ANNUAL REPORT. Pargesa Holding SA

Transcription

1 ANNUAL REPORT 2017 Pargesa Holding SA

2 Pargesa Holding SA

3 Pargesa Holding SA 11, Grand-Rue CH 1204 Genève T info@pargesa.ch Pargesa Holding SA Annual Report 2017

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5 Pargesa Holding SA Annual Report 2017 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 The Pargesa Group and early 2018 highlights 16 Consolidated results for Evolution of Pargesa s net asset value in Total shareholder return 24 Proposals at the Annual General Meeting of 3 May Group portfolio 27 GBL 28 Imerys 30 SGS 32 LafargeHolcim 34 Pernod Ricard 36 adidas 38 Umicore 40 Total 42 Burberry 44 Ontex 46 GEA 48 Parques Reunidos 50 Sienna Capital Corporate Governance Compensation report Consolidated financial statements Parent company financial statements 161 3

6 Annual Report 2017 Pargesa Holding SA Structure and key data Structure and key data Organisation chart at 31 December 2017 (1) Pargesa Holding SA Sienna Capital 50.0% 53.8% 16.6% 9.4% 7.5% 7.5% EUR 926 (5) (2) 17.0% EUR 17'899 (3) 0.6% 6.5% 20.0% 4.3% 21.2% (4) Shareholdings are expressed as a percentage of the capital held % of voting rights, taking into account the suspended voting rights relating to treasury shares. (3) Comprising significant investments in private equity, debt or specific thematic funds. (4) Market value in EUR million of the investments held by GBL at 31 December (5) Estimated value in EUR million at 31 December (1) (2) Group portfolio key data at 31 December 2017 Company GBL Imerys SGS LafargeHolcim Pernod Ricard (5) adidas Umicore Total Burberry (6) Ontex GEA Parques Reunidos (7) Exchange rate EUR/CHF Exchange rate GBP/CHF (1) (2) (3) (4) (5) (6) (7) 4 Direct interest % Total interest % (1) 16.6 (1) 9.4 (1) 7.5 (1) 7.5 (1) 17.0 (1) 0.6 (1) 6.5 (1) 20.0 (1) 4.3 (1) 21.2 (1) % of voting rights 51.8 (4) % flow-through interest Currency (2) 8.3 (2) 4.7 (2) 3.8 (2) 3.8 (2) 8.5 (2) 0.3 (2) 3.3 (2) 10.0 (2) 2.2 (2) 10.6 (2) EUR EUR CHF CHF EUR EUR EUR EUR GBP EUR EUR EUR 2017 net profit (CHF million) (3) (1 675) shareholders equity (CHF million) (3) Total interest % expressed the % of the capital held by GBL. Flow-through interest assessed at the level of Pargesa. Attributable to Group shareholders. Taking into account the suspended voting rights relating to treasury shares. Financial year ending on 31 March ; net profit is that of the 2016/2017 financial year ; shareholders equity is the figure at 31 March Financial year ending on 30 June ; net profit is that of the 2016/2017 financial year ; shareholders equity is the figure at 30 June Financial year ending on 30 September ; net profit is that of the 2016/2017 financial year ; shareholders equity is the figure at 30 September 2017.

7 Pargesa Holding SA Annual Report 2017 Structure and key data Global and per-share data CHF million Consolidated shareholders equity, Group share Operating income Non-operating income (352.9) (2.2) Consolidated net profi t, Group share (32.0) Gross dividend (1) Shares entitled to dividend Market capitalization at year-end Net asset value at year-end CHF per share Share price year-end high low average Consolidated shareholders equity, Group share Net asset value at year-end Operating income (2) Non-operating income (2) (4.17) (0.03) Consolidated net profi t, Group share (2) (0.38) 4.51 Total dividend (1) (Average) total return 3.9 % 3.0 % 3.7 % 3.8 % 3.3 % (1) Recommendation at the Annual General Meeting on 3 May (2) Calculated on the weighted average number of shares outstanding during year. Market data Market price CHF Net asset value CHF SMI relative CHF 5

8 Pargesa Holding SA Annual Report 2017 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 André DESMARAIS Executive Director, Frère-Bourgeois SA Deputy Chairman, President and Co-Chief Executive Officer, Power Corporation of Canada Directors Bernard DANIEL Victor DELLOYE Paul DESMARAIS III Cedric FRÈRE Ségolène GALLIENNE Jean-Luc HERBEZ Barbara KUX Jocelyn LEFEBVRE Michel PÉBEREAU Gilles SAMYN Amaury de SÈZE Arnaud VIAL Honorary Member of the International Committee of the Red Cross (ICRC) Director and Secretary General, Frère-Bourgeois SA and its subsidiary Compagnie Nationale a Portefeuille SA (CNP) Senior Vice President, Power Corporation of Canada Director, Frère-Bourgeois SA Director, Frère-Bourgeois SA Attorney-at-law Company Director Member of the Management Board, Power Financial Europe BV Honorary Chairman of the Board of Directors, BNP Paribas Chairman of the Board, Compagnie Nationale a Portefeuille SA (CNP) Vice-Chairman, Power Financial Corporation Senior Vice-President, Power Corporation of Canada 6

9 Pargesa Holding SA Annual Report 2017 Committees, Auditor, Management Committees, Auditor, Management Audit Committee Chairman Members Jean-Luc HERBEZ Bernard DANIEL Barbara KUX Jocelyn LEFEBVRE Gilles SAMYN Compensation Committee Chairman Members Bernard DANIEL Jean-Luc HERBEZ Barbara KUX Gilles SAMYN Amaury de SÈZE Auditor Deloitte SA Management Paul DESMARAIS Jr Gérald FRÈRE Pierre HAAS Arnaud VIAL Mark KELLER Jacques WICHT Executive Director Executive Director Advisor to the Chairman Managing Director Financial Director Chief Accountant 7

10 Pargesa Holding SA Annual Report 2017 Letter from the Chairman Letter from the Chairman Dear Shareholders, Financial markets evolved in a favourable environment in The global economic outlook remains positive, including the confirmation of the growth acceleration in Europe. We nevertheless think that the valuation of financial assets remains high, which is why we adopted a cautious approach to reinvesting the proceeds from the sales of Total and ENGIE shares completed in 2016 and early In the year under review, the Group invested a total of EUR 0.9 billion in its portfolio of shareholdings, including additional investments in Burberry and Ontex, and the addition of two new positions to the portfolio (GEA and Parques Reunidos). The market uptrend, combined with the appreciation of the euro, resulted in a 22.1 % increase in Pargesa s adjusted net asset value in 2017, while the market price of Pargesa s bearer share rose 27.5 % over the period. The Group remains financially solid, as net debt is low. Our aim is to not expose the Group s holding companies to a high level of debt. At 31 December 2017, Pargesa Holding s net debt amounted to CHF 239 million for a net asset value of CHF 10.8 billion, while the net debt of GBL, in which your Company owns a 50 % equity interest, stood at EUR 443 million for a net asset value of EUR 18.9 billion. Your Company also delivered solid financial results in 2017, with economic operating income coming in at CHF million, up from CHF million in This increase was due in particular to the higher dividends per share paid by most of the Group s non-consolidated holdings and the contribution from the recent investments, which almost fully offset the expected decrease in the contributions from Total and ENGIE economic operating income also included a substantial contribution from Sienna Capital, the GBL subsidiary that manages the Group s alternative investment portfolio. Owing to its business model and the nature of its operations, Sienna Capital s contribution to income is less predictable than that of the rest of the portfolio. We are nevertheless confident that this activity will continue to participate in the Group s value creation over the long term. I am pleased to announce that at the Annual General Meeting to be held on 3 May 2018, the Board will recommend a dividend for the 2017 financial year of CHF 2.50 per bearer share, representing a 2.5 % increase on the previous year. I would like to close by thanking you, our shareholders, for the trust you have placed in us. I also wish to express my gratitude to the other members of the Board of Directors for contributing to the Board s work and providing invaluable advice. Finally, my sincere thanks go to all of our employees for their dedication and loyalty. Geneva, March 2018 Paul Desmarais Jr 8

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13 01 BUSINESS REPORT Corraterie Fountain District : Plainpalais Jonction Geneva 11

14 Pargesa Holding SA Annual Report 2017 Business report 1 Introduction The Pargesa Group Pargesa Holding SA ( Pargesa ) is the parent company of the Pargesa Group ( the Group ). Benefiting from the support and stability from the partnership created in 1990 between its two controlling shareholders (the Power group from Canada and the Frère group from Belgium), the Pargesa Group aims at creating value over the long-term for the benefit of all its shareholders, by building a portfolio of participations in companies that are market leaders in various industry and services sectors, and acting as a professional shareholder. Hence, the Group s core strategy is based on the following fundamental principles : focus the portfolio primarily on a limited number of shareholdings in companies headquarterd in Europe but with a global presence. The selection of investment opportunities is based on a grid of criteria including : sectors : - exposure to long-term growth drivers, - resilience to economic downturn, - favourable competitive dynamics, - market consolidation opportunities ; companies : - led by high-quality management teams driven by a strategic vision, - market leaders with a clear business model focused on both organic and external growth, - which are able to take advantage of long-term megatrends, - with strong cash flow generation capabilities, and low financial gearing, - well positioned vis-a -vis digital disruption, - with a CSR/ESG strategy and relevant governance bodies being in place ; attractive valuation and potential for return to shareholders ; potential for the Group to hold a significant interest in order to become a reference shareholder. potential for the Group, through representation on the Boards of directors and committees of the Boards, to play an active role and be involved in key decisions and in particular with regard to : the overall strategy, with a particular focus on organic and external growth ; the appointment and compensation of the executive management ; the capital allocation, and more specifically the capital structure adequacy, the dividend policy, and share buy-back programs. act as a friendly shareholder and build a long-standing relationship with the management teams of portfolio companies. As a long-term shareholder with a patrimonial approach, the Pargesa Group, whose portfolio is essentially built from permanent capital, is not constrained by any investment horizon. Shareholdings are therefore held for as long as needed to optimize their value. Continuous assessment of the portfolio is conducted in order to potentially define a disposal strategy. This assessment focuses on the following areas : potential for further value creation ; valuation risk ; risks which may be specific to an investment, such as business model disruption risk associated with digital or technological evolution, other company risks including competition, geopolitics, ESG ; portfolio concentration risk (overweighting). Group evolution Implementation of the strategy During the 90s and the first half of the 2000s, the Group took significant actions aimed at simplifying its own structure, as well as implementing a new strategic orientation. As a result, the Group sold all its investments in the financial sector (which represented at the end of 1990 more than 50 % of the value of the portfolio) while focusing on a limited number of shareholdings. Today, the Group s portfolio is held through Pargesa s subsidiary Groupe Bruxelles Lambert (GBL), which is listed on Euronext Brussels. At 31 December 2017, Pargesa held 50.0 % of the share capital and 51.8 % of the voting rights of GBL, taking into account the suspended voting rights related to GBL treasury shares. 12

15 Pargesa Holding SA Annual Report 2017 Business report Since 2012, a progressive rebalancing of the portfolio has been initiated, with a view to strengthen its growth profile and thus optimize its potential for long-term value creation, while maintaining the Group s traditional investment philosophy. As a result : a substantial reduction of the exposure to the high yielding investments in the energy and utilities sectors has been achieved, and the proceeds from disposals have been reinvested in growth assets in the industry, services and consumer goods sectors which are more exposed to long-term growth trends ; the portfolio now presents a more harmonious profile in terms of relative weightings than before, while being more diversified on a geographical standpoint ; in addition to a limited number of large shareholdings that continue to make up the majority of its portfolio, the Group may invest in public or private companies of a smaller size ; the Group is progressively developing a portfolio of alternative investments through Sienna Capital, a wholly-owned subsidiary of GBL, which holds significant investments in private equity funds, debt funds, and thematic funds. The evolution of the portfolio has been achieved while maintaining a sound financial structure at the level of the Group s holding companies, thus respecting the objective to not expose them to a high level of indebtedness. As at 31 December 2017, Pargesa Holding s net debt position was CHF 239 million, to be compared with a net asset value of CHF 10.8 billion. At that same date, GBL s net debt position stood at EUR 443 million, to be compared with a net asset value of EUR 18.9 billion. During the period and excluding Sienna Capital, EUR 6.5 billion of disposals have been achieved, while EUR 5.7 billion have been invested in 7 new listed companies worth EUR 8.5 billion at the end of Investments EUR 5.7 billion EUR 2.2 billion 2014 EUR 0.4 billion 2015 EUR 0.9 billion 2016 EUR 1.3 billion 2017 EUR 0.9 billion Disposals EUR 6.5 billion 2012 EUR 1.0 billion 2013 EUR 1.4 billion 2014 EUR 1.0 billion 2015 EUR 0.6 billion 2016 EUR 2.3 billion 2017 EUR 0.2 billion (1) During the past years a distinction was made in the presentation of the Group portfolio, between Strategic shareholdings, defined as investments with a value usually superior to EUR 1 billion, and the Incubator portfolio, comprising investments of a smaller size (ranging from EUR 250 million to EUR 1 billion). It was decided to no longer make this distinction. (1) Former name of ENGIE. 13

16 Pargesa Holding SA Annual Report 2017 Business report At 31 December 2017, the Group s portfolio (excluding Sienna Capital) was composed of 11 listed shareholdings, meeting the investment and governance criteria described above. Sectors Specialty Minerals Inspection, Verification, Test, Certification Cement & Aggregates Wines & Spirits Sports equipment Materials Technology & Recycling of Metals Oil & Gas Renewable Energies Chemicals Luxury fashion and accessories Hygiene Consumables Process Technology Regional Leisure Parks Sector positioning N 1 N 1 N 1 N 2 N 2 Top 3 Top 5 Top 5 Top 3 N 1 Top 3 Market capitalization (1) % Group s ownership (2) 53.8 % 16.6 % 9.4 % 7.5 % 7.5 % 17.0 % 0.6 % 6.5 % 20.0 % 4.3 % 21.2 % Shareholder since (3) Group s position as a shareholder N 1 N 1 N 2 N 2 N 1 N 1 N 11 N 3 N 1 N 5 N 2 Representation : Board of directors YES YES YES YES YES YES YES NO YES NO YES Number of representatives 6 /17 3 /10 2 /12 2 /13 1 /16 2 /11 1 /12 1 /10 1 /7 Committees YES (4), (5), (6) YES (4), (5) YES (4), (5), (6) YES (4), (5), (6) YES (4) YES (4) YES (4), (5) n.a. NO n.a. YES (5) (1) At 31 December, in EUR million excluding SGS and LafargeHolcim (CHF million) as well as Burberry (GBP million). (2) Equity interest. (3) The Group was originally a shareholder of Petrofina which merged in 1999 with Total. The combined entity then merged with Elf in (4) Audit committee. (5) Nomination and/or remuneration committee. (6) Strategic committee. Including Sienna Capital, whose fair value was estimated at EUR 926 million at the end of 2017, the aggregate portfolio value (at the level of GBL) has increased from EUR 12.3 billion at the end of 2011 to EUR 18.8 at the end of The evolution of the composition of the portfolio during the period can be illustrated with the following graphs : Relative weighting : Portfolio at the end of 2011 Portfolio at the end of % 1% 15% 30% 4% 8% Sienna Capital 18% 1% 14% 20% 15% Other 3% 3% 3% 12% 3% 13% 14% 2% 14% 2% 14

17 Pargesa Holding SA Annual Report 2017 Business report Evolution by geographies (company s headquarters) : Portfolio at the end of 2011 Portfolio at the end of % 10% Other France 97% 16% 5% Belgium Sienna Capital Germany France 36% 3% UK Spain Switzerland 1% 29% Evolution by sector : Portfolio at the end of 2011 Portfolio at the end of % Other 5% Sienna Capital 15% Consumer goods 15% 4% Energy Services 53% Energy/Utilities 42% Industry 29% Industry 34% Consumer goods Evolution by asset type : Portfolio at the end of 2011 Portfolio at the end of % Other 5% Sienna Capital 15% Growth 4% Value/yield 53% Value/yield 34% Value/growth 29% Value/growth 57% Growth 15

18 Pargesa Holding SA Annual Report 2017 Business report and early 2018 highlights As a reminder, GBL sold at the beginning of % of ENGIE s share capital, representing almost all of its remaining interest in that company, for net proceeds of EUR 145 million and generating an accounting gain of EUR 1 million. Furthermore, the remaining balance (EUR 306 million) of the bonds exchangeable for ENGIE shares which were issued by GBL in 2013 was redeemed in cash at maturity, on 7 February In May 2017, GBL successfully completed a 7-year bond issue for EUR 500 million with a coupon of %. The proceeds from this issuance are intended to cover GBL s general corporate purposes. This transaction allowed GBL to extend its average debt maturity profile and to further diversify its financing sources. In December 2017, GBL repaid at maturity the EUR 350 million retail bond with a 4 % coupon. Burberry Group Plc ( Burberry ) announced in February 2017 that GBL had crossed upwards the 3.0 % threshold of the voting rights of the company, then in July 2017, the 4.0 % threshold and later, in November 2017, the 6.0 % threshold. As at 31 December 2017, GBL held 6.5 % of Burberry s share capital, worth EUR 557 million. In March 2017, GBL participated in the capital increase realized by Ontex, with the objective to refinance the company following the acquisition of the hygienic consumables activity of Hypermarcas. Following this operation, GBL s ownership in Ontex remains unchanged at %. Furthermore, the general shareholders meeting of Ontex of 24 May 2017 approved the election of a GBL representative on the board of directors. At 31 December 2017, the market value of the investment in Ontex amounted to EUR 454 million. GBL announced on 12 April 2017 the acquisition of a 15.0 % interest in the capital of Parques Reunidos Servicios Centrales, S.A. ( Parques ). Parques, whose shares are listed on the Madrid Stock Exchange, is a reference operator of regional leisure parks. With a presence in 14 countries, Parques operates more than 60 parks, primarily in Europe and the USA. On 25 April 2017, Parques co-opted a GBL representative on its board of directors. At the end of 2017, GBL crossed the 20 % threshold in Parques capital and held, at 31 December 2017, 21.2 % of the share capital of the company, worth EUR 254 million. On 18 July 2017, Imerys announced that it had completed the acquisition of Kerneos, the world leader in high performance calcium aluminates binders for the building chemical markets. This operation enables Imerys to strengthen its innovation capability with a world-class technology platform and to step up its presence in China with 3 new plants. GEA Group ( GEA ) announced on 3 August 2017 that GBL had crossed the 3.0 % threshold of the voting rights of the company. GEA, from Germany, is a worldwide leader in the supply of equipment and project management for a wide range of processing industries, primarily in the Food & Beverage sectors. At 31 December 2017, GBL held 4.3 % of the share capital of GEA, representing a market value of EUR 328 million. On 8 February 2018, Umicore announced that it had raised EUR 892 million from institutional investors and other investors through an accelerated bookbuild. The new shares, which represent 10 % of the number of outstanding shares prior to the transaction, were issued at a price of EUR per share. GBL participated in the capital increase by investing EUR 144 million, which slightly diluted GBL s shareholding to 16.9 % of Umicore s capital, compared with 17.0 % prior to the transaction. At the level of Sienna Capital : Ergon Capital Partners III (ECP III) sold in March 2017 its majority stake in Golden Goose, an Italian designer of shoes, clothes and contemporary accessories. This transaction generated a consolidated gain of EUR 112 million for GBL, or CHF 64.3 million at the level of Pargesa ; On 25 July 2017, ECP III sold its interest in ELITech, a manufacturer of specialty in-vitro diagnostics equipment and reagents. This transaction generated a gain of EUR 104 million for GBL (CHF 60.1 million at the level of Pargesa) ; In September 2017, ECP III acquired a majority stake in Keesing Media Group, the leading European publisher of games and puzzle magazines ; In November 2017, ECP III announced the signature of an agreement for the acquisition of svt Holding GmbH ( svt ). This German company is one of the leaders in preventive passive fire protection. The acquisition was finalized in January In February 2018, an agreement to acquire Rolf Kuhn GmbH was signed. The merger of these two players of the fire protection sector is subject to customary antitrust approvals ; In December 2017, Ergon Capital Partners launched a new fund (ECP IV), with a first closing expected in 2018 and a targeted fundraising of EUR 500 million. Sienna Capital committed EUR 200 million to this new fund ; In February 2018, Ergon Capital Partners II entered into exclusive negotiations with Regal Beloit in order to sell its stake in Nicotra Gebhardt. The completion of the transaction is subject to customary antitrust approvals. 16

19 Pargesa Holding SA Annual Report 2017 Business report In February 2017, Sagard 3 acquired 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 ; In September 2017, a group of investors announced they had entered into exclusive negotiations with Sagard 3 and Alvest s management team, to acquire a significant stake in Alvest, the global leader in the production and distribution of airport ground support equipment. The transaction was finalized in January 2018, and Sagard 3 reinvested in the capital of the company ; In November 2017, the shareholders (including Sagard) of Kiloutou, one of the European leaders of rental construction equipment, entered into exclusive negotiations for the sale of a majority shareholding position in the company. The transaction was finalized in February 2018 ; In December 2017, Sagard entered into exclusive negotiations for the acquisition of a majority shareholding in Climater, one of the French leading firms in climatic engineering (installation and maintenance of air conditioning, heating and ventilation systems in buildings). The investment was completed in January It is also reminded that at the end of 2016, Kartesia launched a new investment fund, in which Sienna Capital made a commitment for EUR 150 million. In 2017, the fundraising was closed with total commitments of EUR 870 million. During Q2 2017, Mérieux Participations II (MP II) acquired a minority shareholding in Xeris Pharmaceuticals Inc., a biopharmaceutical company developing injectable therapeutics for multiple indications including diabetes. MP II has also acquired a minority stake in Ivantis Inc., a company dedicated to the development of new and innovative solutions for glaucoma. On 29 September 2017, Sienna Capital, committed EUR 25 million in Backed 1 LP ( Backed ), a venture capital fund established in London and specialized in the sector of new digital technologies ; On 8 March 2018, Sienna Capital committed to invest EUR 250 million alongside funds affiliated with the investment firm KKR in Flora Food Group ( FFG ), the Spreads division of Unilever. FFG is the world leader in margarine and plant-based cooking products, present in 69 countries and generating pro forma sales of around EUR 3.0 billion in FFG s portfolio is made up of consumer brands such as Becel, Flora, Country Crock, Blue Band, Rama and ProActiv. The completion of the transaction is expected in mid-2018, subject to regulatory approvals and employee consultations in certain jurisdictions. At 31 December 2017, GBL s commitments with respect to Sienna Capital amounted to EUR 733 million (EUR 601 million at 31 December 2016). 17

20 Pargesa Holding SA Annual Report 2017 Business report 3. Consolidated results for Presentation of results in accordance with IFRS The simplified income statement in accordance with IFRS is as follows : CHF million Operating income Operating expenses ( ) ( ) Other income and expenses (579.4) Operating profit (loss) (68.7) Dividends and interest from long-term investments Other financial income and expenses (141.0) (48.8) Taxes (165.3) (163.2) Income from associates and joint ventures Consolidated net profit (before non-controlling interests) Attributable to non-controlling interests (584.4) (151.4) Attributable to Pargesa shareholders (Group share) (32.0) Basic earnings per share attributable to Pargesa shareholders (CHF) 4.51 (0.38) Average number of share (thousands) Average EUR/CHF exchange rate Operating income and expenses are primarily the revenues and operating expenses of Imerys, whose accounts are fully consolidated. Other income and expenses include net capital gains and losses as well as impairments and reversals of previous impairments on Group shareholdings and operations. In 2017, this figure mainly comprises the gains realized by ECP III on the sale of its investments in Golden Goose and ELITech for a total amount of CHF million. For 2016, this item included primarily the impairment charges recorded by GBL on its investments in LafargeHolcim and ENGIE for a net aggregate amount of CHF million (of which, CHF million were related to LafargeHolcim), as well as the impact of the gain recorded by GBL on the sale of 1.8 % of Total s share capital (CHF million, including a historical foreign exchange gain of CHF 490 million at the level of Pargesa) and the accounting loss incurred from the sale of ENGIE shares (CHF 12.2 million). The dividends and interests from long-term investments item comprises the net dividends recorded by the Group from its nonconsolidated investments. The other financial income and expenses and taxes item includes Pargesa s, GBL s and Imerys figures. 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. These shareholdings are primarily held within Sienna Capital s portfolio or by Imerys (1). The item non-controlling interests mainly relates to the share of income attributable to the minority shareholders of GBL and Imerys, these two companies being fully consolidated into Pargesa s financial statements Economic presentation of Pargesa s financial results In addition to the accounts drawn up in accordance with IFRS, Pargesa publishes 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 on one hand, of the holding companies activities on the other hand, to its results (Group share). Because IFRS require different accounting treatments depending on the Group s percentage holding in each of its investments (full integration of GBL and Imerys, equity method for Parques Reunidos since end of 2017 GBL having crossed the threshold of 20 % of capital in the company at the end of the year, with other Group shareholdings being classified as Available for sale financial assets, notably), the analysis of the evolution of these contributions from the consolidated accounts may sometimes be difficult to achieve. (1) As mentioned in 3.2, the Groups participation in Parques Reunidos is accounted for using the equity method since end of The Group will therefore account its share in the results of the company from 1 January

21 Pargesa Holding SA Annual Report 2017 Business report The economic presentation is intended to illustrate in an analytical approach the origin of the formation of the consolidated result (Group share) of Pargesa, and more specifically, on one hand, the contribution of the various components of the portfolio (Pargesa s share), and, on the other hand, the contribution from holding companies activities (Pargesa and its share of GBL s holding activities). The analysis also draws a distinction between the operating and non-operating items in the income, the non-operating part including in particular net capital gains and losses in connection with disposals as well as any restructuring charges and impairments or reversals of previous impairments (with the exception of GBL s results from trading activities, as well as net results from disposals or impairments recorded by private equity and other investment funds, which, due to the business model of this asset class, are included in operating income). Per this presentation : the economic operating income highlights (1) : the contribution of the portfolio s shareholdings, which is constituted of Pargesa s share in the operating result (as defined above) of such shareholdings which are fully consolidated (Imerys) or consolidated using the equity method (none in 2016 and 2017), as well as in the dividends paid by the non-consolidated shareholdings ; the net contribution from private equity and other investment funds activities (combined under Sienna Capital at GBL) ; and the impact of net financial income (or expenses) and general expenses and income taxes of the holding companies. non-operating income includes, on one hand, Pargesa s share of non-operating items from shareholdings that are fully consolidated (Imerys) or consolidated using the equity method (none in 2016 and 2017), and, on the other hand, non-operating income generated at the level of the holding companies (Pargesa and its share of the non-operating income of GBL). the sum of economic operating income and non-operating income corresponds to the net income (Groups share), as reported in the consolidated financial statements. Remarks : 1) IFRS 9, which came into effect on 1 January 2018, notably changes the treatment of variations in the fair value of Available-for-sale financial assets (AFS), which currently constitute the majority of the Group s portfolio. It is reminded that the AFSs are valued in the balance sheet at their fair value (being the market value for listed securities), the variations of which until now were recorded via shareholder s equity. These changes in value did not influence the income statement except in the following cases : in case of a disposal : changes in fair value previously recorded in shareholder s equity since the time of acquisition were then recorded through income statement, or ; in the event of an impairment : the (negative) change in fair value since the acquisition was recorded through income statement (the same treatment applied to any additional negative variation) without the possibility of reversal (except in the case of a disposal). As of 1 January 2018, the AFSs will continue to be recorded at fair value, with changes in fair value to be recorded at the option of the company : either systematically through income statement : all positive or negative changes in the market value of listed AFSs (or the fair value in the case of unlisted AFSs) will therefore directly impact the income statement (the change in fair value that will be recorded in the income statement in Q will represent the difference between the fair value at 31 March 2018 and the fair value at 1 January 2018 (2) ); or in shareholder s equity : all positive or negative changes in the market value of listed AFSs (or fair value in the case of unlisted AFSs) will impact the consolidated reserves, and the corresponding amounts will never be recycled in the income statement, even in the case of a disposal. Moreover, AFSs will no longer be subject to impairments recorded through income statement. It should be noted that this choice can be made (i) globally for all AFSs or (ii) individually. The Group has opted for the method of recording changes in fair value of the main AFSs (3) via shareholder s equity (excluding those of Sienna Capital funds that meet the AFS classification criterion, for which changes in fair value will be recorded through the income statement). Therefore, non-operating income should no longer record, as from the 2018 financial year, any gain or loss on disposal nor impairment charge on AFSs for which the option for the method of recording changes in fair value through shareholder s equity has been retained. In addition, the contribution from the main AFSs to the economic operating income will continue to be constituted by the dividends. (1) Note : at the level of the economic operating income, the contributions of all the shareholdings as well as from the private equity and other investment funds activities are all set on the same level ( Contribution from the portfolio to operating income ). (2) As a result, changes in fair value previously recorded in shareholder s equity until 31 December 2017 will never be recorded through income statement. (3) This option currently involves the following AFSs : SGS, LafargeHolcim, Pernod Ricard, adidas, Umicore, Total, Burberry, Ontex, and GEA. Parques Reunidos is accounted for using the equity method since end of

22 Pargesa Holding SA Annual Report 2017 Business report 2) As mentioned on page 13, it was decided to no longer make a distinction between Strategic investments and Incubator investments in the presentation of the Group s portfolio and therefore in the economic presentation of Pargesa s results. For the sake of consistency, it was also decided to present in the operating income the contributions from the participations and the contribution from private equity and other funds activities under the same heading entitled Contribution from the portfolio to operating income. In the table below, the presentation of the economic results for the year 2016 has therefore been restated accordingly (1). According to this approach, the economic results at 31 December 2017 can be analyzed as follows : CHF million Contribution from the portfolio to operating income Consolidated shareholdings : Imerys share of operating income Non-consolidated shareholdings : LafargeHolcim net dividend SGS net dividend Pernod Ricard net dividend Total net dividend adidas net dividend Umicore net dividend Ontex net dividend Burberry net dividend Parques Reunidos net dividend 1.7 GEA net dividend 1.2 ENGIE net dividend Contribution from private equity and other funds Contribution from the portfolio to operating income per share (CHF) Net financial income and expenses (20.3) 8.1 General expenses and taxes (35.3) (29.5) Economic operating income per share (CHF) Non-operating income (loss) from consolidated shareholdings (11.0) (21.4) Non-operating income (loss) from holding company activities 8.8 (331.5) Net income (loss) (32.0) per share (CHF) 4.51 (0.38) Average number of shares (thousands) Average EUR/CHF exchange rate Most of the income comes from GBL, whose results are denominated in Euros. The average EUR/CHF exchange rate in 2017 was 1.112, compared with in 2016, which represents an increase of +2.0 %. (1) In the press release dated 17 March 2017 announcing the results for the 2016 financial year, the contribution (dividends) from the investments then classified in the Incubator portfolio appeared under the heading Other operating income from holding company activities. 20

23 Pargesa Holding SA Annual Report 2017 Business report Economic operating income : Contribution from the portfolio to operating income Consolidated shareholdings (Imerys): Imerys reported net income from current operations of EUR million in 2017, an increase of 11.4 % compared with 2016 (EUR million). Pargesa s share of Imerys net income from current operations, in Swiss francs terms, was CHF million in 2017, compared with CHF million in After taking into account non-operating items of EUR million (1) net of taxes (which include transaction costs in particular), Imerys net income was EUR million in 2017 (in 2016, Imerys net income amounted to EUR million after taking into account non-operating items of EUR million net of taxes). Non-consolidated shareholdings : The contributions from LafargeHolcim, SGS, Pernod Ricard, Total, adidas, Umicore, Ontex, Burberry, Parques Reunidos, GEA and ENGIE represent Pargesa s share of net dividends recorded by GBL. The contribution of the non-consolidated shareholdings amounts to CHF million in 2017, compared with CHF million in It is reminded that in 2016, the forward sales of Total and ENGIE shares initiated by GBL had allowed the Group to continue to receive interim dividends on the underlying shares until the maturity of the forward sales contracts (2). The contribution from LafargeHolcim amounts to CHF 59.7 million in 2017, compared with CHF 44.3 million in The variance in the contribution reflects primarily the increase of the annual dividend paid by the company (CHF 2.00 per share in 2017, compared with CHF 1.50 in 2016, a 33 % increase). SGS contribution came in at CHF 45.9 million in 2017, compared with CHF 41.5 million in The year-over-year variance in the contribution results primarily from the increased dividend per share paid by SGS (CHF 70, versus CHF 68 in 2016, up 2.9 %), as well as from the increase of GBL s ownership in the company. Pernod Ricard s dividend for the financial year amounted to EUR 2.02 per share (consisting of an interim dividend of EUR 0.94 and a final dividend of EUR 1.08), against EUR 1.88 for the previous financial year (consisting of an interim dividend of EUR 0.90 and a final dividend of EUR 0.98), an increase of 7.4 %. Pernod Ricard s contribution in 2017 amounted to CHF 22.8 million compared with CHF 21.2 million in The contribution from Total was CHF 19.8 million in 2017, compared with CHF 28.0 million in The final 2016 dividend and the three interim dividends for 2017 amounted to EUR 0.62 per share each, a 1.6 % increase over the corresponding amounts in 2016 (EUR 0.61). The smaller contribution from this holding reflects the impact of the disposal of Total shares by GBL in 2016 (3). The contribution from adidas in 2017 amounted to CHF 14.9 million, compared with CHF 10.7 million in This increase reflected primarily the increase in the dividend paid by adidas (EUR 2.00 per share, up from EUR 1.60 in 2016, an increase of 25 %), as well as the increase of GBL s ownership in the company. The contribution from Umicore amounted to CHF 14.4 million in 2017, compared with CHF 14.1 million in 2016, and represents Pargesa s share of the final dividend related to 2016, or EUR 0.35 per share (unchanged from the previous year), as well as the interim dividend related to the 2017 financial year of EUR per share (EUR 0.30 per share in 2016) (4). Ontex s contribution in 2017 amounts to CHF 5.0 million, compared with CHF 2.9 million in This increase is mainly due to the increase in the annual dividend paid by Ontex in 2017 (EUR 0.55 per share against EUR 0.46 in 2016, or %), as well as from additional investments made by GBL. Burberry s contribution in 2017 amounts to CHF 5.1 million, compared with CHF 3.3 million in The increase results partly from the increase in the Burberry s dividend per share as well as from the increase of GBL s interest in the company. Burberry paid in 2017 the final dividend related to the financial year (GBP per share compared with GBP in 2016) and declared an interim dividend for the financial year of GBP per share (GBP in the previous year). (1) In the economic presentation of results, Pargesa s share of non-operating items recorded by Imerys appears under Non operating income (loss) from consolidated shareholdings. (2) In 2016, the corresponding aggregate amount of interim dividends amounted to CHF 21.7 million at the level of Pargesa. (3) It is also reminded that the contribution from Total was negative in Q1 2016, as explained in previous press releases. (4) The dividend per share is indicated post 2 for 1 split of the Umicore shares, effective 16 October

