holding SA Annual Report 2016 Business report

Portfolio composition at end-2016

Growth 48%

Incubator 4%

Sienna Capital 6%

Yield 5%

Value /Cyclicals 37%

Growth : Pernod Ricard, SGS, adidas, Umicore Incubator : Ontex, Burberry Sienna Capital Yield : Total Value / Cyclical : Imerys, LafargeHolcim

Consumer goods 31%

Energy 5%

Other (incl. Umicore and Sienna Capital) 13% Services 15%

Construction materials 17%

Minerals 19%

Consumer goods : Pernod Ricard, adidas, Burberry, Ontex Energy : Total Other : includes Umicore and Sienna Capital Services : SGS Construction materials : LafargeHolcim Minerals : Imerys

At the end of 2011, the holdings in the energy and utilities sectors accounted for 54% of the portfolio, with the two largest holdings representing 50%. Today, the portfolio is more diversified in terms of profile and sectors, and no one holding accounts for more than 19% of the portfolio. As mentioned in section 2.1 above, the holdings in Total and ENGIE offer a high dividend yield and used to make a significant contribution to Pargesa’s economic operating income. As a result, the portfolio restructuring has an impact on economic operating income. However, the proceeds from the sales will be used over time to make investments that will gradually contribute to income depending on when the proceeds are reinvested and the level of return on the new investments.

21 Pargesa Holding SA Annual Report 2016 Business report

5. Proposals at the Annual General Meeting of 4 May 2017

5.1 Appropriation of profit

At the Annual General Meeting, the Board of Directors will recommend a 2016 dividend of CHF 2.44 per bearer share and CHF 0.244 per registered share, an increase of 2.5% on the year-earlier dividend. If approved, a total of CHF 206.6 million will be paid out to shareholders on 10 May 2017.

5.2 E lection of Board members, election of the Chairman of the Board of Directors and election of the members of the Compensation Committee

In accordance with the company’s Articles of Association, at the Annual General Meeting shareholders must each year individually elect the members of the Board of Directors (including the Chairman) and of the Compensation Committee. The Board of Directors of Pargesa Holding SA will therefore recommend that the following individuals be re-elected for a one-year term expiring at the end of the 2018 Annual General Meeting : Paul Desmarais Jr (also as Chairman of the Board), Bernard Daniel, Amaury de Seze, Victor Delloye, Andre Desmarais, Paul Desmarais III, Cedric Frere, Gerald Frere, Segolene Gallienne, Jean-Luc Herbez, Barbara Kux, Michel Pebereau, Gilles Samyn and Arnaud Vial.

As mentioned above, Michel Plessis-Belair announced that he would not seek another term as Director at the Annual General Meeting on 4 May 2017. The Board of Directors will recommend that shareholders elect Jocelyn Lefebvre to the Board for a one-year term that will expire at the end of the 2018 Annual General Meeting. Jocelyn Lefebvre has dual Canadian and French citizenship. He holds a degree from HEC Montreal and is a member of the Canadian Institute of Chartered Professional Accountants. He began his career at Arthur Andersen in Montreal, before moving to Europe in 1982. He joined the Canadian industrial group M.I.L. Inc. in 1986, where he served as CEO of Vickers Inc., one of the group’s main production units. In 1992, Jocelyn Lefebvre joined the Power Group and is now a partner at Sagard Equity Partners and a member of the management boards of Power Financial Europe B.V. and Parjointco N.V.

The Board of Directors will also recommend that Bernard Daniel, Barbara Kux, Amaury de Seze and Gilles Samyn be re-elected to the Compensation Committee and that Jean-Luc Herbez be elected to replace Michel Plessis-Belair as a member of the Committee.

22 Pargesa Holding SA Annual Report 2016 Business report

02 GROUP PORTFOLIO

Eiger, Mönch, Jungfrau – Bernese Oberland – Switzerland – Gouache – Bleuler – early 19th century 25 Pargesa Holding SA Annual Report 2016 Group portfolio GBL

Groupe Bruxelles Lambert (GBL) is a holding company that has been listed on the Brussels Stock Exchange since 1956

GBL owns the Pargesa Group’s strategic shareholdings, which at 31 December 2016 included : Imerys, LafargeHolcim, SGS, adidas, Pernod Ricard, Umicore and Total. www.gbl.be In addition to these large strategic holdings, which make up the majority of its portfolio, GBL began to gradually diversify into two areas in 2012 : • “Incubator” investments, made up of a limited selection of listed and unlisted holdings – each representing an investment of between EUR 250 million and EUR 1 billion – that have the potential to become strategic assets over time. GBL aims to become a core shareholder and, for mid-sized companies, to possibly hold a majority stake in these companies. This type of investment may eventually account for 10-15% of the portfolio ; • the “Financial Pillar”, comprising major stakes in private equity funds, debt funds and thematic funds, grouped under Sienna Capital. These investments may eventually account for up to 10% of the portfolio.

2014 2015 2016 Overall data (EUR millions) Shareholders’ equity at 31 December (group share) 13’173 13’246 14’867 Market capitalisation at 31 December 11’416 12’720 12’863 Consolidated net income (loss) (group share) 875 1’026 (458) Per-share data (EUR) Consolidated net income (loss) 5.64 6.61 (2.95) Dividend 2.79 2.86 2.93 (1) Shares issued (in millions) 161.4 161.4 161.4 Pargesa’s interest (%) 50.0 50.0 50.0 (1) Subject to approval at the Annual General Meeting on 25 April 2017.

In 2016, GBL continued to reduce its exposure to the energy sector by disposing of close to 1.8% of the capital of Total and ENGIE for a net amount of EUR 2.3 billion. In addition, GBL repurchased around 61% of the bonds issued in 2013 and exchangeable for ENGIE shares. The remaining bonds (EUR 306 million in par value) were redeemed in cash in February 2017.

At 31 December 2016, GBL still held a 0.7% stake in Total and a 0.6% stake in ENGIE. Following the additional sales of ENGIE shares in early 2017 (for an amount of EUR 145 million), GBL’s stake in this company, which is no longer considered a strategic holding, amounts to 0.1%.

Proceeds from the sales of Total and ENGIE sales were primarily used to strengthen GBL’s positions in SGS, adidas, Umicore and Ontex, for a total amount of EUR 1’055 million. Umicore and adidas, which were previously part of the “Incubator” portfolio, became strategic holdings in 2016. At 31 December 2016, GBL held 7.5% of adidas’ capital (4.7% at 31 December 2015), 16.2% of SGS’ capital (15.0% at end-2015), 17.0% of Umicore’s capital (16.6% at end-2015), and 19.98% of Ontex’ capital (7.6% at end-2015).

In terms of its portfolio of “Incubator” investments, in 2016 GBL acquired a 2.95% stake in the capital of Burberry, which announced in February 2017 that GBL had crossed the threshold of 3% of the company’s voting rights.

Regarding Sienna Capital (see page 43), last year ECP III disposed of its majority stake in the De Boeck group and Sagard II sold its interest in FläktWoods, which generated gains of EUR 63 million for GBL.

26 Pargesa Holding SA Annual Report 2016 Group portfolio GBL

GBL © David Plas

ECP III, Sagard 3, Mérieux Développement, BDT Capital Partners Excluding these non-recurring items, the 2016 results reflect the and PrimeStone all made new investments. In March 2017, ECP increased contribution from other holdings within the portfolio (1) III sold its majority stake in Golden Goose, generating a capital which more than offset the lower contribution from Total following gain of around EUR 110 million for GBL, which will be recorded the sales of Total shares in 2015 and 2016. The contribution from in Q1 2017. Sienna Capital amounted to EUR 63 million, reflecting the impact of the net gain on the sale of De Boeck by ECP III, with GBL’s share Given the net divestments made in 2016, GBL’s cash position went amounting to EUR 51 million. from a net debt of EUR 740 million at end-2015 to a positive cash position of EUR 225 million at end-2016. As a reminder, GBL recorded net income of EUR 1’026 million in 2015, which included : GBL recorded a net loss (group share) of EUR 458 million, which • the net impact of the deconsolidation of the holding in included the impairment of EUR 1’682 million recognised in H1 Lafarge (EUR 442 million) after its merger with Holcim to form 2016 on the holding in LafargeHolcim and the additional impairment LafargeHolcim ; the EUR 282 million net gain realised on the sale of EUR 62 million on the holding in ENGIE. These impairments of 0.5% of Total’s capital ; the net gain of EUR 24 million on the were partially offset by the capital gain of EUR 732 million realised conversion of bonds exchangeable for Suez shares ; and the on the sale of around 1.8% of Total’s capital. In accordance with additional impairment of EUR 32 million on the holding in ENGIE ; accounting rules, the impairment on LafargeHolcim was calculated • GBL’s EUR 100 million share of Lafarge’s loss in H1 2015, when based on the company’s share price trend during H1 2016. Even Lafarge was accounted for using the equity method ; though LafargeHolcim’s share price then rose sharply in H2 2016, • a EUR 37 million contribution from Imerys and a EUR 18 million under accounting rules, this increase cannot be recorded in the contribution from Sienna Capital. income statement. At GBL’s Annual General Meeting on 25 April 2017, a total dividend for the 2016 financial year of EUR 2.93 per share will be recommended. This represents a rise of 2.4% on the 2015 dividend of EUR 2.86.

(1) In Q2 and Q3 2016, GBL entered into forward sales contracts on Total and ENGIE shares that matured in Q4 2016. GBL therefore continued to receive the interim dividends paid before the contracts matured, which represented a total amount of EUR 38 million. 27 Pargesa Holding SA Annual Report 2016 Main shareholdings Imerys

Imerys is the world leader in mineral specialties, with close to 260 locations in 54 countries

The Imerys group holds leading positions in each of its four main business groups : Energy Solutions & Specialties, Filtration & Performance Additives, Ceramic Materials, and High Resistance Minerals. Imerys processes, enhances and combines a unique range of minerals, in many cases mined from its own deposits, to bring essential features to its customers’ products and production processes. Thanks to their properties, these specialty products have a wide range of applications and are www.imerys.com gaining traction in many growth markets.

2014 2015 2016 Overall data (EUR millions) Shareholders’ equity at 31 December (group share) 2’444 2’644 2’862 Market capitalisation at 31 December 4’629 5’126 5’734 Net income from current operations (group share) 316 342 362 Consolidated net income (group share) 272 68 293 Per-share data (EUR) Net income from current operations 4.15 4.31 4.60 Dividend 1.65 1.75 1.87 (1) Shares issued (in millions) 75.9 79.6 79.6 Pargesa Group’s interest (%) 56.5 53.9 53.9 (1) Subject to approval at the Annual General Meeting on 3 May 2017.

Owing to the positive impact of changes in the scope of consolidation, Imerys recorded growth in 2016 despite difficult overall markets conditions. In organic terms, revenue was down due to lower volumes in a mixed economic environment and because of the difficulties encountered in the ceramic proppants market. In Q4 2016, however, Imerys posted organic revenue growth of 1.4%, as a result of a favourable base effect and the relative improvement in certain markets and regions. The operating margin improved as a result of a positive exchange rate effect, operational excellence programmes, synergies relating to the integration of new acquisitions and especially S&B and a favourable activity mix.

On 11 December 2016, Imerys announced that it intended to acquire Kerneos. This transaction, which has an estimated enterprise value of EUR 880 million, will further strengthen the group’s specialty offering in high-potential markets and enhance growth and profitability in order to create value. The transaction is subject to relevant workers’ council consultation, as well as approval by the relevant regulatory authorities. It should be completed in mid-2017. Using its expertise in calcium aluminate technologies, Kerneos develops performance binders, bringing key properties to customers’ innovative solutions in the construction, civil engineering and refractory sectors. With operations in Europe, North America and emerging countries and 1’500 employees, Kerneos posted consolidated revenue of EUR 415 million and EBITDA of close to EUR 100 million over the 12 months up to 30 September 2016. Imerys took advantage of favourable market conditions to prepare its financing for the transaction and issued, in early January 2017, a EUR 600 million bond with a ten-year maturity and a 1.50% annual coupon.

Finally, Imerys also completed several additional acquisitions during the year (mainly Damolin, Alteo and Spar). These should contribute more than EUR 100 million to group revenue in 2017.

2016 revenue amounted to EUR 4’165 million, up 1.9% on the 2015 figure. On a like-for-like basis, 2016 revenue fell 1.4% year on year. However, it rose 1.4% in Q4, owing to a favourable base effect and the relative improvement in certain markets and regions. Revenue from new products grew 6.7% to EUR 523 million. The price/mix effect remained firm at +0.7% (EUR +27 million) for the whole group in 2016.

28 Pargesa Holding SA Annual Report 2016 Group portfolio Imerys

Imerys site in Milos – Greece – © Imerys

2016 highlights by business group : • High Resistance Minerals, which mainly serves the high temperature (steel, casting, glass, aluminum, etc.) and abrasive • Energy Solutions & Specialties’ revenue totalled EUR 1’251 product industries, posted revenue of EUR 598 million in 2016, million in 2016, unchanged year over year on a reported basis. down 5.0% year on year on a reported basis. On a like-for- On a like-for-like basis (i.e. constant scope and exchange rates), like basis, revenue fell 3.1%, mainly due to the slump in the revenue was down 3.0%, primarily because of the slump in the refractories market. refractories market, which nevertheless saw an improvement in Q4 2016. Net income from current operations rose 6.0% to EUR 362 million in 2016, compared with EUR 342 million in 2015. After other operating • Filtration & Performance Additives, which serves the agro-food income and expenses net of tax, group share of net income came industry and a large number of intermediary industries, recorded in at EUR 293 million in 2016, as against EUR 68 million in 2015, revenue of EUR 1’145 million in 2016, a year-on-year rise of 5.8%. which was impacted by an EUR 209 million impairment recorded The sharp increase was a result of the integration of S&B (scope on the ceramic proppants business. effect of EUR +54 million), together with growth of 1.4% on a like-for-like basis. The business group experienced robust growth Current free operating cash flow was higher in 2016, at EUR 395 in Q4 2016 (+6.0% on a like-for-like basis). This rise in sales was million (EUR 343 million in 2015). spurred by new products. Net financial debt stood at EUR 1’367 million at 31 December • Ceramic Materials posted revenue of EUR 1’222 million in 2016. 2016, down EUR 114 million on the 31 December 2015 figure On a reported basis, revenue rose 4.2% thanks to the positive as a result of strong cash flows. At 31 December 2016 net debt impact of changes in scope (EUR +57 million), resulting primarily accounted for 47% of equity (55% in 2015) and represented 1.7x from the acquisition of BASF’s hydrous kaolin business in the EBITDA (2.0x in 2015). USA and of Matisco’s roofing accessories operations in the At the Annual General Meeting on 3 May 2017, a 2016 dividend of Roofing division in November 2015, as well as to a positive EUR 1.87 per share will be put to shareholders for approval. This exchange rate effect (EUR +9 million). However, owing to a –1.9% represents a rise of 6.9% on the dividend for the 2015 financial year. drop in the clay roof tiles market in 2016, revenue was down –1.4% on a like-for-like basis.

29 Pargesa Holding SA Annual Report 2016 Group portfolio LafargeHolcim

LafargeHolcim is the world leader in building materials : cement, aggregates and concrete

LafargeHolcim – the product of the merger between Lafarge and Holcim finalised in July 2015 – is the world leader in building materials and operates in the cement, aggregates and concrete sectors.

The company employs around 90’000 people in more than 80 countries and has an equal presence in developing and mature markets. This means that it is extremely well positioned to meet the challenges www.lafargeholcim.com of increasing urbanisation.

2015 2016 pro-forma Overall data (CHF millions) Shareholders’ equity at 31 December (group share) 31’365 30’822 Market capitalisation at 31 December 30’528 32’561 Net recurring income (group share) 798 1’615 Consolidated net income (group share) (1’469) 1’791 Per-share data (CHF) Net recurring income 1.32 2.67 Dividend 1.50 2.00 (1) Shares issued (in millions) 607 607 Pargesa Group’s interest (%) 9.4 9.4 (1) Subject to approval at the Annual General Meeting on 3 May 2017.

2016 was marked by a decrease in revenues but a solid operating performance. All regions recorded a like-for-like rise in adjusted operating EBITDA. The group faced some challenging markets in 2016 : Brazil’s economic crisis further depressed the construction sector and decisive measures were taken to reduce costs. In the Asia Pacific region, Indonesia and Malaysia continued to feel the effects of market overcapacity and tough competition through Q4. In response, additional cost reduction measures were implemented to mitigate the earnings impact in both countries.

Cement volumes were down by 2.5% like for like over the full year. In Q4 2016 volumes declined 5.8% on a like-for-like basis, due in part to demonetisation in India, tough trading conditions in Indonesia and unusually favourable weather conditions in the US during the same period in 2015.

Sequentially, cement prices improved by 1.1% in Q4 2016 compared with Q3 2016, due largely to Nigeria and China, and were 5% above Q4 2015 at constant exchange rates. The steady improvement in pricing over the year means that overall price levels are now higher than before the marked decline experienced in 2015.

In Asia Pacific, the construction market was relatively flat, and more intense competition affected prices in some markets. LafargeHolcim’s cement volumes were down slightly on the prior year, but adjusted operating EBITDA was up on a like-for-like basis. Cement volumes in India were affected by the government’s demonetisation programme.

In Europe, LafargeHolcim delivered a solid performance in a difficult economic environment, spurred by disciplined cost management and restructurations. The UK continued to grow strongly despite the uncertainty surrounding the Brexit process. France and Switzerland proved to be resilient performers in soft markets.

30 Pargesa Holding SA Annual Report 2016 Group portfolio LafargeHolcim

Millau Viaduct – France – © LafargeHolcim image library

Latin America benefited from pricing and cost saving measures Recurring earnings per share reached CHF 2.67 – more than double that helped offset the effect of the ongoing economic crisis in the 2015 figure of CHF 1.32 – mainly reflecting an improved business Brazil and more moderate economic slowdowns in other markets. performance and reduced financial charges.

The Middle East and Africa region overcame challenges in Nigeria At the Annual General Meeting on 3 May 2017, a 2016 dividend of and the impact of continued low oil and commodity prices on EUR 2.00 per share, up on the year-earlier dividend of EUR 1.50, many African economies. will be put to shareholders for approval.

Finally, LafargeHolcim posted solid results in the North America Outlook : In 2017, sales growth should be supported by an expected region, supported by a strong performance in the US and despite rise in demand of between 2% and 4% in all markets, bearing in mind challenging conditions in the Canadian market. that the macro economic climate is likely to remain difficult in some emerging markets. This will be combined with price increases in line Net sales in 2016 were down 1.7% on a like-for-like basis, as a result with inflation across the group, with sharper rises in Nigeria, India of lower volumes, which were not offset by the rise in cement prices. and the USA. This year should be an important step in achieving Operating EBITDA adjusted for merger costs and other non- the company’s 2018 targets. LafargeHolcim expects double-digit recurring items was CHF 5’825 million, up 8.7% on a like-for-like like-for-like growth in adjusted operating EBITDA and a rise in basis. All regions delivered increased adjusted operating EBITDA on recurring EPS of more than 20%. Net debt should decrease to a like-for-like basis in 2016, driven by synergies, costs reductions around 2x adjusted operating EBITDA. The group also intends to and price increases in most markets. Synergies contributed a total implement a share buyback programme of up to CHF 1 billion over of CHF 638 million over the full year, well ahead of the target of 2017-2018 and to expand its divestment plan (from CHF 3.5 billion CHF 550 million. in 2016 to CHF 5.0 billion in 2017). Net debt was down CHF 2.5 billion to CHF 14.7 billion at 31 December 2016 (CHF 17.3 billion a year earlier) thanks to cautious investments, the proceeds from divestments, strong free cash flow and rigorous working capital management.

31 Pargesa Holding SA Annual Report 2016 Group portfolio SGS

SGS is the world leader in inspection, verification, testing and certification

SGS was founded in 1878 and listed in 1981. The company provides innovative solutions for inspection, verification, testing and certification to help clients streamline their businesses, making them swifter and more efficient. SGS’ global network comprises more than 2’000 offices and laboratories staffed www.sgs.com by 90’000 employees in over 150 countries. At 31 December 2016, the company’s organisational structure consisted of nine business lines : Agriculture, Food and Life ; Minerals ; Oil, Gas & Chemicals ; Consumer and Retail ; Certification and Business Enhancement ; Industrial ; Environment, Health and Safety ; Transportation ; and Governments and Institutions.

2014 2015 2016 Overall data (CHF millions) Shareholders’ equity at 31 December (group share) 2’327 1’906 1’773 Market capitalisation at 31 December 15’997 14’949 16’208 Consolidated net income (group share) 629 549 543 Per-share data (CHF) Net income (diluted) 81.65 71.95 71.47 Dividend 68.00 68.00 70.00 Shares issued (in thousands) 7’822 7’822 7’822 Pargesa Group’s interest (%) 15.0 15.0 16.2

SGS has four types of activity :

• Inspection : Offers clients a comprehensive range of inspection services across the globe, including verifying the integrity and weight of goods exchanged during transshipment. SGS helps clients verify the quality and quantity of goods and comply with all regulatory requirements in the various markets and regions ;

• Testing : Offers clients a global network of product-testing facilities staffed by qualified, experienced personnel. This service enables clients to reduce risk, shorten time to market and demonstrate the quality, safety and effectiveness of their products with regard to applicable health, safety and other regulations ;

• Certification : Enables clients to demonstrate that their products, processes, systems and services are compliant with national and international regulations and standards or consumer norms, via certification ;

• Verification : Enables clients to verify compliance of products and services with international standards and local regulations. Underpinned by a powerful combination of global coverage and local knowledge across industries, SGS covers the entire value chain, from raw materials to end-users.

The SGS group turned in resilient results in 2016. It delivered revenue growth of 6.0% over the prior year (constant currency basis) to CHF 6.0 billion, corresponding to organic growth of 2.5%, with an additional 3.5% contributed by recently acquired companies. However, due to the continued appreciation of the Swiss franc against the currencies of several of the countries in which SGS operates around the world, growth in revenue stood at 4.8% on a reported basis.

Organic revenue growth was boosted by the non-energy-related business lines, which account for the majority of revenue and adjusted operating income. Overall, these business lines generated growth of 6.2%, which can be broken down as follows : 10% for Government and Institutions ; 9.1% for Certification and Business Enhancement ; 7.9% for Transportation ; 6.9% for Environment, Health and Safety ; 4.7% for Consumer and Retail ; and 4.5% for Agriculture, Food and Life.

32 Pargesa Holding SA Annual Report 2016 Group portfolio SGS

©S SGS A

The difficult environment for the oil and gas and minerals industries Group share of consolidated net income after restructuring costs continued to weigh on energy-related business lines (Oil, Gas & was CHF 543 million, a decline of 1.1% on the previous year. Chemicals, Industrial, and Minerals). Against this backdrop, SGS Operating cash flow remained very robust, at CHF 1’014 million, took certain restructuring measures, which resulted in non- driven by solid management of working capital needs. recurring charges, including asset impairments, for an amount of CHF 40 million after tax. The group paid a total cash consideration of CHF 193 million for acquisitions completed during the year. In 2016, the group pressed ahead with its external growth strategy. Nineteen companies were acquired, including fifteen outside Europe, After the payment of CHF 517 million in dividends and share buybacks thereby strengthening SGS’ presence in seven of its business lines. of CHF 161 million, the group’s net debt amounted to CHF 736 million at end-2016, as against CHF 482 million at end-2015. SGS’ adjusted EBITDA rose 0.6% year on year to CHF 1’198 million (+2.5% on a constant currency basis). Adjusted operating income At the Annual General Meeting on 21 March 2017, a 2016 dividend stood at CHF 919 million, up 0.2% from the previous year on a of CHF 70 per share (up from the previous year’s dividend of reported basis but 2.4% on a constant currency basis. The adjusted CHF 68) was approved by shareholders. operating margin fell to 15.4% from 15.9% in 2015, primarily as a Outlook : SGS will press ahead with its organic and external growth result of the pressure on energy-related business lines, investments strategy and continue to keep costs under strict control. In 2017, in IT systems and the development of new infrastructure for shared SGS intends to deliver solid organic growth in revenue, higher services. adjusted operating income (on a like-for-like basis), and strong cash flow.

33 Pargesa Holding SA Annual Report 2016 Group portfolio adidas

adidas is the European leader in sportswear

adidas is a global group specialised in the design, development, production and distribution of sportswear (footwear, clothing and equipment). Its business is built around four main brands : adidas, Reebok, TaylorMade and CCM. Products are distributed through the company’s own stores, online and through third-party retailers.

www.adidas-group.com 2014 2015 2016 Overall data (EUR millions) Shareholders’ equity at 31 December (group share) 5’624 5’666 6’472 Market capitalisation at 31 December 11’773 18’000 30’254 Net income from continuing operations (1) 642 720 1’019 Consolidated net income (group share) 490 634 1’017 Per-share data (EUR) Net income (diluted) (1) 2.72 3.32 4.99 Dividend 1.50 1.60 2.00 (2) Shares issued (in millions) 204 200 201 Pargesa Group’s interest (%) 0.0 4.7 7.5 (1) Excluding a good will impairment of EUR 78 million in 2014 and EUR 34 million in 2015. (2) Subject to approval at the Annual General Meeting on 11 May 2017.

adidas has four main brands :

• adidas (85% of 2016 sales) : adidas is world co-leader in sports equipment and offers a range of products through adidas Sport Performance (specialised in sports products), adidas Originals and Neo (specialised in sportswear and streetwear), as well as through partnerships with designers such as Yohji Yamamoto and Stella McCartney ;

• Reebok (9% of 2016 sales) : Reebok, a subsidiary acquired in 2005, is one of the world leaders in fitness equipment. The company offers products through its Functional Training, Combat Training, Studio, Running, Walking and Reebok Classics lines ;

• TaylorMade (5% of 2016 sales) : TaylorMade is a US company that produces golf clubs and other golf accessories (bags, hats and gloves). Its brands include TaylorMade, adidas Golf, Adams and Ashworth ;

• CCM (1% of 2016 sales) : CCM was acquired by Reebok in 2004 and specialises in ice hockey equipment.

In 2016, sales stood at EUR 19’291 million, up 18% on a currency-neutral basis (+14% on a reported basis). Currency-neutral sales increased in all geographical areas, with double-digit growth in almost all areas.

China, the USA and Western Europe recorded the strongest growth, with sales up by 28%, 24% and 20%, respectively (on a currency-neutral basis).

In China, the group achieved double-digit growth in most categories, with a 28% rise in sales for adidas and a 17% increase for Reebook, boosted by Training, Running and Classics.

In North America, the adidas brand saw sales increase by 30%, mainly thanks to Training, Running, US Sports, Originals and Neo. Reebok’s sales, however, were down 1%, as a result of a challenging US market.

adidas and Reebok performed well in Western Europe, with currency-neutral sales up 20% for adidas (18% growth in 2015) and up 18% for Reebok, boosted by Training and Classics.

34 Pargesa Holding SA Annual Report 2016 Group portfolio adidas

Latin America, Japan and MEAA recorded growth of 16% in currency- After payment of EUR 322 million in dividends, EUR 229 million in neutral sales. Russia/CIS delivered sales growth of 3% on the same treasury share repurchases and the conversion of EUR 226 million basis despite the difficult environment. convertible bonds, net debt stood at EUR 103 million at end-2016 (versus EUR 460 million at end-2015). The Golf business line posted a 1% decline in sales on an organic basis, owing to a slowdown in the Adams Golf and Ashworth brands. At the Annual General Meeting on 11 May 2017, a 2016 dividend CCM Hockey’s sales fell 13%. of EUR 2.00 per share, representing a 25% rise on the year-earlier dividend of EUR 1.60, will be put to shareholders for approval. In spite of the negative currency impact, gross profit rose 15% to EUR 9’379 million (EUR 8’168 million in 2015), representing 48.6% Outlook : The adidas group should continue to experience double- of sales (48.3% in 2015). This was due to a more favourable pricing, digit growth in sales, supported by : (i) increased spending on product and channel mix, as well as lower input costs. EBIT came sportswear ; (ii) the growing athleisure trend ; and (iii) increasing in at EUR 1’491 million, a rise of 40.7% on 2015 (+36.3% excluding awareness in all regions of health problems and the benefits of the goodwill impairments recorded in 2015). The EBIT margin was doing sport. Western Europe, North America and China should 7.7%, up 130 bps. see the strongest growth. The adidas brand, which accounts for 85% of sales, should continue to grow strongly. For 2017, the Net income from continuing operations reached EUR 1’019 million company’s operating margin is expected to improve to between in 2016, compared with EUR 686 million in 2015 (EUR 720 million 8.3% and 8.5% (against 7.7% in 2016), and operating profit should excluding the goodwill impairment). Group share of net income rise by between 18% and 20%, to EUR 1’200 to EUR 1’225 million. was EUR 1’017 million in 2016, compared with EUR 634 million in 2015 (EUR 668 million excluding the goodwill impairment).

Operating cash flow rose to EUR 1’348 million (EUR 1’090 million in 2015).

35 Pargesa Holding SA Annual Report 2016 Group portfolio Pernod Ricard

The world’s co-leader in wines and spirits, Pernod Ricard holds a top position on every continent

Since it was created in 1975, Pernod Ricard has achieved significant organic growth and made numerous acquisitions – most notably Seagram in 2001, Allied Domecq in 2005 and Vin&Sprit in 2008 – and www.pernod-ricard.com has become the world’s co-leader in the wines and spirits market.

With a strong presence on every continent and a sound position in the emerging markets of Asia, Eastern Europe and South America, the group produces and distributes a range of 13 strategic international brands of spirits and champagne and four “Priority Premium” wines, as well as 15 stratetic local brands that are leaders in their markets, and a large number of regional brands.

In spirits, the group’s main brands are : Absolut, Ballantine’s, Beefeater, Chivas Regal, Havana Club, Jameson, Malibu, Martell, Ricard, Royal Salute et The Glenlivet ; in champagnes : Mumm and Perrier Jouët ; and in “Priority Premium” wines : Brancott Estate, Campo Viejo, Graffigna, Kenwood and Jacob’s Creek.

30 June 2014 30 June 2015 30 June 2016 Overall data (EUR millions) Shareholders’ equity (group share) 11’621 13’121 13’337 Market capitalisation (1) 24’488 27’922 27’325 Net profit from recurring operations (group share) 1’185 1’329 1’381 Consolidated net profit (group share) 1’016 861 1’235 Per-share data (EUR) Net profit from recurring operations (diluted) 4.46 4.99 5.20 Dividend 1.64 1.80 1.88 Shares issued (in millions) 265.4 265.4 265.4 Pargesa Group’s interest (%) (1) 7.5 7.5 7.5 (1) At year-end.

For the 2015-2016 financial year ending on 30 June 2016, Pernod Ricard delivered solid results in a mixed macro environment. Net sales came in at EUR 8’682 million, a year-on-year rise of 2% in organic terms (adjusted for the technical impact of shipments in France being brought forward from July to June 2015 ahead of the pooling of Ricard and Pernod’s back-offices on 1 July 2015). On a reported basis, net sales were up 1%, with a −1% impact from changes in scope and a negligible exchange rate effect.

On an organic basis, sales of the Top 14 (1) remained stable, while key local brands were up 6%, spurred mainly by sales of Indian whiskies, and Priority Premium wines sales were up 5%.

Profit from recurring operations was EUR 2’277 million, up 2% in organic terms and on a reported basis. The operating margin rose 7 bps to 26.2%, thanks to strict control of advertising expenses and structure costs (as a percentage of sales), together with initiatives to boost operational efficiencies, and despite a slight decline in the gross margin (–13 bps to 61.9%, compared with a 105 bps drop in 2014-2015) caused by the negative mix effect (growth in India and slowdown in China).

Group share of net profit from recurring operations was up 4% to EUR 1’381 million, compared with EUR 1’329 million in 2014-2015. This rise was mainly due to the increase in profit from recurring operations and lower average debt servicing costs. Group net profit came in at EUR 1’235 million, up 43% on the previous year, in which an impairment was recognised on the Absolut vodka brand.

Group net debt decreased to EUR 8’716 million at 30 June 2016, thanks to the strong rise in free cash flow, partly as a result of the decrease in non-recurring charges. The net debt/EBITDA ratio went from 3.5x to 3.4x.

(1) Following changes within the “House of Brands” in July 2016, there are now 13 strategic international brands and 15 strategic local brands.

36 Pargesa Holding SA Annual Report 2016 Group portfolio Pernod Ricard

At the Annual General Meeting on 17 November 2016, the group’s Cash generation was robust, with free cash flow of EUR 658 shareholders approved a dividend of EUR 1.88 per share for the million, representing a year-over-year rise of 34%, which was 2015-2016 financial year, a rise of 4% on the year-earlier dividend partly enhanced by phasing. Net debt rose by EUR 237 million of EUR 1.80. in H1 2016-2017 to EUR 8’953 million, due in particular to an unfavourable impact of exchange rates on debt denominated in Net sales for the first half of the 2016-2017 financial year, which USD (EUR/USD exchange rate : 1.11 at 30 June 2016 versus 1.05 ended on 31 December 2016, were EUR 5’061 million, representing at 31 December 2016). The net debt/EBITDA ratio at average rates organic growth of 4% (2% on a reported basis, owing to unfavourable fell below 3.4x at 31 December 2016, an improvement on both 31 exchange rates). This increase was mainly due to higher sales for December 2015 (<3.6x) and 30 June 2016 (3.4x). the strategic international brands (organic growth of 6%), while strategic local brands recorded slower growth (+1%, compared Outlook : In H1 2016-2017, Pernod Ricard delivered organic growth with 6% in H1 of the previous year), particularly in India. of 4% in sales and operating profit (3% after the adjustment for the Chinese New Year). The group saw growth in all regions, confirming The gross margin was 62.4% compared with 62.1% in H1 2015- a gradual improvement in a still-mixed operating environment. For 2016. On an organic basis, however, the gross margin was the full 2016-2017 year, Pernod Ricard expects to see a further down 31 bps, with a positive price/mix effect despite a limited growth in the USA, in Jameson worldwide and in innovation, and price effect and strict control of costs. H1 2016-2017 profit from a year-over-year improvement in sales trend in China and from recurring operations came in at EUR 1’500 million, an organic rise Absolut and Chivas. A temporary slowdown in growth is of 4% on the year-earlier period. Group share of net profit from nevertheless expected in India as a result of demonetisation. recurring operations was EUR 957 million, up 5%, while group net Furthermore, the group remains focussed on its operating margin profit rose 3% to EUR 914 million. and cash-flow generation and expects to deliver organic growth in profit from recurring operations in line with the guidance of +2% to +4%.

37 Pargesa Holding SA Annual Report 2016 Group portfolio Umicore

Umicore is a global group specialised in materials technology and recycling

Umicore was GBL’s first investment in its “Incubator” portfolio in 2013. It became a strategic holding in 2016. At 31 December 2016, GBL held 17.0% of Umicore’s capital and was the company’s largest shareholder. The market value of GBL’s stake stood at EUR 1’032 million at year-end. www.umicore.com Umicore focuses on areas in which its expertise in materials science, chemistry and metallurgy stands out. Umicore has three core business groups : Catalysis (including catalysts for emissions controls), Energy & Surface Technologies (including rechargeable batteries materials), and Recycling (including recycling of precious metals).

2014 2015 2016 Overall data (EUR millions) Shareholders’ equity at 31 December (group share) 1’705 1’732 1’790 Market capitalisation at 31 December 3’730 4’331 6’065 Recurring net profit (group share) 193 246 233 Consolidated net profit (group share) 171 169 131 Per-share data (EUR) Recurring net profit 1.79 2.27 2.14 Dividend 1.00 1.20 1.30 (1) Shares issued (in millions) 112 112 112 Pargesa Group’s interest (%) 12.4 16.6 17.0 (1) Subject to approval at the Annual General Meeting on 25 April 2017.

Umicore’s 2016 revenues (excluding metals) rose slightly to EUR 2’667 million, up from EUR 2’629 million in 2015. This represents a rise of 1% including discontinued operations (+3% excluding discontinued operations). Strong growth in Automotive Catalysts and Rechargeable Battery Materials more than offset the impact of falling metal prices on the group’s recycling activities.

Recurring EBIT, including associates, stood at EUR 351 million in 2016, versus EUR 330 million in 2015, representing a rise of 6% (+7% excluding discontinued operations). The recurring EBIT margin excluding associates was 12.5%, compared with 12.0% in 2015.

The segment performances were as follows :

• Ca talysis : Revenues in Catalysis increased by 6%, driven by strong growth in Automotive Catalysts. Recurring EBIT grew by 23% to EUR 153 million, compared with EUR 124 million in 2015, with volume growth in Automotive Catalysts complemented by a positive mix effect and scale effects following the ramp up of production in recently commissioned investments.

• E nergy & Surface Technologies : Revenues were up 4%, with strong volume growth in cathode materials for automotive applications more than offsetting lower demand in certain other end markets served by the business group. EBIT was up 16% in 2016 (EUR 81 million as against EUR 70 million in 2015) as a result of higher revenues as well as margin improvements in some divisions.

• Re cycling : Revenues and EBIT were down 3% and 12% respectively, reflecting the impact of lower metal prices. Recurring EBIT stood at EUR 125 million, compared with EUR 142 million in 2015.

38 Pargesa Holding SA Annual Report 2016 Group portfolio Umicore

Group share of recurring net profit was EUR 233 million (including The balance sheet remained sound with net financial debt of discontinued operations) ; it came in lower than the 2015 figure of EUR 296 million, or 0.6x recurring EBITDA (EUR 321 million and EUR 246 million as a result of a rise in financial expenses and taxes. 0.6x at 31 December 2015).

Group share of net profit stood at EUR 131 million, compared with At the Annual General Meeting on 25 April 2017, the Board of EUR 169 million in 2015. Non-recurring items resulted in a charge of Directors will recommend an annual dividend of EUR 1.30 per EUR 110 million to EBIT (charge of EUR 75 million in 2015), of which share, of which EUR 0.60 was already paid out as an interim EUR 69 million corresponded to the fine imposed by the French dividend in August 2016. The dividend paid for the previous year Competition Authority in relation to Umicore’s Building Products amounted to EUR 1.20 per share. activities in France (discontinued operation). The remaining non- Outlook : Umicore’s clean mobility activities are expected to deliver recurring items related primarily to the closing of two production solid growth in 2017. Strong demand for cathode materials for sites, in Europe and China. automotive applications should drive an increase in volumes this Capital expenditure amounted to EUR 287 million, most of year. Although no major new emission norms are expected in 2017, which related to growth projects in clean mobility and recycling. demand for automotive catalysts is also set to grow. In recycling, Most of the capital expenditure came from Energy & Surface the ramp up of capacity in the Hoboken plant should lead to Technologies as expansion works to triple production capacity for higher processed volumes compared to 2016. As anticipated, the cathode materials in China and Korea by the end of 2018 began. incremental volumes are likely to be somewhat less beneficial in In Catalysis, the new production plant in Thailand has been terms of margins. commissioned and production is ramping up. In Recycling, there were additional investments in auxiliary equipment in connection with the expansion of the Hoboken site.

39 Pargesa Holding SA Annual Report 2016 Group portfolio Total

Total is a global integrated oil and gas group with a presence in chemicals

Total is one of the world’s leading international oil and gas groups. It has operations in more than 130 countries and spans all upstream and downstream sectors. Total also has a major presence in the chemicals industry and works to develop renewable energies.

Total’s integrated business model leverages synergies among its various operations throughout the world. The group’s activities are divided into five segments.

In the Upstream segment, the group has oil and natural gas exploration and production operations in more than 50 countries. As a result of a sharp drop in the price of crude oil, the segment reviewed its objectives in order to develop a more resilient, profitable and sustainable model for hydrocarbon www.total.com production.

In the Refining & Chemicals segment, Total is one of the main global players in refining and petrochemicals, two highly complementary activities that the group develops in synergy.

The Marketing & Services segment is the group’s sales and marketing arm, provided through its service stations network and the sale of fuel and other products. In 2016, the segment’s products were available in more than 150 countries, with a network of more than 16’000 service stations serving around 4 million customers daily.

The Trading & Shipping segment sells crude oil, supplies refineries, charters tankers and conducts transactions on derivatives markets.

The Gas, Renewables & Power segment develops the group’s new low carbon activities and aims to strengthen Total’s position within the electricity value chain. Total is developing its natural gas markets and is expanding into renewable energies.

2014 2015 2016 Overall data (millions) Shareholders’ equity at 31 December (group share) (USD) 90’330 92’494 98’680 Market capitalisation at 31 December (EUR) 101’420 100’689 118’376 Adjusted net income (group share) (USD) 12’837 10’518 8’287 Consolidated net income (group share) (USD) 4’244 5’087 6’196 Per-share data Adjusted net income (diluted) (USD) 5.63 4.51 3.38 Dividend (EUR) 2.44 2.44 2.45 (1) Shares issued (in millions) 2’385 2’440 2’430 Pargesa Group’s interest (%) 3.0 2.4 0.7 (1) Subject to approval at the Annual General Meeting on 26 May 2017.

Oil prices were extremely volatile in 2016, ranging from USD 27/b to USD 58/b. Last year’s average was USD 43.7/b, compared with USD 52.4/b in 2015, a drop of 17%. The Upstream business was hit by this decline, which was partially offset by higher output (up 4.5% from 2’347 kboe/d to 2’452 kboe/d), a reduction in operating costs and a lower average tax rate than in 2015.

