Grupo Carrefour Brasil

Transcription

1 Free translation into English from the original previously issued in Portuguese Grupo Carrefour Brasil Individual and Financial Statements as of December 31, 2017 Atacadão S.A. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

2 Management report Independent auditors report on the individual and consolidated financial information Statements of financial position Income statements Statements of comprehensive income Statements of changes in shareholders equity Statements of cash flows Statements of value added Notes to the individual and consolidated financial statements Statement of the Directors on the financial statements and the report of the independent auditors Annual Summary Report of the Statutory Audit Committee Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

3 Management report MANAGEMENT REPORT 2017 Dear Shareholders, We submit for your analysis the Management Report for the fiscal year ended December 31, 2017, the Financial Statements of Atacadão S.A. for referred fiscal year and the Independent Auditor s report on the Financial Statements. The information contained herein is available on the website of Grupo Carrefour Brasil s Investor Relations (IR) ( and on the website of the Brazilian Securities and Exchange Commission CVM ( Message from Management 2017 will be a remarkable year in Grupo Carrefour Brasil s history, with our controlling shareholder, Carrefour Group s decision of holding an initial public offering of its wholly-owned subsidiary on a stock exchange outside its country of origin. Also relying on the support of our minority shareholder, Península Participações, we debuted on the Brazilian stock exchange B3 in July 2017, under the ticker CFRB3. After several years and high investments, in 2016, we reached the leading position in our market in terms of sales and market share, but on the stock exchange, we were already born big. We are the largest retailer listed on B3 with a market cap of R$30.2 billion at the end of December Our IPO was one of the largest ones held in Brazil since 2013, and we are ranked amongst the top 20 most valuable companies of the Brazilian stock exchange (Economática ranking). Grupo Carrefour Brasil reached highest-ever net profits despite a very challenging economic environment marked by unprecedented food deflation. Atacadão and Carrefour Retail both posted positive like-for-like sales growth, demonstrating the underlying strength of their respective formats. The Cash and Carry segment accounted for 65% of our consolidated sales in 2017 and has been very resilient to the current economic scenario, which explains the consistency of our results and the solid cash generation recorded in the full-year. Carrefour Soluções Financeiras completed the successful rollout of the Atacadão credit card and an improved risk profile and greater efficiency helped mitigate the impact of the new regulations on credit cards. We continued expanding our stores chain in 2017, with the inauguration of 12 new Atacadão stores, 49 Carrefour Express stores and one supermarket Carrefour Market. We are aware of Brazilian consumer s new demands for higher quality food, better services, and increasingly more attractive prices, but this consumer is also connected and demands additional services. This consumer wants to have the option of shopping online or by phone and to know exactly when the product will be delivered. Thus, we have been strongly investing in the development of new digital services. In 2016, we sold through the Internet only non-food products traded in our hypermarkets, but this assortment has been broadly expanded in Immediately after the IPO, we rolled out the food e-commerce, a service which initially is only available in the city of São Paulo. We have over 6,000 food products offered at competitive prices, which are added to more than 50,000 nonfood items traded by Carrefour.com marketplace. Our online platform is unique under the same brand by which we are strongly known: Carrefour.com. We ended 2017 with 5.5 million clients registered in the program who already shopped online and/or downloaded and registered at the app, which in turn recorded over 800,000 downloads. Since October 2017, all the stores have been signaled with purple tags indicating specific sales referring to Meu Carrefour program, which includes a wide range of digital solutions especially built up by Carrefour for its retail operation (such as store locator, barcode reader and customer purchase history), and is shaping the backbone of our customer relationship program (CRM Carrefour). We are increasingly improving our database, collecting relevant operating information and strengthening our relationship with consumers. Aiming at becoming increasingly omnichannel, Carrefour offered for the first time during the Black Friday in 2017 the Click&Collect option in 39 hypermarkets of 12 Brazilian States for selected items. As a result, approximately 24% of clients who selected the Click&Collect option purchased other items at our stores when they picked up their products. In addition, we saw sales growth at stores where clients had a positive online shopping experience during the Black Friday. This omnichannel strategy allows Carrefour to know better its clients needs, increasing the average expenditures and shopping frequency. In 2018, we will continue implementing the Click&Collect option in all hypermarkets. Another highlight in 2017 was the CSF s roll-out of the Atacadão s co-branded credit card, with exclusive benefits. Although this is the sole credit card accepted at Atacadão stores, like Carrefour credit card, it can be used inside and outside our chain. We invested R$100 million in the development and implementation of Atacadão credit card, already fully digital, that can be issued at Atacadão stores and available for use in the first purchase. In its first year of operation, we recorded approximately 1 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

4 Management report million cards issued and billings of nearly R$1.5 billion at the end of December. Besides the successful implementation of Atacadão credit card, Carrefour Soluções Financeiras improved in 2017 the risk profile of its clients which, coupled with greater efficiency, helped mitigate the impact of the new regulations on credit cards. Despite our record net income, our profitability level at Carrefour Retail was temporarily impacted in 2017 by investments in the implementation of Atacadão credit card and our full e-commerce offer, with the launch in Q4 of the food ecommerce and further development of our marketplace. However, we are building a solid platform for the future growth. In 2018, we aim at continuing playing our leading role in the Brazilian sector of cash and carry wholesale and food retail, by protecting but at the same time, cultivating our great assets: Atacadão s outstanding position in the Cash and Carry segment, the strength of our financial services operation and a solid Carrefour brand recognition by consumers. In 2018, in line with the Carrefour Group Transformation Plan globally announced in January, we will continue to expand our growth formats, notably, Atacadão, grow our online business and improve our productivity. With its multi-format and multi-channel approach and solid financial services business, Grupo Carrefour Brasil is well positioned to accelerate its growth momentum and to strengthen its leadership in food retail as the Brazilian economy gradually improves. We thank all our employees, clients, suppliers, partners and now as a publicly-held company, our shareholders for their confidence and partnership during Noël Prioux, Chief Executive Officer of Grupo Carrefour Brasil Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

5 Management report We are the sole Brazilian retailer with a national footprint, selling food and non-food products in over 150 cities in all 26 Brazilian States and in the Federal District. Our omnichannel, bimodal and multi-format platform allows us to meet our clients needs and their shopping habits uniquely, whether by means of brick-and-mortar stores, which added 634 stores at the year-end or through our online platforms. Points of Sale per Region (1)(2) (%) 11% 4% 9% 8% 68% North South Northeast Midwest Southeast Atacadão Stores Atacadão Wholesale Hyper Super Convenience Gas Stations Drugstores 146 (2) Points of Sale: 634 (1) (1) December 2017, (2) Includes Supeco Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

