2016 ANNUAL REPORT CONTENT MESSAGES FROM THE SUPERVISORY BOARD AND THE MANAGEMENT BOARD 02 1 4 Profile of the Group and its Businesses | Financial Report | Statutory Auditors’ Report Financial Communication, Tax Policy on the Consolidated Financial Statements | and Regulatory Environment | Risk Factors 05 Consolidated Financial Statements | 1. Profi le of the Group and its Businesses 07 Statutory Auditors’ Report on 2. Financial Communication, Tax policy and Regulatory Environment 43 the Financial Statements | Statutory 3. Risk Factors 47 Financial Statements 183 Selected key consolidated fi nancial data 184 I - 2016 Financial Report 185 II - Appendix to the Financial Report: Unaudited supplementary fi nancial data 208 2 III - Consolidated Financial Statements for the year ended December 31, 2016 210 Societal, Social and IV - 2016 Statutory Financial Statements 300 Environmental Information 51 1. Corporate Social Responsibility (CSR) Policy 52 2. Key Messages 58 3. Societal, Social and Environmental Indicators 64 4. Verifi cation of Non-Financial Data 101 5 Recent Events | Forecasts | Statutory Auditors’ Report on EBITA forecasts 343 1. Recent Events 344 2. Forecasts 344 3 3. Statutory Auditors’ Report on EBITA forecasts 345 Information about the Company | Corporate Governance | Reports 107 1. General Information about the Company 108 2. Additional Information about the Company 109 3. Corporate Governance 125 6 4. Report by the Chairman of Vivendi’s Supervisory Board Responsibility for Auditing the Financial Statements 347 on Corporate Governance, Internal Audits and Risk 1. Responsibility for Auditing the Financial Statements 348 Management – Fiscal year 2016 172 5. Statutory Auditors’ Report, Prepared in Accordance with Article L.225-235 of the French Commercial Code, on the Report Prepared by the Chairman of the Supervisory Board of Vivendi SA 181 ANNUAL REPORT 2016 ANNUAL REPORT 2016 The Annual Report in English is a translation of the French “Document de référence” provided for information purposes. This translation is qualifi ed in its entirety by reference to the “Document de référence”. ANNUAL REPORT 2016 1 The Management Board around Vincent Bolloré. FROM LEFT TO RIGHT: Simon Gillham, Member of the Management Board and Chairman of Vivendi Village, Senior Executive Vice President, Communications of Vivendi - Vincent Bolloré, Chairman of the Supervisory Board - Frédéric Crépin, Member of the Management Board and Group General Counsel - Arnaud de Puyfontaine, Chairman of the Management Board - Stéphane Roussel, Member of the Management Board and Chief Operating Officer - Hervé Philippe, Member of the Management Board and Chief Financial Offi cer . A CLEAR AND AMBITIOUS STRATEGY Vivendi’s teams are building a global content see that Vivendi already owns most of them. It Vivendi is able to pursue its far-reaching and media group. This is one of the third has made major acquisitions to own every type strategy in several regions, including Africa, millennium’s most attractive industries, first of content consumed worldwide, with Universal Asia and Southern Europe, due to its very of all because in the years ahead, many more Music Group (music), Gameloft (mobile games) robust balance sheet and the long-term stability consumers will be able to enjoy entertainment. and Canal+ Group (TV/motion pictures). provided by its core shareholder, the Bolloré Not only will two billion people in Africa, Asia The teams in charge of content and media work family group (which held 29% of the voting and South America enter the leisure economy together as an industrial group, so that they rights in April 2017). by 2025, they will also be better equipped to create more value to shareholders. These ambitious developments, which are going access entertainment content. Worldwide, the Vivendi is also expanding in the distribution to drive the creation of high value, will go hand number of smartphones, now considered the market by strengthening its own capabilities in hand with a dividend payout representing a premier viewing device, is expected to rise from through Canal+ Group, by acquiring platforms yield of approximately 2% per share. four billion in 2016 to more than six billion in such as Dailymotion and forming partnerships 2020. with telecoms operators and digital platforms If we look at the world’s most popular forms of such as Google, Apple, Facebook and Amazon . content today – music, video games, movies/TV C ontent can in this way be offered both on a Vincent Bolloré series and TV shows/live broadcasts – we can local and global scale. Chairman of the Supervisory Board 2 ANNUAL REPORT 2016 Messages from the Supervisory Board and the Management Board A YEAR OF SUCCESSFUL TRANSITION IN 2016, A YEAR OF GROWTH IN 2017 With the acquisition