In the Downstream segment, the ERMI indicator of refining margins in Europe came in at USD 34.1 per tonne in 2016 versus USD 48.5 per tonne a year earlier, a decline of 30%. Petrochemicals continued to record solid results, thanks in particular to the contribution from integrated platforms in Asia and the Middle East.

In Marketing & Services, adjusted net operating income was stable excluding New Energies, despite asset disposals in Turkey.

40 Pargesa Holding SA Annual Report 2016 Group portfolio Total

Floating unit – Angola – © Thierry Gonzalez - Total

Total pressed ahead with its cost cutting programme, which Net investments in 2016 came in at USD 17.8 billion, representing resulted in savings of USD 2.8 billion, above the USD 2.4 billion a 13% decline on 2015 (USD 20.4 billion). Group net cash flow was target, thereby once again reducing production costs. USD –0.8 billion, compared with USD –1.0 billion in 2015. The drop in investments offset the decline in the gross margin caused by lower Adjusted net operating income from the business segments was oil prices and a lower ERMI. The net-debt-to-equity ratio stood at USD 9’420 million, a 17% decrease on 2015 (USD 11’362 million), 27% at the end of 2016, as against 28% at 31 December 2015. owing to the declines in the Brent oil price and the ERMI, which were partially offset by the rise in production and lower costs. At the Annual General Meeting on 26 May 2017, a 2016 dividend of EUR 2.45 per share will be put to shareholders for approval. This The average tax rate for the segments was 25.8%, compared with represents a EUR 0.01 rise on the year-earlier dividend. 33.9% in 2015. Outlook : Total expects hydrocarbon prices to remain volatile this Adjusted net income stood at USD 8’287 million as against year. The group will continue its efforts to contain costs and aims USD 10’518 million in 2015, a decline of 21%. Group share of net to achieve USD 3.5 billion in savings in 2017. Investments are income after non-recurring items (including asset impairments, moving into the sustainable range needed to deliver profitable provisions) amounted to USD 6’196 million, compared with future growth and are expected to be between USD 16 billion and USD 5’087 million in 2015. USD 17 billion in 2017, including resource acquisitions. Total’s breakeven should continue to fall, reaching less than USD 40/b pre-dividend. Cash flow from operations is expected to cover investments and the cash portion of the dividend at USD 50/b. Total plans to eliminate the discount on the scrip dividend when Brent is at USD 60/b.

41 Pargesa Holding SA Annual Report 2016 Group portfolio Other GBL assets

In addition to the large strategic holdings that make up the majority of its portfolio, GBL began to gradually diversify into two areas in 2012 :

• “Incubator” investments, made up of a limited selection of listed and unlisted holdings – each INCUBATOR representing an investment of between EUR 250 million and EUR 1 billion – that have the potential FINANCIAL PILLAR to become strategic assets over time. This was the case in 2016 for the investments in adidas and (SIENNA CAPITAL) Umicore, which are now considered strategic holdings, owing to their market value and the Group’s presence on their boards of directors. This type of investment may eventually account for 10–15% of the value of GBL’s portfolio ;

• Significant stakes in private equity, debt or thematic funds, grouped under GBL’s wholly owned subsidiary, Sienna Capital. These investments may eventually account for up to 10% of the value of GBL’s portfolio.

Incubator

www.ontexglobal.com

Ontex specialises in disposable hygiene products for babies, women and adults. Ontex products are distributed in more than one hundred countries under the company’s own brands and distributors’ private labels. They are available through a range of channels, mainly including retail stores, medical facilities and pharmacies.

In 2016, GBL strengthened its position in Ontex, and at 31 December 2016 it held 19.98% of the company’s capital (7.6% at 31 December 2015), representing a market value of EUR 423 million.

2014 2015 2016 Overall data (EUR millions) Shareholders’ equity at 31 December (group share) 671 852 999 Market capitalisation at 31 December 1’614 2’363 2’115 Adjusted net income 65 103 132 Consolidated net income (group share) 9 99 120 Per-share data (EUR) Adjusted net income 0.95 1.50 1.77 Net income 0.13 1.43 1.61 Dividend 0.19 0.46 0.55 (1) Shares issued (in millions) 68.1 72.1 74.9 Pargesa Group’s interest (%) 0.00 7.60 19.98 (1) Subject to approval at the Annual General Meeting on 24 May 2017.

2016 revenues stood at EUR 1’993 million, a rise of 0.2% in organic terms and 18.0% on a reported basis, thanks to the acquisition of Grupo Mabe in Mexico in March 2016. Growth was supported by adult incontinence products, while babycare and femcare saw lower sales on an organic basis. From a regional perspective, growth was spurred by countries in Eastern Europe, the Middle East and North Africa.

Adjusted EBITDA rose 18.9% to EUR 249 million, compared with EUR 209 million in 2015. The adjusted EBITDA margin stood at 12.5%, a rise of 10 bps on 2015, thanks to the improvement in the gross margin, which was offset by a negative currency effect.

42 Pargesa Holding SA Annual Report 2016 Group portfolio Other GBL assets

Net debt rose from EUR 255 million at 31 December 2015 to EUR 665 million at 31 December 2016 (2.7x 2016 EBITDA), as consequence of the acquisition of Grupo Mabe.

At the Annual General Meeting on 24 May 2017, a 2016 dividend of EUR 0.55 per share, compared with EUR 0.46 a year earlier, will be put to shareholders for approval.

In early 2017, Ontex acquired the Personal Hygiene division of the Brazilian group Hypermarcas, for an enterprise value of EUR 305 million. This transaction will enable Ontex to strengthen its incontinence business, increase the proportion of brand products, and develop its platform in the Americas.

Outlook : In 2017, Ontex expects to grow revenue ahead of its markets in all divisions in 2017, supported by commercial investments in the brand portfolio and in retail partners’ brands. The operating environment is expected to remain challenging in 2017, with volatile exchange rates and some pressures on raw material costs. Ontex remains committed to moderate margin expansion over time.

www.burberryplc.com

At 31 December 2016, GBL held 2.95% of the capital of Burberry, representing a market value of EUR 230 million. On 28 February 2017, Burberry announced that GBL had crossed the threshold of 3% of the company’s voting rights.

Burberry, listed on the London Stock Exchange, is a British luxury brand that specialises in designing, manufacturing and distributing high- end clothes and accessories. Products are sold throughout the world through its network of proprietary retail stores, online and through third-party retailers. Burberry employs close to 11’000 staff, and sales for the 2015-2016 financial year amounted to around GBP 2.5 billion.

Sienna Capital (“Financial Pillar”) www.sienna-capital.com

GBL intends to continue diversifying its portfolio and achieve its value creation objectives through alternative investments made via its subsidiary Sienna Capital.

Sienna Capital aims to generate attractive, risk-adjusted returns by constructing a diversified portfolio of investment managers that each perform well in their area of expertise (equity funds, debt funds and theme-based funds).

Sienna Capital is an active partner, working closely with the companies in which it invests. It provides support to managers, helping them to raise money, attract talent and identify investment opportunities. It also offers guidance on matters of good governance and best practice.

At 31 December 2016, Sienna Capital’s portfolio comprised six managers investing in close to 100 companies through 12 funds. The portfolio includes investments in private equity funds (Ergon and Sagard), a debt fund (Kartesia), a fund specialised in the healthcare sector (Mérieux Développement), a fund whose strategy consists of acquiring long-term shareholdings in mid-sized European companies (PrimeStone), and a fund that provides long-term capital to family-owned and founder-led businesses (BDT Capital Partners).

Sienna Capital’s portfolio was valued at EUR 955 million at 31 December 2016.

43 Pargesa Holding SA Annual Report 2016 Group portfolio Other GBL assets

Strategy

Sienna Capital offers a differentiated approach, providing fund managers with long-term capital in exchange for attractive financial terms. It is an active partner that aims to create value. Its strategy is to support new funds while also looking to make direct investments with existing external managers. Sienna Capital generates revenue through capital gains, interest income, dividends and fees earned through revenue-sharing agreements with its underlying managers.

Sienna Capital – key figures since its creation (in EUR millions)

Mérieux BDT Capital Ergon Sagard Kartesia Développement PrimeStone Partners Total

Initial commitment 663 398 300 75 150 113 1’699 Called up capital 480 250 138 33 150 48 1’098 Residual commitment 183 149 163 42 – 65 601 Distributions 322 194 10 – – – 526 Value of holding (Sienna Capital portfolio) 342 144 155 34 161 53 889 (1) (1) Excluding a claim of EUR 66 million on Sagard 3.

Activity in 2016 In 2016, Sienna Capital made new commitments amounting to EUR 268 million, including additional commitments of EUR 100 million in ECP III and EUR 17 million in Sagard 3, together with a commitment of EUR 150 million to Kartesia’s new fund.

Through its underlying funds, Sienna Capital invested EUR 161 million in 2016. This included capital calls to support investments in Financière Looping and Deutsche Intensivpflege Holding GmbH (DIH) by Ergon Capital Partners III (ECP III) ; Sagard 3’s investment in two holding companies (including Prosol, the parent company of Grand Frais) ; the investments made by Mérieux Participations II in Keranova, NovaCap and Le Noble Age ; and other investments made by Kartesia and BDT Capital Partners.

In 2016, Sienna Capital received EUR 83 million, primarily from the sales of De Boeck and Larcier by ECP III and the disposal of FläktWoods by Sagard II.

Sienna Capital contributed EUR 18 million in net dividends to GBL in 2016.

Sienna Capital – 2016 key figures (in EUR millions)

Mérieux BDT Capital Ergon Sagard Kartesia Développement PrimeStone Partners Total

New commitments 100 17 150 – – – 268 Called up capital 58 36 (1) 23 14 – 30 161 Distributions 58 18 (1) 7 – – – 83 Contribution to GBL’s net dividends 18 (1) Excluding the impact of Sagard 3’s funding round.

44 Pargesa Holding SA Annual Report 2016 Group portfolio Other GBL assets

Ergon Capital Partners (“ECP”) www.ergoncapital.com

Company profile

Ergon Capital Partners (ECP) was created in 2005 as a family of private equity funds operating in the mid-market segment. It invests between EUR 20 million and EUR 70 million in companies operating in niche markets in the Benelux, Italy, Spain, France, Germany and Switzerland, with positions that are dominant and sustainable over the long term.

Sienna Capital & Ergon

ECP I was founded in 2005, and its initial shareholders were GBL and Parcom Capital, a subsidiary of ING. The first fund totalled EUR 150 million. In 2007, these same shareholders backed a second fund, ECP II, in the amount of EUR 275 million. In 2010, GBL supported a third fund of EUR 350 million, ECP III. ECP III was increased by EUR 150 million in 2016, bringing its total size to EUR 500 million.

2016 financial year

During the year, ECP completed the sale of its stake in Stroili. ECP III also invested in Financière Looping and DIH and sold its interests in De Boeck and Larcier.

Sagard www.sagard.com

Company profile

Created in 2002 on the initiative of Power Corporation of Canada, Sagard invests in companies that are valued at more than EUR 100 million and that are leaders in their markets, primarily in French-speaking European countries. It works closely with management teams and supports them in their growth.

Sienna Capital & Sagard

GBL committed EUR 50 million to the first Sagard fund (Sagard I). GBL then committed EUR 150 million to the second fund, Sagard II, in 2006. This amount was then reduced to EUR 113 million in 2014. In 2013, Sienna Capital committed EUR 200 million to the launch of Sagard 3.

2016 financial year

In 2016, Sagard II finalised the sale of its stake in FläktWoods. Sagard 3 invested in Prosol (Grand Frais), raised an additional EUR 404 million in new commitments, including a commitment of EUR 17 million by Sienna Capital.

Kartesia www.kartesia.com

Company profile

Kartesia offers liquidity and credit solutions to mid-sized European companies, while providing a higher stable return to its investors. More generally, Kartesia aims to facilitate the participation of institutional and high net worth investors in the European LBO debt market by offering them exposure to highly rated, resilient and diversified credit through primary, secondary or rescue financing operations carried out with selected mid-sized companies.

Sienna Capital & Kartesia

The final closing of the Kartesia fund took place in March 2015 for an amount EUR 508 million, of which EUR 150 million came from Sienna Capital. In 2016, Sienna Capital committed EUR 150 million to the new fund launched by Kartesia.

2016 financial year

At 31 December 2016, Kartesia had invested EUR 468 million in primary and secondary market transactions. Last year, Kartesia distributed EUR 24 million to its investors.

45 Pargesa Holding SA Annual Report 2016 Group portfolio Other GBL assets

Mérieux Développement www.merieux-developpement.com

Company profile

Mérieux Développement was created in 2009 and is an investment manager specialised in growth and venture capital investments in the healthcare and nutrition sectors. It works alongside entrepreneurs and companies whose products and services can bring genuine advances to the health of patients and consumers worldwide. Mérieux Développement is a subsidiary of Institut Mérieux.

Sienna Capital & Mérieux Développement

In 2014, Sienna Capital committed to invest EUR 75 million in the two funds managed by Mérieux Développement : Mérieux Participations I and Mérieux Participations II.

2016 financial year

In 2016, Mérieux Participations II made three new investments, in Keranova, NovaCap and Le Noble Age, for a total amount of EUR 40 million.

PrimeStone www.primestonecapital.com

Company profile

PrimeStone was founded in 2014 by three former partners from The Carlyle Group. These buyout specialists had worked and invested together across Europe for more than 15 years. PrimeStone’s strategy is based on a constructive and active approach in mid-sized listed European companies that offer significant value creation potential through strategic, operational or financial improvements. PrimeStone creates value by taking a long-term perspective, adopting an active approach and exercising significant influence over its portfolio investments through a constructive dialogue with Boards of Directors and management teams.

Sienna Capital & PrimeStone

As part of a long-term agreement, Sienna Capital invested EUR 150 million in February 2015.

2016 financial year

In 2016, PrimeStone made six new investments.

BDT Capital Partners

Company profile

BDT Capital Partners was created in 2009 by Byron Trott, a longstanding partner of Goldman Sachs, with the aim of meeting the strategic and financial needs of family-owned and/or founder-led businesses around the globe. BDT Capital Partners successfully raised USD 3 billion over two rounds of fund-raising in 2010 and 2012 and then created a second fund in 2014, BDT Capital Partners Fund II (“BDTCP II”), with a size of USD 5 billion. In 2015, BDTCP II was reopened to new investors in order to raise USD 1 billion in additional capital.

Sienna Capital & BDT Capital Partners

In 2015, Sienna Capital committed EUR 113 million to the additional fund-raising for BDTCP II.

2016 financial year

BDTCP II made three investments in 2016, for a total amount of USD 2 billion.

46 Pargesa Holding SA Annual Report 2016 Group portfolio Other GBL assets

47 48 03 CORPORATE GOVERNANCE

Source of the Arve river – Haute Savoie – France – Etching – early 18th century 49 Pargesa Holding SA Annual Report 2016 Corporate Governance

1. Group structure and shareholders

1.1 Group structure

For the purposes of this Corporate Governance Report, Pargesa Group companies include the Swiss parent company Pargesa Holding SA (the “Company”), and its subsidiaries and consolidated shareholdings.

Listed companies within the scope of consolidation :

Place of Market capitalisation % of voting Name and registered office listing at 31.12.2016 % of capital rights ISIN Pargesa Holding SA SIX Swiss Grand-Rue 11 Exchange parent CH – 1204 Geneva Zurich CHF 5.6 billion company CH0021783391

Groupe Bruxelles Lambert (GBL) Avenue Marnix 24 Euronext B – 1000 Brussels Brussels EUR 12.9 billion 50.0 51.9 (1) BE0003797140

Imerys Rue de l’Université 154 / 156 Euronext F – 75007 Paris Paris EUR 5.7 billion 53.9 (2) 69.7 (2) FR0000120859

(1) Taking into account the suspended voting rights relating to treasury shares. (2) Owned through GBL.

Unlisted companies controlled by the parent company :

Name and registered office Share capital % of capital/vote Pargesa Netherlands BV ; Herengracht 540 ; NL – 1017 CG Amsterdam CHF 109 million 100.0

1.2 Significant shareholders

Under Article 120.1 of the Swiss Federal Financial Market Infrastructure Act (FMIA), anyone who directly or indirectly or acting in concert with third parties acquires or disposes of shares or acquisition or sale rights relating to shares of a company with its registered office in 1 2 Switzerland and thereby reaches, falls below or exceeds the thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 33 /3%, 50% or 66 /3% of the voting rights, whether exercisable or not, must notify this to the company and to the stock exchanges on which the equity securities are listed.

% of voting rights conferred on Significant shareholders at 31.12.2016 (1) % of capital (2) exchange rights (3) Stichting AK Frère-Bourgeois / Trust Desmarais 55.5 75.4

First Eagle Investment Management LLC (USA) 9.0 4.9

(1) 3% or more of the voting rights. (2) Capital percentages are calculated based on the total number of issued shares recorded in the commercial register (bearer equivalent) making up the capital, less treasury shares, i.e. a denominator of 84’659’190 at 31 December 2016. (3) Percentages of voting rights are calculated based on the total number of voting rights attached to the shares issued, i.e. a denominator of 154’429’400 at 31 December 2016.

Announcements concerning holdings were published during the financial year. Following the entry into force of the FMIA, a simplified shareholder structure, which is provided on the next page, was published on 2 August 2016. Further details are available on the SIX Swiss Exchange website : www.six-exchange-regulation.com/en/home/publications/significant-shareholders.html

50 Pargesa Holding SA Annual Report 2016 Corporate Governance

Shareholder structure of Pargesa Holding SA on 1st August 2016

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0 2 0 2 arointo

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1 rustees of a trust set up upon the death of the late Paul G. Desmarais for certain members of the Desmarais family. 2 ontrol el trou te intereiar of eeral leal entitie ine te entr into fore of te A on 1t anuar 2016 te puliation of te oplete areoler truture i no loner reuire Joint control.

1.3 Cross-shareholdings

There are no cross-shareholdings within the Group.

2. Capital structure 2.1 Capital

The total share capital of the Company amounts to CHF 1’698’723’400 and is fully paid in. It is composed of 77’214’700 registered shares with a par value of CHF 2 each, 76’937’720 bearer shares with a par value of CHF 20 each, and 276’980 treasury shares (bearer shares) with a par value of CHF 20 each and no dividend rights. Only bearer shares are listed on the SIX Swiss Exchange.

2.2 Authorised and conditional capital

The Board of Directors has been granted authorisation, until 3 May 2018, to increase the share capital by CHF 253 million by issuing 11’500’000 registered shares with a par value of CHF 2 and 11’500’000 bearer shares with a par value of CHF 20. On 1 June 1994, the Company created conditional capital with a maximum par value of CHF 242 million through the creation of 11’000’000 registered shares with a par value of CHF 2 each and 11’000’000 bearer shares with a par value of CHF 20 each.

In terms of authorised capital, shareholders in principle have preferential subscription rights on new shares. However, the Board of Directors may cancel shareholders’ preferential subscription rights for good reason, in particular if the shares are issued in connection with total or partial mergers or acquisitions, investments, or for the placement of shares on foreign markets in order to expand the shareholder base. The Company must sell any preferential subscription rights that have not been exercised, at market conditions.

In terms of conditional capital, the right to acquire new shares may be conferred on holders of convertible bonds resulting from convertible bond issues or option rights issued by the Company or by one of its affiliates. The preferential subscription rights of shareholders are cancelled for these new shares. The right of shareholders to subscribe to convertible bond issues or to options at the time of issue

51 Pargesa Holding SA Annual Report 2016 Corporate Governance

may be limited or cancelled by the Board of Directors for good reason, in particular if the convertible bonds or the options are issued in connection with total or partial mergers or acquisitions, investments, or for the placement of shares on foreign markets in order to expand the shareholder base. In such cases, the following rules apply : (a) the convertible bonds or the options must be issued in accordance with normal market conditions ; and (b) conversion rights may be exercised for a maximum of seven years and options for a maximum of five years from the issue date.

2.3 Changes in capital

Changes in the capital structure and in reserves during the 2015 and 2016 financial years appear in the consolidated statement of changes in equity on page 73 of this Annual Report. Changes that took place in 2014 can be found on page 69 of the 2015 Annual Report, which is available on the Company’s website under “Financial Reports” : www.pargesa.ch/fileadmin/documents/en/rapports/ra15en.pdf

2.4 Shares and share certificates

Registered and bearer shares provide one vote per share, subject to the restrictions mentioned in section 6.1 below, and entitle the holder to a dividend proportional to the par value (see sections 2.1 and 2.2 above). An acquirer of shares in the Company is not required to present a public tender under Articles 135 and 163 of the FMIA if the thresholds provided under Articles 135 and 163 of FMIA (opting-out clause) have been exceeded.

2.5 Profit-sharing certificates

The Company has not issued any profit-sharing certificates.

2.6 Limitations on transfers and registration of nominees

As mentioned in section 2.2 above, the Company’s share capital is made up of registered and bearer shares. Only bearer shares are listed on the SIX Swiss Exchange ; registered shares are not listed. There are no limitations on the transfer of bearer shares. The transfer of registered shares is subject to approval by the Board of Directors. The Company may refuse to grant approval, provided that it offers to buy the registered shares from the seller for its own account, for the account of other shareholders or for the account of third parties, at their market value at the time of the request for approval. The Company may also refuse to record the acquirer in the share register if, on the Company’s request, the acquirer does not expressly declare that he is acquiring the shares in his own name and for his own account. The Company has no regulations concerning the registration of nominees. Shareholders may lift restrictions on the transfer of registered shares at the Annual General Meeting, if such restrictions are approved by an absolute majority of the votes represented.

2.7 Bond issues and options

The Company has no outstanding convertible bonds. In 2007, Pargesa set up a plan for staff and certain members of Management, whereby stock options are granted annually. The main features of the plan are as follows :

Year Number of options Final expiration Vesting Conversion Strike price Share capital of issue date conditions ratio (in CHF) concerned (in CHF 2007 12’150 2017 2008 to 2010 1 option / 1 share 133 243’000 2008 16’150 2018 2009 to 2011 1 option / 1 share 116 323’000 2009 36’650 2019 2010 to 2012 1 option / 1 share 53 733’000 2010 19’090 2020 2011 to 2013 1 option / 1 share 87 381’800 2011 20’210 2021 2012 to 2014 1 option / 1 share 87 404’200 2012 24’780 2022 2013 to 2015 1 option / 1 share 65 495’600 2013 24’510 2023 2014 to 2016 1 option / 1 share 67 490’200 2014 23’930 2024 2015 to 2017 1 option / 1 share 79 478’600 2015 26’780 2025 2016 to 2018 1 option / 1 share 72 535’600 2016 (1) 37’792 2026 2017 to 2019 1 option / 1 share 60.6 / 63.75 755’840

(1) Including 30’072 options awarded on 24 March 2016 at a strike price of CHF 60.60 and 7’720 options awarded on 10 May 2016 at a strike price of CHF 63.75.

52 Pargesa Holding SA Annual Report 2016 Corporate Governance

3. Board of Directors Arnaud VIAL France / Canada Ecole supérieure d’Electricite – 1977-1988 Banque Paribas (Paris) 3.1 and 3.2 Members of the Board of Directors – 1988-1997 Director of accounting and financial services ; then Deputy Managing Director of Parfinance (France) – 1993-1997 Information on Board members is given in the following order : Secretary General of Pargesa Holding SA – Since 1997 Senior Vice Name, nationality President of Power Corporation of Canada and Power Financial Education, professional career and present positions Corporation (Canada) – Managing Director of Pargesa Holding SA since June 2013 Operational management functions within Pargesa or a Group company Managing Director and Director of Pargesa Holding SA – Director and Member of the Standing Committee of GBL SA (Belgium) – Other activities Director of Imerys (France) – Member of the Supervisory Board of Pargesa Netherlands BV (Netherlands) – Chairman of PGB SA Executive Directors : and SFPG (France)

Paul DESMARAIS Jr Canada Non-executive Directors : Bachelor of Commerce, McGill University – MBA, INSEAD – Power Corporation of Canada since 1981, appointed Chairman of the Bernard DANIEL Switzerland Board and Co-Chief Executive Officer of Power Corporation of Law degree and IMD Lausanne – 1987-2007 Secretary General Canada in 1996 – Became Vice President at Power Financial and Secretary of the Board of Directors of Nestlé SA (Switzerland) Corporation (Canada) in 1984 ; President and Chief Operating – 1967-1972 International Committee of the Red Cross delegate Officer from 1986 to 1989 ; Executive Vice Chairman from 1989 – Since 2009 Member of the International Committee of the Red to 1990 ; Executive Chairman from 1990 to 2005 ; Chairman of Cross Geneva (Switzerland) the Executive Committee from 2006 to 2008 ; and Executive Co- Chairman since 2008 – Appointed to the Management Committee Director of Pargesa Holding SA of Pargesa Holding SA in 1982, and made Executive Chairman in Other activities : Member of the Board of Caisse d’épargne Riviera, 1998 – Director of Pargesa Holding SA since 1992 ; appointed Vice Compagnie Industrielle et Commerciale du Gaz SA, Holdigaz SA Chairman of the Board in 2002 ; then Executive Director in 2003 – Co-founder and member of the Board of Riviera Finance SA Chairman of the Board of Directors of Pargesa Holding SA since (Switzerland) 2013 – Vice Chairman of the Board, Director and Member of the Standing Committee of GBL SA (Belgium) Victor DELLOYE Belgium

Other activities : Director of several companies in the Power Law degree, Université Catholique de Louvain, and Master of group in North America, including Great-West Lifeco Inc. and its Fiscal Sciences degree (ESSF – Brussels, Belgium) – 1980-1987 subsidiaries, and IGM Financial Inc. and its subsidiaries (Cana- Coopers & Lybrand – Joined the Frère-Bourgeois group in 1987 ; da) – Chairman of the Advisory Board of Sagard Private Equity currently Director and Secretary General of Frère-Bourgeois SA Partners (France) – Director of Total SA (France), LafargeHolcim and its subsidiary Compagnie Nationale à Portefeuille SA (Belgium) SA (France), and SGS SA (Switzerland) Director of Pargesa Holding SA – Director and Member of the Standing Committee of GBL SA (Belgium) Gérald FRÈRE Belgium Other activities : Since the 1989-1990 academic year, Lecturer for Institut “Le Rosey” (Switzerland), Athénée Royal de Chimay the Executive Masters in Tax Management at the Solvay Brussels (Belgium) – Career within the Frère-Bourgeois group (Belgium) School of Economics & Management (ULB, Belgium) – Vice Chairman – Executive Director of Frère-Bourgeois SA – Director of Erbe of the Association Belge des Sociétés Cotées, ASBL (Belgium) SA – Chairman of the Board of Directors of Loverval Finance SA (Belgium)

Vice Chairman of the Board of Directors and Executive Director of Pargesa Holding SA – Chairman of the Board and Member of the Standing Committee of GBL SA (Belgium)

Other activities : Director of Power Financial Corporation (Canada) – Regent of Banque Nationale de Belgique

53 Pargesa Holding SA Annual Report 2016 Corporate Governance

André DESMARAIS Canada Ségolène GALLIENNE Belgium

BA from Concordia University (Canada) – 1979-1980 Campeau BA, Vesalius College – Economics – Vrije Universiteit Brussels Corporation (Canada) – 1980 Ministry of Justice and Public (VUB) – Since 1998 Director of Frère-Bourgeois SA (Belgium) Prosecution Service of Canada – Since 1981 Power Corporation Director of Pargesa Holding SA – Director of GBL SA (Belgium) of Canada, since 1988 Power Financial Corporation, since 1996 President and co-Chief Executive Officer of Power Corporation Other activities : Chair of the Board of Stichting Administratiekan- of Canada – Since 2008 Deputy Chairman of Power Corporation toor Peupleraie (Netherlands) and Diane SA (Switzerland) – Director of Canada and Executive co-Chairman of Power Financial of Stichting Administratiekantoor Frère-Bourgeois (Netherlands), Corporation (Canada) Erbe SA, Fonds Charles-Albert Frère ASBL (Belgium), Christian Dior SA and Société Civile du Château Cheval Blanc (France) Vice Chairman of the Board of Directors of Pargesa Holding SA

Other activities : Director and Member of the Executive Board of Jean-Luc Herbez Switzerland Power Corporation of Canada and Power Financial Corporation Degrees from the University of Geneva in economics (1970) and (Canada) – Chairman of the Board of Square Victoria Communica- in law (1976) and from the University of Pennsylvania (LLM, 1981) tions Group Inc., Gesca Ltée and La Presse Ltée (Canada) – Direc- – After working in Frankfurt and Washington DC, joined Swiss law tor of Great-West Lifeco Inc., IGM Financial Inc., Mackenzie Inc., firm Froriep SA as a partner in 1987 Investors Group Inc., London Life Insurance Company, Canada Life (Canada) and Putnam Investments LLC (USA) Director of Pargesa Holding SA

Other activities : Member of the Ordre des avocats de Genève Paul DESMARAIS III Canada and the Swiss Bar Association Degree in economics, Harvard University – MBA, INSEAD (France) – 2004-2009 began career at Goldman Sachs (USA) – Barbara KUX Switzerland 2010-2012 worked in project management and strategy at Imerys MBA with distinction, INSEAD – began career as a Management (France) – 2012-2014 Deputy Vice President of Risk Management Consultant at McKinsey & Company (Germany) – Held top at Great-West Lifeco – Currently Senior Vice President of Power management positions within multinational companies, with Corporation of Canada and Power Financial Corporation (Canada) responsibility for developing and managing emerging markets Director of Pargesa Holding SA - Director and Member of the – 2008-2013 member of the Management Committee of Philips Standing Committee of GBL SA (Belgium) and Imerys (France) group (Netherlands) – 2008-2013 member of the Managing Board of Siemens AG (Germany) – Since 2013, Director of several Other activities : Director of Great-West Life Inc., Investor’s Group, multinationals and member of the Advisory Board of INSEAD – In Mackenzie Inc., and Sagard Capital Partners GP, Inc. (Canada), 2016, appointed by the European Commission to the expert panel Putnam Investments LLC (USA) on decarbonisation

Cedric FRÈRE Belgium / France Director of Pargesa Holding SA

BA, Vesalius College – Business and Economics (Belgium) – 2007 Other activities : Member of the Board of Directors of Total and internship in “Investment Banking” division, Goldman Sachs Paris ENGIE (France), Henkel (Germany), Firmenich (Switzerland) and (France) – 2007-2008 “Corporate Finance” division, Royal Bank of Umicore (Belgium) Scotland, London (United Kingdom) – 2008-2010 “Private Deals” department, Banque Degroof, Brussels (Belgium) – Since 2010, Michel PÉBEREAU France Director of Compagnie Nationale à Portefeuille SA (Belgium) 1961-1963 Ecole Polytechnique – 1965-1967 Ecole Nationale Director of Pargesa Holding SA – Director and Member of the d’Administration – 1967-1970 French General Finance Inspectorate Standing Committee of GBL SA (Belgium) – 1970-1974 Member of Cabinet of the French Minister for the Economy and Finance – 1971-1982 Treasury Division – 1978-1981 Other activities : Director of Frère-Bourgeois SA, Erbe SA and Cabinet Director and special assistant to the French Minister for Compagnie Nationale à Portefeuille SA (Belgium) – Director of the Economy – 1982-1986 Managing Director of Crédit Commercial Cheval Blanc Finance SAS (France) – Tenured Director of Cheval de France – 1986-1993 Chairman and Managing Director of Crédit des Andes (Argentina) Commercial de France – Honorary Chairman of Crédit Commercial de France since 1993 – 1993-2000 Chairman and CEO of Banque Nationale de Paris – 2000-2003 Chairman and CEO of BNP Paribas – 2003-2011 Chairman of the Board of Directors of BNP Paribas – Director of BNP Paribas until 13 May 2015 – Honorary Chairman of BNP Paribas (France) since December 2011

Director of Pargesa Holding SA

54 Pargesa Holding SA Annual Report 2016 Corporate Governance

Other activities : Vice Chairman of the Supervisory Board of Amaury de SÈZE France Banque Marocaine pour le Commerce et l’Industrie (BMCI) Stanford Business School (USA) – 1978-1993 AB Volvo (Sweden) (Morocco) – Chairman of the Fondation BNP Paribas – Chairman – 1993-1999 Paribas – 1998-2007 PAI Partners (France) – of the Fondation ARC pour la Recherche sur le Cancer – Chairman Since 2010 Vice Chairman of the Board and member of Senior of Centre des Professions Financières – Member of the Board of Management of Power Financial Corporation (Canada) the Fondation Nationale des Sciences Politiques – Member of the Académie des Sciences Morales et Politiques (France) – Chairman Director of Pargesa Holding SA – Director and Member of the of the Club des partenaires de TSE – Member of the Board of the Standing Committee of GBL SA (Belgium) Fondation JJ. Laffont-TSE – Member of the Supervisory Board Other activities : Member of the Supervisory Board of Publicis ESL Network – Member of the Sponsoring Committee of the Group (France) – Lead Director of Carrefour – Director of RM2 (UK) Cercle Jean-Baptiste Say – Member of the Sponsoring Committee and BW Group (Singapore) of the Collège des Bernardins – Honorary Chairman and member of the Steering Committee of the Institut de l’Entreprise (IDEP) 3.3 Further information under ORAb – Chairman of the Scientific and Teaching Board of the Institut Vaucanson – Member of the Strategic Steering Committee of At the Annual General Meeting held on 5 May 2015, Pargesa Holding MEDEF – Member of Paris fait son cinéma – Manager of MJP SA amended the Articles of Association as required under the Conseil Ordinance against excessive compensation in listed corporations (“ORAb”). Under these provisions, the Articles of Association now Michel PLESSIS-BÉLAIR Canada stipulate, in Article 31, the maximum number of positions that may be held in the management or on the boards of directors of MBA in Finance, Columbia University (New York, USA) – L. Sc. companies outside the Pargesa Group. Members of the Board of Commerce HEC (Canada) – 1967-1968 Samson Bélair Côté, Lac- Directors may not hold more than ten positions of office in the roix and Partners – 1968-1974 SMA-ETD Group – 1975-1986 highest management or supervisory bodies of third party legal Société Générale de Financement du Québec – 1986 to January entities, of which no more than five may be in listed companies. 2008 Chief of Financial Services and Director of Power Corpora- Furthermore, they may hold up to ten positions within the governing tion of Canada and Power Financial Corporation – Vice Chairman bodies of non-profit or charity entities. of Power Corporation of Canada since January 2008 and of Power Financial Corporation (Canada) since 2012 An entity is not deemed to be a third party legal entity under Article 31 of the Articles of Association, and is therefore not taken into Director of Pargesa Holding SA – Director and Member of the consideration for the calculation of the abovementioned maximum Standing Committee of GBL SA (Belgium) number of positions, if : (1) it directly or indirectly controls the Company Other activities : Director of Square Victoria Communications or is controlled by the Company ; or (2) it is not required to be recorded Group Inc. (Canada) in the commercial register or in a similar foreign register (e.g. public corporations and institutions, non-profit associations, ecclesiastical Gilles SAMYN Belgium / France foundations or family foundations) ; or (3) the position is held at the request of the Company or a company controlled by it. Commercial Engineer, Solvay Business School, Université Libre de Bruxelles (ULB) – 1972-1973 Mouvement Coopératif Belge – Positions held with legal entities under direct or indirect common 1973-1974 military service – 1974-1982 Groupe Bruxelles Lambert control of a legal entity or person or at the request of such legal SA – 1982-1983 self-employed businessman – Since 1983 entity or person are counted as one single mandate for the purpose Frère-Bourgeois SA, currently Executive Director – Chairman of of this provision. Compagnie Nationale à Portefeuille SA (Belgium) The Company’s Articles of Association are available at the Director of Pargesa Holding SA – Director and Member of the following address : Standing Committee of GBL SA (Belgium) www.pargesa.ch/fileadmin/documents/en/statutsen.pdf

Other activities : Executive Director of Frère-Bourgeois SA All members of the Board of Directors are in compliance with the and Erbe SA (Belgium) – Chairman of Compagnie Nationale à provisions of Article 31 of the Articles of Association. Portefeuille SA, AOT Holding Ltd and Transcor Astra Group SA (Belgium) and Groupe Flo SA (France) – Member of the Supervisory Board of Métropole Télévision (M6) (France) – Director of the Grand Hôpital de Charleroi ASBL (Belgium), Pernod Ricard, Société Civile du Château Cheval Blanc (France) and Banca Leonardo SpA (Italy)

55 Pargesa Holding SA Annual Report 2016 Corporate Governance

3.4 Elections and terms of office Distribution of responsibilities

Since the entry into force of ORAb on 1 January 2014, the Annual The responsibilities of each member of the Board of Directors can General Meeting must each year elect every member of the Board be found on page 6 of this Annual Report. The composition of the of Directors individually. As a result, all terms will expire at the next Committees of the Board can be found on page 7 of this Annual Annual General Meeting. At the Annual General Meeting on 5 May Report. The duties and scope of responsibilities of the Committees 2015, the Articles of Association were amended accordingly. are detailed below.

The Company’s Articles of Association do not contain any clauses Composition, duties and scope of responsibilities, working method that conflict with legal provisions concerning the appointment of The Company’s Board of Directors appoints one or more Vice the Chairman of the Board, the members of the Compensation Chairmen and two Executive Directors. An individual may hold Committee and the Independent Proxy. the function of Chairman or Vice Chairman and that of Executive Year of Director at the same time. The Executive Directors are responsible 1st appointment for the operational running of the Company. They may delegate day-to-day management to other members of Management, Paul DESMARAIS Jr 1992 unless otherwise stipulated by law, the Articles of Association Gérald FRÈRE 1992 or the internal regulations. The Managing Director represents Gilles SAMYN 1992 Management in relation to the other Company bodies. André DESMARAIS 1996 Michel PLESSIS-BÉLAIR 1999 At its meetings, the Board of Directors examines the business Amaury de SÈZE 2001 affairs of the Group and its shareholdings and the financial Victor DELLOYE 2004 statements of the Group, and deliberates on all current or strategic Ségolène GALLIENNE 2004 matters as required by the circumstances. Except in specific cases Michel PÉBEREAU 2005 where there is no financial item on the agenda, the documentation Arnaud VIAL 2010 given to the Board systematically includes analyses of the Group’s Bernard DANIEL 2011 net asset value, recent results and forecast results compared with Cedric FRÈRE 2012 the budget, as well as the outlook and strategic directions of the Paul DESMARAIS III 2014 main shareholdings. Company Management is present at Board Barbara KUX 2014 meetings. During 2016, the Board of Directors met five times. Jean-Luc HERBEZ 2016 Committees of the Board of Directors

Since 1997, the Company has had an Audit Committee and a 3.5 Internal organisational structure and 3.6 Compensation Committee, composed of non-executive members Responsibilities of the Board of Directors. The Committees report to the Board of The organisational structure of the Company is defined by Directors. internal regulations initially adopted in 1993. An updated version The task of the Audit Committee is to ensure that accounting of the regulations was approved by the Board of Directors at its methods are adequate and consistent and to check that internal meeting on 13 March 2015. The regulations set out the internal procedures for the collection and control of information guarantee organisation, and the duties and responsibilities of the governing these aims. More specifically, the Committee analyses the bodies, in accordance with the law and the Company’s Articles of consolidated and parent company financial statements and Association. These regulations concern the Chairman and Vice reviews the risk assessment and the internal control systems ; it Chairman (or Vice Chairmen) of the Board of Directors, the Board also examines, with the external auditors, the scope and results of of Directors, the Audit Committee, the Compensation Committee, their audit and analyses the financial information provided to the Executive Directors and Management. shareholders and third parties. Members of Management attend The organisational regulations were amended in 2016 after the Audit Committee meetings. The auditors attend twice a year. The Board of Directors adopted a Code of Conduct. Audit Committee reports to the Board of Directors, which receives its recommendation before approving the financial statements. During 2016, the Committee met twice, both times in the presence of the auditors.