6 Management report Operating Performance Atacadão Carrefour Retail CSF Global Functions In R$ million * % % * % % % Gross sales ex petrol 49,653 46, % 34,088 31, % 15,565 14, % Gross sales 52,376 49, % 34,088 31, % 18,288 17, % Net sales 47,768 44, % 30,984 28, % 16,784 16, % Other revenues 2,512 2, % % % 2,040 2, % - Net Revenues 50,280 47, % 31,080 28, % 17,160 16, % 2,040 2, % - Gross profit 10,257 9, % 4,645 3, % 4,327 4, % 1,285 1, % - Gross Margin 21.5% 21.1% +34 bps 15.0% 13.9% +109 bps 25.8% 25.9% -16 bps SG&A Expenses (6,765) (6,158) 9.9% (2,524) (2,268) 11.3% (3,404) (3,188) 6.8% (728) (606) 20.1% (109) (96) 13.7% Adj. Ebitda 3,516 3, % 2,127 1, % 941 1, % % (109) (96) 13.7% Adj. EBITDA Margin 7.4% 7.5% -11 bps 6.9% 6.0% +84 bps 5.6% 6.4% -75 bps D&A (657) (574) 14.5% (266) (219) 21.5% (375) (343) 9.3% (16) (12) 32.3% - * In Q416, Carrefour Retail recognized R$24 million referring to a proceeding concerned with IPTU (municipal real estate tax) expenses of previous years. In order to make analyses more comparable, Carrefour Retail figures exclude these non-recurring effects in Q416 and 2016 in SG&A and EBITDA In full-year 2017, gross sales ex-petrol were up by 7.2% to R$49.7 billion (+6.7%, including petrol). Atacadão accounted for approximately 65% of consolidated sales in 2017, versus 64% in net sales were up by 6.3% in full-year 2017 to R$47.8 billion, despite the impact of sharp food deflation. The gross sales compound annual growth rate for the past three years stood at 11.4% , ,0 Gross Sales CAGR +11.4% 49102, , Atacadão: Solid sales and profitability, despite strong commodities and food deflation In 2017, Atacadão s gross sales rose by 8.0% vs to R$34.1 billion, despite the sharp drop in the price of commodities and food items in the period. Atacadão posted LFL sales growth of 3.6% in fullyear 2017, excluding calendar effects and works impact. Volumes were up overall in Atacadão s market share remained stable in 2017 (Nielsen) in an expanding market. In full-year 2017, including tax gains, gross margin expanded by 97bps to 15.3% (an improvement of 30bps ex-tax gains). Carrefour Retail: Profitability temporarily impacted by food deflation, investments in future growth and mix effects Gross sales ex-petrol at Carrefour Retail were up by 5.6% in 2017 to R$15.6 billion. LFL sales ex-petrol and ex-calendar were up by 1.8%, despite the impact of sharp food deflation. Carrefour gained 150bps market share in hypermarkets and almost 100bps in convenience in 2017 (Nielsen). In 2017, the gross margin including tax gains was down by 16bps to 25.8%, mainly as a result of e-commerce share in sales mix and electronic products, which have lower margins. E-commerce enjoyed a very strong sales performance again in 2017, accounting for approximately 3.5% of 2017 sales, compared to a share lower than 1% in previous year. In early October, Carrefour completed its e-commerce offering in Brazil with the launch of its food e-commerce, which, initially is only available in the city of São Paulo. Additionally, Carrefour continued to roll-out its convenience format with 49 Express stores opened in the full year, bringing the total number of stores to 119. Nonfood sales, in particular of consumer electronics, remained strong and maintained double-digit growth momentum, increasing their contribution to hypermarket sales. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

7 Management report CSF: Solid year-end performance despite expenses linked to Atacadão card roll-out In 2017, the total number of CSF cardholders reached 7.0 million, up by 18.8% YoY. Banco CSF s total billings rose by 30.3% to R$6.0 billion in full-year 2017, while total credit portfolio increased by 15.8% to R$6.3 billion at the end of December. Carrefour credit card billings rose by 12.5% to approximately R$17.8 billion in 2017, while Atacadão credit card, launched in 2017, already posted billings of R$1,498 million in the full-year. The full roll-out of the Atacadão credit card was successfully concluded in October. Gross profit Gross profit was 8.0% higher in 2017 to R$10.3 billion, a 34bps increase in margin, mainly as a result of tax credits. In 2017, Atacadão expanded its gross margin beyond the underlying tax effect and despite sharp food deflation, confirming the strength of its model. Atacadão s performance more than offset the gross margin pressure from product mix and investment in new formats at Carrefour Retail. Excluding CSF, gross profit was 9.4% higher in the full-year 2017 to R$9.0 billion. Gross margin increased by 54bps to 18.8% in the 12 months, mainly as a result of the positive effect from ICMS-ST and PIS/COFINS tax credits, but also from operational gains and lower shrinkage at Atacadão. SG&A Expenses SG&A expenses were 9.9% higher in 2017 to R$6.8 billion and accounted for 14.2% of consolidated net sales, 50bps higher year-on-year. This increase reflects (i) higher costs, notably wages, that reflected past inflation; (ii) expenses from store openings, in particular, 12 new Atacadão and 49 Express stores; (iii) ramp-up expenses related to food e-commerce deployment; and (iv) a long-term incentive compensation plan implemented post-ipo. Combined selling, general and administrative expenses of Atacadão and Carrefour Retail also increased in 2017 to R$6.0 billion, or 12.4% of net sales. Excluding the impact of new stores from SG&A, underlying SG&A expenses would have increased by only 3% in Adjusted EBITDA Adjusted consolidated EBITDA was up by 4.7% in 2017 to R$3.5 billion (margin of 7.4%). Adjusted EBITDA for Atacadão and Carrefour Retail combined was 11.1% higher in 2017 to R$3.0 billion, an improvement of 30bps in adjusted EBITDA margin to 6.4%. The EBITDA compound annual growth rate for the past three years ended in 2017 stood at 14.2%. Adjusted EBITDA CAGR +14.2% 2,358 2,867 3,381 3, Other income (expenses) In the full-year 2017, the Company booked other income (expenses) for a positive net amount of R$269 million, of which the most relevant item was the non-current impact of the ICMS- ST tax credits related to previous years (2012 to 2016) in the amount of R$750 million, the other R$11 million being related to credits on other taxes. Depreciation and provisions related to ICMS-ST credits were booked for a total amount of R$287 million. Other items totaled R$205 million in the full-year and include gains and losses on asset write-offs, restructuring charges and expenses related to litigation. Financial Result Our cost of debt dropped sharply in the full-year to R$420 million, as a consequence of the IPO, which brought proceeds of R$3.0 billion to the Company pay down debt, and of the continuous decrease of the SELIC rate in The most relevant financial expenses in 2017 were associated with discounted receivables, which totaled a negative R$134 million. Thus, total net financial results in 2017 was a negative R$660 million, 15.5% lower than in Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