24 Pargesa Holding SA Annual Report 2017 Business report The contributions from Parques Reunidos for CHF 1.7 million and GEA for CHF 1.2 million reflect the new investments made in 2017 by GBL in these companies. It should be noted that with respect to Parques Reunidos, which is accounted for using the equity method as of the end of 2017, the contribution in 2018 will be constituted by Pargesa s share of the company s income instead of its share of the dividend. The significant reduction in ENGIE s contribution (CHF 0.1 million, compared with CHF 26.4 million in 2016) is the consequence of the sale of shares of ENGIE by GBL in Q and Q Contribution from private equity and other funds : The contribution from private equity and other investment funds activities comes primarily from investment funds held by GBL through Sienna Capital, and also includes general expenses and management fees. In 2017, the net contribution from these activities came in at CHF million, including Pargesa s share of the gains recorded by ECP III on the sale of its investments in Golden Goose (EUR 112 million for GBL, or CHF 64.3 million at the level of Pargesa) and ELITech (EUR 104 million for GBL, or CHF 60.1 million for Pargesa), as well as the contributions from Kartesia (CHF 13.9 million) and Mérieux Participations II (CHF 4.3 million). Comparatively, the contribution from these activities came in at CHF 38.2 million in 2016, and included Pargesa s share of the gains recorded by ECP III from the sale of its interest in De Boeck group (CHF 29.1 million) and by Sagard II from the sale of its stake in FläktWoods (CHF 9.1 million), as well as the contribution from Kartesia (CHF 12.6 million). Contribution from holding companies to operating results Net financial income and expenses, which includes interest income and expenses, as well as other financial income and expenses, amounted to CHF 20.3 million in 2017 compared with CHF +8.1 million in Interest income and expenses recorded by Pargesa as well as its share in those recorded by GBL represented CHF 21.7 million in 2017, compared with CHF 22.2 million in Other financial income and expenses include in particular : the impact of the marking to market, at the end of each period, of the derivative instruments implicitly embedded in the outstanding exchangeable and convertible bonds issued by GBL. Pargesa s share of this impact, which in 2017 relates only to GBL s convertible bonds, was CHF 6.2 million. In 2016, the comparative figure was CHF million (including CHF million related to the bonds exchangeable for ENGIE shares) ; the net CHF 4.4 million impact resulting from the cancellation of the derivatives embedded in the bonds exchangeable for ENGIE shares redeemed at maturity by GBL in February In 2016, the impact of the cancellation of the derivatives embedded in bonds exchangeable for ENGIE shares repurchased by GBL over the period amounted to CHF 9.8 million ; Pargesa s share of the realized and unrealized results recorded by GBL from trading activities (including dividends) and derivatives used by GBL in managing its portfolio. Pargesa s share of results from these activities was CHF 16.2 million in 2017, compared with CHF 3.1 million in The general expenses and taxes item represents Pargesa s own general expenses and taxes as well as its share of those of GBL. Non-operating income : Non-operating income from consolidated shareholdings represents Pargesa s share of Imerys non-operating items, which, as indicated above, amounts to EUR 35.2 million in 2017 (EUR 69.3 million in 2016). The net non-operating income from holding company activities amounts to CHF 8.8 million in 2017, and includes in particular, the impact of the redemption at maturity of the balance of the bonds exchangeable for ENGIE shares (extinction of the balance of the debt). In 2016, the net non-operating loss from holding company activities of CHF million included primarily : Pargesa s CHF million share of the impairment charges recorded by GBL on its holding in LafargeHolcim at 31 March and 30 June 2016 (EUR million in aggregate) ; Pargesa s CHF 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 million for Pargesa ; the impact of an additional impairment charge on the investment in ENGIE as well as the accounting loss recorded on the disposal of shares of that company, for an aggregate amount of CHF 40.6 million ; the impact of the repurchase and cancellation (extinction of the corresponding debt) of around 69 % of the bonds exchangeable for ENGIE shares, for a net amount of CHF +2.7 million for Pargesa. 22

25 Pargesa Holding SA Annual Report 2017 Business report 4. Evolution of Pargesa s net asset value (1) in 2017 Pargesa s net asset value amounted to CHF million at 31 December 2017, or CHF per share compared with CHF million or CHF per share at 31 December Net asset value increased by 22.1 % over the period, of which 7.9 % results from the favourable evolution of the EUR/CHF spot rate during the period (2). The table below offers a detailed view of Pargesa s flow-through net asset value at 31 December The net asset value is calculated by taking, on one hand, the assets and liabilities of Pargesa (excluding Pargesa s participation in GBL) and, on the other hand, Pargesa s share in the value of the portfolio, the net cash or net debt position and the other assets and liabilities of GBL. The net asset value is calculated on the basis of current market values and exchange rates for listed shareholdings, and on the fair value and current exchange rates for private equity and other investment funds. Pargesa s net asset value per share is shown in relation to one bearer share with a par value of CHF 20, with registered shares (par value : CHF 2 per share) being retained for one tenth of their number. Share price and currency Amount in CHF million Weighting as a % of total Share price and currency Amount in CHF million Weighting as a % of total Listed companies : Imerys EUR % EUR % SGS CHF % CHF % LafargeHolcim EUR % EUR % Pernod Ricard EUR % EUR % adidas EUR % EUR % Umicore EUR % EUR % Total EUR % EUR % Burberry GBP % GBP % Ontex EUR % EUR % GEA EUR % Parques Reunidos EUR % Other 42 1 % Other investments : Sienna Capital % % Other Pargesa 26 0 % 37 0 % Total portfolio % % GBL treasury shares % % Net cash (debt) (a) (147) (2%) (497) (5%) Net asset value % % per Pargesa share CHF CHF EUR/CHF exchange rate (a) This item includes in particular Pargesa s share of the market value of GBL trading portfolio. The evolution of Pargesa s net asset value in 2017 reflects in particular : the increase in the share prices of almost all the shareholdings ; the impact of new or additional investments made in 2017 ; the strengthening of the Euro vs the Swiss Franc. (1) This terminology replaces the one previously used Adjusted Net Asset Value, the calculation method remaining the same. (2) At constant exchange rate, using the EUR/CHF spot rate at 31 December 2016 (1.074), net asset value per share would have stood at CHF at the end of

26 Pargesa Holding SA Annual Report 2017 Business report 5. Total shareholder return The evolution of Pargesa s net asset value primarily reflects the evolution of the value of the underlying portfolio. For a shareholder, the total shareholder return (TSR) of an investment in Pargesa shares over a given period is also a performance indicator. TSR takes into consideration the evolution of Pargesa s share price as well as dividends paid during the period, which are assumed to be reinvested into additional shares. Pargesa aims at creating value over the long-term. Over a 20-year period, Pargesa s annualized TSR stands at 7.4 %. Expressed in a different way, the value of CHF 100 invested at the end of 1997 in Pargesa s shares would represent CHF 414 at the end of 2017, assuming dividends have been reinvested. Over the same 20-year period, Pargesa has distributed an aggregate amount of CHF 3.6 billion in dividends to its shareholders, while the dividend per share increased at an annual growth rate of 2.7 % Pargesa BEL 20 CAC 40 SMI Total shareholder return (annualized): Pargesa 7.4% BEL % CAC % SMI 4.5% The table below gives an overview of Pargesa s annualized TSR over different periods ending 29 December 2017, in comparison with SMI, BEL 20 and CAC 40 indices over the same periods. 1 year 3 years 5 years 10 years 19 years (1) 20 years Pargesa (in CHF) 31.8 % 6.8 % 10.0 % 0.6% 6.5 % 7.4 % Pargesa (in EUR) (2) 20.8 % 7.7 % 10.7 % 2.9 % 8.3 % SMI (in CHF) 17.9 % 4.8 % 10.0 % 4.2 % 3.7 % 4.5 % BEL 20 (in EUR) 14.5 % 10.7 % 14.4 % 3.5 % 4.2 % 6.2 % CAC 40 (in EUR) 12.6 % 11.3 % 11.6 % 3.2 % 4.4 % 6.0 % (1) Since the introduction of the Euro. (2) Pargesa Group s portfolio is mainly made up of shares listed in Euro. Source : Bloomberg daily basis 24

27 Pargesa Holding SA Annual Report 2017 Business report 6. Proposals at the Annual General Meeting of 3 May Appropriation of profit At the Annual General Meeting, the Board of Directors will propose the payment for fiscal year 2017 of a dividend of CHF 2.50 per bearer share (compared with CHF 2.44 in the previous year, an increase of 2.5 %) and CHF per registered share, representing a total distribution of CHF million which will take place on 15 May Election of Board members, election of the Chairman of the Board 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 elect individually each year the members of the Board of Directors and its Chairman, as well as the members of the Compensation Committee. The Board of Directors of Pargesa Holding SA will recommend to re-elect as board members Paul Desmarais Jr (also as Chairman of the Board of Directors), Bernard Daniel, Victor Delloye, André Desmarais, Paul Desmarais III, Cedric Frère, Gérald Frère, Ségolène Gallienne, Jean-Luc Herbez, Barbara Kux, Jocelyn Lefebvre, Michel Pébereau, Gilles Samyn, Amaury de Sèze and Arnaud Vial for a term of one year which will expire at the end of the 2019 Annual General Meeting. The Board of Directors will also recommend that Bernard Daniel, Jean-Luc Herbez, Barbara Kux, Gilles Samyn and Amaury de Sèze be re-elected to the Compensation Committee for a one-year term expiring at the end of the 2019 Annual General Meeting. 6.3 Renewal of the authorized capital : amendment to Article 5 bis of the Articles of Association The Board of Directors will recommend to the Annual General Meeting to renew the authorized capital for a period of two years and consequently to amend Article 5 bis para. 1 of the Articles of Association, as follows (changes in bold) : The Board of Directors is authorised to increase, until 3 May 2020, the share capital by up to two hundred and fifty-three million Swiss francs (CHF ) through the issuance of a maximum of bearer shares with a nominal value of CHF 20 each and a maximum of registered shares with a nominal value of CHF 2 each. The new shares are required to be fully paid-in. The Board of Directors may increase the share capital in one or several portions. 25

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29 02 GROUP PORTFOLIO Escalade Fountain - District : Eaux-Vives Cité Geneva 27

30 Pargesa Holding SA Annual Report 2017 Group portfolio GBL Pargesa Holding holds 50 % of the share capital (1) of Groupe Bruxelles Lambert ( GBL ), an established investment holding company with over sixty years of stock exchange listing. Profile GBL holds the portfolio of the Pargesa Group. At 31 December 2017, this portfolio comprised shareholdings in 11 listed companies with an aggregate market value of EUR 17.9 billion, as well as, though GBL s subsidiary Sienna Capital, alternative investments with an aggregate estimated fair value of EUR 0.9 billion. At that same date, GBL s net asset value stood at EUR 18.9 billion, or EUR per share, and its market capitalization was EUR 14.5 billion. Key financial data EUR million Overall data (EUR million) Shareholders equity (group share) NAV Market capitalization Consolidated net income (loss) (group share) (458) 705 Per-share data (EUR) NAV Closing share price Consolidated net income (loss) 6.61 (2.95) 4.53 Dividend (1) Shares issued (in million) Pargesa s interest (%) (1) Subject to approval at the annual general meeting on 24 April Portfolio In 2017, GBL further pursued its portfolio rebalancing strategy through the redeployment of EUR 0.9 billion of capital in 4 shareholdings, including two new investments. GBL : progressively increased its interest in Burberry to 6.5 % at year-end 2017 (market value : EUR 557 million). participated in March 2017 in the EUR 221 million capital increase completed by Ontex following its acquisition of the hygienic consumables activity of Hypermarcas, thus maintaining its ownership at % (market value : EUR 454 million at year-end). GBL is represented at the board of directors of the company since May announced in April 2017 the acquisition of a 15.0 % interest in the share capital of Parques Reunidos, a reference operator of leisure parks in Europe, North America and Asia. GBL subsequently further increased its stake to % (market value : EUR 254 million at year-end). GBL is represented at the board of directors of the company. started to invest progressively in GEA, a worldwide leader in the supply of equipment and project management for a wide range of processing industries, primarily in the Food & Beverage sectors. At year-end 2017, GBL held 4.3 % of the company s share capital (market value : EUR 328 million). In February 2018, GBL participated in the EUR 892 million capital increase completed by Umicore, representing an investment of EUR 144 million for GBL. The proceeds will be used by Umicore to fund growth investments, in particular in cathode materials, and will provide increased financial flexibility to the group. Following this transaction, GBL remains Umicore s largest shareholder with an ownership percentage almost unchanged at %, compared with % prior to the transaction. (1) At 31 December 2017, Pargesa held 51.8 % of GBL s voting rights, taking into account the suspended voting rights related to treasury shares. 28

31 Pargesa Holding SA Annual Report 2017 Group portfolio GBL GBL David Plas Sienna Capital made new commitments in 2007 to (i) Ergon s fourth investment vehicle, for EUR 200 million and (ii) Backed, a venture capital fund specialized in new digital technologies, for EUR 25 million. In March 2018, Sienna Capital committed to invest EUR 250 million alongside funds affiliated with the investment firm KKR, in Flora Food Group ( FFG ), Unilever s Spreads business. In 2017, GBL completed its exit from the utilities sector, with the disposal, for EUR 145 million, of the balance of the shares in ENGIE used to cover the bonds exchangeable into shares of that company still outstanding. These bonds, which were issued in 2013, matured in February Financial position In May 2017, GBL took advantage of the historically low interest rate environment to issue a EUR 500 million 7-year inaugural institutional bond with a % coupon. In December 2017, GBL repaid at maturity the EUR 350 million retail bond with a 4 % coupon. As at 31 December 2017, GBL s net debt position was EUR 443 million Results Consolidated net result (group share) was EUR 705 million in 2017, compared with a net loss of EUR 458 million in In 2017, net result was primarily driven by : GBL s share of Imerys net earnings, for EUR 200 million (EUR 160 million in 2016) ; the contribution (dividends received) from non-consolidated portfolio companies, almost at the same level as in 2016 despite the expected reduction in the contributions from Total and ENGIE, as a result of disposals made in 2016 and in the first quarter of 2017 ; and the net gains recorded on the disposals of Golden Goose and ELITech by ECP III, one of Sienna Capital s fund managers, which amounted to EUR 216 million in aggregate at the level of GBL. It is reminded that in 2016, GBL s net result was affected in particular by an impairment charge recorded on the investment in LafargeHolcim (EUR million) and an additional impairment charge on the investment in ENGIE (EUR 62 million), partly offset by a gain of EUR 732 million resulting from the sale of 1.8 % of the share capital of Total. Dividend for the 2017 financial year At GBL s annual general meeting to be held on 24 April 2018, a gross dividend for the 2017 financial year of EUR 3.00 per share will be recommended. This represents an increase of 2.4 % over the dividend for the previous year (EUR 2.93). 29

32 Pargesa Holding SA Annual Report 2017 Group portfolio Imerys Imerys is the world leader in mineral-based specialty solutions for industry Profile N o 1 Global leader in mineral-based solutions for industry 4.6 EUR billion in turnover Over 50 Countries where Imerys is active Over Employees 24% 25% Geographic breakdown of 2017 revenue 28% 5% EUR million 43% Segment breakdown of 2017 revenue 29% 19% EUR million 27% Japan/Australia USA/Canada Western Europe Emerging countries High Resistance Minerals Ceramic Materials Filtration & Performance Additive Solutions for Energy & Specialties Imerys extracts, transforms, develops and combines a unique range of minerals to provide functionalities that are keys to its customers products and production processes. These specialties have a very wide range of applications and are used in numerous growing markets. Key financial data EUR million Simplified income statement Revenue Current operating income Net income from current operations (group share) Net income (group share) Simplified balance sheet Shareholders equity (group share) Net debt Debt-equity ratio (%) Net debt/ebitda (x) Performance in 2017 In 2017, the group s results increased significantly and its cash flow generation was robust. Imerys largely exceeded its growth target for net income from current operations. The group broadened its business portfolio with the acquisition of Kerneos, the world leader in calcium aluminate specialties on the fast-growing building chemicals market. It also completed several bolt-on acquisitions, which contributed for EUR 133 million to revenue in 2017 and enabled the group to broaden its specialty offering and develop its geographic presence in emerging countries such as Brazil, India and particularly China where Imerys now generates more than 7 % of its revenue. Revenue in 2017 stood at EUR million, a 10.4 % increase compared with This increase can be explained by (i) a 3.3 % organic growth in a markedly improved global macroeconomic environment, particularly in the second half of the year, (ii) a significant group structure effect of +7.9 %, particularly due to the consolidation of Kerneos from July 2017 (EUR 196 million) as well as to the other external growth operations completed in late 2016 and in 2017 (EUR 133 million), and (iii) a negative exchange rate effect of 0.8%, due to a negative currency translation impact in the second half of By business groups, revenue from Solutions for Energy & Specialties was up 6.1 % compared with 2016 (+4.0% at comparable structure and exchange rates) ; revenue from Filtration & Performance Additives increased by 8.1 % in 2017 (+5.3% at comparable structure and exchange rates) ; revenue from High Resistance Minerals (which includes Kerneos since July 2017) was up 53.1 % compared with 2016 (+10.7 % at comparable structure and exchange rates). Revenue from Ceramic Materials was down 3.2 % year-on-year ( 2.5% at comparable structure and exchange rates), although the Roofing division s sales levelled out in the fourth quarter. Current operating income stood at EUR 648 million in 2017, up 11.3 % from Operating margin improved by 10 basis points to 14.1 %, and takes into account a negative exchange rate impact in the second half, as well as the fact that several acquisitions were completed in In 2017, Imerys benefited from the positive contribution from volumes and the price-mix component (EUR +91 million in aggregate). The increase in variable costs (external production costs) remained under control (EUR +10 million), thanks to operating excellence programs in a context of rising prices for some raw materials. The EUR 45 million rise in fixed costs and general expenses resulted from the upturn in activity, from capital expenditure in production capacities, innovation, human resources and from programs intended to strengthen the group s competitiveness and support its future growth. 30

33 Pargesa Holding SA Annual Report 2017 Group portfolio Imerys Copyright Imerys location : Sylacauga (usa) Division Imerys Carbonates Photo creit JeFF Bird Net income from current operations (group share) increased by 11.4 % to EUR 403 million (EUR 362 million in 2016). Net income (group share) came in at EUR 368 million (EUR 293 million in 2016). Imerys generated in 2017 current free operating cash flow of EUR 358 million, compared with EUR 395 million in Net debt stood at EUR million at 31 December 2017, an EUR 880 million increase year-on-year, including the payment of the acquisitions made in 2017, the dividend payment (EUR 150 million) and the implementation of the share buy-back program (EUR 27 million). At the annual general meeting to be held on 4 May 2018, the board of directors will propose a dividend of EUR per share, corresponding to a 11 % increase compared with the previous year. Market data and information on the Group s investment in Imerys Stock market data Market capitalization (EUR million) Closing share price (EUR/per share) Current net income (EUR/per share) Dividend (EUR/per share) (1) Pargesa Group s investment Percentage of share capital (%) Percentage of voting rights (%) Market value of the investment (EUR million) (2) Imerys s contribution to the Group s portfolio 17.9% (1) Subject to the annual general meeting s approval (2) At the level of GBL 31

34 Pargesa Holding SA Annual Report 2017 Group portfolio SGS SGS is the world leader in inspection, verification, testing and certification Profile SGS provides tailored inspection, verification, testing and certification solutions to its customers to make their commercial activities faster, simpler and more efficient. Its worldwide network consists of more than employees in more than offices and laboratories. The group operates through 9 activities : Agriculture, Food and Life ; Minerals ; Oil, Gas and Chemicals ; Consumer and Retail ; Certification and Business Enhancement ; Industrial ; Environment, Health and Safety ; Transportation ; Governments and Institutions. N o 1 Worldwide leader 150 Countries where SGS is active Key financial data CHF million Simplified income statement Revenue Adjusted EBITDA Adjusted operating income Net income (group share) Simplified balance sheet Shareholders equity (group share) Net debt Debt-equity ratio (%) Net Debt/EBITDA (x) Employees Locations around the globe Geographic breakdown of 2017 revenue 26% CHF million 30% 44% Americas Europe, Africa and Middle East Asia Pacific Performance in 2017 The SGS group achieved solid results in Total revenue reached CHF 6.3 billion and SGS is on track to deliver the revenue growth projected in the 2020 strategic plan. On a constant currency basis, the group recorded revenue growth of 5.4 %, of which 4.2 % was organic and 1.2 % was contributed by recent acquisitions. On a reported basis, group revenue increased by 6.1 %. Significant growth was reported across the majority of the portfolio. Adjusted operating income reached CHF 969 million compared with CHF 919 million in 2016, an increase of 5.4 % on a constant currency basis. Adjusted operating income margin remained stable compared with 2016 at constant currency (15.3 %), with the improved underlying performance being partly offset by strategic investments. Net income for the period (group share) reached CHF 621 million, an increase of 14.4 %, mainly due to improved performance, fewer restructuring expenses and a one-time tax rate decrease to 22.0 % (2016: 24.0 %) driven by the US tax reform, and despite a non-tax deductible goodwill impairment charge of CHF 30 million impacting the Industrial activity. This activity continued to face headwinds from reduced and delayed maintenance and shutdowns in the oil and gas industry, as well as strong price competition resulting in pressure on revenue and profitability. The group generated solid operating cash flow at CHF 987 million, supported by strong underlying business performance revenue by activity 4% 18% OG&C G&I 8% 9% 5% 11% CHF million 14% 16% 15% AF&L C&R C&BE EH&S T M I C&BE : Certification and Business Enhancement ; EHS : Environment, Health and Safety ; G&I : Governments & Institutions ; OG&C : Oil, Gas & Chemicals ; AF&L : Agriculture, Food and Life ; C&R : Consumer & Retail ; T : Transportation ; M : Minerals ; I : Industrial 32

35 Pargesa Holding SA Annual Report 2017 Group portfolio SGS SGS SA 2018 all rights reserved Net investments in fixed assets were CHF 281 million and the group completed 12 acquisitions during the period for a total cash consideration payable of CHF 40 million. In 2017, the group paid a dividend of CHF 528 million. At 31 December 2017, the Group s net debt position amounted to CHF 698 million compared with CHF 736 million at 31 December The annual general meeting held on 19 March 2018 approved a dividend of CHF 75 per share, an increase of 7 % compared with the previous year (CHF 70 per share). Market data and information on the Group s investment in SGS Stock market data Market capitalization (CHF million) Closing share price (CHF/per share) Basic adjusted earnings per share (CHF/per share) (1) Earnings per share (CHF/per share) Dividend (CHF/per share) Pargesa Group s investement Percentage of share capital (%) Percentage of voting rights (%) Market value of the investment (EUR million) (2) SGS s contribution to the Group s portfolio 14.6% (1) Adjusted with depreciation of intangible assets and non-recurring items (2) At the level of GBL 33

36 Pargesa Holding SA Annual Report 2017 Group portfolio LafargeHolcim LafargeHolcim is the leading global construction materials and solutions company Profile 18% N o 1 In the construction materials sector Production s sites 80 Countries where LafargeHolcim is active Employees 14% 13% 21% Segment breakdown of 2017 net sales 8% CHF 26.1 billion 60% Solutions and products Aggregates Geographic breakdown of 2017 net sales 11% CHF 26.1 billion 28% Ready-mix Concrete Cement Latin America Middle East and Africa Asia-Pacific North America LafargeHolcim is the world leader in construction materials. The group offers the most innovative solutions to meet its customers needs. The group employs around persons in approximately 80 countries and has a balanced presence in developing and mature markets. Key financial data CHF million pro-forma Simplified income statement Net sales Recurring EBITDA Net income (group share) (1 469) (1 675) (1) Cash flow from operating activities Simplified balance sheet Shareholders equity (group share) Net debt Debt-equity ratio (%) Net debt/ebitda (x) (1) After CHF 3.8 billion in asset write-downs Performance in 2017 In 2017, LafargeHolcim continued to show improvements in the key measures relating to net sales and recurring EBITDA, driven by excellent cost discipline and commercial initiatives. Most regions recorded growth in 2017 in net sales and recurring EBITDA on a like-for-like basis, with four of the five regions reporting growth in recurring EBITDA. Reported net sales stood at CHF million in 2017, down 2.9 % compared with 2016 (CHF million). On a like-for-like basis however, net sales increased by 4.7 %. Volumes of cement sold were up 3.3 % like-for-like. Recurring EBITDA reached CHF million in 2017, compared with CHF in 2016 (1), an increase of 0.7 %. On a like-for-like basis, recurring EBITDA grew by 6.1 % in In Asia-Pacific, net sales increased by 6.7 % in 2017 on a like-for-like basis. Recurring EBITDA was 6.9 % lower than in 2016 on a like-for-like basis, reflecting contrasting progression of markets in the region. Solid performances recorded in India and China notably were offset by challenging market conditions in a cost inflationary environment in South East Asia. In Europe, net sales increased by 2.0 % like-for-like. Recurring EBITDA on a like-for-like basis was up 3.7 % in 2017 over the previous year. In the UK, the group posted good results in a resilient market while in France margins and contribution improved in the last quarter. In Switzerland, the challenging market environment persisted. In Latin America, net sales were up 11.0 % in 2017 compared with 2016 (like-for-like). Recurring EBITDA increased by 22.9 % on a like-for-like basis. Argentina recorded a strong performance, while Mexico s solid numbers were achieved in the face of less favourable macroeconomic factors. In Brazil, turnaround initiatives generated significant benefits in a persistently challenging environment. 27% Europe (1) Recurring EBITDA 2016 has been restated due to the reclassification of group s share of profit of a joint venture 34 in China.

37 Pargesa Holding SA Annual Report 2017 Group portfolio LafargeHolcim Lafarge Medialibrary Edouard Francois (architect) Performance in the Middle East-Africa region reflected a tough prior year comparable base for the fourth quarter and worsening conditions in some key markets. Recurring EBITDA for the region was up 3.5 % like-for-like in 2017, but was 30.4 % down in the fourth quarter. The group posted solid profits in Algeria despite weaker cement demand in an increased competitive environment. Nigeria recorded a strong margin progression supported by pricing and cost initiatives in an improving economic environment. In North America, net sales were slightly down in 2017 like-for-like ( 0.4%). Recurring EBITDA was up 10.5 % in 2017 (like-for-like), with a strong contribution from the US despite the decline in volumes. The early signs of recovery in the oil sector helped West Canada deliver improved results while East Canada increased its earnings contribution despite a challenging competitive environment. Net income (group share) before impairments and divestments increased by 11.3 %, to CHF million (CHF million in 2016). The group recorded impairments of CHF million in 2017, including CHF million related to operating assets. As a result, the group posted a net loss (group share) of CHF million in 2017, compared with net income of CHF million in Free cash flow stood at CHF million, up 1.5 % compared with Net debt stood at CHF million at year-end, an improvement of CHF 378 million over the prior year. The board of directors will recommend to the annual general meeting to be held on 8 May 2018 the payment of a dividend of CHF 2.00 per share, unchanged from the previous year. Market data and information on the Group s investment in LafargeHolcim Stock market data Market capitalization (CHF million) Closing share price (CHF/per share) Dividend (CHF/per share) (1) Pargesa Group s investment Percentage of share capital (%) Percentage of voting rights (%) Market value of the investment (EUR million) (2) LafargeHolcim contribution to the Group s portfolio 14.3% (1) Subject to the annual genneral meeting s approval (2) At the level of GBL 35

38 Pargesa Holding SA Annual Report 2017 Group portfolio Pernod Ricard Pernod Ricard, the world s number two in Wines & Spirits, holds a leading position globally Profile N o 2 Wines and spirits in the world 86 Countries where Pernod Ricard is active Over Employees 96 Active production sites Geographic breakdown of net sales 40% EUR million 29% 31% Asia/Rest of world Europe Americas Breakdown of profit from recurring operations 42% Asia/Rest of world Through organic growth and acquisitions, Pernod Ricard has become the world s number two player in the Wine & Spirits market, and has built up the most premium portfolio in the industry. This portfolio includes notably 13 Strategic International Brands, 15 Strategic Local Brands and 4 Strategic Wines, produced and distributed by the group through its own worldwide distribution network. The group s main brands are : Absolut, Ballantine s, Beefeater, Chivas Regal, Havana Club, Jameson, Malibu, Martell, Ricard, Royal Salute and The Glenlivet ; in champagnes : Mumm and Perrier Jouët ; and in Strategic Wines : Brancott Estate, Campo Viejo, Kenwood and Jacob s Creek. Key financial data EUR million Simplified income statement Net sales Profit from recurring operations Net profit (group share) Simplified balance sheet Shareholders equity (group share) Net debt Debt-equity ratio (%) Net debt/ebitda (x) Performance in (financial year ended 30 June 2017) In financial year , Pernod Ricard delivered a strong performance. Organic sales growth accelerated and reached 3.6 % (+4% on a reported basis), getting closer to the mid-term objective of 4 % to 5 %. The acceleration was driven in FY by the Strategic International Brands. In terms of geographies, the improvement was driven by the USA, China (back to growth), Eastern Europe and Global Travel Retail. Gross margin improved by 4 %: the mix turned positive (mainly due to Jameson and Martell), pricing was still muted and Costs of Goods Sold were tightly managed thanks to operational efficiency initiatives. Profit from Recurring Operations (PRO) recorded an organic growth of 3.3 % (+5% on a reported basis), despite unexpected regulatory changes in India : on an organic basis, PRO grew by 8 % in the Americas, 1 % in Asia/Rest of the World and 1 % in Europe. Operating margin was up by 35 bps, thanks to foreign exchange impacts (operating margin was almost table at same exchange rates and perimeter). Reported group share of net PRO and net profit were up 7 % and 13 %, respectively. Cash flow generation and deleveraging improved significantly. Free cash flow increased by 22 % during the financial year to EUR million, resulting in a significant deleveraging with net debt/ebitda ratio at average rates at 3.0x, down 0.4x vs. financial year , and net debt was down EUR 0.9 billion to EUR million. At the annual general meeting held on 9 November 2017, the shareholders approved a dividend of EUR 2.02 per share, a 7 % increase compared with the previous year. EUR million 25% Europe 33% Americas 36

39 Pargesa Holding SA Annual Report 2017 Group portfolio Pernod Ricard Pernod Ricard Medialibrary Performance in H (period from 1 July to 31 December 2017) Sales in H reached EUR million, with organic growth of 5.1 % (reported growth was 0.4 % due to unfavourable forex impact). All categories were dynamic, each growing at 5 %: Strategic International Brands continued their strong growth, driven in particular by Martell and Jameson, while both Strategic Local Brands (driven in particular by Indian whiskies) and Strategic Wines (due to Campo Viejo s momentum) accelerated. In terms of geographies, organic growth was 6 % in the Americas, 7 % in Asia-Rest of the World (including 8 % in China despite later Chinese New Year, 9 % in India and 19 % in Travel Retail Asia), and 3 % in Europe. PRO stood at EUR million compared with EUR million in the corresponding period in financial year, down 0.3 % on a reported basis due to the weakness of the US dollar. On an organic basis, PRO experienced a 5.7 % growth, resulting in a 21 bps increase in organic PRO margin reflecting in particular a 65 bps improvement in gross margin ratio (partly enhanced by phasing) and despite an increase of 7 % in advertising and promotion expenses. Group share of net PRO was EUR 994 million compared with EUR 957 million in H , up 4 % on a reported basis thanks to a reduction in financial expenses and despite adverse forex impact. At constant exchange rates, group share of net PRO was up 10 %. Net income (group share) was EUR million for the period compared with EUR 914 million in H , an increase of 25 % due in particular to the reduction in financial expenses and positive non-recurring items. Free cash flow increased significantly to EUR 7 99 million compared with EUR 658 million in H (+21 %). Net debt stood at EUR million at 31 December 2017, resulting in a net debt/ebitda ratio at average rates of 2.9x. Market data and information on the Group s investment in Pernod Ricard Stock market data Market capitalization (EUR million) Share price (EUR/per share) Diluted net earnings from recurring operations (group share) (EUR/per share) (1) Dividend (EUR/per share) (1) Pargesa Group s investment Percentage of share capital (%) Percentage of voting rights (%) Market value of investment (EUR million) (2) Pernod Ricard s contribution to the Group s portfolio 13.9% (1) Financial year from 1 July to 30 June (2) At the level of GBL 37

40 Pargesa Holding SA Annual Report 2017 Group portfolio adidas adidas is the European leader in sports equipment Profile adidas is a global leader specialized in the design, development, production and distribution of sporting goods (footwear, clothing and equipment). The group s business is built around two main brands : adidas and Reebok. The group s products are distributed through its own retail stores, online and independent distributors. Key financial data N o 1 In Europe in sporting goods Over 21 EUR billion in net sales Over 160 Countries in which adidas is present Over Employees Geographic breakdown of 2017 net sales 28% 3% 3% 5% EUR 9% million 14% 20% 36% 18% Breakdown of 2017 net sales per category 59% EUR million Westerm Europe Other Russia Japan Latin America China MEAA North America Footwear Apparel EUR million (1) 2017 (1) Simplified income statement Net sales Operating profit Net income from continuing operations (2) Net income (group share) Simplified balance sheet Shareholders equity (group share) Net cash/(net debt) (460) (103) 484 Debt-equity ratio (%) 8 2 n.a. (1) Restated to reflect continuing operations as a result of the divesture of the Rockport, TaylorMade, Adams Golf, Ashworth et CCM Hockey business (2) Excluding a negative one time tax impact (EUR 76 million) Performance in was another year of strong performance for adidas. The group reported sales of EUR million in 2017, compared with EUR million in 2016, an increase of 15 %. On a currency-neutral basis, sales increased by 16 %, primarily reflecting an 18 % increase for the adidas brand (90% of 2017 group sales) which was mainly driven by double-digit sales increases in the running category as well as at adidas Originals and adidas neo, while the training category achieved high-single-digit sales growth. Sales at the Reebok brand grew 4 % in 2017, driven by double-digit sales increases in Classics, while the running category recorded low-single-digit growth. Double digit increases in sales were achieved in all distribution channels, with online sales growing by 57 %. From a regional perspective and on a currency-neutral basis, the combined sales of the adidas and Reebok brands grew at double-digit rates in nearly all regions. Greater China and North America, which are key regions for the group, delivered particularly strong sales growth, with currency-neutral sales increases of 29 % and 27 %, respectively. Currency-neutral sales grew by 13 % in Western Europe and 12 % in Latin America, while MEAA (Middle East, Asia and Africa) and Japan both achieved sales growth of 10 % each. Sales in Russia/CIS (Commonwealth of Independent States) declined 13 %, reflecting the ongoing challenging consumer sentiment as well as additional store closures during the year. The company s gross margin increased 120 bps to 50.4 % (2016 : 49.2 %). This development was due to the positive effects from a better pricing and product mix, which more than offset negative currency effects as well as higher input costs. Operating expenses increased in 2017 compared with the prior year. Expressed as a percentage of sales, however, operating expenses decreased by 80 bps to 41.9 % (2016 : 42.7 %). Operating profit grew 31 % to EUR million (2016 : EUR million), and operating margin improved by 120 bps points to 9.8 % (2016 : 8.6 %). 5% Hardware adidas recorded in 2017 a one-time tax charge of EUR 76 million, reflecting a revaluation of deferred tax assets following the implementation of the US tax reform. 38

41 Pargesa Holding SA Annual Report 2017 Group portfolio adidas adidas Excluding the negative one-time tax impact, net income from continuing operations increased 32 % to EUR million (2016 : EUR million). Losses from discontinued operations were EUR 254 million in 2017 (2016 : EUR 62 million), mainly relating to the divestiture of the TaylorMade and CCM Hockey businesses. Net income (group share), excluding the negative one-time tax impact, grew 15 % in 2017 to EUR million (2016 : EUR million), while reported net income (group share) (including the one-time tax impact) was EUR million in Net cash position was EUR 484 million at year-end, compared with a net debt position of EUR 103 million a year earlier. This improvement was driven by the increase in cash generated from operating activities as well as by the proceeds from the disposal of TaylorMade and CCM Hockey, partly offset by investments in fixed assets, the dividend paid to shareholders and the repurchase of adidas shares. The company s executive and supervisory boards will propose at the next annual general meeting to be held on 9 May 2018 to pay a dividend of EUR 2.60 per share, an increase of 30 % compared to the prior year dividend (EUR 2.00). On 13 March 2018 adidas announced its decision to launch a multi-year share buyback program of up to EUR 3.0 billion until 11 May 2021, and plans to buy back shares worth up to EUR 1.0 billion in Market data and information on the Group s investment in adidas (1) (1) Stock market data Market capitalization (EUR million) Closing share price (EUR/per share) Basic earnings from continuing operations (EUR/per share) (2) Dividend (EUR/per share) (3) Pargesa Group s investment Percentage of share capital (%) Percentage of voting rights (%) Market value of the investment (EUR million) (4) adidas s contribution to the Group s portfolio 13.9% (1) Restated to reflect continuing operations as a result of the divesture of the Rockport, TaylorMade, Adams Golf, Ashworth et CCM Hockey business (2) Excluding a negative one time tax impact (3) Subject to the annual general meeting s approval (4) At the level of GBL 39