56 Pargesa Holding SA Annual Report 2016 Corporate Governance

The Compensation Committee assists the Board of Directors in all 4. Senior Management matters relating to the compensation of members of the Board of Directors and Management, including incentive plans. The 4.1 and 4.2 Members of Senior Management Committee may appoint and receive advice from experts in Paul DESMARAIS Jr Canada compensation or legal matters. It also supervises the drawing up of the Compensation Report and makes recommendations Chairman of the Board of Directors and Executive Director of concerning the compensation proposals to be submitted to the Pargesa Holding SA Annual General Meeting. The Committee also ensures that the type (see section 3 on the Board of Directors above) of compensation awarded to members of the Board of Directors and Management is in keeping with applicable regulations. Gérald FRÈRE Belgium Members of Management attend the meetings of the Committee. The Compensation Committee reports to the Board of Directors, Vice Chairman of the Board of Directors and Executive Director which has the authority to take decisions. During 2016, the of Pargesa Holding SA Committee met once with the auditor and once electronically. (see section 3 on the Board of Directors above) The Board of Directors is responsible for the management and supervision of the Company. It determines the Company’s Arnaud VIAL France / Canada organisation, accounting principles and financial controls. It Director of Pargesa Holding SA and Managing Director of Pargesa appoints and dismisses the officers entrusted with the Company’s Holding SA management and representation, and supervises the officers entrusted with management tasks to ensure that they comply with (see section 3 on the Board of Directors above) the law, the Articles of Association, regulations and instructions received. The Board of Directors is also responsible for drawing up Mark Keller Switzerland the Annual Report and the Compensation report, as well as for Financial Director of Pargesa Holding SA preparing the Annual General Meeting and implementing its decisions. Diploma and school-leaving certificate from the Malagnou Business The Executive Directors, who are appointed by the Board of School, Geneva – 1983-1985 Banque hypothécaire du canton de Directors, are authorised to decide on all matters not attributed Genève – At Pargesa Holding SA since 1986 ; appointed Head of to another Company body by law, the Articles of Association Accounting in 1992 and Financial Director in 2016 or the regulations. They make recommendations to the Board of Directors concerning the general aims of the Company’s Member of the Supervisory Board of Pargesa Netherlands BV investment policy and new orientations. They also make (Netherlands) – Director of SFPG (France) recommendations to the Board concerning : the Company’s position regarding the management approach of its subsidiaries 4.3 Additional information pursuant to ORAb and the major shareholdings ; the Company’s financing policy ; and As indicated in section 3.3 above, at its Annual General Meeting on the appropriation of profit. They also determine the key principles 5 May 2015, Pargesa Holding SA amended the Articles of Association of treasury management. as required under ORAb. In particular, the Articles of Association now stipulate the maximum number of positions that may be held The Executive Directors instruct Management and supervise the in the management or on the boards of directors of companies implementation of the decisions and orientations decided by the outside the Pargesa Group. Board of Directors and the Executive Directors. Under Article 31 of the Articles of Association, members of 3.7 Board information and control instruments Management may not hold more than ten positions of office in The members of the Board of Directors have permanent access the highest management or supervisory bodies of third party legal to all information concerning the business of the Company. They entities, of which no more than five may be in listed companies. receive financial documentation on at least a quarterly basis. Furthermore, they may hold up to ten positions within the governing Members of Management attend the meetings of the Board of bodies of non-profit or charity legal entities. Directors. Before these meetings, full documentation is given to An entity is not deemed to be a third party legal entity under Article attendees, including, and depending on the items on the agenda, 31 of the Articles of Association, and is therefore not taken into a review of shareholdings, operating and financial information and consideration for the calculation of the abovementioned maximum outlook, and any other relevant information concerning the current number of positions, if : (1) it directly or indirectly controls the affairs or future direction of the Group. Company or is controlled by the Company ; or (2) it is not required to be recorded in the commercial register or in a similar foreign register (e.g. public corporations and institutions, non-profit associations, ecclesiastical foundations or family foundations) ; or (3) the position is held at the request of the Company or a company controlled by it.

57 Pargesa Holding SA Annual Report 2016 Corporate Governance

Positions held with legal entities under direct or indirect common 6.2 Quorums as per the Articles of Association control of a legal entity or person or at the request of such legal entity The Articles of Association do not require certain decisions taken or person are counted as one single mandate for the purpose of at the Annual General Meeting to be made with larger majorities this provision. than required by law. The Company’s Articles of Association are available at the 6.3 Convening the Annual General Meeting following address : www.pargesa.ch/fileadmin/documents/en/statutsen.pdf The provisions of the Articles of Association on convening the Annual General Meeting are in accordance with the law. All members of Management are in compliance with the provisions of Article 31 of the Articles of Association. 6.4 Adding an item to the agenda

Shareholders representing shares with a par value of at least one 4.4 Management contracts million Swiss francs who wish to place one or more items on the There are no management contracts between the Company and agenda of the Annual General Meeting must submit their request third parties. in writing to the Board of Directors at the latest 45 days before the date of the Meeting, indicating the subject matter and the 5. Compensation, shareholdings and loans proposals to be put on the agenda. 6.5 Recordings in the share register Information concerning the compensation of members of the Board of Directors and Management can be found in the Only holders of (unlisted) registered shares recorded in the share Compensation Report (page 64), pursuant to ORAb. register ten days before the Annual General Meeting are authorised to exercise their voting rights. At the Annual General Meeting on 5 May 2015, Pargesa Holding SA amended the Articles of Association as required under ORAb. Under these provisions, the Articles of Association now set out, in 7. Changes of control and defence measures Articles 32 to 38, the principles and components of compensation 7.1 Obligation to submit an offer awarded to the Board of Directors and Management, and the method used to approve compensation at the Annual General The Company has adopted the opting-out clause (Article 10 of its Meeting. Articles of Association) according to which an acquirer of shares www.pargesa.ch/images/stories/societe/en/statutsen.pdf in the Company is not required to present a public tender under Articles 135 and 163 of the FMIA if the thresholds provided under 6. Shareholders’ voting rights Articles 135 and 163 of FMIA have been exceeded. www.pargesa.ch/fileadmin/documents/en/statutsen.pdf 6.1 Limits and representation 7.2 Changes in control Shareholders’ voting rights are proportional to the number of shares There are no clauses concerning changes of control in the they hold, regardless of their par value. Each shareholder has at agreements and programmes established in favour of the least one vote, even with only one share. members of the Board of Directors and/or Management, with In the following cases, shareholders exercise the right to vote in the following exception : under the stock option plan for staff and proportion to the par value of their shares and not in proportion to certain members of Management (see section 2.7 above), all rights the number of shares they hold : are immediately vested to the beneficiary or his beneficiaries in the • appointment of the external auditors ; event of a change of control in Pargesa Holding SA. • appointment of experts to verify all or part of the management ; • resolution to conduct a special audit ; • resolution to bring a liability claim.

At the Annual General Meeting, decisions can be taken and appointments made regardless of the number of shares represented, unless a mandatory provision of law or the Articles of Association requires the presence of a minimum number of shares.

The Company’s Articles of Association do not include any specific provisions on instructions to be given to the Independent Proxy or on attending the Annual General Meeting remotely.

58 Pargesa Holding SA Annual Report 2016 Corporate Governance report

8. Auditor 9. Information policy 8.1 Length of mandate and term as lead auditor The following information is provided to investors and other members of the public and is accessible at : The length of the auditor’s mandate is one year. The current auditor’s www.pargesa.ch mandate was first approved at the 1997 Annual General Meeting. • Press releases concerning quarterly, half-yearly and annual results : Thierry Aubertin, the current lead auditor, has held the post since www.pargesa.ch/en/pressreleases/2017 2013. • Graph of the trading price of the shares and the adjusted net asset 8.2 Audit fees value updated weekly on the website : Fees invoiced by the audit firm during the year under review totalled www.pargesa.ch/en/listed-securities/pargesa-shares/ CHF 204’821. This amount included the total fees invoiced by the net-asset-value/chart/ auditors appointed at the Annual General Meeting of Pargesa in • Presentations at the Annual General Meeting and to investors : 2016. www.pargesa.ch/en/presentations/library Member companies of the Deloitte organisation invoiced audit • Half-yearly and annual reports : fees of CHF 0.5 million to GBL and CHF 3.3 million to Imerys, www.pargesa.ch/en/presentations/library which form part of the same Group (see section 1.1 above). • Financial calendar : 8.3 Additional fees www.pargesa.ch/en/shareholders/financial-calendar The audit firm or related third parties provided additional services The Company’s website also includes the e-mail address of the to the Company for a total of CHF 4’000. These services included person in charge of investor relations : [email protected] a review of the economic presentation of the consolidated results. Member companies of the Deloitte organisation provided additional services amounting to a total of CHF 1.8 million to GBL and Imerys, 10. Corporate social and environmental which form part of the same Group (see section 1.1 above). responsibility 8.4 Information instruments with respect to Pargesa pays particular attention to social and environmental the external auditor responsibility issues. As indicated in section 3.5 above, the Audit Committee examines, Owing to its investment in GBL, Pargesa deals with these matters together with the auditors, the scope and results of their audits through the strategic investments of GBL. Pargesa, through GBL, and analyses the financial information intended for shareholders carefully follows major social and environmental issues in each and third parties. of those shareholdings and encourages the application of best The auditors attend the meetings of the Audit Committee in which practice in these matters by the companies concerned. the annual and half-year accounts are examined, as well as any Each company prepares a detailed social and environmental other meeting at which their attendance is desired, based on the responsibility report every year ; these are available on each circumstances. company’s website. The Audit Committee examines a report, prepared by Management, Pargesa’s corporate social responsibility statement is available at : assessing the execution of the assignment given to the auditors ; www.pargesa.ch/en/csr this report contains details enabling the Audit Committee to assess the quality of the services provided. Fees paid to the auditors for their work are negotiated annually and agreement is reached in particular about the scope of the auditing work. Any additional tasks are subject to separate negotiation. In 2016, the auditors provided additional services for the sum of CHF 4’000.

The Audit Committee met twice in the presence of the auditors in 2016. At the meeting of the Audit Committee in March 2017, during which the 2016 financial statements were examined, the auditors gave a documented report on the execution of their assignment and the results of their audits. They issued an unqualified audit opinion.

59 60 04 COMPENSATION REPORT

Lutschinen stream – Bernese Oberland – Switzerland – etching – early 18th century 61 Pargesa Holding SA Annual Report 2016 Compensation report

Compensation Report

This report has been drawn up in accordance with the provisions of the Ordinance against excessive compensation in listed corporations (known as “ORAb”), which came into force on 1 January 2014.

Compensation of the Board of Directors and Management

Members of the Board of Directors, the Board’s Committees and Management receive compensation directly from Pargesa. The total compensation awarded to certain members of the Board of Directors and Management, as indicated in the table on page 64, also includes the compensation for positions they hold in other companies within the Pargesa Group (particularly GBL and its shareholdings) at the Group’s request (see Article 34.4 of the Articles of Association), as well as any share options awarded under the incentive plans of these companies.

In accordance with ORAb and Article 36 of the Articles of Association, at the Annual General Meeting shareholders must each year approve the Board of Directors’ recommendation for each of the following :

• the total compensation to be awarded to the Board of Directors for the period up to the next Annual General Meeting ; and

• the total compensation to be awarded to Management for the coming financial year.

In accordance with these provisions, at the Annual General Meeting on 3 May 2016, shareholders approved the payment of :

• total compensation of CHF 8’300’000 for the Board of Directors for the period up to the Annual General Meeting on 4 May 2017 ; and

• total compensation of CHF 1’230’000 for Management for the 2017 financial year.

Principles

The compensation awarded directly by Pargesa to members of the Board of Directors and Management, which is included in the aforementioned total compensation, is set annually by the Board of Directors based on the recommendations of the Compensation Committee. While, as a general rule, compensation does not include any short-term variable cash component, in exceptional circumstances bonuses may be awarded to members of Management, as was the case in 2016 (see below).

The compensation paid directly by Pargesa is determined based on market practices for equivalent positions in a selection of companies, backed by analyses carried out periodically by international independent consultants contracted specifically for this purpose. The level of compensation awarded directly by Pargesa to members of the Board of Directors and Management was reviewed at the end of 2015 ; the previous review had taken place in 2010. Two sets of benchmarks were used in the 2015 review. They were : a selection of Swiss listed companies and, to take account of the Company’s specific profile, a selection of listed European holding companies. The basis for comparison is the market median. In addition, Pargesa’s Compensation Committee takes into account the level of operational responsibility when determining compensation, and for members of the Board of Directors, any positions on the Board’s committees (Audit Committee or Compensation Committee) are also taken into account.

Following the compensation review conducted at the end of 2015, the Board decided that, as of 2016, it would increase by 10% the fees paid to Company’s directors who are independent of the controlling shareholders.

The Managing Director’s fixed compensation was increased by 2.5% in 2016. The fixed compensation awarded to the Financial Director, who was appointed by the Board of Directors at its meeting on 29 July 2016 and who was up until then Head of Accounting, was revised up by 21% relative to his prior level of compensation, in light of his new functions and increased responsibility. Upon the recommendation of the Compensation Committee, the Board of Directors also decided to award the Managing Director a one-off bonus of CHF 200’000, in recognition of the role he played in the difficult circumstances that followed the death of the Deputy Managing Director/Financial Director at the end of 2015.

62 Pargesa Holding SA Annual Report 2016 Compensation report

Details

Compensation awarded directly by Pargesa includes fixed cash compensation. When, in exceptional circumstances, short-term variable compensation is awarded to a member of Management (as was the case in 2016 - see above), this compensation is also paid in cash.

Compensation also includes a share option plan, which Pargesa Holding set up for its staff and certain members of Management (not including Executive Directors) in 2007, following a decision by the Board of Directors. The main features of this plan are as follows : - the options are granted annually ; - t he strike price is equal to the Pargesa share price four days after the granting of options is approved by the Board ; - the number of options to be awarded is calculated based on a percentage of the compensation paid by the Company to the beneficiary, divided by the strike price ; the percentage, which had been set at a maximum of 125% since 2007, was raised to a maximum of 180% for options granted from 2016 ; - the options have a term of ten years ; - a third of the options is vested each year over a three-year period ; - a three-year locking-in period applies.

The aim of this long-term plan is to maintain the loyalty of staff and participating members of Management and to involve them in the creation of shareholder value. In 2016, the total number of options granted to members of Management under this plan concerned 17’530 underlying Pargesa shares. (1)

Members of the Board of Directors and Management are not entitled to any contractual payment for early departure. Option rights not yet fully vested on the date of retirement or dismissal are vested on that date, unless the case is one involving serious misconduct or voluntary departure. No compensation is paid to members of Management or directors who no longer have professional duties within the Group.

(1) Including 8’525 options awarded to the Financial Director for the position he held at Pargesa prior to his appointment as a member of Management.

63 Pargesa Holding SA Annual Report 2016 Compensation report

Compensation of the Board of Directors and Management in 2016

The compensation paid directly and indirectly to members of the Board of Directors and Management, pursuant to Article 14 of ORAb, for the 2016 financial year is provided below.

Fees and salaries Value of Pension Total for Total for options on benefits and 2016 2015 Paid Paid Pargesa contributions directly by indirectly shares to statutory Pargesa by other awarded pension Holding companies by schemes CHF SA (1) Sub-total Pargesa (2) and others Executive Directors Paul Desmarais Jr Chairman and Exec. Director 2’300’000 617’463 2’917’463 – 138’862 3’056’325 2’945’686 Albert Frère (5) - - - – - - 1’186’631 Gérald Frère Vice Chairman and Exec. Director (5) 1’850’000 303’593 2’153’593 – 104’604 (3) 2’258’197 1’622’708 Arnaud Vial Director (8) 59’000 146’255 205’255 – 9’819 215’074 162’889

Non-executive Directors André Desmarais Vice Chairman and Director 175’000 - 175’000 – 8’969 183’969 184’013 Marc-Henri Chaudet Director (6) 36’427 - 36’427 – 1’515 37’942 98’396 Bernard Daniel Director 104’000 - 104’000 – 4’469 108’469 98’396 Victor Delloye Director 59’000 172’781 231’781 – 3’024 234’805 185’122 Paul Desmarais III Director 59’000 200’306 259’306 – 28’587 287’893 183’913 Cedric Frère Director 59’000 79’032 138’032 – 3’024 141’056 116’111 Ségolène Gallienne Director 59’000 73’582 132’582 – 3’024 135’606 92’632 Jean-Luc Herbez Director (7) 67’573 - 67’573 – 2’889 70’462 - Barbara Kux Director 88’000 - 88’000 – 4’510 92’510 83’910 Michel Pébereau Director 65’000 - 65’000 – 2’470 67’470 61’173 Michel Plessis-Bélair Director 79’800 82’303 162’103 – 3’229 165’332 144’943 Gilles Samyn Director 195’800 308’226 504’026 – 24’762 528’788 456’558 Amaury de Sèze Director 79’800 186’407 266’207 – 17’291 283’498 399’577 Total Directors 5’336’400 2’169’948 7’506’348 – 361’048 7’867’396 8’022’659

Members of Management (8) (9) 975’490 32’703 1’008’193 35’936 126’943 (4) 1’171’072 1’049’194 (10)

(1) These figures include compensation paid by companies within the Pargesa Group (primarily GBL and Imerys), as well as compensation for positions held at the Group’s request. (2) The value of Pargesa options awarded by Pargesa during the period was determined on the basis of the Black & Scholes model ; the unit value for 2016 was CHF 2.05. (3) Includes CHF 10’294 in benefits in kind. (4) Includes CHF 3’220 in benefits in kind. (5) At the end of the Annual General Meeting on 5 May 2015, Gérald Frère replaced Albert Frère as Executive Director, following Albert Frère’s decision not to seek another term as Director. (6) Marc-Henri Chaudet did not seek another term as Director at the Annual General Meeting on 3 May 2016. (7) Jean-Luc Herbez was appointed to the Board of Directors at the Annual General Meeting on 3 May 2016. (8) The Executive Directors (Paul Desmarais Jr and Gérald Frère) are also members of Management, within the meaning of ORAb, but do not receive any separate compensation for this function ; in addition to his Director’s fee, Arnaud Vial, however, receives compensation for his role as Managing Director of Pargesa (see note 9). (9) The Management member who received the highest total compensation in 2016 was Arnaud Vial, who was paid a total of CHF 620’276 as Pargesa’s Managing Director ; Mr Vial also receives a fee as a member of Pargesa’s Board of Directors and holds positions within the Power Corporation of Canada Group. (10) This amount includes CHF 581’695 in compensation paid to the late Andrew Allender, Deputy Managing Director, who passed away on 2 November 2015.

The Company did not award any of the benefits that fall within the scope of Article 15 of ORAb (loans and advances to members of the Board of Directors and Management) or Article 16 of ORAb (allowances, loans and advances not granted at market conditions to related parties).

64 Pargesa Holding SA Annual Report 2016 Compensation report

Report of the statutory auditor to the General Meeting of Pargesa Holding SA, Geneva

Geneva, March 17, 2017

Report of the statutory auditor in relation to the compensation report in accordance with the Ordinance against Excessive compensation in Stock Exchange Listed Companies (Ordinance)

We have audited page 64 of the accompanying compensation report of Pargesa Holding SA for the year ended December 31, 2016.

Responsibility of the Board of Directors

The Board of Directors is responsible for the preparation and overall fair presentation of the compensation report in accordance with Swiss law and the Ordinance against Excessive compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.

Auditor’s Responsibility

Our responsibility is to express an opinion on the accompanying compensation report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the compensation report complies with Swiss law and articles 14 – 16 of the Ordinance.

An audit involves performing procedures to obtain audit evidence on the disclosures made in the compensation report with regard to compensation, loans and credits in accordance with articles 14 – 16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the compensation report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the compensation report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the compensation report for the year ended December 31, 2016 of Pargesa Holding SA complies with Swiss law and articles 14 – 16 of the Ordinance.

Deloitte SA

Thierry Aubertin Aurélie Darrigade Licensed audit expert Licensed audit expert Auditor in Charge

65 66 05 CONSOLIDATED FINANCIAL STATEMENTS

Source of the Arveiron river – Haute Savoie – France – etching – early 16th century 67 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

68 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Contents

Consolidated income statement and Consolidated statement of comprehensive income Consolidated balance sheet Consolidated cash flow statement Consolidated statement of changes in equity

Notes to the consolidated financial statements 1 General information and accounting policies 2 Segment reporting 3 Changes in working capital 4 Other operating income and expenses 5 Financial instruments 5.1 Nature and extent of risks arising from financial instruments 5.2 Derivative financial instruments 5.3 Dividends and net interest from available-for-sale financial assets 5.4 Other financial income and expenses 5.5 Available-for-sale financial assets 5.6 Other long-term financial and non-financial assets 5.7 Trade receivables 5.8 Other short-term financial and non-financial assets 5.9 Cash and cash equivalents 5.10 Other long-term financial and non-financial liabilities 5.11 Financial debt 5.12 Other short-term financial and non-financial liabilities 6 Staff costs 7 Restructuring costs 8 Impairment of assets 9 Operating leases 10 Income taxes 11 Intangible assets 12 Goodwill 13 Tangible assets 14 List of main consolidated and equity-accounted companies 15 Subsidiaries with material non-controlling interests 16 Acquisitions and disposals of subsidiaries 17 Investments in associates and joint ventures 18 Inventories 19 Provisions 20 Share capital, treasury shares, equity and other comprehensive income 21 Dividend paid and proposed by Pargesa Holding SA 22 Basic and diluted net earnings per share 23 Pension liabilities and similar benefits 24 Share-based payments 25 Main off-balance-sheet rights and commitments 26 Related parties disclosures 27 Important events taking place after the closing date

Report of the statutory auditor on the consolidated financial statements

69 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Consolidated income statement Note 2016 2015 CHF millions CHF millions

Revenue 2 4’940.0 4’6 87.6 Other operating income 71.1 69.8 Changes in inventory (14.6) 17.0 Raw materials, goods intended for resale and consumables (1’548.8) (1’528.2) Staff costs 6 (1’099.8) (1’049.5) Depreciation of tangible assets and amortisation of intangible assets 11, 13 (287.7 ) (276.0) Other operating expenses (1’549.5) (1’625.1) Other operating income and expenses 4 (579.4) 820.3 Operating profit (68.7) 1’115.9

Net interest and dividends from available-for-sale financial assets 5.3 368.9 345.2 Other financial income 5.4 111.6 133.3 Other financial expenses 5.4 (160.4) (164.4) Financial profit 320.1 314.1

Operating and financial profit 251.4 1’430.0 Income from associates and joint ventures 17 31.2 ( 77.6) Net profit before tax 282.6 1’352.4 Income taxes 10 (163.2) (69.8)

Net profit for the period (including minority interests) 119.4 1’282.6 - attributable to non-controlling interests 151.4 644.4 - attributable to Pargesa shareholders (Group share) (32.0) 638.2

Basic net earnings per share in CHF (Group share) 22 (0.38) 7.54 Diluted net earnings per share in CHF (Group share) 22 (0.38) 7.45

Consolidated statement of comprehensive income

Note 2016 2015 CHF millions CHF millions

Net profit for the period (including minority interests) 119.4 1’282.6

Other comprehensive income

Items not subsequently reclassified as income Actuarial gains/losses 10.1 48.2 Share of other comprehensive income of associates and joint ventures – 3.7 Total items not subsequently reclassified as income (1) 10.1 51.9

Items that are or may be subsequently reclassified as income Change in fair value of available-for-sale financial assets(2) 2’170.8 (1’175.5) Change in hedging reserve 18.0 (0.7) Translation difference (3) (84.6) (1’652.7) Share of other comprehensive income of associates and joint ventures – 309.9 Total items that are or may be subsequently reclassified as income (4) 2’104.2 (2’519.0)

Total other comprehensive income (5) 2’114.3 (2’467.1)

Total comprehensive income for the period (including minority interests) 2’233.7 (1’184.5) - attributable to non-controlling interests 1’177.6 (627.4) - attributable to Pargesa shareholders (Group share) 1’056.1 (557.1)

(1) Of which CHF –3.5 million in taxes in 2016 (CHF –7.3 million in 2015) ; see note 10.8. (2) These amounts mainly represent the impact of changes in the share prices of available-for-sale financial assets. (3) These amounts mainly represent the impact of changes in the exchange rates on consolidated subsidiaries. (1) Of which CHF –7.6 million in taxes in 2016 (CHF +9.4 million in 2015) ; see note 10.8. (5) Details of the reclassification adjustments carried through the income statement are shown in note 20.4.

70 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Consolidated balance sheet

ASSETS Note 31.12.2016 31.12.2015 CHF millions CHF millions

Long-term assets Intangible assets 11 309.7 368.1 Goodwill 12 2’220.7 2’044.3 Tangible assets 13 2’569.3 2’381.3 Investments in associates and joint ventures 17 387.1 358.4 Available-for-sale financial assets 5.5 13’747.4 13’403.6 Deferred tax assets 10.3 105.9 119.7 Other long-term financial assets 5.6 104.1 91.5 Other long-term non-financial assets 5.6 7.9 10.3 Total long-term assets 19’452.1 18’777.2

Short-term assets Inventories 18 804.6 843.1 Trade receivables 5.7 735.7 700.0 Financial assets held for trading 5 1’099.3 715.2 Other short-term financial assets 5.8 134.3 256.6 Other short-term non-financial assets 5.8 288.4 264.6 Cash and cash equivalents 5.9 1’285.3 1’028.3 Total short-term assets 4’347.6 3’807.8

TOTAL ASSETS 23’799.7 22’585.0

LIABILITIES AND EQUITY Note 31.12.2016 31.12.2015 CHF millions CHF millions

Shareholders’ equity Share capital 20.1 1’698.7 1’698.7 Capital reserve 256.6 256.6 Treasury shares 20.2 (5.5) (5.5) Revaluation and hedging reserve 2’555.4 1’382.9 Translation reserve (4’019.8) (3’968.7) Consolidated reserves 7’377.7 7’6 47.0 Equity attributable to the Group 7’863.1 7’011.0 Equity attributable to non-controlling interests 9’630.0 8’658.9 Total equity (including minority interests) 17’493.1 15’669.9

Long-term liabilities Provisions 19 371.4 332.5 Pension liabilities and similar benefits 23.3 327.0 358.0 Deferred tax liabilities 10.3 139.2 129.7 Financial debt 5.11 2’9 57.4 4’186.9 Other long-term financial liabilities 5.10 18.0 104.0 Other long-term non-financial liabilities 5.10 51.8 46.1 Total long-term liabilities 3’864.8 5’157.2

Short-term liabilities Provisions 19 25.3 22.6 Trade payables 519.0 538.8 Income tax payable 112.3 77.0 Financial debt due within the year 5.11 1’363.6 661.9 Other short-term financial liabilities 5.12 36.2 85.1 Other short-term non-financial liabilities 5.12 385.4 372.5 Total short-term liabilities 2’441.8 1’757.9

TOTAL LIABILITIES AND EQUITY 23’799.7 22’585.0

71 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Consolidated cash flow statement

Note 2016 2015 CHF millions CHF millions

OPERATING ACTIVITIES Net profit before tax 282.6 1’352.4 Adjusted for : Income from associates and joint ventures (31.2) 77.6 Dividends received from associates and joint ventures 25.9 107.3 Dividends recognised on available-for-sale financial assets (368.9) (345.2) Dividends received on available-for-sale financial assets 421.0 304.2 Profit/loss from the sale of tangible and intangible assets (15.6) (3.7) Profit/loss from the sale of available-for-sale financial assets (1’295.2) (511.9) Profit/loss from the sale of subsidiaries (59.8) (6.5) Reversal of revaluation and translation reserves – 190.6 Depreciation, amortisation, impairment, impairment reversals and negative goodwill 4 2’241.3 (74.5) Miscellaneous items of income not involving cash movements (51.4) (79.2) Interest income (19.0) (22.7) Interest expense 142.5 137.5 Operating cash flow before changes in working capital and taxes 1’272.2 1’125.9 Changes in working capital 3 (301.3) 176.9 Income taxes paid (111.0) (107.1) Cash flows from operations 859.9 1’195.7

INVESTMENT ACTIVITIES Acquisitions of subsidiaries, net of cash acquired 16 (232.3) (475.5) Disposals of subsidiaries, net of cash transferred 106.7 16.1 Acquisitions of associates and joint ventures (42.9) (75.0) Disposals of associates and joint ventures 15.6 43.2 Acquisitions of tangible and intangible assets (328.4) (316.5) Disposals of tangible and intangible assets 33.3 7.9 Advances, repayments of long-term advances granted, and other (10.1) 2.7 Acquisitions of available-for-sale financial assets (1’547.0) (1’209.6) Disposals of available-for-sale financial assets 2’605.5 643.4 Cash flows from investments 600.4 (1’363.3)

FINANCING ACTIVITIES Share issue/capital reduction by subsidiaries (share of non-controlling interests) 63.3 29.7 Additional/partial acquisitions and disposals in existing subsidiaries 3.2 3.9 Long-term financial debt taken out 617.7 293.5 Interest received 19.7 16.1 Interest paid (120.9) (119.8) Dividend paid by parent company to shareholders 21 (201.5) (192.2) Dividends paid by subsidiaries to minority shareholders (303.2) (287.2) Repayment of long-term debt and finance lease debt (769.0) (419.1) Short-term financial debt taken out 17.4 340.8 Short-term financial debt repaid (546.2) (44.9) Cash flows from financing (1’219.5) (379.2)

Effect of exchange rate variation 16.2 (203.6)

Increase/decrease in cash and cash equivalents 257.0 (750.4)

Cash and cash equivalents at 1 January 1’028.3 1’778.7 Cash and cash equivalents at 31 December 5.9 1’285.3 1’028.3

72 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Consolidated statement of changes in equity

Revaluation Non- Treas- and Consoli- Group control- Share Capital ury hedging Translation dated share of ling Total CHF millions capital reserve shares reserve reserve reserves equity interests equity 1 January 2015 1’698.7 256.6 (5.5) 1’936.9 (3’317.5) 7’155.8 7’725.0 9’315.9 17’040.9 2015 net profit – – – – – 638.2 638.2 644.4 1’282.6 Change in fair value of available-for-sale financial assets ––– (597.5) – (12.8) (610.3) (565.2) (1’175.5) Change in hedging reserve ––– (0.2) – – (0.2) (0.5) (0.7) Translation difference ––– – (766.2) – (766.2) (886.5) (1’652.7) Actuarial gains/losses ––– – – 18.5 18.5 29.7 48.2 Share of other comprehensive income of associates and joint ventures ––– 46.0 115.0 1.9 162.9 150.7 313.6 Other equity items recognised in other comprehensive income ––– (2.3) – 2.3 – – – Other comprehensive income ––– (554.0) (651.2) 9.9 (1’195.3) (1’271.8) (2’467.1) 2015 total comprehensive income ––– (554.0) (651.2) 648.1 (557.1) (627.4) (1’184.5) Dividend paid by parent company ––– – – (192.2) (192.2) – (192.2) Dividends paid by subsidiaries ––– – – – – (287.2) (287.2) Other changes in equity (1) ––– – – 1.6 1.6 7.0 8.6 Effects of changes in scope and capital increases on non-controlling interests (2) ––– – – 33.7 33.7 250.6 284.3 Changes in items other than total comprehensive income ––– – – (156.9) (156.9) (29.6) (186.5) Total changes in 2015 ––– (554.0) (651.2) 491.2 (714.0) (657.0) (1’371.0) 31 December 2015 1’698.7 256.6 (5.5) 1’382.9 (3’968.7) 7’647.0 7’011.0 8’658.9 15’669.9 2016 net profit ––– – – (32.0) (32.0) 151.4 119.4 Change in fair value of available-for-sale financial assets ––– 1’167.4 – (36.1) 1’131.3 1’039.5 2’170.8 Change in hedging reserve ––– 5.1 – – 5.1 12.9 18.0 Translation difference ––– – (51.1) – (51.1) (33.5) (84.6) Actuarial gains/losses ––– – – 2.8 2.8 7.3 10.1 Other comprehensive income ––– 1’172.5 (51.1) (33.3) 1’088.1 1’026.2 2’114.3 2016 total comprehensive income ––– 1’172.5 (51.1) (65.3) 1’056.1 1’177.6 2’233.7 Dividend paid by parent company ––– – – (201.5) (201.5) – (201.5) Dividends paid by subsidiaries ––– – – – – (303.3) (303.3) Other changes in equity (1) ––– – – 7.0 7.0 17.6 24.6 Effects of changes in scope and capital increases on non-controlling interests – – – – – (9.5) (9.5) 79.2 69.7 Changes in items other than total comprehensive income ––– – – (204.0) (204.0) (206.5) (410.5) Total changes in 2016 ––– 1’172.5 (51.1) (269.3) 852.1 971.1 1’823.2 31 December 2016 1’698.7 256.6 (5.5) 2’555.4 (4’019.8) 7’377.7 7’863.1 9’630.0 17’493.1

(1) These lines mainly represent various changes originating in subsidiaries, especially the cost of share-based payments at GBL and Imerys, as well as changes originating in GBL’s equity-accounted shareholdings. (2) This line mainly comprises the impact of the decrease in GBL’s% holding in Imerys, which went from 56.5% at end-2014 to 53.9% at end-2015, mainly following the capital increase conducted by Imerys as part of the acquisition of S&B, i.e. CHF +33.3 million for the Group share and CHF +213.0 million for non-controlling interests (see note 16) ; this line also includes the new minority interests, representing an amount of CHF 40.6 million, following the acquisition of Golden Goose (see note 16). The reclassification adjustments carried through the income statement and details of changes in the revaluation and hedging reserve are provided in notes 20.4 and 20.5.

73 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Notes to the consolidated financial statements Note 1 – General information and accounting policies Pargesa Holding SA (“the Company”), 11 Grand-Rue, 1204 Geneva, Switzerland, is recorded in the Commercial Register of the Canton of Geneva. Its main purpose is the purchase, sale, administration and management, in Switzerland and abroad, of investments of a financial, commercial and industrial nature. The consolidated financial statements of the Company for the accounting periods ending 31 December 2016 and 31 December 2015 bring together the Company and the subsidiaries it controls (“the Group”) and the Group’s interests in associates and joint ventures. The Board of Directors authorised the publication of the consolidated accounts on 17 March 2017. Pargesa Holding is majority owned by Parjointco, a Dutch corporation. The end shareholders are Stichting Administratiekantoor Frère- Bourgeois in the Netherlands and the Desmarais familiy in Canada, specifically Jacqueline Desmarais, Paul Desmarais Jr and André Desmarais.

Accounting principles

The consolidated annual accounts are prepared in accordance with “International Financial Reporting Standards” (IFRS) published by the “International Accounting Standards Board” (IASB) and in accordance with the interpretations published by the “International Financial Reporting Interpretations Committee” (IFRIC) of the IASB. The following standards, amendments and annual improvements, which came into effect in 2016, apply to the accounting for, and the measurement and presentation of transactions, events and conditions existing in the Group, but were not applied in advance at 31 December 2015 :

Standard Application date Amendments to IAS 1 Presentation of financial statements : Disclosures 01.01.16 Amendments to IAS 27 Equity method in separate financial statements 01.01.16 Amendments to IAS 16 and IAS 38 Acceptable methods of depreciation and amortisation 01.01.16 Amendments to IAS 16 and IAS 41 Agriculture : bearer plants 01.01.16 Amendments to IFRS 11 Acquisition of an interest in a joint operation 01.01.16 Amendments to IFRS 10, IFRS 12 and IAS 28 Investment entities : Applying the consolidation exception 01.01.16 IFRS 14 Regulatory deferral accounts 01.01.16 Annual improvements 2012 – 2014 cycle 01.01.16

These standards, amendments and annual improvements had no significant impact on the accounts at 31 December 2016.

The Group has not adopted in advance any standards, interpretations, amendments or annual improvements with an application date after the 2016 financial year ; no early adoption before the mandatory application date is currently planned. Standards, interpretations, amendments and improvements become mandatory in the year following the application date. Those in question are :

Standard Application date Amendments to IAS 7 Disclosures 01.01.17 Amendments to IAS 12 Recognition of deferred tax assets for unrealised losses 01.01.17 Amendments to IFRS 2 Classification and measurement of share-based payment transactions 01.01.18 Amendments to IFRS 10 and IAS 28 Sales or contributions of assets between an investor and its associate or joint venture to be determined Amendments to IFRS 15 Effective date of IFRS 15 01.01.18 Amendments to IFRS 4 Applying IFRS 9 financial instruments with IFRS 4 contracts 01.01.18 Amendments to IAS 40 Transfers of investment property 01.01.18 IFRS 9 Financial instruments 01.01.18 IFRS 15 Revenue from contracts with customers 01.01.18 IFRS 16 Leases 01.01.19 IFRIC 22 Foreign currency transactions and advance consideration 01.01.18 Annual improvements 2014 – 2016 cycle 01.01.17 / 01.01.18

74 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

The amendments to IAS 7 must be applied from 1 January 2017. Framework for the preparation and presentation of the The aim of this amendment is to improve disclosures on changes financial statements in liabilities arising from financing activities. The purpose of the annual financial statements is to present a true IFRS 9, which becomes mandatory from 1 January 2018, should and fair view of the financial situation, financial performance and affect in particular the treatment of non-consolidated investments cash flows of the Group. They are prepared in accordance with the not held for trading. The Group will have to choose between going-concern principle. The conventions for the presentation of recognition of the gains and losses on these shareholdings in the statements are exactly the same from one financial year to the the income statement or in equity. The potential impact on the next in order to ensure comparability, and are only altered if the accounts is being assessed. The other provisions of IFRS 9 (credit change corresponds to the provisions of a standard, interpretation, risk and hedge accounting) should not have any significant impact amendment or annual improvement, or enables more reliable and/ on the Group’s accounts. or more relevant information to be disclosed. When booked, assets and liabilities and income and expenses are only offset as a result IFRS 15 becomes mandatory as of 1 January 2018. The new standard of applying the provisions of a standard, interpretation, amendment replaces IAS 11 (construction contracts) and IAS 18 (revenue from or annual improvement. For assets and liabilities, a distinction is ordinary operating activities) and is based on two principles : firstly, made between long-term and short-term items, depending on sales are recognised when control of the goods or service passes whether their realisation or due date is more or less than 12 months to the customer, and secondly, a measurement is used for the after the balance sheet date. The income and expenses recorded amount of the expected payment. For sales of goods, the analysis in the consolidated income statement are grouped by type. in progress is focusing on the impacts related to the use of some specific incoterms. For service contracts, the completed analysis The consolidated financial statements, which concern a period of specifically examined how the notion of control could influence 12 months, are presented in millions of Swiss francs, which is the the recognition pattern of revenue, depending on whether the functional currency. Due to roundings, the sum of certain figures customer obtains control over the service at a point in time or may not correspond exactly to the totals given in this report. throughout time. The analysis of the various contract types in the The year-end financial statements are prepared on a historical monolithic refractories business, the main business concerned by cost basis, except for some non-current assets and financial this issue, concluded that the requirements of the new standard instruments (derivatives, instruments held for trading, available would not result in any material impact. for sale financial assets, etc.), which are measured at fair value. Financial assets and liabilities hedged at fair value are stated at fair IFRS 16 becomes mandatory as of 1 January 2019. This standard value based on the risk hedged. abolishes for the lessee the current distinction between operating leases, which are recognised as expenses, and finance leases, The accounting policies are applied consistently within the Group which are recognised as tangible assets against a financial debt at all times. to require, for all leases, the recognition of a use right against a financial debt. Application of this standard will have an impact on the Basis of consolidation amount of capital invested, the depreciation expense recognised The consolidated year-end financial statements include all the in operating profit, the interest expense recognised in financial companies under Group control ; companies over which the income, impairment tests, and the level of the commitments Group exercises significant influence or joint control are accounted given with respect to the current operating leases contracts. At for using the equity method. In accordance with the materiality Imerys, the main company affected by this new standard, work principle, certain non-significant companies are not included in was undertaken to define the perimeter of the contracts included the scope of consolidation. These companies are classified under in the scope of the standard and to find IT solutions to manage the “available-for-sale financial assets” and recorded at fair value at 31 volume of identified contracts. December. Intercompany transactions, balances and gains and The adoption of the other new standards in force for the financial losses between Group companies are eliminated in order to reflect years after 2016 should have no significant impact on the the economic reality of the Group’s transactions. consolidated financial statements. (1) Subsidiaries Subsidiaries are companies under Group control. A company is under Group control when the Group : • has power over the subsidiary ; • is exposed to, or is entitled to, variable returns as a result of its connection with the subsidiary ; • is able to exercise power over the subsidiary so as to influence the amount of the returns obtained.