8 Management report Working Capital In 2017, working capital requirements, including discounted receivables were a negative R$2.2 billion, from negative R$1.9 billion in 2016, mainly as a result of the 9-day improvement in payment terms with suppliers to 82 days (from 73 days in Q4 16). This improved working capital management contributed to our free cash flow, which reached R$1.1 billion in Free Cash Flow 288 1,052 1, Indebtedness In October 2017, the Company completed the issue of R$2 billion in promissory notes at a much lower cost than previous issue, with an average rate of 102.6% of CDI. Of this amount, approximately R$1.6 billion was used to pay down the balance of intercompany loans totaling 320 million Euros and carry out an early redemption of another, more expensive promissory note in the amount of R$390 million. Grupo Carrefour Brasil now holds only local debt and no intercompany loans with Carrefour Group. Our gross debt/ebitda ratio fell to 1.2x in Q4 from 1.8x in Q2. We ended the year with net cash of R$2.6 billion in 2017 compared to net debt of roughly R$840 million in Income Tax Income tax expense increased by 43.0% in 2017 to R$731 million, mainly as a result of taxes paid on tax credit of ICMS-ST, or 30.0% of taxable income, against 27.3% in Net Income In full-year 2017, net income was up by 36.2% to R$1.6 billion, with a net margin of 3.3%. Excluding all income (expenses) (and in particular non-recurring tax credits), net income was up 30% to R$1.4 billion in full-year The net income compound annual growth rate for the past three years stood at 44.7%. Net income, Group Share 528 CAGR +44.7% 766 1,174 1, Payment of Interest on Shareholders Equity (IOE) Our Board of Directors approved, on February 27, proposal to distribute the gross amount of R$317 million in the form of interest on equity to its shareholders throughout This amount is equivalent to R$0.16 per share and represents a total remuneration equivalent to 25.0% of the net income for the period. The proposal to allocate 2017 results will be submitted for shareholders approval at the Annual Shareholders Meeting to be held in April The remaining amount shall be declared by our Board of Directors during the year of Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

9 Management report Corporate Governance The Company is listed at the Novo Mercado. Pursuant to our Bylaws and the Brazilian laws, our Management is composed of a 10-member Board of Directors, of whom, two are independent members and a Board of Executive Officers. We also have the following permanent advisory bodies of the Board of Directors: audit committee, strategic committee, and human resources committee. Our Bylaws also provide for the existence of a Fiscal Council to be installed upon shareholders request. We are also subject to certain additional requirements established by the Novo Mercado rules. Independent Auditors The parent company and consolidated financial statements of Atacadão S.A. for the fiscal year ended December 31, 2017 were audited by KPMG Auditores Independentes. Our hiring of independent auditors and services provided by them require that they maintain their independence, objectivity and integrity of services rendered. As such, our independent auditors (i) cannot audit their own work; (ii) they can neither act nor assume managerial responsibilities on our behalf and (iii) they can neither act as our attorneys nor provide any other services which will contradict these restrictions. Pursuant to Instruction issued by the Brazilian Securities and Exchange Commission CVM No. 381/03, we declare that for the fiscal year ended December 31, 2017, KPMG provided other services rather than those relating to the external audit of the financial statements, with fees totaling R$ 1,413 thousand. Adhesion to the Market Arbitration Panel The Company, its shareholders, Management and members of the Audit Committee, if instated, shall undertake to resolve by means of arbitration, before the Market Arbitration Panel, all and any dispute or controversy which may arise among them, related to or deriving from, especially, the application, validity, efficacy, construal, infringement and effects of provisions contained in Law No /76, in the Company s Bylaws and in the rules issued by the Brazilian Monetary Council, the Brazilian Central Bank and Brazilian Securities and Exchange Commission, as well as other rules applicable to the operation of the capital markets in general, besides those included in the Novo Mercado Listing Rules, the Arbitration Rules of the Market Arbitration Panel, the Regulation on the Application of Monetary Sanctions at the Novo Mercado and the Novo Mercado Listing Agreement. The Management Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

10 Management report Q4 and full-year 2017 Key Financial Highlights Gross sales excluding petrol up 5.3% to R$13.6 billion in Q and up 7.2% in the full year (3.0% like-for-like) to R$ 49.7 billion, representing additional sales of R$3.3 billion Positive sales growth in Q4 and FY despite sharply lower food inflation (LTM food inflation of -5.1% in Q4 17 vs +11.9% in Q4 16) (1) ; monthly food inflation turned positive in December for the first time since April 17 Q4 LfL improved sequentially to +1.4% from 1.1% in Q3 adj. EBITDA (2) growth of 2.8% to R$1.1 billion in Q4 (8.6% margin) and 4.0% in full-year 2017 to R$3.5 billion (7.4% margin) Strong performance at Atacadão: 6.9% Adj. EBITDA margin in 2017, up 80 bps, driven by operational efficiency and recognition of ICMS ST credits as from Q3 (EBITDA margin rose by 20bps in Q4 to 6.7% excluding tax gains) Carrefour Retail profitability temporarily impacted by the combination of lower sales growth, as a result of food deflation, and higher costs reflecting past inflation; pressure on SG&A expenses slowed in Q4 (+3.3% in Q4 vs +6.8% in the full-year), as a consequence of the cost efficiency measures underway Carrefour Soluções Financeiras (CSF) recorded a year-on-year increase in EBITDA in Q4 despite costs linked to Atacadão card roll-out, drop in interest rates and new regulation on credit cards Net income, Group share, up 11.1% to R$596 million in Q4 and up 36.2% in 2017 to R$1.6 billion, including the non-recurring ICMS-ST tax credits booked in other income (expenses). Excluding all other income (expenses), net income in 2017 was up 12.4% to R$1.4 billion (3), the highest profit level ever recorded by Grupo Carrefour Brasil Free cash flow of R$1.1 billion, driven by improved working capital On February 27, 2018, our Board of Directors proposed to pay interest on equity of R$317 million (R$0.16 per share), a payout ratio of 25.0% of adjusted net income 2018 Priorities Accelerate expansion: Capex of R$1.8 billion and 20 Atacadao openings Ramp-up digital strategy: Roll out click-and-collect in our hypermarkets and supermarkets Further develop our CRM strategy Leverage financial services across formats: Expand Atacadão card and achieve breakeven by year-end Continue digitization of banking activities Enhance productivity and efficiency in all businesses and continue generating strong free cash flow Noël Prioux, CEO of Grupo Carrefour Brasil, declared: "With growth in sales and highest-ever net profits, Grupo Carrefour Brasil turned in a solid performance in 2017 despite a very challenging economic environment marked by unprecedented food deflation.atacadão and Carrefour Retail both posted positive like-for-like sales growth, demonstrating the underlying strength of their respective formats. Carrefour Soluções Financeiras completed the successful roll-out of the Atacadão credit card and an improved risk profile, and greater efficiency helped mitigate the impact of the change in regulation on credit cards. Our 2017 profitability levels were temporarily impacted by investments to deploy the Atacadao card and a full e-commerce offer, with the launch in Q4 of online food and further development of our marketplace. However, we are building a solid platform for future growth. In 2018, in line with the Carrefour Group Transformation Plan that was announced in January, we will continue to expand our growth formats, notably Atacadão, grow our online business and improve our productivity. With its multi-format and multi-channel approach and solid financial services business, Grupo Carrefour Brasil is well positioned to accelerate its growth momentum and to strengthen its leadership in food retail as the Brazilian economy gradually improves. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