42 Pargesa Holding SA Annual Report 2017 Group portfolio Umicore Umicore is a leader in materials technology and recycling of precious metals Profile N o 1 Global leader in precious metals recycling 23 Countries in which Umicore is present Employees 32% 51 Industrial sites Segment split of 2017 revenue EUR million 23% 45% Segment split of 2017 recurring EBIT (1) 32% EUR 435 million 38% Energy & Surface Technologies Catalysis Recycling Energy & Surface Technologies Catalysis Umicore is a global group specialized in materials technology and the recycling of precious metals. Its activity is focused on application fields where its expertise in materials science, chemistry and metallurgy is widely recognized. Its activities are organized in three business groups : Catalysis, Energy & Surface Technologies, and Recycling. Key financial data EUR million Simplified income statement Revenue (excluding metal) Recurring EBITDA Recurring EBIT Recurring net profit (group share) Simplified balance sheet Shareholders equity (group share) Net debt Debt-equity ratio (%) Net debt/ebitda (x) Performance in 2017 Umicore achieved an outstanding performance in 2017, driven, among others, by strong growth in Energy & Surface Technologies, benefiting from high demand and the ramp-up of new production capacity for cathode materials. Revenue (excluding metal) increased by 9 % in 2017, reaching EUR 2.9 billion, while recurring EBITDA and recurring EBIT were up 14 % and 17 %, respectively. Excluding discontinued operations, revenue were up 16 % in 2017, while recurring EBITDA and recurring EBIT increased by 18 % and 24 %, respectively. By business groups : Catalysis : revenue increased by 8 % in 2017 to EUR million, reflecting in particular higher sales of heavy-duty diesel catalysts, as well as the positive impact of the full consolidation of Ordeg, in the Automotive Catalysts division. Recurring EBIT grew by 9 %, to EUR 166 million. Energy & Surfaces Technologies : revenue increased significantly in 2017 (+46%) to EUR 894 million, mainly reflecting strong volume growth in the Rechargeable Battery Materials division driven by strong demand for Umicore s cathode materials used in Li-ion batteries. Recurring EBIT was up 72 % to EUR 141 million. Recycling : revenue and recurring EBIT were slightly higher year on year (+1 % to EUR 650 million, and +2 % to 128 million, respectively), with the positive impact of higher processed volumes and more favourable metal prices in the Precious Metals Refining division being partly offset by less favorable commercial terms in the second half of the year. Recurring net profit (group share) was up 15 % to EUR 267 million, compared with EUR 233 million in Cash flow from operations was EUR 218 million. Capital expenditures totaled EUR 365 million, most of which being related to Umicore s growth investments in clean mobility and recycling. 30% Recycling (1) Excluding Corporate 40

43 Pargesa Holding SA Annual Report 2017 Group portfolio Umicore Umicore Net debt increased to EUR 840 million, up from EUR 296 million a year earlier, largely driven by Umicore s capital expenditures and net working capital spending, as well as by the acquisitions in the Automotive Catalysts and Cobalt & Specialty Materials divisions. Average net debt/recurring EBITDA multiple was 0.9x in 2017, compared with 0.6x in saw significant progress in reshaping the group : Completion of the portfolio realignment announced in 2015, with the divestments of Building Products, the European operations of Technical Materials and of the large area coatings activity of Thin Film Products ; Selective acquisitions to strengthen positioning in Automotive Catalysts and Cobalt & Specialty Materials. The board of directors will propose an increase of the dividend to EUR 0.70 per share at the annual general meeting to be held on 26 April 2018, compared with EUR 0.65 for the previous financial year. On 8 February 2018, Umicore successfully completed a EUR 892 million capital increase. The proceeds will be used to fund growth investments, particularly in cathode materials, and will provide more financial flexibility to pursue potential acquisitions and partnerships. Market data and information on the Group s investment in Umicore Stock market data Market capitalization (EUR million) Closing share price (EUR/per share) Current earnings per share (EUR/per share) Dividend (EUR/per share) (1) Pargesa Group s investment Percentage of share capital (%) Percentage of voting rights (%) Market value of the investment (EUR million) (2) Umicore s contribution to the Group s portfolio 8.0% (1) Subject to the annual general meeting s approval (2) At the level of GBL 41

44 Pargesa Holding SA Annual Report 2017 Group portfolio Total Total is an integrated global oil and gas group with a presence in chemicals Profile Total is one of the leading global oil and gas groups. The group operates in more than 130 countries and covers every oil industry segment, from Upstream to Downstream. Total is also a major player in chemicals and is committed to the development of renewable energy. Key financial data 30% N o 4 International major 130 Countries where Total is active Kboe/j of hydrocarbon production Employees Hydrocarbon production by geographic area 14% 9% 2'566 kboe/d 25% 30% Asia Pacific Americas Europe & Central Asia Middle East & North Africa Africa Adjusted net operating income from business segments 4% 50% 14% USD 11'936 million 32% Marketing & Services Gas, Renewables & Power Refining & Chemicals Exploration & Production USD million Simplified income statement Sales Adjusted net operating income from business segments Adjusted net income (group share) Net income (group share) Simplified balance sheet Shareholders equity (group share) Net debt Debt-equity ratio (%) Performance in 2017 Brent prices rose to USD 54/b on average in 2017 from USD 44/b in 2016 while remaining volatile. The group demonstrated its ability to capture the benefit of higher prices by reporting an increase in adjusted net income (group share) of 28 % over 2016, compared to a 24 % increase in Brent price, and a return on equity above 10 %. The Upstream, in particular, increased its results by more than 80 % and its operating cash flow by close to 40 %. The Downstream confirmed again in 2017 its ability to generate around USD 7 billion of operating cash flow and reported a return on capital employed of more than 30 %. Financial discipline was successfully maintained. Organic investments were USD 14.4 billion, and cost savings reached USD 3.7 billion in In Exploration & Production, the group is preparing for future growth with the announced acquisition of Maersk Oil, and participates in a major discovery in the Gulf of Mexico. In the framework of reinforcing its integrated gas strategy, Total announced the acquisition of the LNG business of ENGIE. Marketing and Services continues to grow, notably by expanding its retail network into Mexico. Analysis by business segments Adjusted net operating income from business segments came in at USD million in 2017, up 27 % from 2016 (USD million), mainly due to the increase in the contribution from Exploration & Production which benefited from new projects ramp-ups and higher prices. Exploration & Production Hydrocarbon production was kboe/d in 2017, an increase of 5 % over 2016 (2 452 kboe/d). Adjusted net operating income for the segment was USD million, up 86 % from 2016, notably due to production growth, cost reductions and the increase in oil and gas prices. Refining & Chemicals Refinery output decreased by 7 % in 2017 compared with 2016, as a result of the definitive ending of distillation capacities in France and the UK and the temporary shutdown due to Hurricane Harvey in the US. The group s European refining margin indicator (ERMI) increased to 40.9 USD/t in 2017 (34.1 USD/t in 2016), due to elevated petroleum product demand. Petrochemicals continued to benefit from a favourable environment, although down compared to the previous year. 42

45 Pargesa Holding SA Annual Report 2017 Group portfolio Total Vega Pleyade s block 2015 Uzubiaga Jose Adrian TOTAL Adjusted net operating income for the segment was USD million, down 10 % from 2016, notably due to the impact of Hurricane Harvey, the impact of modernization work on the Antwerp platform and the sale of Atotech in early 2017, as well as lower trading results. Marketing & Services Petroleum product sales were generally stable compared with 2016, with a move toward Africa and Asia where the group has strong growth. European sales were affected by the divestment of mature LPG distribution activities in Belgium and Germany. In a context of strong retail margins, notably in Africa, adjusted net operating income was up 8 % in 2017, to USD million. Gas, Renewables & Power Adjusted net operating income came in at USD 485 million in 2017, up 10 % from Net cash flow amounted to USD million in 2017 compared with USD 769 million in 2016, primarily due to the USD 4 billion increase in operating cash flow before working capital changes, the decrease in net investments and the sale of Atotech. The board of directors will propose to the annual general meeting to be held on 1 June 2018 a dividend of EUR 2.48 per share for the financial year 2017, up 1.2 % from the previous financial year. Market data and information on the Group s investment in Total Stock market data Market capitalization (EUR million) Closing share price (EUR/per share) Adjusted fully-diluted net income (EUR/per share) Dividend (EUR/per share) (1) Pargesa Group s investment Percentage of share capital (in %) Percentage of voting rights (in %) Market value of the investment (EUR million) (2) Total s contribution to the Group s portfolio 4.0% (1) Subject to the annual general meeting s approval (2) At the level of GBL 43

46 Pargesa Holding SA Annual Report 2017 Group portfolio Burberry Burberry is a global luxury brand with a distinctive British heritage N o 1 British Luxury Brand 209 Mainline stores 200 Concession stores 60 Outlets Geographic breakdown of FY17 retail/wholesale revenue (1) Profile Founded in 1856, Burberry is a global luxury brand with a diversified product offering across apparel, accessories and leather goods. The company designs and manufactures its products, selling them through a diversified network of retail, wholesale, franchisees and licensing channels. The company further developed its brand image over the last 20 years, by streamlining its product offering, building on iconic items and expanding into the digital area. Key financial data GBP million Simplified income statement Revenue Gross margin (%) Adjusted operating profit Net income (group share) Simplified balance sheet Shareholders equity (group share) Net cash position Debt-equity ratio (%) n.a. n.a. n.a. Performance in (financial year ended 31 March 2017) 2016/2017 was a year of transition during which Burberry took strategic actions to strengthen the long-term success of its brand. On a reported basis, revenue were up 10 % at GBP 2.8 billion, positively impacted by the GBP devaluation following the vote on Brexit. Underlying sales were down 2 % however, with Retail (which represents 77 % of revenue) up 3 %, while Wholesale and Licensing were down 14 % and 48 %, respectively. Adjusted operating profit was up GBP 41 million or 10 % to GBP 459 million on a reported basis, but down 21 % underlying, in part due to taking strategic actions to elevate the brand. Net cash position at 31 March 2017 was GBP 809 million, up by GBP 149 million compared to 31 March 2016 (after a share buyback program of GBP 97 million), driven by the decrease in investments and the positive impact of the variation in working capital requirements. 39% GBP 2'741 million 36% Asia-Pacific EMEIA (2) Dividend for the financial year was GBP per share, up 5 %. Performance in H (period from 1 April to 30 September 2017) 25% Breakdown of FY17 revenue by channel Americas Revenue stood at GBP million, up 4 % underlying and up 9 % on a reported basis. Retail sales increased by 5 % underlying, and 10 % on a reported basis (GBP 944 million). Excluding Beauty, Wholesale revenue grew by 1 % underlying, and by 7 % on a reported basis (GBP 233 million). Beauty Wholesale revenue stood at GBP 77 million, up 5 % underlying and 10 % reported. Licensing revenue (GBP 9 million) was GBP 4 million lower year-on-year, primarily reflecting reduced revenue from Japan. 1% Licensing Adjusted operating profit stood at GBP 185 million compared with GBP 144 million in H , 22% GBP 2'766 million Wholesale up 17 % underlying and 28 % reported. Underlying growth in adjusted operating profit benefited from the delivery of GBP 20 million incremental savings associated with the cost efficiency program, the improvement in Beauty profitability, the phasing of IT and marketing costs which helped offset 77% Retail increases in other costs, and from a positive regional mix as Asia Pacific outperformed. Adjusted operating margin increased by 210 bps (partly due to positive impact of forex) to 14.6 %. (1) Excluding Licensing (2) Europe, Middle East, India, Africa 44

47 Pargesa Holding SA Annual Report 2017 Group portfolio Burberry Burberry Cash from operating activities in H was GBP 270 million, compared with GBP 182 million in H Net cash position at 30 September 2017 was GBP 654 million, compared with GBP 529 million at 30 September 2016 and GBP 809 million at 31 March During the six-month period, Burberry paid dividends of GBP 123 million and bought back worth GBP 191 million of its own shares. In November 2017, Burberry released its new strategy focusing on elevating the brand towards luxury fashion, underpinned by focusing on product design and communication, reinventing digital content and experiences in stores, and ensuring alignment between brand positioning and distribution through the closure of non-luxury points of sale, mainly in the US and EMEIA. Market data and information on the Group s investment in Burberry Stock market data Market capitalization (GBP million) Closing share price (GBP/per share) Adjusted diluted EPS (GBP/per share) (1) Dividend (GBP/per share) (1) Pargesa Group s investment Percentage of share capital (%) Percentage of voting rights (%) Market value of investment (EUR million) (2) Burbbery s contribution to the Group s Portfolio 3.0% (1) Financial year from 1 April to 31 March (2) At the level of GBL 45

48 Pargesa Holding SA Annual Report 2017 Group portfolio Ontex Ontex is a leading international personal hygiene solutions provider Profile Ontex is a growing group specialized in hygienic products for baby, adult and feminine care. Ontex products are distributed in more than 110 countries under the company s own brands and retailer brands. The main sales channels are retail trade, medical institutions and pharmacies. Key financial data Over 2 EUR billion turnover 7 R&D centers EUR million Simplified income statement Revenue Adjusted EBITDA Adjusted profit Profit (group share) Simplified balance sheet Shareholders equity (group share) Net debt Debt-equity ratio (%) Net debt/adjusted EBITDA (x) Performance in Production sites Over Employees 14% 27% 29% 9% Geographic breakdown of 2017 revenue 13% EUR million 46% Breakdown of 2017 revenue per category 1% EUR million 61% Eastern Europe Rest of the world Western Europe Americas Other Adult incontinence Baby Care Femcare Ontex sales in 2017 were EUR 2.36 billion, up 18.2 % on a reported basis. Sales excluding the Brazilian acquisition (the hygienic consumables activity of Hypermarcas, in early 2017), which represent more than 90 % of 2017 sales, outperformed the broadly flat personal hygiene market, delivering 5.5 % like-for-like growth. Ontex achieved sales growth across all three categories (baby care, adult care, and feminine care), reflecting strong consumer demand for the group s products, which resulted in market share gains across most of the divisions. The overall performance of the Brazilian business acquired in March 2017 fell short of expectations. Challenging market conditions provided a difficult backdrop. Actions have already been taken to address the issues in Brazil, including some changes in the sales incentive system and reinforced processes and controls. Most geographies delivered higher like-for-like sales. As a result of the double-digit like-for-like growth and the acquisition in Brazil, sales in the Americas rose to 27 % of group sales, while the proportion of sales in Western Europe were less than 50 % for the first time ever, despite the increase in sales in this region (+3.4% like-for-like). Sales in Eastern Europe (13% of group sales) were flat compared with 2016 on a like-for-like basis (+0.2%). Rest of the World (14 % of group sales) delivered solid growth with sales increasing by 10.6 % like-for-like. By product categories, sales in the Baby care category increased 23.4 % on a reported basis, and 6.3 % on a like-for-like basis. The Feminine care category reported sales up 6.3 % in 2017, and 4.2 % higher on a like-for-like basis. Sales in the Adult Incontinence category grew by 14.8 % on a reported basis, and were up 5.2 % on a like-for-like basis in Gross margin stood at EUR 681 million in 2017, an increase of 16.3 % compared to the prior year. Gross margin as a percentage of sales was 47 basis points lower than in 2016 (28.9% vs 29.4 %). Like-for-like revenue growth and savings generated throughout the year did not fully compensate higher raw material pricing, and to a lesser extent a negative currency impact and additional manufacturing expenses to service the top line. At EUR million, adjusted EBITDA was 7.1 % higher than in 2016 (EUR million). The increase in gross margin was partly offset by the temporary impact of higher distribution expenses (mainly due to revenue growth) and continued investment in sales and marketing capabilities. 46

49 Pargesa Holding SA Annual Report 2017 Group portfolio Ontex Ontex Adjusted EBITDA margin of the group excluding Brazil was 12.0 % compared with 12.5 % in In Brazil, challenging market conditions combined with the impact of excess discounts resulted in adjusted EBITDA margin of 3.8 %. Net debt at 31 December 2017 amounted to EUR 744 million (EUR 665 million at the end of 2016), and net leverage multiple based on the last twelve months adjusted EBITDA was 2.79x. The refinancing of debt in the second half of 2017 resulted in a meaningful extension of debt maturities to 2022 and 2024, and a lower average cost of debt. The board of directors will propose at the next annual general meeting to be held on 25 May 2018 to pay a gross dividend of EUR 0.60 per share, compared with EUR 0.55 per share in the previous year. Market data and information on the Group s investment in Ontex Stock market data Market capitalization (EUR million) Closing share price (EUR/per share) Adjusted EPS (EUR/per share) Dividend (EUR/per share) (1) Pargesa Group s investment Percentage of share capital (%) Percentage of voting rights (%) Market value of the investment (EUR million) (2) Ontex s contribution to the Group s Portfolio 2.4% (1) Subject to the annual general meeting s approval (2) At the level of GBL 47

50 Pargesa Holding SA Annual Report 2017 Group portfolio GEA GEA is one of the largest suppliers of process technology for the food industry Over 70 % Of sales from food and beverages end-markets 1 out of 3 Process line for instant coffee installed by GEA Over 50 Countries where GEA is active Employees worldwide Breakdown of revenue per end-market 12% 13% 13% EUR million 14% 21% 28% Beverages Other industries Dairy farming Food Pharma/Chemical Dairy processing Geographic breakdown of revenue 13% 21% EUR 7% million 18% 19% North & Central Europe DACH & Eastern Europe 22% Asia-Pacific Latin America North America Western Europe, Middle East and Africa Profile GEA is a world leader in the supply of equipment and project management for a wide range of processing industries. Its technology focuses on component and production processes for various markets, particularly in the Food & Beverage sectors. The group has nearly employees worldwide. Key financial data EUR million Simplified income statement Revenue Operating EBITDA (1) Operating EBIT (1) Net income (group share) Simplified balance sheet Shareholders equity (group share) Net-cash position Debt equity ratio (%) n.a. n.a. n.a. (1) Before allocation of purchase prices and adjustments Performance in 2017 The impact of acquisitions and of exchange rate fluctuations offset each other in 2017 at the level of both order intake and revenue, with an unfavourable impact from a strong euro, in particular in the second half of the year. GEA s order intake in 2017 amounted to EUR million, up 1.7 % from 2016, and sets a new record for the group. A marked reticent approach to investment was noted in the dairy processing customer industry and, to a lesser extent, in the beverages customer industry. This was more than compensated however by double-digit growth in dairy farming and growth in the pharma/chemical industries. Revenue in 2017 were EUR million in 2017 compared with EUR million in 2016, up 2.5 % both on a reported basis and like-for-like. All the regions recorded growth in revenue, except North and Central Europe and, to a lesser extent, Asia-Pacific. From a business area perspective, revenue in the Business Area Equipment increased by 4.9 % likefor-like, primarily thanks to developments in the dairy processing, dairy farming and food customer industries. Revenue in the Business Area Solutions were slightly up in 2017 like-for-like (+0.6%). Significant sales increase in food was affected by the decline in the pharma/chemical customer industry and beverages. The group s operating EBITDA amounted to EUR 564 million, slightly down 0.5 % from 2016 (EUR 566 million). EBITDA in 2017 includes additional costs for filling machines of EUR 20 million incurred by the Business Area Solutions. Operating EBITDA margin stood at 12.2 % in Without the additional costs for filling machines, operating EBITDA margin would have been 12.7 %. Operating EBIT was EUR 478 million in 2017, compared with EUR 485 million in the prior year. Net interest expense was lower by around EUR 15 million in 2017 compared with 2016, primarily due to the repayment of long-term loans during the year. Income tax expense increased markedly in 2017 (EUR +49 million), primarily as a consequence of the remeasurement of deferred taxes in connection with the US tax reform (impact of EUR 45 million). Net income in 2017 was lower than in the previous year, at EUR 243 million compared with EUR 285 million in

51 Pargesa Holding SA Annual Report 2017 Group portfolio GEA GEA Cash flow from operating activities amounted to EUR 270 million, an increase of EUR 108 million compared with 2016, thanks to the decrease in working capital. In 2017, GEA spent EUR 119 million in capital expenditure, EUR 234 million in acquisitions, and EUR 429 million to repurchase its own shares in the context of the share buy-back program of up to EUR 450 million launched in March GEA s net cash position at 31 December 2017 was EUR 6 million, compared with EUR 783 million at the end of The decrease includes the payment of the dividend and the repurchase of GEA s own shares. A dividend of EUR 0.85 per share will be proposed at the annual general meeting to be held on 19 April 2018, an increase of 6.25 % over the previous year (EUR 0.80 per share). Market data and information on the Group s investment in GEA Stock market data Market capitalization (EUR million) Closing Share price (EUR/per share) EPS (EUR/per share) Dividend (EUR/per share) (1) Pargesa Group s investment Percentage of share capital (%) 4.3 Percentage of voting rights (%) 4.3 Market value of the investment (EUR million) (2) 328 GEA s contribution to the Group s Portfolio 1.7% (1) Subject to the annual general meeting s approval (2) At the level of GBL 49

52 Pargesa Holding SA Annual Report 2017 Group portfolio Parques Reunidos Parques Reunidos is a leading operator of leisure parks with a global presence N o 2 European operator of leisure parks 14 Countries where Parques Reunidos is active Over Employees 24% Over 60 Parks Geographic breakdown of revenue 2% EUR 579 million 36% 38% Geographic breakdown of EBITDA Headquarters Spain United States Rest of Europe Headquarters 9% Profile Since its inception in 1967 as a small-sized Spanish operator, Parques Reunidos has become one of the leading operators of leisure parks, through organic growth and multiple acquisitions, including Bobbejaanland (Belgium, 2004), Mirabilandia (Italy, 2006), Warner (Spain, 2007) and Palace Entertainment (USA, 2007). With a presence in 14 countries, Parques Reunidos operates over 60 leisure, animal and water parks primarily in Europe and the United States, with a portfolio of regional and local parks which have strong local brands. Key financial data EUR million Simplified income statement Revenue Recurring EBITDA Net income (group share) Simplified balance sheet Shareholders equity (group share) Net debt Debt-equity ratio (%) Net debt/ebitda (x) Performance in (financial year ended 30 September 2017) During the financial year, the performance of Parques Reunidos has been negatively affected by (i) adverse weather conditions particularly in Central Europe and the USA, (ii) the recovery of the activity at Marineland park in France which is taking more time than expected and (iii) the negative impact of Hurricanes Irma and Harvey. These adverse events significantly offset the strong underlying performance achieved in Spain and during the low season. The group achieved revenue of EUR 579 million and recurring EBITDA of EUR 174 million, compared with EUR 584 million ( 0.8%) and EUR 188 million ( 7.5 %), respectively, in However, the group has still been able to generate positive free cash flow and proposed to distribute EUR 20 million in dividends, in line with the previous year. In addition, Parques Reunidos announced a number of initiatives during the financial year, including : the opening of theme parks in Dubaï and Vietnam which will be managed by Parques Reunidos ; the development of an indoor entertainment center (Lionsgate Entertainment City) in Times Square, New York ; a partnership with Discovery Communications to develop entertainment centers ; the development of Ducati World park in Mirabilandia, Italy ; the opening of the first Nickelodeon-branded indoor entertainment center in Murcia, Spain. These initiatives are in line with the company s strategy to grow through external avenues in order to further diversify the portfolio. 34% EUR 174 million 38% Spain United States Finally, the board appointed 3 new directors in 2017, including one GBL representative. 37% Rest of Europe 50

53 Pargesa Holding SA Annual Report 2017 Group portfolio Parques Reunidos Alberto Cassani 2010 Performance in Q (period from 1 October to 31 December 2017) Parques Reunidos achieved during the first quarter of its financial year revenue of EUR 69 million, an increase of 2.9 % on a reported basis. On a like-for-like basis, revenue increased by 7.6 % compared to the same period of the previous year. In particular, marketing actions such as the extension of the season through Halloween and Christmas events, resulted in a 16 % revenue growth during both campaigns. Furthermore, season passes sales have increased by 25 %. Parques Reunidos benefits from its geographical diversification. Revenue have grown across all regions during the first quarter. On a like-for-like basis, revenue in Spain increased by 10.2 %, while revenue in the US and the Rest of Europe grew by 7 % and 6 % respectively. The first quarter represents only 11 % of total annual revenue. Like-for-like recurring EBITDA in Q came in at EUR 4.0 million, compared with EUR 4.2 million in the corresponding period of the previous financial year. Market data and information on the Group s investment in Parques Reunidos Stock market data Market capitalization (EUR million) n.a Closing share price (EUR/per share) n.a Proforma earnings per share (EUR/per share) (1) n.a Dividend (EUR/per share) (1) Pargesa Group s investment Percentage of share capital (%) 21.2 Percentage of voting rights (%) 21.2 Market value of the investment (EUR million) (2) 254 Parques Reunidos s contribution to the Group s portfolio 1.3% (1) Financial year from 1 October to 30 September (2) At the level of GBL 51

54 Pargesa Holding SA Annual Report 2017 Group portfolio Sienna Capital Sienna Capital, a subsidiary of GBL, pursues the development of the Group s portfolio of alternative investments Profile Sienna Capital aims at generating attractive risk-adjusted returns by building a diversified portfolio of investment managers delivering a strong performance in their area of expertise (e.g. private equity, debt and specific thematic funds). Being an active partner for the managers it invests in, Sienna Capital supports them by helping to raise funds, attract talent and source investment opportunities as well as by providing advice on good governance and best practices. Its development and diversification strategy consists of supporting the launch of new funds, as well as examining opportunities for direct commitments into additional investment managers. Sienna Capital generates revenue from capital gains, interest income, dividends and fees earned through revenue-sharing agreements with its underlying managers. Performance in 2017 EUR million Ergon Capital Partners Sagard Kartesia Mérieux Développement PrimeStone BDT Capital Partners Backed Total New commitments Capital calls Distributions In 2017, through its underlying managers, Sienna Capital has indirectly invested EUR 92 million. This amount mainly includes (i) the investment in Keesing Media Group by ECP III, (ii) the investment in Ipackchem as well as some add-ons on existing investments by Sagard 3, (iii) the investments notably in Xeris and Ineldea by Mérieux Participations 2, as well as (iv) new transactions completed by Kartesia, PrimeStone and BDT Capital Partners. Sienna Capital received proceeds totaling EUR 318 million in 2017, primarily from ECP III (EUR 271 million) and Kartesia (EUR 43 million). New commitments made by Sienna Capital in 2017 were EUR 225 million, including EUR 25 million in Backed (in September) and EUR 200 million in ECP IV (in December). In 2017, Sienna Capital distributed EUR 40 million in dividends to GBL. Sienna Capital s portfolio as at 31 December 2017 Created in 2002 on the initiative of Power Corporation of Canada, Sagard invests in companies valued at more than EUR 100 million that are leaders in their markets, primarily in French-speaking European countries. Working with portfolio companies management teams, Sagard supports them in their growth. In 2017, Sagard 3 invested in Ipackchem, one of the global leaders in the manufacturing of barrier packaging, and completed add-ons on existing investments. Created in 2005, Ergon Capital Partners ( ECP ) is a private equity fund operating in the mid-market segment. ECP makes equity investments from EUR 25 million up to EUR 75 million in leading companies with a sustainable competitive position in attractive niche markets located in the Benelux, Italy, Spain, France, Germany and Switzerland. In 2017, ECP III completed the sale of its majority stakes in Golden Goose and ELITech and invested in Keesing Media Group. In December 2017, ECP IV has been launched with a closing expected in 2018 and a target of EUR 500 million. Sienna Capital committed EUR 200 million to this new fund. 52

55 Pargesa Holding SA Annual Report 2017 Group portfolio Sienna Capital Kartesia offers liquidity and credit solutions to mid-sized European companies, with the objective of providing a higher stable return to its investors. More generally, Kartesia wishes to facilitate the participation of institutional investors and high net worth individuals 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 duly selected mid-sized companies. At 31 December 2017, the Kartesia funds in which Sienna Capital is an investor had invested EUR 414 million in primary and secondary transactions, and distributed EUR 147 million to their investors during the year. Established in 2009, Mérieux Développement invests in growth equity and venture capital within the healthcare and nutrition sectors, working alongside entrepreneurs whose products and services can bring genuine advances to patients and consumers worldwide. Mérieux Développement is the investment arm of Institut Mérieux. In 2017, Mérieux Participations 2 has invested in 4 new companies for a total amount of EUR 26 million. Established in 2014, PrimeStone offers a constructive and active approach directed towards mid-sized listed European companies that have significant value creation potential through strategic, operational or financial improvement. PrimeStone has a long-term perspective, adopting an active approach and seeking significant influence over its underlying investments through a constructive dialogue with boards and management teams. In 2017, PrimeStone completed 2 new investments. BDT Capital Partners was created in 2009 with the aim of meeting the strategic and financial needs of families and/or company founders around the globe. In 2017, BDTCP II made an additional investment for a total of USD 518 million. Launched in 2015, Backed is a London-based venture capital fund and has a unique investment proposition, with an investment team of millennials targeting millennials entrepreneurs who create products and offer services for millennials. Since its inception, Backed has invested EUR 13 million across 23 transactions, out of which 6 were made in Sienna Capital s key financial data Sienna Capital s contribution to the Group s portfolio 4.9% Fund/year initial investment EUR million Invested Capital Distributions received to date Commitments Shareholding Value In % of total Ergon Capital Partners Sagard Kartesia Mérieux Développement PrimeStone BDT Capital Partners Backed Total NB : Figures are rounded 53

56 54

57 03 CORPORATE GOVERNANCE Escalade Fountain District : Eaux-Vives Cité Geneva 55

58 Pargesa Holding SA Annual Report 2017 Corporate Governance 1. Group structure and shareholders 1.1 Group structure Description of the issuer s operational 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. The simplified structure of the Group (including non consolidated shareholdings) and the Company s internal organisation are described on pages 4, 6 and 7 of this Annual Report and in sections 3.5 and 3.6 of this Corporate Governance Report Listed companies within the issuer s scope of consolidation Listed companies within the scope of consolidation (full consolidation) are the following : Name and registered office Place of listing Market capitalization at % of capital % of voting rights ISIN Pargesa Holding SA SIX Swiss Grand-Rue 11 Exchange parent CH 1204 Geneva Zurich CHF 7.2 billion company CH Groupe Bruxelles Lambert (GBL) Avenue Marnix 24 B 1000 Brussels Imerys Quai de Grenelle 43 F Paris Euronext Brussels EUR 14.5 billion (1) BE Euronext Paris EUR 6.3 billion 53.8 (2) 67.5 (2) FR (1) Taking into account the suspended voting rights relating to GBL treasury shares. (2) Owned through GBL Unlisted companies within the issuer s scope of consolidation Pargesa Netherlands BV, the only direct subsidiary of Pargesa Holding SA, is wholly owned by the Company and owns Pargesa Holding SA s stake in GBL : Name and registered office Share capital % of capital/ voting rights Pargesa Netherlands BV ; Herengracht 540 ; NL 1017 CG Amsterdam CHF 109 million The list of the main listed and unlisted fully consolidated or equity-accounted companies at 31 December 2017 is provided on pages 130 to 131 of this Annual Report. In addition : GBL owns its holdings through subsidiaries ; these subsidiaries are included in the list provided on page 92 of GBL s 2017 Annual Report ( Imerys conducts its business operations through subsidiaries ; the list of these subsidiaries at 31 December 2017 is provided on page 232 of Imerys 2017 Annual Report ( IMERYS_DDR %202017_VA %2021_03_2018.pdf). 1.2 Significant shareholders The Company is controlled by Parjointco NV in the Netherlands, which in turn is jointly controlled by the ultimate shareholders mentioned in the diagram on the next page, under the terms of an agreement entered into in The agreement was first extended in 1996 until 2014, and then on 18 December 2012 until 2029, with the possibility of a further extension. This agreement, which is not publicly disclosed, aims in particular to establish and maintain equal control between the two family groups in Pargesa Holding SA and GBL. The simplified shareholder structure is provided on the next page of this Corporate Governance Report. 56

59 Pargesa Holding SA Annual Report 2017 Corporate Governance Pursuant to article 120 al. 1 of the Financial Market Infrastructure Act (FMIA), anyone who directly or indirectly, or acting in concert with third parties, owns, acquires or disposes of shares or acquisition or sale rights relating to shares of a company with its registered office in Switzerland and thereby reaches, falls below or exceeds the thresholds of 3 %, 5 %, 10 %, 15 %, 20 %, 25 %, 33 1/3 %, 50 % or 66 2/3 % 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. Significant shareholders at 31 December 2017 (1) % of capital (2) % of voting rights (3) Stichting AK Frère-Bourgeois / Trust Desmarais First Eagle Investment Management LLC (USA) (1) 3 % or more of the voting rights. (2) Percentages of capital 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 at 31 December (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 at 31 December Announcements issued in keeping with the disclosure rules concerning disclosure of shareholdings are available on the SIX Swiss Exchange website under : Shareholder structure of Pargesa Holding SA at 31 December 2017 Jacqueline DESMARAIS (1),(2) Paul DESMARAIS Jr (1) André DESMARAIS (1) (CA) Stichting AK Frère-Bourgeois (NL) 50% (3) 50% (3) Parjointco NV (NL) (4) 55.5% of the capital 75.4% of the voting rights Pargesa Holding SA (CH) (1) Trustees of a trust set up upon the death of the late Paul G. Desmarais for certain members of the Desmarais family (2) Mrs Jacqueline Desmarais passed away on 3 March 2018 (3) Control held through the intermediary of several legal entities (4) Joint control 1.3 Cross-shareholdings There are no cross-shareholdings within the Group. 57

60 Pargesa Holding SA Annual Report 2017 Corporate Governance 2. Capital structure 2.1 Capital The total share capital of the Company amounts to CHF and is fully paid in. It is composed of registered shares with a par value of CHF 2 each, and bearer shares with a par value of CHF 20 each, including 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. Pursuant to Article 9 of the Company s Articles of Association, the ratio of registered shares to bearer shares must be maintained in the event of a capital increase. The Company s Articles of Association are available at the following address : Authorised and conditional capital Authorised capital The Company s authorised capital is set forth in Article 5 bis of the Articles of Association. Pursuant to that Article, the Board of Directors is authorised, until 3 May 2018, to increase the share capital by a maximum of CHF 253 million (which represents 15 % of the par value of the existing share capital) by issuing up to registered shares with a par value of CHF 2 each and bearer shares with a par value of CHF 20 each. Shareholders benefit, in principle, from preemptive subscription rights on the newly issued shares. However, the Board of Directors is entitled to withdraw the shareholders preemptive subscription rights for good cause, in particular if the shares are issued for the purpose of financing the acquisition or the merger of companies, company units or shareholding, or to facilitate the opening of the Company s capital on the international market. The preemptive subscription rights that are not exercised must be sold by the Company at market conditions. Conditional capital The Company s conditional capital is set forth in Article 5 ter of the Articles of Association. On 1 June 1994, the Company created conditional capital with a maximum par value of CHF 242 million (which represents 14 % of the par value of the existing share capital) for the exercise of conversion rights or option rights, through the issuance of up to registered shares with a par value of CHF 2 each and bearer shares with a par value of CHF 20 each. The right to subscribe for newly issued shares may be given to the holders of convertible option rights resulting from convertible bonds or option rights issued by the Company or one of its affiliates. Shareholders preemptive subscription rights are excluded for the newly issued shares. When convertible bonds or options are issued, the Board of directors may restrict or exclude Shareholders subscription right for good cause, in particular if the convertible bonds or options are issued for the purpose of financing the acquisition or the merger of companies, company units or participations or to facilitate the opening of the Company s capital to the international market. In case of restriction or exclusion of subscription rights, the following rules are applicable : a) the convertible bonds or options must be issued at market conditions b) as from their issuance, conversion rights can be exercised during a maximum of 7 years and option rights during a maximum of 5 years. At 31 December 2017, the Company had not issued any registered shares or bearer shares as conditional capital, nor had it issued any conversion rights or option rights within the meaning of Article 5 ter of the Articles of Association. 2.3 Changes in capital No changes were made to the share capital during the past three financial years. Changes were made to reserves in 2017 after options were exercised and treasury shares were put into circulation. There were no changes in reserves in 2015 and Changes in reserves during the periods appear in the consolidated statement of changes in equity in Chapter 5 Consolidated Financial Statements of the Annual Report (page 87 of this Annual Report for 2016 and 2017 ; for 2015, this information is provided on page 73 of the 2016 Annual Report). These Annual Reports are available on the Company s website under Financial Reports : 58