75 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

The Group controls a subsidiary when and only when all of the Foreign currencies above three criteria are met. The Group reassesses its control over In the financial statements of the Company and of each subsidiary, a subsidiary when the facts and circumstances indicate that one associate or joint venture, foreign currency transactions, when first or more of the above three criteria have changed. recognised, are recorded in the functional currency of the company The consolidated financial statements of the subsidiaries are inte- concerned using the exchange rate applicable on the transaction grated into those of the Group as of the date on which control is date. On the balance sheet date, monetary items denominated in first exercised and until the date when control ceases. When a foreign currencies are translated using the rate on the last day of subsidiary is held for sale, its assets, liabilities and income are the financial year (closing rate of exchange). Gains or losses from presented in accordance with IFRS 5. the realisation or translation of foreign currency monetary items A list of the main subsidiaries of the Group is given in note 14. are recognised as gains or losses by the entity concerned in the period during which they occur. (2) Investments in associates and joint ventures On consolidation, the assets and liabilities of the Group’s foreign An associate is a company in which the Group exercises significant operations are translated using the closing rate of exchange. influence by participating in the financial and operating policy Income and expenses are translated using the average rate for decisions of the investee, but which is neither a subsidiary nor a the period. Resulting translation differences are recorded in equity joint arrangement of the Group. Significant influence is presumed under “translation reserve”. These translation differences are to exist when the Company owns, directly or indirectly through its recognised as gains or losses when the company concerned is subsidiaries, 20% or more, but less than 50%, of the voting power. disposed of. Movements of funds in the consolidated cash flow A joint venture is the result of a contractual arrangement whereby statement are translated at the average rates of exchange. the Group and one or more parties agree to run a jointly controlled business operation and have rights to the net assets of that The following rates of exchange were used in the translation of the operation. consolidated financial statements : Investments in associates and joint ventures are included in the consolidated financial statements using the equity accounting Closing rate of exchange Average rate of exchange method as of the date on which significant influence is first exercised 2016 2015 2016 2015 and until the date when significant influence ceases. According to EUR / CHF 1.0739 1.0863 1.0901 1.0672 the equity accounting method, a shareholding is accounted for at cost, which is then adjusted according to the changes that occur Business combinations and goodwill with regard to the Group’s share of the net assets of each associate or joint venture ; this value is, where necessary, reduced by any When the Group acquires an operation or a business, the impairments, which are determined individually for each associate identifiable assets, liabilities and contingent liabilities of the investee or joint venture. are recognised at fair value. The excess cost of the business A list of the main associates of the Group is given in note 14. combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised Changes in the scope of consolidation as goodwill. When this difference, after remeasurement of the values of a subsidiary, associate or joint venture, is negative (i.e. In March 2016, Ergon Capital Partners III (ECP III), a subsidiary of negative goodwill), it is immediately recognised in the income GBL, acquired a stake in Financière Looping S.A.S. statement. Negative goodwill represents the excess of the Group In December 2016, ECP III also acquired an interest in the company share in the net fair value of the identifiable assets, liabilities and Deutsche Intensivpflege. contingent liabilities of a subsidiary, associate or joint venture at In June 2016, ECP III announced that it had entered into an the acquisition date, compared with the acquisition cost. agreement for the sale of De Boeck. Costs directly connected with an acquisition are recognised in (See note 16 for more details of these transactions.) the income statement as and when they are incurred. If there is In H1 2015, Imerys acquired 100% of the voting rights concerning incomplete information about the fair value of assets and liabilities the main industrial minerals businesses of Greek group S&B. As a at the end of the period during which the business combination result of this transaction, GBL’s holding in Imerys was diluted, from is effective, its accounting is determined provisionally. Where 56.5% at end-December 2014 to 53.9% at end-December 2015. necessary, the amounts provisionally recognised are adjusted On 19 May 2015, ECP III acquired an indirect majority stake in during the following year, in order to reflect the new information Golden Goose, an Italian designer of contemporary shoes, clothes obtained about facts or circumstances prevailing at the time of the and accessories. combination which, had they been known at that date, would have Lafarge, which had been accounted for using the equity method, affected the amounts recognised. was reclassified under assets held for sale at 30 June 2015. After the merger between Lafarge and Holcim was finalised in July 2015, the holding in LafargeHolcim was classified under available-for-sale financial assets.

76 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Goodwill is considered to be an asset and is not amortised but Estimated useful lives : tested annually for impairment on the balance sheet date (or an Software 1- 5 years earlier date if there are indications of a goodwill impairment). For Patents, licences and concessions 5 - 40 years the purposes of the impairment test, goodwill is allocated to the Industrial proceduries and other maximum 10 years cost-generating unit (CGU) or CGU group likely to benefit from the business combination synergies. If the recoverable amount of the Greenhouse gases emission rights of the Imerys group are not CGU is less than the carrying amount of the unit, the impairment is amortised. Intangible assets with an indefinite useful life are not first allocated to the goodwill of that unit, then to the other assets amortised but tested annually for impairment on the balance sheet in the unit. Impairments are recognised immediately in the income date (or at an earlier date if there is an indication of impairment). statement and are not subsequently reversed. When the recoverable value of an asset is lower than its carrying Goodwill arising from the acquisition of an associate or joint venture amount, the carrying amount is reduced in order to reflect the is included in the carrying amount of the associate or joint venture. impairment. Goodwill arising from the acquisition of subsidiaries is presented separately on the balance sheet. Mining assets When a subsidiary is sold, the non-amortised part of the goodwill is taken into account in order to determine the profit or loss from Imerys group applies the following methods of recognition and the sale. measurement for mining assets. Prospection expenditures, i.e. the For a business combination, a non-controlling ownership interest costs of seeking new knowledge about the mining potential, may be measured, on a case-by-case basis and at the Group’s technical feasibility and commercial viability of a geographical area discretion, either at fair value or based on the proportionate share of are expensed immediately under current operating income. the net identifiable asset of the acquiree. The increase or decrease Mineral reserves are tangible assets and are initially measured at in the percentage interest in a subsidiary, for transactions with third acquisition cost excluding the subsoil, plus expenses incurred in parties, constitutes a transaction with non-controlling interests establishing the tonnage of ore in the deposit. Overburden works, and is recognised directly in equity without any adjustment to the i.e. removal of the topsoil to access the deposit, also qualify as a carrying amount of the existing goodwill. component of the mineral reserve asset. Their initial measurement includes the production cost and the discounted value of Intangible assets restoration obligations resulting from the damage caused by the construction of these assets. Mineral reserves and overburden An intangible asset is recorded if, and only if, it is probable that the assets form the “mining assets” item in note 13. Mining assets are future economic benefit of the asset will accrue to the Group and subsequently valued at cost less depreciation and any if the cost of that asset can be estimated reliably. Intangible assets accumulated impairment. The methods used for mining asset are recognised as assets over their useful life. They are recognised amortisation are estimates carried out by Imerys. A mineral reserve at acquisition cost less accumulated amortisation and any is amortised on a quantity equal to the geological inventory of the impairment. The amortisation of intangible assets with a defined deposit less discounts relating to the uncertainty of resources. useful life is determined using the straight-line method on the basis Overburden works, which form part of the mineral reserve asset, of the estimated useful life of the intangible asset in question. are depreciated based on the quantity of the reserve that they Costs incurred by the Group’s research teams in order to improve specifically give access to. The subsoil, which is the surface of the the quality and properties of products generally address specific land outside the deposit, is not depreciated because it is not requirements made by customers and are therefore immediately consumed by mineral operations. Mining assets are allocated to recognised as expenses in the income statement. They are CGUs in the same way as other assets of the Imerys group and are capitalised only if they correspond to an industrial process that subject to the same impairment tests. is new or improved, technically feasible and related to future economic benefits. In the absence of an applicable standard or interpretation, Imerys considers greenhouse gas emission rights as intangible assets. Imerys holds these rights solely to justify its emissions volumes and performs no trading transactions, such as forward purchases or sales. Rights received free of charge are recognised for a value of zero, while rights acquired on the market are recognised at acquisition cost. If on the closing date the rights held are inferior to actual emissions, a provision is recognised in the income statement for the value of rights to be acquired, measured at market value. Disposals only relate to excess rights and are recognised in the income statement as asset disposals.

77 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Tangible assets Impairment of assets (excluding goodwill and available-for-sale financial assets) Tangible assets are capitalised if they are controlled under a title deed or a finance lease that transfers the inherent risks and At each balance sheet date, the Group reviews the carrying benefits of ownership. Tangible assets are initially measured at amount of its investments in associates and joint ventures and acquisition or production cost. The initial cost of tangible assets of tangible and intangible assets with a finite useful life in order to held under a finance lease is the lower of the fair value of the asset determine whether there are any indications that the value of these and the discounted value of minimum future payments. The cost assets is impaired. of tangible assets includes the cost of the loans funding their For intangible and tangible assets, if there is any such indication, construction or production when they require a prolonged period the recoverable amount of the asset is estimated in order to of development. Where appropriate, the cost of tangible assets compare it with the carrying amount. The recoverable amount is is reduced by the amount of public subsidies used to fund their the higher of the asset’s net selling price or its value in use. The acquisition or construction. Maintenance and repair expenses are value in use is the discounted value of estimated future cash flows immediately expensed. The cost of tangible assets includes, in expected from the continued use of an asset. When it is not particular for satellite industrial plants built on customer land, the possible to estimate the recoverable amount of an individual asset, discounted value of the obligation to restore or decommission, the Group estimates the recoverable amount of the CGU to which when a current obligation exists. Tangible assets are subsequently the asset belongs. If the recoverable amount of the asset (or CGU) measured at cost less depreciation and any accumulated is considered to be less than its carrying amount, the carrying impairment. The methods used for tangible asset depreciation are amount of the asset (or CGU) is reduced to its recoverable amount. estimates carried out by the Group. This impairment is immediately recognised as an expense. When an impairment recognised during prior periods no longer Estimated useful lives : exists, the impairment recognised on the asset or CGU is immediately Buildings 10 – 50 years recognised as income in order to adjust the value of the asset or Industrial structures 10 – 30 years CGU to an amount corresponding to the new measurement of its Installations in and improvements to buildings recoverable amount. However, after an impairment reversal, the and structures 5 – 15 years carrying amount of an asset or CGU may not be greater than the Facilities, machinery, plant and equipment 5 – 20 years carrying amount it would have had if no impairment had been Vehicles 2 – 5 years recognised for that asset or CGU during prior periods. Other tangible assets 10 – 20 years When there is objective evidence of impairment of an associate or joint venture, it is subjected to an impairment test, in accordance Land is not amortised. with IAS 36 and IAS 28. The recoverable amount of the asset is estimated in order to compare it with the carrying amount Finance leases and operating leases and, where necessary, to recognise an impairment equal to the A finance lease is a contract with transfer to the lessee of practically difference. The recoverable amount is the higher of its fair value all the inherent risks and benefits of the property (see the less net selling price and its value in use. The value in use is the accounting principles relating to tangible assets as well). All other discounted value of estimated expected future cash flows. When leases are defined as operating leases. Finance-leased assets are an impairment recognised in a prior period ceases to exist, the recognised as assets by the Group at the start of the lease at the carrying amount is partly or wholly restored and the impairment lower of discounted value of future minimum payments or fair value. reversal is immediately recognised as income. The debt owed to the lessor in connection with the asset is recorded in the balance sheet as a finance lease debt. Finance charges are recorded in the income statement over the duration of the lease and are allocated to the various periods covered by the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each accounting period. Operating lease payments are recognised as expenses in the income statement on a straight-line basis throughout the term of the lease.

78 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Financial assets • F inancial assets at fair value through profit or loss : financial assets in this category are either held for trading or qualified as Financial assets are recorded on the transaction date and are such on initial recognition. A financial asset is held for trading if initially recognised at fair value, which in most cases corresponds it is acquired with a view to being resold in the short term or if it to their cost of acquisition. is a derivative instrument that does not qualify as a hedging • Available-for-sale financial assets : Available-for-sale financial instrument. The financial assets in this category are subsequently assets include holdings in companies in which the Group measured at fair value and any change in value is recognised exercises no significant influence. The Group is deemed to through profit or loss. have no significant influence if it does not directly or indirectly hold more than 20% of the voting rights. These investments are Other long-term financial and non-financial assets recognised at fair value, based on the market price for listed This item includes long-term advances, loans and deposits (i.e. those shareholdings. Holdings in private equity and other investment with a term of more than 12 months), long-term derivative financial funds are remeasured at fair value, which is determined by the instruments and any other long-term non-financial assets. fund managers based on the investment portfolio. Available-for- sale financial assets are measured at fair value on each balance Inventories sheet date. Changes in fair value are recognised in the revaluation Inventories are capitalised on the date on which the risks, benefits and hedging reserve in equity in “other comprehensive income”, and control are transferred to the Group. When sold, inventories with the exception of prolonged or significant impairment, which are recognised as an expense in the income statement on the is recognised in the income statement. When there is objective same date as the corresponding income. Inventories are measured evidence of impairment (i.e. a drop in fair value of more than at the lower of acquisition cost or net realisable value. When the 30% or over more than one year) for an available-for-sale production rate is less than normal capacity, the fixed costs that asset, it is subjected to an impairment test. An impairment is can be included specifically exclude the proportion corresponding recognised in the income statement for the period if the asset to the under-activity. Inventories with similar features are measured tested is considered to have been impaired. In that case, the using the same method. The methods used in the Group are First impairment amount recognised is the difference between the In First Out (FIFO) and weighted average cost per unit. When the acquisition cost of the asset and its fair value (i.e. share price) on production cost cannot be recovered, it is calculated as the net the balance sheet date. Where an impairment was recognised in realisable value in accordance with the conditions on the balance a prior period, any new decrease in fair value automatically leads sheet date. to further impairment. Impairments recognised in the income statement are not reversed in the income statement during a Trade receivables subsequent period unless the asset is sold. The accumulated A receivable is recognised as a sale of goods when the risks, profit or loss in the revaluation and hedging reserve is recognised benefits and control are transferred. A receivable is recognised for in the income statement when the asset is sold. Assets placed the rendering of a service based on the percentage of the service in this category are generally assets held over the medium and rendered on the balance sheet date. Moreover, both for the sale of long term. goods and the rendering of services, a receivable is only recognised if it is recoverable and the amount of the transaction and the costs • Held-to-maturity investments : on each balance sheet date, necessary to complete it can be measured reliably. The sale of the financial assets delivering fixed inflows, or flows determinable goods and the rendering of services are measured at the fair value on fixed due dates, which the Group clearly intends, and is able, of the transaction, less trade and volume rebates, and discounts to keep to maturity (held-to-maturity investments) are measured for early settlement. When a receivable proves to be wholly or at amortised cost, less any impairment recognised in order to partly uncollectable, it is individually reduced to its recoverable reflect uncollectable amounts. Any rebate or premium for the amount based on the conditions on the balance sheet date. acquisition of a security held to maturity is amortised over the life of the instrument, so that the profit recognised in each period Cash and cash equivalents represents a constant rate of return on the investment. This item comprises cash, demand deposits and short-term • L oans and receivables : loans, trade receivables and other deposits with a maturity of three months or less, and highly liquid unquoted receivables not classified as assets held to maturity investments that are readily convertible into a known amount of are stated in “loans and receivables”. These are revalued at cash and that are subject to an insignificant risk of changes in value. amortised cost less any losses or impairment in the case of sums that cannot be recovered. Revenues are recognised according to the effective interest rate method except for short- term receivables and loans for which the effect is immaterial.

79 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Capital Financial liabilities

(1) Costs of equity issues Financial liabilities includes financial liabilities at fair value through Issuing costs directly attributable to an equity transaction are profit or loss and other financial liabilities. recognised as a deduction from equity. • Financial liabilities at fair value through profit or loss : financial (2) Treasury shares liabilities in this category are thos held for trading or qualified as Treasury shares are presented as a deduction from equity and such on initial recognition. A financial liability is held for trading if recorded as a change in equity. No gain or loss is recognised in it is entered into with a view to being acquired or redeemed in the income statement on the sale, issue or cancellation of treasury the short term or if it is a derivative instrument that does not shares. qualify as a hedging instrument. Financial liabilities in this category are subsequently measured at fair value and any (3) Dividends change in value is recognised through profit or loss ; Pargesa Holding SA dividends are recognised in the consolidated financial statements in the period in which they were approved by • Other financial liabilities : other financial liabilities, including shareholders at the Annual General Meeting. borrowings, are initially measured at the fair value of the amount of cash obtained, less transaction costs. Trade payables and (4) Reserves other financial liabilities are valued at amortised cost. The reserves included in Group equity include the following :

• Capital reserve, which corresponds to the premium paid by the Hybrid instruments – convertible and shareholders at the time of a Company share issue ; exchangeable bonds Convertible bonds (redeemable for the issuer’s shares) or • R evaluation and hedging reserve, which corresponds to the exchangeable bonds (redeemable for shares other than the latent loss or gain on available-for-sale financial assets. The latent issuer’s shares) are considered to be hybrid instruments loss or gain is recognised in the income statement when the comprising a bond component and an option component. On the corresponding asset is sold or when an impairment of an asset date of issue, the fair value of the bond component is estimated on is considered to be permanent. The hedging reserve represents the basis of the prevailing market rates for similar non-convertible unrealised gains and losses on hedging operations ; (or non-exchangeable) bonds. The interest expense on the bond • Translation reserve, which corresponds to the translation component is calculated by applying the interest rate thus differences relating to subsidiaries, associates and joint determined at issue. The difference between this expense and the ventures ; interest effectively paid is added, during each period, to the carrying amount of the bond, so as to reconstitute, on maturity, the • Consolidated reserves, which represent accumulated net redemption value based on the amortised cost method. The profit (this item includes retained earnings, which include difference between the income from the convertible or mandatory retained earnings and any treasury reserve, which exchangeable bond issue and the fair value attributed to the bond are required reserves under the Swiss Code of Obligations). component is representative of the option to convert the debt into (or to exchange it for) other financial instruments. Earnings per share If these other financial instruments are : Basic earnings per share are calculated by dividing the Group’s • e quity instruments of consolidated entities : the optional net profit by the weighted average number of shares outstanding component, which is measured at fair value at issue, is during the period, excluding treasury shares. Diluted earnings per recognised in equity and is not subject to further revaluation ; share are calculated on the weighted average number of shares • o ther financial instruments : the option component, which is outstanding, adjusted for the presumption that the exercise measured at fair value at issue, is remeasured at fair value at the of all share options has a potentially dilutive effect, and taking end of each accounting period. The fluctuation in fair value is into account the impact of the conversion of convertible and recorded on the income statement. (For bonds that are convertible exchangeable bonds. into the issuer’s shares with the possibility of cash redemption, the option component is treated as an exchangeable bond and the option component’s fluctuation in fair value is recorded in the income statement.)

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Derivative financial instruments (2) Cash flow hedging A cash flow hedge makes it possible to hedge the unfavourable The Group uses derivative financial instruments and may conduct variations in cash flow connected with a recognised asset or liability transactions on call and put options. The Group’s operating or a highly probably future transaction, when these variations are companies use derivative financial instruments to reduce their likely to affect the income statement. At each balance sheet date, exposure to various risks, in particular exchange rate, interest rate the effective part of the hedge is recognised in equity and the and energy price risks. Derivatives are recorded on the transaction ineffective part in the income statement. When the transaction is date, i.e. when the hedging contract is entered into, and are recognised, the effective part in equity is recorded in the income booked as current or non-current assets or liabilities depending on statement at the same time as the hedged item is recognised. their maturity and that of the underlying transactions. Derivatives are initially carried at fair value and then revalued at each balance (3) Hedging of net investments in foreign operations sheet date with reference to market conditions. Fair value, which The exchange rate variations generated by the net assets held in includes the derivative’s accrued coupons, is determined through a foreign currencies in the Group’s consolidated operating companies model that uses observable data, i.e. closing date prices provided may be hedged. At each balance sheet date, the effective part of by third parties active in the financial markets (level 2 fair value). the hedge is recognised in equity and the ineffective part in the These valuations are adjusted for the credit risks of counterparties income statement. The effective part in equity is recorded in the and the credit risk of the Group companies concerned. When the income statement only if control over a consolidated company is lost market value of the derivative is positive (derivative asset), its fair or the holding in a company under significant influence is reduced. value includes the counterparty’s probability of default (i.e. credit (4) Financial instruments not qualifying as hedging instruments value adjustment, CVA). When the market value of the derivative A derivative financial instrument that does not qualify as a hedging is negative (derivative liability), its fair value takes account of the instrument is recognised as a trading instrument. Variations in probability of default of the Group companies concerned (i.e. a fair value of financial instruments that do not qualify as hedging debit value adjustment, DVA). These adjustments are determined instruments are recognised immediately in the income statement. using the spreads of bonds on the secondary market, such The ineffective part of operational hedging instruments is booked as those issued by the Group companies concerned and the as operating income or expense. The ineffective part of financial counterparties (level 2 fair value). Only those instruments that hedging instruments is booked as financial income or expense. satisfy hedge accounting criteria are subject to the accounting treatment described below. Fair value Each transaction that qualifies as a hedge is documented with Fair value is the price that would be obtained for the sale of an asset reference to the hedging strategy by identifying the risk hedged, or would be paid for the transfer of a liability in an arm’s length the item hedged, the hedging instrument, the hedging relationship transaction on the valuation date. and the method used to assess the effectiveness of the hedging When the Group records a financial instrument on the balance relationship. The effectiveness of the hedge is assessed at each sheet for the first time, the instrument is measured at fair value. This balance sheet date. Recognition of derivatives used for hedging value corresponds to the value at acquisition including transaction varies according to whether they qualify as fair value hedges, cash costs for the assets and liabilities that are not measured at fair value flow hedges or hedges of a net investment in foreign operations. through profit and loss. After initial recognition, financial assets and Derivatives that do not qualify for hedge accounting are recognised liabilities (including derivatives) are measured at fair value, except in financial income and expenses. for assets recorded at amortised cost. The fair value of listed company equity instruments is measured (1) Fair value hedging on the basis of the stock market prices on the balance sheet When variations in the fair value of a recognised asset or liability or date. When there is no active market for a financial instrument, in an unrecognised firm commitment are liable to affect the income the Group measures fair value using techniques involving existing statement, such variations may be hedged by a fair value hedge. market data. The hedged item and the hedging instrument are remeasured symmetrically against income on each balance sheet date. The impact on the income statement is limited to the ineffective part of the hedge. For fair-value hedging of an available-for-sale financial asset, the change in fair value of the derivative instrument and the available- for-sale financial asset is recognised in equity. For forward sale contracts on available-for-sale financial assets, the fair value of the contract is zero at maturity. A gain is recorded in the income statement on the sale of available-for-sale financial assets (hedged item) on the date the forward sales contract matures.

81 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Provisions Pension costs and direct payments to beneficiaries are booked to the income statement as staff costs, with the exception of Provisions are recognised as soon as the Group has a current (legal contributions and payments relating to restructurings, which are or implicit) obligation resulting from past events that will probably carried under other operating expenses, and contributions to cause an outflow of funds representing economic benefits, the under-funded closed plans with mandatory funding requirements, amount of which can be reliably estimated. which are carried under other financial income and expenses. The amount provisioned corresponds to the best estimate of the The impact of these contributions on the income statements is amounts that must be spent in order to extinguish the current eliminated by releases of provisions, each carried under one of the liability at the balance sheet date. three income statement items. Other items relating to changes in Provisions are recognised as an expense in the income statement, post-employment benefits are booked to the income statement as with the exception of Imerys’ provisions for the decommissioning of staff costs, with the exception of plan amendments, curtailments assets and certain provisions for the restoration of mining locations and settlements relating to a restructuring, which are carried under for which the offset is included in the cost of the related assets, other operating expenses, and the unwinding of liabilities and the notably for industrial building work and mining development work. normalised return of assets, which are carried under other financial Provisions that are expected to be settled within 12 months income and expenses. Administrative fees are carried under staff following the end of the period or that may be settled at any time costs, with the exception of administrative fees relating to under- are not discounted. Provisions that are expected to be settled more funded closed plans with mandatory funding requirements, which than 12 months after the end of the period are discounted. This are booked under other financial income and expenses. Plan treatment applies mainly to provisions at Imerys that are accrued amendments, curtailments and settlements are recognised with respect to environmental obligations to rectify pollution, immediately in the income statement. The actuarial differences obligations to dismantle plants and obligations to restore mine sites and asset limitations of post-employment plans are entirely once extraction is completed. Changes in discounted provisions due recognised in equity, net of asset management fees, with no to a revision of the amount of the obligation, the timing of settlement subsequent reclassification to income. or its discount rate are recognised in the income statement, or for provisions recognised against assets, as an adjustment of the cost Share-based payments of the latter. The unwinding is deducted from other financial income and expense. The fair value of services rendered against the granting of share Provisions for restructuring costs are recognised when the Group options and free shares is measured using a commonly accepted has established a detailed restructuring plan and as soon as this pricing model (Black & Scholes, Monte Carlo) with reference to the has been communicated to the parties concerned. fair value of instruments at the grant date. This measurement takes into consideration the exercise price and the term of instruments, Pension liabilities and similar benefits the underlying share price, the turnover rate of beneficiaries and the volatility of the underlying share. In most cases, the acquisition (1) Defined contribution plans of rights is subject to terms relating to length of service, and the In accordance with regulatory requirements and business practices fair value of services rendered is recognised under “staff costs” in each country, the Group contributes to building up retirement over the vesting periods of rights, against an increase in equity, benefits for its employees by paying, on either a compulsory or and on the basis of the best available estimate concerning the optional basis, contributions to external entities such as pensions number of rights that will be acquired in the future. The turnover funds, insurance companies or financial institutions. These plans rates of beneficiaries are definitively adjusted as vesting periods are known as defined contribution plans and offer no guarantee to are closed. The accounting treatment is the same if, in addition to beneficiaries concerning the amount of future benefits they will terms relating to length of service, the acquisition of rights requires receive. Charges incurred under defined contribution pension plans certain pre-determined economic performance conditions to be are recognised in the income statement under “staff costs” in the accomplished. financial year during which they are due. When the transaction is settled in cash, the Group incurs a liability, (2) Defined benefit plans which is measured at fair value. Until the liability is settled, the Some Group companies (mainly Imerys) guarantee that plan fair value is measured on every balance sheet date, and then on beneficiaries will receive a defined level of future benefits. the settlement date. Changes in fair value are recognised in the Defined benefit liabilities and the annual cost booked to the income income statement for the period. statement are measured using the projected unit credit method and demographic and financial actuarial assumptions. These assumptions are used to establish the entitlements acquired by beneficiaries based on an estimated salary at the retirement date. The provisions (or assets) recognised correspond to the discounted value of the liability, less the fair value of plan assets, which if neccesary may be capped.

82 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Income recognition Income taxes

Sales of assets are recorded when the risks and benefits of Taxes on profit for the financial year comprise current taxes and ownership have been transferred to the buyer. In the case of the deferred taxes. They are recorded in the income statement except delivery of goods, this is generally when the goods have been where they concern items recorded directly in equity, in which delivered and ownership title transferred. case they are also recognised in equity. At Imerys, sales of goods represent the greater part of ordinary Current taxes are the taxes payable on the taxable profit for the income. Their incoterms are multiple because of the specificities financial year, calculated according to the rates of taxation that were of packaging (bulk, powder, paste, slurry, etc.) and freight (sea, rail, adopted at the balance sheet date, as well as adjustments for the road, etc.) and represent the key indicator for the recognition of sales previous financial years. of goods. Reinvoicing the freight cost of the product represents Deferred taxes are calculated according to the variable deferral the majority of rendering of services, and its recognition generally method applied to the timing differences between the carrying derives from the sale of the transported product. Moreover, both amount of the assets and liabilities recorded in the balance sheet for goods and the rendering of services, a receivable is only and their tax base. The following differences are not taken into recognised if it is recoverable and the amount of the transaction account : non-tax-deductible goodwill and initial recognition of and the costs necessary to complete it can be measured reliably. assets and liabilities having no impact on the book and fiscal The sale of goods and the rendering of services are measured at results. Deferred taxes are calculated as a function of how the asset the fair value of the transaction, less trade and volume rebates, and and liability items are expected to be realised or settled, on the discounts for early settlement. basis of the rates of taxation that were adopted or virtually adopted Interest is recognised on a time proportion basis, taking into account at the balance sheet date. Furthermore, deferred tax liabilities the effective yield on the asset. Dividends and interim dividends relating to shareholdings in subsidiaries are not recognised when are recognised as soon as the Group’s right to receive them is the Group is able to control the date on which the timing difference established and it is probable that the Group will benefit from the will be reversed and when it does not expect the timing difference resulting financial flows. to be reversed in the foreseeable future. Deferred tax assets are recognised only to the extent that taxable earnings are liable to be Borrowing costs generated that allow use to be made of the deductible timing differences, tax losses and tax credits. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised and Non-current assets held for sale and incorporated at the acquisition cost of the qualifying asset. A discontinued operations qualifying asset is understood to be an asset that necessarily takes a substantial period of time (more than a year) to be completed When, at the balance sheet date, it is highly probable that non- before it can be used or sold. Borrowing costs can include interest current assets or directly connected groups of assets and liabilities on sums due to banks at sight and on short-term or long-term will be disposed of, they are designated as non-current assets (or borrowings, the amortisation of premiums or reimbursements disposal groups) held for sale. Their disposal is considered highly relating to borrowings, amortisation of ancillary costs incurred in probable if, at the balance sheet date, a plan for selling them at a connection with the arrangement of borrowings, financial expenses reasonable price compared with their fair value has been made in in respect of finance leases and exchange differences arising from order to find a buyer and realise their sale within a maximum period foreign currency borrowings to the extent that they are regarded of one year. Non-current assets (or disposal groups) classed as as an adjustment to interest expenses. being held for sale are valued at the lower of their carrying amount and their fair value less the cost of the sale. They are presented separately in the balance sheet. A discontinued operation is a component of an operation that has been sold or is classified as held for sale. It represents a major and distinct line of business or geographical region, it is part of a single coordinated plan to dispose of a major and distinct line of business or geographical region, or it is a subsidiary exclusively acquired for the purposes of being resold. A component of an entity is understood to mean the operations and cash flows that, from an operating point of view and in terms of financial disclosure, can be clearly distinguished from the rest of the business operations. Discontinued operations are presented in a separate line item in the income statement and the cash flow statement.

83 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Segment reporting Accounting changes, errors, main accounting judgements and estimates Pargesa and GBL are holding companies with investments in companies that have little in common from a commercial or A change in accounting policy is only made if required by the industrial point of view. These investments are acquired, managed provisions of a standard, interpretation or amendment to a and sold with a view to maximising shareholder value. Therefore, standard, or if the change will result in more relevant and reliable with regard to segment reporting, the business segments are based information being disclosed. Changes in accounting policy are on the segregation of the various shareholdings and the absence applied retrospectively, except in the case of transitional measures of connections between them, each significant investment being specific to the standard, or the interpretation or amendment to a regarded as a segment. The operations of the holding companies standard. The financial statements affected by a change in controlled by Pargesa are presented as a separate segment. accounting method are adjusted for all the accounting periods Business segments are also shown by geographical location. The presented, as if the new accounting policy had always been in use. Group’s segment reporting is consistent with the internal reports An error, when discovered, is also adjusted retrospectively. made to the Board of Directors. The segment reporting described The inherent uncertainties of business operations require estimates above is presented in note 2. to be used when preparing the financial statements. Estimates are based on judgements intended to give a reasonable assessment of Risk management the latest reliable information. An estimate is revised to reflect changes in circumstances, new information and the effect of experience. (1) Exchange rate risk Changes in estimates are accounted for prospectively : they affect Each subsidiary is responsible for managing its own exchange the accounting period during which they occurred, and possibly rate risk. Exchange rate risk may be hedged by forward foreign the following periods. exchange contracts, foreign currency swaps and foreign exchange options. These instruments are used to hedge receivables, payables, The main judgements and estimates used in the preparation firm commitments in foreign currencies and net investments in of the financial statements relate in particular to the following foreign entities. assumptions :

(2) Interest rate risk (1) Tangible and intangible assets Interest rate risk management involves fully or partially hedging the Tangible and intangible assets with a definite useful life are fluctuation in debt interest rates either by a fixed rate of interest, by depreciated or amortised using the straight-line method based on interest rate swaps or by options, depending on the individual policy the estimated useful life of the fixed asset in question. (See also laid down by the Board of Directors of each entity based on the the accounting principles on intangible assets, mining assets and needs of that entity. tangible assets.)

(3) Credit risk (2) Impairment Credit risk concerns the risk that third party contractors will not Impairment tests (see also the accounting policies concerning fulfill their commitments towards the Group when they enter into business combinations and goodwill, and impairment of assets) transactions with it. Each shareholding is responsible for managing check whether the carrying amount of assets will be recovered on credit risk, using the specific arrangements most suited to the the basis of the present value of future cash flows. situation. At Imerys, the CGU definitions and impairment indication, as well (4) Liquidity risk as the allocation of assets and goodwill to the CGU, are matters of Liquidity risk is the risk that an entity cannot fulfil its commitments judgement for Imerys senior management. The term and amount to repay debts. Liquidity risk is managed at each level of the Group. of future cash flows and the discount rates used in the calculation of the CGUs’ value in use are estimates carried out by Imerys senior (5) Energy price risk management. Events that trigger an impairment test are matters Imerys’ energy price risk is hedged by forward contracts and by of judgement for Imerys senior management. Such events mainly option instruments. include significant changes in business operations, interest rates, In order to manage risks, the Group may conduct studies on particular technology level, obsolescence and asset yield. An impairment situations. The analysis carried out by Imerys (the main Group test must be carried out immediately on a CGU or individual asset company potentially concerned) in 2016 on the consequences of if there is an adverse change in one of these indicators. the British decision to leave the European Union (Brexit) concluded An analysis of the impairment test conducted for the CGUs is that the potential risks were immaterial. provided in note 12 and an analysis of the impairment recorded for the year is given in note 8.

84 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

(3) Employee benefits For Ontex, in which the Group had a 19.98% stake at year-end, no At 31 December 2016, the net provisions established for employee indicators of significant influence were found. benefits primarily concerned Imerys (see the accounting policies GBL’s representation on the boards of directors of SGS and concerning pension liabilities and similar benefits). The actuarial Umicore, in which the Group held stakes of 16.20% and 17.01% assumptions used to measure the value of defined benefits plans respectively at end-2016, is not sufficient to demonstrate a are estimates determiend by Imerys senior management. The rates significant influence. In addition, the representation on the boards used to discount commitments and calculate the normalised return is limited to the term of office and is not the result of a contractual of the assets on the income statement are set by reference to the or legal right but of a resolution at the annual general meetings. rates of the bonds issued by AA-rated (i.e. high-quality) companies in the main iBoxx GBP Corporate AA GBP and USD indices. In light of these factors, GBL decided to recognise its holdings in An analysis of employee benefits is given in note 23. Ontex, Umicore and SGS as available-for-sale financial assets at 31 December 2016. (4) Provisions The sum recognised for provisions corresponds to the best estimate Events after the balance sheet date of the expenditure required in order to extinguish the current (legal or implicit) liability at the balance sheet date. The environmental Events occurring between the balance sheet date and the date on and rehabilitation provisions set aside by Imerys for its mining and which the financial statements were approved for publication by the manufacturing operations require an estimate of the amounts the Board of Directors only result in an adjustment if they reveal, specify group will have to pay and assumptions about the repayment or confirm conditions already existing on the balance sheet date. schedule and discount rates. Litigation claims involving the Imerys group are assessed by the Imerys Legal Department with the help of lawyers. Finally, provisions relating to restructurings within the Imerys group also require estimates to be made (see accounting policies relating to provisions as well). An analysis of the provisions is presented in note 19.

(5) Holdings At 31 December 2016, shares in LafargeHolcim, SGS, adidas, Pernod Ricard, Umicore, Total, Ontex, ENGIE and Burberry, which are available-for-sale financial assets measured at fair value on the basis of recently observed market prices (the measurement of which is not the result of assumptions or other sources of uncertainty), accounted for 56% of balance sheet assets.

In terms of judgement, GBL analysed the accounting treatment to be used for its holdings in Ontex, Umicore and SGS and whether they should be booked (i) as an investment in an associate (IAS 28), with GBL’s share of Ontex, Umicore and SGS’ income and equity capital being recognised, or (ii) as an available-for-sale financial asset (IAS 39), with the fair value of the holdings being recognised and dividends being recorded as income.

Under IAS 28, a company is presumed not to have a significant influence if it holds less than 20.00%, unless such influence can be clearly demonstrated. Under IAS 28, significant influence is clearly demonstrated if there is (i) representation on the board of directors ; (ii) participation in the policy-making process ; (iii) material transactions between the investor and the investee ; (iv) interchange of managerial personnel ; or (v) provision of essential technical information.

85 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 2 – Segment reporting

The Group’s business is subdivided into two segments : Holdings and Imerys.

The Holdings segment groups together Pargesa and GBL, a company listed on Euronext Brussels, and their wholly owned subsidiaries, together with private equity funds and other investment funds, mainly held by Sienna Capital, which, in turn, is wholly owned by GBL. The main purpose of the group of companies in the Holdings segment is the management of investments. This segment also includes operational subsidiaries consolidated by the funds.

The Imerys segment comprises the Imerys group, which is listed on Euronext Paris and holds leading positions in each of its four business groups :

– Energy Solutions & Specialties : functional additives used in construction (e.g. plastics, paints, etc.) and in paper production, monolithic refractories for high-temperature industries (e.g. steelmaking, casting, petrochemicals, glass, cement, etc.), and mineral specialties for mobile energy, electronics and unconventional oil exploration ;

– Filtration & Performance Additives : mineral agents for the filtration of food liquids, and mineral specialties for plastics, paints, polymers and paper used for construction, consumer goods (e.g. food and drink, magazines, packaging, pharmaceutical products, health and beauty products, etc.), and durable goods (particularly cars) ;

– Ceramic Materials : clay roof tiles, and minerals for tiles, sanitary ware, tableware, technical ceramics, paints, plastics and paper ;

– High Resistance Minerals : fused minerals for abrasives (tools for cutting, grinding and polishing) and minerals for refractories used in high temperature industries (e.g. steelmaking, casting, energy generating, etc.).

2.1 Segment analysis by business

2016 income by segment

CHF millions Holdings Imerys Total Revenue 399.5 4’540.5 4’940.0 Other operating income 5.9 65.2 71.1 Changes in inventory 2.6 (17.2) (14.6) Raw materials, goods intended for resale and consumables (145.4) (1’403.4) (1’548.8) Staff costs (120.3) (979.5) (1’099.8) Depreciation of tangible assets and amortisation of intangible assets (34.0) (253.7) (287.7 ) Other operating expenses (135.6) (1’413.9) (1’549.5) Other operating income and expenses (575.7) (3.7) (579.4) Operating profit (603.0) 534.3 (68.7) Net interest and dividends from available-for-sale financial assets 368.9 – 368.9 Other financial income 91.2 20.4 111.6 Other financial expenses (80.2) (80.2) (160.4) Financial profit 379.9 (59.8) 320.1 Operating and financial profit (223.1) 474.5 251.4 Income from associates and joint ventures 29.4 1.8 31.2 Net profit before tax (193.7) 476.3 282.6 Income taxes (8.2) (155.0) (163.2) Net profit for the period (including minority interests) (201.9) 321.3 119.4

Other information : Impairment of tangible assets – (23.7) (23.7) Impairment (reversal) on investments, operations, goodwill, intangible assets and negative goodwill (1’918.3) (2.7) (1’921.0) Capital gains/losses on investments and operations 1’342.6 (1.0) 1’341.6 Interest income 5.7 13.3 19.0 Interest expense (71.5) (71.0) (142.5)

86 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Balance sheet at 31 December 2016

CHF millions Holdings Imerys Total Long-term assets 14’787.8 4’664.3 19’452.1 - of which investments in associates and joint ventures 255.6 131.5 387.1 Short-term assets 1’781.9 2’565.7 4’3 47.6 Total assets 16’569.7 7’230.0 23’799.7 Long-term liabilities 1’333.9 2’530.9 3’864.8 Short-term liabilities 872.4 1’569.4 2’441.8 Total liabilities 2’206.3 4’100.3 6’306.6

2015 income by segment

CHF millions Holdings Imerys Total Revenue 326.2 4’361.4 4’6 87.6 Other operating income 11.2 58.6 69.8 Changes in inventory (0.3) 17.3 17.0 Raw materials, goods intended for resale and consumables (124.1) (1’404.1) (1’528.2) Staff costs (112.8) (936.7) (1’049.5) Depreciation of tangible assets and amortisation of intangible assets (31.5) (244.5) (276.0) Other operating expenses (120.7) (1’504.4) (1’625.1) Other operating income and expenses 983.3 (163.0) 820.3 Operating profit 931.3 184.6 1’115.9 Net interest and dividends from available-for-sale financial assets 345.2 – 345.2 Other financial income 112.1 21.2 133.3 Other financial expenses (84.2) (80.2) (164.4) Financial profit 373.1 (59.0) 314.1 Operating and financial profit 1’304.4 125.6 1’430.0 Income from associates and joint ventures (86.1) 8.5 ( 77.6) Net profit before tax 1’218.3 134.1 1’352.4 Income taxes (9.6) (60.2) (69.8) Net profit for the period (including minority interests) 1’208.7 73.9 1’282.6

Other information : Impairment of tangible assets (0.9) (124.8) (125.7) Impairment (reversal) on investments, operations, goodwill, intangible assets and negative goodwill 653.2 (165.3) 487.9 Capital gains/losses on investments and operations 330.1 2.3 332.4 Interest income 13.0 9.7 22.7 Interest expense (74.7) (62.8) (137.5)

Balance sheet at 31 December 2015

CHF millions Holdings Imerys Total Long-term assets 14’226.5 4’550.7 18’777.2 - of which investments in associates and joint ventures 221.3 137.1 358.4 Short-term assets 1’657.3 2’150.5 3’8 07.8 Total assets 15’883.8 6’701.2 22’585.0 Long-term liabilities 2’741.0 2’416.2 5’157.2 Short-term liabilities 375.3 1’382.6 1’757.9 Total liabilities 3’116.3 3’798.8 6’915.1

87 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Acquisition cost of segment assets for the period

The following table summarises the costs incurred during the year in acquiring both intangible and tangible segment assets, by business segment.

CHF millions 2016 2015 Imerys 303.8 92.6% 289.1 91.4% Holdings 24.2 7.4% 27.1 8.6% Total 328.0 100.0% 316.2 100.0%

2.2 Segment analysis by geographical location of customers

North Asia, Oceania CHF millions Switzerland Europe America and other Total 2016 – Revenue 45.5 2’434.3 1’246.0 1’214.2 4’940.0 2015 – Revenue 30.8 2’333.1 1’190.6 1’133.1 4’687.6

Revenue comes mainly from Imerys and can be broken down as follows :

CHF millions 2016 2015 Sale of goods 4’348.5 4’092.4 Rendering of services 591.5 595.2 Total 4’940.0 4’687.6

Revenue from ordinary operations resulting from transactions between Imerys and each of its external clients never exceeds 10% of the revenue from the ordinary operations of the Imerys group.

