FINANCIAL REPORT 2016 — Ladies and gentlemen, We have called this ordinary Annual General Meeting in accordance with the provisions of the law and our company’s articles of association to report on business in the course of the fi nancial year ended December 31, 2016 and to submit for approval the company’s annual and consolidated fi nancial statements. At the meeting, the report of the Chairman of the Board of Directors, the general report of the company’s Statutory Auditors on the annual fi nancial statements for the fi nancial year ended December 31, 2016, the report of the Statutory Auditors on the consolidated fi nancial statements for the fi nancial year ended December 31, 2016 and the special report of the Statutory Auditors on related-party agreements will be presented to you. The required notices of the meeting have been duly sent to you. The Statutory Auditors’ reports, the management report, the company’s annual fi nancial statements, the consolidated fi nancial statements and all related documents required under the applicable laws and regulations have been sent to you or made available to you at the company’s registered offi ce in accordance with all legal requirements and within the required timeframes to allow you to familiarise yourselves with their content. The fi nancial statements presented to you have been drawn up in accordance with International Financial Reporting Standards (IFRS) as adopted in the European Union, and with the principles of prudence and fairness. Hervé Guillou Chairman & Chief Executive Offi cer DCNS Financial report ! MANAGEMENT REPORT I. Presentation of the Group and DCNS’ position during the year 5 II . Post-balance sheet events 25 CONSOLIDATED FINANCIAL STATEMENTS ! I. Comprehensive income 27 II . Consolidated balance sheet 28 III . Consolidated Equity 30 IV . Consolidated Cash Flow Statement 31 V. Notes 33 VI . Report of the auditors on the consolidated fi nancial statements 67 CORPORATE SOCIAL RESPONSIBILITY REPORT " I. General information 69 II . GRI (Global Reporting Initiative) table 113 III . Methodology note on the reporting of environmental, social and governance indicators at DCNS 116 IV . Summary – corporate social responsibility report 2016 118 V. Report by the independent verifi er on the consolidated social, environmental and societal information stated in the management report 121 OTHER INFORMATION # Appendix 1 Regulated agreements signed in 2016 approved by the Board of Directors 124 Agreements signed in previous years, the execution of which continued during the 2016 fi nancial year 124 Appendix 2 List of delegations of power obtained from the General Meeting of Shareholders 125 Appendix 3 List of offi ces held and functions performed by each corporate offi cer during the year ended December 31, 2016 126 Director whose term of offi ce at DCNS terminated during the year ended December 31, 2016 129 Appendix 4 Proposal to allocate the earnings of DCNS SA for the year ended December 31, 2016 129 All amounts are in millions of euros, unless stated otherwise. DCNS Financial report M Meeting of the Board of Directors of February 23 2017 All Þ gures are expressed in millions of euros unless stated otherwise. I. PRESENTATION OF THE GROUP AND DCNS’ POSITION DURING THE YEAR !" I. PRESENTATION OF THE DCNS GROUP I. 1.a. Ownership and governance Governance Corporate governance means the system formed by the DCNS SA (the “company”) is a société anonyme (public totality of rules, behaviours and institutions that determine limited company) under French law. As at December 31, the manner in which the company is managed, administered 2016, 62.49% of its capital was held by the French State, and controlled. The governance of DCNS is structured 35% by Thales, and 1.64% by current and former members around an Executive Committee made up of eleven members of staff through the Actions DCNS employee mutual fund including the Chairman and CEO. (FCPE Action DCNS), the remaining 0.87% being made up of treasury shares held by DCNS Actionnariat. General management In accordance with the resolution passed by the company’s The sale by French State of a 10% equity stake in DCNS to Board of Directors on June 2, 2003, general management Thales on December 22 2011 qualifi ed as a further sale of a of the company is assumed by the chairman of the Board of minority interest under title II of law no. 86-912 of August 6, Directors, who consequently bears the title of “Chairman and 1986 on privatisation procedures. It was therefore regarded Chief Executive Offi cer”. as the trigger event for a new offer of shares to the staff of the DCNS Group (the “Second Reserved Share Offer”). The Chairman and Chief Executive Officer chairs an Executive Committee which meets on a weekly basis. The Under the Second Reserved Share Offer, 2,616,839 shares Executive Committee sets the Group’s objectives and rules were purchased from the State