11 Q4 Operating Highlights Management report Atacadão Carrefour Retail CSF Global Functions In R$ million Q4 17 Q4 16* % Q4 17 Q4 16 % Q4 17 Q4 16* % Q4 17 Q4 16 % Q4 17 Q4 16 % Gross sales ex petrol 13,629 12, % 9,309 8, % 4,320 4, % Gross sales 14,351 13, % 9,309 8, % 5,041 4, % Net sales 13,053 12, % 8,459 7, % 4,594 4, % Other revenues % % % % - Net Revenues 13,717 13, % 8,488 7, % 4,707 4, % % - Gross profit 2,847 2, % 1,297 1, % 1,189 1, % % - Gross Margin 21.8% 21.8% +6 bps 15.3% 14.4% +97 bps 25.9% 27.3% -144 bps SG&A Expenses (1,735) (1,634) 6.2% (678) (620) 9.4% (842) (815) 3.3% (193) (166) 16.1% (22) (33) -33.2% Adj. Ebitda 1,118 1, % % % % (22) (33) -33.2% Adj. EBITDA Margin 8.6% 8.7% -14 bps 7.3% 6.6% +78 bps 7.7% 9.6% -190 bps D&A (170) (146) 16.4% (71) (57) 24.6% (99) (85) 16.5% 0 (4) % - *In 4Q16 Carrefour retail was awarded R$24 million regarding IPTU tax gains from prior years. SG&A expenses and EBITDA of 4Q16 were therefore adjusted to take this one-off gain out. Full-year Operating Highlights Atacadão Carrefour Retail CSF Global Functions In R$ million * % % * % % % Gross sales ex petrol 49,653 46, % 34,088 31, % 15,565 14, % Gross sales 52,376 49, % 34,088 31, % 18,288 17, % Net sales 47,768 44, % 30,984 28, % 16,784 16, % Other revenues 2,512 2, % % % 2,040 2, % - Net Revenues 50,280 47, % 31,080 28, % 17,160 16, % 2,040 2, % - Gross profit 10,257 9, % 4,645 3, % 4,327 4, % 1,285 1, % - Gross Margin 21.5% 21.1% +34 bps 15.0% 13.9% +109 bps 25.8% 25.9% -16 bps SG&A Expenses (6,765) (6,158) 9.9% (2,524) (2,268) 11.3% (3,404) (3,188) 6.8% (728) (606) 20.1% (109) (96) 13.7% Adj. Ebitda 3,516 3, % 2,127 1, % 941 1, % % (109) (96) 13.7% Adj. EBITDA Margin 7.4% 7.5% -11 bps 6.9% 6.0% +84 bps 5.6% 6.4% -75 bps D&A (657) (574) 14.5% (266) (219) 21.5% (375) (343) 9.3% (16) (12) 32.3% - *In 4Q16 Carrefour retail was awarded R$24 million regarding IPTU tax gains from prior years. SG&A expenses and EBITDA of 4Q16 were therefore adjusted to take this one-off gain out. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

12 Management report Operating Performance by Segment Excluding petrol, calendar effect and stores temporarily closed for works Gross Sales (R$m) LFL (1) Q Full-Year 2017 Expansion Total growth Gross Sales (R$m) LFL (2) Expansion Total growth Atacadão 9, % 5.5% 7.0% 34, % 5.3% 8.0% Carrefour Retail 4, % 2.0% 1.8% 15, % 4.0% 5.6% Group 13, % 4.4% 5.3% 49, % 4.9% 7.2% (1) calendar effect was a negative 0.5% in Q4 (2) calendar effect was a negative 0.4% in 2017 (2016 was a leap year); the temporary closure of Atacadão s Rondonópolis store (mainly in Q3) had a 0.3% negative impact on consolidated sales Atacadão: Solid sales and profitability despite strong commodity and food deflation In Q4, Atacadão s gross sales rose by 7.0% to R$9.3 billion and in the full-year, gross sales rose by 8.0% to R$34.1 billion, despite the sharp drop in the price of commodities and food items in the period. Atacadão posted LFL sales growth of 2.2% in Q4 (a sequential improvement over Q3) and of 3.6% in full-year 2017, excluding calendar and works impact. Volumes were up overall in Q4 and full-year Atacadão s market share remained stable (Nielsen) in 2017 in an expanding market. Gross margin rose by 97bps to 15.3% in Q4. Gross margin includes recurring ICMS-ST tax credits (tax credits related to past years were booked in other income (expenses). Excluding those tax gains, underlying gross margin showed an increase of 17bps to 14.6% in Q4, notably due to efficiency gains and lower shrinkage. In the full-year, including tax gains, gross margin expanded by 109bps to 15.0% (an improvement of 30bps ex-tax gains). Adjusted EBITDA at Atacadão rose by 19.5% in Q4 to R$621 million and EBITDA margin increased 78bps to 7.3%, boosted mainly by the forementioned tax credits. In the full year 2017, adjusted EBITDA at Atacadão grew by 22.9% to R$2.1 billion, with EBITDA margin up 84bps to 6.9% (or up by 5bps ex-tax gains to 6.1%). Carrefour Retail: Profitability temporarly impacted by food deflation, investments in future growth and mix effects Gross sales ex-petrol at Carrefour Retail were up by 1.8% in Q4 to R$4.3 billion. LFL sales ex-petrol and ex-calendar were flat in Q4. In the full year, gross sales ex-petrol were up by 5.6% to R$15.6 billion, with LFL sales ex-petrol and excalendar up by 1.8%, despite the impact of sharp food deflation. Carrefour gained 150bps market share in hypermarkets and almost 100bps in convenience in 2017 (Nielsen). In Q4, gross margin was 144 bps lower at 25.9%, largely due to the greater share in the sales mix of e-commerce and consumer electronics, which carry lower margin. However, excluding these mix effects and tax impacts (the 50bps gain resulting from Pis/Cofins and ICMS-ST recurring tax credits recorded in Q was more than offset by tax benefits in the same period last year related to previous quarters), the margin drop in Q was limited to 20 bps. In full-year 2017, gross margin including tax gains was down by 16bps to 25.8%, mainly as a result of the mix effect. E-commerce enjoyed a very strong sales performance again in Q4, boosted by solid Black Friday sales and a favorable calendar effect. E-commerce accounted for about 5% of sales in Q4 and 3.5% in full-year 2017, compared with less than 3% and 1% respectively in the year-ago periods. In early October, Carrefour completed its e-commerce offering in Brazil with the launch of its food e-commerce activity, which is initially only available in the city of São Paulo. Additionally, Carrefour continued to roll-out its convenience format with 49 Express stores opened in the full year, bringing the total number of stores to 119. Non-food sales, in particular of consumer electronics, remained strong and maintained double-digit growth momentum in Q4, increasing their contribution to hypermarket sales. Carrefour Retail s profitability was temporarily impacted (EBITDA margin of 7.7%, down by 190bps) by the combination of lower sales growth, as a result of sharp food deflation and higher costs reflecting past inflation; pressure on SG&A expenses slowed in Q4 (+3.3%* in Q4 vs +6.8% in the full-year) as a consequence of the cost-efficiency measures underway. SG&A expenses also reflect investments in the 22 Express stores opened in Q4 and the launch of food e- Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