61 Pargesa Holding SA Annual Report 2017 Corporate Governance 2.4 Shares and share certificates The Company s share capital is made up of listed bearer shares and unlisted registered shares. Registered and bearer shares provide one vote per share, subject to the restrictions mentioned in section 6.1 below. Registered and bearer shares entitle the holder to a dividend proportional to their par value (see sections 2.1 and 2.2 above for more information on the par value of the Company s shares). See section 7.1 below for more information about the opting-out clause set forth in the Articles of Association. The Company has not issued any share certificates. 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 2.1 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. Bearer shares Holders of bearer shares do not need to be recorded in the share register in order to exercise their rights. The Articles of Associations therefore do not place any restrictions on the transfer of bearer shares or the exercise of shareholder rights via nominees. Registered shares The transfer of registered shares is subject to the Company s approval. The Company may refuse its approval, provided it offers the seller to buy its registered shares 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 furthermore refuse to register the acquirer in the share register if, on request of the Company, the acquirer has not expressly declared that he is acquiring the shares in his own name and for his own account. A resolution of the General Meeting of shareholders may lift the restriction on the transfer of registered shares, subject to the approval by a two-thirds majority of the votes represented and by an absolute majority of the par value represented (Article 19 of the Articles of Association). As registered shares are not listed, there are no restrictions concerning the registration of nominees. 2.7 Convertible bonds and options The Company has no outstanding convertible bonds. In 2007, Pargesa set up a plan for employees and certain members of Management (excluding Executive Directors), whereby options for the purchase of bearer shares are granted annually. These options have a term of ten years and a conversion ratio of one share per option. So far, all shares awarded after options were exercised have been taken from the reserve of bearer treasury shares. Since the plan s inception, the total number of options exercised is (out of a total of granted). The options that were awarded in 2007 and not yet exercised ( options) expired in At 31 December 2017, the total number of outstanding options was The main features of the plan are as follows : Year of grant Number of options awarded Number of outstanding options Final expiration date Vesting conditions Strike price in CHF Share capital concerned in CHF (2) to to to to to to to to (1) to / to Total (1) Including options awarded on 24 March 2016 at a strike price of CHF and options awarded on 10 May 2016 at a strike price of CHF (2) Par value of the shares corresponding to the number of outstanding options. The shares likely to be delivered if options are exercised are treasury shares and therefore result in no change in the share capital. The total number of outstanding options at 31 December 2017 represented 84 % of treasury shares and 0.27 % of the par value of the Company s share capital. 59

62 Pargesa Holding SA Annual Report 2017 Corporate Governance 3. Board of Directors 3.1 Members of the Board of Directors The composition of the Board of directors of Pargesa Holding SA reflects the Company s controlling shareholding structure. As indicated in section 1.2 of this Corporate Governance Report, the Company is controlled by Parjointco NV, which in turn is equally controlled by the two families of shareholders mentioned in the chart on page 57 of this Corporate Governance Report, under the terms of an agreement that aims, in particular, to establish and maintain equal control between the two family groups in Pargesa Holding SA. This explains the composition of the Board of directors, which at 31 December 2017 included 11 representatives put forward by Parjointco NV, out of a total of 15 members. None of the non-executive directors was part of the management of the Company or a Group company in the 2014, 2015 and 2016 reporting periods, and none of them has close business relations with the Company or a Group company. Key events during the period under review Michel Plessis-Bélair, a member of the Board of Directors of Pargesa Holding SA since 1999 and a member of the Audit Committee and the Compensation Committee, did not seek another term as Director at the Annual General Meeting on 4 May At the Annual General Meeting on 4 May 2017, Jocelyn Lefebvre was appointed to the Company s Board of Directors. Executive Directors : Paul DESMARAIS Jr Canadian Paul Desmarais Jr has been a Director of Pargesa Holding SA since 1992, Executive Director since 2003 and Chairman of the Board of Directors since He has also been a member of the Supervisory Board of Parjointco NV (Netherlands) since In 1981, Paul Desmarais Jr joined Power Corporation of Canada, where he has been Chairman of the Board and Co-Chief Executive Officer since Since 2008, he has been Executive Co-Chairman of Power Financial Corporation, which he helped to create in 1984 and where he was Vice President and then President and Chief Operating Officer from 1986 to 1989, Executive Vice Chairman from 1989 to 1990, Executive Chairman from 1990 to 2005, and Chairman of the Executive Committee from 2006 to He holds a Bachelor of Commerce from McGill University (Canada) and an MBA from INSEAD (France). Other key activities and positions : Within or at the request of Pargesa Group : Vice Chairman of the Board of Directors and member of the Standing Committee of GBL SA (Belgium), Director of SGS SA (Switzerland), and Director of LafargeHolcim Ltd (Switzerland) Within or at the request of Power Group : Director of several companies within the Power Group in North America, including Great-West Lifeco Inc. (Canada) and its subsidiaries, and IGM Financial Inc. (Canada) and its subsidiaries Other positions : Chairman of the Advisory Board of Sagard Private Equity Partners (France) Gérald FRÈRE Belgian Gérald Frère has been a Director of Pargesa Holding SA since 1992, Vice Chairman since 2002 and Executive Director since He has also been a member of the Supervisory Board of Parjointco NV (Netherlands) since After studying in Switzerland and Belgium, Gérald Frère joined Frère-Bourgeois SA (Belgium), where he has served as Executive Director until 25 January He was also an Executive Director and Chairman of the Standing Committee of GBL SA (Belgium) from 1993 to Other key activities and positions : Within or at the request of Pargesa Group : Chairman of the Board of Directors and member of the Standing Committee of GBL SA (Belgium) Other positions : Director of Power Financial Corporation (Canada) and Regent of Banque Nationale de Belgique Arnaud VIAL French/Canadian Arnaud Vial has been a Director of Pargesa Holding SA since 2010 and Managing Director since He has also been a member of the Supervisory Board of Parjointco NV (Netherlands) since Arnaud Vial joined Power Group (Canada) in 1997 and is now Senior Vice President of Power Corporation of Canada and Power Financial Corporation. He was Director of accounting and financial services and then Deputy Managing Director of Parfinance (Finance) from 1988 to 1997, and Secretary General of Pargesa Holding SA from 1993 to Arnaud Vial began his career at Banque Paribas (France) in He is a graduate of the Ecole supérieure d Electricité (France). Other key activities and positions : Within or at the request of Pargesa Group : Member of the Supervisory Board of Pargesa Netherlands BV (Netherlands), Director and member of the Standing Committee of GBL SA (Belgium), Director and member of the Strategic Board of Imerys (France), Chairman and Managing Director of PGB SA and Société Française Percier Gestion (SFPG) (France) 60

63 Pargesa Holding SA Annual Report 2017 Corporate Governance Non-executive Directors : Bernard DANIEL Swiss Bernard Daniel has been a Director of Pargesa Holding SA since 2011 and is Chairman of the Compensation Committee and a member of the Audit Committee. He has been a member of the International Committee of the Red Cross Geneva (Switzerland) since 2009 and an honorary member since He was Secretary General and Secretary of the Board of Directors of Nestlé SA (Switzerland) from 1987 to 2007 and an International Committee of the Red Cross delegate from 1967 to Bernard Daniel holds a law degree from the University of Geneva and is a graduate of IMD Lausanne. Other key activities and positions : Director of Holdigaz SA (Switzerland), Energiapro SA (Switzerland) and Compagnie Industrielle et Commerciale du Gaz SA (Switzerland) Victor DELLOYE Belgian Victor Delloye has been a Director of Pargesa Holding SA since He has also been a member of the Supervisory Board of Parjointco NV (Netherlands) since Victor Delloye joined Frère-Bourgeois Group in 1987 ; he is currently Director and Secretary General of Frère-Bourgeois SA and its subsidiary Compagnie Nationale a Portefeuille SA (Belgium). Victor Delloye worked for Coopers & Lybrand (PWC) from 1980 to He holds a law degree from the Université Catholique de Louvain, and a Master s of fiscal sciences from the Ecole Supérieure des Sciences Fiscales (ICHEC Brussels) (Belgium). Other key activities and positions : Within or at the request of Pargesa Group : Director and member of the Standing Committee of GBL SA (Belgium) Within or at the request of Frère-Bourgeois Group : Director of several companies, including Financière de la Sambre SA (Belgium) Other positions : Vice Chairman of the Association Belge des Sociétés Cotées (ASBL), Lecturer for the Executive Master s in Tax Management at the Solvay Brussels School of Economics & Management (Université Libre de Bruxelles) André DESMARAIS Canadian André Desmarais has been a Director of Pargesa Holding SA since 1996 and Vice Chairman since He has also been a member of the Supervisory Board of Parjointco NV (Netherlands) since In 1983, André Desmarais joined Power Corporation of Canada, where he has been Executive Chairman since 2008 and Chairman and Co-Chief Executive Officer since He has also been Deputy Chairman and Executive co-chairman of Power Financial Corporation since Before joining Power Corporation, he worked as the special assistant to the Minister of Justice of Canada and an institutional investment advisor at Richardson Greenshields Securities Ltd. André Desmarais holds a Bachelor s degree in commerce from Concordia University (Canada). Other key activities and positions : Within or at the request of Power Group : Director of several companies within the Power Group in North America, including Great-West Lifeco Inc. (Canada) and its subsidiaries, and IGM Financial Inc. (Canada) and its subsidiaries Chairman of Square Victoria Communications Group Inc., Gesca Ltée and La Presse Ltée (Canada) Paul DESMARAIS III Canadian Paul Desmarais III has been a Director of Pargesa Holding SA since In 2014, Paul Desmarais III joined Power Corporation of Canada, where he has been Senior Vice President since He is also Senior Vice President of Power Financial Corporation. He was Deputy Vice President of Risk Management at Great-West Lifeco (Canada) from 2012 to 2014 and before that worked in project management and strategy at Imerys (France). Paul Desmarais III began his career in 2004 at Goldman Sachs in the USA. He holds a Bachelor s degree in economics from Harvard University and an MBA from INSEAD (France). Other key activities and positions : Within or at the request of Pargesa Group : Director and member of the Standing Committee of GBL SA (Belgium) and Director and member of the Strategic Board of Imerys (France) Within or at the request of Power Group : Director of several companies within the Power Group in North America, including Great-West Lifeco Inc., Investor s Group, Mackenzie Inc. and Sagard Capital Partners GP Inc. (Canada), and Putnam Investments LLC (USA) Cedric FRÈRE Belgian/French Cedric Frère has been a Director of Pargesa Holding SA since In 2010, he joined Compagnie Nationale a Portefeuille in Belgium (Frère-Bourgeois Group) and is a Director there. In 2007, he began his career in the banking sector, holding several positions in Paris, London and Brussels. He holds a Bachelor of Arts in Business and Economics from Vesalius College (Vrije Universiteit Brussel VUB)). Other key activities and positions : Within or at the request of Pargesa Group : Director and member of the Standing Committee of GBL SA (Belgium) Within or at the request of Frère-Bourgeois Group : Director of several companies, including Frère-Bourgeois SA (Belgium) and Cheval Blanc Finance SAS (France), and a Tenured Director of Cheval des Andes (Argentina) 61

64 Pargesa Holding SA Annual Report 2017 Corporate Governance Ségolène GALLIENNE Belgian Jocelyn LEFEBVRE Canadian/French Ségolène Gallienne has been a Director of Pargesa Holding SA since She has been a Director of Frère-Bourgeois SA (Belgium) since She was previously Head of Public Relations at Belgacom (which became Proximus Belgium) and Director of Communications at Dior Fine Jewelry (France). She holds a Bachelor of Arts in Business and Economics from Vesalius College (Vrije Universiteit Brussel VUB)). Other key activities and positions : Within or at the request of Pargesa Group : Director and member of the Standing Committee of GBL SA (Belgium) Within or at the request of Frère-Bourgeois Group : Director of several group entities, including Chair of the Board of Stichting Administratiekantoor Peupleraie (Netherlands) and Diane SA (Switzerland) and Director of Stichting Administratiekantoor Frère- Bourgeois (Netherlands), Fonds Charles-Albert Frère ASBL (Belgium), and Société Civile du Cha teau Cheval Blanc (France) Other positions : Director of Christian Dior SA (Paris) Jean-Luc HERBEZ Swiss Jean-Luc Herbez has been a Director of Pargesa Holding SA since 2016 and is Chairman of the Audit Committee and a member of the Compensation Committee. He has been a partner at Swiss law firm Froriep Legal SA since 1987, prior to which he worked in Frankfurt and Washington DC. He is a member of the Ordre des avocats de Genève and the Swiss Bar Association. He holds degrees in economics (1970) and in law (1976) from the University of Geneva and an LLM from the University of Pennsylvania Law School, Centre for Study of Financial Institutions (1981). Barbara KUX Swiss Barbara Kux has been a Director of Pargesa Holding SA since 2014 and is a member of the Audit Committee and the Compensation Committee. In 2016, she was appointed by the European Commission to the high-level expert panel aimed at drawing up a plan for the decarbonisation of Europe. She has been a member of the Advisory Board of INSEAD (France) since 2013 and Director in Residence for Corporate Governance since From 2008 to 2013, Barbara Kux was a member of the Managing Board of Siemens AG (Germany), and between 2003 and 2008, she was a member of the Management Committee of Philips Group (Netherlands). Prior to that, she held top management positions within multinational companies, with responsibility for developing and managing emerging markets. She began her career as a Management Consultant with McKinsey & Company. She holds an MBA with distinction from INSEAD (France). Jocelyn Lefebvre has been a Director of Pargesa Holding SA since 2017 and is a member of the Audit Committee. He has also been a member of the Board of Parjointco NV (Netherlands) since He has been Chairman of Sagard Equity Partners since He joined Power Group in 1992 after holding various executive positions, including Chairman of Vickers Inc., one of the largest production units of Canadian manufacturing group M.I.L., which he joined in He began his career at Arthur Andersen in Montréal, before moving to Europe in Jocelyn Lefebvre holds a degree from the Hautes Études Commerciales (HEC) Montréal and is a member of the Québec Institute of Chartered Professional Accountants (CPA). Other key activities and positions : Within or at the request of Pargesa Group : Director and member of the Standing Committee of GBL SA (Belgium) Within or at the request of Power Group : Member of the Board of Power Financial Europe BV Michel PÉBEREAU French Michel Pébereau has been a Director of Pargesa Holding SA since He has been Honorary Chairman of BNP Paribas since December 2011 ; he was also Chairman of BNP Paribas Board of Directors from 2003 to 2011, Chairman and CEO from 2000 to 2003 and Director until 13 May From 1993 to 2000, he was Chairman and CEO of Banque Nationale de Paris. Since 1993, he has been Honorary Chairman of Crédit Commercial de France, where he was Chairman and Managing Director from 1986 to 1993 and Managing Director from 1982 to Prior to that, he held various high-level civil service positions in France, including Cabinet Director and then Special Assistant to the French Minister for the Economy, as well as positions within the Treasury Division. Michel Pébereau began his career in the French General Finance Inspectorate. He holds degrees from Ecole polytechnique (France) and from Ecole nationale d administration (France). Other key activities and positions : Vice Chairman of the Supervisory Board of Banque Marocaine pour le Commerce et l Industrie (BMCI) (Morocco), Chairman of the Supervisory Board of ESL Network, Manager of MJP Conseil and member of the Strategic Board of IBM France. He is also a member of several foundations and associations Other key activities and positions : Vice Chair of the Board of Directors of Firmenich (Switzerland), Director of ENGIE (France) and Henkel (Germany) 62

65 Pargesa Holding SA Annual Report 2017 Corporate Governance Gilles SAMYN Belgian/French Gilles Samyn has been a Director of Pargesa Holding SA since 1992 and is a member of the Audit Committee and the Compensation Committee. He has also been a member of the Supervisory Board of Parjointco NV (Netherlands) since Gilles Samyn joined Fre re-bourgeois Group in 1983 and has been Executive Director of Fre re-bourgeois SA until 25 January Prior to that, he worked for Groupe Bruxelles Lambert from 1974 to 1982, after joining Mouvement Coopératif Belge in Gilles Samyn is a Commercial Engineer and graduate of the Solvay Business School, Université Libre de Bruxelles (ULB). Other key activities and positions : Within or at the request of Pargesa Group : Director, member of the Standing Committee, the Audit Committee and the Appointment and Compensation Committee of GBL SA (Belgium) and Director of Pernod Ricard (France) Within or at the request of Frère-Bourgeois Group : Director of several companies within Fre re-bourgeois Group, including Chairman of Compagnie Nationale à Portefeuille SA (Belgium), AOT Holding Ltd, Transcor Astra Group SA (Belgium), Société Civile du Château Cheval Blanc (France) and Banca Leonardo SpA (Italy) and a member of the Supervisory Board of Métropole Télévision (M6) (France) Other positions : Director of Grand Hôpital de Charleroi ASBL (Belgium) Amaury de SÈZE French Amaury de Se ze has been a Director of Pargesa Holding SA since 2001 and is a member of the Compensation Committee. He has been Vice Chairman of the Board of Power Financial Corporation since He is also Chairman of the Supervisory Board of PAI Partners, where he was Chairman and CEO from 1998 to Until 2004, he was a member of the Executive Board of BNP Paribas, which he joined in 1993 as the member of Management Board in charge of industrial matters. From 1978 to 1993, he worked at Volvo Group as Chairman of Volvo Europe and a member of the Executive Board, after starting his career at Bull General Electric. Amaury de Se ze holds degrees in business administration from the Centre de Perfectionnement aux Affairs (Paris) and from the Stanford Graduate School of Business. 3.2 Other activities and vested interests of members of the Board of Directors The other activities and vested interests of the members of the Board of Directors are provided in section 3.1 above. 3.3 Additional information for issuers subject to ORAb (1) At the Annual General Meeting held on 5 May 2015, Pargesa Holding SA amended the Articles of Association as required by ORAb. Under these provisions, the Articles of Association now stipulate, in Article 31, the maximum number of mandates that may be held in the supreme management or supervisory bodies of entities outside the Pargesa Group. Members of the Board of Directors may not hold more than ten mandates in the entities supreme management or supervisory bodies of third party legal entities, of which no more than five may be in listed companies. Furthermore, they may hold up to ten mandates in the supreme management or supervisory bodies of third party legal entities having a non-profit or charitable purpose. 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 consideration for the calculation of the abovementioned maximum number of mandates, if : (1) it directly or indirectly controls the Company or is controlled by the Company ; or (2) it is not required to register itself in the commercial registry or in a similar foreign register (e.g. public corporations and institutions, non-profit associations, ecclesiastical foundations or family foundations) ; or (3) the mandate is held at the request of the Company or a company controlled by it. Mandates held with legal entities under direct or indirect common control of a legal entity or person or at the request of such legal entity or person are counted as one single mandate for the purposes of this provision. The Company s Articles of Association are available at the following address : All members of the Board of Directors are in compliance with the provisions of Article 31 of the Articles of Association. Other key activites and positions : Within or at the request of Pargesa Group : Director and member of the Standing Committee and Chairman of the Appointment and Compensation Committee of GBL SA (Belgium) Other positions : Member of the Supervisory Board of Publicis Group (France), Lead Director of Carrefour SA (France), Director of RM2 (UK), BW Group (Singapore) and Chairman of the Supervisory Board of PAI Partners (1) Ordonnance against excessive compensation 63

66 Pargesa Holding SA Annual Report 2017 Corporate Governance 3.4 Elections and terms of office Since the entry into force of ORAb on 1 st January 2014, the Annual General Meeting must each year elect every member of the Board of Directors individually. As a result, all terms will expire at the next Annual General Meeting. At the Annual General Meeting on 5 May 2015, the Articles of Association were amended accordingly. Members of the Board of Directors may be re-elected for an unlimited number of successive terms of office. The Company s Articles of Association do not contain any clauses that conflict with legal provisions concerning the appointment of the Chairman of the Board, the members of the Compensation Committee and the Independent Proxy. The first year in which members were appointed to the Board of Directors is provided in Section 3.1 above. 3.5 Internal organisational structure The organisational structure of the Company is defined by regulations initially adopted in An updated version of the regulations was approved by the Board of Directors at its meeting on 13 March The regulations were further amended in 2016 after the Board of Directors adopted a Code of Ethics. The regulations set out the internal organisation, and the duties and responsibilities of the governing bodies, in accordance with the law and the Company s Articles of Association. In particular, these regulations set out the respective roles of the Chairman of the Board of Directors (the Chairman ), the Vice Chairman (or Vice Chairmen), the Board of Directors, the Audit Committee, the Compensation Committee, the Executive Directors and Management. Distribution of responsibilities The responsibilities of each member of the Board of Directors can be found on page 6 of this Annual Report. The composition of the Committees of the Board can be found on page 7 of this Annual Report. The duties and scope of responsibilities of the Committees are detailed below. Composition, duties and scope of responsibilities, working method The Company s Board of Directors appoints one or more Vice Chairmen and two Executive Directors as well as the Secretary, who may, or not, be a member of the Board of Directors. An individual may hold the position of Chairman or Vice Chairman and that of Executive Director at the same time. The Vice Chairman shall assume the Chairman s role if the Chairman is prevented from doing so ; if there are several Vice Chairmen, the oldest Vice Chairman shall take on this interim role. The breakdown of responsibilities within the Company is provided in Section 3.6 below. The Board of Director meets as often as required by the business at hand, and meetings are convened by the Chairman. The Board of Directors takes decisions by majority, as provided for in the Articles of Association. In the event of a tie, the Chairman has the casting vote. At its meetings, the Board of Directors examines the business affairs of the Group and its shareholdings and the financial statements of the Group, and deliberates on all current or strategic matters as required by the circumstances. Except in specific cases where there is no financial item on the agenda, the documentation given to the Board members systematically includes analyses of the Group s net asset value, recent and projected financial results, and the outlook and strategic directions of the main shareholdings. Company Management is present at Board meetings. Any member of the Board of Directors may request information from Management outside of the meetings. Committees of the Board of Directors Since 1997, the Company has had an Audit Committee and a Compensation Committee, composed of non-executive members of the Board of Directors. The Committees report to the Board of Directors. With the exception of the Compensation Committee, the members of which are elected by shareholders at the Annual General Meeting, the Committees are set up by the Board of Directors, which appoints committee members and the chair. Given that the Company has a controlling shareholder, representatives put forward by this shareholder sit on the Audit Committee and the Compensation Committee. Since 2017, the majority of the members of the Audit Committee and Compensation Committee have been independent within the meaning of the Swiss Code of Best Practice for Corporate Governance and with no relation to Parjointco NV, the Company s controlling shareholder. Audit Committee The responsibilities of the Audit Committee are set out in a charter. According to this charter, the Audit Committee : ensures that the Company s accounting methods are adequate and consistent and checks that internal procedures for the collection and control of information guarantee these aims ; analyses the Company s consolidated and parent company financial statements and submits a recommendation to the Board concerning approval of the financial statements ; analyses financial information provided to shareholders and third parties ; ensures that the auditor is independent and makes recommendations regarding the appointment, re-election or firing of the auditor or amendments to the hiring terms ; submits an opinion on whether to entrust the auditor with additional tasks not related to the audit ; examines the scope and results of the audit and communicates with those in charge of the audit where necessary ; examines the risk assessment and internal control system at least once a year ; 64

67 Pargesa Holding SA Annual Report 2017 Corporate Governance periodically reviews the Company s Code of Ethics and submits any recommended amendments to the Board of Directors ; gathers information concerning any irregularities within the Company communicated by the internal body entrusted with this task ; and takes, upon the proposal of the Board of Directors or on its own initiative, adequate measures to verify any allegations of irregularities that come to the Committee s attention, and submits recommendations on remedial measures to the Board of Directors. Members of Management attend Audit Committee meetings. The auditors attend twice a year. The Audit Committee met twice in 2017 (both times in the presence of the auditors), and the average weighted rate of participation by members was 80 %. The average length of Audit Committee meetings was generally between two and three hours. The individual participation rate of the members of the Audit Committee at these meetings was as follows : Members Participation rate Jean-Luc HERBEZ Chairman 100 % Bernard DANIEL (1) 100 % Barbara KUX 100 % Jocelyn LEFEBVRE (1) 100 % Michel PLESSIS-BÉLAIR (2) 0 % Gilles SAMYN 100 % Amaury de SÈZE (2) 0 % Total 80 % (1) From the Annual General Meeting on 4 May Participation rate calculated based on the meetings held during his term as a member of the Audit Committee. (2) Up to the Annual General Meeting on 4 May Participation rate calculated based on the meetings held during his term as a member of the Audit Committee. The Board of Directors remains responsible for adopting decisions regarding compensation. It delegates to the Managing Director responsibility for awarding options to employees that are not part of Management, within the limits approved by the Board of Directors. Compensation is set and options awarded once a year. Company Management is present at Compensation Committee meetings. The Committee may appoint and receive advice from experts in compensation or legal matters. More information on the procedure for issuing compensation recommendations is provided in Chapter 4 Compensation Report of this Annual Report. In 2017, the Compensation Committee met once ; the auditor was present at the meeting. All Committee members took part in person or via conference call, and the meeting lasted one hour. The Committee was also consulted once via . The individual participation rate of the members of the Compensation Committee was as follows : Members Participation rate Bernard DANIEL Chairman 100 % Jean-Luc HERBEZ (1) n.a. Barbara KUX 100 % Michel PLESSIS-BÉLAIR (2) 100 % Gilles SAMYN 100 % Amaury de SÈZE 100 % Total 100 % (1) From the Annual General Meeting on 4 May In 2017, no meeting was held after his appointment. However, Mr Herbez was involved in the consultation via . (2) Up to the Annual General Meeting on 4 May Participation rate calculated based on the meetings held during his term as a member of the Compensation Committee. Compensation Committee The responsibilities of the Compensation Committee are also set out in a charter. The Compensation Committee reports to the Board of Directors and assists it in all matters concerning the compensation of the Board of Directors and Management (including share option plans). More specifically, it draws up and periodically reviews the Company s compensation strategy, its guidelines and performance criteria, and drafts recommendations concerning the compensation of members of the Board of Directors and Management to be put to the Annual General Meeting. It also supervises the drawing up of the Compensation Report and makes recommendations to the Board of Directors concerning the compensation proposals to be submitted to the Annual General Meeting. The Committee also ensures that the type of compensation awarded to members of the Board of Directors and Management is in keeping with applicable regulations. Regarding the share option plan for Company employees and members of Management (excluding Executive Directors), the Compensation Committee submits a recommendation to the Board of Directors concerning the number of options to be awarded to members of Management. 65

68 Pargesa Holding SA Annual Report 2017 Corporate Governance 3.6 Areas of responsibility Board of Directors The Board of Directors is responsible for the management and supervision of the Company. It determines the Company s organisation, accounting principles and financial controls. It appoints and dismisses the officers entrusted with the Company s management and representation, and supervises the officers entrusted with management tasks to ensure that they comply with the law, the Articles of Association, regulations and instructions received. The Board of Directors is also responsible for drawing up the Annual Report and the Compensation Report, as well as for preparing the Annual General Meeting and implementing its decisions. The Board of Directors alone is responsible for : approving the overall objectives of the investment policy and the new strategic directions put forward by the Executive Directors ; determining the Company s financing policy and, as such, deciding to issue bonds and setting the maximum amount of security interests that can be committed by the Executive Directors ; approving the investments and divestments by the Company with a value exceeding 10 % of shareholders equity proposed by the Executive Directors ; ruling on recommendations by the Compensation Committee concerning the compensation of members of the Board of Directors and Management and submitting such recommendations to the Annual General Meeting for approval ; taking adequate measures to ensure implementation and compliance with the Company s Code of Ethics and, more broadly speaking, Management s compliance with applicable legislation and the Company s internal regulations ; periodically reviewing the Code of Ethics, upon the proposal of the Audit Committee ; and ensuring that Management informs Company employees of any regulations applicable to their activities and of the principles governing the Company s Code of Ethics. The Board of Directors met five times in 2017, and the average weighted rate of participation by members was 84 %. The average length of Board meetings was generally between two and three hours. The individual participation rate of the members of the Board of Directors at these meetings was as follows : Directors Participation rate Paul DESMARAIS Jr Chairman 100 % Gérald FRÈRE 100 % André DESMARAIS (1) 0 % Bernard DANIEL 100 % Victor DELLOYE 100 % Paul DESMARAIS III 60 % Cedric FRÈRE 80 % Ségolène GALLIENNE 100 % Jean-Luc HERBEZ 100 % Barbara KUX 100 % Jocelyn LEFEBVRE (2) 100 % Michel PÉBEREAU 100 % Michel PLESSIS-BÉLAIR (3) 50 % Gilles SAMYN 100 % Amaury de SÈZE 40 % Arnaud VIAL 100 % Total 84 % (1) On temporary sick leave from 28 April 2017 (see also the compensation table in Chapter 4 Compensation Report ). (2) From the Annual General Meeting on 4 May Participation rate calculated based on the meetings held during his term as a member of the Board of Directors. (3) Up to the Annual General Meeting on 4 May Participation rate calculated based on the meetings held during his term as a member of the Board of Directors. Executive Directors and Management Executive Directors are appointed by the Board of Directors. They are authorised to decide on all matters not attributed to another Company body by law, the Articles of Association or the regulations. In particular, the Executive Directors have the following responsibilities : they determine and make recommendations to the Board of Directors concerning the general aims of the Company s investment policy and new orientations ; they make recommendations to the Board of Directors concerning the Company s position with regard to the management approach of subsidiaries and the main shareholdings ; they draw up the budgets, make recommendations to the Board of Directors in this regard, and monitor implementation ; they submit the Company s financing policy to the Board of Directors for approval ; they establish the key principles of the Company s treasury management ; they make recommendations to the Board of Directors concerning the appropriation of profit ; they make recommendations to the Board of Directors concerning the appointment of members of Management ; and they make recommendations to the Board of Directors concerning investments and divestments with a value exceeding 10 % of shareholders of equity. 66

69 Pargesa Holding SA Annual Report 2017 Corporate Governance The Executive Directors instruct the other members of Management and supervise them with respect to the implementation of the decisions and orientations decided by the Board of Directors and the Executive Directors. The Managing Director is responsible for the day-to-day running of Management matters and reports to the Executive Directors. The Executive Directors delegate the following tasks to other members of Management : managing teams ; preparing and implementing budgets ; conducting internal and external controls ; managing public relations ; drawing up business development initiatives ; analysing investments and divestments ; overseeing operations with banks ; coordinating with the external auditor ; managing the stock-market listing ; resolving administrative and financial matters ; doing the Company accounting and preparing the financial statements and other interim accounts ; publishing the balance sheet and other requisite financial statements and transmitting them to the relevant authorities ; ensuring compliance with applicable legal provisions and internal regulations, particularly the Code of Ethics ; providing information to governing bodies and employees on relevant applicable legal provisions ; appointing a person that Company employees can contact if they remark irregularities within the framework of their activity for the Company. 3.7 Information and control instruments regarding Management The members of the Board of Directors have permanent access to all information concerning the business of the Company. They receive financial documentation on at least a quarterly basis. Members of Management attend the meetings of the Board of Directors. Before these meetings, full documentation is given to the Board members, including, and depending on the items on the agenda, a review of shareholdings, operating and financial information and outlook, and any other relevant information concerning the current affairs or future direction of the Group. Within the Company, the Audit Committee examines the risk assessment and internal control system at least once a year. The internal control and risk management systems of GBL and Imerys are presented to the Audit Committee of Pargesa Holding SA. The scope of the risk assessment is therefore limited to Pargesa Holding SA and its wholly owned subsidiaries and is determined by the Company s business activities, their complexity and the level of involvement of the Board of Directors in the management of the Company. In particular, it takes account of the nature of the Company s business, which is essentially limited to holding and managing investments in other companies. Pargesa has adopted the risk classification model put forward by COSO (Committee of Sponsoring Organisations). COSO breaks the risk universe down into four categories : strategy ; operations ; compliance ; finance. Within each category, a matrix of the risks that the Company could be exposed to is established. The inventory of risks at Pargesa Holding SA and its wholly owned subsidiaries is conducted using a matrix of all risks and determines the Company s risk universe. The risk analysis is conducted in several stages : identifying risks to the Company ; conducting a quantitative and/or qualitative assessment of potential exposure to risks before taking account of existing measures and controls ; assessing the probability of a risk occurring (low/high); existing measures and controls in the event a risk occurs. Management identifies risks using an assessment grid, classifying the risks identified, where necessary, according to the extent of their impact and the probability that they will occur. Potential risks are classified according to four levels : Level 1 : Identified risk with potential of impact and occurrence. Level 2 : Identified risk with potential of impact but occurrence unlikely. Level 3 : Identified risk with no potential impact and occurrence unlikely. Level 4 : Not identified as a risk for the Company. In 2017, the list of Level 1 risks did not change compared with the previous year. These risks concern the following risk categories : Strategy : governance (control environment), and planning & resources (changes in tax legislation) ; Operations : human resources (recruitment and loyalty, turnover and compensation) ; Compliance : regulations (regulatory changes) ; Finance : markets (interest rates and exchange rates), risk management (counterparty risk), accounting and reporting. Given the nature of the Company s business, these risks are monitored and assessed continuously, and appropriate measures are implemented when necessary to minimise the probability of the risks occurring. The Board of Directors is responsible for assessing risks, with validation taking place in two stages : Pargesa s Audit Committee assesses the draft risk assessment drawn up by Management ; The Board of Directors approves the risk assessment based on the recommendations of the Audit Committee. 67

70 Pargesa Holding SA Annual Report 2017 Corporate Governance 4. Senior Management 4.1 Members of Management Paul DESMARAIS Jr Chairman of the Board of Directors and Executive Director (see section 3 on the Board of Directors above) Gérald FRÈRE Vice Chairman of the Board of Directors and Executive Director (see section 3 on the Board of Directors above) Arnaud VIAL Managing Director and Director of Pargesa Holding SA (see section 3 on the Board of Directors above) Mark KELLER Financial Director of Pargesa Holding SA since Canadian Belgian French/Canadian Swiss From 1992 to 2016, Mark Keller was Head of Accounting at Pargesa Holding SA, which he joined in 1986 after working at Banque hypothe caire du canton de Gene ve from 1983 to He holds a diploma and school-leaving certificate from the Malagnou Business School, Geneva. Other key activities and positions : Within or at the request of Pargesa Group : Member of the Supervisory Board of Pargesa Netherlands BV (Netherlands) and Director of Socie te Française Percier Gestion SA (SFPG) (France) 4.2 Other activities and vested interests of the members of Management The other activities of the members of Management are provided in Sections 3 (for the Executive Directors and the Managing Director) and 4.1 above. 4.3 Additional information for issuers subject to ORAb As indicated in section 3.3 above, at its Annual General Meeting on 5 May 2015, Pargesa Holding SA amended the Articles of Association as required under ORAb. In particular, the Articles of Association now stipulate the maximum number of mandates that may be held in the supreme management or supervisory bodies of entities outside the Pargesa Group. Furthermore, they may hold up to ten mandates in the supreme management or supervisory bodies of third party legal entities having a non-profit or charitable purpose. 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 consideration for the calculation of the abovementioned maximum number of mandates, if : (1) it directly or indirectly controls the Company or is controlled by the Company ; or (2) it is not required to register itself in the commercial registry or in a similar foreign register (e.g. public corporations and institutions, non-profit associations, ecclesiastical foundations or family foundations) ; or (3) the mandate is held at the request of the Company or a company controlled by it. Mandates held with legal entities under direct or indirect common control of a legal entity or person or at the request of such legal entity or person are counted as one single mandate for the purposes of this provision. The Company s Articles of Association are available at the following address : All members of Management are in compliance with the provisions of Article 31 of the Articles of Association. 4.4 Management contracts There are no management contracts between the Company and third parties. 5. Compensation, shareholdings and loans Information concerning the compensation of members of the Board of Directors and Management can be found in the Compensation Report (Chapter 4 of this Annual Report), pursuant to ORAb. 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 Articles 32 to 38, the principles and components of compensation awarded to the Board of Directors and Management, and the method used to approve compensation at the Annual General Meeting. Under these provisions, the Articles of Association now stipulate, in Article 31, that members of the Management may not hold more than ten mandates in the entities supreme management or supervisory bodies of third party legal entities, of which no more than five may be in listed companies. 68