Geographical distribution of assets based on the segment analysis by business sector at 31 December

North Asia, Oceania 2016 CHF millions Switzerland Europe America and other Total Long-term assets 5’781.7 11’279.6 1’388.0 1’002.8 19’452.1 - tangible and intangible assets 64.0 1’266.8 924.3 623.9 2’879.0 - goodwill 9.2 1’549.5 374.4 287.6 2’220.7 - investments in associates and joint ventures – 355.4 14.5 17.2 387.1 - available-for-sale financial assets 5’699.8 8’047.5 – 0.1 13’747.4 Short-term assets 175.5 3’020.0 488.4 663.7 4’347.6 Total assets 5’957.2 14’299.6 1’876.4 1’666.5 23’799.7

North Asia, Oceania 2015 CHF millions Switzerland Europe America and other Total Long-term assets 5’274.8 11’198.8 1’237.5 1’066.1 18’777.2 - tangible and intangible assets 83.8 1’118.2 889.0 658.4 2’749.4 - goodwill 33.5 1’446.3 241.6 322.9 2’044.3 - investments in associates and joint ventures – 321.5 15.8 21.1 358.4 - available-for-sale financial assets 5’151.2 8’252.4 – – 13’403.6 Short-term assets 306.2 2’288.9 506.5 706.2 3’807.8 Total assets 5’581.0 13’487.7 1’744.0 1’772.3 22’585.0

88 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 3 – Changes in working capital

CHF millions 2016 2015 (Increase)/decrease in long-term assets 5.0 6.3 (Increase)/decrease in inventories and trade receivables 32.1 62.6 (Increase)/decrease in financial assets held for trading (421.7) 158.7 (Increase)/decrease in other short-term assets 92.3 21.0 (Increase)/decrease in pension liabilities and similar benefits – (0.2) (Increase)/decrease in provisions (0.7) (2.3) (Increase)/decrease in trade payables and other short-term liabilities (8.3) (69.2) Total (301.3) 176.9

Note 4 – Other operating income and expenses

Capital gains/losses and impairments on investments and operations

CHF millions 2016 2015 Capital gain on disposal of Total shares at GBL 798.0 300.7 Translation difference on the reversal of the Total revaluation reserve at Pargesa 490.0 133.6 Impairment on LafargeHolcim (1’834.1) – Translation difference on the impairment on LafargeHolcim at Pargesa (14.0) – Impairment reversal on Lafarge at GBL – 661.9 Reversal of the Lafarge revaluation and hedging reserve and the translation reserve at GBL – (190.6) Translation difference on the reversal of the Lafarge revaluation and hedging reserve at Pargesa – (1.9) Capital loss on the disposal of ENGIE shares are GBL (see note 5.11) (12.2) – Impairment on ENGIE (67.5) (33.8) Translation difference on the impairment on ENGIE at Pargesa 1.3 30.8 Capital gain on the disposal of Suez shares at GBL – 40.3 Translation difference on the reversal of the Suez revaluation reserve at Pargesa – 16.3 Capital gains realised by private equity funds 80.3 31.7 Impairment on private equity funds at Pargesa and GBL (see notes 5.5 and 8) (1.9) (1.6) Goodwill impairment at Imerys (see notes 8 and 12) (0.5) (126.8) Miscellaneous (18.8) (40.3) Total (579.4) 820.3

In 2016, in addition to the CHF 798.0 million capital gain on the disposal of Total shares at GBL, Pargesa recorded an historical exchange rate gain of CHF 490.0 million as a result of the reversal of the corresponding revaluation reserve related to Total at Pargesa. The impairment on LafargeHolcim of CHF 1’834.1 million represents the impact for Pargesa of the EUR 1’682.5 million impairment recognised by GBL on its holding in LafargeHolcim (see notes 5.5 and 8). The impairment on ENGIE of CHF 67.5 million represents the impact for Pargesa of the impairments amounting to a total of EUR 61.9 million recognised by GBL in 2016 (at 31 March 2016 and at 31 December 2016) on its holding in ENGIE (see notes 5.5 and 8). Capital gains realised by private equity funds included the capital gain of CHF 60.9 million realised by Ergon Capital Parners III on the disposal of De Boeck (De Boeck Education SA, De Boeck Digital SA and Larcier Holding SA) and the capital gain of CHF 15.4 million realised by Sagard II on the disposal of FläktWoods. In 2016, “miscellaneous” included a negative amount of CHF –13.6 million, representing the total cost of the repurchase of bonds exchangeable for ENGIE shares conducted by GBL in 2016 (see note 5.11).

In 2015, in addition to the CHF 300.7 million capital gain on the disposal of Total shares at GBL, Pargesa recorded an historical exchange rate gain of CHF 133.6 million as a result of the reversal of the corresponding revaluation reserve related to Total at Pargesa. Pargesa also recorded an historical exchange rate gain of CHF 16.3 million as a result of the reversal of the Suez revaluation reserve at Pargesa, in addition to the CHF 40.3 million capital gain on the delivery of Suez shares following the partial redemption of the Suez exchangeable bond at GBL.

89 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

The reversal of the impairment on Lafarge at GBL represents : the partial reversal at 30 June 2015 of the impairment previously recorded on Lafarge, which corresponded to the difference in the value of the Lafarge shares held by GBL between (i) the market price on 30 June 2015 and (ii) the last equity-accounted value of the holding, i.e. EUR 403.1 million (CHF 430.2 million) ; and the additional reversal of the impairment previously recorded on Lafarge following the loss of influence in the new LafargeHolcim group since 10 July 2015 and its classification as an available-for-sale financial asset, corresponding to the change in market value of the holding between (i) 30 June 2015 and (ii) 10 July 2015, i.e. EUR 217.1 million (CHF 231.7 million). The total reversal amounted to CHF 661.9 million. The reversal of the Lafarge revaluation and translation reserve followed the LafargeHolcim merger and the recognition in the income statement of the other comprehensive income/(expense) attributable to Lafarge and recorded in the equity of GBL since Lafarge was first accounted for using the equity method on 1 January 2008. This had a negative impact of CHF 192.5 million on net income. In 2015, the impairment of CHF 33.8 million on ENGIE at GBL was partly offset at Pargesa by an historical exchange rate gain of CHF 30.8 million following the reversal of the corresponding revaluation reserve related to ENGIE. In 2015, the line item “miscellaneous” included an impairment on tangible assets at Imerys amounting to CHF 38.5 million.

Note 5 – Financial instruments Financial instrument categories, hierarchy of fair value financial instruments and income from the financial instruments carried through the income statement

Financial asset and liability categories at carrying amount – Comparison between carrying amount and fair value

Financial assets Loans and 2016 2016 and liabilities Derivative receivables Derivative at fair value financial and financial Available- financial through profit instruments liabilities for-sale instruments Total or loss (excluding at amortised financial used as carrying Fair CHF millions (excl. derivatives) hedges) cost assets hedges amount value Available-for-sale financial assets (see note 5.5) – – – 13’747.4 – 13’747.4 13’747.4 Other long-term financial assets (see note 5.6) – 19.1 85.0 – – 104.1 104.1 Trade receivables (see note 5.7) – – 735.7 – – 735.7 735.7 Financial assets held for trading 1’099.3* – – – – 1’099.3 1’099.3 Other short-term financial assets (see note 5.8) – – 118.1 – 16.2 134.3 134.3 Cash and cash equivalents (see note 5.9) – – 1’285.3 – – 1’285.3 1’285.3 Total financial assets 1’099.3 19.1 2’224.1 13’747.4 16.2 17’106.1 17’106.1 Financial debt (see note 5.11) – (18.6)** (2’938.8) – (2’957.4) (3’091.5) Other long-term financial liabilities (see note 5.10) – (12.7) (2.0) (3.3) (18.0) (18.0) Trade payables*** – – (519.0) – (519.0) (519.0) Financial debt due within the year (see note 5.11) – 2.4** (1’366.0) – (1’363.6) (1’407.9) Other short-term financial liabilities (see note 5.12) – (16.3) (14.6) (5.3) (36.2) (36.2) Total financial liabilities – (45.2) (4’840.4) (8.6) (4’894.2) (5’072.6) Total 1’099.3 (26.1) (2’616.3) 13’747.4 7.6 12’211.9 12’033.5

* Including CHF 1’047 million in investments in money market funds at GBL and an equity portfolio of CHF 52 million held by GBL (including the marking to market of ENGIE shares received as a dividend). ** These derivative products are financial-debt-related instruments and are recorded in the balance sheet under “financial debt” and “financial debt due within the year”. *** All trade payables are due in 2017.

90 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Financial assets Loans and 2015 2015 and liabilities Derivative receivables Derivative at fair value financial and financial Available- financial through profit instruments liabilities for-sale instruments Total or loss (excluding at amortised financial used as carrying Fair CHF millions (excl. derivatives) hedges) cost assets hedges amount value Available-for-sale financial assets (see note 5.5) –– – 13’403.6 – 13’403.6 13’403.6 Other long-term financial assets (see note 5.6) – 16.3 75.2 – – 91.5 91.5 Trade receivables (see note 5.7) –– 700.0 – – 700.0 700.0 Financial assets held for trading 715.2 * – – – – 715.2 715.2 Other short-term financial assets (see note 5.8) – 5.4 251.2 – – 256.6 256.6 Cash and cash equivalents (see note 5.9) –– 1’028.3 – – 1’028.3 1’028.3 Total financial assets 715.2 21.7 2’054.7 13’403.6 – 16’195.2 16’195.2 Financial debt (see note 5.11) – (12.8) ** (4’174.1) – (4’186.9) (4’451.4) Other long-term financial liabilities (see note 5.10) – (9.2) (94.6) (0.2) (104.0) (104.0) Trade payables – – (538.8) – (538.8) (538.8) Financial debt due within the year (see note 5.11) – 0.7 ** (662.6) – (661.9) (664.9) Other short-term financial liabilities (see note 5.12) – (8.8) (61.7) (14.6) (85.1) (85.1) Total financial liabilities – (30.1) (5’531.8) (14.8) (5’576.7) (5’844.2) Total 715.2 (8.4) (3’477.1) 13’403.6 (14.8) 10’618.5 10’351.0

* Including CHF 637 million in investments in money market funds at GBL and an equity portfolio of CHF 78 million held by GBL (including the marking to market of ENGIE shares received as a dividend). ** These derivative products are financial-debt-related instruments and are recorded in the balance sheet under “financial debt” and “financial debt due within the year”.

Valuation of financial assets/liabilities in the 3-level fair value hierarchy

(financial assets and liabilities carried at fair value on the closing date)

2016 CHF millions Level 1 Level 2 Level 3 Total Available-for-sale financial assets 13’316.8 – 430.6 13’747.4 Other long-term financial assets – 19.1 – 19.1 Financial assets held for trading 1’099.1 – 0.2 1’099.3 Other short-term financial assets – 16.2 – 16.2 Total financial assets carried at fair value 14’415.9 35.3 430.8 14’882.0 Financial debt – (18.6) – (18.6) Other long-term financial liabilities – (16.0) – (16.0) Financial debt due within the year – 2.4 – 2.4 Other short-term financial liabilities – (21.6) – (21.6) Total financial liabilities carried at fair value – (53.8) – (53.8)

91 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

2015 CHF millions Level 1 Level 2 Level 3 Total Available-for-sale financial assets 13’015.3 – 388.3 13’403.6 Other long-term financial assets – 16.3 – 16.3 Financial assets held for trading 715.0 – 0.2 715.2 Other short-term financial assets – 5.4 – 5.4 Total financial assets carried at fair value 13’730.3 21.7 388.5 14’140.5 Financial debt – (12.8) – (12.8) Other long-term financial liabilities – (9.4) – (9.4) Financial debt due within the year 0.7 – 0.7 Other short-term financial liabilities – (23.4) – (23.4) Total financial liabilities carried at fair value – (44.9) – (44.9)

During 2016 and 2015, there were no significant transfers between the various levels.

The tables above present the valuation of the financial assets/liabilities in a fair value hierarchy that reflects the importance of the data used for the measurements. This fair value hierarchy is as follows :

- Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities ; Level 1 assets are generally publicly listed shares and bonds ; inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) ;

- Level 2 : the assets generally classed as Level 2 are time deposits and derivative products ; liabilities classed at this Level are generally derivatives ; inputs for the asset or liability that are not based on observable market data (unobservable inputs) ;

- Level 3 : the assets classed at Level 3 are generally investments in private equity funds and unlisted shares ; no liability was recognised in this category.

Group financial instruments recorded at fair value are for the large majorityLevel 1 assets.

Not many financial assets are carried atLevel 2 fair value. They mainly include the derivative component of exchangeable or convertible bonds issued by GBL and other derivative instruments at Imerys and GBL.

Group financial instruments recorded at Level 3 are primarily GBL’s investments in private equity and other investment funds. The following methods are used to assess the fair value of Level 3 financial instruments : holdings in private equity and other investment funds are remeasured at fair value, which is determined by the fund managers based on the investment portfolio.

Change in Level 3 available-for-sale financial assets

CHF millions 2016 2015 Balance at 1 January 388.3 149.2 Acquisitions 96.4 271.1 Disposals (110.4) (47.2) Profits and losses recognised in equity 51.3 5.1 Profits and losses recognised in the income statement 3.5 (2.6) Translation and other differences 1.5 12.7 Balance at 31 December 430.6 388.3

In 2016 and 2015, the line item “acquisitions” mainly included additional investments in private equity and other investment funds (see note 5.5).

92 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 5.1 – Nature and extent of risks arising from financial instruments

5.1.1 Credit risks

The Group could potentially be exposed to credit risks because of the nature of its operations. Group credit risks are associated with its cash deposits and with risks incurred by Imerys, whose accounts are consolidated into Pargesa’s.

At Pargesa, cash is generally deposited at sight and in time deposits with banking institutions that are very rigorously selected. In 2015, Pargesa placed the proceeds from the CHF 150 million bond issue conducted at the end of April 2015 and part of available cash in time deposits maturing in 2016. In 2016, Pargesa also placed part of its available cash in time deposits with a maturity of between 12 and 24 months.

At GBL, the risk of default by a counterparty derives for the most part from its deposits, drawdowns on credit lines, hedging transactions, stock market transactions, derivative financial instruments and other transactions conducted with banks or financial intermediaries, including pledging of collateral. GBL seeks to mitigate this risk by diversifying the types of investment and the counterparties and by constantly monitoring their financial situation. At 31 December 2016, cash and cash equivalents were for the most part placed in current accounts at a limited number of top-rated banks and in money market funds selected based on their size, volatility and liquidity. Financial contracts (including ISDAs – International Swaps and Derivatives Association) are reviewed in-house by the legal team.

At Imerys, credit risk relates to the risk that a debtor will not repay its debt on the due date. This risk, which mainly affects the loans and receivables category, is monitored within each business entity. This monitoring is primarily based on the analysis of receivables that are past due and may be supplemented by a more in-depth investigation of solvency. Imerys group entities may hedge credit risk by taking out credit insurance policies or obtaining guarantees. At the balance sheet date, loans and receivables are reduced to their recoverable value through individually measured impairment. At 31 December 2016, the impairment on loans and receivables amounted to CHF 96.7 million (CHF 82.6 million at 31 December 2015). Imerys’ maximum exposure to credit risk before credit insurance and guarantees, i.e. the carrying amount of its receivables, was thus CHF 982.5 million at 31 December 2016 (CHF 938.2 million at 31 December 2015). Details of trade receivables and their age are given in note 5.7.

5.1.2 Liquidity risks

The financial liability repayment schedule groups the financial liabilities at every level of the companies consolidated into the financial statements of the Group, i.e. Pargesa, GBL and Imerys. The repayment schedule of the Group’s financial debts is provided in note 5.11.

Liquidity risk is managed at each level of the Group.

At 31 December 2016, Pargesa had a positive cash position of CHF 119.0 million (CHF 52.8 million at 31 December 2015) as well as short- term bank deposits amounting to CHF 10.0 millions (CHF 190.0 million at 31 December 2015) and a long-term bank deposit of CHF 5.0 million (CHF 0 million at 31 December 2015). Pargesa’s financial liabilities are made up of two bonds : a 1.5% bond maturing in December 2018 for CHF 250 million and a 0.875% bond maturing in April 2024 for CHF 150 million (see note 5.11). Pargesa had no bank debts at 31 December 2016 (CHF 0 million at 31 December 2015). At end-2015, three bond issues were outstanding for a total of CHF 550 million in par value, including a 2.5% bond issue of CHF 150 million that was redeemed at maturity in November 2016. Redemption of the 1.5% and 0.875% bond issues could require refinancing in the market.

At 31 December 2016, GBL had a positive cash position of CHF 296.9 million (CHF 524.6 million at 31 December 2015). Its financial liabilities comprised mainly : the remaining bonds exchangeable for ENGIE shares, issued in 2013 and maturing in 2017 (see note 5.11) for an amount of EUR 306 million in par value ; the bond convertible into GBL shares, issued in 2013 and maturing in 2018 (see note 5.11) for an amount of EUR 428.4 million in par value and redeemable at 105.14% of par value ; and a 4% bond issued in June 2010, maturing in 2017 and amounting to EUR 350 million (see note 5.11). The conversion of the exchangeable and convertible bonds is secured by existing ENGIE shares held in the portfolio, as well as GBL treasury shares. If the exchangeable and convertible bonds have not been converted at maturity, or at the time of the redemption for the 4% bond issue, this would create the need for refinancing on the markets. This could expose GBL to liquidity risk, which is mitigated by the possibility of using various internal and external sources of funding, in particular the possibility for GBL to remit ENGIE and GBL shares to the bondholders (see note 5.11). GBL (excluding private equity) had no bank debts (see note 5.11) at 31 December 2016 or at 31 December 2015. Bank debts relating to private equity amounted to CHF 213.4 million at 31 December 2016 (CHF 203.2 millions at 31 December 2015).

At 31 December 2016, Imerys had a commercial paper programme capped at CHF 1’073.9 million (CHF 869.0 million at 31 December 2015), rated P-2 by Moody’s (same rating at 31 December 2015). At year-end, no notes were outstanding (CHF 377.6 million in notes issued at 31 December 2015). At 31 December 2016, Imerys had banking facilities at its disposal in an amount of CHF 1’992.1 million (CHF 1’548.0 million at 31 December 2015), part of which secured the commercial paper issued (CHF 0 at 31 December 2016 and

93 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

CHF 377.6 million at 31 December 2015). In 2016, Imerys updated its Euro Medium Term Notes (EMTN) programme. The programme represents a total of EUR 2.5 billion (CHF 2.7 billion) and authorises the issue of securities similar to ordinary bonds for terms of between one month and 30 years. At year-end, notes had been issued for a total of CHF 1’671.7 million (CHF 1’035.7 million at 31 December 2015).

For part of its funding, Imerys is required to respect a number of financial ratios. The main restrictive terms and conditions attached to some of its bilateral bank credit facilities and to certain bonds issued in the form of private placements are as follows :

• Assigned objectives : general financing requirements of Imerys • Commitments in terms of financial ratios : depending on the financing contracts concerned, the ratio of consolidated net financial debt to consolidated equity must be less than 1.50 or 1.60 at the end of each half-yearly or yearly consolidated reporting period. At 31 December 2016, the ratio was 0.47 (0.55 at 31 December 2015) ; depending on the financing contracts concerned, the ratio of consolidated net financial debt to consolidated EBITDA over the previous 12 months must be at or below 3.75 at the end of each half-yearly or yearly consolidated reporting period. At 31 December 2016, the ratio was 1.67 (1.99 at 31 December 2015). • Absence of any collateral in favour of the lenders.

Failure to comply with the above obligations in relation to any of the financing contracts concerned could lead to the cancellation of the available funds and a requirement, at the request of one or more of the lenders concerned, to repay the amount of the corresponding financial debt immediately. With the exception of two contracts, the Imerys financing contracts do not provide for cross default should a mandatory financial ratio applicable to one of these contracts not be complied with. At 31 December 2016, Imerys had a Moody’s long- term rating of Baa2 with a stable outlook (same rating at 31 December 2015) and a new rating BBB with a stable outlook granted by S&P .

Financial resources are the main variable at Imerys’ disposal for the adjustment of its financing capacity. This capacity is either financial debt in the form of securities or financing commitments granted by top-rated banking institutions. The medium-term financial resources furnished by the bilateral bank credit facilities can be used during very brief drawdown periods (one to 12 months) while remaining available over longer terms (five years). Imerys’ financial resources stood at EUR 3.9 billion, or CHF 4.2 billion, at 31 December 2016 (EUR 2.9 billion or CHF 3.2 billion at 31 December 2015). Imerys manages its total financial resources by regularly calculating the difference between its total financial resources and the sums it has used in order to determine the available financial resources it has access to.

5.1.3 Market risks

Risk management and hedging activities are described in note 5.2.

Market price sensitivity

The following sensitivity analysis is based on the exposure to the risks of stock market price fluctuation of the main available-for-sale financial assets, i.e. LafargeHolcim, Total, SGS, Pernod Ricard, ENGIE, adidas, Umicore, Ontex and Burberry shares, which, at 31 December 2016, accounted for 96% of total available-for-sale financial assets (97% at 31 December 2015), 77% of total financial assets (80% at 31 December 2015) and 56% of total balance sheet assets (58% at 31 December 2015).

2016 2015 Impact of Impact of Impact of Impact of a rise in a fall in a rise in a fall in stock market stock market stock market stock market CHF millions prices prices prices prices 5 % change in stock market prices Impact on equity (including minority interests) +661.7 –661.7 +650.7 –650.7 Impact on equity attributable to the Group +343.5 –343.5 +338.1 –338.1

The sensitivity analysis essentially covers equity because changes in the value of the main available-for-sale financial assets are recorded directly in equity, except for impairments, which are recognised in the income statement.

The above sensitivity analysis should be viewed with caution, as in some cases a 5% drop in the market price of certain available-for-sale financial assets could lead to an impairment being recognised in the income statement.

94 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Interest rate sensitivity

The exposure of Pargesa’s financial liabilities to interest rate fluctuations is not relevant because Pargesa mainly has long-term, fixed- rate debt. The negative interest rate levied by the Swiss National Bank (SNB) on sight deposits that exceed a given exemption threshold has been set at –0.75% since 15 January 2015. A certain number of banks also introduced a negative interest rate on client assets held in Swiss francs. Pargesa has not, for the moment, been majorly affected by negative interest rates. Pargesa’s cash position (cash and cash equivalents, together with short- and long-term bank deposits) amounted to CHF 134.0 million at 31 December 2016 (CHF 242.8 million at 31 December 2015). The amount paid in negative interest in 2016 stood at CHF 0.4 million. Pargesa paid no negative interest in 2015.

Owing to its financial situation,GBL is exposed to interest rate fluctuations, which impact both its debt and its cash flows. GBL’s total debt is primarily at a fixed rate. Regarding its cash position, GBL has chosen, despite the negative interest rate environment imposed by the European Central Bank, to continue to favor liquidity while limiting counterparty risk. The cash is therefore placed over the very short term in order to remain available at any time so as to ensure flexibility and security for the group in case of investment or the materialisation of external risks. It is monitored closely based on changes in market parameters and internal constraints. GBL continues to pay close attention to the trend in interest rates and to their significance in the overall economic environment.

For Imerys, a 0.5% rise in the interest rates on net financial debt after interest rate derivatives would not affect the 2016 financial profit of the Pargesa Group (CHF +0.2 million in 2015) for the ineffective portion of derivative instruments qualified as cash flow hedges and derivative instruments not eligible for hedge accounting. A 0.5% fall in interest rates would increase the 2016 financial profit of the Pargesa Group by CHF 0.4 million (CHF +0.2 million in 2015). A 0.5% rise in interest rates would have no impact on shareholders’ equity (including minority interests) for the effective portion of derivative instruments qualified as cash flow hedges (no impact in 2015 either). A 0.5% fall in interest rates would have no impact on shareholders’ equity (including minority interests) (no impact in 2015 either).

Energy price sensitivity

Imerys is exposed to risks relating to the price of the types of energy involved in the production cycle of its operations, mainly natural gas and electricity, and coal to a lesser extent. Energy price risk is hedged by forward contracts and by options-based instruments. These instruments qualify as cash flow hedges. According to Imerys’ estimates, a 10% increase in the natural gas and Brent indices at 31 December 2016 would decrease Pargesa Group shareholders’ equity (including minority interests) by CHF 2.4 million (CHF +12.2 million in 2015), while a 10% decrease would reduce equity by CHF 12.2 million (CHF +3.7 million in 2015), in line with the change in the effective portion of the derivative instruments qualified as cash flow hedges. The change in the ineffective part recognised in the income statement would not be significant.

Exchange rate sensitivity

At Group level, Pargesa has practically no operational exposure to transactional exchange rate risks impacting Group income, with the exception of those relating to the operations of Imerys.

Pargesa and GBL are exposed to exchange rate risks that could have an impact on the value of their portfolio, through the listed foreign currency holdings and changes in the dividends received. Pargesa and GBL hedge against the risk relating to announced dividends but remain exposed to exchange rate fluctuations directly affecting their portfolio. Nevertheless, diversification across regions and sectors reduces the risk of exposure to one foreign currency in particular.

Imerys recommends that its operating entities carry out their transactions in their functional currencies as far as possible. A 10% increase in the exchange rates for all the foreign currencies of the derivative instruments in the Imerys portfolio at 31 December 2016 would reduce Pargesa Group shareholders’ equity (including minority interests) by CHF 9.2 million (CHF +7.9 million at 31 December 2015), while a 10% decrease would increase equity by CHF 8.7 million (CHF +20.6 million at 31 December 2015), in line with the change in the effective part of the derivative instruments qualifying as cash flow hedges

A 10% increase in the exchange rates for all the foreign currencies of the derivative instruments in the Imerys portfolio at 31 December 2016 would decrease Pargesa Group income (including minority interests) by CHF 3.4 million in 2016 (CHF –2.5 million in 2015), while a 10% decrease would reduce income by CHF 2.4 million (CHF –3.0 million in 2015), in line with the change in the ineffective part of the derivative instruments qualifying as cash flow hedges and in the fair value of the derivative instruments not eligible for hedge accounting.

GBL and Imerys’ results are expressed in euros and consolidated in Swiss francs at the average conversion rate for the financial year, which produces a translation risk. A 1% change in the EUR/CHF exchange rate would have an impact of CHF 3.4 million (CHF 11.3 million in 2015) on the 2016 consolidated income of Pargesa Group (including minority interests).

95 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

As indicated in note 5.2, Pargesa is a company whose direct investments are essentially represented by its shareholdings in GBL, whose accounting currency is the euro, whereas the functional currency for the Pargesa financial statements is the Swiss franc. The impact on balance sheet items of fluctuations in the EUR/CHF exchange rate is recorded in the translation reserve in equity, and thus has no impact on earnings. A 1% change in the EUR/CHF exchange rate would have an impact on equity (including minority interests) of approximately CHF 167 million in the 2016 financial statements of Pargesa Group (CHF 151 million in 2015).

The impact on Imerys of fluctuations between the euro and the currencies (such as the US dollar and pound sterling) involved in the translation of the financial statements of the subsidiaries of Imerys, is also recorded in the “translation reserve” in equity, in the Pargesa Group financial statements

Note 5.2 – Derivative financial instruments

5.2.1 Risk management and hedging

In view of the specific nature of each of the companies consolidated in the Group’s financial statements, and their very different operations – Pargesa and GBL have financial businesses, while Imerys is industrial – risk is managed independently by each entity.

Pargesa is a company whose direct investments are essentially represented by its shareholding in GBL, a listed company whose accounting currency is the euro, whereas the functional currency for the Pargesa financial statements is the Swiss franc. Pargesa’s exposure to currency fluctuations between the euro and the Swiss franc is not hedged on the balance sheet or the income statement. Pargesa does not have substantial exposure to interest rate risks, as at 31 December 2016 its financial debts mainly comprised two bond issues for which the interest rates are fixed. In addition, Pargesa’s cash position has not, for the moment, been majorly affected by the introduction of negative interest rates on the Swiss franc.

GBL is a holding company whose accounts are presented in euros, which is also the currency in which its assets and liabilities are denominated. The assets on GBL’s balance sheet are primarily shareholdings with the euro as the reference currency (excluding SGS, which is in Swiss francs, and Burberry, which is listed in pound sterling), almost all of which are listed on the stock exchange, and the rest is cash. Assets are financed for the most part by equity, but also by debt. GBL uses financial instruments and derivatives. These operations are carried out within the framework of well-established documentation and pre-defined packages. They are subject to precise and appropriate prior analyses, systematic monitoring and active management when necessary. GBL has also put in place strict rules in terms of appropriate segregation of duties and internal approval processes. Every financial transaction requires two signatures and is systematically reviewed by the finance and legal departments.

Imerys manages its own risks relating to operational transactions (i.e. transactional exchange rate risks and energy price risks), foreign investments (i.e. risks relating to the translation of financial statements) and financing (i.e. transactional exchange rate risks and interest rate risks). Derivatives are only used to hedge certain risks. Imerys has no speculative positions. Derivatives are traded centrally by Imerys, on over-the-counter markets and with top-rated financial institutions. Imerys does not allow companies within the group to subscribe directly to derivative instruments outside the Imerys group. Imerys hedges part of its net investments in its foreign operations by borrowings specifically allocated to their long-term financing and through the proportion of its financial debt denominated in currencies other than the euro. The translation gains or losses generated on these loans and borrowings, which qualify as hedges of net investments in foreign operations, are recognised in equity in order to eliminate, to a certain extent, the translation gains or losses on the net investments hedged. On that basis, Imerys carried out currency exchange swaps for a notional amount revalued at 31 December 2016 at EUR 219.6 million (CHF 235.8 million) and EUR 172.4 million (CHF 187.3 million) at 31 December 2015. Where necessary, transactional exchange rate risk at Imerys may be hedged in isolated cases by forward foreign exchange contracts, foreign currency swaps and foreign exchange options. These instruments are used to hedge highly probable budgetary flows. The relevant hedges qualify as cash flow hedges.

Interest rate risk is managed, in relation to the Imerys group’s consolidated net financial debt, with the aim of guaranteeing its cost in the medium term. Imerys group’s policy is to obtain financing mainly in euros, at fixed rates. Fixed-rate medium-term bonds are changed into variable-rate bonds through interest-rate swaps. Imerys holds a number of derivative instruments intended to hedge part of its variable-rate debt. Those instruments include interest rate swaps and options, including caps, floors, swaptions, and forward contracts. In view of the trend in interest rates expected in 2016, Imerys established a fixed rate of interest for some of its future financial debt with a variety of maturities.

96 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

To deal with energy price risk, Imerys has diversified in terms of its geographical locations and sources of supply. Energy price risk is the risk that a payable cash flow for an energy purchase is likely to be decreased as a result of a rise in the market price. Imerys endeavours to pass on energy price rises in the selling prices of its products. In addition, management of natural gas price risk, both in Europe and in the United States, is centralised, with Imerys group’s Treasury responsible for establishing the necessary framework and resources to apply a common management policy including, among other things, appropriate use of the financial instruments available on these markets. Energy price risk is hedged by forward contracts and options-based instruments. At 31 December 2016, Imerys had various hedging transactions for periods not exceeding one year in order to manage energy price risk.

Note 5.2.2 – Derivative financial instruments

Fair value of short-term and long-term derivative financial instruments

2016 2015 2016 2015 2016 2015 CHF millions Asset positions Liability positions Net positions Short-term instruments 16.2 (1) 5.5 (1) (21.6) (3) (23.4) (3) (5.4) (17.9) Long-term instruments 19.1 (2) 16.4 (2) (16.0) (4) (92.3) (4) 3.1 (75.9) Total 35.3 21.9 (37.6) (115.7) (2.3) (93.8)

(1) See note 5.8. (2) See note 5.6. (3) See note 5.12. (4) See note 5.10.

Notional amounts of short-term and long-term derivative financial instruments 2016 2015 2016 2015 CHF millions Asset positions Liability positions 823.1 832.2 2’475.2 2’905.8

Maturities of derivative financial instruments at 31 December 2016 by notional amount

Less than Between Between More than CHF millions 1 year 1 and 2 years 3 and 5 years 5 years 1’410.5 644.1 4.3 –

Change in net balance sheet position of derivative financial instruments CHF millions 2016 2015 Net position at 1 January (93.8) (250.3) Increase/decrease recognised in the income statement 64.0 132.6 Increase/decrease recognised in equity 27.5 (2.2) Purchases, business combinations, sales, transfers and other – 26.1 Net position at 31 December (2.3) (93.8)

Maturity of derivative financial instruments

Less than Between CHF millions 1 year 1 and 2 years Total Maturities of derivative financial instruments associated with cash flow hedging at 31 December 2016 8.1 (0.5) 7.6 Maturities of other derivative financial instruments at 31 December 2016 (9.9) – (9.9) Total (1.8) (0.5) (2.3)

97 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

5.2.3 Hedging

Hedging operations are principally undertaken by the Imerys group.

Fair value hedging

At 31 December 2016, the Imerys group held interest rate swaps intended to hedge its exposure to changes in the fair value of its various borrowings. These instruments qualify as fair value hedges. They hedge the risk of changes in the risk-free rate of interest rather than the interest rate spread corresponding to the credit risk of the Imerys group. The hedged borrowings and derivative instruments have the same features.

Notional amount in millions Borrowing currency in currency in CHF Fixed rate received Variable rate paid JPY 7’000 60.9 2.39 % 6-month JPY Libor

The fair value of asset hedging instruments amounted to CHF 0 million at 31 December 2016 (CHF 0 million at 31 December 2015) and that of liability hedging instruments was CHF 18.6 million (CHF 14.6 million at 31 December 2015). In 2016, the income recognised on the effective portion of hedging instruments amounted to CHF 0 million (CHF 0 million in 2015). The change in fair value of the items hedged was CHF 0 million in 2016 (CHF 0 million in 2015).

Cash flow hedging

As part of its policy for managing exchange rate, interest rate and energy price risks, Imerys holds derivative instruments to hedge certain future purchases and sales in foreign currencies, part of its floating-rate debt and part of its future energy consumption in the United States, the United Kingdom and France. The cash flow hedges recognised by Imerys in equity in 2016 amounted to EUR +19.1 million or CHF +20.5 million (EUR –36.5 million or CHF –39.6 million in 2015). The amount carried through the income statement was EUR +6.7 million or CHF +7.3 million in 2016 (EUR +34.6 million or CHF +37.5 million in 2015). In 2016, the ineffective portion of cash flow hedges recognised in the income statement amounted to CHF +1.6 million (CHF –1.1 million in 2015). The effective portion amounted to CHF –7.3 million in 2016 (CHF –36.9 million in 2015).

Hedging of net investments in foreign operations

Imerys hedges part of its net investments in its foreign operations by borrowings specifically allocated to their long-term financing and through the proportion of its financial debt denominated in foreign currencies. The translation gains or losses generated on these loans and borrowings, which qualify as hedges of net investments in foreign operations, are recognised in equity in order to eliminate, to a certain extent, the translation gains or losses on the net investments hedged. At 31 December 2016, the main borrowings and exchange rate swaps hedging net investments in foreign operations were as follows : USD 447.2 million (CHF 455.6 million), SGD 5.5 million (CHF 3.9 million), CHF 47.5 million, GBP 2.2 million (CHF 2.8 million) and ZAR 558.6 million (CHF 41.4 million). At 31 December 2015, the main borrowings and exchange rate swaps hedging net investments in foreign operations were as follows : USD 397.9 million (CHF 397.8 million), SGD 5.5 million (CHF 3.9 million), CHF 47.4 million and GBP 20.0 million (CHF 29.5 million) and ZAR 152.2 million (CHF 9.7 million).

Exchange rate swap sensitivity (used to hedge net investments in foreign operations) to interest rate variation

A 10% increase in the exchange rates for the foreign currencies of the exchange rate swaps in the Imerys portfolio at 31 December 2016 would lead to a CHF 51.7 million increase (CHF +42.5 million in 2015) in Group equity (including minority interests), while a 10% decrease would lead to a CHF 53.4 million decrease (CHF –49.9 million in 2015). A 10% change would have no impact on Group income (including minority interests).

The impact of these changes is measured on equity for the effective part of derivative instruments qualified as hedges of net investments in foreign operations and on income for the ineffective part of derivative instruments qualified as hedges of net investments in foreign operations and derivative instruments not eligible for hedge accounting.

In addition, in Q4 2016, GBL sold 4.5 million ENGIE shares through forward contacts, for a net amount of EUR 55 million. At maturity in January 2017, the transactions did not generate any income. They are subject to hedge accounting.

98 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 5.3 – Dividends and net interest from available-for-sale financial assets

CHF millions 2016 2015 LafargeHolcim dividend 84.9 – SGS dividend 79.5 71.6 Total dividend 53.5 164.7 ENGIE dividend 50.7 49.6 Pernod Ricard dividend 40.8 38.2 Umicore dividend 27.0 16.3 adidas dividend 20.5 3.2 Burberry dividend 6.3 – Ontex dividend 5.7 1.1 Suez dividend – 0.5 Total 368.9 345.2

Note 5.4 – Other financial income and expenses

Other financial income

CHF millions 2016 2015 Miscellaneous interest income 19.0 22.7 Gains (losses) on financial trading and derivatives 83.7 98.7 Net translation differences 8.9 11.9 Total 111.6 133.3

Other financial expenses

CHF millions 2016 2015 Interest expense (142.5) (137.5) Other financial expenses (17.9) (26.9) Total (160.4) (164.4)

The income statement line items “other financial income” and “other financial expenses” are mainly comprised of interest income and expenses on financial trading and derivatives.

At 31 December 2016, other financial income and expenses included the positive impact of CHF +78.6 million of GBL’s marking to market of derivative instruments embedded in the bonds exchangeable for ENGIE shares or convertible into GBL shares (non-cash impact of CHF +93.5 million in 2015, which in addition included the impact of the marking to market of the derivative instruments embedded in the remaining bonds exchangeable for Suez shares which matured in 2015). This non-cash gain of CHF 78.6 million (non-cash gain of CHF 93.5 million in 2015) was a result of the change in value of the call options on shares implicitly embedded in exchangeable and convertible bonds issued by GBL in 2013. Under IFRS, changes in the fair value of these derivative instruments must be recorded in the income statement, while changes in the value of the corresponding Suez and ENGIE shares held by GBL to cover the exchangeable bonds are recorded directly in equity and do not appear in the income statement, except in the event of impairment or if the shares are sold. Treasury shares held by GBL to cover the convertible bonds are deducted from equity in the consolidated accounts.

Following the redemption of the bonds exchangeable for Suez shares (see note 5.11), other financial income and expenses in 2015 also included the cancellation, on a pro-rata basis, of the derivative embedded in the exchangeable bonds and recorded as a liability on the balance sheet. This produced a book-entry gain of CHF 17.1 million in the income statement. The cancellation of the debt, which was also recognised as a liability on the balance sheet, resulted in a charge of CHF –32.2 million, which was also included under other financial income and expenses.

99 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 5.5 – Available-for-sale financial assets

Fair value at Disposals at Change (Impairment)/ Fair value at 1 January acquisition in fair impairment Translation 31 December CHF millions 2016 Acquisitions price value reversal differences Other 2016 LafargeHolcim * 2’905.0 – – 2’003.3 (1’834.1) (5.9) – 3’068.3 SGS 2’245.2 184.6 – 223.7 – (28.4) – 2’625.1 adidas 966.8 659.4 – 924.8 – (20.8) – 2’530.2 Pernod Ricard 2’273.5 – – (48.0) – (25.9) – 2’199.6 Umicore 782.2 15.7 – 318.9 – (9.2) – 1’107.6 Total 2’674.9 – (1’072.2) (712.9) – (14.6) (27.9) 847.3 Ontex 196.1 290.9 – (26.7) – (6.6) – 453.7 Burberry 1.7 222.4 (2.2) 26.5 – (3.2) 1.7 246.9 ENGIE 969.5 – (1’027.0) (110.7) 324.2 (0.6) – 155.4 Private equity funds 373.1 89.8 (110.4) 51.4 4.8 (3.9) 4.8 409.6 Other 15.6 89.6 – 2.2 (1.6) (1.6) (0.5) 103.7 Total 13’403.6 1’552.4 (2’211.8) 2’652.5 (1’506.7) (120.7) (21.9) 13’747.4

Fair value at Disposals at Change (Impairment)/ Fair value at 1 January acquisition in fair impairment Translation 31 December CHF millions 2015 Acquisitions price value reversal differences Other 2015 LafargeHolcim * – – – (1’229.5) – 140.8 3’993.7 2’905.0 SGS 2’399.5 2.9 – 74.8 – (232.0) – 2’245.2 adidas 101.9 608.4 – 255.5 – 1.0 – 966.8 Pernod Ricard 2’207.3 – – 279.6 – (213.4) – 2’273.5 Umicore 557.4 176.9 – 95.9 – (50.7) 2.7 782.2 Total 3’669.8 – (292.0) (340.3) – (360.1) (2.5) 2’674.9 Ontex – 153.0 – 40.4 – 2.7 – 196.1 Burberry – 1.7 – – – – – 1.7 ENGIE 1’277.4 – – (149.9) (33.8) (124.2) – 969.5 Suez 89.6 – (54.5) (25.4) – (9.7) – – Private equity funds 130.3 267.1 (41.8) 4.6 (1.1) (6.3) 20.3 373.1 Other 18.9 4.1 (5.2) 0.2 (1.5) (0.9) – 15.6 Total 10’452.1 1’214.1 (393.5) (994.1) (36.4) (852.8) 4’014.2 13’403.6

* Since the merger between Lafarge and Holcim, the holding in LafargeHolcim has been classed as an available-for-sale financial asset ; the holding in Lafarge was previously classed as an associate.