13 Management report commerce. Excluding expenses related to new store openings and food e-commerce deployment, SG&A expenses were flat in Q4. Adjusted EBITDA stood at R$351 million in Q4. In the full-year 2017, adjusted EBITDA was 8.7% lower at nearly R$941 million and EBITDA margin was 75bps lower at 5.6%. * In Q4 2016, Carrefour Retail was awarded R$24 million related to IPTU tax gain from prior years. In order to facilitate comparison, Carrefour Retail s numbers exclude this one-off effect in Q and full-year 2016 at the SG&A and EBITDA levels. CSF: Solid year-end performance despite expenses linked to Atacadão card roll-out and impact from change in credit card regulation Q4 Full-Year In R$ million Billings Carrefour credit card 4,530 4, % 15,813 17, % Billings Atacadão credit card Nm 1 1,498 nm Other products* % % Total billings 4,613 6, % 16,157 19, % Total Credit portfolio 5,431 6, % 5,431 6, % Total cardholder base (million) % % *Other products include personal loans and payment of bills using the card. In Q4, the total number of cardholders reached 7.0 million, up by 18.8% YoY. In Q4, Banco CSF s total billings rose by 30.3% to R$6.0 billion. Carrefour credit card billings were up 9.9% to nearly R$5.0 billion. Atacadão credit card billings reached R$949 million in Q4 and R$1,498 million in the full-year. The full roll-out of the Atacadão credit card was successfully completed in October. The total credit portfolio rose by 15.8% to R$6.3 billion at the end of December. In Q4, revenues were down 3.9% to R$522 million, reflecting the impact of the new regulation on credit card and lower interest rates, but were 10% higher on a sequential basis. Despite a macroeconomic environment that remained challenging, the quality of our loan portfolio continued to improve. Loans overdue by more than 90 days totaled 9.8% of the total portfolio in Q4 2017, compared with 13.5% in Q and 11.1% in Q Provisions for loan losses accounted for 12.6% of the total portfolio in Q at R$794 million, including provisons for the new Atacadão card, 340 bps lower compared to the year-ago quarter (see Appendix IV). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

14 Management report In Q4 adjusted EBIT stood at R$168 million, R$7 million above last year, despite an additional R$24 million investment in the roll-out of the Atacadão card, lower interest rates and the impact of the new regulation on credit cards. Excluding this investment, CSF s adjusted EBIT stands at R$192 million, up 10% vs last year. In the full-year, CSF s adjusted EBIT stood at R$541 million, down by R$139 million compared to 2016, including the Atacadão card roll-out investment of R$106 million and the effects of the new credit card regulation. As expected, the Atacadão card roll-out was completed last October and we expect it to reach break-even by year-end Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

15 Management report Financial Performance Gross Sales In R$ million Q4 17 Q Gross Sales ex-petrol 13,629 12, % 49,653 46, % Gross Sales 14,351 13, % 52,376 49, % Net Sales 13,053 12, % 47,768 44, % Other Revenues % 2,512 2, % Total Net Sales 13,717 13, % 50,280 47, % Gross sales were up 5.3% ex-petrol to R$13.6 billion in Q4. In the full year, gross sales ex-petrol grew by 7.2% to R$49.7 billion (or +6.7% including petrol). Atacadão accounted for close to 65% of consolidated sales in 2017, up from 64.3% in net sales rose by 4.2% in Q4 to R$13.7 billion and by 5.8% in the full year to R$50.3 billion, despite the sharp impact of food deflation. Gross Profit In Reais Million Q4 17 Q Gross Profit 2,847 2, % 10,257 9, % Gross Margin 21.8% 21.8% +5bps 21.5% 21.1% +34bps Gross Profit excluding CSF 2,486 2, % 8,972 8, % (Atacadão and Carrefour Retail combined) Gross Margin excluding CSF (Atacadão and Carrefour Retail combined) 19.0% 19.1% -7bps 18.8% 18.2% +54bps Gross profit was 4.7% higher in Q4 to R$2.8 billion, resulting in a consolidated gross margin of 21.8%, stable year-onyear. In the full-year 2017, gross profit was 8.0% higher at R$10.3 billion, for a 34bps increase in margin, mainly as a result of tax credits. In 2017, Atacadão expanded its gross margin beyond the underlying tax effect and despite sharp food deflation, confirming the strength of its model. Atacadão s performance more than offset the gross margin pressure from mix and investment in new formats at Carrefour Retail. Excluding CSF, gross profit was 4.2% higher in Q4 and 9.4% higher in the full year 2017 to roughly R$2.5 billion and R$9.0 billion, respectively. Gross margin decreased by 7bps to 19.0% in Q4 and increased by 54bps to 18.8% in the 12 months, mainly as a result of the positive effect from ICMS-ST and Pis/Cofins tax credits, but also from operational gains and lower shrinkage at Atacadão. Gross Profit and Margin (2017 and Q4) In Reais Billion and as % of Net Sales 21,4% 21,4% 21,1% 21,5% 21.8% 21,8% 18.2% 18.8% 19.1% 19.0% 7,5 8,4 9,5 10,3 2,7 2, Q4 16 Q4 17 Gross Profit Gross Margin Gross Margin excl. CSF Atacadão and Carrefour Retail combined Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

16 SG&A Expenses Management report In R$ million Q4 17 Q4 16* * SG&A Expenses (1,735) (1,634) 6.2% (6,765) (6,158) 9.9% SG&A Expenses excluding CSF (Atacadão and Carrefour Retail combined) (1,520) (1,435) 5.9% (5,928) (5,456) 8.6% *In 4Q16 Carrefour retail was awarded R$24 million regarding IPTU tax gains from prior years. SG&A expenses and EBITDA of 4Q16 were therefore adjusted to take this one-off gain out. SG&A expenses were 6.2% higher in Q4 at R$1.7 billion and represented 13.3% of consolidated net sales, 20 bps higher year-on-year. This increase reflects: (i) (ii) (iii) (iv) higher costs, notably wages, that reflected past inflation, an effect that eased in Q4 with the slowdown of Brazil s inflation rate, and as result of the cost efficiency measures taken, expenses from store openings, in particular 12 new Atacadão and 49 Express stores, ramp-up expenses related to food e-commerce deployment and a long-term incentive compensation plan implemented pre-ipo. Expenses associated with new store openings amounted to 60bps of sales in Q In the full-year 2017, SG&A expenses totaled R$6.8 billion, up 9.9%; excluding CSF, SG&A expenses grew by 8.6% to about R$6.0 billion, representing 11.5% of net sales. However, excluding the impact of new stores from SG&A, underlying SG&A expenses would have increased by only 3% in SG&A and SG&A as % of Net Sales (2017 and Q4) 14,6% 14,2% 13.7% 14,2% 13.1% 13,3% 12.1% 5,1 5,6 6,1 12,4% 6,8 11.5% 11.6% 1,6 1,7 Adjusted EBITDA Q4 16 Q4 17 SG&A as % of consolidated net sales as % of sales excl. CSF Atacadão and Carrefour Retail combined In R$ million Q4 17 Q4 16* * Adj. EBITDA 1,118 1, % 3,516 3, % Adj. EBITDA Margin 8.6% 8.7% -14bps 7.4% 7.5% -11bps Adj. EBITDA at Atacadão % 3,068 2, % and Carrefour Retail combined Adj. EBITDA Margin at Atacadão and Carrefour Retail combined 7.4% 7.7% -30bps 6.4% 6.1% +30bps **In 4Q16 Carrefour retail was awarded R$24 million regarding IPTU tax gains from prior years. SG&A expenses and EBITDA of 4Q16 were therefore adjusted to take this one-off gain out. Adjusted consolidated EBITDA was up 2.8% to R$1.1 billion in Q4 with EBITDA margin of 8.6%, down 14bps from higher SG&A expenses. Excluding CSF, EBITDA for Atacadão and Carrefour Retail combined was 1.7% higher in Q4 at R$972 million for 7.4% margin. In the full-year 2017, adjusted EBITDA for Atacadão and Carrefour Retail combined rose 11.1% to a little over R$3.0 billion, representing an EBITDA margin improvement of 30bps to 6.4%. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