71 Pargesa Holding SA Annual Report 2017 Corporate Governance 6. Shareholders voting rights 6.1 Limits on and representation of voting rights Shareholders voting rights are proportional to the number of shares they hold, regardless of their par value. Each shareholder is entitled to at least one vote, even with only one share. In the following cases, shareholders exercise the right to vote in proportion to the par value of their shares and not in proportion to the number of shares they hold : the election of the auditors ; the election of the experts to verify all or part of the management of the Company ; the resolution to implement a special audit ; the resolution to bring a liability claim. At the Annual General Meeting, decisions can be taken regardless of the number of shares represented, unless a mandatory provision of law states otherwise. 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 using an electronic platform. 6.2 Quorums as per the Articles of Association No quorum is required for the Annual General Meeting to pass valid resolutions. The Articles of Association do not require certain decisions taken at the Annual General Meeting to be made with larger majorities than required by law. 6.3 Convening the Annual General Meeting The Articles of Association are in accordance with the law regarding the convening of the Annual General Meeting. The Annual General Meeting is convened at least 20 days before the date of the Meeting, with the notice published in the Feuille Officielle Suisse du Commerce and sent by registered letter to holders of registered shares at the address listed in the share register. 6.4 Adding an item to the agenda Shareholders representing shares with a total par value of at least CHF 1 million who wish to place one or more items on the agenda of the Annual General Meeting must submit their request in writing to the Board of Directors at the latest 45 days before the date of the Meeting, indicating the subject matter and the proposals to be put on the agenda. 7. Changes of control and defence measures 7.1 Obligation to submit an offer Article 10 of the Company s Articles of Association contains an opting-out clause pursuant to Article 125 al. 3 and 125 al. 4 of the FMIA. According to this clause, 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 have been exceeded Changes of control There are no clauses concerning changes of control in the agreements and programmes established in favour of the members of the Board of Directors and/or Management, with the following exception : under the stock option plan for employees and certain members of Management (see section 2.7 above), all rights are immediately vested to the beneficiary or his beneficiaries in the event of a change of control in Pargesa Holding SA. 8. Auditor 8.1 Length of mandate and term as lead auditor The length of the auditor s mandate is one year. The current auditor s mandate was first approved at the 1997 Annual General Meeting. Thierry Aubertin (Deloitte), the current lead auditor, has held the position since The maximum legal term of office for the lead auditor is seven years (i.e. the mandate can not be renewed more than seven times). 8.2 Audit fees Fees invoiced by the audit firm during the year under review totalled CHF This amount included the total fees invoiced by the auditors appointed at the Annual General Meeting of Pargesa in Member companies of the Deloitte organisation invoiced audit fees of CHF 0.5 million to GBL (and its non-operating subsidiaries) and CHF 3.5 million to Imerys, which form part of the same Group (see section 1.1 above). 8.3 Additional fees The audit firm or related third parties provided additional services to the Company for a total of CHF These services included a review of the economic presentation of the consolidated results. 6.5 Recordings in the share register Only the Company s bearer shares are listed. Holders of bearer shares do not need to be recorded in the shareholder register in order to exercise their rights. For (unlisted) registered shares and in accordance with Company practice, only shareholders recorded in the share register ten days before the Annual General Meeting are authorised to exercise their voting rights. 69

72 Pargesa Holding SA Annual Report 2017 Corporate Governance Member companies of the Deloitte organisation provided additional services amounting to a total of CHF 2.5 million to GBL and Imerys (respectively CHF 0.5 million to GBL and its non operating subsidiaries, and 2.0 million to Imerys), which form part of the same Group (see section 1.1 above). These additional fees include fees with respect to services required by law (for instance in 2017 (non exhaustive list), fees were paid for reports in connection with a contribution in kind or the issuance of stock-options), as well as with respect to other non-audit services (for instance, in 2017 (non exhaustive list), fees were paid for tax assistance (VAT, review of tax returns) or in connection with contemplated transactions (Imerys: due diligence services for CHF 0.7 million, contractual audits for CHF 0.9 million)). More information on these additional services is available on page 133 of the GBL Annual Report and page 238 of the Imerys Annual Report. 8.4 Information instruments with respect to the external auditor As indicated in section 3.5 above, the Audit Committee examines, together with the auditors, the scope and results of their audits and analyses the financial information intended for shareholders and third parties. The auditors attend the meetings of the Audit Committee during which the annual and half-year accounts are examined, as well as any other meeting at which their attendance is desired, based on the circumstances. The Audit Committee examines a report, prepared by Management, assessing the execution of the assignment given to the external auditor ; this report contains details enabling the Audit Committee to assess the quality of the services provided. The Audit Committee assesses the auditor s performance, focussing on : (1) the composition, skills and experience of the team ; (2) the scope and area of the auditor s mission ; (3) a critical review of the invoiced fees ; (4) whether adequate resources are available within the auditor s network ; (5) planning and compliance with deadlines ; (6) the extent to which the auditor coordinated and cooperated with the external auditors within the Group ; and (7) compliance with delivery dates. Fees paid to the auditors for their work are negotiated annually and agreement is reached in particular in light of the scope of the auditing work. Any additional servicies are subject to separate negotiation. The Audit Committee met twice in the presence of the auditors in At the meeting of the Audit Committee in March 2017, during which the 2016 financial statements were examined, the auditors provided a documented report on the execution of their assignment and the results of their audits. They issued an unqualified audit opinion. At the second meeting, held in July 2017, the auditors presented a report on their limited review of the consolidated financial statements (IFRS) for the first half of 2017, drawn up in accordance with IAS 34 (interim financial reporting). They issued an unqualified audit opinion. In March 2018, the Audit Committee met in the presence of the auditors and examined the 2017 financial statements. The auditors gave a documented report on the execution of their assignment and the results of their audits. They issued an unqualified opinion. 9. Information policy The following information is provided to investors and other members of the public and is accessible at : Press releases concerning important events that could affect the share price, as well as financial results : quarterly results are published following the first and third quarters and include a simplified consolidated income statement and the economic analysis of results, as well as a summary of recent developments ; half-yearly results include the consolidated financial statements in accordance with IAS 34, which are subject to a limited review by the auditor ; annual results. People who wish to receive the Company s press releases can sign up for this service on the Company s website : Share price and net asset value updated weekly on the website : actif-net-reevalue/actif-netcours-de-bourse Graph of the share price and net asset value updated weekly on the website : net-asset-value/chart/ Presentations made at the Annual General Meeting or to investors : Half-yearly and annual reports : Financial calendar : The Company s website also includes the address for investor relations : info@pargesa.ch Phone : Head office : Grand-Rue 11, 1204 Geneva 70

73 Pargesa Holding SA Annual Report 2017 Corporate Governance 10. Corporate social and environmental responsibility (CSR) Pargesa pays particular attention to social and environmental responsibility issues. Owing to its investment in GBL, Pargesa deals with these matters through GBL s investments. Pargesa, through GBL, carefully follows major social and environmental issues in each of those shareholdings and encourages the application of best practice in these matters by the companies concerned. Each of these companies prepares a detailed social and environmental responsibility report every year ; these are available on each company s website. Pargesa s Corporate Social Responsibility statement is available at : 71

74 72

75 04 COMPENSATION REPORT Œuvre Water Ring Madeleine Place District : Eaux-Vives Cité Geneva 73

76 Pargesa Holding SA Annual Report 2017 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, and the SIX Swiss Exchange s Directive on Information relating to Corporate Governance. Compensation paid to the Board of Directors and Management Members of the Board of Directors, the Board s Committees and Management receive compensation directly from Pargesa Holding SA ( Pargesa or the Company ). The total compensation awarded to certain members of the Board of Directors and Management, as indicated in the table on page 77, also includes the compensation for positions and mandates 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, when relevant, any share options awarded under the incentive plans of these companies. In accordance with ORAb and Article 36 of the Articles of Association, 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 next financial year. At the Annual General Meeting, the Board of Directors may submit compensation proposals that cover different time periods and concerning either all members of the Board of Directors or Management or certain members only. The vote of the General Meeting of shareholders on the compensation proposals is binding. If the General Meeting of shareholders does not approve a compensation proposal made by the Board of Directors, the Board of Directors makes an alternative proposal to the same General meeting of shareholders, or convenes an extraordinary General meeting of shareholders. The Company, or companies that it directly or indirectly controls, may pay compensation prior to approval by the General meeting of shareholders, subject to subsequent approval by the General meeting of shareholders and a restitution obligation from the relevant member of the corporate body. If a member of the Management is elected after the General meeting of shareholders has approved the remuneration of the Management (new member), the Company or group companies can pay such member a supplementary amount during the compensation period already approved, as a remuneration and/or compensation for benefits he renounced to or was denied by leaving his previous position. The supplementary amount cannot exceed by more than 40 % the most recently approved average remuneration of the other members of the Management. The limit is set forth at 50 % as regards the CEO. The average remuneration is determined by dividing the aggregate remuneration of the Management most recently approved by the General meeting of shareholders by the number of current members. In accordance with these provisions, at the Annual General Meeting on 4 May 2017, shareholders approved the following total compensation amounts (which were the same as those approved at the Annual General Meeting on 3 May 2016) : total compensation of CHF for the Board of Directors for the period up to the Annual General Meeting on 3 May 2018 ; and total compensation of CHF for Management for the 2018 financial year. 74

77 Pargesa Holding SA Annual Report 2017 Compensation report Principles The compensation awarded directly by the Company 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 recommendation of the Compensation Committee (see page 65 of this Annual Report). Executive Directors of the Company, who are also members of Management within the meaning of ORAb, do not receive any separate compensation in this regard. The compensation awarded directly by the Company is determined based on similar positions observed in a selection of companies, backed by analyses carried out periodically by international international consulting firms contracted specifically for this purpose by the Compensation Committee. The basis for comparison is the market median. In addition, the Company 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. While, as a general rule, compensation does not include any long- or short-term variable cash component, in exceptional circumstances bonuses may be awarded to members of Management, as was the case in 2016 (see footnote (1) on the next page and page 62 of the 2016 Annual Report of the Company : An update of the level of compensation awarded directly by the Company to members of the Board of Directors and Management was reviewed at the end of 2015 on the basis of an analysis conducted by Ernst & Young ; the previous review had taken place in Two sets of benchmarks were used in the last review : A selection of 21 listed Swiss companies included in the SMIM index (1), which were selected based on certain financial criteria (2). Among the companies selected, 13 had a significant shareholder (holding of more than 25 %) or a controlling shareholder (holding of more than 50 %). A selection of 6 listed European holding companies (3), to take account of the Company s specific profile. A comparison with other companies with similar operational profiles to that of the Company (holding company) can be useful for cross-referencing. Following the compensation review conducted at the end of 2015, upon the recommendation of the Compensation Committee, the Board decided that, as of 2016, it would increase by 10 % the fees paid to the Company s directors who do not represent Parjointco NV, the controlling shareholder (4 members out of a total of 15). In addition, another renown international independent consultancy firm (4) conducted a further analysis in 2016 upon the request of the Compensation Committee in order to validate the compensation level of the new Financial Director, appointed in July The Managing Director s fixed compensation was increased slightly in As a reminder, 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 Chief Accountant, was revised up by a substantial amount relative to his prior level of compensation, in light of his new position and increased responsibility (see page 62 of the 2016 Annual Report of the Company : No changes were made to the compensation policy in the year under review. (1) Aryzta, Ba loise, Barry Callebaut, Basler Kantonalbank, Banque Cantonale Vaudoise, Clariant, DKSH, Dufry, EMS, Galenica, Georg Fischer, Helvetia, Kuehne+Nagel, Logitech, Lonza, Oerlikon, Sika, Sonova, Sulzer, Swiss Life, Zürcher Kantonalbank. (2) Revenues, total assets, market capitalization, net income. (3) InvestorAB, Wendel, Eurazeo, Ackermans & Van Haaren, Sofina, FFP. (4) Analysis conducted by Mercer / Kepler or the compensation of CFOs in large Swiss corporations and in European holding companies. 75

78 Pargesa Holding SA Annual Report 2017 Compensation report Details Compensation awarded directly by the Company to members of the Board of Directors and Management comprises fixed cash compensation. When, in exceptional circumstances, short-term variable compensation is awarded to a member of Management (as was the case in 2016 (1) ), this compensation is also paid in cash. Members of the Board of Directors and Management are not entitled to any contractual payment from the Company for early departure. Furthermore, the Company does not pay any compensation to members of Management or directors who no longer hold positions or mandates within the Company. Pargesa Holding set up for its employees and members of Management (excluding Executive Directors) a share option plan in 2007, following a decision by the Board of Directors. The main features of this plan are as follows : The options are granted annually. The 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. This percentage is set at 125 % for options granted to the Managing Director. For other beneficiaries, the maximum percentage, which had been 125 % since 2007, was increased to 180 % for options awarded as of In 2017, the percentage applied to the compensation of the beneficiaries ranged from 90 % to 180 % based on their hierarchical position and their individual performance. 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 lock-up period applies from the date of grant. The aim of this long-term plan is to maintain the loyalty of employees and participating members of Management and to involve them in the creation of shareholder value. In 2017, the total number of options granted to members of Management under this plan concerned underlying Pargesa shares. Option rights that are still subject to the lock-up period on the date of retirement, dismissal or death are vested on that date, unless the case is one involving serious misconduct or voluntary departure. (1) Upon the recommendation of the Compensation Committee, the Board of Directors awarded the Managing Director a one-off bonus of CHF in 2016, 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

79 Pargesa Holding SA Annual Report 2017 Compensation report Compensation of the Board of Directors and Management in 2017 The compensation paid directly and indirectly to members of the Board of Directors and Management, pursuant to Article 14 of ORAb, for the 2017 financial year is provided below. in CHF Paid directly by Pargesa Holding SA Fees and salaries Paid indirectly by other companies (1) Sub-total Value of options of Pargesa shares awarded by Pargesa (2) Pension benefits, contributions to statutory pension schemes and others Total for 2017 Total for 2016 Executive Directors (7) Paul Desmarais Jr Chairman and Exec Director Gérald Frère Vice Chairman and Exec. Director Arnaud Vial Director Non-executive Directors André Desmarais Vice Chairman and (4) Director Marc-Henri Chaudet Director Bernard Daniel Director Victor Delloye Director Paul Desmarais III Director Cedric Frère Director Ségolène Gallienne Director Jean-Luc Herbez Director Barbara Kux Director Jocelyn Lefebvre Director (5) Michel Pébereau Director Michel Plessis-Bélair Director (6) Gilles Samyn Director Amaury de Sèze Director Total Directors Members of Management Arnaud Vial Managing Director (7) Mark Keller Financial Director (3) (8) Other members of Management Total Members of Management (1) These figures include compensation paid by companies within the Pargesa Group (primarily GBL and Imerys), as well as compensation for positions held on the Group s behalf (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 2017 was CHF 2.59 (3) Includes CHF in benefits in kind (4) Prorated payment from 1 January 2017 to 28 April 2017, when André Desmarais took a temporary sick leave until 3 January André Desmarais decided to waive his compensation during this period. (5) Jocelyn Lefebvre was appointed to the Board of Directors at the Annual General Meeting on 4 May 2017 (6) Michel Plessis did not seek another term as Director at the Annual General Meeting on 4 May 2017 (7) 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. Mr Vial also holds positions in the Power Corporation of Canada group (8) The Board of Directors appointed Mark Keller as Financial Director on 29 July 2016 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). 77

80 Pargesa Holding SA Annual Report 2017 Compensation report Deloitte SA Rue du Pré-de-la-Bichette Geneva Switzerland Phone: +41 (0) Fax: +41 (0) 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) To the General Meeting of Pargesa Holding SA, Geneva We have audited page 77 of the accompanying compensation report of Pargesa Holding SA for the year ended December 31, 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 remuneration 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 remuneration report complies with Swiss law and articles of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles of the Ordinance. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatements in the remuneration 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 remuneration 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, 2017 of Pargesa Holding SA complies with Swiss law and articles of the Ordinance. Deloitte SA Thierry Aubertin Licensed audit expert Auditor in Charge Aurélie Darrigade Licensed audit expert Geneva, March 15,

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83 05 CONSOLIDATED FINANCIAL STATEMENTS Perron Fountain Old town Geneva 81

84 Pargesa Holding SA Annual Report

85 Pargesa Holding SA Annual Report 2017 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 5.13 Changes in liabilities urising from financing activities 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 83

86 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Consolidated income statement Note CHF million CHF million Revenue Other operating income Changes in inventory 6.3 (14.6) Raw materials, goods intended for resale and consumables ( ) ( ) Staff costs 6 ( ) ( ) Depreciation of tangible assets and amortisation of intangible assets 11, 13 (330.6) (287.7) Other operating expenses ( ) ( ) Other operating income and expenses (579.4) Operating profit (68.7) Dividends and net interest from available-for-sale financial assets Other financial income Other financial expenses 5.4 (170.6) (160.4) Financial profit Operating and financial profit Income from associates and joint ventures Net profit before tax Income taxes 10 (165.3) (163.2) Net profit for the period (including minority interests) attributable to non-controlling interests attributable to Pargesa shareholders (Group share) (32.0) Basic net earnings per share in CHF (Group share) (0.38) Diluted net earnings per share in CHF (Group share) (0.38) Consolidated statement of comprehensive income Note CHF million CHF million Net profit for the period (including minority interests) Other comprehensive income Items not subsequently reclassified to income statement Actuarial gains/losses (14.1) 10.1 Total items not subsequently reclassified to income statement (1) (14.1) 10.1 Items that are or may be subsequently reclassified to income statement Change in fair value of available-for-sale financial assets (2) Change in hedging reserve (4.4) 18.0 Change in translation reserve (3) (84.6) Total items that are or may be subsequently reclassified to income statement (4) Total other comprehensive income (5) Total comprehensive income for the period (including minority interests) attributable to non-controlling interests attributable to Pargesa shareholders (Group share) (1) Of which CHF 5.7 million in taxes in 2017 (CHF 3.5 million in 2016) ; see note (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. (4) Of which CHF 13.3 million in taxes in 2017 (CHF 7.6 million in 2016), see note (5) Details of the reclassification adjustments carried through the income statement are shown in note

87 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Consolidated balance sheet ASSETS Note CHF million CHF million Long-term assets Intangible assets Goodwill Tangible assets Investments in associates and joint ventures Available-for-sale financial assets Deferred tax assets Other long-term financial assets Other long-term non-financial assets Total long-term assets Short-term assets Inventories Trade receivables Financial assets held for trading Other short-term financial assets Other short-term non-financial assets Cash and cash equivalents Total short-term assets TOTAL ASSETS LIABILITIES AND EQUITY Note CHF million CHF million Shareholders equity Share capital Capital reserve Treasury shares 20.2 (5.5) (5.5) Revaluation and hedging reserve Translation reserve ( ) ( ) Consolidated reserves Equity attributable to the Group Equity attributable to non-controlling interests Total equity (including non-controling interests) Long-term liabilities Provisions Pension liabilities and similar benefits Deferred tax liabilities Financial debt Other long-term financial liabilities Other long-term non-financial liabilities Total long-term liabilities Short-term liabilities Provisions Trade payables Income tax payable Financial debt due within the year Other short-term financial liabilities Other short-term non-financial liabilities Total short-term liabilities TOTAL LIABILITIES AND EQUITY

88 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Consolidated cash flow statement Note CHF million CHF million OPERATING ACTIVITIES Net profit before tax Adjusted for : Income from associates and joint ventures (36.4) (31.2) Dividends received from associates and joint ventures Dividends recognised on available-for-sale financial assets (378.8) (368.9) Dividends received on available-for-sale financial assets Profit/loss on the sale of tangible and intangible assets (5.0) (15.6) Profit/loss on the sale of available-for-sale financial assets (10.1) ( ) Profit/loss on the sale of subsidiaries (265.8) (59.8) Depreciation, amortisation, impairment, impairment reversals and negative goodwill Miscellaneous items of income statement not involving cash movements 12.0 (51.4) Interest income (11.3) (19.0) Interest expense Operating cash flow before changes in working capital and taxes Changes in working capital (301.3) Income taxes paid (139.0) (111.0) Cash flows from operations INVESTMENT ACTIVITIES Acquisitions of subsidiaries, net of cash acquired 16 (493.2) (1) (232.3) Disposals of subsidiaries, net of cash transferred Acquisitions of associates and joint ventures (38.0) (42.9) Disposals of associates and joint ventures Acquisitions of tangible and intangible assets (400.7) (328.4) Disposals of tangible and intangible assets Advances, repayments of long-term advances granted, and other 5.1 (10.1) Acquisitions of available-for-sale financial assets ( ) ( ) Disposals of available-for-sale financial assets Cash flows from investments ( ) FINANCING ACTIVITIES Treasury shares put into circulation by the parent company 0.3 Share issue/capital reduction by subsidiaries (share of non-controlling interests) Additional/partial acquisitions and disposals in existing subsidiaries Dividend paid by parent company to shareholders 21 (206.6) (201.5) Dividends paid by subsidiaries to minority shareholders (348.7) (303.2) Long-term financial debt proceeds Repayment of long-term debt and finance leases 5.13 ( ) (769.0) Short-term financial debt proceeds Short-term financial debt repaid 5.13 (9.0) (546.2) Interest received Interest paid (140.1) (120.9) Cash flows from financing (982.4) ( ) Effect of exchange rate variation Increase/decrease in cash and cash equivalents (566.7) Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December (1) Including cash payments for additions to the scope of consolidation in previous reporting periods. 86

89 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Consolidated statement of changes in equity CHF million Share capital Capital Treasury reserve shares Revaluation and hedging reserve Translation Consolidated reserve reserves Group share of equity Noncontrolling interests 1 January (5.5) ( ) net profit (32.0) (32.0) Change in fair value of available-for-sale financial assets (36.1) Change in hedging reserve Change in translation reserve (51.1) (51.1) (33.5) (84.6) Actuarial gains/losses Other comprehensive income (51.1) (33.3) total comprehensive income (51.1) (65.3) Dividend paid by parent company (201.5) (201.5) (201.5) Dividends paid by subsidiaries (303.3) (303.3) Other changes in equity (1) Effects of changes in scope and capital increases on non-controlling interests (9.5) (9.5) Changes in items other than total comprehensive income (204.0) (204.0) (206.5) (410.5) Total changes in (51.1) (269.3) December (5.5) ( ) net profit Change in fair value of available-for-sale financial assets (25.0) Change in hedging reserve (1.2) (1.2) (3.2) (4.4) Change in translation reserve Actuarial gains/losses (3.2) (3.2) (10.9) (14.1) Other comprehensive income (28.2) total comprehensive income Dividend paid by parent company (206.6) (206.6) (206.6) Dividends paid by subsidiaries (348.7) (348.7) Treasury shares put into circulation Other changes in equity (1) (7.9) (0.8) Effects of changes in scope and capital increases on non-controlling interests (9.5) (9.5) (11.9) (21.4) Changes in items other than total comprehensive income 0.2 (209.0) (208.8) (368.5) (577.3) Total changes in December (5.5) ( ) Total equity (1) These lines mainly represent various changes originated in subsidiaries, especially the cost of share-based payments at GBL and Imerys, as well as changes originated in GBL s equity-accounted shareholdings. 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

90 Pargesa Holding SA Annual Report 2017 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 2017 and 31 December 2016 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 2017 consolidated accounts on 15 March Pargesa Holding is majority owned by Parjointco, a Dutch corporation. At 31 December 2017, the end shareholders were Stichting Administratiekantoor Frère-Bourgeois in the Netherlands and the Desmarais family in Canada, specifically Jacqueline Desmarais (who passed away on 3 March 2018), 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 2017, 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 2016 : Standard Application date Amendments to IAS 7 Disclosures initiative 1 January 2017 Amendments to IAS 12 Recognition of deferred tax assets for unrealised losses 1 January 2017 Annual improvements cycle 1 January 2017 These amendments and annual improvements had no significant impact on the accounts at 31 December The aim of the amendment to IAS 7 is to improve disclosures on changes in liabilities arising from financing activities. This additional information is provided in note The Group has not adopted in advance any standards, interpretations, amendments or annual improvements with an application date after the 2017 financial year and 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 IFRS 2 Classification and measurement of share-based payment transactions 1 January 2018 Amendments to IFRS 4 Applying IFRS 9 financial instruments with IFRS 4 1 January 2018 Amendments to IFRS 9 Prepayment features with negative compensation 1 January 2019 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 1 January 2018 Amendments to IFRS 15 Clarifications to IFRS 15 1 January 2018 Amendments to IAS 19 Plan amendment, curtailment and settlement 1 January 2019 Amendment to IAS 28 Long-term interests in associates and joint ventures 1 January 2019 Amendments to IAS 40 Transfers of investment property 1 January 2018 IFRS 9 Financial instruments 1 January 2018 IFRS 15 Revenue from contracts with customers 1 January 2018 IFRS 16 Leases 1 January 2019 IFRS 17 Insurance contracts 1 January 2021 IFRIC 22 Foreign currency transactions and advance consideration 1 January 2018 IFRIC 23 Uncertainty over income taxes treatments 1 January 2019 Annual improvements cycle 1 January 2018 Annual improvements cycle 1 January

91 Pargesa Holding SA Annual Report 2017 Consolidated financial statements The main standards and interpretations applied after 31 December 2017 are the following : IFRS 9 will replace current IAS 39 on financial instruments. The improvements introduced by IFRS 9 include a classification and measurement model for financial instruments, an impairment loss model based upon expected losses and no longer upon past credit events, as well as a new approach to hedge accounting. The classification and measurement model for financial instruments introduced by IFRS 9 is simpler than that of current standard IAS 39. No material impact is expected from the change from an incurred loss model to an expected loss model as a consequence of the limited exposure of the Group to credit risk. Amendments to IFRS 9 on financial instruments state that entities that adopt IFRS 9 as of 1 January 2018 will not have to restate any comparative period, which is the option chosen by the Group. The amended IFRS 9 should affect in particular the treatment of non-consolidated investments not held for trading (recognised as Available-for-sale financial assets ). These assets will continue to be valued at fair value. The Group has chosen to recognise gains and losses on these investments in equity, as well the related exchange-rate gains and losses in the revaluation reserve, with no recycling through income statement, even in the event of a sale or impairment. However, for private-equity funds and other investment funds, the Group determined that the characteristics of these investments did not allow, in accordance with IFRS 9, the recognition of gains and losses in equity, but only in income statement. IFRS 15 became mandatory as of 1 January The new standard replaces IAS 11 (construction contracts) and IAS 18 (revenue from ordinary operating activities) and is based on two principles : firstly, sales are recognised when control of the goods or service passes to the customer, and secondly, a measurement is used for the amount of the expected payment. For sales of goods, the analysis focuses on the impacts related to the use of some specific incoterms. For service contracts, which primarily concern Imerys through its transport-on-sale service, the completed analysis specifically examined how the notion of control could influence the recognition pattern of revenue, depending on whether the customer obtains control over the service at a point in time or throughout time. The analysis of the various contract types in the Monolithic Refractories business, the main business concerned by this issue, concluded that the requirements of the new standard would not result in any material impact. the main company affected by this new standard, work was undertaken to limit the perimeter of the contracts included in the scope of the standard and to find IT solutions to manage the volume of identified contracts. The adoption of the other new standards and amendments in effect for years after 2017 should not have any major impact on the consolidated financial statements, with the exception of IFRS 9, as mentioned above, with the gains and losses on investments recognised in equity with no subsequent recycling. Framework for the preparation and presentation of the financial statements The purpose of the annual financial statements is to present a true and fair view of the financial situation, financial performance and cash flows of the Group. They are prepared in accordance with the going-concern principle. The conventions for the presentation of the statements are exactly the same from one financial year to the next in order to ensure comparability, and are only altered if the change corresponds to the provisions of a standard, interpretation, amendment or annual improvement, or enables more reliable and/ or more relevant information to be disclosed. When recorded, assets and liabilities and income and expenses are only offset as a result of applying the provisions of a standard, interpretation, amendment or annual improvement. For assets and liabilities, a distinction is made between long-term and short-term items, depending on whether their realisation or due date is more or less than 12 months after the balance sheet date. The income and expenses recorded in the consolidated income statement are grouped by nature. The consolidated financial statements, which concern a period of 12 months, are presented in millions of Swiss francs, which is the functional currency of Pargesa. Due to roundings, the sum of certain figures may not correspond exactly to the totals given in this report. The year-end financial statements are prepared on a historical cost basis, except for some non-current assets and financial instruments (derivatives, instruments held for trading, available-for-sale financial assets, etc.), which are measured at fair value. Financial assets and liabilities hedged at fair value are stated at fair value based on the risk hedged. The accounting policies are applied consistently within the Group at all times. IFRS 16 becomes mandatory as of 1 January This standard abolishes for the lessee the current distinction between operating leases, which are recognised as expenses, and finance leases, which are recognised as tangible assets against a financial debt, to require, for all leases, the recognition of the right of use against a financial debt. Application of this standard will have an impact on the amount of capital invested, the depreciation expense recognised in operating profit, the interest expense recognised in financial income, impairment tests, and the level of the commitments given with respect to the current operating leases contracts. At Imerys, 89

92 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Basis of consolidation Changes in the scope of consolidation The consolidated year-end financial statements include all the companies under Group control ; companies over which the Group exercises significant influence or joint control are accounted for using the equity method. In accordance with the materiality principle, certain non-significant companies are not included in the scope of consolidation. These companies are classified under availablefor-sale financial assets and recorded at fair value at 31 December. Intercompany transactions, balances and gains and losses between Group companies are eliminated in order to reflect the economic reality of the Group s transactions. (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. The Group controls a subsidiary when and only when all of the above three criteria are met. The Group reassesses its control over a subsidiary when the facts and circumstances indicate that one or more of the above three criteria have changed. The consolidated financial statements of the subsidiaries are integrated into those of the Group as of the date on which control is first exercised and until the date when control ceases. When a subsidiary is held for sale, its assets, liabilities and income are presented in accordance with IFRS 5. A list of the main subsidiaries of the Group is given in note 14. (2) Investments in associates and joint ventures An associate is a company in which the Group exercises significant influence by participating in the financial and operating policy decisions of the investee, but which is neither a subsidiary nor a joint arrangement of the Group. Significant influence is presumed to exist when the Company owns, directly or indirectly through its subsidiaries, 20 % or more, but less than 50 %, of the voting power. A joint venture is the result of a contractual arrangement whereby the Group and one or more parties agree to run a jointly controlled business operation and have rights to the net assets of that operation. Investments in associates and joint ventures are included in the consolidated financial statements using the equity accounting method as of the date on which significant influence or the joint control is first exercised and until the date when significant influence or joint control ceases. According to the equity accounting method, a shareholding is accounted for at cost, which is then adjusted according to the changes that occur 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 impairments, which are determined individually for each associate or joint venture. A list of the main associates of the Group is given in note 14. Ergon Capital Partners III (ECP III), a GBL subsidiary, sold its majority stake in Golden Goose in March 2017 and its holding in ELITech in July In September 2017, ECP III acquired a majority stake in Keesing Media Group, the largest publisher of games and puzzle magazines in Europe. On 18 July 2017, Imerys, a GBL subsidiary, acquired Kerneos, world leader in high performance calcium aluminates binders (see note 16 for more details of these transactions). At the end of 2017, Parques Reunidos became an associate company and is accounted for with the equity method (see note 17 for more details of this transaction). In March 2016, ECP III acquired a stake in Financière Looping S.A.S. In December 2016, ECP III also acquired an interest in the company Deutsche Intensivpflege. In June 2016, ECP III announced that it had entered into an agreement for the sale of De Boeck. Foreign currencies In the financial statements of the Company and of each subsidiary, associate or joint venture, foreign currency transactions, when first recognised, are recorded in the functional currency of the company concerned using the exchange rate applicable on the transaction date. On the balance sheet date, monetary items denominated in foreign currencies are translated using the rate on the last day of the financial year (closing rate of exchange). Gains or losses from the realisation or translation of foreign currency monetary items are recognised in income statement by the entity concerned in the period during which they occur. On consolidation, the assets and liabilities of the Group s foreign operations are translated using the closing exchange rate. Income and expenses are translated using the average rate for the period. Resulting translation differences are recorded in equity under translation reserve. These translation differences are recognised as gains or losses when the company concerned is disposed of. Movements of funds in the consolidated cash flow statement are translated at the average exchange rates. The following exchange rates were used in the translation of the consolidated financial statements : Closing exchange rate Average exchange rate EUR / CHF

93 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Business combinations and goodwill When the Group acquires an operation or a business, the identifiable assets, liabilities and contingent liabilities of the investee are recognised at fair value. The excess cost of the business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill. When this difference, after remeasurement of the values of a subsidiary, associate or joint venture, is negative (i.e. negative goodwill), it is immediately recognised in the income statement. Negative goodwill represents the excess of the Group share in the net fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary, associate or joint venture at the acquisition date, compared with the acquisition cost. Costs directly connected with an acquisition are recognised in the income statement as and when they are incurred. If there is incomplete information about the fair value of assets and liabilities at the end of the period during which the business combination is effective, its accounting is determined provisionally. Where necessary, the amounts provisionally recognised are adjusted during the following year, in order to reflect the new information obtained about facts or circumstances prevailing at the time of the combination which, had they been known at that date, would have affected the amounts recognised. Goodwill is considered to be an asset and is not amortised but tested annually for impairment on the balance sheet date (or an earlier date if there are indications of a goodwill impairment). For the purposes of the impairment test, goodwill is allocated to the cost-generating unit (CGU) or CGU group likely to benefit from the business combination synergies. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment is first allocated to the goodwill of that unit, then to the other assets in the unit. Impairments are recognised immediately in the income statement and are not subsequently reversed. Goodwill arising from the acquisition of an associate or joint venture is included in the carrying amount of the associate or joint venture. Goodwill arising from the acquisition of subsidiaries is presented separately on the balance sheet. 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 the sale. For a business combination, a non-controlling ownership interest may be measured, on a case-by-case basis and at the Group s discretion, either at fair value or based on the proportionate share of the net identifiable asset of the acquiree. The increase or decrease in the percentage interest in a subsidiary, for transactions with third parties, constitutes a transaction with non-controlling interests and is recognised directly in equity without any adjustment to the carrying amount of the existing goodwill. Intangible assets An intangible asset is recorded if, and only if, it is probable that the future economic benefit of the asset will flow to the Group and if the cost of that asset can be estimated reliably. Intangible assets are recognised as assets over their useful life. They are recognised at acquisition cost less accumulated amortisation and any impairment. The amortisation of intangible assets with a defined useful life is determined using the straight-line method on the basis of the estimated useful life of the intangible asset in question. Costs incurred by the Group s research teams in order to improve the quality and properties of products generally address specific requirements made by customers and are therefore immediately recognised as expenses in the income statement. They are capitalised only if they correspond to an industrial process that 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. Estimated useful lives : Software 1-5 years Patents, licences and concessions 5-40 years Industrial procedures and other Maximum of 10 years Greenhouse gases emission rights of the Imerys group are not amortised. Intangible assets with an indefinite useful life are not amortised but tested annually for impairment on the balance sheet date (or at an earlier date if there is an indication of impairment). When the recoverable value of an asset is lower than its carrying amount, the carrying amount is reduced in order to reflect the impairment. Mining assets Imerys group applies the following methods of recognition and measurement for mining assets. Prospection expenditures, i.e. the costs of seeking new knowledge about the mining potential, technical feasibility and commercial viability of a geographical area are expensed immediately under current operating income. Mineral reserves are tangible assets and are initially measured at acquisition cost excluding the subsoil, plus expenses incurred in establishing the tonnage of ore in the deposit. Overburden works, i.e. removal of the topsoil to access the deposit, also qualify as a component of the mineral reserve asset. Their initial measurement includes the production cost and the discounted value of restoration obligations resulting from the damage caused by the construction of these assets. Mineral reserves and overburden assets form the 91

94 Pargesa Holding SA Annual Report 2017 Consolidated financial statements mining assets item in note 13. Mining assets are subsequently valued at cost less depreciation and any accumulated impairment. The methods used for mining asset amortisation are estimates carried out by Imerys. A mineral reserve is amortised on a quantity equal to the geological inventory of the deposit less discounts relating to the uncertainty of resources. Overburden works, which form part of the mineral reserve asset, are depreciated based on the quantity of the reserve that they specifically give access to. The subsoil, which is the surface of the land outside the deposit, is not depreciated because it is not consumed by mineral operations. Mining assets are allocated to CGUs in the same way as other assets of the Imerys group and are subject to the same impairment tests. Tangible assets Tangible assets are capitalised if they are controlled under a title deed or a finance lease that transfers the inherent risks and benefits of ownership. Tangible assets are initially measured at acquisition or production cost. The initial cost of tangible assets held under a finance lease is the lower of the fair value of the asset and the discounted value of minimum future payments. The cost of tangible assets includes the cost of the loans funding their construction or production when they require a prolonged period of development. Where appropriate, the cost of tangible assets is reduced by the amount of public subsidies used to fund their acquisition or construction. Maintenance and repair costs are immediately expensed. The cost of tangible assets includes, in particular for satellite industrial plants built on customer land, the discounted value of the obligation to restore or decommission, when a current obligation exists. Tangible assets are subsequently measured at cost less depreciation and any accumulated impairment. The methods used for tangible asset depreciation are estimates carried out by the Group. Estimated useful lives : Buildings years Industrial structures years Installations in and improvements to buildings and structures 5 15 years Facilities, machinery, plant and equipment 5 20 years Vehicles 2 5 years Other tangible assets years Land is not depreciated. Finance leases and operating leases A finance lease is a contract with transfer to the lessee of practically all the inherent risks and benefits of the property (see the accounting principles relating to tangible assets as well). All other leases are defined as operating leases. Finance-leased assets are recognised as assets by the Group at the start of the lease at the lower of discounted value of future minimum payments or fair value. 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. Impairment of assets (excluding goodwill and available-for-sale financial assets) At each balance sheet date, the Group reviews the carrying amount of its investments in associates and joint ventures and of tangible and intangible assets with a finite useful life in order to determine whether there are any indications that the value of these assets is impaired. For intangible and tangible assets, if there is any such indication, the recoverable amount of the asset is estimated in order to compare it with the carrying amount. The recoverable amount is the higher of the asset s net selling price or its value in use. The value in use is the discounted value of estimated future cash flows expected from the continued use of an asset. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs. If the recoverable amount of the asset (or CGU) is considered to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. This impairment is immediately recognised as an expense. When an impairment recognised during prior periods no longer exists, the impairment recognised on the asset or CGU is immediately recognised as income in order to adjust the value of the asset or CGU to an amount corresponding to the new measurement of its recoverable amount. However, after an impairment reversal, the carrying amount of an asset or CGU may not be greater than the carrying amount it would have had if no impairment had been recognised for that asset or CGU during prior periods. When there is objective evidence of impairment of an associate or joint venture, it is subjected to an impairment test, in accordance with IAS 36 and IAS 28. The recoverable amount of the asset is estimated in order to compare it with the carrying amount and, where necessary, to recognise an impairment equal to the difference. The recoverable amount is the higher of its fair value less net selling price and its value in use. The value in use is the discounted value of estimated expected future cash flows. When an impairment recognised in a prior period ceases to exist, the carrying amount is partly or wholly restored and the impairment reversal is immediately recognised as income. 92