by staff and former staff of the on all matters that have a major impact on the Group’s company and of subsidiaries in which the company directly strategy, its functioning and its commercial and operational or indirectly held a majority shareholding on the initial offer activities. date. The purchasers contributed said shares to the 2014 Compartment of FCPE Action DCNS. Composition and operation of the Board During 2016, DCNS Actionnariat (a 100% subsidiary of the of Directors Group) purchased 29,330 shares in DCNS SA in accordance The Board of Directors deliberates on all major issues with the share buyback guarantee granted to staff under concerning the strategic, economic, fi nancial and technical the initial employee share offer. Of these, 27,178 related to orientation of the company’s business. It upholds the inter- the 2008 Compartment of FCPE Action DCNS (the First ests of its principal stakeholders, that is, its shareholders, Reserved Share Offer) and 2,152 to the 2014 Compartment employees and customers. of FCPE Actions DCNS (the Second Reserved Share Offer). Its eighteen members were reappointed on December 19, As at December 31, 2016, the Group thus held 491,098 treasury 2014. shares in relation to the two share offers. One member of the company’s Board of Directors is The composition of, appointment to and rules of procedure appointed by the French State in accordance with the provi- of the company’s Board of Directors are governed simultane- sions of article 4 of the Order. ously by the provisions of the Commercial Code pertaining A third of the Board of Directors is made up of staff repre- to sociétés anonymes , by the provisions of order no. 2014-948 sentatives, in accordance with article 7 of the Order. There of August 20, 2014 (the “Order”), by the provisions of law are thus six such directors. In accordance with article 8 of the no. 83-675 of July 26, 1983 concerning the democratisation of Order, they are elected by the workforce under the terms laid the public sector (the “Democratisation Act”) with regard to down in title II, chapter II of the Democratisation Act. the election and status of directors representing the staff, and by the company’s articles of association and the bylaws of the Board itself. (1) OECD. DCNS Financial report ! M ! "#$#!% '#()'% 2016 The General Meeting of Shareholders which met on The Group covers the entire spectrum of naval armament, December 19, 2014 appointed eleven new directors, of whom ranging from ocean patrol vessels to conventional subma- fi ve were proposed by the French State and three by Thales. rines via coastal subs, corvettes, frigates, destroyers and The French State is represented as a director by: aircraft carriers. • Mr Jack Azoulay, who was appointed as the State’s repre- Alongside maintenance and repair services aimed at main- sentative on the Board of Directors of the company on taining ships’ performance over time, the Group carries September 16, 2016 by order of the Ministry of the Economy out major upgrade and vessel life extension programmes. and Finance. He replaces Ms Astrid Mislan. It is thus able to make overall commitments regarding the operational availability of a fl eet. The eleven directors appointed by the General Meeting of Shareholders are: The Group offers its products and services worldwide, thanks to its know-how, its unique industrial resources and its • Mr Hervé Guillou; ability to form strategic local partnerships. • Ms Sophie Mantel, proposed by the French State; Last but not least, the Group’s new subsidiary DCNS • Ms Sandra Lagumina, proposed by the French State; Energies offers a wide range of solutions in marine renew- • Mr Jacques Hardelay, proposed by the French State; able energy. These include tidal power, harnessing the • Mr Bertrand Le Meur, proposed by the French State; kinetic energy of the ocean’s currents, as well as ocean thermal energy conversion and offshore wind power from • Mr Bernard Rétat, proposed by the French State; semi-submersible platforms. • Mr Patrice Caine, proposed by Thales; The Group’s know-how • Ms Nathalie Ravilly, proposed by Thales; The Group can call on exceptional know-how in five major • Mr Pascal Bouchiat, proposed by Thales; areas: • Ms Gabrielle Gauthey; • its ability to fulfi l highly complex large-scale programmes; • Mr Luc Rémont. • its technical expertise in naval systems; The six directors elected as representatives of the staff are: • the development and integration of naval anti-aircraft • Ms Isabelle Roué; combat systems for both surface vessels and submarines, • Mr Jacques André; which represent a key source of added value for modern • Mr Joël Ricaud; warships; • Mr Thierry Barbarin; • its role in the assembly and maintenance of nuclear vessels, both as regards the installation of weapons and nuclear • Mr Laurent Chagnas; propulsion equipment and with respect to ongoing servicing, • Mr Gilles Rapale.