LafargeHolcim, SGS, adidas, Pernod Ricard, Umicore, Total, Ontex, Burberry and ENGIE are all held by GBL. These shares, which are all listed in euros (with the exception of SGS, which is listed in Swiss francs, LafargeHolcim, which is listed in Swiss francs and euros, and Burberry, which is listed in pound sterling), are shown in the financial statements at fair value, which corresponds to the value in Swiss francs of their market price on the reference date. For LafargeHolcim, the fair value is based on the market price in euros converted into Swiss francs. Private equity funds include the Group’s investments in the funds Sagard, Sagard II, Sagard 3, Mérieux Participations I, BDT Capital Partners II and PrimeStone. These funds are recorded in the accounts at their fair value on the reference date.

Acquisitions in 2016 amounting to CHF 1’552.4 million included GBL’s additional purchases of adidas shares (at 31 December 2016, GBL held a 7.5% stake in adidas), its additional purchases of Ontex shares (at 31 December 2016, GBL held a 19.98% stake in Ontex), and additional purchases of SGS shares (at 31 December 2016, GBL held a 16.2% stake in SGS). Disposals at acquisition price amounted to CHF 2’211.8 million in 2016 and included the disposals of 1.8% of Total’s capital by GBL (at 31 December 2016, GBL still held 0.7% of Total’s capital) and disposals of 1.8% of ENGIE’s capital (at 31 December 2016, GBL still held 0.6% of ENGIE’s capital).

100 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Furthermore, in Q4 2016, GBL entered into forward contracts maturing in January 2017 for the sale of 4.5 million ENGIE shares, representing 0.2% of ENGIE’s capital, for an amount of EUR 55 million (CHF 59 million). GBL applied hedge accounting rules to these forward sales contracts. Neither a gain nor a loss will be recorded in the 2017 income statement. Acquisitions in 2016 also included the purchase of Burberry shares, with GBL holding 2.95% of Burberry’s capital at 31 December 2016 (see note 27).

The impairment on LafargeHolcim of CHF 1’834.1 million represents the impact for Pargesa of the EUR 1’682.5 million impairments recognised by GBL on its holding in LafargeHolcim at 31 March and 30 June 2016, in accordance with IFRS. At 31 March 2016, the LafargeHolcim share price was EUR 41.28, which was more than 30% below its book value of EUR 66.49. It had therefore crossed the threshold that marks a “significant” decline in share price, leading to an impairment being recognised. At 30 June 2016, the LafargeHolcim share price was EUR 37.10, a decline on the 31 March figure, leading to a further impairment. In 2016, the column “(impairment)/ impairment reversals” included the further impairment of EUR 61.9 million (CHF 67.5 million) recognised on the holding in ENGIE in order to adjust the carrying amount of these shares (EUR 14.44 per share at end-2015) to their market value at 31 March 2016 (EUR 13.64 per share) and then at 31 December 2016 (EUR 12.12 per share). The “(impairment)/impairment reversals” on ENGIE included the impairment reversal of EUR 391.7 million recorded on the shares sold in 2016. The impairments reversed included part of the impairment recorded at 31 March 2016, together with earlier impairments. The impairment reversal of CHF 391.7 million was offset by a loss in the same amount.

In 2016, the “other” column for Total included the dividend announced but not yet paid, which was booked as income. Interim dividends are booked on the date they are announced by the board of directors and not on the effective payment date. In Q4 2016, GBL booked an amount of CHF 9.6 million relating to the third 2016 interim dividend, which was announced in October 2016 but payable in 2017. The reversal of CHF –37.5 million on the dividend booked in Q4 2015 and paid in 2016 was also included.

The amount of CHF 3’993.7 million in the LafargeHolcim line in 2015 represents the reclassification of Lafarge shares, which were classed as “investments in associates and joint ventures” until 30 June 2015, as “assets held for sale” from 30 June 2015 until 10 July 2015 and as “available-for-sale financial assets” from 10 July 2015, when the merger between Lafarge and Holcim was finalized.

Acquisitions in 2015 amounting to CHF 1’214.1 million included GBL’s further purchases of Umicore shares (at 31 December 2015, GBL held 16.6% of Umicore’s capital and voting rights) and purchases of shares in adidas (GBL held 4.7% of adidas at 31 December 2015). In 2015, GBL also acquired a 7.6% stake in the capital of listed Belgian group Ontex. Acquisitions during the period also included an investment of EUR 150 million (CHF 160.1 million) in PrimeStone, a fund whose strategy consists of making medium- to long-term investments in medium-sized listed companies in Europe.

Disposals at acquisition price amounting to CHF 393.5 million in 2015 included GBL’s disposal of 0.5% of Total’s share capital and the delivery of Suez shares by GBL following the redemption of the Suez exchangeable bond.

In 2015, (impairment)/impairment reversals included the further impairment of EUR 31.7 million (CHF 33.8 million) recognised on the holding in ENGIE in order to adjust the book value of these shares (EUR 15.02 per share at end-2014) to their market value at 30 September 2015 (EUR 14.44 per share).

101 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 5.6 – Other long-term financial and non-financial assets

2016 2015 CHF millions Carrying amount Carrying amount Other long-term financial assets Derivative financial instruments 19.1 16.4 Long-term advances, loans and deposits 31.3 23.5 Other long-term financial assets 53.7 51.6 Total other long-term financial assets 104.1 91.5 Other long-term non-financial assets Other long-term non-financial assets 7.9 10.3 Total other long-term non-financial assets 7.9 10.3 Total other long-term assets 112.0 101.8

Other long-term assets are shown net of an impairment on Imerys assets of CHF 63.0 million at 31 December 2016 (CHF 50.4 million at 31 December 2015). The allocation for 2016 was CHF 5.8 million (CHF 0.6 million in 2015).

Repayment schedule of other long-term financial assets at the end of 2016

Between More than CHF millions 1 and 2 years 5 years Total Other long-term financial assets 74.9 29.2 104.1

Note 5.7 – Trade receivables

2016 2015 CHF millions Carrying amount Carrying amount Trade receivables 775.4 736.6 Receivables 5.9 5.6 Impairment on trade receivables (45.6) (42.2) Total 735.7 700.0

Trade receivables essentially relate to Imerys. A non-recourse factoring agreement for an indeterminate period and with an authorised limit of EUR 125 million was signed by Imerys in 2009. Consequently, at 31 December 2016, CHF 44.6 million (CHF 47.9 million au 31 December 2015) of receivables had been sold and hived off, the risks and benefits associated with the receivables having been transferred to the factoring bank.

Details of impairment on trade receivables

CHF millions 2016 2015 Impairment at 1 January (42.2) (35.4) Impairment for the year (12.4) (18.5) Impairment reversals 8.1 9.1 Translation and other differences 0.9 2.6 Impairment at 31 December (45.6) (42.2)

Trade receivables are not interest bearing and generally have a due date of between 30 and 90 days. On the balance sheet date, certain trade receivables (detailed below) may have reached the due date without having been depreciated, for example where they are hedged by a credit insurance agreement or by a guarantee.

102 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Age of trade receivables due and not depreciated

CHF millions 2016 2015 Late by no more than 1 month 79.6 58.5 Late by 1 to 3 months 29.0 26.7 Late by more than 3 months 27.6 30.4 Total trade receivables due and not depreciated 136.2 115.6

Trade receivables not yet due and trade receivables due and depreciated 599.5 584.4 Total trade receivables 735.7 700.0

Note 5.8 – Other short-term financial and non-financial assets

2016 2015 CHF millions Carrying amount Carrying amount Other short-term financial assets Derivative financial instruments 16.2 5.5 Bank deposits with a maturity of between 3 months and 1 year 10.0 190.0 Other short-term financial assets 108.1 61.1 Total other short-term financial assets 134.3 256.6 Other short-term non-financial assets Recoverable income tax 134.0 117.1 Other recoverable taxes and VAT 69.5 69.7 Deferred and advanced expenses 24.6 27.4 Other short-term non-financial assets 60.3 50.4 Total other short-term non-financial assets 288.4 264.6 Total other short-term assets 422.7 521.2

Other short-term assets are shown net of an impairment on Imerys assets of CHF 1.5 million at 31 December 2016 (CHF 1.4 million at 31 December 2015). The allocation for 2016 was CHF 0.8 million (CHF 0.4 million in 2015). The line “other short-term financial assets” includes the receivables on Total shares at GBL for an amount of CHF 21.9 million in 2016 and CHF 51.2 million in 2015, as well as receivables on private equity funds at GBL of CHF 76 million.

Note 5.9 – Cash and cash equivalents

2016 2015 CHF millions Carrying amount Carrying amount Cash in bank 935.1 8 47.5 Short-term bank deposits and other cash equivalents with a term of less than 3 months 350.2 180.8 Total 1’285.3 1’028.3

Note 5.10 – Other long-term financial and non-financial liabilities

2016 2015 CHF millions Carrying amount Carrying amount Other long-term financial liabilities Derivative financial instruments 16.0 92.3 Finance lease liabilities 2.0 2.4 Other long-term financial liabilities – 9.3 Total other long-term financial liabilities 18.0 104.0 Other long-term non-financial liabilities Other long-term non-financial liabilities 51.8 46.1 Total other long-term non-financial liabilities 51.8 46.1 Total other long-term liabilities 69.8 150.1

In 2016 and 2015, “derivative financial instruments” mainly represented the option component of GBL exchangeable and convertible bonds (see notes 5.4 and 5.11). In 2016 and 2015, “other long-term non-financial liabilities” primarily consisted of debt on tangible fixed assets at Imerys.

103 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 5.11 – Financial debt

Long-term financial debt

2016 2015 CHF millions Carrying amount Carrying amount Long-term bank borrowings 214.2 199.7 Pargesa bonds 399.8 399.6 GBL bond convertible into GBL shares 466.3 462.0 GBL bond* – 380.2 GBL bond exchangeable for ENGIE shares* – 1’076.7 Other bonds and similar 1’715.1 1’658.2 Other long-term financial debt 162.0 10.5 Total 2’957.4 4’186.9

* The GBL bond maturing in December 2017 and the outstanding bonds exchangeable for ENGIE shares maturing in February 2017 were reclassified in 2016 under “financial debt due within the year” (see also “GBL bond” and “GBL bond exchangeable for ENGIE shares” on the next pages).

Group debt is at fixed or variable rates depending on the individual case. With variable-rate debt, the various entities can hedge their interest rate risk by taking out interest rate swap contracts (see note 5.2). In 2016, “other long-term financial debt” mainly included the debt of the operating subsidiaries of Ergon Capital Partners III, itself a subsidiary of GBL.

Pargesa bonds

CHF millions 2016 2015 Par Interest rate Carrying Carrying Issuer value nominal effective Term amount amount Pargesa Holding SA – 2.50% 2.68% 15.11.2010-15.11.2016 – 144.8 Pargesa Holding SA 250.0 1.50% 1.62% 10.12.2013-10.12.2018 249.5 249.3 Pargesa Holding SA 150.0 0.875% 0.859% 24.04.2015-24.04.2024 150.3 150.3 Total 400.0 399.8 544.4

In November 2010, Pargesa issued stock-exchange-listed, CHF-denominated bonds, with a six-year term and an interest rate of 2.5%. In 2015, Pargesa Holding SA repurchased CHF 5.0 million in par value of these bonds at an average price of 103.9%, generating a book- entry loss of CHF 0.2 million. The bonds were redeemed at par on 15 November 2016.

In December 2013, Pargesa issued stock-exchange-listed, CHF-denominated bonds, with a five-year term and an interest rate of 1.5%. The fair value of these bonds at 31 December 2016 was CHF 257.9 million (level 1 fair value under IFRS 13) and CHF 260.1 million at 31 December 2015.

On 24 April 2015, Pargesa Holding SA issued a CHF-denominated bond for a total par value of CHF 150 million ; the bonds are listed, have a term of nine years and pay a coupon of 0.875%. The issue price was 100.605%. The fair value of these bonds at 31 December 2016 was CHF 153.1 million (level 1 fair value under IFRS 13) and CHF 152.2 million at 31 December 2015.

104 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

GBL bond convertible into GBL shares

CHF millions Interest rate 2016 2015 Issuer Par value (millions) nominal effective Term Carrying amount Carrying amount Sagerpar EUR 428.4 0.375% 2.46% 09.10.2013-09.10.2018 466.3 462.0

In 2013, GBL issued EUR 428.4 million in bonds convertible into GBL shares. The bonds are convertible into 5 million existing GBL shares held as treasury stock. They have a maturity of five years and pay an annual coupon of 0.375%. The bonds will be redeemed on 9 October 2018, either through a cash payment, delivery of shares or a combination of the two. The redemption price is set at 105.14% of par value, representing an effective conversion price of EUR 90.08, compared with the reference price on the GBL share at issue of EUR 63.465. GBL reserves the right to redeem the bond early, as of 31 October 2016, if the value of the shares exceeds 130% of the bond’s par value over a certain period of time. The bonds are listed on the Euro MTF market of the Luxembourg stock exchange. The carrying amount of the bond (excluding the option component) was CHF 466.3 million at 31 December 2016 (CHF 462.0 million at 31 December 2015). The option component, which is carried at fair value (level 2 fair value under IFRS 13), amounted to CHF 10.8 million (carried uner “other long-term financial liabilities” on the balance sheet) at 31 December 2016 (CHF 34.3 million at 31 December 2015). The fair value of these bonds at 31 December 2016 was CHF 493.8 million (level 1 fair value under IFRS 13) and CHF 518.3 million at 31 December 2015. In terms of the derivative’s sensitivity, the instrument’s liquidity and the volatility and market price of the underlying shares are the main factors that would result in a change in the fair value of the derivative.

GBL bond

CHF millions 2016 2015 Issuer Par value (millions) Interest rate Term Carrying amount Carrying amount GBL EUR 350.0 4.00% 30.06.2010-29.12.2017 375.9 380.2

In 2010, GBL issued stock-exchange-listed, EUR-denominated bonds, with a 7.5-year term and a coupon of 4%. The fair value of these bonds at 31 December 2016 was CHF 389.5 million (level 1 fair value under IFRS 13) and CHF 402.3 million at 31 December 2015.

GBL bond exchangeable for Suez shares In September 2012, GBL issued EUR 400.8 million in bonds exchangeable for Suez shares. The bonds were listed on the Euro MTF market on the Luxembourg Exchange. The bond issue covered almost all of the Suez shares held by GBL, i.e. 35 million shares. In 2014, GBL received early conversion requests for the GBL bonds exchangeable for Suez shares. GBL therefore delivered 29.9 million Suez shares for a total par value of EUR 342 million. In 2015, GBL redeemed the remaining bonds and delivered 5.1 million Suez shares for a total par value of EUR 59 million (CHF 64 million). GBL’s holding in Suez’s share capital was thus reduced from 1.1% at end-2014 to 0% at 31 December 2015. The conversions generated a book-entry gain of EUR 37.8 million (CHF 40.3 million) on the Suez shares delivered, representing the difference between the average price of the Suez shares when the exchanges took place in 2015 (EUR 17.2 per share) and the economic cost of EUR 9.9 per share. The cancellation, on a pro-rata basis of the bonds exchanged, of the derivative embedded in the exchangeable bonds and recorded as a liability on the balance sheet, resulted in a book-entry gain of EUR 16.0 million (CHF 17.1 million) recognised in 2015 income. The cancellation of the debt resulted in a charge of EUR 30.2 million (CHF 32.2 million), which was also recorded in the 2015 income statement.

105 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

GBL bond exchangeable for ENGIE shares

CHF millions Interest rate 2016 2015 Issuer Par value (millions) nominal effective Term Carrying amount Carrying amount GBL Verwaltung EUR 306.2 1.25% 2.05% 07.02.2013-07.02.2017 328.4 1’076.7

In early 2013, GBL issued EUR 1 billion in bonds exchangeable for ENGIE shares. This issue covered approximately 55 million shares, or 2.3% of ENGIE’s capital and voting rights, representing just under half of the ENGIE shares held by GBL. They had a term of four years and paid an annual coupon of 1.25%. GBL could redeem the bond at par on 22 February 2016 if the value of the ENGIE share remained above 130% of the bond’s par value for a certain period of time. The bond also contained a put option, which could be exercised at par by investors on 7 February 2016. The bond would be redeemed at par on 7 February 2017, unless GBL exercised its option to remit ENGIE shares to the bondholders at a price of EUR 18.32 per share and to pay, if necessary, in cash the difference between the value of the shares to be delivered and the bond’s par value. In 2016, GBL partially repurchased the GBL bonds exchangeable for ENGIE shares. EUR 691.0 million in principal amount was repurchased on the market and through a buyback offer launched by GBL in May. In addition, EUR 2.8 million in principal amount was redeemed early by bondholders. These transactions reduced the debt by a principal amount of EUR 693.8 million (CHF 745.1 million), with the initial issue amounting to EUR 1 billion (CHF 1’073.9 million). This resulted in a charge of EUR 12.5 million (CHF 13.6 million), which was recorded in the income statement for the period. The outstanding debt of EUR 306.2 million (CHF 328.8 million) will mature in February 2017 and was moved from “long-term financial debt” to “financial debt due within a year”. The bonds are listed on the Euro MTF market of the Luxembourg stock exchange. The carrying amount of the bond (excluding the option component) was CHF 328.4 million at 31 December 2016 (CHF 1’076.7 million at 31 December 2015). The option component, which is carried at fair value (level 2 fair value under IFRS 13), amounted to zero (carried under “other long-term financial liabilities” on the balance sheet) at 31 December 2016 (CHF 55.8 million at 31 December 2015). The fair value of these bonds at 31 December 2016 was CHF 332.4 million (level 1 fair value under IFRS 13) and CHF 1’167.0 million at 31 December 2015. In terms of the derivative’s sensitivity, the instrument’s liquidity and the volatility and market price of the underlying shares are the main factors that would result in a change in the fair value of the derivative.

106 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

“Other bonds and similar” in the statement of long-term financial debt mainly comprises listed and unlisted bonds issued by Imerys, the details of which are as follows :

CHF millions 2016 Par value Interest rate Listed / in currency (millions) nominal effective unlisted Maturity Fair value Carrying amount JPY 7’000 3.40% 3.47% unlisted 16.09.2033 90.2 61.4 USD 30 5.28% 5.38% unlisted 06.08.2018 33.1 31.3 EUR 500 5.00% 5.09% listed 18.04.2017 – – EUR 300 2.50% 2.60% listed 26.11.2020 348.2 322.9 EUR 100 2.50% 1.31% listed 26.11.2020 116.1 107.7 EUR 300 0.88% 0.96% listed 31.03.2022 328.1 324.3 EUR 300 1.88% 1.92% listed 31.03.2028 337.7 326.7 EUR 500 2.00% 2.13% listed 10.12.2024 547.5 537.6 Total 1’800.9 1’711.9

Since the EUR 500 million Imerys bond matures in April 2017, in 2016 it was moved from “long-term financial debt” to “financial debt due within the year”.

CHF millions 2015 Par value Interest rate Listed / in currency (millions) nominal effective unlisted Maturity Fair value Carrying amount JPY 7’000 3.40% 3.47% unlisted 16.09.2033 83.2 58.6 USD 30 5.28% 5.38% unlisted 06.08.2018 33.6 30.5 EUR 500 5.00% 5.09% listed 18.04.2017 594.4 562.4 EUR 300 2.50% 2.60% listed 26.11.2020 3 47.5 326.7 EUR 100 2.50% 1.31% listed 26.11.2020 115.8 108.8 EUR 500 2.00% 2.13% listed 10.12.2024 553.8 543.9 Total 1’728.3 1’630.9

Financial debt due within the year

2016 2015 Carrying Carrying CHF millions amount amount Short-term bank loans 58.8 442.1 Due to banks at sight 11.4 3.5 Pargesa bond – 144.8 GBL bond 375.9 – GBL bond exchangeable for ENGIE shares 328.4 – Other financial debt bearing interest (including other long-term financial debt due within the year) 589.1 71.5 Total 1’363.6 661.9

Since the GBL bond matures in December 2017 and the GBL bond exchangeable for ENGIE shares in Feburary 2017, in 2016 they were moved from “long-term financial debt” to “financial debt due within the year”. “Other financial debt bearing interest” includes the Imerys bond in principal amount of EUR 500 million maturing in April 2017.

107 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Repayment schedule of short and long-term financial debt (based on carrying amounts)

Less than Between Total CHF millions 1 year In the 2nd year 3 and 5 years > 5 years > 1 year Total 2016 1’363.6 294.3 1’089.7 1’573.4 2’957.4 4’321.0 2015 661.9 1’466.9 1’978.9 741.1 4’186.9 4’848.8

Analysis of debt by currency

CHF millions CHF EUR USD Other Total 2016 399.9 3’737.7 58.2 125.2 4’321.0 2015 544.3 4’132.2 55.3 117.0 4’848.8

Residual contractual maturities of financial liabilities in 2016

2017 2018 - 2022 2023 and beyond CHF millions Capital Interest Capital Interest Capital Interest Financial debt 704.3 62.0 1’632.3 175.1 1’116.4 95.3 Other long-term financial liabilities – – 0.9 – 1.3 – Derivative financial instruments 26.3 – 11.3 – – – Trade payables 519.0 – – – – – Financial debt due within the year 1’363.6 24.1 – – – – Other short-term financial liabilities 13.5 – – – – – Total 2’626.7 86.1 1’644.5 175.1 1’117.7 95.3

Residual contractual maturities of financial liabilities in 2015

2016 2017 - 2021 2022 and beyond CHF millions Capital Interest Capital Interest Capital Interest Financial debt 150.0 100.6 3’321.7 175.1 828.2 98.5 Other long-term financial liabilities – – 0.8 – 1.3 – Derivative financial instruments 115.4 – 0.3 – – – Trade payables 538.8 – – – – – Financial debt due within the year 517.1 0.3 – – – – Other short-term financial liabilities 60.2 – – – – – Total 1’381.5 100.9 3’322.8 175.1 829.5 98.5

Group companies each have credit lines in connection with their operating activities. Each consolidated subsidiary is responsible for its own credit management based on the requirements of its operating activities.

Used and unused credit lines available at 31 December and their due dates

Less than Between More than 2016 2015 CHF millions 1 year In the 2nd year 3 and 5 years 5 years Total Total Pargesa – – – 10.0 10.0 5.0 GBL – 134.2 2’308.9 – 2’443.1 2’121.0 Imerys 444.5 – 1’320.9 – 1’765.4 1’083.4 Total 444.5 134.2 3’629.8 10.0 4’218.5 3’209.4

108 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 5.12 – Other short-term financial and non-financial liabilities

2016 2015 Carrying Carrying CHF millions amount amount Other short-term financial liabilities Derivative financial instruments 21.6 23.4 Other short-term financial liabilities 14.6 61.7 Total other short-term financial liabilities 36.2 85.1 Other short-term non-financial liabilities Tax payable other than income tax 39.7 44.5 Tax, social security debt and other short-term non-financial liabilities 345.7 328.0 Total other short-term non-financial liabilities 385.4 372.5 Total other short-term liabilities 421.6 457.6

Note 6 – Staff costs

CHF millions 2016 2015 Remuneration, salaries and bonuses (872.8) (829.1) Social security contributions (165.0) (163.0) Defined contribution and defined benefit pension plans (41.2) (38.5) Stock option plan charges (see note 24) (13.9) (12.5) Other payroll expenses (6.9) (6.4) Total (1’099.8) (1’049.5)

Note 7 – Restructuring costs

CHF millions 2016 2015 Restructuring expenditure during the year (56.7) (67.9) Impairment on assets in connection with restructuring (24.4) (163.3) Change in restructuring provisions (1.1) (16.0) Total (82.2) (247.2)

Restructuring costs in 2016 related mainly to Imerys and originated in the four areas in which Imerys operates. They covered a small number of restructuring activities, including an impairment of EUR 24.5 million (CHF 26.7 million) mainly on Refractory Minerals in China.

Restructuring costs in 2015 related mainly to Imerys and originated in the four areas in which Imerys operates. They related mainly to the adjustment of the Oilfield Solutions activity to a downturn in the ceramic proppants market and the integration of S&B.

Restructuring costs are recognised in the income statement under “other operating expenses”.

Note 8 – Impairment of assets

The net amount of impairments and impairment reversals recorded in 2016 was CHF –1’944.7 million and mainly included the impairment of EUR 1’682.5 million, or CHF 1’834.1 million, on LafargeHolcim (see note 5.5). It also included further impairments on ENGIE. These impairments were recorded by GBL at 31 March 2016 and at 31 December 2016 and amounted to EUR 61.9 million, or CHF 67.5 million (see also note 5.5). LafargeHolcim and ENGIE are both held by GBL and are classed as “available-for-sale financial assets” in the Group accounts. The impairments recognised in 2016 also included the depreciation of tangible assets at Imerys, for an amount of CHF 23.7 million.

The net amount of impairments and impairment reversals recorded in 2015 was CHF +362.2 million and included the impairment reversal of CHF 661.9 million on Lafarge (see note 17). Impairments included the additional impairment recorded on ENGIE, a shareholding owned by GBL and recognised as an “available-for-sale financial assets” in the Group financial statements (see also note 5.5). This impairment was recorded at 30 September 2015 and amounted to EUR 31.7 million at GBL (CHF –33.8 million). The impact of this impairment on Pargesa was largely offset by the historical exchange rate gain of CHF 30.8 million resulting from the reversal of the ENGIE revaluation reserve at Pargesa. Impairments of CHF 291.0 million at Imerys included goodwill impairments of CHF 126.8 million, impairments on intangible assets of CHF 38.5 million and impairments on tangible assets of CHF 125.7 million (see also note 12).

109 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 9 – Operating leases Operating lease liabilities come mainly from Imerys and correspond to commitments to pay future rent under leasing agreements for administrative premises, capital goods, wagons, trucks and other vehicles. They are not recognised in the balance sheet. Lease payments are recorded in the income statement, while commitments to pay future rent are off-balance-sheet commitments (see note 25). Their maturities are as follows :

CHF millions 2016 2015 During the 1st year 63.4 46.5 Between the 2nd and 5th year 111.1 100.9 Beyond the 5th year 95.9 122.1 Total future payments on operating leases 270.4 269.5

Expenses recognised in the income statement during the year in relation to operating leases

CHF millions 2016 2015 Total expenses for the year 102.9 98.0

Note 10 – Income tax

10.1 Income tax for the year

CHF millions 2016 2015 Current tax for the period (145.5) (147.0) Current tax for prior periods 1.4 (1.8) Total current tax (144.1) (148.8) Origination and reversal of timing differences (27.9) 78.4 Other deferred tax 8.8 0.6 Total deferred tax (19.1) 79.0 Total tax expense on income for the period (163.2) (69.8)

10.2 Breakdown of deferred tax expenses and income

CHF millions 2016 2015 Intangible assets (5.0) 37.2 Tangible assets 2.3 22.8 Long-term financial assets 5.7 2.9 Commitments relating to employee benefits (4.0) (0.2) Inventories, receivables, financial debts and other provisions 1.2 9.4 Tax losses and unused tax credits (8.0) 7.9 Changes in tax rates 4.9 (0.3) Other (16.2) (0.7) Total deferred tax expenses and income (19.1) 79.0

110 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

10.3 Deferred taxes on the balance sheet by type

2016 2015 2016 2015 CHF millions Deferred tax assets Deferred tax liabilities Intangible assets 30.5 43.9 62.0 77.9 Tangible assets 68.4 85.4 221.9 237.9 Long-term financial assets (9.7) (10.6) 14.7 8.0 Commitments relating to employee benefits 58.2 72.5 (0.5) – Inventories, receivables, financial debts and other provisions 92.3 83.3 18.6 24.8 Tax losses and unused tax credits 25.3 39.2 (1.1) – Set-offs (201.8) (238.8) (201.8) (238.8) Other 42.7 44.8 25.4 19.9 Total deferred tax expenses (as shown on the balance sheet) 105.9 119.7 139.2 129.7

10.4 Reconciliation of taxes on income

CHF millions 2016 2015 Net profit before tax 282.6 1’352.4 Income from associates and joint ventures (31.2) 77.6 Net profit before tax and income from associates and joint ventures 251.4 1’430.0 (operating and financial profit)

Impact of the various tax regimes in foreign countries 65.6 (449.4) Tax impact of non-taxable income in subsidiaries (1) 416.9 487.8 Tax impact of non-deductible expenses in subsidiaries (2) (575.1) (94.4) Other tax adjustments (70.6) (13.8) Total tax expense on income for the period (163.2) (69.8)

(1) This line mainly represents tax-exempt dividends, capital gains and impairment reversals. (2) This line mainly represents non-deductible impairments.

Given the nature of the parent company’s revenue, which consists primarily of dividends from holdings, the level of income tax paid by the parent company is negligible.

10.5 Group effective rate of tax

The sharp rise in the amount of effective tax rate between 2015 and 2016 reflects the fact that impairment charges, which were higher in 2016, are not tax-deductible. The 2015 effective tax rate was also lower because non-taxable gains on the disposal of holdings and impairment reversals were higher than in 2016.

111 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

10.6 Expiration date of tax losses and credits for which no deferred tax is recognised

2016 2015 2016 2015 CHF millions Tax losses Tax credits During the 1st year 47.3 60.4 0.5 0.2 During the 2nd, 3rd and 4th years 204.4 141.5 - 0.5 During the 5th year and beyond 1’456.6 1’930.3 - - Unlimited 6’233.2 2’299.4 39.2 41.7 Total 7’941.5 4’431.6 39.7 42.4

At 31 December 2016, CHF 7’700.9 million of deferrable tax losses came from the Group’s holding companies ; the remaining CHF 240.6 million came from the Imerys group.

In addition, taxes deferred on tax losses are only recognised if the taxable income is likely to be realised, allowing the losses to be used. At 31 December 2016, a total of CHF 25.3 million was recognised as a deferred tax asset on tax losses and tax credits (CHF 39.2 million at 31 December 2015).

10.7 Timing differences under Group control

No deferred tax liability is recognised for the taxable timing differences between the carrying amount and the tax amount of equity securities when the Group is able to control the date on which the timing difference is reversed and it is probable that this difference will not be reversed in the foreseeable future. Imerys group estimates that the unrecognised deferred tax liability under this line item at 31 December 2016 was CHF 20.0 million (CHF 17.4 million at 31 December 2015).

10.8 Tax relating to all other items of comprehensive income

2016 2015 Tax (expenses) Tax (expenses) CHF millions income income Actuarial gains/losses (3.5) ( 7.3) Change in revaluation and hedging reserve (13.6) (0.5) Translation differences 6.0 9.9 Total (11.1) 2.1

112 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 11 – Intangible assets

Development Mining Patents, licences CHF millions costs Software rights and concessions Other Total Total carrying amount : at 1 January 2015 89.5 121.4 17.9 83.4 170.5 482.7 Investments 14.7 3.2 – 0.7 49.1 67.7 Acquisitions – 6.2 – 149.7 18.1 174.0 Translation differences (7.5) (6.4) (2.4) (4.5) (9.8) (30.6) Disposals, reclassifications and other changes for the period (0.5) (14.9) (13.9) 3.3 (3.1) (29.1) at 31 December 2015 96.2 109.5 1.6 232.6 224.8 664.7 Investments 6.3 3.3 0.1 3.4 8.2 21.3 Acquisitions – 0.5 – (0.3) 2.2 2.4 Translation differences (2.7) (0.2) – (2.2) 0.1 (5.0) Disposals, reclassifications and other changes for the period (62.5) (27.1) (0.4) (46.0) (17.7 ) (153.7) at 31 December 2016 37.3 86.0 1.3 187.5 217.6 529.7

Accumulated amortisation : at 1 January 2015 (39.8) (92.5) (3.3) (31.4) (72.2) (239.2) Amortisation (7.5) (9.3) – (4.9) (16.3) (38.0) Translation differences 3.5 5.5 0.3 2.3 2.9 14.5 Impairment – (0.5) – (3.3) (37.3) (41.1) Disposals, reclassifications and other changes for the period 1.0 10.6 1.5 (1.1) (4.8) 7.2 at 31 December 2015 (42.8) (86.2) (1.5) (38.4) (127.7) (296.6) Amortisation (3.4) ( 7.4) (0.1) (2.0) (10.8) (23.7) Translation differences 0.8 0.9 – 0.3 (0.3) 1.7 Impairment – – – – (0.8) (0.8) Disposals, reclassifications and other changes for the period 32.9 28.6 0.9 19.7 17.3 99.4 at 31 December 2016 (12.5) (64.1) (0.7) (20.4) (122.3) (220.0)

Net carrying amount : at 31 December 2015 53.4 23.3 0.1 194.2 97.1 368.1 at 31 December 2016 24.8 21.9 0.6 167.1 95.3 309.7

Intangible assets have a defined lifetime, except for patents and trademarks, which have an indeterminate lifetime and were entered in the “patents, licences and concessions” column as amounting to CHF 132.7 million at 31 December 2016 (CHF 131.8 million at 31 December 2015). Amortisation for the period is included in the “depreciation of tangible assets and amortisation of intangible assets” line in the income statement. The impairments recorded on intangible assets during the period essentially relate to Imerys.

Research and development costs during the period were as follows :

CHF millions 2016 2015 Charge for the period (19.3) (23.8)

113 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 12 – Goodwill

CHF millions 2016 2015 Total carrying amount at 1 January 2’144.8 1’688.9 Acquisitions 231.6 689.5 Disposals (28.7) – Translation differences (29.4) (108.1) Other changes for the period (1) – (125.5) at 31 December 2’318.3 2’144.8 Accumulated impairment at 1 January (100.5) (105.9) Impairment (0.5) (126.8) Translation differences 3.4 6.7 Other changes for the period (1) – 125.5 at 31 December (97.6) (100.5)

Net carrying amount at 31 December 2’220.7 2’044.3

(1) For 2015, these two line items represent the elimination of all the goodwill in the Oilfield Solutions CGU which is within the Energy Solutions & Specialties arm and which was consecutively removed from the financial statements.

In 2016, goodwill from acquisitions amounting to CHF 231.6 million came mainly from acquisitions by Imerys for CHF 49.8 million and the acquisitions of Looping (for CHF 57.3 million) and DIH (CHF 124.5 million) by Ergon Capital Partners III, a GBL subsidiary (see note 16). In 2015, goodwill from acquisitions amounting to CHF 689.5 million came mainly from the purchase by Imerys of 100% of the voting rights for the main industrial minerals activities of Greek group S&B for CHF 615.8 million, together with the purchase by Ergon Capital Partners III, a subsidiary of GBL, of Golden Goose for CHF 31.9 million (see note 16).

Defining Imerys’ CGUs is a matter of judgement for Imerys senior management ; it is based on the existence of the following three criteria, at the level of the smallest identifiable group of assets : a homogeneous production process in terms of the mineral portfolio, processing and applications procedures ; an active market with homogeneous macro-economic features ; and a degree of operating power in terms of continuing, restructuring or closing down a mining, industrial or commercial operation. Ensuring that each CGU meets these three criteria guarantees the independence of each CGU’s respective cash flows. The CGUs are the direct result of the analytical structure followed each month by Imerys senior management as part of its management reporting. All the Imerys group’s assets, including mining assets and goodwill, are allocated to a CGU. The CGUs are grouped to form the Imerys operating divisions. In the following table, the carrying amount and the impairment of goodwill are shown for each group of CGUs (Energy Solutions & Specialties, Filtration & Performance Additives, Ceramic Materials, and High-Resistance Materials) with regard to the goodwill originating in Imerys. For GBL, goodwill is allocated to each shareholding.

Goodwill at 31 December was allocated to the following CGUs :

2016 2015 Total Accumulated Carrying Total Accumulated Carrying CHF millions amount impairment amount amount impairment amount Energy Solutions & Specialties 336.3 – 336.3 304.3 – 304.3 Filtration & Performance Additives 853.2 – 853.2 859.0 – 859.0 Ceramic Materials 298.5 (3.4) 295.1 304.8 (2.9) 301.9 High Resistance Materials 384.6 (71.6) 313.0 380.7 (74.7) 306.0 De Boeck* – – – 27.4 – 27.4 Elitech* 42.2 – 42.2 42.1 – 42.1 Benito* 27.2 (22.6) 4.6 27.5 (22.9) 4.6 Sausalitos* 14.7 – 14.7 14.9 – 14.9 Golden Goose* 32.1 – 32.1 32.5 – 32.5 Looping* 56.5 – 56.5 – – – DIH* 122.6 – 122.6 – – – Holdings (Pargesa, GBL, Imerys) 150.4 – 150.4 151.6 – 151.6 Total 2’318.3 (97.6) 2’220.7 2’144.8 (100.5) 2’044.3

* GBL’s investments held through Sienna Capital.

114 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

In accordance with IAS 36, Group companies test all their cash-generating units (CGUs) for impairment annually if there is goodwill in the unit in question.

At Imerys, systematic annual testing of every CGU is obligatory due to the presence of goodwill in almost every CGU. In 2016, no impairment needed to be recognised as a result of this test.

In 2015, this test resulted in an impairment of CHF 268.3 million being recognised on the Oilfield Solutions CGU of the Energy Solutions & Specialties business, of which CHF 125.5 million corresponded to the entirety of goodwill (see also note 4) and CHF 142.8 million to part of the production tools. Including inventory write-downs of CHF 23.6 million, the total losses recognised with respect to this business amounted to CHF 291.9 million. At 31 December 2015, the recoverable amount of the Oilfield Solutions CGU was EUR 157.7 million (CHF 168.3 million) based on its value in use.

The recoverable amount is the higher of the fair value less net selling price and the value in use of a CGU or an individual asset. In practice, fair value can only be estimated reliably for individual assets, in which case it corresponds to prices for recent transactions concerning similar asset disposals. The value in use is the basis most often used for valuation, both for CGUs and individual assets. The forecast cash flows used by Imerys to estimate the value in use originated in their 2017 budget and an extrapolation for 2018 to 2020. The key hypotheses behind these forecasts are first and foremost the level of volumes and, to a lesser extent, the price level. For the terminal value, Imerys uses Gordon and Shapiro’s perpetual growth model. The discount rate used to calculate the value in use is determined from the weighted average capital cost of groups comparable to Imerys in the industrial minerals sector. The rate – 6.50% in 2016 (6.75% in 2015) – is adjusted, depending on the CGU or individual assets tested, by a country/market risk premium of 0 to +170 basis points (0 to +200 basis points in 2015). The discount rate after income tax averaged 6.78% in 2016 (6.96% in 2015). The results of the post-income tax calculation are the same as would be obtained using pre-tax flows and rates, as required by the applicable standards.

In the following table, the weighted average discount and perpetual growth rates used to calculate value in use at Imerys are shown for each CGU.

2016 2015 Perpetual Perpetual Discount rate growth rate Discount rate growth rate Energy Solutions & Specialties 6.78% 1.94% 6.83% 1.89% Filtration & Performance Additives 6.70% 2.00% 7.01% 2.00% Ceramic Materials 6.77% 1.56% 6.89% 1.43% High Resistance Materials 7.01% 2.00% 7.21% 2.00% Average rate 6.78% 1.86% 6.96% 1.81%

The goodwill recognised in respect of GBL’s private equity activities was also tested annually for impairment. In 2016, no goodwill impairment was recognised as a result of these tests (no impairment in 2015 either). The goodwill allocated to the “holdings” line item is subject to systematic annual impairment testing with reference to the value of the underlying asset. All Group impairments recognised in the 2016 income statement are shown in note 8.

Sensitivity to changes in the forecast cash flow, discount rate and perpetual growth rate

At Imerys, estimates for changes in forecast cash flows, the discount rate and the perpetual growth rate are the changes that would have the greatest impact on the Group’s financial statements. Impairments for each CGU that would be recognised in the event of an unfavourable impact on the Group financial statements at 31 December 2016 resulting from a change in the hypotheses used are the following : - A 5.0% decrease in forecast cash flows would not require the recognition of an impairment (impairment of CHF 8.4 million on the production tools of the Oilfield Solutions CGU of the Energy Solutions & Specialties arm at 31 December 2015). - A 1% increase in the discount rate would have an immaterial impact on the production tools of the Oilfield Solutions CGU of the Energy Solutions & Specialties arm (impairment of CHF 36.0 million at 31 December 2015 on the production tools of the Oilfield Solutions CGU of the Energy Solutions & Specialties arm). - A 1% decrease in the perpetual growth rate would have an immaterial impact on the production tools of the Oilfield Solutions CGU of the Energy Solutions & Specialties arm (impairment of CHF 29.1 million at 31 December 2015 on the production tools of the Oilfield Solutions CGU of the Energy Solutions & Specialties arm).