95 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Financial assets Financial assets are recorded on the transaction date and are initially recognised at fair value, which in most cases corresponds to their cost of acquisition. Available-for-sale financial assets : Available-for-sale financial assets include investments in companies in which the Group exercises no significant influence. The Group is deemed to have no significant influence if it does not directly or indirectly hold more than 20 % of the voting rights. These investments are recognised at fair value, based on the market price for listed shareholdings. Investments in private equity and other investment funds are remeasured at fair value, which is determined by the fund managers based on the investment portfolio. Available-for-sale financial assets are measured at fair value on each balance sheet date. Changes in fair value are recognised in the revaluation and hedging reserve in equity in other comprehensive income, with the exception of prolonged or significant impairment, which is recognised in the income statement. When there is objective evidence of impairment (i.e. a drop in fair value of more than 30 % or over more than one year) for an available-for-sale asset, it is subjected to an impairment test. An impairment is recognised in the income statement if the asset tested is considered to have been impaired. In that case, the impairment amount recognised is the difference between the acquisition cost of the asset and its fair value (i.e. share price) on the balance sheet date. Where an impairment was recognised in a prior period, any new decrease in fair value automatically leads to further impairment. Impairments recognised in the income statement are not reversed in the income statement during a subsequent period unless the asset is sold. The accumulated profit or loss in the revaluation and hedging reserve is recognised in the income statement when the asset is sold. Assets placed in this category are generally assets held over the medium and long term. Held-to-maturity investments : on each balance sheet date, the financial assets delivering fixed inflows, or flows determinable on fixed due dates, which the Group clearly intends, and is able, to keep to maturity (held-to-maturity investments) are measured at amortised cost, less any impairment recognised in order to reflect uncollectable amounts. Any rebate or premium for the acquisition of a security held to maturity is amortised over the life of the instrument, so that the profit recognised in each period represents a constant rate of return on the investment. Loans and receivables : loans, trade receivables and other unquoted receivables not classified as assets held to maturity are stated in loans and receivables. These are revalued at amortised cost less any losses or impairment in the case of amounts that cannot be recovered. Revenues are recognised according to the effective interest rate method except for shortterm receivables and loans for which the effect is immaterial. Financial assets at fair value through profit or loss : financial assets in this category are either held for trading or qualified as such on initial recognition. A financial asset is held for trading if it is acquired with a view to being resold in the short term or if it is a derivative instrument that does not qualify as a hedging instrument. The financial assets in this category are subsequently measured at fair value and any change in value is recognised through the income statements. Other long-term financial and non-financial assets This item includes long-term advances, loans and deposits (i.e. those with a term of more than 12 months), long-term derivative financial instruments and any other long-term non-financial assets. Inventories Inventories are capitalised on the date on which the risks, benefits and control are transferred to the Group. When sold, inventories are recognised as an expense in the income statement on the same date as the corresponding income. Inventories are measured at the lower of acquisition cost or net realisable value. When the production rate is less than normal capacity, the fixed costs that can be included specifically exclude the proportion corresponding to the under-activity. Inventories with similar features are measured using the same method. The methods used in the Group are First In First Out (FIFO) and weighted average cost per unit. When the production cost cannot be recovered, it is calculated as the net realisable value in accordance with the conditions on the balance sheet date. Trade receivables A receivable is recognised as a sale of goods when the risks, benefits and control are transferred. A receivable is recognised for the rendering of a service based on the percentage of the service rendered on the balance sheet date. Moreover, both for the sale of goods and the rendering of services, a receivable is only recognised if it is recoverable and the amount of the transaction and the costs necessary to complete it can be measured reliably. The sale of goods and the rendering of services are measured at the fair value of the transaction, less trade and volume rebates, and discounts for early settlement. When a receivable proves to be wholly or partly uncollectable, it is individually reduced to its recoverable amount based on the conditions on the balance sheet date. 93

96 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Cash and cash equivalents This item comprises cash, demand deposits and short-term deposits with a maturity of three months or less, and highly liquid investments that are readily convertible into a known amount of cash and that are subject to an insignificant risk of changes in value. Capital (1) Costs of equity issues Issuing costs directly attributable to an equity transaction are recognised as a deduction from equity. (2) Treasury shares Treasury shares are presented as a deduction from equity and recorded as a change in equity. No gain or loss is recognised in the income statement on the sale, issue or cancellation of treasury shares. (3) Dividends Pargesa Holding SA dividends are recognised in the consolidated financial statements in the period in which they were approved by shareholders at the Annual General Meeting. (4) Reserves The reserves included in Group equity include the following : Capital reserve, which corresponds to the premium paid by the shareholders at the time of a Company share issue. Revaluation and hedging reserve, which corresponds to the latent loss or gain on available-for-sale financial assets. Until 31 December 2017, the latent loss or gain was recognised in the income statement when the corresponding asset was sold or when an impairment of an asset was considered to be permanent. The hedging reserve represents unrealised gains and losses on hedging operations. Translation reserve, which corresponds to the translation differences relating to subsidiaries, associates and joint ventures. Consolidated reserves, which represent accumulated net profit (this item includes retained earnings, which include mandatory retained earnings and any treasury reserve, which are required reserves under the Swiss Code of Obligations). Earnings per share Basic earnings per share are calculated by dividing the Group s net profit by the weighted average number of shares outstanding during the period, excluding treasury shares. Diluted earnings per share are calculated on the weighted average number of shares outstanding, adjusted for the presumption that the exercise of all share options has a potentially dilutive effect, and taking into account the impact of the conversion of convertible and exchangeable bonds. Financial debt Financial debt includes financial liabilities at fair value through profit or loss and other financial liabilities. Financial liabilities at fair value through profit or loss : financial liabilities in this category are those held for trading or qualified as such on initial recognition. A financial liability is held for trading if it is entered into with a view to being acquired or redeemed in the short term or if it is a derivative instrument that does not qualify as a hedging instrument. Financial liabilities in this category are subsequently measured at fair value and any change in value is recognised through profit or loss. Other financial liabilities : other financial liabilities, including borrowings, are initially measured at the fair value of the amount of cash obtained, less transaction costs. Trade payables and other financial liabilities are valued at amortised cost. Hybrid instruments convertible and exchangeable bonds Convertible bonds (redeemable for the issuer s shares) or exchangeable bonds (redeemable for shares other than the issuer s shares) are considered to be hybrid instruments comprising a bond component and an option component. On the date of issue, the fair value of the bond component is estimated on the basis of the prevailing market rates for similar non-convertible (or non-exchangeable) bonds. The interest expense on the bond component is calculated by applying the interest rate thus determined at issue. The difference between this expense and the interest effectively paid is added, during each period, to the carrying amount of the bond, so as to reconstitute, on maturity, the redemption value based on the amortised cost method. The difference between the income from the convertible or exchangeable bond issue and the fair value attributed to the bond component is representative of the option to convert the debt into (or to exchange it for) other financial instruments. 94

97 Pargesa Holding SA Annual Report 2017 Consolidated financial statements If these other financial instruments are : Equity instruments of consolidated entities : the option component, which is measured at fair value at issue, is recognised in equity and is not subject to further revaluation ; Other financial instruments : the option component, which is measured at fair value at issue, is remeasured at fair value at the end of each accounting period. The fluctuation in fair value is recorded on the income statement (for bonds that are convertible 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). Derivative financial instruments The Group uses derivative financial instruments and may conduct transactions on call and put options. The Group s operating companies use derivative financial instruments to reduce their exposure to various risks, in particular exchange rate, interest rate and energy price risks. Derivatives are recorded on the transaction date, i.e. when the hedging contract is entered into, and are booked as current or non-current assets or liabilities depending on their maturity and that of the underlying transactions. Derivatives are initially carried at fair value and then revalued at each balance sheet date with reference to market conditions. Fair value, which includes the derivative s accrued coupons, is determined through a model that uses observable data, i.e. closing date prices provided by third parties active in the financial markets (level 2 fair value). These valuations are adjusted for the credit risks of counterparties and the credit risk of the Group companies concerned. When the market value of the derivative is positive (derivative asset), its fair value includes the counterparty s probability of default (i.e. credit value adjustment, CVA). When the market value of the derivative is negative (derivative liability), its fair value takes account of the probability of default of the Group companies concerned (i.e. a debit value adjustment, DVA). These adjustments are determined using the spreads of bonds on the secondary market, such as those issued by the Group companies concerned and the counterparties (level 2 fair value). Only those instruments that satisfy hedge accounting criteria are subject to the accounting treatment described below. Each transaction that qualifies as a hedge is documented with reference to the hedging strategy by identifying the risk hedged, the item hedged, the hedging instrument, the hedging relationship and the method used to assess the effectiveness of the hedging relationship. The effectiveness of the hedge is assessed at each balance sheet date. Recognition of derivatives used for hedging varies according to whether they qualify as fair value hedges, cash flow hedges or hedges of a net investment in foreign operations. Derivatives that do not qualify for hedge accounting are recognised in financial income and expenses. (1) Fair value hedging When variations in the fair value of a recognised asset or liability or in an unrecognised firm commitment are liable to affect the income statement, such variations may be hedged by a fair value hedge. The hedged item and the hedging instrument are remeasured symmetrically against income statements 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 availablefor-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. (2) Cash flow hedging A cash flow hedge makes it possible to hedge the unfavourable variations in cash flow connected with a recognised asset or liability or a highly probably future transaction, when these variations are likely to affect the income statement. At each balance sheet date, the effective part of the hedge is recognised in equity and the ineffective part in the income statement. When the transaction is recognised, the effective part in equity is recorded in the income statement at the same time as the hedged item is recognised. (3) Hedging of net investments in foreign operations The exchange rate variations generated by the net assets held in foreign currencies in the Group s consolidated operating companies may be hedged. At each balance sheet date, the effective part of the hedge is recognised in equity and the ineffective part in the income statement. The effective part in equity is recorded in the income statement only if control over a consolidated company is lost or the holding in a company under significant influence is reduced. (4) Financial instruments not qualifying as hedging instruments A derivative financial instrument that does not qualify as a hedging instrument is recognised as a trading instrument. Variations in fair value of financial instruments that do not qualify as hedging instruments are recognised immediately in the income statement. The ineffective part of operational hedging instruments is booked as operating income or expense. The ineffective part of financial hedging instruments is booked as financial income or expense. 95

98 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Fair value Pension liabilities and similar benefits Fair value is the price that would be obtained for the sale of an asset or would be paid for the transfer of a liability in an arm s length transaction on the valuation date. When the Group records a financial instrument on the balance sheet for the first time, the instrument is measured at fair value. This value corresponds to the value at acquisition including transaction costs for the assets and liabilities that are not measured at fair value through profit and loss. After initial recognition, financial assets and liabilities (including derivatives) are measured at fair value, except for assets recorded at amortised cost. The fair value of listed company equity instruments is measured on the basis of the stock market prices on the balance sheet date. When there is no active market for a financial instrument, the Group measures fair value using valuation techniques involving existing market data. Provisions Provisions are recognised as soon as the Group has a current (legal or implicit) obligation resulting from past events that will probably cause an outflow of funds embotying economic benefits, the amount of which can be reliably estimated. The amount provisioned corresponds to the best estimate of the amounts that must be spent in order to extinguish the current liability at the balance sheet date. Provisions are recognised as an expense in the income statement, with the exception of Imerys provisions for the decommissioning of assets and certain provisions for the restoration of mining locations for which the offset is included in the cost of the related assets, notably for industrial building work and mining development work. Provisions that are expected to be settled within 12 months following the end of the period or that may be settled at any time are not discounted. Provisions that are expected to be settled more than 12 months after the end of the period are discounted. This treatment applies mainly to provisions at Imerys that are accrued with respect to environmental obligations to rectify pollution, obligations to dismantle plants and obligations to restore mine sites once extraction is completed. Changes in discounted provisions due to a revision of the amount of the obligation, the timing of settlement or its discount rate are recognised in the income statement, or for provisions recognised against assets, as an adjustment of the cost of the latter. The unwinding is deducted from other financial income and expense. Provisions for restructuring costs are recognised when the Group has established a detailed restructuring plan and as soon as this has been communicated to the parties concerned. (1) Defined contribution plans In accordance with regulatory requirements and business practices in each country, the Group contributes to building up retirement benefits for its employees by paying, on either a compulsory or optional basis, contributions to external entities such as pensions funds, insurance companies or financial institutions. These plans are known as defined contribution plans and offer no guarantee to beneficiaries concerning the amount of future benefits they will receive. Charges incurred under defined contribution pension plans are recognised in the income statement under staff costs in the financial year during which they are due. (2) Defined benefit plans Some Group companies (mainly Imerys) guarantee that plan beneficiaries will receive a defined level of future benefits. Defined benefit liabilities and the annual cost booked to the income 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 necessary may be capped. Pension costs and direct payments to beneficiaries are booked to the income statement as staff costs, with the exception of contributions and payments relating to restructurings, which are carried under other operating expenses, and contributions to under-funded closed plans with mandatory funding requirements, which are carried under other financial income and expenses. The impact of these contributions on the income statements is eliminated by releases of provisions, each carried under one of the three income statement items. Other items relating to changes in post-employment benefits are booked to the income statement as staff costs, with the exception of plan amendments, curtailments and settlements relating to a restructuring, which are carried under other operating expenses, and the unwinding of liabilities and the normalised return of assets, which are carried under other financial income and expenses. Administrative fees are carried under staff costs, with the exception of administrative fees relating to under-funded closed plans with mandatory funding requirements, which are booked under other financial income and expenses. Plan amendments, curtailments and settlements are recognised immediately in the income statement. The actuarial differences and asset limitations of post-employment plans are entirely recognised in equity, net of asset management fees, with no subsequent reclassification to income statements. 96

99 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Share-based payments The fair value of services rendered against the granting of share options and free shares is measured using a commonly accepted pricing model (Black & Scholes, Monte Carlo) with reference to the fair value of instruments at the grant date. This measurement takes into consideration the exercise price and the term of instruments, the underlying share price, the turnover rate of beneficiaries and the volatility of the underlying share. In most cases, the acquisition of rights is subject to terms relating to length of service, and the fair value of services rendered is recognised under staff costs over the vesting periods of rights, against an increase in equity, and on the basis of the best available estimate concerning the number of rights that will be acquired in the future. The turnover rates of beneficiaries are definitively adjusted as vesting periods are closed. The accounting treatment is the same if, in addition to terms relating to length of service, the acquisition of rights requires certain pre-determined economic performance conditions to be accomplished. When the transaction is settled in cash, the Group incurs a liability, which is measured at fair value. Until the liability is settled, the fair value is measured on every balance sheet date, and then on the settlement date. Changes in fair value are recognised in the income statement for the period. Income recognition Sales of assets are recorded when the risks and benefits of ownership have been transferred to the buyer. In the case of the delivery of goods, this is generally when the goods have been delivered and ownership title transferred. At Imerys, sales of goods represent the greater part of ordinary income. Their incoterms are multiple because of the specificities of packaging (bulk, powder, paste, slurry, etc.) and freight (sea, rail, road, etc.) and represent the key indicator for the recognition of sales of goods. Reinvoicing the freight cost of the product represents the majority of rendering of services, and its recognition generally derives from the sale of the transported product. Moreover, both for goods and the rendering of services, a receivable is only recognised if it is recoverable and the amount of the transaction and the costs necessary to complete it can be measured reliably. The sale of goods and the rendering of services are measured at the fair value of the transaction, less trade and volume rebates, and discounts for early settlement. Interest is recognised on a time proportion basis, taking into account the effective yield on the asset. Dividends and interim dividends are recognised as soon as the Group s right to receive them is established and it is probable that the Group will benefit from the resulting financial flows. Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised and incorporated at the acquisition cost of the qualifying asset. A qualifying asset is understood to be an asset that necessarily takes a substantial period of time (more than a year) to be completed before it can be used or sold. Borrowing costs can include interest on sums due to banks at sight and on short-term or long-term borrowings, the amortisation of premiums or reimbursements relating to borrowings, amortisation of ancillary costs incurred in connection with the arrangement of borrowings, financial expenses in respect of finance leases and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest expenses. Income taxes Taxes on profit for the financial year comprise current taxes and deferred taxes. They are recorded in the income statement except where they concern items recorded directly in equity, in which case they are also recognised in equity. Current taxes are the taxes payable on the taxable profit for the financial year, calculated according to the rates of taxation that were adopted at the balance sheet date, as well as adjustments for the previous financial years. Deferred taxes are calculated according to the variable deferral method applied to the timing differences between the carrying amount of the assets and liabilities recorded in the balance sheet and their tax base. The following differences are not taken into account : non-tax-deductible goodwill and initial recognition of assets and liabilities having no impact on the book and fiscal results. Deferred taxes are calculated as a function of how the asset and liability items are expected to be realised or settled, on the basis of the rates of taxation that were adopted or virtually adopted at the balance sheet date. Furthermore, deferred tax liabilities relating to shareholdings in subsidiaries are not recognised when the Group is able to control the date on which the timing difference will be reversed and when it does not expect the timing difference to be reversed in the foreseeable future. Deferred tax assets are recognised only to the extent that taxable earnings are liable to be generated that allow use to be made of the deductible timing differences, tax losses and tax credits. 97

100 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Non-current assets held for sale and discontinued operations When, at the balance sheet date, it is highly probable that non-current assets or directly connected groups of assets and liabilities will be disposed of, they are designated as non-current assets (or disposal groups) held for sale. Their disposal is considered highly probable if, at the balance sheet date, a plan for selling them at a reasonable price compared with their fair value has been made in order to find a buyer and realise their sale within a maximum period of one year. Non-current assets (or disposal groups) classed as 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. Segment reporting Pargesa and GBL are holding companies with investments in companies that have little in common from a commercial or industrial point of view. These investments are acquired, managed and sold with a view to maximising shareholder value. Therefore, with regard to segment reporting, the business segments are based on the segregation of the various shareholdings and the absence of connections between them, each significant investment being regarded as a segment. The operations of the holding companies controlled by Pargesa are presented as a separate segment. Business segments are also shown by geographical location. The Group s segment reporting is consistent with the internal reports made to the Board of Directors. The segment reporting described above is presented in note 2. Risk management (1) Exchange rate risk Each subsidiary is responsible for managing its own exchange rate risk. Exchange rate risk may be hedged by forward foreign exchange contracts, foreign currency swaps and foreign exchange options. These instruments are used to hedge receivables, payables, firm commitments in foreign currencies and net investments in foreign entities. (2) Interest rate risk Interest rate risk management involves fully or partially hedging the fluctuation in debt interest rates either by a fixed rate of interest, by interest rate swaps or by options, depending on the individual policy laid down by the board of directors of each entity based on the needs of that entity. (3) Credit risk Credit risk concerns the risk that third party contractors will not fulfil their commitments towards the Group when they enter into transactions with it. Each shareholding is responsible for managing credit risk, using the specific arrangements most suited to the situation. (4) Liquidity risk Liquidity risk is the risk that an entity cannot fulfil its commitments to repay debts. Liquidity risk is managed at each level of the Group. (5) Energy price risk Imerys energy price risk is hedged by forward contracts and by option instruments. In order to manage risks, the companies of the Group may conduct studies on particular situations. The analysis carried out by Imerys (the main Group company potentially concerned) in 2017 on the consequences of the British decision to leave the European Union (Brexit) concluded that the potential risks were immaterial. Accounting changes, errors, main accounting judgements and estimates A change in accounting policy is only made if required by the provisions of a standard, interpretation or amendment to a standard, or if the change will result in more relevant and reliable information being disclosed. Changes in accounting policy are applied retrospectively, except in the case of transitional measures specific to the standard, or the interpretation or amendment of a standard. The financial statements affected by a change in accounting method are adjusted for all the accounting periods presented, as if the new accounting policy had always been in use. An error, when discovered, is also adjusted retrospectively. The inherent uncertainties of business operations require estimates to be used when preparing the financial statements. Estimates are based on judgements intended to give a reasonable assessment of the latest reliable information. An estimate is revised to reflect changes in circumstances, new information and the effect of experience. Changes in estimates are accounted for prospectively : they affect the accounting period during which they occurred, and possibly the following periods. The main judgements and estimates used in the preparation of the financial statements relate in particular to the following assumptions : 98

101 Pargesa Holding SA Annual Report 2017 Consolidated financial statements (1) Tangible and intangible assets Tangible and intangible assets with a definite useful life are depreciated or amortised using the straight-line method based on the estimated useful life of the fixed asset in question. (See also the accounting principles on intangible assets, mining assets and tangible assets.) (2) Impairment Impairment tests (see also the accounting policies concerning business combinations and goodwill, and impairment of assets) check whether the carrying amount of assets will be recovered on the basis of the present value of future cash flows. At Imerys, the CGU definitions and impairment indication, as well as the allocation of assets and goodwill to the CGU, are matters of judgement for Imerys senior management. The term and amount 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 management. Events that trigger an impairment test are matters of judgement for Imerys senior management. Such events mainly include significant changes in business operations, interest rates, technology level, obsolescence and asset yield. An impairment test must be carried out immediately on a CGU or individual asset if there is an adverse change in one of these indicators. An analysis of the impairment test conducted for the CGUs is provided in note 12 and an analysis of the impairment recorded for the year is given in note 8. (3) Employee benefits At 31 December 2017, the net provisions established for employee benefits primarily concerned Imerys (see the accounting policies concerning pension liabilities and similar benefits). The actuarial assumptions used to measure the value of defined benefits plans are estimates determined by Imerys senior management. The rates used to discount commitments and calculate the normalised return of the assets on the income statement are set by reference to the rates of the bonds issued by AA-rated (i.e. high-quality) companies in the main iboxx GBP Corporate AA GBP and USD indices. An analysis of employee benefits is given in note 23. (4) Provisions The sum recognised for provisions corresponds to the best estimate of the expenditure required in order to extinguish the current (legal or implicit) liability at the balance sheet date. The environmental and rehabilitation provisions set aside by Imerys for its mining and manufacturing operations require an estimate of the amounts the group will have to pay and assumptions about the repayment 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) Investments At 31 December 2017, investments in SGS, LafargeHolcim, Pernod Ricard, adidas, Umicore, Total, Burberry, Ontex and GEA, 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 61 % of balance sheet assets. In terms of judgement, GBL analysed the accounting treatment to be used for its investments in Ontex, Umicore, SGS and Parques Reunidos and whether they should be booked (i) as an investment in an associate (IAS 28), with GBL s share in the profit or loss and shareholders equity of Ontex, Umicore, SGS and Parques Reunidos, or (ii) as an available-for-sale financial asset (IAS 39), with the recognition of the investment at its fair value and the recognition of the dividend though profit or loss. Under IAS 28, a company is presumed not to exercise significant influence if it holds less than %, unless such influence can be clearly demonstrated. Under IAS 28, significant influence is clearly demonstrated in the case of (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. At 31 December 2017, the stakes in each of the four companies were %, 17.0 %, 16.6 % and 21.2 % respectively. GBL s representation on the boards of directors of Ontex, SGS and Umicore is not sufficient to demonstrate a significant influence. In addition, the representation on the boards is limited to the mandates and is not the result of a contractual or legal right but of a resolution at the companies annual general meetings. GBL therefore decided to recognise these investments as available-for-sale financial assets at 31 December The new investment in Parques Reunidos exceeds the % threshold and GBL is represented on the board of directors. These two factors therefore demonstrate a significant influence. As a result, GBL decided that it exercises significant influence over this company and that Parques Reunidos would be recognised as an associate and accounted for using the equity method. GBL also decided to transition to equity accounting using the fair value method, with no impact on income statement. Events after the balance sheet date Events occurring between the balance sheet date and the date on which the financial statements were approved for publication by the Board of Directors only result in an adjustment if they reveal, specify or confirm conditions already existing on the balance sheet date. 99

102 Pargesa Holding SA Annual Report 2017 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 2017 income by segment CHF million Holdings Imerys Total Revenue Other operating income Changes in inventory (0.3) Raw materials, goods intended for resale and consumables (91.7) ( ) ( ) Staff costs (189.4) ( ) ( ) Depreciation of tangible assets and amortisation of intangible assets (34.7) (295.9) (330.6) Other operating expenses (129.0) ( ) ( ) Other operating income and expenses Operating profit Dividends and net interest from available-for-sale financial assets Other financial income Other financial expenses (72.1) (98.5) (170.6) Financial profit (88.2) Operating and financial profit Income from associates and joint ventures Net profit before tax Income taxes (2.8) (162.5) (165.3) Net profit for the period (including non-controlling interests) Other information : Impairment of tangible assets (15.5) (15.5) Impairment (reversal) on investments, operations, goodwill, intangible assets and negative goodwill (5.1) (5.1) Capital gains/losses on investments and operations Interest income Interest expenses (60.9) (63.1) (124.0) 100

103 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Balance sheet at 31 December 2017 CHF million Holdings Imerys Total Long-term assets of which investments in associates and joint ventures Short-term assets Total assets Long-term liabilities Short-term liabilities Total liabilities income by segment CHF million Holdings Imerys Total Revenue Other operating income Changes in inventory 2.6 (17.2) (14.6) Raw materials, goods intended for resale and consumables (145.4) ( ) ( ) Staff costs (120.3) (979.5) ( ) Depreciation of tangible assets and amortisation of intangible assets (34.0) (253.7) (287.7) Other operating expenses (135.6) ( ) ( ) Other operating income and expenses (575.7) (3.7) (579.4) Operating profit (603.0) (68.7) Dividends and net interest from available-for-sale financial assets Other financial income Other financial expenses (80.2) (80.2) (160.4) Financial profit (59.8) Operating and financial profit (223.1) Income from associates and joint ventures Net profit before tax (193.7) Income taxes (8.2) (155.0) (163.2) Net profit for the period (including non-controlling interests) (201.9) Other information : Impairment of tangible assets (23.7) (23.7) Impairment (reversal) on investments, operations, goodwill, intangible assets and negative goodwill ( ) (2.7) ( ) Capital gains/losses on investments and operations (1.0) Interest income Interest expenses (71.5) (71.0) (142.5) Balance sheet at 31 December 2016 CHF million Holdings Imerys Total Long-term assets of which investments in associates and joint ventures Short-term assets Total assets Long-term liabilities Short-term liabilities Total liabilities

104 Pargesa Holding SA Annual Report 2017 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 million Imerys % % Holdings % % Total % % 2.2 Segment analysis by geographical location of customers CHF million Switzerland Europe North America Asia, Oceania and others 2017 Revenue Revenue Total Revenue comes mainly from Imerys and can be broken down as follows : CHF million Sale of goods Rendering of services Total 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 CHF million Switzerland Europe North America Asia, Oceania and others Long-term assets tangible and intangible assets goodwill investments in associates and joint ventures available-for-sale financial assets Short-term assets Total assets Total CHF million Switzerland Europe North America Asia, Oceania and others Long-term assets tangible and intangible assets goodwill investments in associates and joint ventures available-for-sale financial assets Short-term assets Total assets Total 102

105 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 3 Changes in working capital CHF million (Increase)/decrease in long-term assets (0.7) 5.0 (Increase)/decrease in inventories and trade receivables (80.5) 32.1 (Increase)/decrease in financial assets held for trading (421.7) (Increase)/decrease in other short-term assets (Increase)/decrease in pension liabilities and similar benefits 0.4 (Increase)/decrease in provisions 3.6 (0.7) (Increase)/decrease in trade payables and other short-term liabilities 52.3 (8.3) Total (301.3) Note 4 Other operating income and expenses Capital gains/losses and impairments on investments and operations CHF million Capital gain/loss on the disposal of ENGIE shares at GBL (see note 5.11) 1.3 (12.2) Capital gain realised by private equity funds (see note 16) Impairment on private equity funds at Pargesa and GBL (4.7) (1.9) Capital gain on the disposal of Total shares at GBL Translation difference on the reversal of the Total revaluation reserve at Pargesa Impairment on LafargeHolcim ( ) Translation difference on the impairment on LafargeHolcim at Pargesa (14.0) Impairment on ENGIE (67.5) Translation difference on the impairment on ENGIE at Pargesa 1.3 Goodwill impairment at Imerys (see notes 12) (0.5) Miscellaneous 16.6 (18.8) Total (579.4) 2017 The CHF 1.3 million capital gain on the disposal of ENGIE shares corresponds to the sale of the remaining ENGIE shares (11.9 million shares or 0.5 % of ENGIE s share capital) underlying the bonds exchangeable for ENGIE shares (see also note 8). The capital gains realised by private equity funds mainly represent the capital gains realised by Ergon Capital Partners III on the disposals of Golden Goose (CHF million) and ELITech (CHF million) In 2016, in addition to the CHF million capital gain on the disposal of Total shares at GBL, Pargesa recorded an historical exchange rate gain of CHF million as a result of the reversal of the corresponding revaluation reserve related to Total at Pargesa. The impairment on LafargeHolcim of CHF million represented the impact for Pargesa of the EUR million impairment recognised by GBL on its participation in LafargeHolcim (see notes 5.5 and 8). The impairment on ENGIE of CHF 67.5 million represented 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 participation 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). 103

106 Pargesa Holding SA Annual Report 2017 Consolidated financial statements 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 CHF million Financial assets and liabilities at fair value through profit or loss (excl. derivatives) Derivative financial instruments (excluding hedges) Loans and receivables and financial instruments at amortised cost Available-forsale financial assets Derivative financial instruments used as hedges 2017 Total carrying amount 2017 Fair value Available-for-sale financial assets (see note 5.5) Other long-term financial assets (see note 5.6) Trade receivables (see note 5.7) Financial assets held for trading * Other short-term financial assets (see note 5.8) Cash and cash equivalents (see note 5.9) Total financial assets Financial debt (see note 5.11) 0.2 ** ( ) (17.4) ( ) ( ) Other long-term financial liabilities (see note 5.10) (2.1) (3.2) (5.3) (5.3) Trade payables*** (631.8) (631.8) (631.8) Financial debt due within the year (see note 5.11) 3.5 ** ( ) ( ) ( ) Other short-term financial liabilities (see note 5.12) (25.6) (13.8) (10.5) (49.9) (49.9) Total financial liabilities (21.9) ( ) (31.1) ( ) ( ) Total ( ) (22.4) * Including CHF million in investments in money market funds at GBL and an equity portfolio of CHF 31.6 million held by GBL. ** These derivative products are financial-debt-related instruments and are recorded on the balance sheet under financial debt and financial debt due within the year. *** All trade payables fall due in

107 Pargesa Holding SA Annual Report 2017 Consolidated financial statements CHF million Financial assets and liabilities at fair value through profit or loss (excl. derivatives) Derivative financial instruments (excluding hedges) Loans and receivables and financial instruments at amortised cost Available-forsale financial assets Derivative financial instruments used as hedges 2016 Total carrying amount 2016 Fair value Available-for-sale financial assets (see note 5.5) Other long-term financial assets (see note 5.6) Trade receivables (see note 5.7) Financial assets held for trading * Other short-term financial assets (see note 5.8) Cash and cash equivalents (see note 5.9) Total financial assets Financial debt (see note 5.11) (18.6) ** ( ) ( ) ( ) 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 ** ( ) ( ) ( ) Other short-term financial liabilities (see note 5.12) (16.3) (14.6) (5.3) (36.2) (36.2) Total financial liabilities (45.2) ( ) (8.6) ( ) ( ) Total (26.1) ( ) * Including CHF 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 on 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) 2017 CHF million Level 1 Level 2 Level 3 Total Available-for-sale financial assets Other long-term financial assets Financial assets held for trading Other short-term financial assets Total financial assets carried at fair value Financial debt (17.2) (17.2) Other long-term financial liabilities (3.2) (3.2) Financial debt due within the year Other short-term financial liabilities (36.1) (36.1) Total financial liabilities carried at fair value (53.0) (53.0) 105

108 Pargesa Holding SA Annual Report 2017 Consolidated financial statements CHF million Level 1 Level 2 Level 3 Total Available-for-sale financial assets Other long-term financial assets Financial assets held for trading Other short-term financial assets Total financial assets carried at fair value Financial debt (18.6) (18.6) Other long-term financial liabilities (16.0) (16.0) Financial debt due within the year Other short-term financial liabilities (21.6) (21.6) Total financial liabilities carried at fair value (53.8) (53.8) 2016 During 2017 and 2016, 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 : Level 1 assets are generally publicly listed shares and bonds.quoted prices (unadjusted) in active markets for identical assets or liabilities ; 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 majority Level 1 assets. There are not many financial assets carried at Level 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 million Balance at 1 January Acquisitions Disposals (7.5) (110.4) Gains and losses recognised in equity Gains and losses recognised in the income statement (7.9) 3.5 Translation and other differences Balance at 31 December In 2017 and 2016, the line item acquisitions mainly include additional investments in private equity and other investment funds (see note 5.5). 106

109 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 5.1 Nature and extent of risks arising from financial instruments 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. At Pargesa, cash is generally deposited at sight and in time deposits with banking institutions that are very rigorously selected. The maximum term of its time deposits is end 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 2017, cash and cash equivalents were for the most part placed in time deposits, commercial paper and current accounts at various financial institutions. 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 2017, the depreciation on loans and receivables amounted to CHF 92.4 million (CHF 96.7 million at 31 December 2016). Imerys maximum exposure to credit risk before credit insurance and guarantees, i.e. the carrying amount of its receivables, was thus CHF million at 31 December 2017 (CHF million at 31 December 2016). Details of trade receivables and their age are given in note 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 Liquidity risk is managed at each level of the Group. At 31 December 2017, Pargesa had a positive cash position of CHF million (CHF million at 31 December 2016) as well as short-term bank deposits amounting to CHF 20.0 million (CHF 10.0 at 31 December 2016). Pargesa had no long-term bank deposits at 31 December 2017 (CHF 5.0 million at 31 December 2016). Pargesa s financial liabilities are made up of two bonds : a 1.5 % bond maturing in December 2018 for CHF 250 million and a % bond maturing in April 2024 for CHF 150 million (see note 5.11). Pargesa had no bank debts at 31 December 2017 (CHF 0 million at 31 December 2016). Redemption of the 1.5 % and % bond issues could require funding in the market. At 31 December 2017, GBL had a positive cash position of CHF million (CHF million at 31 December 2016). Its financial liabilities comprised mainly : the bond convertible into GBL shares, issued in 2013 and maturing in 2018 (see note 5.11) for an amount of EUR 428 million in par value and redeemable at % of par value ; and a % bond issued in May 2017 and maturing in 2024 for an amount EUR 500 million (see note 5.11). 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 were redeemed in cash at maturity on 7 February The 4 % bond issued in June 2010 and maturing in 2017 for an amount of EUR 350 million (see note 5.11) was also redeemed in cash at maturity on 29 December The conversion of the convertible bonds is ensured by GBL treasury shares held by GBL. If convertible bonds have not been converted at maturity, and when the % bond issue is redeemed, this will create the need for funding 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 GBL shares to the bondholders (see note 5.11). GBL (excluding private equity) had bank debts amounting to CHF 66.2 million (see note 5.11) at 31 December 2017 (CHF 0 million at 31 December 2016). Bank debts relating to private equity amounted to CHF million at 31 December 2017 (CHF million at 31 December 2016) 107