17 Management report Adj. EBITDA and Margin (2017 and Q4) 6,8% 7,3% 7.5% 7.4% 6.1% 6.4% In Reais Billion and as % of Net Sales 8.7% 8.6% 7.7% 7.4% 2,4 2, ,5 1,1 1, Q4 16 Q4 17 EBITDA Adj. EBITDA Margin Adj. EBITDA Margin Atacadão and Carrefour Retail combined Other Income (Expenses) In R$ million Q4 17 Q Tax credits recovered related to prior years 11 (2) nm nm Depreciation and provisions on non-recurring 10 (15) nm (287) (15) nm ICMS credits Restructuring costs (29) (24) 20.8% (104) (83) 25.3% Income and expenses related to litigations (13) (8) 62.5% (71) (20) nm Net gains or losses on asset sale (22) (2) nm (30) (45) -36.2% Other income (expenses) (43) (52) 13.2% 269 (137) nm In the full-year 2017, the Company booked other income (expenses) for a positive net amount of R$269 million, of which the most relevant item was the non-current impact of the ICMS- ST tax credits related to previous years (2012 to 2016) in the amount of R$750 million, the other R$11 million being related to credits on other taxes. Depreciation and provisions related to ICMS-ST credits were booked for a total amount of R$287 million. Other items totaled R$205 million in the full-year and include gains and losses on asset write-offs, restructuring charges and expenses related to litigation. Net Debt Profile and Financial Result Our cost of debt dropped sharply in Q4 and in the full-year to R$35 million and R$420 million, respectively, as a consequence of the IPO, which brought proceeds of R$ 3.0 billion to the Company, and of the continuous decrease of the SELIC rate in The most relevant financial expense in Q4 was associated with receivables discounted, which totaled a negative R$30 million in Q4 and negative R$134 million in the full-year Total net financial result in Q4 was a negative R$65 million, down 75.5% compared with Q In the full year, net financial result was a negative R$660 million, 15.5% lower. In R$ million Q4 17 Q Cost of Debt, gross (35) (149) -76.5% (420) (643) -34.7% Financial Revenue % % Cost of Debt, Net (15) (132) -88.6% (365) (561) -34.9% Interest on credit card receivables (30) (39) -23.1% (134) (128) 4.7% discounted Inflation adjustments on judicial deposits and - (42) nm (79) (1) nm contingencies FX gains or losses (1) (12) -91.7% (6) (28) -78.6% Others (18) (40) -55.0% (76) (63) 20.6% Net financial expense (65) (265) -75.5% (660) (781) -15.5% In October 2017, the Company completed the issue of R$2 billion in promissory notes at a much lower cost than previous issues, with an average rate of 102.6% of CDI. Of this amount, approximately R$1.6 billion was used to pay down the balance of intercompany loans totaling 320 million Euros and carry out an early redemption of another, more Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

18 Management report expensive promissory note in the amount of R$390 million. Grupo Carrefour Brasil now holds only local debt and no intercompany loans with Carrefour Group. Our gross debt/ebitda ratio (including discounted receivables) fell to about 1.2x in Q4 from 1.8x in the beginning of the year. We ended the year with net cash of R$800 million in 2017 compared to net debt of roughly R$2.1 billion in 2016, including discounted receivables. The following chart summarizes the changes in our debt profile and payments since Q2. Income Tax In R$ Million Q4 17 Q Income Before Taxes % 2,444 1, % Income and Social Contribution Tax (201) (63) nm (731) (511) 43.0% Effective Tax Rate 24.1% 9.7% nm 30.0% 27.3% 276bps Income tax expense increased by R$138 million in Q4 to R$201 million, mainly as a result of higher income before taxes. The effective tax rate was 9.7% in Q4 16, reflecting the recognition for the first time, at Carrefour, of tax losses carry forward. In Q4 17, the effective tax rate was 24.1% and includes additional recognition of tax losses carry forward and other temporary differences. In 2017, total taxes paid reached R$731 million, up 43.0% year-on-year, representing 30.0% of taxable income, including a 6% reduction coming from the additional recognition of tax losses carry forward and other temporary differences. At the end of 2017, the total amount of tax losses carry forward and other temporary differences not recognized in our balance sheet was R$1.6 billion (Note 17.4 of our financial statements). Net income Reported net income, Group share, was up 11.1% to R$596 million in Q4 (net margin of 4.6%) and up 36.2% in the fullyear to R$1.6 billion (net margin of 3.3%), the highest-ever recorded by Grupo Carrefour Brasil. Excluding all income (expenses) (and in particular non-recurring tax credits), net income was up 12.4% to R$1.4 billion in the full-year Payment of Interest on Shareholders Equity (IOE) Our Board of Directors approved, on February 27, proposal to distribute the gross amount of R$317 million in the form of interest on equity to its shareholders throughout This amount is equivalent to R$0.16 per share and represents a total remuneration equivalent to 25.0% of the adjusted net income for the period. The proposal to allocate 2017 results will be submitted for shareholders approval at the Annual Shareholders Meeting to be held in April The remaining amount shall be declared by our Board of Directors during the year of Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

19 Management report Working Capital In Q4 17, working capital requirements including discounted receivables were a negative R$2.3 billion, from negative R$1.9 billion in Q4 16, mainly as a result of the improvement in payment terms with suppliers to 82 days (from 73 days in Q4 16). This improved working capital management contributed to our free cash flow, which reached R$1.1 billion in In R$ million Q4 17 Q4 16 (+) Accounts Receivables 1, (+) Inventories 4, (+) Recoverable Taxes (+) Other Assets (+) Current Operating Assets 6,678 6, (-) Suppliers 9,410 8,007 1,403 (-) Payroll, Vacation and others (1) (-) Taxes Payable (-) Deferred Revenue (24) (-) Other Accounts Payable (34) (-) Current Operating Liabilities 10,791 9,358 1,433 (=) Working Capital - WC (4,113) (3,274) (839) Gross Revenue (LTM) 52,376 49,102 3,274 WC as % of Gross Revenue (LTM) (7.9%) (6.7%) 0 (+) Discounted Receivables 1,858 1, (=)WC including Disc. Receivables (2,255) (1,858) (397) WC as % of Gross Revenue (LTM) (4.3%) (3.8%) 50bps In days (+) Accounts Receivables (+) Inventories (-) Suppliers (82) (73) (9) (=) Working Capital Merchandise (29) (20) (9) *WC Merchandise: is composed of Trade Payables (excluding Trade payables for fixed assets suppliers) Inventories - Trade Receivables related to sales in stores and rebates to be received from suppliers. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