115 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 13 – Tangible assets

Facilities machinery, plant and Fixed assets Other Land and Mining transport under tangible CHF millions buildings assets equipment construction assets Total Total carrying amount : at 1 January 2015 667.8 921.7 4’259.8 151.8 33.6 6’034.7 Investments 4.9 57.4 36.5 146.0 3.7 248.5 Acquisitions 49.5 88.8 378.1 8.6 2.5 527.5 Disposals (4.3) (0.9) (49.1) (1.0) (0.3) (55.6) Translation differences (62.3) (75.7) (303.3) (11.2) (1.5) (454.0) Reclassifications and other changes for the period 10.8 (23.2) (76.0) (91.1) (3.2) (182.7) at 31 December 2015 666.4 968.1 4’246.0 203.1 34.8 6’118.4 Investments 8.1 55.3 77.7 158.1 8.0 3 07.2 Acquisitions 55.8 14.3 65.5 2.2 46.7 184.5 Disposals (3.4) (0.3) (78.4) (0.2) (3.5) (85.8) Translation differences 5.1 9.1 (27.8) 3.4 (0.6) (10.8) Reclassifications and other changes for the period (0.3) (42.3) (5.5) (162.3) (4.0) (214.4) at 31 December 2016 731.7 1’004.2 4’277.5 204.3 81.4 6’299.1 Accumulated depreciation and impairment : at 1 January 2015 (290.8) (368.9) (2’944.5) (2.3) (13.0) (3’619.5) Depreciation (17.8) (54.6) (162.8) – (2.8) (238.0) Impairment (20.3) (5.1) (99.4) (1.0) – (125.8) Disposals 3.4 0.9 50.2 – 0.2 54.7 Translation differences 26.2 25.4 202.8 0.2 0.9 255.5 Reclassifications and other changes for the period (8.4) 34.2 (90.5) – 0.7 (64.0) at 31 December 2015 (307.7) (368.1) (3’044.2) (3.1) (14.0) (3’737.1) Depreciation (22.3) (56.6) (174.9) (0.2) (10.0) (264.0) Impairment (1.7) (1.1) (19.9) (1.0) – (23.7) Disposals 7.4 0.3 82.3 0.3 3.3 93.6 Translation differences (1.0) 2.2 39.1 – 0.5 40.8 Reclassifications and other changes for the period 6.9 47.6 104.4 0.5 1.2 160.6 at 31 December 2016 (318.4) (375.7) (3’013.2) (3.5) (19.0) (3’729.8) Net carrying amount : at 31 December 2015 358.7 600.0 1’201.8 200.0 20.8 2’381.3 at 31 December 2016 413.3 628.5 1’264.3 200.8 62.4 2’569.3

At 31 December 2016, Group tangible assets mainly comprised Imerys assets, including the mining reserves measured at cost less depreciation and any accumulated impairments. The impairments recorded on tangible assets during the period essentially relate to Imerys (see note 8). Depreciation for the period is included in the “depreciation of tangible assets and amortisation of intangible assets” line in the income statement.

Leased assets

Tangible assets controlled by a finance lease are shown on the balance sheet as amounting to CHF 2.4 million at 31 December 2016 (CHF 2.6 million at 31 December 2015). Leased assets are essentially Imerys’ transport equipment. The discounted value of commitments in respect of future rent payments is CHF 0.4 million for 2017, CHF 0.8 million for the 2018-2021 period and CHF 1.2 million beyond that period.

116 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 14 – List of main consolidated and equity-accounted companies

Organisation chart showing the main consolidated and equity-accounted companies at 31 December 2016

aresa oldin

aresa eterlands

Fully integrated companies Equity-accounted companies

ec ron Capital mers roup artners

ron Capital oopin artners

artesia enito anaement

artesia ausalitos Credit p

roupe

olden rieu oose articipations

117 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Fully consolidated companies at 31 December

2016 2016 2015 2015 Percentage Percentage of Percentage Percentage of Country of capital voting rights of capital voting rights Main Companies of HQ held controlled held controlled activity Parent Parent Parent Parent Pargesa Holding SA Switzerland company company company company Holding Pargesa Netherlands BV Netherlands 100% 100% 100% 100% Holding GBL (1) Belgium 50.0% 51.9% (2) 50.0% 52.0% (2) Holding Imerys (3) France 53.9% 69.7% 53.9% 69.8% Mining industry ELITechGroup (4) France 64.4% 64.4% 64.4% 64.4% Health care De Boeck Group Belgium – – 92.0% 92.0% Media Looping (5) France 100% 100% – – Theme-park operator Benito Spain 98.3% 98.3% 99.4% 99.4% Urban equipment Sausalitos (6) Germany 77.2% 77.2% 77.2% 77.2% Food services DIH Group (7) Netherlands 100% 100% – – Health care Golden Goose (8) Italie 86.7% 86.7% 86.7% 86.7% Clothing manufacturing 2016 2015 (1) Percentage of consolidation. 51.9% 52.0% (2) Percentage of voting rights taking into account the suspended voting rights relating to treasury shares. (3) Percentage of consolidation. 54.5% 54.0% (4) Company 64.4% owned by EVONG, which was 74.3% owned by E.V.E., which in turn was 100% controlled by GBL at 31 December 2016. (5) Company 100% owned by Ride Holding, which was 51.1% owned by E.V.R., which in turn was 78.6% controlled by GBL at 31 December 2016. (6) Company 77.2% owned by E.V.S., which was 98.2% controlled by GBL at 31 December 2016. (7) Company 100% owned by Care Holding, which was 65.8% owned by E.V.C., which in turn was 86.6% controlled by GBL at 31 December 2016. (8) Company 86.7% owned by G.G.D.B. Holding, which was 65.3% owned by E.V.G., which in turn was 84.5% controlled by GBL at 31 December 2016.

Companies consolidated using the equity method at 31 December

2016 2016 2015 2015 Percentage Percentage of Percentage Percentage of Country of capital voting rights of capital voting rights Main Companies of HQ held controlled held controlled activity Ergon Capital Partners Belgium 50.0% 50.0% 43.0% 43.0% Private equity Ergon Capital Partners II Belgium 42.4% 42.4% 42.4% 42.4% Private equity Kartesia Managememt Luxembourg 22.2% 22.2% 40.0% 40.0% Debt fund Kartesia Credit Opportunities I Luxembourg 29.6% 29.6% 29.6% 29.6% Debt fund I.P.E. (Visionnaire) Italy 65.6% 65.6% 65.6% 65.6% Furniture Mérieux Participations II France 37.8% 37.8% 37.8% 37.8% Health care

GBL analysed the accounting treatment to be applied to its holding in I.P.E. and came to the conclusion that it did not exercise significant influence despite holding 65.6% of the capital on the basis of a shareholders’ agreement.

118 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 15 – Subsidiaries with material non-controlling interests The tables below show details of each Group subsidiary with material non-controlling interests, before intragroup eliminations.

As Imerys is held by GBL, minority interests in Imerys are also found in the GBL column and are consequently eliminated in the ”intragroup eliminations” column.

Individual 2016 non-material Intragroup CHF millions GBL Imerys subsidiaries eliminations Total

% of ownership interests held by non-controlling interests 50.0% 46.1% % of voting rights held by non-controlling interests 48.1% 30.2% Long-term assets 19’373.1 4’664.3 Short-term assets 4’217.7 2’565.7 Long-term liabilities (3’464.9) (3’067.8) Short-term liabilities (2’440.0) (1’032.6) Non-controlling interests (1’618.6) (56.6) Equity attributable to the Group 16’067.3 3’073.0 Non-controlling interests 9’346.0 1’455.0 163.6 (1’334.6) 9’630.0 Revenue 4’940.0 4’540.5 Net profit attributable to Pargesa shareholders (Group share) (259.0) 174.0 Net profit attributable to non-controlling interests (79.9) 147.3 12.8 71.2 151.4 Net profit for the period (including minority interests) (338.9) 321.3 Other comprehensive income attributable to Pargesa shareholders (Group share) 1’401.7 58.0 Other comprehensive income attributable to non-controlling interests 1’350.9 52.1 0.7 (377.5) 1’026.2 Total other comprehensive income (including minority interests) 2’752.6 110.1 Total comprehensive income attributable to Pargesa shareholders (Group share) 1’142.7 232.0 Total comprehensive income attributable to non-controlling interests 1’271.0 199.4 13.5 (306.3) 1’177.6 Total comprehensive income for the period (including minority interests) 2’413.7 431.4 Dividends paid to non-controlling interests 233.0 68.2 Net cash flows from operations 692.9 738.4 Net cash flows from investments 599.2 (303.6) Net cash flows from financing (1’115.3) (33.0) Effect of exchange rate variation on funds held and of changes in the scope of consolidation 25.1 28.2

Increase/decrease in cash and cash equivalents 201.9 430.0

119 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Individual 2015 non-material Intragroup CHF millions GBL Imerys subsidiaries eliminations Total % of ownership interests held by non-controlling interests 50.0% 46.1% % of voting rights held by non-controlling interests 48.0% 30.2% Long-term assets 18’704.8 4’550.6 Short-term assets 3’564.7 2’150.5 Long-term liabilities (4’757.6) (2’416.1) Short-term liabilities (1’610.4) (1’382.5) Non-controlling interests (1’409.9) (30.2) Equity attributable to the Group 14’491.6 2’872.3 Non-controlling interests 8’371.9 1’351.1 58.8 (1’122.9) 8’658.9 Revenue 4’6 87.6 4’361.3 Net profit attributable to Pargesa shareholders (Group share) 569.1 39.4 Net profit attributable to non-controlling interests 557.7 34.4 (2.9) 55.2 644.4 Net profit for the period (including minority interests) 1’126.8 73.8 Other comprehensive income attributable to Pargesa shareholders (Group share) (332.2) 17.2 Other comprehensive income attributable to non-controlling interests (288.8) 14.8 3.1 (1’000.9) (1’271.8) Total other comprehensive income (including minority interests) (621.0) 32.0 Total comprehensive income attributable to Pargesa shareholders (Group share) 236.9 56.6 Total comprehensive income attributable to non-controlling interests 268.9 49.2 0.2 (945.7) (627.4) Total comprehensive income for the period (including minority interests) 505.8 105.8 Dividends paid to non-controlling interests 222.1 65.1 Net cash flows from operations 1’401.6 635.3 Net cash flows from investments (1’370.4) (649.7) Net cash flows from financing (565.1) (219.1) Effect of exchange rate variation on funds held and of changes in the scope of consolidation (34.1) (24.0) Increase/decrease in cash and cash equivalents (568.0) (257.5)

120 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 16 – Acquisitions and disposals of subsidiaries

The following acquisitions were made in 2016 :

On 1 March 2016, Ergon Capital Partners III, a subsidiary of GBL, acquired a majority indirect stake in Financière Looping S.A.S. (“Looping”), a European theme-park operator. The purchase price was EUR 71 million (CHF 77 million). The net cash impact of the acquisition was EUR 41 million (CHF 45 million). Provisional goodwill after recognition of the acquisition was EUR 53 million (CHF 57 million). Looping contributed EUR 0 million to Group income. On 20 December 2016, ECP III also acquired a majority stake in Deutsche Intensivpflege Holding (“DIH”) GmbH, a company involved in intensive care services. The purchase price was EUR 134 million (CHF 146 million). The net cash impact of the acquisition was EUR 127 million (CHF 138 million). Provisional goodwill was EUR 114 million (CHF 124 million). DIH contributed EUR –2.3 million to Group income (CHF –2.5 million). In addition, Imerys also acquired stakes in companies for a total purchase price of EUR 44.1 million (CHF 48.0 million). Provisional goodwill was EUR 43.8 million (CHF 47.7 million).

The following key acquisitions were made in 2015 :

On 26 February 2015, Imerys acquired 100% of the voting rights corresponding to the main industrial minerals activities of Greek group S&B, i.e. bentonite (binders for foundry, sealing solutions, and additives for drilling and for consumer products), continuous casting fluxes for the steel industry, wollastonite (functional additives for polymers and paints), and perlite-based solutions for building materials and horticulture. These businesses were acquired from the Kyriacopoulos family and the Rhône Capital investment fund for EUR 623.8 million (CHF 665.8 million), with EUR 339.8 million (CHF 362.7 million) paid in cash, EUR 263.0 million (CHF 280.7 million) in Imerys shares, and EUR 21.0 million (CHF 22.4 million) in the form of an additional performance-related amount. Upon the acquisition of the controlling interest, the cash remitted to the seller was funded out of the bonds issued by Imerys in December 2014 and the share consideration by the issuance of 3.7 million Imerys shares, as part of a reserved capital increase. When the transaction was finalised, the Kyriacopoulos family held approximately a 4.7% interest in the capital of Imerys SA, and GBL’s holding was diluted slightly to 53.9% at 31 December 2015 (56.5% at 31 December 2014). Independent experts were appointed to assess the fair value of most of the assets and liabilities that could be identified on the date when the controlling interest was acquired. The goodwill resulting from the difference between these revalued net assets and the investment value thus came to a provisional amount of EUR 577.0 million (CHF 615.8 million) at 31 December 2015. On 26 February 2016, the mineral reserves, tangible and intangible assets, inventories, the high-yield bond issue, employee benefits, provisions, and income tax assets and liabilities were revalued. The final goodwill stood at EUR 577.0 million at 31 December 2016, with no significiant adjustment on the provisional amount published at 31 December 2015.

Details of the S&B acquisition

CHF millions S&B Long-term assets 373.5 Short-term assets 241.7 Long-term liabilities (467.5) Short-term liabilities (96.8) Non-controlling interests (0.9) Net assets acquired 50.0 Goodwill 615.8 Total consideration 665.8

Paid - in cash (362.7) - in shares delivered (267.9) - in shares to be delivered (12.8) - in future installments (22.4) Net cash outflows and share payments relating to the acquisition - cash and share payments (665.8) - cash and bank balances acquired 85.5 Total cash outflows and share payments relating to the acquisition (580.3)

121 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

On 30 October 2015, Imerys acquired 100% of the voting rights of the Precipitated Calcium Carbonate (PCC) division of Belgian group Solvay, representing four plants in Europe (Austria, France, Germany and the United Kingdom). It is Europe’s leading producer of fine and ultra-fine PCC used as functional additives and mainly serves the automotive (polymers), construction (paints, coatings, sealants) and consumer goods (health & beauty) markets. The acquisition price was EUR 27.0 million (CHF 28.8 million). The goodwill resulting from the difference between the partially revalued net assets and the investment value came to a provisional amount of EUR 14.4 million (CHF 15.4 million) at 31 December 2015. On 30 October 2016, the emissions rights, tangible and intangible assets, inventories, employee benefits, provisions, and income tax assets and liabilities were revalued. The final goodwill stood at EUR 13.7 million (CHF 14.7 million) at 31 December 2016.

Imerys made other minor acquisitions in 2015. These acquisitions, which were paid for in cash for a total amount of EUR 42.4 million (CHF 45.2 million) generated provisional goodwill of EUR 25.1 million (CHF 26.8 million). Final goodwill stood at EUR 27.5 million (CHF 29.5 million).

On 19 May 2015, Ergon Capital Partners III acquired an indirect majority stake in Golden Goose S.r.l., an Italian designer of contemporary shoes, clothes and accessories. The purchase price was EUR 109 million (CHF 116 million), with EUR 87 million (CHF 93 million) paid in cash, EUR 4 million (CHF 4 million) in the form of a deferred payment due in April 2016, and EUR 18 million (CHF 19 million) in the form of an additional performance-related amount. The net cash impact of the acquisition was EUR 88 million (CHF 94 million). Goodwill after recognition of the acquisition was EUR 30 million (CHF 32 million). The acquisition made a CHF 0 million contribution to Group net income.

Disposals of subsidiaries

In Q2 2016, Ergon Capital Partners III entered into an agreement for the sale of De Boeck (De Boeck Education, De Boeck Digital and Larcier Holding). This transaction generated a capital gain of EUR 55.9 million or CHF 60.9 million (see note 4 as well).

During 2015, no disposals had a material impact.

Note 17 – Investments in associates and joint ventures

CHF millions 2016 2015 Carrying amount at 1 January 358.4 4’224.7 Acquisitions 31.5 105.9 Disposals and redemption (9.8) (38.3) Income 31.2 ( 77.6) Dividend paid (25.9) (108.5) Translation and other differences (1) 1.7 (425.8) Reclassifications (2) – (3’322.0) Carrying amount at 31 December 387.1 358.4

(1) In 2015, this line item included translation differences relating to Lafarge. (2) This line item represents the reclassification in 2015 of Lafarge as an asset held for sale at 30 June 2015 ; in July 2015, the new LafargeHolcim shares were then classed as available-for-sale financial assets.

Acquisitions in 2016 included additional investments in Kartesia and Mérieux Participations II (investment funds) by Sienna Capital, a subsidiary of GBL. Acquisitions in 2015 included the additional investment in Kartesia (an investment fund) by Sienna Capital, and Imerys’ acquisitions.

122 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Analysis of investments in associates and joint ventures

CHF millions 2016 2015 Ergon Capital Partners and Ergon Capital Partners II 20.6 46.3 Kartesia 166.6 126.1 Other GBL and Imerys equity associates 199.9 186.0 Carrying amount at 31 December 387.1 358.4

Ergon Capital Partners, Ergon Capital Partners II and Kartesia are unlisted companies and are part of the “Holdings” sector in the segment reporting. “Other GBL and Imerys equity associates” comprises Visionnaire and Mérieux Participations II, which are held through Sienna Capital. At 31 December 2016, no listed companies were accounted for using the equity method.

“Other GBL and Imerys equity associates” is made up of various equity-accounted holdings at GBL and Imerys ; at 31 December 2016, the largest holdings in terms of equity-accounted value were : Visionnaire (associate), for an amount of CHF 42.1 million (CHF 39.5 million at 31 December 2015) ; Mérieux Participations II (associate), for an amount of CHF 26.3 million (CHF 9.3 million at 31 December 2015) ; MST Mineralien Schiffahrt (associate), for an amount of CHF 26.4 million (CHF 46.7 million at 31 December 2015) ; and The Quartz Corporation (joint venture), for an amount of CHF 30.6 million (CHF 28.1 million at 31 December 2015).

Holcim-Lafarge merger in 2015

In H1 2015, the Boards of Directors of Holcim and Lafarge announced that they had reached an agreement on revised terms for the merger of equals initiated between the two groups in 2014. The parties agreed on a new exchange ratio of nine Holcim shares for ten Lafarge shares. On 1 June 2015, Holcim launched its public exchange offer for all Lafarge shares. At the end of the reopening period, 96.4% of Lafarge’s shares had been tendered to the offer. A squeeze-out was then launched and successfully completed on 23 October 2015. In September 2015, the new entity, LafargeHolcim, distributed a scrip dividend at a ratio of one new LafargeHolcim share for every 20 existing shares (with no impact on the income statement, in accordance with IFRS).

At 30 June 2015, GBL considered that the merger was highly probable, given the progress made in the merger project in Q2 2015. As a result : • GBL recognised its holding in Lafarge using the equity method until 30 June 2015 ; and • The holding was reclassified under “assets held for sale” and recognised at its fair value at 30 June 2015, which led to a partial reversal of CHF 430.2 million of the impairment previously recorded. This reversal was the result of the holding in Lafarge being recognised at its fair value at 30 June 2015 (it had previously been accounted for using the equity method).

The following impacts were also recorded in Q3 2015 : • The impairment previously recorded on Lafarge was further partly reversed as a result of the loss of influence in the new LafargeHolcim group since 10 July 2015 and the reclassification of the holding as an available-for-sale financial asset ; the partial reversal corresponded to the change in the market price of the holding between (i) 30 June 2015 and (ii) 10 July 2015, i.e. CHF 231.7 million. • The other comprehensive income attributable to Lafarge and recognised in Group equity since the holding was first accounted for using the equity method on 1 January 2008 was recognised in the income statement. This had a negative impact of CHF 192.5 million on net income.

The total impact of the merger amounted to CHF 469.4 million. At 31 December 2015, GBL held 9.4% of the new entity.

123 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Analysis of income from associates and joint ventures

CHF millions 2016 2015 Lafarge (H1 2015 contribution) – (107.1) Ergon Capital Partners and Ergon Capital Partners II (0.7) 12.7 Kartesia 24.2 4.8 Other GBL and Imerys equity associates 7.7 12.0 Income from associates and joint ventures 31.2 (77.6)

Following the merger of Lafarge and Holcim, the new LafargeHolcim shares were classed as available-for-sale financial assets, and accounting rules specific to this asset category are now applied, particularly as regards the contribution to income (dividend – see note 5.3).

Kartestia’s contribution in 2016 included interest on loans and gains on the fair value adjustments of loans.

In 2015, the contribution from Ergon Capital Partners and Ergon Capital Partners II included a gain of EUR 14.2 million (CHF 15.2 million) on the disposal of the majority holding in Joris Ide, a leader in insulating sandwich panels and steel profiles.

The table below provides a summary of the financial information for the main equity associates of the Group, including Kartesia Credit Opportunities III S.C.A. at 31 December 2016 and Lafarge up to 30 June 2015. This summary shows the amounts recorded in the companies’ financial statements, which are drawn up in accordance with IFRS.

2016 2015 CHF millions Kartesia Other Total Lafarge Other Total Long-term assets 560.8 531.5 1’092.3 – 783.0 783.0 Short-term assets 45.0 156.4 201.4 – 303.3 303.3 Long-term liabilities (40.9) (228.8) (269.7) – (211.8) (211.8) Short-term liabilities (1.2) (104.5) (105.7) – (82.8) (82.8) Non-controlling interests – (0.5) (0.5) – – – Equity attributable to the Group 563.7 354.1 917.8 – 791.7 791.7 Percentage of capital held 29.6% – – – – – Share of equity 166.6 215.5 382.1 – 352.8 352.8 Goodwill – 5.0 5.0 – 5.6 5.6 Carrying amount at 31 December 166.6 220.5 387.1 – 358.4 358.4 Revenue – 442.1 442.1 6’743.6 397.2 7’140.8 Income from continued operations 82.3 14.5 96.8 (441.8) 70.9 (370.9) Net profit for the period (including minority interests) 82.3 14.5 96.8 (441.8) 70.9 (370.9) Net profit for the period (Group share) – 94.0 94.0 (509.1) 70.9 (438.2) Other comprehensive income – – – 595.3 – 595.3 Total comprehensive income for the period 82.3 14.5 96.8 153.5 70.9 224.4 Dividends received over the period – 25.9 25.9 82.3 26.2 108.5 Group share of income for the period 24.2 7.0 31.2 (107.1) 29.5 (77.6)

124 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 18 – Inventories

CHF millions 2016 2015 Raw materials, consumables and spare parts 354.7 366.0 Work in progress 82.7 85.9 Finished goods and products 430.7 455.8 Total before write-downs 868.1 907.7 Write-downs on inventories Raw materials, consumables and spare parts (40.6) (38.2) Work in progress (1.4) (0.8) Finished goods and products (35.3) (38.6) Total write-downs on inventories (77.3) (77.6) Reversal of write-downs on inventories Raw materials, consumables and spare parts 5.9 6.7 Work in progress – 0.3 Finished goods and products 7.9 6.0 Total reversal of write-downs on inventories 13.8 13.0 Net total 804.6 843.1

Inventories expensed during the year

CHF millions 2016 2015 Income (charge) (31.3) (12.6)

Note 19 – Provisions

Legal, 2016 2015 labour-related and CHF millions Environment Litigation regulatory risks Total Total at 1 January 199.2 30.2 125.7 355.1 344.3 Allocations 11.9 8.3 48.2 68.4 48.6 Utilisations ( 7.2) (2.6) (16.9) (26.7) (39.6) Reversals (2.5) (2.0) (22.5) (27.0) (19.3) Acquisitions 17.2 – 8.7 25.9 49.7 Translation differences (4.3) (0.4) 2.2 (2.5) (22.6) Reclassifications and other 3.3 (0.2) 0.4 3.5 (6.0) at 31 December 217.6 33.3 145.8 396.7 355.1 - short-term provisions 7.6 – 17.7 25.3 22.6 - long-term provisions 210.0 33.3 128.1 371.4 332.5

The Group’s provisions amounted to CHF 393.5 million at 31 December 2016 (CHF 351.3 million at 31 December 2015) and mainly originate in the Imerys group. Imerys has provisions to hedge the environmental risks resulting from its industrial operations and provisions for the restoration of sites no longer mined. These provisions amounted to CHF 217.6 million at 31 December 2016 (CHF 199.1 million at 31 December 2015), of which CHF 132.1 million was for the restoration of mining sites. CHF 84.7 million of the corresponding liabilities have probable due dates between 2017 and 2021, CHF 89.2 million between 2022 and 2031 and CHF 43.7 million from 2032. Imerys’ litigation provisions (i.e. for product guarantees), which amounted to CHF 33.0 million (CHF 29.8 million at 31 December 2015), have a probable due date between 2017 and 2021. Imerys is also exposed to litigation and claims in the normal course of business. These relate to allegations of opersonal injury or financial loss entailing the liability of the Group’s entities with regard to : their commercial or industrial activities ; the possible infringement of certain contractual obligations ; and the failure to observe certain applicable legal or statutory provisions inrelation to social, fiscal, property or environmental matters. Imerys group is also required to respect certain contractual obligations in relation to compensation for the past disposal of assets. The provision for Imerys’ legal, labour-related and regulatory risks amounted to CHF 142.9 million at 31 December 2016 (CHF 122.4 million at 31 December 2015). Most of these provisions are likely to mature between 2017 and 2021.

125 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 20 – Share capital, treasury shares, equity and other comprehensive income

20.1 Share capital

Registered shares Bearer shares Total shares CHF millions Number Par value (1) Number Par value (2) Number (3) Par value Share capital at 1 January 2015 77’214’700 154.4 77’214’700 1’544.3 84’936’170 1’698.7 Share capital at 31 December 2015 77’214’700 154.4 77’214’700 1’544.3 84’936’170 1’698.7 Share capital at 31 December 2016 77’214’700 (4) 154.4 77’214’700 (4) 1’544.3 84’936’170 1’698.7

Share capital outstanding at 31 December 2016 Share capital 77’214’700 154.4 77’214’700 1’544.3 84’936’170 1’698.7 Treasury shares (5) (276’980) (5.5) (276’980) (5.5) Net share capital outstanding 77’214’700 154.4 76’937’720 1’538.8 84’659’190 1’693.2

(1) CHF 2 per share. (2) CHF 20 per share. (3) the number of registered shares is converted into the equivalent number of bearer shares by dividing by ten. (4) Each share carries one vote. (5) These shares do not give entitlement to dividends or voting rights.

On 1 June 1994, the Company created conditional capital with a par value of up to CHF 242 million by issuing 11’000’000 registered shares with a par value of CHF 2 and 11’000’000 bearer shares with a par value of CHF 20.

On 3 May 2016, the Company renewed its authorised capital. Consequently, the Board of Directors is authorised to increase the share capital, up to 3 May 2018, by CHF 253 million by issuing 11’500’000 new registered shares with a par value of CHF 2 and 11’500’000 new bearer shares with a par value of CHF 20.

Bearer shares are listed on the SIX Swiss Exchange. Registered shares are not listed.

20.2 Treasury shares (1)

Not yet outstanding, Not yet outstanding, Total reserved for Board reserved for the exercise use of options (2) Carrying Carrying Carrying CHF millions Number amount Number amount Number amount 1 January 2015 122’776 2.4 154’204 3.1 276’980 5.5 Granting of options (26’780) (0.5) 26’780 0.5 – – 31 December 2015 95’996 1.9 180’984 3.6 276’980 5.5 Granting of options (37’792) (0.7) 37’792 0.7 – – Cancellation of options 6’365 0.1 (6’365) (0.1) – – 31 December 2016 64’569 1.3 212’411 4.2 276’980 5.5

(1) Treasury shares are all bearer shares. (2) Shares not yet outstanding and reserved for the exercise of options granted to the beneficiaries of share option schemes established by the Company (see note 24.1).

20.3 Capital management

Management of the consolidated equity of Pargesa Group is aimed at maintaining a highly capitalised financial structure with a low debt- equity ratio. It is also aimed at generating stable or increasing dividends for its shareholders, through a regular and sustained increase in net profit. The Group manages its capital structure as a function of its financial needs, taking into account economic and financial conditions and opportunities, and also the risk characteristics of its main assets. With a view to maintaining or adjusting the structure of its capital, the Group may, at its various levels, issue new shares, hybrid instruments or buy its own shares. There was no change in the Group’s capital management policy during the period. The Group is not subject to external regulatory requirements regarding its capital.

126 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

CHF millions 31.12.2016 31.12.2015 Total financial debt 4’321.0 4’848.8 Cash and cash equivalents (1’285.3) (1’028.3) Net financial debt 3’035.7 3’820.5

Shareholders’ equity (including minority interests) 17’493.1 15’669.9

20.4 Reclassification adjustments carried through the income statement

CHF millions 2016 2015 Change in fair value of available-for-sale financial assets : - recognised in other comprehensive income 1’703.8 (801.7) - carried through the income statement 467.0 2’170.8 (373.8) (1’175.5) Change in hedging reserve : - recognised in other comprehensive income 13.4 (25.3) - carried through the income statement 4.6 18.0 24.6 (0.7) Translation reserve : - recognised in other comprehensive income (85.7) (1’656.8) - carried through the income statement 1.1 (84.6) 4.1 (1’652.7) Actuarial gains/losses : - recognised in other comprehensive income 10.1 10.1 48.2 48.2 Share of other comprehensive income of associates and joint ventures : - recognised in other comprehensive income – 119.6 - carried through the income statement – – 194.0 313.6 Total other comprehensive income 2’114.3 (2’467.1)

20.5 Change in revaluation and hedging reserve (Pargesa Group share)

2016 2015 Revaluation Hedging Revaluation Hedging CHF millions reserve reserve Total reserve reserve Total Balance at 1 January 1’389.6 (6.7) 1’382.9 1’942.3 (5.4) 1’936.9 Change in fair value recognised in equity 923.3 – 923.3 (404.0) – (404.0) Change in fair value carried through the income statement 244.1 – 244.1 (148.7) – (148.7) Total change in fair value 1’167.4 (552.7) Change in hedging reserve recognised in equity – 3.8 3.8 – (9.1) (9.1) Change in hedging reserve carried through the income statement – 1.3 1.3 – 7.8 7.8 Total change in hedging reserve 5.1 (1.3) Balance at 31 December 2’557.0 (1.6) 2’555.4 1’389.6 (6.7) 1’382.9

20.6 Impact of a change in percentage interest in subsidiaries not resulting in a loss of control

During the period, the consolidated percentage of interests in GBL remained stable. It was 51.9% at 31 December 2016 (52.0% at 31 December 2015). GBL bought and sold treasury shares during 2016. Following these movements in 2016, a negative amount of CHF 2.8 million (Group share) was recognised in equity in the consolidated reserves (CHF –1.2 million in 2015).

127 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 21 – Dividend paid and proposed by Pargesa Holding SA

CHF millions 2016 2015 Dividend for the previous period paid during the year 201.5 192.2 - CHF per bearer share 2.38 2.27 - CHF per registered share 0.238 0.227

Dividend proposed for the period ending 31 December 2016 206.6 - CHF per bearer share 2.44 - CHF per registered share 0.244

The proposed dividend will be submitted for approval at the Annual General Meeting on 4 May 2017. Note 22 – Basic and diluted net earnings per share

2016 2015 Average number of shares taken into consideration – basic 84’659’190 84’659’190 Dilutive effect of ordinary shares : - Share options 4’257 2’984 Average number of shares taken into consideration – diluted 84’663’447 84’662’174

Non-dilutive potential shares excluded from the dilution calculation : - Share options 165’154 141’744

CHF millions 2016 2015 Net earnings (Group share) – basic (32.0) 638.2 Dilutive effect of ordinary shares – (7.7) Net earnings (Group share) – diluted (32.0) 630.5

CHF per share 2016 2015 Basic net earnings per share (Group share) (0.38) 7.54 Diluted net earnings per share (Group share) (0.38) 7.45

Note 23 – Pensions liabilities and similar benefits

Through its subsidiaries (mainly Imerys), the Group contributes to building up retirement benefits for its staff in accordance with the regulations and company practices in each country concerned. The benefits take the form of either defined contribution plans, where the level of future benefits is not guaranteed by the Group, or defined benefit plans, where the level of future benefits is guaranteed by the Group through provisions.

23.1 Description of pension plans and post-employment benefits A. Defined contribution plans :

Under defined contribution plans, Group companies pay contributions to an insurance company or to a fund and have no other obligations. These are the plans granted to the vast majority of Imerys staff. Amounts are charged to the income statement during the year in which they are due. Total contributions paid during the year under defined contribution plans were as follows :

CHF millions 2016 2015 Contributions paid during the year (14.2) (25.3)

128 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

B. Defined benefit plans :

With this type of plan, the Group guarantees the level of benefits that recipients will be paid in future. Defined benefit plans may be funded by insurance companies, pension funds or separate entities. The plans are subject to an annual actuarial review by independent actuaries. At 31 December 2016, the provisions for employee benefits amounted to CHF 319.1 million (CHF 350.7 million at 31 December 2015). Post-employment benefits are awarded by the various companies in the Group on the basis of local practice.

23.2 Main actuarial assumptions used for the calculation of defined benefit plans

2016 2015 as a % Min. Max. Min. Max. Discount rate 1.6% 3.9% 1.7% 4.0% Expected rate of salary increases 2.2% 5.8% 2.2% 5.8% Expected inflation rate 1.8% 2.2% 1.8% 1.9%

For the two countries in which liabilities are greatest (the United Kingdom and the United States), the actuarial assumptions are as follows :

2016 2015 as a % UK USA UK USA Discount rate 2.7% 3.9% 3.6% 4.0% Expected rate of salary increases 2.2% 0.0% 2.2% 0.0% Expected inflation rate 2.2% 0.0% 1.9% 0.0%

Sensitivity analysis

At 31 December 2016, the net provisions for employee benefits essentially came from Imerys.

Out of these assumptions, a change in the discount rate would have the greatest impact on the Group financial statements. The table below demonstrates the impact of a reasonably likely decrease or increase of 0.5% in the discount rate based on the assumption retained in the financial statements at 31 December 2016 (real 2016). The impact of these changes is measured on three aggregates (liability, unwinding, current service costs) in the two currency zones with the greatest liabilities (the United Kingdom and the United States).

2016 2015 CHF millions +0.5% –0.5% +0.5% –0.5% United Kingdom Discount rate 2.2% 3.2% 3.1% 4.1% Liability on the closing date –70.9 +65.8 – 85.1 +75.4 Net interest recognised in the income statement for the period –1.6 +2.3 –2.6 +3.0 Service costs recognised in the income statement for the period – – – – United States Discount rate 3.4% 4.4% 3.5% 4.5% Liability on the closing date –18.6 +16.4 –17.2 +16.1 Net interest recognised in the income statement for the period –0.2 +0.3 – 0.1 +0.3 Service costs recognised in the income statement for the period – 0.1 +0.1 – 0.1 –

129 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

23.3 Amounts recorded in the balance sheet for defined benefit plans

The Group finances the greater part of staff benefits through investments unavailable to third parties in trusts or through insurance contracts that are legally separate from the Group. These investments qualify as plan assets and amounted to CHF 1’359.8 million at 31 December 2016 (CHF 1’374.6 million at 31 December 2015). Imerys also holds reimbursement rights, which are investments held directly by the Group ; these amounted to CHF 6.6 million at 31 December 2016 (CHF 6.7 million at 31 December 2015). The funding rate for liabilities stood at 81.1% at 31 December 2016 (79.8% at 31 December 2015). Provisions for funded plan deficits and unfunded plans amounted to CHF 319.1 million at 31 December 2016 (CHF 350.7 million at 31 December 2015).

2016 2015 CHF millions UK USA Other Total UK USA Other Total Present value of liabilities that are wholly or partially funded (1’002.4) (300.5) (203.7) (1’506.6) (1’066.6) (302.1) (184.6) (1’553.3) Liabilities funded by reimbursement rights – – (31.1) (31.1) – – (28.8) (28.8) Fair value of plan assets at year-end 991.5 228.3 140.0 1’359.8 1’016.6 231.9 126.1 1’374.6 Fair value of funded reimbursement – – 6.6 6.6 – – 6.7 6.7 Deficit of funded rights (10.9) (72.2) (88.2) (171.3) (50.0) (70.2) (80.6) (200.8) Present value of unfunded liabilities – (12.1) (135.7) (147.8) – (15.5) (134.4) (149.9) Net liabilities/net assets on the balance sheet (10.9) (84.3) (223.9) (319.1) (50.0) (85.7) (215.0) (350.7) - long-term liabilities (327.0) (358.0) - long-term assets 7.9 7.3

23.4 Amounts recognised in comprehensive income

CHF millions 2016 2015 Service costs : Current service costs (17.3) (20.3) Past service costs and gains/(losses) from settlement 10.5 3.6 Net interest ( 7.1) (10.4) Components of defined benefits costs recognised in the income statement (13.9) (27.1) Remeasurement on the net defined benefit liability : Return on plan assets (excluding amounts included in net interest expense) 149.4 24.2 Actuarial gains/losses arising from changes in demographic assumptions (4.0) 0.7 Actuarial gains/losses arising from changes in financial assumptions (155.9) 24.8 Actuarial gains/losses arising from experience adjustments 24.1 5.8 Components of defined benefits costs recognised in other comprehensive income 13.6 55.5 Total recognised in comprehensive income (0.3) 28.4

Expenses are recorded under staff costs.

130 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

23.5 Actuarial gains and losses and cap on assets recognised in equity (excluding tax)

CHF millions 2016 2015 Balance at 1 January (275.8) (331.3) Changes recorded in equity * 13.6 55.5 Balance at 31 December (262.2) (275.8)

* of which tax (3.5) ( 7.3) Changes recorded in equity net of tax 10.1 48.2

23.6 Change in present value of liabilities Fully and partially funded liabilities, and unfunded liabilities

CHF millions 2016 2015 Present value of liabilities at 1 January (1’732.0) (1’808.6) Current service costs (17.3) (20.3) Financial costs (51.6) (55.5) Remeasurement gain/(losses) : Actuarial gains/losses arising from changes in demographic assumptions (4.0) 0.7 Actuarial gains/losses arising from changes in financial assumptions (155.9) 24.8 Actuarial gains/losses arising from experience adjustments 24.2 5.8 Liabilities assumed in a business combination (13.5) (63.0) Translation differences 164.8 72.5 Benefits paid 90.9 115.0 Other changes 8.9 (3.4) Present value of liabilities at 31 December (1’685.5) (1’732.0)

23.7 Change in fair value of defined benefit plan assets

Assets held by the Group to fund employee benefits generated a real return of CHF 194.0 million in 2016 (CHF 70.2 million in 2015), as shown in the table below. In accordance with applicable standards, only the normalised part of this return, which amounted to CHF 44.6 million in 2016 (CHF 46.0 million in 2015), was credited to the income statement ; this amount was calculated on the basis of the risk-free rate used to discount liabilities. The remaining real return was credited to equity, for an amount of CHF 149.4 million in 2016 (CHF 24.2 million in 2015).

2016 2015 CHF millions UK USA Other Total UK USA Other Total Fair value of plan assets at 1 January 1’016.4 231.9 126.3 1’374.6 1’055.7 230.1 127.0 1’412.8 Interest income 33.1 8.7 2.8 44.6 35.2 8.4 2.4 46.0 Remeasurement gain/(losses) : Return on plan assets (excluding amounts included in the calculation of net interest) 147.7 (0.2) 1.9 149.4 13.6 4.1 6.5 24.2 Contributions 7.9 7.5 6.9 22.3 9.8 5.8 6.3 21.9 Assets distributed on settlements (52.9) (23.4) (6.7) (83.0) (54.0) (37.9) (8.8) (100.7) Translation differences (160.8) 4.3 (0.6) (157.1) (43.9) 2.0 (9.7) (51.6) Changes in scope / Business combinations – (0.6) 9.6 9.0 – 19.4 2.6 22.0 Fair value of plan assets at 31 December 991.4 228.2 140.2 1’359.8 1’016.4 231.9 126.3 1’374.6

131 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

23.8 Breakdown of plan assets

CHF millions 2016 2015 Cash and cash equivalents 77.0 6% 82.6 6% Listed equities 516.8 38% 563.5 41% Listed bonds 705.0 52% 673.5 49% Real estate 61.0 4% 55.0 4% Fair value of plan assets at 31 December 1’359.8 100% 1’374.6 100%

23.9 Features of Imerys’ defined benefit plans

Two plans represented 68.5% of total Group liabilities at 31 December 2016 (70.2% at 31 December 2015) and concerned Imerys. These two plans were the Imerys UK Pension Scheme (Imerys UK) and the Imerys USA Retirement Growth Account Plan (Imerys USA). The table below shows the main features of these plans.