110 Pargesa Holding SA Annual Report 2017 Consolidated financial statements At 31 December 2017, Imerys had a commercial paper programme capped at CHF million (CHF million at 31 December 2016), rated P-2 by Moody s (same rating at 31 December 2016). At year-end, notes had been issued for a total of CHF million (CHF 0 million at 31 December 2016). At 31 December 2017, Imerys had banking facilities at its disposal in an amount of CHF million (CHF million at 31 December 2016), part of which secured the commercial paper issued (CHF 0 at 31 December 2017 and at 31 December 2016). In 2016, Imerys updated its Euro Medium Term Notes (EMTN) programme. The programme represents a total of EUR 3.0 billion (CHF 3.5 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 million (CHF million at 31 December 2016). For part of its funding, Imerys is required to respect a number of financial convenants. 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 2017, the ratio was 0.78 (0.47 at 31 December 2016) ; depending on the financing contracts concerned, the ratio of consolidated net financial debt/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 2017, the ratio was 2.53 (1.67 at 31 December 2016). 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 2017, Imerys had a Moody s long-term rating of Baa2 with a stable outlook (same rating at 31 December 2016). 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 3.3 billion, or CHF 3.9 billion, at 31 December 2017 (EUR 3.9 billion, or CHF 4.2 billion, at 31 December 2016). 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 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, adidas, Umicore, Ontex, GEA and Burberry shares, which, at 31 December 2017, accounted for 96 % of total available-for-sale financial assets (96% at 31 December 2016), 85 % of total financial assets (77% at 31 December 2016) and 59 % of total balance sheet assets (56% at 31 December 2016). CHF million Impact of a rise in stock market prices Impact of a fall in stock market prices Impact of a rise in stock market prices Impact of a fall in stock market prices 5 % change in stock market prices Impact on equity (including minority interests) Impact on the equity attributable to the Group

111 Pargesa Holding SA Annual Report 2017 Consolidated financial statements 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. 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 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-term bank deposits) amounted to CHF million at 31 December 2017 (CHF million at 31 December 2016). The amount paid in negative interest in 2017 stood at CHF 0.5 million (CHF 0.4 million in 2016). 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 secure the group in case of investment or the materialisation of external risks. It is monitored closely based on changes in market parameters and in GBL s own 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 of net financial debt after interest rate derivatives would not affect the 2017 financial profit of the Pargesa Group (no impact in 2016) 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 2017 financial profit of the Pargesa Group by CHF 0.1 million (+CHF 0.4 million in 2016). 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 2016 either). A 0.5 % fall in interest rates would have no impact on shareholders equity (including minority interests) (no impact in 2016 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 2017 would increase Pargesa Group shareholders equity (including minority interests) by CHF 2.5 million (CHF 2.4 million in 2016), while a 10 % decrease would reduce equity by CHF 8.3 million (CHF 12.2 million in 2016), 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 investments 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 2017 would reduce Pargesa Group shareholders equity (including minority interests) by CHF 4.2 million (CHF 9.2 million at 31 December 2016), while a 10 % decrease would increase equity by CHF 5.5 million (CHF 8.7 million at 31 December 2016), in line with the change in the effective part of the derivative instruments qualifying as cash flow hedges 109

112 Pargesa Holding SA Annual Report 2017 Consolidated financial statements A 10 % increase in the exchange rates for all the foreign currencies of the derivative instruments in the Imerys portfolio at 31 December 2017 would decrease Pargesa Group income (including minority interests) by CHF 1.1 million in 2017 (CHF 3.4 million in 2016), while a 10 % decrease would reduce income by CHF 0.9 million (CHF 2.4 million in 2016), 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 9.9 million on the 2017 consolidated income of Pargesa Group (including minority interests) (CHF 3.4 million in 2016). 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 201 million in the 2017 financial statements of Pargesa Group (CHF 167 million in 2016). 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 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 2017 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 2017 at EUR million (CHF million) and EUR million (CHF million) at 31 December 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. 110

113 Pargesa Holding SA Annual Report 2017 Consolidated financial statements 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 o f the trend in interest rates expected in 2017, Imerys established a fixed rate of interest for some of its future financial debt with a variety of maturities. 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 2017, Imerys had various hedging transactions for periods not exceeding one year in order to manage energy price risk Derivative financial instruments Fair value of short-term and long-term derivative financial instruments CHF million Asset positions Liability positions Net positions Short-term instruments 8.2 (1) 16.2 (1) (36.2) (3) (21.6) (3) (28.0) (5.4) Long-term instruments 26.3 (2) 19.1 (2) (3.2) (4) (16.0) (4) Total (39.4) (37.6) (4.9) (2.3) (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 CHF million Asset positions Liability positions Maturities of derivative financial instruments at 31 December 2017 by notional amount CHF million Less than 1 year Between 1 and 2 years Between 3 and 5 years > 5 years Change in net balance sheet position of derivative financial instruments CHF million Net position at 1 January (2.3) (93.8) Increase/decrease recognised in the income statement Increase/decrease recognised in equity (6.7) 27.5 Purchases, business combinations, sales, transfers and other 0.8 Net position at 31 December (4.9) (2.3) 111

114 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Maturities of derivative financial instruments CHF million Less than 1 year Between 1 and 2 years Total Maturities of derivative financial instruments associated with cash flow hedging at 31 December Maturities of other derivative financial instruments at 31 December 2017 (9.2) (9.2) Total (4.9) (4.9) Hedging Hedging operations are principally undertaken by the Imerys group. Fair value hedging At 31 December 2017 Imerys holds an interest rate swap intended to hedge the exposure to changes in fair value of a loan. This instrument qualifies as fair value hedge. It hedges the risk of change in the risk-free rate and not the diffential corresponding to the credit risk of the Group. The hedged loan and the derivative instrument present the same characteristics. Notional amount in million Borrowing currency in currency in CHF Fixed rate received Variable rate paid JPY % 6 months JPY Libor The fair value of asset hedging instruments amounted to CHF 0 million at 31 December 2017 (CHF 0 million at 31 December 2016) and that of liability hedging instruments was CHF 17.6 million (CHF 18.6 million at 31 December 2016). In 2017, the result recognised on the effective portion of hedging instruments amounted to CHF 0 million (CHF 0 million in 2016). The change in fair value of the items hedged was CHF 0 million in 2017 (CHF 0 million in 2016). 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 2017 amounted to EUR 11.2 million or CHF 13.1 million (EUR 19.1 million or CHF 20.5 million in 2016). The amount carried through the income statement was EUR 16.9 million or CHF 18.8 million in 2017 (EUR +6.7 million or CHF +7.3 million in 2016). In 2017, the ineffective portion of cash flow hedges recognised in the income statement amounted to CHF 2.3 million (CHF +1.6 million in 2016). The effective portion amounted to CHF 18.8 million in 2017 (CHF 7.3 million in 2016). 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 2017, the main borrowings and exchange rate swaps hedging net investments in foreign operations were as follows : USD million (CHF million), SGD 5.5 million (CHF 4.0 million), CHF 47.5 million, GBP 8.2 million (CHF 10.8 million) and ZAR million (CHF 40.7 million). At 31 December 2016, the main borrowings and exchange rate swaps hedging net investments in foreign operations were as follows : USD million (CHF million), SGD 5.5 million (CHF 3.9 million), CHF 47.5 million, GBP 2.2 million (CHF 2.8 million) and ZAR million (CHF 41.4 million). Exchange rate swap sensitivity (used to hedge net investments in foreign operations) to exchange 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 2017 would lead to a CHF 49.0 million increase (CHF million in 2016) in Group equity (including minority interests), while a 10 % decrease would lead to a CHF 72.4 million decrease (CHF 53.4 million in 2016). 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 statement for the ineffective part of derivative instruments qualified as hedges of net investments in foreign operations and derivative instruments not eligible for hedge accounting. 112

115 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 5.3 Dividends and net interest from available-for-sale financial assets CHF million LafargeHolcim dividend SGS dividend Pernod Ricard dividend Total dividend adidas dividend Umicore dividend Ontex dividend Burberry dividend Parques Reunidos dividend 3.3 GEA dividend 2.4 ENGIE dividend Total Note 5.4 Other financial income and expenses Other financial income CHF million Miscellaneous interest income Gains (losses) on financial trading and derivatives Net translation differences 8.9 Total Other financial expenses CHF million Net translation differences (15.4) Interest expense (124.0) (142.5) Other financial expenses (31.2) (17.9) Total (170.6) (160.4) 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 2017, other financial income and expenses included the negative impact of CHF 11.9 million of GBL s marking to market of derivative instruments embedded in the bonds convertible into GBL shares (non-cash impact of CHF 78.6 million in 2016, which in addition included the impact of the marking to market of the derivative instruments embedded in the remaining bonds exchangeable for ENGIE shares). This non-cash charge of CHF 11.9 million (non-cash gain of CHF 78.6 million in 2016) 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 Under IFRS, changes in the fair value of these derivative instruments must be recorded in the income statement, while treasury shares held by GBL to cover the convertible bonds are deducted from equity in the consolidated accounts and changes in the value of the corresponding ENGIE shares held by GBL to cover the 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. 113

116 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 5.5 Available-for-sale financial assets Fair value at 1 January 2017 Acquisitions Disposals at acquisition price Change in fair value (Impairment)/ impairment reversal Translation differences Fair value at 31 December 2017 CHF million Other LafargeHolcim (192.6) SGS adidas Pernod Ricard Umicore Total (50.2) 76.0 (0.6) Ontex (15.2) Burberry (1.9) GEA Parques Reunidos (48.3) 16.2 (275.8) ENGIE (290.5) Private equity funds (4.6) (1.9) 36.7 (5.2) Other (86.7) (1.9) (1.1) Total (381.8) (283.2) Fair value at 1 January 2016 Acquisitions Disposals at acquisition price Change in fair value (Impairment)/ impairment reversal Translation differences Fair value at 31 December 2016 CHF million Other LafargeHolcim ( ) (5.9) SGS (28.4) adidas (20.8) Pernod Ricard (48.0) (25.9) Umicore (9.2) Total ( ) (712.9) (14.6) (27.9) Ontex (26.7) (6.6) Burberry (2.2) 26.5 (3.2) ENGIE ( ) (110.7) (0.6) Private equity funds (110.4) (3.9) Other (1.6) (1.6) (0.5) Total ( ) ( ) (120.7) (21.9) LafargeHolcim, SGS, adidas, Pernod Ricard, Umicore, Total, Ontex, Burberry, GEA 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 Sagard, Sagard II, Sagard 3, Mérieux Participations I, BDT Capital Partners II and PrimeStone funds. These funds are recorded in the accounts at their fair value on the reference date On 12 April 2017, GBL announced that it had acquired a 15 % stake in the capital of Parques Reunidos Servicios Centrales, S.A. ( Parques Reunidos ), a leading operator of the leisure parks in Europe, North America and Asia. In Q4 2017, GBL crossed the threshold of 20.0 % and held 21.2 % of the company s capital at 31 December As a result, GBL concluded that it exercised significant influence over the participation, which has therefore been accounted for using the equity method since the end of 2017 (see note 14). Acquisitions in 2017 amounting to CHF million also included GBL s participation in Ontex capital increase in March 2017, which aimed to refinance Ontex following the acquisition of the personal hygiene business of Hypermarcas. After this transaction, GBL s stake in Ontex remained unchanged at %. In 2017, GBL also increased its stake in Burberry and held 6.5 % of that company s capital at 31 December GBL also acquired an interest in GEA Group, one of the world s largest suppliers of equipment and project management for an array of processing industries, and held 4.3 % of the company s capital at 31 December Disposals at acquisition price amounting to CHF million in 2017 included GBL s disposal of 0.5 % of ENGIE s share capital. 114

117 Pargesa Holding SA Annual Report 2017 Consolidated financial statements The Impairment reversal column on ENGIE includes a CHF million reversal of impairments recognised in prior financial years, following the sale of ENGIE shares in H The impairment reversal of CHF million was offset by a loss in a slightly smaller amount. This same column also includes the reclassification of Parques Reunidos as an equity-accounted holding. In Q4 2017, GBL reached the threshold of 20.0 % of the company s capital, meaning it exercises significant control over the company. The amount of CHF million represents the fair value of the investement when GBL gained significant influence over the company Acquisitions in 2016 amounting to CHF 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 % 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 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). 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 had applied hedge accounting rules to these forward sales contracts. Neither a gain nor a loss was 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 The impairment on LafargeHolcim of CHF million represented the impact for Pargesa of the EUR 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 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 that led 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 per share at end-2015) to their market value at 31 March 2016 (EUR per share) and then at 31 December 2016 (EUR per share). The (Impairment)/Impairment reversals on ENGIE included the reversal of EUR million recorded on the shares sold in 2016 for impairments recorded during the year and in prior years. The impairment reversal of CHF million was offset by a loss in a similar 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 had booked an amount of CHF 9.6 million relating to the third 2016 interim dividend, which was announced in October 2016 but payable in The reversal of CHF 37.5 million on the dividend booked in Q and paid in 2016 was also included. 115

118 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 5.6 Other long-term financial and non-financial assets CHF million 2017 Carrying amount 2016 Carrying amount Other long-term financial assets Derivative financial instruments Long-term advances, loans and deposits Other long-term financial assets Total other long-term financial assets Other long-term non-financial assets Other long-term non-financial assets Total other long-term non-financial assets Total other long-term assets Other long-term assets are shown net of an impairment on Imerys assets of CHF 57.5 million at 31 December 2017 (CHF 63.0 million at 31 December 2016). The charge for 2017 was CHF 0.1 million (CHF 5.8 million in 2016). Repayment schedule of other long-term financial assets at the end of 2017 Between Between More than CHF million 1 and 2 years 3 and 5 years 5 years Total Other long-term financial assets Note 5.7 Trade receivables CHF million 2017 Carrying amount 2016 Carrying amount Trade receivables Receivables 5.9 Impairment on trade receivables (39.8) (45.6) Total 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 Consequently, at 31 December 2017, CHF 49.5 million (CHF 44.6 million au 31 December 2016) 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 million Impairment at 1 January (45.6) (42.2) Impairment for the year (8.4) (12.4) Impairment reversals Translation and other differences (2.0) 0.9 Impairment at 31 December (39.8) (45.6) 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. 116

119 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Age of trade receivables due and not depreciated CHF million Late by no more than 1 month Late by 1 to 3 months Late by more than 3 months Total trade receivables due and not depreciated Trade receivables not yet due and trade receivables due and depreciated Total trade receivables Note 5.8 Other short-term financial and non-financial assets CHF million 2017 Carrying amount 2016 Carrying amount Other short-term financial assets Derivative financial instruments Bank deposits with a maturity of between 3 months and 1 year Other short-term financial assets Total other short-term financial assets Other short-term non-financial assets Recoverable income tax Other recoverable taxes and VAT Deferred and advanced expenses Other short-term non-financial assets Total other short-term non-financial assets Total other short-term assets Other short-term assets are shown net of an impairment on Imerys assets of CHF 8.7 million at 31 December 2017 (CHF 1.5 million at 31 December 2016). The charge for 2017 was CHF 2.3 million (CHF 0.8 million in 2016). The line Other short-term financial assets included in 2016 receivables on Total shares at GBL for an amount of CHF 21.9 million, as well as receivables on private equity funds at GBL of CHF 76 million. Note 5.9 Cash and cash equivalents CHF million 2017 Carrying amount 2016 Carrying amount Cash in bank Short-term bank deposits and other cash equivalents with a term of less than 3 months Total Note 5.10 Other long-term financial and non-financial liabilities CHF million 2017 Carrying amount 2016 Carrying amount Other long-term financial liabilities Derivative financial instruments Finance lease liabilities Total other long-term financial liabilities Other long-term non-financial liabilities Other long-term non-financial liabilities Total other long-term non-financial liabilities Total other long-term liabilities In 2017 and 2016, derivative financial instruments mainly represented the option component of GBL convertible bonds (see notes 5.4 and 5.11). In 2017 and 2016, other long-term non-financial liabilities primarily consisted of capital expenditure payables at Imerys. 117

120 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 5.11 Financial debt Long-term financial debt CHF million 2017 Carrying amount 2016 Carrying amount Long-term bank borrowings Pargesa bond* GBL bond convertible into GBL shares** GBL bond Other bonds and similar Other long-term financial debt Total * Since the Pargesa bond amounting to CHF million in par value matures in December 2018, it was reclassified under financial debt due within the year in ** Since the convertible GBL bond amounting to CHF million in par value matures in October 2018, it was reclassified under financial debt due within the year in 2017 (see also GBL bond convertible into GBL shares below). 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 2017, 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 million Par Interest rate Carrying Carrying Issuer value nominal effective Term amount amount Pargesa Holding SA % 1.62 % Pargesa Holding SA % % Total In December 2013, Pargesa Holding SA 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 2017 was CHF million (level 1 fair value under IFRS 13) and CHF million at 31 December In April 2015, Pargesa Holding SA issued stock-exchange-listed, CHF-denominated bonds, with a nine-year term and an interest rate of %. The fair value of these bonds at 31 December 2017 was CHF million (level 1 fair value under IFRS 13) and CHF million at 31 December GBL bond convertible into GBL shares CHF million Par value Interest rate Carrying Carrying Issuer (million) nominal effective Term amount amount Sagerpar EUR % 2.46 % In 2013, GBL issued EUR 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 %. 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 % 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 GBL reserves the right to redeem the bond early, from 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 million at 31 December 2017 (CHF million at 31 December 2016). 118

121 Pargesa Holding SA Annual Report 2017 Consolidated financial statements The option component, which is carried at fair value (level 2 fair value under IFRS 13), amounted to CHF 24.3 million (carried under Other long-term financial liabilities on the balance sheet) at 31 December 2017 (CHF 10.8 million at 31 December 2016). The fair value of these bonds at 31 December 2017 was CHF million (level 1 fair value under IFRS 13) and CHF million at 31 December 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 million Par value (million) Interest rate Term 2017 Carrying amount 2016 Carrying amount Issuer GBL 4.00 % GBL EUR % Total EUR In 2010, GBL issued EUR 350 million in par value of stock-exchange-listed, EUR-denominated bonds, with a 7.5-year term and an interest rate of 4 %. The fair value of these bonds at 31 December 2016 was CHF million (level 1 fair value under IFRS 13). The bonds were redeemed at par at maturity in late In 2017, GBL issued EUR 500 million in par value of bonds with a seven-year term (maturing on 23 May 2024) and paying an annual coupon of %. The fair value of these bonds at 31 December 2017 was CHF million (level 1 fair value under IFRS 13). GBL bond exchangeable for ENGIE shares CHF million Par value Interest rate Carrying Carrying Issuer (million) nominal effective Term amount amount GBL Verwaltung 1.25 % 2.05 % 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 %. During 2016, GBL partially repurchased the GBL bonds exchangeable for ENGIE shares. EUR 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 million (CHF million), with the initial issue amounting to EUR 1 billion (CHF 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 bonds, representing EUR million (CHF million), were redeemed in cash at maturity on 7 February The carrying amount of the bond (excluding the option component) was CHF million at 31 December The option component was carried at fair value (level 2 fair value under IFRS 13) and amounted to zero (carried under other long-term financial liabilities on the balance sheet) at 31 December The fair value of these bonds at 31 December 2016 was CHF million (level 1 fair value under IFRS 13). 119

122 Pargesa Holding SA Annual Report 2017 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 million 2017 Par value in currency (million) Interest rate Listed / nominal effective unlisted Maturity Fair value Carrying amount JPY % 3.47 % unlisted USD % 5.38 % unlisted EUR % 2.60 % listed EUR % 1.31 % listed EUR % 2.13 % listed EUR % 0.96 % listed EUR % 1.92 % listed EUR % 1.69 % listed Total Since the Imerys bond amounting to USD 30 million matures in August 2018, it was reclassified from long-term financial debt to financial debt due within the year in CHF million 2016 Par value in currency (million) Interest rate Listed / nominal effective unlisted Maturity Fair value Carrying amount JPY % 3.47 % unlisted USD % 5.38 % unlisted EUR % 5.09 % listed EUR % 2.60 % listed EUR % 1.31 % listed EUR % 0.96 % listed EUR % 1.92 % listed EUR % 2.13 % listed Total Since the Imerys bond amounting to EUR 500 million matured in April 2017, it was reclassified from long-term financial debt to financial debt due within the year in Financial debt due within the year CHF million Carrying amount Carrying amount Short-term bank loans Due to banks at sight Pargesa bond GBL bond Imerys bond 31.3 GBL bond exchangeable for ENGIE shares GBL bond convertible into GBL shares Other financial debt bearing interest (including other long-term financial debt due within the year) Total Since the Pargesa bond matures in December 2018, it was reclassified from long-term financial debt to financial debt due within the year in Since the GBL convertible bond matures in October 2018, it was reclassified from long-term financial debt to financial debt due within the year in Other financial debt bearing interest includes the Imerys bond of USD 30 million in par value maturing in August

123 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Repayment schedule of short and long-term financial debt (based on carrying amounts) CHF million Less than 1 year In the 2nd year Between 3 and 5 years More than 5 years Total > 1 year Total Analysis of debt by currency CHF million CHF EUR USD Other Total Residual contractual maturities of financial liabilities in et plus CHF million Capital Interest Capital Interest Capital Interest Financial debt Other long-term financial liabilities Derivative financial instruments Trade payables Financial debt due within the year Other short-term financial liabilities Total Residual contractual maturities of financial liabilities in et plus CHF million Capital Interest Capital Interest Capital Interest Financial debt Other long-term financial liabilities Derivative financial instruments Trade payables Financial debt due within the year Other short-term financial liabilities 13.5 Total 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 In the Between More than CHF million 1 year 2nd year 3 and 5 years 5 years Total Total Pargesa GBL Imerys Total

124 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 5.12 Other short-term financial and non-financial liabilities CHF million 2017 Carrying amount 2016 Carrying amount Other short-term financial liabilities Derivative financial instruments Other short-term financial liabilities Total other short-term financial liabilities Other short-term non-financial liabilities Tax payable other than income tax Tax, social security debt and other short-term non-financial liabilities Total other short-term non-financial liabilities Total other short-term liabilities Note 5.13 Changes in liabilities arising from financing activities The table below shows changes in liabilities as a result of the Group s financing activities, including changes resulting from cash flows and those with no treasury counterparty. This table should be read in conjunction with the financing activities indicated in the consolidated cash flow statement. At 1 January 2017 Cash flows Acquisition/ loss of control of companies Changes in fair value Change in exchange rates Other changes At 31 December 2017 CHF million Commitments on finance leases 2.0 (0.1) Financial debt (2.1) (788.5) Commitments on finance leases due within the year Other debt due within the year and overdrafts (702.2) (0.3) Hedging assets (10.3) (3.1) (0.8) (0.6) 4.4 (10.4) Total (344.1) The changes in cash flows in the table above can be reconciled with the consolidated cash flow statement as follows : CHF million 2017 Long-term financial debt proceed Repayment of long-term debt and finance lease debt ( ) Short-term financial debt proceed Short-term financial debt repaid (9.0) Total (344.1) 122

125 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 6 Staff costs CHF million Remuneration, salaries and bonuses ( ) (872.8) Social security contributions (197.5) (165.0) Defined contribution and defined benefit pension plans (50.2) (41.2) Stock option plan charges (see note 24) (21.4) (13.9) Other payroll expenses (12.0) (6.9) Total ( ) ( ) Note 7 Restructuring costs CHF million Restructuring expenditure during the year (30.9) (56.7) Impairment on assets in connection with restructuring (15.5) (24.4) Change in restructuring provisions (0.4) (1.1) Total (46.8) (82.2) Restructuring costs in 2017 and 2016 related mainly to Imerys and originated in the four areas in which Imerys operates. In 2016, 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 are recognised in the income statement under other operating expenses. Note 8 Impairment of assets 2017 The net amount of impairments and impairment reversals recorded in 2017 was CHF million and mainly comprised impairments on tangible assets at Imerys of CHF 15.6 million The net amount of impairments and impairment reversals recorded in 2016 was CHF million and mainly included the impairment of EUR million, or CHF 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. 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). The commitments maturities are as follows : CHF million During the 1st year Between the 2nd and 5th year Beyond the 5th year Total future payments on operating leases Expenses recognised in the income statement during the year in relation to operating leases CHF million Total expenses for the year

126 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 10 Income tax 10.1 Income tax for the year CHF million Current tax for the period (137.6) (145.5) Current tax for prior periods (5.1) 1.4 Total current tax (142.7) (144.1) Origination and reversal of timing differences (25.9) (27.9) Other deferred tax Total deferred tax (22.6) (19.1) Total tax expense on income for the period (165.3) (163.2) 10.2 Breakdown of deferred tax expenses and income CHF million Intangible assets 1.2 (5.0) Tangible assets (1.6) 2.3 Long-term financial assets (5.7) 5.7 Commitments relating to employee benefits 1.2 (4.0) Inventories, receivables, financial debts and other provisions (8.4) 1.2 Tax losses and unused tax credits (8.0) (8.0) Changes in tax rates Other (1.4) (16.2) Total deferred tax expenses and income (22.6) (19.1) 10.3 Deferred taxes on the balance sheet by nature CHF million Deferred tax assets Deferred tax liabilities Intangible assets Tangible assets Long-term financial assets 2.3 (9.7) Commitments relating to employee benefits (0.5) Inventories, receivables, financial debts and other provisions Tax losses and unused tax credits (1.1) Set-offs (232.2) (201.8) (232.2) (201.8) Other Total deferred tax expenses (as shown on the balance sheet) Reconciliation of taxes on income CHF million Net profit before tax Income from associates and joint ventures (36.4) (31.2) Net profit before tax and income from associates and joint ventures (operating and financial profit) Impact of the various tax regimes in foreign countries (292.4) 65.6 Tax impact of non-taxable income in subsidiaries (1) Tax impact of non-deductible expenses in subsidiaries (2) (14.7) (575.1) Other tax adjustments (58.6) (70.6) Total tax expense on income for the period (165.3) (163.2) (1) This line mainly represents tax-exempt dividends, capital gains and impairment reversals. (2) This line mainly represents non-deductible impairments. 124

127 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Given the nature of the parent company s revenue, which consists primarily of dividends from participations, the level of income tax paid by the parent company is negligible Group effective rate of tax CHF million Net profit before tax Income from associates and joint ventures (36.4) (31.2) Net profit before tax and income from associates and joint ventures Total tax expense on income (165.3) (163.2) Effective tax rate % % The sharp decline in the effective tax rate between 2016 and 2017 reflects the impact of tax-exempt impairment reversals and capital gains on the disposals of investments in 2017 and non-deductible impairments recorded in 2016, which pushed up the effective tax rate in that year Expiration date of tax losses and credits for which no deferred tax is recognised CHF million Tax losses Tax credits During the 1st year During the 2nd, 3rd and 4th years During the 5th year and beyond Unlimited Total At 31 December 2017, CHF million in deferrable tax losses came from the Group s holding companies (CHF million in 2016) ; the remaining CHF million (CHF million in 2016) came from the Imerys group. In addition, deferred tax assets on tax losses are only recognised if the taxable income is likely to be realised, allowing the losses to be used. At 31 December 2017, a total of CHF 19.7 million was recognised as a deferred tax asset on tax losses and tax credit (CHF 25.3 million at 31 December 2016) Timing differences controlled by the Group 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 2017 was CHF 18.7 million (CHF 20.0 million at 31 December 2016) Tax relating to all other items of comprehensive income CHF million 2017 Tax income (expenses) 2016 Tax income (expenses Actuarial gains/losses 5.7 (3.5) Change in revaluation and hedging reserve 2.3 (13.6) Translation differences (15.6) 6.0 Total (7.6) (11.1) 125

128 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 11 Intangible assets CHF million Development costs Software Mining rights Patents, licences and concessions Other Total Total carrying amount : at 1 January Investments Acquisitions 0.5 (0.3) 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 Investments Acquisitions Translation differences Disposals, reclassifications and other changes for the period (31.9) (0.3) (0.1) (138.4) (69.3) (240.0) at 31 December Accumulated amortisation : at 1 January 2016 (42.8) (86.2) (1.5) (38.4) (127.7) (296.6) Depreciation (3.4) (7.4) (0.1) (2.0) (10.8) (23.7) Translation differences (0.3) 1.7 Impairment (0.8) (0.8) Disposals, reclassifications and other changes for the period at 31 December 2016 (12.5) (64.1) (0.7) (20.4) (122.3) (220.0) Depreciation (0.6) (9.4) (0.1) (2.4) (15.6) (28.1) Translation differences (0.8) (1.6) (1.0) (4.8) (8.2) Disposals, reclassifications and other changes for the period 9.2 (27.9) 0.1 (29.4) at 31 December 2017 (4.7) (103.0) (0.7) (53.2) (88.6) (250.2) Net carrying amount : at 31 December at 31 December Intangible assets have a defined lifetime, except for patents and trademarks, which have an indefinite lifetime and were entered in the patents, licences and concessions column as amounting to CHF 69.0 million at 31 December 2017 (CHF million at 31 December 2016). The biggest changes in 2017 related to changes in the scope of consolidation following the acquisitions of Kerneos and Keesing and the disposals of Golden Goose and ELItech. 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 million Charge for the period (54.8) (19.3) 126

129 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 12 Goodwill CHF million Total carrying amount at 1 January Acquisitions Disposals (77.8) (28.7) Translation differences (29.4) Subsequent adjustments in value and other changes for the period (30.4) at 31 December Accumulated impairment at 1 January (97.6) (100.5) Impairment (0.5) Translation differences (3.4) 3.4 Other changes for the period (13.9) at 31 December (114.9) (97.6) Net carrying amount at 31 December In 2017, goodwill from acquisitions amounting to CHF million came mainly from acquisitions by Imerys for CHF million and the acquisition of Keesing for CHF 91.9 million. In 2016, goodwill from acquisitions amounting to CHF 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 million) by Ergon Capital Partners III, a GBL subsidiary (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 : CHF million Total amount Accumulated impairment 2017 Carrying amount Total amount Accumulated impairment 2016 Carrying amount Energy Solutions & Specialties Filtration & Performance Additives Ceramic Materials (2.9) (3.4) High-Resistance Materials (87.4) (71.6) ELITech* Benito* 29.7 (24.6) (22.6) 4.6 Sausalitos* Golden Goose* Keesing* Looping* DIH* Holdings (Pargesa, GBL, Imerys) Total (114.9) (97.6) * Investments held by GBL through Sienna Capital. 127

130 Pargesa Holding SA Annual Report 2017 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 2017, no impairment needed to be recognised as a result of this test. In 2016, no impairment needed to be recognised as a result of this test. The recoverable amount is the higher of the fair value less costs to sell 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 2018 budget and an extrapolation for 2019 to 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 2017 (6.50% in 2016) is adjusted, depending on the CGU or individual assets tested, by a country/market risk premium of 0 to +230 basis points (0 to +170 basis points in 2016). The discount rate after income tax averaged 7.01 % in 2017 (6.78% in 2016). 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 Discount rate Perpetual growth rate Discount rate Perpetual growth rate Energy Solutions & Specialties 7.15 % 1.48 % 6.78 % 1.94 % Filtration & Performance Additives 7.11 % 2.27 % 6.70 % 2.00 % Ceramic Materials 6.75 % 1.78 % 6.77 % 1.56 % High-Resistance Materials 6.99 % 2.00 % 7.01 % 2.00 % Average rate 7.01 % 1.93 % 6.78 % 1.86 % The goodwill recognised in respect of GBL s private equity activities was also tested annually for impairment. In 2017, no goodwill impairment was recognised as a result of these tests (no impairment in 2016 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 2017 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 2017 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 (no impairment in 2016 either). 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 (immaterial impact on the production tools of the Oilfield Solutions CGU of the Energy Solutions & Specialties arm in 2016 as well). 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 (immaterial impact on the production tools of the Oilfield Solutions CGU of the Energy Solutions & Specialties arm in 2016 as well). 128

131 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 13 Tangible assets CHF million Land and buildings Mining assets Facilities machinery plant and transport equipment Fixed assets under construction Other tangible assets Total carrying amount : at 1 January Investments Acquisitions Disposals (3.4) (0.3) (78.4) (0.2) (3.5) (85.8) Translation differences (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 Investments Acquisitions Disposals (23.1) (0.6) (77.7) (0.8) (2.4) (104.6) Translation differences Reclassifications and other changes for the period 14.0 (26.6) (195.7) (17.1) (94.6) at 31 December Accumulated depreciation and impairment : at 1 January 2016 (307.7) (368.1) ( ) (3.1) (14.0) ( ) 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 Translation differences (1.0) Reclassifications and other changes for the period at 31 December 2016 (318.4) (375.7) ( ) (3.5) (19.0) ( ) Depreciation (19.5) (71.8) (197.7) (0.1) (13.4) (302.5) Impairment (2.0) (12.6) (0.9) (15.5) Disposals Translation differences (8.4) (3.0) (79.7) (0.2) (0.9) (92.2) Reclassifications and other changes for the period (429.8) 6.7 (402.4) at 31 December 2017 (325.9) (439.7) ( ) (4.4) (24.4) ( ) Net carrying amount : at 31 December at 31 December Total At 31 December 2017 and 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 under a finance lease are shown on the balance sheet as amounting to CHF 2.5 million at 31 December 2017 (CHF 2.4 million at 31 December 2016). Leased assets are essentially Imerys transport equipment. The discounted value of commitments in respect of future rent payments is CHF 0.5 million for 2018, CHF 0.9 million for the period and CHF 1.2 million beyond that period. 129

132 Pargesa Holding SA Annual Report 2017 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 2017 Pargesa Holding Pargesa Netherlands GBL Fully integrated companies Equity-accounted companies Imerys Looping Ergon Capital Partners Parques Reunidos Benito Ergon Capital Partners II Sausalitos Kartesia Management Groupe DIH Kartesia Credit Op. III Keesing Kartesia Credit Op. IV I.P.E. Companies grouped under Sienna Capital Mérieux Participations II Backed 1 LP 130

133 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Fully consolidated companies at 31 December Companies Country of HQ 2017 Percentage of capital held 2017 Percentage of voting rights controlled 2016 Percentage of capital held 2016 Percentage of voting rights controlled Main activity Pargesa Holding SA Switzerland Parent company Parent company Parent company Parent company Holding Pargesa Netherlands BV Netherlands 100 % 100 % 100 % 100 % Holding GBL (and its non-operational subsidiaries) (1) Belgium 50.0 % 51.8 % (2) 50.0 % 51.9 % (2) Holding Imerys (and its subsidiaries) (3) France 53.8 % 67.5 % 53.9 % 69.7 % Mining industry ELITechGroup (4) France 64.4 % 64.4 % Health care Looping (5) France 100 % 100 % 100 % 100 % Theme-park operator Benito Spain 99.1 % 99.1 % 98.3 % 98.3 % Urban equipment Sausalitos (6) Germany 85.0 % 85.0 % 77.2 % 77.2 % Food services Groupe DIH (7) Netherlands 100 % 100 % 100 % 100 % Health care Keesing (8) Netherlands 60.0 % 60.0 % Game and Puzzle magazine publishing Clothing Golden Goose (9) Italy 86.7 % 86.7 % (1) Percentage of consolidation % 51.9 % (2) Percentage of voting rights taking into account the suspended voting rights relating to treasury shares. (3) Percentage of consolidation % 54.5 % (4) Company sold in (5) Company wholly owned by Ride Holding S.A.S., which was 45.5 %-owned by E.V.R. S.A., which in turn was 78.6 %-controlled by GBL. (6) Company 85 %-owned by E.V.S., which was 96.2 %-controlled by GBL at 31 December manufacturing (7) Company 100 %-owned by Care Holding, which was 60.8 %-owned by E.V.C., which in turn was 82.7 %-controlled by GBL at 31 December (8) Company 60.0 %-owned by E.V.P., which was 95.4 %-controlled by GBL at 31 December (9) Company sold in Companies consolidated using the equity method at 31 December 2017 Percentage of capital held 2017 Percentage of voting rights controlled 2016 Percentage of capital held 2016 Percentage of voting rights controlled Companies Country of HQ Main activity Ergon Capital Partners Belgium 50.0 % 50.0 % 50.0 % 50.0 % Private equity Ergon Capital Partners II Belgium 42.4 % 42.4 % 42.4 % 42.4 % Private equity Kartesia Management Luxembourg 22.2 % 22.2 % 22.2 % 22.2 % Debt fund Kartesia Credit Opportunities III Luxembourg 29.6 % 29.6 % 29.6 % 29.6 % Debt fund Kartesia Credit Opportunities IV Luxembourg 17.2 % 17.2 % 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 Backed 1 LP UK 48.6 % 48.6 % Private equity Parques Reunidos Spain 21.2 % 21.2 % Leisure parks GBL analysed the accounting treatment to be applied to its investment 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. 131