20 Management report CAPEX In R$ Million Expansion % Maintenance % Remodeling % IT and other % Total 1,808 1, % In the full year 2017, growth of total capex was contained to 1.2% and reached R$1.8 billion for 68 new stores and an increase of nearly 5% in sales area. About 47% of the total capex was spent on expansion and 20% on store remodelings. STORE NETWORK AS OF DECEMBER 2017 December 31, 2017 December 31, 2016 Total number of stores Cash & Carry Wholesale facilities Hypermarkets Supermarkets Convenience Stores Drugstores Gas Stations Total floor-space for sales (sqm) 1,777,672 1,696, % Cash & Carry 930, , % Hypermarkets 723, , % Supermarkets 63,006 62, % Convenience Stores 22,111 13, % Drugstores 8,081 7, % Gas Stations 31,347 29, % Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

21 Management report APPENDIX I - Income Statement In R$ Million Q4 17 Q4 16 % % Gross sales 14,351 13, % 52,376 49, % Net sales 13,053 12, % 47,768 44, % Other revenue % 2,512 2, % Net operating revenue 13,717 13, % 50,280 47, % Cost of goods sold, service and financial (10,870) (10,447) 4.1% (40,023) (38,033) 5.2% Gross Profit 2,847 2, % 10,257 9, % SG&A expenses (1,735) (1,610) 7.8% (6,765) (6,134) 10.3% Adjusted EBITDA 1,118 1, % 3,516 3, % Adjusted EBITDA Margin 8.6% 8.9% 30bps 7.4% 7.5% -10bps Depreciation and amortization (170) (146) 16.4% (657) (574) 14.5% Net income from equity accounted company 0 (1) nm (0) (1) nm Other income (expenses) (43) (52) -17.3% 269 (137) nm Adjusted EBIT % 3,104 2, % Net financial expenses (65) (265) -75.5% (660) (781) -15.5% Income before income tax and social ,444 1, % Income Tax (201) (63) 221.0% (731) (511) 43.0% Net income % 1,713 1, % Net income, Group share ,599 1, % Net Income - Non-controlling interests (NCI) % % % Net income, Group share 1,599 1, % (+/-) Other income and expenses (269) 137 nm Income Tax (34%) 91 (47) 93.6% Net adjusted Income, Group share 1,421 1, % Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

22 Management report APPENDIX II - Balance Sheet In R$ Million December 17 December 16 Assets Cash and cash equivalents 4,804 3,242 Marketable securities 6 - Trade receivable 1, Consumer credit granted by our financial solutions company 5,265 4,435 Inventories 4,999 4,751 Tax receivables Income tax and social contribution recoverable Derivative financial instruments 5 - Prepaid expenses Other accounts receivable Current assets 16,758 13,761 Consumer credit granted by our financial solutions Marketable securities Tax receivables 1, Deferred tax assets Prepaid expenses 8 16 Judicial deposits and collateral 2,170 1,952 Other accounts receivable ,790 3,305 Investment properties Investments in equity accounted companies Property and equipment 9,597 8,941 Intangible assets and goodwill 2,236 2,166 Non-current assets 17,120 14,567 Total assets 33,878 28,328 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

23 Management report In R$ Million December 17 December 16 Liabilities Suppliers 9,410 8,007 Borrowings 1, Consumer credit financing 4,032 3,042 Tax payable Income tax and social contribution payable Payroll, vacation and related charges Dividends payable Deferred income Other accounts payable Derivative financial instruments Current liabilities 16,284 13,321 Borrowings 1,016 3,394 Consumer credit financing Deferred tax liabilities Dividends payable - 85 Provisions 2,790 2,608 Deferred income Other accounts payable Non-current liabilities 4,454 6,558 Share capital 7,599 4,055 Capital reserve 2, Income reserve 2,658 3,061 Net effect of acquisition of minority interest (282) (282) Equity evaluation adjustment 3 1 Shareholders equity group share 12,145 7,501 Non-controlling interest Total liabilities and shareholders' equity 33,878 28,328 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

24 Management report APPENDIX III - Free Cash Flow 12 months in R$ million % change Adjusted EBIT 2,835 2, % Cancellation of depreciation, incl. Supply Chain % Adjusted EBITDA 3,516 3, % Other income (expenses) 269 (137) % Cancellation of non cash items 73 (198) % Financial result (excl. Net Cost of financial debt) (295) (220) 34.1% Gross Cash Flow From Operations Before Taxes 3,563 2, % Income taxes paid (836) (587) 42.4% Gross Cash Flow From Operations After Taxes 2,727 2, % Change in Trade Payables 1,413 1, % Change in Trade Receivables (84) (117) -28.2% Change in Inventory (248) (742) -66.6% Change in operating working capital 1, % Change in other current assets and liabilities (1,096) (22) nm Adjustment of change in judicial deposits & others investments % Change in consumer credit's working capital 137 (15) nm Change in other working capital (844) 45 Nm Adjusted Net cash from operating activities (*) 2,964 2, % Capital expenditures (1,808) (1,787) 1.2% Changes in payables to fixed assets suppliers (64) (119) -46.2% Free Cash Flow (*) 1,092 1, % (*) We calculate Free Cash Flow as net cash provided by our operating activities, less interest received from shortterm investments, plus (less) foreign exchange losses (gains), plus cash used in changes in judicial deposits and judicial freeze of deposits, and unrealized interest income from marketable securities, less cash provided from the disposal of non-operational assets, less cash used in additions to property and equipment, less cash used in additions to intangible assets. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

25 Management report APPENDIX IV Banco CSF In R$ million Q417 Q Net operating revenues % 2,040 2, % Risk Charges % % Gross profit % 1,285 1, % SG&A expenses % % Depreciation and amortization expenses 0-4 nm % Adjusted EBIT % % Other revenues (expenses) nm nm Net Financial results % nm Income tax % % Net income (100%) % % Overdue Portfolio Analysis In R$ million December 17 September 17 June 17 March 17 December 16 Total Portfolio 6, % 5, % 5, % 5, % 5, % On time payments 5, % 4, % 4, % 4, % 4, % Over 30 days % % % % % Over 90 days % % % % % Total Overdue % % % 1, % 1, % Provisions for loan losses Provisions for loan losses / over 90 days % % % % % 129% 128% 124% 118% 118% -340bps Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

26 Management report APPENDIX V Adjusted EBITDA Reconciliation In R$ million Q4 17 Q Net income % 1,713 1, % (+) Income tax and social contribution nm % (+) Net financial results % % (+) Depreciation and amortization % % (+) Supply chain depreciation and amortization (*) % % (=) Adjusted EBITDA 1,075 1, % 3,785 3, % (+/-) Other (income) expenses (**) % (269) 137 nm (=) Adjusted EBITDA 1,118 1, % 3,516 3, % (*) Supply chain depreciation and amortization is included in gross profit as costs of goods sold. (**) Items classified a other (income) and expenses, which in our understanding could not be classified in other income statement line items and may include items that are limited in number, clearly identifiable, unusual and have a material impact on our consolidated results. (please see note 25 of the individual and consolidated financial statements) Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