of Gameloft, the opening Widely recognized in music, Vivendi’s creative channels (C8, CStar and CNews); subscription of the fi rst CanalOlympia venue in Africa and expertise was also broadened to mobile video offers redesigned around pick and choose the launch of Studio+ in Europe and Latin games in 2016 with the acquisition of Gameloft, thematic packages; and a €300-million cost America, in 2016, Vivendi continued to pursue a world-renowned publisher with a billion game optimization plan that should have a full- the dynamic strategy it set in motion two downloads. Its integration is ongoing smoothly year impact in 2018. Lastly, Vivendi owns the years ago with the goal of becoming a world- and has already resulted in a business plan Dailymotion platform, a worldwide digital renowned leader in the creation and distribution that will enable it to reinject creativity into the showcase for our content, with three billion of entertainment content. heart of its growth model. Thanks to Gameloft, videos viewed per month. A new Dailymotion, Recent months have confirmed that Vivendi Vivendi now holds a position in video games, with more premium editorial content and a more now forms an aligned industrial group with an industry with high potential that fits well fl uid user experience, will be released in 2017. its member companies working together and with its other businesses. This same reasoning applies to its interest in Ubisoft. To reach critical mass and maximize content focusing their strengths on a shared vision. delivery, Vivendi has also joined forces with 2016 was an eventful year during which Vivendi Lastly, in 2016 Vivendi strengthened the third a large number of distributors. It has formed pillar of its content business – television consolidated its foundations while successfully strategic partnerships, both with telecom and motion pictures. In cinema, Studiocanal reaching new stages in its development. operators (e.g., Telecom Italia, Telefonica, continued to produce great popular fi lms such Orange, Free and Bouygues Telecom) to The group confirmed its ability to build as Bridget Jones’s Baby , which was the UK’s broaden its local presence and with leading leadership positions in the three fastest biggest selling fi lm in 2016. On the television digital platforms (e.g., Google, Apple, Facebook, growing segments of the creative industry: side, Canal+ continued to demonstrate the music with Universal Music Group (UMG); unmatched quality of its Créations Originales, Amazon, Spotify and Deezer) to reach new mobile games with Gameloft; and television which, from The Young Pope and Midnight Sun consumers around the world. and motion pictures with Canal+ Group. In sum, to The Bureau, enjoyed huge ratings success. All these achievements confi rm that Vivendi is more than €2.5 billion was invested in content committing the resources and energy it needs in 2016. At the same time, Vivendi invested heavily in leading European production companies, to build a creative group that will deliver high To begin with, UMG had a great year in 2016, including Mediaset, Banijay Group, Urban value over time. While 2016 was a year of led by the subscription streaming services that Myth Films and Bambú Producciones. The transition, 2017 will be a year of growth, with have revitalized the worldwide recorded music group also began producing short formats, revenue increasing by more than 5% and, due market. The number of paying subscribers to with Studio+, the fi rst global offer of premium to the measures taken in 2016, EBITA increasing streaming services has more than doubled short series. All of these developments, both around 25%. since 2014, passing the 100 million milestone in-house and external, are enabling Vivendi to Everything is now in place for Vivendi to in 2016. Due to its agreements with more than cover the entire range of audiovisual content successfully fulfi ll its ambitious corporate vision 400 streaming platforms, UMG is now a major consumed today. player in this revolutionary way we listen to of holding leadership positions in the fastest music. The three most streamed artists in the Along with content creation, distribution is growing entertainment markets and enjoying the last 12 months – Drake, Rihanna and Justin another cornerstone of the group. stability of a core, long-term shareholder, backed Bieber – are all group talents. Vivendi distributes its content primarily by substantial fi nancial resources. 2017 is already offering opportunities to demonstrate this. To promote all its artists, Vivendi is helping through its own networks. In 2016, Canal+ UMG to expand in the live performance International maintained its robust momentum segment due to its entertainment venues in pay television, with a subscriber base