134 Pargesa Holding SA Annual Report 2017 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. CHF million GBL Imerys % of ownership interests held by non-controlling interests 50.0 % 46.2 % % of voting rights held by non-controlling interests 48.2 % 32.5 % Long-term assets Short-term assets Long-term liabilities ( ) ( ) Short-term liabilities ( ) ( ) Non-controlling interests ( ) (59.2) Equity attributable to the Group Individual non-material subsidiaries Intragroup eliminations Non-controlling interests ( ) Revenue Net profit attributable to Pargesa shareholders (Group share) Net profit attributable to non-controlling interests (206.5) Net profit for the period (including minority interests) Other comprehensive income attributable to Pargesa shareholders (Group share) (161.4) Other comprehensive income attributable to non-controlling interests (139.2) (0.6) Total other comprehensive income (including minority interests) (300.6) Total comprehensive income attributable to Pargesa shareholders (Group share) Total comprehensive income attributable to non-controlling interests Total comprehensive income for the period (including minority interests) Dividends paid to non-controlling interests Net cash flows from operations Net cash flows from investments ( ) (699.9) Net cash flows from financing ( ) (505.3) Effect of exchange rate variation on funds held and of changes in the scope of consolidation (58.2) (23.3) Increase/decrease in cash and cash equivalents (695.4) (475.3) 2017 Total 132

135 Pargesa Holding SA Annual Report 2017 Consolidated financial statements CHF million GBL Imerys % 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 Short-term assets Long-term liabilities ( ) ( ) Short-term liabilities ( ) ( ) Non-controlling interests ( ) (56.6) Equity attributable to the Group Individual non-material subsidiaries Intragroup eliminations Non-controlling interests ( ) Revenue Net profit attributable to Pargesa shareholders (Group share) (259.0) Net profit attributable to non-controlling interests (79.9) Net profit for the period (including minority interests) (338.9) Other comprehensive income attributable to Pargesa shareholders (Group share) Other comprehensive income attributable to non-controlling interests (377.5) Total other comprehensive income (including minority interests) Total comprehensive income attributable to Pargesa shareholders (Group share) Total comprehensive income attributable to non-controlling interests (306.3) Total comprehensive income for the period (including minority interests) Dividends paid to non-controlling interests Net cash flows from operations Net cash flows from investments (303.6) Net cash flows from financing ( ) (33.0) Effect of exchange rate variation on funds held and of changes in the scope of consolidation Increase/decrease in cash and cash equivalents Total 133

136 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 16 Acquisitions and disposals of subsidiaries The following acquisitions were made in 2017 : On 4 January 2017, Imerys acquired 100 % of the voting rights of Danish group Damolin, which specialises primarily in oil and chemical absorbents. The acquisition price of EUR 62.2 million (CHF 69.1 million) was paid in cash to the seller, Danish investment fund Erhvervsinvest, on the date of control was taken. 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. Most of the business assets and liabilities were temporarily maintained at their historical value pending the outcome of the purchase price allocation work. The goodwill resulting from the difference between these partially revalued net assets and the investment value came to a provisional amount of EUR 51.9 million (CHF 57.7 million) at 31 December On 18 July 2017, Imerys acquired 100 % of the voting rights of Kerneos, a world leader in calcium aluminate-based high-performance binders for an acquisition price of EUR million (CHF million). The provisional goodwill generated by the acquistion was EUR million (CHF million). Since it was acquired, the Kerneos group has contributed EUR 106 million (CHF million) in revenue and EUR 1 million (CHF 1.1 million) in net profit for Pargesa. If the acquisition had been finalised at 1 January 2017, the contribution to revenue would have been EUR 445 million (CHF million) and the contribution to Pargesa s net profit would have been EUR 2 million (CHF 2.2 million). In September 2017, ECP III, a GBL subsidiary, acquired from Telegraaf Media Group a 60 % majority stake in Keesing Media Group, the largest publisher of games and puzzle magazines in Europe. The acquisition price was EUR 84.2 million (CHF 93.6 million). Provisional goodwill stood at EUR 82.7 million (CHF 91.9 million). The acquisition made a EUR 1.0 million (CHF 1.1 million) contribution to Group net income. The details of these two main acquisitions are as follows : CHF million Kerneos Keesing Other Total Long-term assets Short-term assets Long-term liabilities ( ) (104.6) (27.6) ( ) Short-term liabilities (112.9) (27.1) (48.1) (188.1) Net assets acquired (274.8) (191.7) Goodwill Badwill (4.0) (4.0) Total consideration Paid in cash in future installments Cash and cash equivalents acquired Cash flows The following key acquisitions were made in 2016 : On 1 March 2016, Ergon Capital Partners III acquired a majority indirect stake in Financière Looping S.A.S. ( Looping ), an 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). Final goodwill after acquisition accounting was EUR 84.8 million (CHF 99.2 million). On 20 December 2016, ECP III also acquired a majority stake in Deutsche Intensivpflege Holding GmbH ( DIH ), a company involved in intensive care services. The acquisition price was EUR 134 million (CHF 146 million). The net cash impact of the acquisition was EUR 127 million (CHF 138 million). Final goodwill generated by the acquisition was EUR 77.2 million (CHF 90.8 million). In addition, Imerys also acquired stakes in companies for a total purchase price of EUR 44.1 million (CHF 48.0 million). Final goodwill stood at EUR 34.8 million (CHF 40.7 million). 134

137 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Disposals of subsidiaries In March 2017, ECP III sold its majority stake in Golden Goose, an Italian designer of contemporary shoes, clothes and accessories. This transaction generated a capital gain of EUR million, or CHF million (see note 4). In July 2017, ECP III sold its majority stake in ELITech, a manufacturer and distributor of in vitro diagostic equipment and reagents, to PAI Partners. This transaction generated a consolidated net capital gain of EUR million, or CHF million for GBL (see note 4). In Q2 2016, ECP 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). Note 17 Investments in associates and joint ventures CHF million Carrying amount at 1 January Acquisitions Disposals and redemption (40.4) (9.8) Net income Dividend paid (6.6) (25.9) Reclassification of available-for-sale financial assets Translation and other differences Carrying amount at 31 December Acquisitions in 2017 include additional investments by Sienna Capital, a subsidiary of GBL. On 12 April 2017, GBL announced that it had acquired a 15 % stake in the capital of Parques Reunidos Servicios Centrales, SA ( Parques Reunidos ), a Spanish group specialising in leisure parks. In Q4 2017, GBL crossed the threshold of 20.0 % and held 21.2 % of the company s capital at 31 December As a result, GBL concluded that it exercised significant influence over the investment, which has therefore been accounted for using the equity method since the end of The significant influence in Parques Reunidos was acquired in stages. The company was first recognised as a available-for-sale financial asset and was then accounted for using the equity method on the date GBL acquired significant influence in the company. This transfer had no impact on the income statement. The difference between the net assets of Parques Reunidos at 31 December and its fair value at the time significant influence was acquried was CHF 11.7 million and represents provisional goodwill. Acquisitions in 2016 included additional investments in Kartesia and Mérieux Participations II (investment funds) by Sienna Capital, a subsidiary of GBL. Analysis of investments in associates and joint ventures CHF million Parques Reunidos Kartesia Ergon Capital Partners et Ergon Capital Partners II Other GBL and Imerys equity associates Carrying amount at 31 December 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. With the exception of Parques Reunidos, no equity associate was listed at 31 December The market value of Parques Reunidos was CHF million at end Other GBL and Imerys equity associates is made up of various equity-accounted investments at GBL and Imerys ; at 31 December 2017, the largest investment in terms of equity-accounted value were : Visionnaire (associate), for an amount of CHF 49.3 million (CHF 42.1 million at 31 December 2016) ; Mérieux Participations II (associate), for an amount of CHF 47.2 million (CHF 26.3 million at 31 December 2016) ; MST Mineralien Schiffahrt (associate), for an amount of CHF 27.1 million (CHF 26.4 million at 31 December 2016) ; and The Quartz Corporation (joint venture), for an amount of CHF 32.2 million (CHF 30.6 million at 31 December 2016). 135

138 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Analysis of income from associates and joint ventures CHF million Kartesia Ergon Capital Partners and Ergon Capital Partners II (8.6) (0.7) Other GBL and Imerys equity associates Income from associates and joint ventures The contribution from Kartesia in 2017 and 2016 included interest on loans and gains on adjustments in the fair value of the loan portfolio. The table below provides a summary of the financial information for the main equity associates of the Group. In 2017, Kartesia included Credit Opportunities III S.C.A., which GBL has a 29.6 % stake in, and Kartesia Credit Opportunities IV S.C.A., which GBL has a 17.2 % interest in (only Kartesia Credit Opportunities III S.C.A. in 2016). This summary shows the amounts recorded in the companies financial statements, which are drawn up in accordance with IFRS. CHF million Kartesia Parques Reunidos Other 2017 Total Long-term assets Short-term assets Long-term liabilities (350.8) (948.9) (239.2) ( ) Short-term liabilities (6.5) (183.5) (101.7) (291.7) Non-controlling interests (0.6) (1.2) (1.8) Equity attributable to the Group Percentage of capital held n.a % n.a. n.a. Share of equity Goodwill Carrying amount at 31 December Revenue Income from continued operations 99.5 (33.8) Net profit for the period (including minority interests) 99.5 (33.8) Net profit for the period (Group share) 99.5 (33.8) Other comprehensive income (3.0) (3.0) Total comprehensive income for the period 99.5 (36.8) Dividends received over the period Group share of income for the period

139 Pargesa Holding SA Annual Report 2017 Consolidated financial statements 2016 CHF million Kartesia Other Total Long-term assets Short-term assets Long-term liabilities (40.9) 40.9 Short-term liabilities (1.2) (104.5) (105.7) Non-controlling interests (0.5) (0.5) Equity attributable to the Group Percentage of capital held 29.6 % n.a. n.a. Share of equity Goodwill Carrying amount at 31 December Revenue Income from continued operations Net profit for the period (including minority interests) Net profit for the period (Group share) Other comprehensive income Total comprehensive income for the period Dividends received over the period Group share of income for the period Note 18 Inventories CHF million Raw materials, consumables and spare parts Work in progress Finished goods and products Total before write-downs Write-downs on inventories Raw materials, consumables and spare parts (42.6) (40.6) Work in progress (2.1) (1.4) Finished goods and products (22.8) (35.3) Total write-downs on inventories (67.5) (77.3) Reversal of write-downs on inventories Raw materials, consumables and spare parts Work in progress 0.4 Finished goods and products Total reversal of write-downs on inventories Net total Inventories expensed during the year CHF million Income (charge) 59.0 (31.3) 137

140 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 19 Provisions Legal, labourrelated CHF million Environment Litigation and regulatory risks Total Total at 1 January Allocations Utilisations (11.6) (2.8) (19.2) (33.6) (26.7) Reversals (8.1) (2.3) (53.8) (64.2) (27.0) Acquisitions Translation differences (2.5) Reclassifications and other 35.7 (0.4) at 31 December short-term provisions long-term provisions The Group s provisions amounted to CHF million at 31 December 2017 (CHF million at 31 December 2016) and mainly originated 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 million at 31 December 2017 (CHF million at 31 December 2016), of which CHF million was for the restoration of mining sites. CHF 70.4 million of the corresponding liabilities have probable due dates between 2018 and 2022, CHF million between 2023 and 2032 and CHF 57.2 million from Imerys litigation provisions (i.e. for product guarantees), which amounted to CHF 35.3 million (CHF 33.0 million at 31 December 2016), have a probable due date between 2018 and 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 in social, fiscal, property or environmental matters. Imerys group is also required to respect certain compensation obligations in relation to the past disposal of assets. The provision for Imerys legal, labour-related and regulatory risks amounted to CHF million at 31 December 2017 (CHF million at 31 December 2016). Most of these provisions are likely to mature between 2018 and

141 Pargesa Holding SA Annual Report 2017 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 million Number Par value (1) Number Par value (2) Number (3) Par value Share capital at 1 January Share capital at 31 December Share capital at 31 December (4) (4) Share capital outstanding at 31 December 2017 Share capital Treasury shares (5) ( ) (5.5) ( ) (5.5) Net share capital outstanding (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 maximum par value of up to CHF 242 million through the issuance of registered shares with a par value of CHF 2 and 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 a maximum CHF 253 million by issuing new registered shares with a par value of CHF 2 and new bearer shares with a par value of CHF 20. Bearer shares are listed on the SIX Swiss Exchange. Registered shares are not listed Treasury shares (1) Not yet outstanding, reserved for Board use Not yet outstanding, reserved for the exercise of options (2) Carrying Carrying Carrying CHF million Number amount Number amount Number amount 1 January Granting of options (37 792) (0.7) Cancellation of options (6 365) (0.1) 31 December Granting of options (31 940) (0.6) Exercise of options (4 430) (4 430) Cancellation of options (12 150) (0.2) 31 December (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). Total 139

142 Pargesa Holding SA Annual Report 2017 Consolidated financial statements 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. CHF million Total financial debt Cash and cash equivalents (718.6) ( ) Net financial debt Shareholders equity (including minority interests) Reclassification adjustments carried through the income statement CHF million Change in fair value of available-for-sale financial assets : recognised in other comprehensive income carried through the income statement (2.5) Change in hedging reserve : recognised in other comprehensive income carried through the income statement (13.0) (4.4) Change in translation reserve : recognised in other comprehensive income (85.7) carried through the income statement (5.2) (84.6) Actuarial gains/losses : recognised in other comprehensive income (14.1) (14.1) Total other comprehensive income Change in revaluation and hedging reserve (Pargesa Group share) Revaluation Hedging Revaluation Hedging CHF million reserve reserve Total reserve reserve Total Balance at 1 January (1.6) (6.7) Change in fair value recognised in equity Change in fair value carried through the income statement (1.3) (1.3) Total change in fair value Change in hedging reserve recognised in equity Change in hedging reserve carried through the income statement (3.6) (3.6) Total change in hedging reserve (1.2) 5.1 Balance at 31 December (2.8) (1.6) 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 51.8 % at 31 December 2017 (51.9 % at 31 December 2016). GBL bought and sold treasury shares during Following these movements in 2017, a negative amount of CHF 4.5 million (Group share) was recognised in equity in the consolidated reserves (CHF 2.8 million in 2016). 140

143 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Note 21 Dividend paid and proposed by Pargesa Holding SA CHF million Dividend for the previous period paid during the year CHF per bearer share CHF per registered share Dividend proposed for the period ending 31 December CHF per bearer share 2.50 CHF per registered share The proposed dividend will be submitted for approval at the Annual General Meeting on 3 May Note 22 Basic and diluted net earnings per share Average number of shares taken into consideration basic Dilutive effect of ordinary shares : Share options Average number of shares taken into consideration diluted Non-dilutive potential shares excluded from the dilution calculation : Share options CHF million Net earnings (Group share) basic (32.0) Dilutive effect of ordinary shares (0.9) Net earnings (Group share) diluted (32.0) CHF per share Basic net earnings per share (Group share) 4.51 (0.38) Diluted net earnings per share (Group share) 4.50 (0.38) 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. 141

144 Pargesa Holding SA Annual Report 2017 Consolidated financial statements 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 million Contributions paid during the year (32.5) (14.2) 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 2017, the provisions for employee benefits amounted to CHF million (CHF million at 31 December 2016). Post-employment benefits are awarded by the various companies in the Group on the basis of local practice Main actuarial assumptions used for the calculation of defined benefit plans as a % Minimum Maximum Minimum Maximum Discount rate 1.4 % 3.4 % 1.6 % 3.9 % Expected rate of salary increases 2.4 % 5.8 % 2.2 % 5.8 % Expected inflation rate 1.8 % 2.1 % 1.8 % 2.2 % For the two countries in which liabilities are greatest (the United Kingdom and the United States), the actuarial assumptions are as follows : as a % UK USA UK USA Discount rate 2.4 % 3.4 % 2.7 % 3.9 % Expected rate of salary increases 2.4 % 0.0 % 2.2 % 0.0 % Expected inflation rate 2.1 % 0.0 % 2.2 % 0.0 % Sensitivity analysis At 31 December 2017, 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 discloses the impact of a reasonably possible decrease or increase of 0.5 % in the discount rate based on the assumption retained in the financial statements at 31 December 2017 (actual 2017). The impact of these changes is measured on three aggregates (liability, net interest, current service costs) in the two currency zones with the greatest liabilities (the United Kingdom and the United States) CHF million +0.5 % 0.5% +0.5 % 0.5% United Kingdom Discount rate 1.9 % 2.9 % 2.2 % 3.2 % Liability on the closing date Net interest recognised in the income statement for the period Service costs recognised in the income statement for the period USA Discount rate 2.9 % 3.9 % 3.4 % 4.4 % Liability on the closing date Net interest recognised in the income statement for the period Service costs recognised in the income statement for the period

145 Pargesa Holding SA Annual Report 2017 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 million at 31 December 2017 (CHF million at 31 December 2016). Imerys also holds reimbursement rights, which are investments held directly by the Group ; these amounted to CHF 7.4 million at 31 December 2017 (CHF 6.6 million at 31 December 2016). The funding rate of obligations stood at 79.7 % at 31 December 2017 (81.1 % at 31 December 2016). Provisions for funded plan deficits and unfunded plans amounted to CHF million at 31 December 2017 (CHF million at 31 December 2016) CHF million UK USA Other Total UK USA Other Total Present value of liabilities that are wholly or partially funded ( ) (321.5) (220.5) ( ) ( ) (300.5) (203.7) ( ) Liabilities funded by reimbursement rights (35.6) (35.6) (31.1) (31.1) Fair value of plan assets at year-end Fair value of reimbursement rights Deficit of funded plans (26.5) (70.5) (88.2) (185.2) (10.9) (72.2) (88.2) (171.3) Present value of unfunded liabilities (22.5) (167.9) (190.4) (12.1) (135.7) (147.8) Net liabilities/net assets on the balance sheet (26.5) (93.0) (256.1) (375.6) (10.9) (84.3) (223.9) (319.1) long-term liabilities (383.0) (327.0) long-term assets Amounts recognised in comprehensive income CHF million Service costs : Current service costs (19.9) (17.3) Past service costs and gains/(losses) from settlement (1.1) 10.5 Net interest (6.3) (7.1) Components of defined benefits costs recognised in the income statement (27.3) (13.9) Remeasurement on the net defined benefit liability : Return on plan assets (excluding amounts included in net interest expense) Actuarial gains/losses arising from changes in demographic assumptions 3.0 (4.0) Actuarial gains/losses arising from changes in financial assumptions (74.3) (155.9) Actuarial gains/losses arising from experience adjustments Components of defined benefits costs recognised in other comprehensive income (19.8) 13.6 Total recognised in comprehensive income (47.1) (0.3) Expenses are recorded under staff costs. 143

146 Pargesa Holding SA Annual Report 2017 Consolidated financial statements 23.5 Actuarial gains and losses and cap on assets recognised in equity (excluding tax) CHF million Balance at 1 January (262.2) (275.8) Changes recorded in equity* (19.8) 13.6 Balance at 31 December (282.0) (262.2) * of which tax 5.7 (3.5) Changes recorded in equity net of tax (14.1) Change in present value of liabilities Fully and partially funded liabilities, and unfunded liabilities CHF million Present value of liabilities at 1 January ( ) ( ) Current service costs (19.9) (17.3) Financial costs (44.1) (51.6) Remeasurement gain/(losses) : Actuarial gains/losses arising from changes in demographic assumptions 3.0 (4.0) Actuarial gains/losses arising from changes in financial assumptions (74.3) (155.9) Actuarial gains/losses arising from experience adjustments Liabilities assumed in a business combination (60.9) (13.5) Translation differences (66.4) Benefits paid Other changes Present value of liabilities at 31 December ( ) ( ) 23.7 Change in fair value of defined benefit plan assets Assets held by the Group to fund employee benefits generated an actual return of CHF 85.1 million in 2017 (CHF million in 2016), as shown in the table below. In accordance with current standards, only the normative portion of this return was booked to the income statement for an amount of CHF 39.8 million in 2017 (CHF 44.6 million in 2016) ; this amount is calculated on the basis of the rate used to discount liabilities. The remaining actual return was credited to equity, for an amount of CHF 45.3 million in 2017 (CHF million in 2016) CHF million UK USA Other Total UK USA Other Total Fair value of plan assets at 1 January Interest income Remeasurement gain/(losses) : Return on plan assets (excluding amounts included in the calculation of net interest) (0.2) Contributions Assets distributed on settlements (47.0) (23.5) (12.0) (82.5) (52.9) (23.4) (6.7) (83.0) Translation differences 50.9 (10.9) (160.8) 4.3 (0.6) (157.1) Liquidation Changes in scope / Business group (0.6) Fair value of plan assets at 31 December

147 Pargesa Holding SA Annual Report 2017 Consolidated financial statements 23.8 Breakdown of plan assets CHF million Cash and cash equivalents % % Listed equities % % Listed bonds % % Real estate % % Fair value of plan assets at 31 December % % 23.9 Features of Imerys defined benefit plans Two plans represented 66.4 % of total Group liabilities at 31 December 2017 (68.5 % at 31 December 2016) 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 Imerys UK Imerys USA Imerys UK Imerys USA Liabilities by beneficiary category (CHF million) Working beneficiaries (204.8) (42.4) (176.0) (44.0) Deferred beneficiaries (220.1) (39.2) (194.4) (40.2) Retired beneficiaries (655.3) (66.1) (632.0) (67.5) Total ( ) (147.7) ( ) (151.7) Age Average age of working beneficiaries Average age of deferred beneficiaries Average age of retired beneficiaries Eligibility Last hiring date Retirement age 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 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. 145

148 Pargesa Holding SA Annual Report 2017 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 95.0 % and 98.7 % of the value of liabilities at 31 December The Group estimates that it will have to pay CHF 24.2 million in contributions for defined benefit plans in 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 2017, the Company granted options, each option enabling the holder to acquire one Pargesa Holding SA share, at a price of CHF 70, equal to the market price on the grant date. At 31 December 2017, the total expense of this option plan was recognised in staff costs and amounted to CHF 0.1 million (CHF 0.1 million in 2016). Changes in options granted CHF par action Number of options Weighted average exercise price Number of options Weighted average exercise price Options at 1 January Granted during the period Exercised during the period (4 430) Cancelled during the period (12 150) (6 365) Options at 31 December The options were valued using the Black & Scholes model. The fair value of the options on the grant date in 2017 was CHF 2.59 per option (CHF 2.05 and CHF 2.31 per option in 2016). Assumptions of the option valuation model Rate of staff turnover 0.00 % 0.00 % Expected term 7 ans 7 ans Expected volatility % % Expected dividend growth 0.00 % 0.00 % Risk-free rate 0.05% 0.40% Expected volatility is based on the historical volatility of the previous four years. 146

149 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Number of Pargesa share options at the end of 2017 Number Exercise price (CHF) Maturity Entitlement vested vested vested vested vested vested vested vested vested /3 vested 1/3 in /3 vested 1/3 in /3 in /3 vested 1/3 in /3 in /3 in /3 in /3 in 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 grant date, at a rate of one third per year. Changes in options granted EUR per share Number of options Weighted average Weighted average exercise price Number of options exercise price Options at 1 January Exercised during the period ( ) ( ) Options at 31 December No such options were granted in 2017 and The GBL share options granted have exercise prices of between EUR and EUR per share. The maturity dates of the options are between 2018 and 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 its second-tier subsidiary, LTI One SA. In total, 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 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 an option was EUR at 31 December At 31 December 2017, options were still outstanding. The debt on the balance sheet was CHF 0.1 million. On 29 April 2014, GBL set up an incentive plan covering the shares of its second-tier subsidiary, LTI Two SA. In total, 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 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 an option was EUR at 31 December A debt of CHF 0.9 million was recorded as a liability on the balance sheet. At 31 December 2017, options were still outstanding. 147

150 Pargesa Holding SA Annual Report 2017 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, 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 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 at 31 December A debt amounting to CHF 4.3 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, 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 or transferred from 3 May 2019 up to 2 May 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 an option was EUR at 31 December A debt amounting to CHF 2.1 million was recorded as a liability on the balance sheet. On 8 May 2017, GBL set up an incentive plan covering the shares of its second-tier subsidiary, Finpar II SA. In total, 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 II SA share value on the grant date. The options may be exercised or transferred from 8 May 2020 up to 7 May 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 an option was EUR 0 at 31 December No debt was recorded as a liability on the balance sheet. In 2017, the total cost relating to GBL incentive plans was recorded on the income statement under Staff costs and amounted to CHF 6.7 million (CHF 2.4 million in 2016). In addition, an incentive plan was granted to Ergon Capital Partners III management covering 16.7 % of Ergon Capital Partners III shares 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 EUR per share Number of options Weighted average exercise price Number of options Weighted average exercise price Options at 1 January Cancelled during the period (23 173) ( ) Exercised during the period ( ) ( ) Options at 31 December The Imerys share options granted have exercise prices of between EUR and EUR per share. The maturity dates of the options are between 2018 and All of these options are vested. 148

151 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Changes in free shares awarded Number of shares Number of shares Shares at 1 January Granted during the period Cancelled during the period ( ) (85 480) Definitively vested during the period ( ) (48 297) Shares at 31 December The fair value of the free shares awarded in 2017 was EUR per share (EUR and EUR per share in 2016). The free Imerys shares awarded have definitive vesting dates of between 2018 and At 31 December 2017, the total charge recognised under staff expenses for the Imerys group in connection with the option and free share plans amounted to CHF 14.9 million (CHF 11.4 million in 2016). 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 million at 31 December 2017 (CHF million at 31 December 2016) 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 2017 amounted to CHF million and details are given in note 9. Commitments relating to the restoration of sites of CHF 52.9 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 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 million at 31 December 2017 (CHF million at 31 December 2016). At 31 December 2017, they included a liability guarantee of EUR 63.1 million, or CHF 73.8 million, (EUR 57.9 million, or CHF 62.2 million, at 31 December 2016) received by Imerys from the Rio Tinto Group under the terms of the acquisition of the Luzenac group in 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 73.8 million at 31 December Pargesa and GBL s commitments in private equity and other investment funds Pargesa undertook to invest EUR 37.1 million (CHF 43.4 million) in the Sagard II private equity fund, which was created in 2002 and has raised funds amounting to EUR million (CHF million). The residual commitment at 31 December 2017 was CHF 5.3 million. GBL s commitments to invest in private equity and other investment funds through Sienna Capital amounted to EUR million (CHF million). 149

152 Pargesa Holding SA Annual Report 2017 Consolidated financial statements 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 million Short-term benefits (total compensation) Post-employment benefits Total compensation awarded Note 27 Important events taking place after the closing date On 8 February 2018, Umicore announced that it had raised EUR 892 million in capital. GBL fully supported the group by contributing EUR 144 million to the capital increase. Following this transaction, GBL is still Umicore s main shareholder, with a practically unchanged stake of %. On 8 March 2018, GBL, through its subsidiary Sienna Capital, committed to investing EUR 250 million alongside funds affiliated with the investment firm KKR in Flora Food Group ( FFG ), Unilever s spreads business. FFG is the global market leader in plant-based margarine spreads and cooking products, operating in 69 markets around the world and generating pro forma revenue of approximately EUR 3.0 billion in FFG s portfolio of iconic consumer brands includes Becel, Flora, Country Crock, Blue Band, Rama and ProActiv. The transaction is expected to be completed in mid-2018, subject to certain regulatory approvals and employee consultations in certain jurisdictions. 150

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154 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Deloitte SA Rue du Pré-de-la-Bichette Geneva Switzerland Phone: +41 (0) Fax: +41 (0) Statutory Auditor s Report To the General Meeting of Pargesa Holding SA, Geneva 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, 2017, including a summary of significant accounting policies. In our opinion the consolidated financial statements (pages 81 to 150) give a true and fair view of the consolidated financial position of the Group as at December 31, 2017, 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. 152

155 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Pargesa Holding SA Statutory Auditor s Report for the year ended December 31, 2017 Goodwill and associated impairment testing Key audit matter The Pargesa Group's balance sheet includes goodwill of CHF million, representing 11.9% of the total assets of the Group as of December 31, In accordance with IAS 36, goodwill is allocated to cash-generating units (CGUs). More than 80% of the goodwill of the Group - detailed in note 12 of the consolidated financial statements - is allocated to the Imerys CGUs. These CGUs are tested annually for potential impairment by comparing the recoverable value with the net book value of the CGU. The recoverable amount of a CGU is the higher value between the fair value net of costs of sales and the value in use. In practice, the value in use determined from a projected discounted cash flow is the most commonly used valuation basis. A recoverable value lower than the net book value implies the recognition of an impairment. The parameters that have a significant impact on the determination of the recoverable amount are disclosed in note 12 of the consolidated financial statements: Volumes and, to a lesser extent price levels, allowing the determination of expected cash flows; Perpetual growth rate; Discount rates taking into account country specificities. As part of our audit, we identified impairment testing as a key audit matter primarily for the following reasons: The determination of the parameters of the model requires significant estimates from the management; The material amount of the goodwill. How the scope of our audit responded to the key audit matter The following procedures have been performed: Interviews with the management of the relevant companies to identify possible indications of impairment loss and have, if necessary, analysed their complicance with IAS 36 Impairment of Assets; Analysis of the compliance with IAS 36 and the method used by management of the relevant companies to determine the recoverable amount of the CGU; Critical review with the assistance of a valuation expert of the implementation terms of this methodology and analysis of: - The consistency of the determination of this amount with the means by which cash flow projections have been determined for the value in use; - The reasonableness of the cash flow projections relating to each CGU compared to the economic and financial context in which they operate; - The consistency of these cash flow projections with the most recent management estimates that were presented to the Board of Directors as part of the budget process; - The consistency of the growth rate adopted for the projected cash flows with market analysis and the consensus of the main players; - The calculation of the discount rates applied to future cash flows. Verification of the sensitivity calculations performed by management of the relevant companies, in particular, for forecast cash flows, discount rates and perpetual growth rates, in order to determine the amount from which an impairment loss should be recognized; Verification of arithmetical calculations; Review of the information published in the annual report and evaluation of its compliance with IFRS. The procedures outlined above have generated sufficient audit evidence to address the key audit matter related to the impairment tests on goodwill. 153

156 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Pargesa Holding SA Statutory Auditor s Report for the year ended December 31, 2017 Accounting for Umicore, SGS and Ontex investments Key audit matter As indicated in note 1 (Accounting changes, errors, main accounting judgements and estimates paragraph 5) to the consolidated financial statements, the subsidiary Groupe Bruxelles Lambert ( GBL ) holds, as of December 31, 2017 a 17.01% stake in Umicore, a 16.60% stake in SGS and a 19.98% stake in Ontex. In accordance with IAS 39, the Group considers these investments as available-for-sale financial assets. How the scope of our audit responded to the key audit matter We have reviewed the management's position paper, arguments supporting the classification of Umicore, SGS and Ontex as available-for-sale financial assets and obtained the related supporting documents. The procedures outlined above have generated sufficient audit evidence to address the key audit matter related to accounting for available-for-sale assets. GBL analysed the accounting treatment of these three 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 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; Other 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 value of these investments; The analysis of the indicators of significant influence according to IAS 28 requires a high level of judgment from management. 154

157 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Pargesa Holding SA Statutory Auditor s Report for the year ended December 31, 2017 Provisions for the restoration of sites no longer mined Key audit matter As set out in note 19 to the consolidated financial statements, Imerys Group, is subject to a number of regulatory obligations regarding rehabilitation of sites no longer mined. As a result, provisions amounting to CHF million are accounted for as of December 31, As part of our audit, we have identified provision for restoration of sites no longer mined as a key audit matter mainly for the following reasons: The calculation of these provisions requires significant management judgment in estimating the life of operations for the mining sites, as well as the quantum and timing of future costs associated with the performance of the above obligations, particularly given the unique nature of each site, the long timescales involved, the scope and nature of the mandatorily required obligations. The calculations are sensitive to changes regarding the assumptions which are made by the management, in particular the discount rate. The material amount of these provisions. These calculations require, when deemed necessary, the use of internal or external experts. These calculations take into account the effects of expected changes in local legislation as well as management practices in site remediation. How the scope of our audit responded to the key audit matter The provisions for restoration of sites no longer mined within Pargesa Group comes mainly from the subsidiary Imerys. The following procedures were performed as part of the audit: Acknowledgment of the procedures set up by Imerys management to determine these provisions. For a sample of operational entities: Evaluation of the objectivity and competence of the internal experts involved by the Imerys management in the evaluation of rehabilitation costs; In the context of the detailed examination of the selected sites, asssessment of the pertinence of the method adopted and analysis of the reasonabless of the cost estimates with respect to applicable legal or contractual requirements; Analysis of the method for determining discount rates and reconciled the component parameters with market data. For the other entities: Analysis of the changes in provisions to identify potential inconsistencies with respect to our understanding of the relevant mining site restoration programs; The procedures outlined above have generated sufficient audit evidence to address the key audit matter related to provision for environmental risks and for restoration of sites no longer mined. 155

158 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Pargesa Holding SA Statutory Auditor s Report for the year ended December 31, 2017 Provisions related to legal procedures Key audit matter As described in the note 19 to the consolidated financial statements of Pargesa, Imerys Group is exposed to litigation and claims in the course of its ordinary operations. These risks concern allegations of personal or financial damage issued by third parties and involving the civil liability of group companies, and possible breaches of some of their contractual obligations or of legal or regulatory requirements relating to labour, property or environmental matters. As of December 31, 2017, provisions recorded to deal with these risks are included in the CHF million provisions for legal, labour-related and regulatory risks. Amongst this amount, CHF million is related to Imerys. As part of our audit, we have identified provisions for legal procedures as a key audit matter of the audit primarily for the following reasons: The need to recognise a provision and its valuation requires significant judgment and assumptions; The 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. How the scope of our audit responded to the key audit matter In order to assess the reasonableness of the amount of the provisions recognized, the following procedures have been performed: Review of reports on litigation prepared by internal regional legal department of the companies concerned and discussion of the known and potential significant litigation with the relevant departments; Obtaining confirmation letters from outside legal counsel in charge of significant litigation in order to compare their assessment of the provisions to be recorded with those of Management; Review of the minutes of the Board of Directors regarding discussions or developments concerning important procedures or risks. Review of information published in the annual report and assessment of their compliance with IFRS. The procedures outlined above have generated sufficient audit evidence to address the key audit matter related to provisions related to legal procedures. 156

159 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Pargesa Holding SA Statutory Auditor s Report for the year ended December 31, 2017 Accounting of Kerneos acquisition Key audit matter As described in the note 16 to the consolidated financial statements of Pargesa, Imerys completed the acquisition of 100% of Kerneos on July 18, 2017 for a total purchase price of CHF million. The acquisition resulted in the recognition of a goodwill of CHF million. The allocation of the purchase price will be finalized in the 12 months following the acquisition. As part of our audit, we have identified the accounting of Kerneos acquisition as a key audit matter of the audit primarily for the following reasons: The requirement of significant judgements and estimations exercised by the management to perform a purchase price allocation exercise to fair value and identify the assets and liabilities of the acquired business; The material amount of this acquisition. How the scope of our audit responded to the key audit matter The following procedures have been performed: Review of the acquisition process implemented by management to account for this acquisition; Analysis of the purchase agreement to understand the key terms and conditions; Review of the work performed by the management to determine the purchase price allocation; Challenge with the support of valuation specialist the assumptions adopted and conclusion reached by Imerys management in terms of allocation of the acquisition price to assets and liabilities; Review of the due diligence report prepared by the independent firm mandated by Imerys, to identify possible overvalued assets or undervalued liabilities or not taken into account during the process to identify and value assets acquired and liabilities assumed. The procedures outlined above have generated sufficient audit evidence to address the key audit matter related to the accounting of Kerneos acquisition. 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 157

160 Pargesa Holding SA Annual Report 2017 Consolidated financial statements Pargesa Holding SA Statutory Auditor s Report for the year ended December 31, 2017 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: 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 Licensed Audit Expert Auditor in Charge Aurélie Darrigade Licensed Audit Expert Geneva, March 15, 2018 THA/ADA/ahe 158

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163 06 PARENT COMPANY FINANCIAL STATEMENTS Beauregard Street Fountain District : Eaux-Vives Cité Geneva 161