2016 2015 Imerys UK Imerys USA Imerys UK Imerys USA Liabilities by beneficiary category (CHF millions) Working beneficiaries (176.0) (44.0) (192.4) (49.2) Deferred beneficiaries (194.4) (40.2) (201.8) (40.3) Retired beneficiaries (632.0) (67.5) (672.4) (59.7) Total (1’002.4) (151.7) (1’066.6) (149.2) Age Average age of working beneficiaries 53 52 53 52 Average age of deferred beneficiaries 53 54 54 53 Average age of retired beneficiaries 75 70 75 69 Eligibility Last hiring date 31.12.04 31.03.10 31.12.04 31.03.10 Retirement age 65 65 65 65 Benefit description Payment method Annuity Capital Annuity Capital Increase based on retail price index Yes No Yes No Regulatory framework Minimum funding requirement for the employer Yes Yes Yes Yes Minimum contribution requirement for the beneficiary Yes No Yes No Governance Trustees representing employer Yes Yes Yes Yes Trustees representing beneficiaries Yes No Yes No Independent trustees Yes No Yes No Responsibility of trustees Define the investment strategy Yes Yes Yes Yes Negotiate refunding of deficits with employer Yes – Yes – Administrative management of benefit payments Yes Yes Yes Yes

23.10 Management of risks relating to employee benefits at Imerys

Description of risks : The main issue relating to the financial management of employee benefits is controlling the funding ratio of liabilities, i.e. the ratio between the value of plan assets and the value of liabilities. The liability funding ratio is likely to be adversely affected if there is a decorrelation between the change (especially downwards) of plan assets and the change (especially upwards) in liabilities. The value of plan assets may be decreased by a fall in the fair value of investments. The value of liabilities may rise for all plans if the discount rate is decreased, or it may rise for benefits paid in the form of a life annuity if the inflation rate used to remeasure liabilities in certain plans rises, or if there is an increase in the life expectancy of beneficiaries.

132 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Risk management : The strategy for managing the liability funding ratio consists first of all of optimising the value of plan assets. Investment policies therefore aim to deliver regular returns while taking advantage of opportunities with limited or moderate risk levels. Investment choices are specific to each plan and are determined based on the length of the plan and regulatory constraints in terms of minimum funding. In the United Kingdom in particular, since 2011 Imerys has applied a strategy specifically aimed at managing the liability funding ratio, which consists of determining the investment of plan assets so that they match the liabilities. This qualifies as a liability driven investment (LDI), the aim of which is to manage the liability funding ratio by correlating cash inflows and outflows over the length of the liability. In practice, this strategy consists of structuring the asset portfolio so that the cash inflows generated by investment returns match the cash outflows generated by the payment of benefits. Under this strategy, the risk of liabilities increasing as a result of a fall in the discount rate or a rise in inflation was hedged at 100.0% and 89.0% of the value of liabilities at 31 December 2016, respectively.

The Group estimates that it will have to pay CHF 31.3 million in contributions for defined benefit plans in 2016.

Note 24 – Share-based payments

24.1 Pargesa share options granted by Pargesa Holding SA

On 3 May 2007, the Company created an incentive plan for the Company’s employees, managers and executives involving the annual awarding of options on Pargesa Holding SA shares. The right to exercise the options is vested over time, i.e. one third after one year, two thirds after two years and in full after three years. The options have a maximum term of ten years. The options may be exercised at any time from the fourth year and until the plan expires. The shares needed to exercise options will be taken from the Company’s treasury shares. In 2016, the Company granted 37’792 options, each option enabling the holder to acquire one Pargesa Holding SA share, at a price of either CHF 60.60 or CHF 63.75, equal to the market price on the two grant dates.

At 31 December 2016, the total cost of this option plan was recognised in staff costs and amounted to CHF 0.1 million (CHF 0.1 million in 2015).

Changes in options granted

2016 2015 Weighted average Weighted average CHF per share Number of options exercise price Number of options exercise price Options at 1 January 180’984 80.87 154’204 82.41 Granted during the period 37’792 61.24 26’780 72.00 Cancelled during the period (6’365) 63.75 – – Options at 31 December 212’411 77.89 180’984 80.87

The options were valued using the Black & Scholes model. The fair value of the options on the grant dates in 2016 was CHF 2.05 and CHF 2.31 per option (CHF 2.56 per option in 2015).

Assumptions of the option valuation model

2016 2015 Rate of staff turnover 0.00% 0.00% Expected term 7 years 7 years Expected volatility 20.00% 18.00% Expected dividend growth 0.00% 0.00% Risk-free rate –0.40% – 0.10%

Expected volatility is based on the historical volatility of the previous four years.

133 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Number of Pargesa share options at the end of 2016

Number Exercise price (CHF) Maturity Entitlement 12’150 133.00 2017 vested 16’150 116.00 2018 vested 15’830 53.00 2019 vested 18’747 87.0 0 2020 vested 19’477 87.0 0 2021 vested 23’410 65.00 2022 vested 24’510 67.0 0 2023 vested 6’840 79.00 2024 vested 17’090 79.00 2024 2/3 - vested 1/3 in 2017 7’710 72.00 2025 vested 19’070 72.00 2025 1/3 - vested 1/3 in 2017 1/3 in 2018 30’072 60.60 2026 1/3 in 2017 1/3 in 2018 1/3 in 2019 1’355 63.75 2026 1/3 in 2017 1/3 in 2018 1/3 in 2019 212’411

24.2 Share options granted by GBL

GBL share options

GBL has incentive plans involving GBL shares for its executive management and staff. These options have a lifetime of ten years and will be definitively vested to the beneficiaries three years after the offer date, at a rate of one third per year.

Changes in options granted

2016 2015 Weighted average Weighted average EUR per share Number of options exercise price Number of options exercise price Options at 1 January 707’457 69.03 774’654 67.96 Exercised during the period (155’510) 55.83 (67’197) 56.75 Options at 31 December 551’947 72.74 707’457 69.03

No such options were granted in 2015 and 2016.

The 551’947 GBL share options granted have exercise prices of between EUR 50.68 and EUR 91.90 per share. The maturity dates of the options are between 2017 and 2023. All of these options are vested. The options can all be exercised.

Other plans

On 29 April 2013, GBL issued an incentive plan covering the shares of a subsidiary of LTI One SA. In total, 254’000 options were granted to GBL staff and executive management. These options give beneficiaries the right to buy a share at an exercise price of EUR 10 per share, which corresponds to the LTI One SA share value on the grant date. The options may be exercised or transferred from 29 April 2016 up to 28 April 2023. Options are settled in cash or in securities. The plan is a cash-settled plan. The options were valued using a Monte Carlo model. The fair value of one option was EUR 15.83 at 31 December 2016. At 31 December 2016, 7’200 options were still outstanding. No debt was recorded as a liability on the balance sheet.

On 29 April 2014, GBL set up an incentive plan covering the shares of its second-tier subsidiary, LTI Two SA. In total, 223’256 options were granted to GBL staff and executive management. These options give beneficiaries the right to buy a share at an exercise price of EUR 10 per share, which corresponds to the LTI Two SA share value on the grant date. The options may be exercised or transferred from 29 April 2017 up to 28 April 2024. Options will be settled in cash or in securities. The plan is a cash-settled plan. The options were valued using a Monte Carlo model. The fair value of one option was EUR 17.24 at 31 December 2016. A debt amounting to CHF 4.4 million was recorded as a liability on the balance sheet.

134 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

On 5 May 2015, GBL set up an incentive plan covering the shares of its second-tier subsidiary, Urdac SA. In total, 257’206 options were granted to GBL staff and executive management. These options give beneficiaries the right to buy a share at an exercise price of EUR 10 per share, which corresponds to the Urdac SA share value on the grant date. The options may be exercised or transferred from 5 May 2018 up to 4 May 2025. Options will be settled in cash or in securities. The plan is a cash-settled plan. The options were valued using a Monte Carlo model. The fair value was EUR 10.71 per option at 31 December 2016. A debt amounting to CHF 2.2 million was recorded as a liability on the balance sheet.

On 3 May 2016, GBL set up an incentive plan covering the shares of its second-tier subsidiary, Finpar SA. In total, 308’009 options were granted to GBL staff and executive management. These options give beneficiaries the right to buy a share at an exercise price of EUR 10 per share, which corresponds to the Finpar SA share value on the grant date. The options may be exercised from 3 May 2019 up to 2 May 2026. Options will be settled in cash or in securities. The plan is a cash-settled plan. The options were valued using a Monte Carlo model. The fair value of one option was EUR 4.95 at 31 December 2016. No debt was recorded as a liability on the balance sheet.

In 2016, the total cost relating to GBL incentive plans was recorded in the income statement under “staff costs” and amounted to CHF 2.4 million (CHF 4.3 million in 2015).

In addition, an incentive plan was granted to Ergon Capital Partners III management covering 16.7% of Ergon Capital Partners III shares.

24.3 Imerys share options granted by Imerys

Imerys has an incentive plan for the group’s executives and certain managers and employees that involves awarding Imerys share options and free Imerys shares. Since 2013, only free shares have been awarded. Each option allows one share to be bought at a predetermined fixed price. The right to exercise the options is generally vested three years after the grant date, the options having a maximum term of ten years. Shares awarded free of charge are definitively vested at the end of a period that, in accordance with current legal requirements in France, may not be less than two years after the grant date ; they are vested subject, in principle, to the achievement of certain economic and financial performance objectives that cannot be assessed over one year only. The number of shares definitively vested is contingent upon, and proportionate to, the achievement of these objectives.

Changes in options granted

2016 2015 Weighted average Weighted average EUR per share Number of options exercise price Number of options exercise price Options at 1 January 1’459’672 54.00 2’484’569 54.04 Cancelled during the period (298’668) 62.88 (66’305) 48.61 Exercised during the period (295’383) 54.75 (958’592) 54.47 Options at 31 December 865’621 50.68 1’459’672 54.00

The 865’621 Imerys share options granted have exercise prices of between EUR 34.54 and EUR 65.61 per share. The maturity dates of the options are between 2017 and 2022. All of these options are vested.

Changes in free shares awarded

2016 2015 EUR per share Number of shares Number of shares Shares at 1 January 894’653 790’559 Granted during the period 302’500 337’400 Cancelled during the period (85’480) (96’489) Definitively vested during the period (48’297) (136’817) Shares at 31 December 1’063’376 894’653

The fair values of the free shares awarded in 2016 were EUR 58.29 and EUR 57.43 per share (EUR 63.01 and EUR 61.17 per share in 2015). The 1’063’376 free Imerys shares awarded have definitive vesting dates of between 2017 and 2019.

At 31 December 2016, the total charge recognised under staff expenses for the Imerys group in connection with the option and free share plans amounted to CHF 11.4 million (CHF 7.8 million in 2015).

135 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 25 – Main off-balance-sheet rights and commitments

In the course of its business, the Group makes obligations to third parties that are often subject to subsequent conditions or events that do not or only partially meet the criteria for recognising liabilities on the balance sheet but that may have an impact on the Group’s future financial situation. The unrecognised part of the obligation shall hereinafter be referred to as a commitment. The Group’s main commitments (made and received) are recorded in accordance with applicable accounting standards and detailed below.

Imerys commitments

The commitments given by Imerys amounted to CHF 692.7 million at 31 December 2016 (CHF 524.9 million at 31 December 2015) and essentially concerned operating lease commitments, or commitments connected with the restoration of sites, with operations or with cash flow. Operating lease commitments at 31 December 2016 amounted to CHF 216.1 million (see note 9). Commitments relating to the restoration of sites of CHF 33.9 million correspond to securities and guarantees obtained from financial institutions in accordance with the legal requirements, less recognised provisions. Commitments relating to operations of CHF 349.8 million correspond to firm purchasing commitments entered into by the Imerys Group under goods, services, energy and transport purchasing agreements. Commitments received amounted to CHF 231.5 million at 31 December 2016 (CHF 185.0 million at 31 December 2015). At 31 December 2016, they included a liability guarantee of EUR 57.9 million, or CHF 62.2 million, (EUR 56.0 million, or CHF 60.8 million, at 31 December 2015) received by Imerys from the Rio Tinto Group under the terms of the acquisition of the Luzenac group in 2011.

GBL commitments

At the start of 2004, GBL and two of its Directors were sued by Rhodia minority shareholders in the Paris Commercial Court, invoking their responsibility as Directors of Rhodia. At the same time, a criminal case was opened against persons unknown. On 27 January 2006, the Paris court decided to suspend the civil proceedings until a decision was taken in the criminal case. Since then, there has been little change in the situation – the civil case is still pending whilst the criminal case continues.

Operating lease commitments at GBL amounted to CHF 54.2 million at 31 December 2016.

Pargesa and GBL’s commitments in private equity and other investment funds

Pargesa undertook to invest EUR 42.7 million (CHF 45.9 million) in the Sagard II private equity fund, which has raised funds amounting to EUR 748.4 million (CHF 803.7 million). The residual commitment at 31 December 2016 was CHF 11.0 million. GBL’s commitments to invest in private equity and other investment funds through Sienna Capital amounted to EUR 601.0 million (CHF 645.4 million).

Note 26 – Related party disclosures

Compensation and interests of directors and management

The compensation detailed below includes compensation paid during the period to executive and non-executive members of the Board of Directors of Pargesa, as well as to members of Pargesa’s Management.

CHF millions 2016 2015 Short-term benefits (total compensation) 8.9 8.9 Post-employment benefits 0.1 0.1 Total compensation awarded 9.0 9.0

136 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Note 27 – Important events taking place after the closing date

On 7 February 2017, GBL redeemed in cash the remaining bonds exchangeable for ENGIE shares, for an amount of EUR 306 million. In 2017, GBL sold its remaining 11.9 million ENGIE shares (0.5% of ENGIE’s capital), which were recorded as “available-for-sale financial assets”, for EUR 145 million, generating a consolidated gain of EUR 1 million. The remaining holding of GBL in ENGIE is 0.1% of the capital.

In February 2017, Sagard 3 announced that it had taken a majority stake in Ipackchem, a leading global manufacturer of barrier packaging whose products are mainly used in the transport and storage of aromas, fragrances and agrochemical products, for which permeability, contamination and evaporation constraints are critical.

On 21 February 2017, GBL crossed the threshold of 10% of the voting rights of Pernod Ricard and held 10.6% of the voting rights (and 7.5% of the capital) on that date. This was a result of the allocation of double voting rights.

In February 2017, Ergon Capital Partners III signed an agreement to sell its majority stake in Golden Goose, an Italian designer of contemporary shoes, clothes and accessories. This transaction was finalised in early March 2017. It generated a consolidated gain of around EUR 110 million.

On 28 February 2017, Burberry Group Plc announced that GBL had crossed the threshold of 3% of the company’s voting rights. The investment in Burberry is part of the strategic diversification of GBL’s portfolio. At 31 December 2016, GBL held 2.95% of the capital of Burberry, representing a market value of EUR 230 million. Burberry is listed on the London Stock Exchange and has a market capitalisation of EUR 9 billion on 28 February 2017. Burberry is a British luxury brand that specialises in designing, developing, making and selling high-end clothes and accessories.

In December 2016, Imerys announced that it intended to acquire Kerneos, a world leader in calcium aluminate-based high-performance binders. Kerneos develops performance binders that contribute key properties (rapid hardening, self-levelling, sealing and wear, corrosion or heat resistance), to its customers’ innovative solutions for the construction (screed and adhesive tiles mortars), civil engineering (sewage system infrastructure) or refractories (protection of blast furnaces, thermal power plant) sectors. The transaction, for an estimated enterprise value of EUR 880 million, is subject to relevant workers’ council consultation, as well as approval by the relevant regulatory authorities, and should be completed in mid-2017. On 10 January 2017, Imerys issued EUR 600 million in par value of bonds with a ten-year term and paying an annual coupon of 1.50%. This bond issue will enable Imerys to prepare its financing for the acquisition of Kerneos.

137 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Statutory Auditor’s Report to the General Meeting of Pargesa Holding SA, Geneva

Geneva, March 17, 2017 Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the consolidated financial statements of Pargesa Holding SA and its subsidiaries (the Group), which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and the notes to the consolidated financial statements for the year ended December 31, 2016, including a summary of significant accounting policies.

In our opinion the consolidated financial statements (pages 67 to 137) give a true and fair view of the consolidated financial position of the Group as at December 31, 2016, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.

Basis for Opinion

We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

138 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Goodwill and associated impairment testing

Key audit matter How the scope of our audit responded to the key audit matter The Pargesa Group’s balance sheet includes goodwill of CHF 2’220.7 million (2015 : CHF 1’583.0 million), representing 9.3% The following procedures have been performed : of the total assets of the Group. In accordance with IAS 36, goodwill • Interview with the management of the relevant companies in order is allocated to cash-generating units (CGUs). More than 80% of the to discuss potential impairment indicators ; goodwill of the Group - details of which are disclosed in note 12 of the consolidated financial statements – is allocated to the Imerys • E valuation of the valuation model, including managment’s CGU. These CGUs are tested annually for potential impairment by assumptions, mathematical accuracy and input factors ; comparing the recoverable amount determined on the basis of • Verification of the forecast of cash flows with the budget approved discounted cash flows with the net asset value. A recoverable by the Management of the respective company ; value lower than the book value of the asset results in impairment. • A ssessment of the reasonableness of the growth rates used ; The parameters that have a significant impact on the determination of the recoverable amount are disclosed in note 12 of the consolidated • Involvement of a valuation specialist in respect of the weighted financial statements : average cost of capital and the discount rates. The procedures • V olumes and, to a lesser extent price levels, allowing the carried out by the specialist include the evaluation of the companies’ determination of expected cash flows ; financing rate, their financial structure and their risk profile ; • P erpetual growth rate ; • S ensitivity analyses of growth rates and discount rates used by • D iscount rates taking into account country specificities. the related companies and assessment of the impact on the As part of our audit, we identified impairment testing as a key audit value in use of the CGUs tested ; matter primarily for the following reasons : • T he determination of the parameters of the model requires • R eview of the information published in the annual report and significant estimates from the management ; evaluation of its compliance with IFRS. • T he material amount of the goodwill. The procedures outlined above have generated sufficient audit evidence to address the key audit matter related to the impairment tests on goodwill.

139 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Accounting for Umicore, SGS and Ontex investments

Key audit matter How the scope of our audit responded to the key audit matter As indicated in note 1 (Accounting changes, errors, main accounting judgements and estimates – paragraph 5) to the consolidated We have reviewed the management’s position paper and arguments financial statements, the subsidiary Groupe Bruxelles Lambert supporting the classification of Umicore, SGS and Ontex as (“GBL”) holds, as of December 31, 2016 a 17.01% stake in available-for-sale financial assets. Umicore, a 16.20% stake in SGS and a 19.98% stake in Ontex. In The procedures outlined above have generated sufficient audit accordance with IAS 39, the Group considers these investments evidence to address the key audit matter related to accounting for as available-for-sale financial assets. available-for-sale assets. As mentioned in Note 1 (Accounting changes, errors, main accounting judgements and estimates – paragraph 5) in which the company’s accounting principles are summarised, GBL analysed the accounting treatment of these two investments and in particular the classification in (i) investments in associates (IAS 28), or (ii) available for sale investments (IAS 39).

Given that the stake in each of these companies is lower than 20% and the fact that

• In Umicore and SGS, GBL’s representation at the Board of Directors is not sufficient to demonstrate the existence of significant influence. In addition, representation on the Board of Directors is limited to the term of office of the directors and does not result from a contractual or legal right but from a resolution of the general meeting of shareholders ;

• In Ontex, GBL has no representative on the Board of Directors ;

• O ther criteria generally considered to demonstrate significant influence are not met.

GBL concluded that significant influence is not demonstrated and therefore, these three companies are accounted for as available for sale investments.

As part of our audit, we have identified the classification of the investments within SGS, Umicore and Ontex as a key audit matter for the following reasons :

• The GBL’s stake is close to the 20% threshold ;

• The material importance of these investments.

140 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Provision for environmental risks and for site restoration

Key audit matter How the scope of our audit responded to the key audit matter As set out in note 19 to the consolidated financial statements, Pargesa, and more particularly Imerys, is subject to a number The provisions for environmental risks and for restoration of sites of regulatory obligations regarding environmental risks and no longer mined within Pargesa Group comes mainly from the rehabilitation of sites no longer mined. subsidiary Imerys. The following procedures were performed as part of the audit : As a result, provisions amounting to CHF 217.6 million are accounted for as of December 31, 2016 (CHF 199.1 million as of December • E valuation of the process which has been established by 31, 2015). management for the examination of provisions ;

As part of our audit, we have identified provision for environmental • P rovisions have been tested in detail on a sample basis. In the risks and for restoration of sites no longer mined as a key audit context of the detailed examination of the selected sites, we have matter mainly for the following reasons : analysed the existence of legal and / or implicit obligations related to the rehabilitation of the mining sites ; • T he calculation of these provisions requires significant management judgment in estimating the life of operations for the • E valuation of the objectivity and competence of the internal and mines / quarries and plants, as well as the quantum and timing external experts involved by the management ; of future costs associated with the performance of the above • R eview of the methodology to determine the applicable discount obligations, particularly given the unique nature of each site, the rates and verification of parameters used ; long timescales involved, the scope and nature of the mandatorily required obligations. • Fo r other business units, we have analysed changes in provisions to identify potential inconsistencies in comparison to • T he calculations are sensitive to changes regarding the our understanding in terms of environmental site remediation, assumptions which are made by the management, in particular restoration and dismantling obligations ; the discount rate. • R eview the information published in the annual report and • The material amount of these provisions. evaluate its compliance with IFRS. These calculations require, when deemed necessary, the use of The procedures outlined above have generated sufficient audit internal or external experts. These calculations take into account evidence to address the key audit matter related to provision for the effects of expected changes in local legislation as well as environmental risks and for restoration of sites no longer mined. management practices in site remediation.

141 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Provisions and contingent liabilities for legal, labour-related and regulatory risks

Key audit matter How the scope of our audit responded to the key audit matter As described in the note 19 to the consolidated financial statements of Pargesa, the Group is also exposed to litigation and claims The following procedures have been performed : in the course of its ordinary operations. These risks concern • R eview of reports prepared by internal regional legal services to allegations of personal or financial damage issued by third the attention of the Group’s central legal department ; parties and involving the civil liability of group companies, and possible breaches of some of their contractual obligations or of • D iscussion of the status of significant disputes with legal advisor ; legal or regulatory requirements relating to labour, property or • O btaining confirmations from external legal advisors in order environmental matters. to compare their expertise with the position of the Group’s As of December 31, 2016, the Pargesa Group’s balance sheet management on the valuation of the provision to be recorded ; includes provisions for legal, labour-related and regulatory risks of • R eview of the minutes of the Board of Directors regarding CHF 145.8 million (2015 : CHF 125.7 million). Amongst this amount, discussions or developments concerning important procedures CHF 142.9 million is related to Imerys (CHF 122.4 million as of or risks. December 31, 2015). The procedures outlined above have generated sufficient audit As part of our audit, we have identified contingent liabilities and evidence to address the key audit matter related to provisions for liabilities related to legal, labour-related and regulatory risks as a legal, labour-related and regulatory risks. key audit matter of the audit primarily for the following reasons :

• T he need to recognise a provision and its valuation requires significant judgment and assumptions ;

• T he high degree of uncertainty associated with the occurrence of legal, labour-related and regulatory risks ;

• The potential significance of these provisions ;

• The sensitivity of the assumptions made by management and their impact on the consolidated financial statements.

142 Pargesa Holding SA Annual Report 2016 Consolidated financial statements

Other Information in the Annual Report

The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements of the Company and the compensation report and our auditor’s reports thereon.

Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual report and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibility of the Board of Directors for the Consolidated Financial Statements The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

A further description of our responsibilities for the audit of the consolidated financial statements is located at the website of EXPERTsuisse : http ://expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of our auditor’s report.

Report on Other Legal and Regulatory Requirements

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

Deloitte SA

Thierry Aubertin Aurélie Darrigade Licensed Audit Expert Licensed Audit Expert Auditor in Charge

143 144 06 PARENT COMPANY FINANCIAL STATEMENTS

Rhone glacier – Valais Canton – Switzerland – etching – early 18th century 145 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Contents

Parent company income statement

Parent company balance sheet

Notes to the parent company financial statements

1 Accounting principles 2 Dividends on long-term investments 3 Other short-term receivables 4 Accrued income and prepaid expenses 5 Loans to affiliated companies 6 Long-term investments 7 Bond issues 8 Share capital 9 Statutory capital reserves 10 Treasury shares 11 Other commitments 12 Significant shareholders 13 Full-time equivalents 14 Transparency information 15 Shares and options on shares 16 Risk assessment 17 Subsequent events

Recommendation by the Board of Directors regarding the appropriation of profit

Report of the Statutory Auditor on the Financial Statements to the Annual General Meeting of Pargesa Holding SA

146 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Parent company income statement

Note 2016 2015 CHF millions CHF millions

Operating income Dividends on long-term investments 2 250.0 200.0 Total operating income 250.0 200.0

Operating expenses Directors’ fees and payroll expenses (8.1) ( 7.8) General and administrative expenses (2.2) (2.1) Total operating expenses (10.3) (9.9)

Net operating income 239.7 190.1

Financial income Interest income 0.3 0.5 Total financial income 0.3 0.5

Financial expense Interest expense (8.7) (8.6) Commissions and bank charges - (0.4) Total financial expense (8.7) (9.0)

Net financial income (expense) (8.4) (8.5)

Non-recurring income and expenses Income on investments and financial assets 2.3 4.7 Provisions - (1.5) Net non-recurring income 2.3 3.2

Net profit before tax 233.6 184.8 Taxes (1.6) (1.6) Net profit for the year 232.0 183.2

147 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Parent company balance sheet

ASSETS Note 31.12.2016 31.12.2015 CHF millions CHF millions

Current assets Cash and cash equivalents 112.6 52.2 Current assets with a stock exchange price 7 – 5.1 Other short-term receivables 3 10.0 190.0 Accrued income and prepaid expenses 4 250.5 200.1 Total current assets 373.1 447.4

Non-current assets Loans to affiliated companies 5 106.3 153.3 Long-term financial assets 18.2 17.2 Long-term investments 6 2’490.9 2’490.9 Total non-current assets 2’615.4 2’661.4

TOTAL ASSETS 2’988.5 3’108.8

LIABILITIES AND SHAREHOLDERS’ EQUITY Note 31.12.2016 31.12.2015 CHF millions CHF millions

Short-term liabilities Bond issues 7 – 150.0 Accrued expenses and deferred income 2.3 3.1 Total short-term liabilities 2.3 153.1

Long-term liabilities Bond issues 7 400.0 400.0 Total long-term liabilities 400.0 400.0

Shareholders’ equity Share capital 8 1’698.7 1’698.7

Statutory capital reserves 9 Capital contribution reserve 22.2 22.2 Other capital reserves 234.4 234.4 256.6 256.6

General legal reserve 249.0 239.8

Voluntary retained earnings Retained earnings to be carried forward 155.4 182.9 Net profit for the year 232.0 183.2 387.4 366.1

Treasury shares 10 (5.5) (5.5)

Total shareholders’ equity 2’586.2 2’555.7

TOTAL LIABILITIES 2’988.5 3’108.8

148 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Notes to the parent company financial statements

Note 1 − Accounting principles

Pargesa Holding SA (the “Company”) has its head office at 11 Grand-Rue, 1204 Geneva, Switzerland, and is recorded in the Commercial Register of the Canton of Geneva. Its main purpose is the purchase, sale, administration and management, in Switzerland and abroad, of investments of a financial, commercial and industrial nature. The year-end financial statements are drawn up in accordance with the requirements of the Swiss Code of Obligations. They are prepared using the historical cost principle and presented in millions of Swiss francs.

Foreign currencies Transactions in foreign currencies are initially recorded at the exchange rate on the transaction date. At closing, monetary items in foreign currencies are converted at the year-end exchange rate. Gains and losses realised when recording or translating monetary items in a foreign currency are recognised as gains and losses in the period during which they occur. Non-monetary items are valued at their historical cost.

Cash and cash equivalents This item includes cash, sight deposits and deposits of less than three months.

Current assets with a stock exchange price These assets are stated at purchase price less any impairment.

Other short-term receivables This item comprises short-term deposits with a term of more than three months but less than 12 months.

Accrued/deferred income and accrued/prepaid expenses On the assets side, this item includes prepaid expenses and accrued income. On the liabilities side, it includes accrued expenses and deferred income.

Financial assets Financial assets are each stated at their purchase price less any impairment.

Long-term investments Directly held long-term investments are each stated at their purchase price less any impairment.

Bond issues Bond issues are recorded on the balance sheet at par value. Premiums and discounts are recorded on the balance sheet at issue and then on the income statement throughout the bond’s term. Issue fees are offset against any premium, and any remaining amount is recorded on the income statement.

Treasury shares The Company’s treasury shares are essentially fully paid-in shares that were issued at par value and are not yet outstanding. Treasury shares are deducted from the share capital. If the shares become outstanding, their par value is credited to the item “Treasury shares”, and any amount exceeding the par value (i.e. any premium) is booked to the capital contribution reserve.

Interest and dividends Interest is stated on a time proportion basis. Dividends are booked once Pargesa Holding SA’s dividend rights have been established.

Share option plan The Company has an incentive plan for Company employees, managers and executives, under which annual Pargesa Holding SA share options are awarded. When beneficiaries exercise their options, the Company delivers treasury shares. The par value is credited to the item “Treasury shares”, and any amount exceeding the par value (i.e. any premium) is booked to the capital contribution reserve.

149 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Note 2 − Dividends on long-term investments

This item represents the dividend of CHF 250.0 million announced by Pargesa Netherlands BV (CHF 200.0 million in 2015) and recorded during the year (see note 4).

Note 3 − Other short-term receivables

The line item mainly includes bank deposits with a term of more than three months but less than 12 months.

Note 4 − Accrued income and prepaid expenses

At 31 December 2016, this item included the dividend to be received (announced but not yet paid) from Pargesa Netherlands BV for an amount of CHF 250.0 million (CHF 200.0 million at 31 December 2015) (see note 2).

Note 5 − Loans to affiliated companies

These loans bear interest at the market rate.

Note 6 – Long-term investments

Percentange Percentange Percentage of voting Percentage of voting Carrying of capital rights Carrying of capital rights amount held controlled amount held controlled Companies Country of HQ 2016 2016 2016 2015 2015 2015 Direct holding : Pargesa Netherlands BV Netherlands 2’490.9 100 % 100 % 2’490.9 100 % 100 % Total 2’490.9 2’490.9 Main indirect holding : GBL SA(1) Belgium 50.0 % 51.9 %(2) 50.0 % 52.0 %(2)

(1) Company held by Pargesa Netherlands BV. (2) Taking into account the suspended voting rights relating to treasury shares.

Pargesa Netherlands BV, which is a subsidiary of Pargesa Holding SA, and GBL, which is a subsidiary of Pargesa Netherlands BV, are holding companies whose main goal is managing investments.

Note 7 − Bond issues

CHF millions Par Interest Issue Carrying amount Issuer value rate price Term 2016 2015 Pargesa Holding SA – 2.50 % 100.624 % 15/11/2010-15/11/2016 – 150.0 Pargesa Holding SA 250.0 1.50 % 100.279 % 10/12/2013-10/12/2018 250.0 250.0 Pargesa Holding SA 150.0 0.875 % 100.605 % 24/04/2015-24/04/2024 150.0 150.0 Total 400.0 400.0 550.0

These bonds are listed on the SIX Swiss Exchange and are redeemable at par at maturity.

In 2015, Pargesa Holding SA redeemed CHF 5.0 million in par value of bonds maturing in 2016 at an average price of 103.9%. The remaining bonds were redeemed at maturity on 15 November 2016.

150 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Note 8 − Share capital The Company’s share capital is composed of the following :

Number of shares Par value CHF millions 2016 2015 2016 2015

Fully paid-in registered shares with a par value of CHF 2 each 77 214 700 77 214 700 154.4 154.4 Fully paid-in bearer shares with a par value of CHF 20 each 76 937 720 76 937 720 1 538.8 1 538.8 Fully paid-in, reserved bearer shares with a par value of CHF 20 each with no dividend rights (see note 10) 276’980 276’980 5.5 5.5 Total 84’936’170 (1) 84’936’170 (1) 1’698.7 1’698.7

(1) The number of registered shares is converted into the equivalent number of bearer shares by dividing by ten.

Bearer shares are listed on the SIX Swiss Exchange. Registered shares are not listed.

Note 9 − Statutory capital reserves

Pursuant to Swiss tax legislation, premiums on shares issued after 31 December 1996 must be disclosed separately on the balance sheet. As a result, share premiums are split between two items : the “other capital reserves” item, which represents premiums on shares issued prior to 1 January 1997, and the “capital contribution reserve”, which represents premiums on shares issued after that date. Funds from the capital contribution reserve may be distributed to shareholders without deducting the 35% Swiss federal withholding tax.

Note 10 − Treasury shares

Not yet outstanding, Not yet outstanding, reserved Total reserved for Board use for the exercise of options (1) CHF millions Number Carrying amount Number Carrying amount Number Carrying amount 1 January 2015 122’776 2.4 154’204 3.1 276’980 5.5 Granting of options (26’780) (0.5) 26’780 0.5 – – 31 December 2015 95’996 1.9 180’984 3.6 276’980 5.5 Granting of options (37’792) (0.7) 37’792 0.7 – – Cancellation of options 6’365 0.1 (6’365) (0.1) – – 31 December 2016 64’569 1.3 212’411 4.2 276’980 5.5

(1) Shares not yet outstanding and reserved for the exercise of options granted to the beneficiaries of share option schemes established by the Company (see notes 11.2, 14 and 15).

Treasury shares are all previously issued, reserved bearer shares that are fully paid and not yet outstanding. They are recorded at par value and carry no dividend or voting rights.

151 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Note 11 − Other commitments

1. CHF millions 2016 2015

Guarantees issued for wholly owned subsidiaries 10.0 5.0 Guarantees issued for third party 0.1 0.1 Total 10.1 5.1

2. On 3 May 2007, the Company introduced an incentive plan for Company employees, managers and executives, under which annual Pargesa Holding SA share options are awarded. In 2016, the Company granted a total of 37’792 options, including 30’072 options enabling the holder to purchase one Pargesa Holding SA share at a price of CHF 60.60 and 7’720 options at a price of CHF 63.75 (including 6’365 options that were granted in 2016 and subsequently cancelled), which correspond to the market prices on the grant dates. The right to exercise the options is vested over time, i.e. one third after one year, two thirds after two years and in full after three years. The options have a maximum term of ten years. The options may be exercised at any time from the fourth year and until the plan expires. Shares required to exercise options are taken from the Company’s stock of treasury shares (see notes 14 and 15).

3. At 31 December 2016, the Company had a commitment to pay CHF 11.0 million into the Sagard II private equity fund (CHF 12.7 million at 31 December 2015).

Note 12 − Significant shareholders

Shareholders with more than 5% of the voting rights are indicated in the table below :

Capital Votes as a % 2016 2015 2016 2015

Parjointco (Power group 50 % / Frère group 50 %) 55.5 55.5 75.4 75.4

The end shareholders of Parjointco are Stichting Administratiekantoor Frère-Bourgeois in the Netherlands and the Desmarais family in Canada, specifically Jacqueline Desmarais, Paul Desmarais Jr and André Desmarais.

Capital percentages are calculated based on the total number of shares recorded in the commercial register (bearer equivalent) and making up the capital, less treasury shares, i.e. a denominator of 84’659’190 at 31 December 2016. Percentages of voting rights are calculated based on the total number of voting rights attached to the shares issued, i.e. a denominator of 154’429’400 at 31 December 2016.

Note 13 – Full-time equivalents

Pargesa Holding SA’s annual average number of full-time equivalents is below ten.

152 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Note 14 − Transparency information Shareholdings and conversion and options rights in Pargesa Holding SA at 31 December 2016 held by members of the Board of Directors and Management or by persons related to them

Shares Share option rights Nombre de titres registered bearer bearer Gérald Frère Vice Chairman and Director – 161’154 – Arnaud Vial Managing Director and Director – – 27’035 (2) Mark Keller CFO – – 36’685 (2)

Parjointco NV (1) 77’214’700 39’301’000 – Total 77’214’700 39’462’154 63’720

(1) Parjointco NV, the controlling shareholder of Pargesa Holding SA, is a “closely-related person”, within the meaning of Article 678 of the Swiss Code of Obligations, of certain members of the Board of Directors (i.e. the Frère family in Belgium and the Desmarais family in Canada). (2) The entity that issued these Pargesa share option rights is Pargesa Holding SA, under a plan introduced in 2007 permitting the annual awarding of free options on Pargesa Holding SA shares at a price that corresponds to the market price on the grant date. The main features of the plan are as follows : term of ten years ; rights fully vested after three years ; conversion ratio of 1 option/1 share ; strike prices of CHF 60.60 and CHF 63.75 for options granted in 2016, CHF 72 for options granted in 2015, CHF 79 for options granted in 2014, CHF 67 for options granted in 2013, CHF 65 for options granted in 2012, CHF 87 for options granted in 2011, CHF 87 for options granted in 2010, CHF 53 for options granted in 2009, CHF 116 for options granted in 2008, and CHF 133 for options granted in 2007 ; concerns share capital of CHF 1’274’400.

Information regarding the compensation paid to Board members and Management, as required by article 663bbis of the Swiss Code of Obligations, is provided in the Compensation Report.

Note 15 − Shares and options on shares

Options on Pargesa bearer shares awarded during the year :

Number Value Number Value CHF 2016 2016 2015 2015 Members of Management (1) 17’530 35’936 14’920 38’195 Other employees 13’897 28’842 11’860 30’362 Total 31’427 64’778 26’780 68’557

(1) - Including 8’525 options awarded to the CFO as a Pargesa employee before his appointment to Management. - Excluding 6’365 options awarded in 2016 and then cancelled.

The value of Pargesa Holding SA options awarded by Pargesa Holding SA was determined on the basis of the Black & Scholes model on the grant date.

Note 16 − Risk assessment

The Board of Directors carried out a risk assessment. The assessment involved identifying corporate risks relating to strategy, operations, compliance and finance. The Board of Directors examined the potential impact of the risks identified, their probability, and the measures and controls in place.

Note 17 − Subsequent events

No significant event took place after the closing of accounts on 31 December 2016.

153 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Recommendation by the Board of Directors regarding the appropriation of profit

2016 2015 CHF millions CHF millions

Available income Net profit for the year 232.0 183.2 Retained earnings 155.4 177.4 Dissolution of the treasury share reserve – 5.5 Available income 387.4 366.1

Allocation Allocation to the general legal reserve 11.6 9.2 Dividend 206.6 201.5 Retained earnings to be carried forward 169.2 155.4 Profit allocated 387.4 366.1

If approved, the dividend for the financial year ending on 31 December 2016 will be paid on the following terms :

For each bearer share with a par value of CHF 20 : Total dividend CHF 2.44 Less 35% federal withholding tax CHF (0.85) Net dividend CHF 1.59

For each registered share with a par value of CHF 2 : Total dividend CHF 0.244 Less 35% federal withholding tax CHF (0.085) Net dividend CHF 0.159

The dividend will be paid on 10 May 2017.

154 Parent company Pargesa Holding SA Annual Report 2016 financial statements

155 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Statutory Auditor’s Report to the General Meeting of Pargesa Holding SA, Geneva

Geneva, March 17, 2017

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Pargesa Holding SA, which comprise the income statement, the balance sheet as at December 31, 2016 and notes for the year then ended, including a summary of significant accounting policies.

In our opinion the financial statements (pages 145 to 154) as at December 31, 2016 comply with Swiss law and the company’s articles of incorporation. Basis for Opinion

We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that there are no such matters to report. Responsibility of the Board of Directors for the Financial Statements

The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.

156 Parent company Pargesa Holding SA Annual Report 2016 financial statements

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located at the website of EXPERTsuisse : http ://expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of our auditor’s report.

Report on Other Legal and Regulatory Requirements

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.

We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

Deloitte SA

Thierry Aubertin Aurélie Darrigade Licensed Audit Expert Licensed Audit Expert Auditor in Charge

157 Pargesa Holding SA Annual Report 2016 Addresses

Addresses

PARGESA HOLDING SA 11, Grand-Rue – 1204 Geneva – Switzerland Tel. : +41 22 817 77 77 www.pargesa.ch GROUPE BRUXELLES LAMBERT 24, Avenue Marnix – 1000 Brussels – Belgium www.gbl.be IMERYS 154, Rue de l’Université – 75007 Paris – France www.imerys.com LAFARGEHOLCIM Zürcherstrasse 156 – 8645 Jona – Switzerland www.lafargeholcim.com SGS 1 Place des Alpes – 1201 Geneva – Switzerland www.sgs.com ADIDAS Adi-Dassler-Strasse 1- 91074 Herzogenaurach - Germany www.adidas-group.com/en PERNOD RICARD 12, Place des Etats-Unis – 75116 Paris – France www.pernod-ricard.com UMICORE 31, Rue du Marais - 1000 Brussels - Belgium www.umicore.com TOTAL Tour Coupole - 2, Place Jean Millier – Arche Nord – 92078 Paris La Défense Cedex – France www.total.com ONTEX GROUP Korte Keppestraat 21 – 9320 Erembodegem - Belgium www.ontexglobal.com/fr BURBERRY GROUP PLC Horseferry House - Horseferry Road - London SW1P 2AW - United Kingdom www.burberryplc.com

This Annual Report is also available in French ; only the original French text is authoritative.

Production Design and layout : jim.b and 128K. Printed in Switzerland by Atar Roto Presse SA, Geneva. FSC-certified paper

Translation Doublespace Sàrl, Lausanne

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Pargesa Holding SA

ANNUAL REPORT Pargesa E 2016 Holding SA