27 Management report GLOSSARY Like for Like: LFL sales compare gross sales in the relevant period with those in the immediately preceding period, based on gross sales provided by comparable stores, which are defined as stores that have been open and operating for a period of at least twelve consecutive months and that were not subject to closure or renovation within such period. Other retail companies may calculate LFL sales differently from us, and therefore, our historical and future LFL sales performance may not be comparable with other similar metrics used by other companies. Gross sales: Total price paid by our customers at the Group s stores, gas stations, drugstores and on our e-commerce platform. Net sales: Gross sales adjusted for taxes levied on sales (in particular PIS/COFINS and ICMS). Other revenue: Comprises revenue from our Financial Solutions segment (including bank card fees and interest from consumer credit activities), shopping mall rents and commissions related to other services provided in the stores, fast cash and handling fees. Gross Profit Margin: Gross profit divided by net sales for the relevant period, expressed as percentage. EBITDA: Net income (for the year or for the period) adjusted for financial result, net, income tax and social contribution and depreciation and amortization. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not measures of financial performance under Brazilian GAAP or IFRS, and should not be considered as alternatives to net income or as measures of operating performance, operating cash flows or liquidity. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin have no standardized meaning, and our definitions may not be comparable with those used by other companies. Adjusted EBITDA: EBITDA adjusted for the income statement line item other income and expenses (comprising losses on disposals of assets, restructuring costs, income & expenses related to litigations, and tax credits recovered related to prior periods). Adjusted EBITDA Margin: Adjusted EBITDA divided by net sales for the relevant period, expressed as a percentage. Net Income Margin: Net income for the year divided by net sales for the relevant period, expressed as a percentage. Global Functions: Central costs in relation to our central functions and headquarters. These comprise the activities of (i) the cost of our holding divisions, (ii) certain expenses incurred in relation to certain support functions of our parent company which are allocated to the various segments proportionately to their sales, and (iii) cost allocations from our parent company, which are not specific to any segment. Free Cash Flow: net cash provided by our operating activities, less interest received from short-term investments, plus (less) foreign exchange losses (gains), plus cash used in changes in judicial deposits and judicial freeze of deposits, and unrealized interest income from marketable securities, less cash provided from the disposal of non-operational assets, less cash used in additions to property and equipment, less cash used in additions to intangible assets. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

28 KPMG Auditores Independentes Rua Arquiteto Olavo Redig de Campos, 105, 6º andar - Torre A São Paulo/SP - Brasil Caixa Postal CEP São Paulo/SP - Brasil Telefone +55 (11) , Fax +55 (11) Independent Auditor s Report on the Individual and Financial Statements To the Board of Directors and Shareholders of Atacadão S.A. São Paulo - SP (A free translation of the original report in Portuguese, as filed in the Brazilian Securities and Exchange Commission ( CVM ), containing individual and consolidated financial statements prepared accordance with Accounting Practices Adopted in Brazil and with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB)). Opinion We have audited the individual and consolidated financial statements of Atacadão S.A. ( the Company or the Group ), respectively referred as Parent and, which comprise the statement of financial position as at December 31, 2017, the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying individual and consolidated financial statements present fairly, in all material respects, the individual and consolidated financial position of Atacadão S.A. as at December 31, 2017, and its individual and consolidated financial performance and its cash flows for the year then ended in accordance with Accounting Practices Adopted in Brazil and with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). Basis for opinion We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Individual and Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical requirements included in the Accountant Professional Code of Ethics ( Código de Ética Profissional do Contador ) and in the professional standards issued by the Brazilian Federal Accounting Council ( Conselho Federal de Contabilidade ) 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. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity

29 Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the individual and consolidated financial statements of the current period. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Provisions and contingent liabilities (individual and consolidated) See note nº 18 to the individual and consolidated financial statements Why it is a KAM The Group is involved in tax, labor and civil proceedings, in the normal course of the business, and is subject to tax audits that may result in tax assessments. The estimated amount of provisions and the disclosure of lawsuits, administrative proceedings and other contingent liabilities require judgment of the Group and its legal advisors. Changes in the assumptions used by the Group to exercise this judgment, or changes in the external conditions, including the position of the tax and labor authorities and the courts, may significantly affect the amount of provisions and required disclosures in the individual and consolidated financial statements, as well as the amount of investment recorded through the equity method in the Company s financial statements. Due to the significant volume of processes and amounts involved, the complexity of the tax legislation, especially with respect to the amounts to be considered in the tax credits basis in retail companies, and the significant judgments exercised by the Group, we consider this subject as a key audit matter. How our audit addressed the matter We have obtained an understanding of the design of key internal controls we deemed as key related to the identification, monitoring and assessment of legal proceedings, as well as the list of external and internal legal advisors of the Group. We have obtained confirmations from the external and internal legal advisors of the Group contemplating the assessment of the risk of loss and the amounts involved in the outstanding cases. For the most significant proceedings and tax positions taken, we have analyzed, with the support of our tax and legal specialists, the supporting documentation, the external legal opinions, and the existing jurisprudence. We have tested, by sampling, the history of losses of labor lawsuits used to measure the provision for labor lawsuits that are in the initial phase in courts. We have also evaluated the adequacy of the disclosures related to provision for loss contingencies and contingent liabilities with possible risk of loss in the individual and consolidated financial statements. During our audit, we have identified adjustments that, although immaterial, affected the measurement and disclosure of Provisions and contingent liabilities, which were accepted and recorded by management. Based on the evidence obtained through the procedures summarized above, we consider that the level of provision and related disclosures for Provision and contingent liabilities are acceptable in the context of the financial statements taken as a whole. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity

30 Tax receivables (individual and consolidated) See note nº 9 to the individual and consolidated financial statements Why it is a KAM According to state legislation, interstate transfers of goods allow the Group to recognize ICMS tax credits (a value added tax) under the tax substitution regime (ICMS ST) paid on the acquisition of such goods. Due to the increase in items subject to ICMS ST and the interstate transfers of goods, the Group has accumulated significant ICMS ST tax receivables. The Group assesses the likelihood of realization of these tax receivables, as well as their classification between current and noncurrent assets, and whether a provision for losses would be necessary. This assessment is based on technical studies, which consider, by geographical area (states), a projection of purchases and sales in future years, the history of consumption of tax credits, changes in the logistic distribution of the goods, and the requests of special tax regimes. Due to the significant amount involved, to the degree of judgment to determine the assumptions used in the technical studies that may affect the recognized amounts and required disclosures, we have considered this subject as a key audit matter. How our audit addressed the matter We have involved our tax specialists to analyze the adherence to the rules and procedures defined in state legislations and, on a sampling basis, evaluated the adequacy of the respective tax records. Also, with the involvement of our tax specialists, we have obtained the understanding of the methodology and key assumptions used in the preparation of the strategic plan for the realization of these credits by inquiry to those in charge for the tax area of the Group. We have evaluated the adequacy of the presentation of balances between current and noncurrent assets, as well as the adequacy of the provision for losses. We have also evaluated the adequacy of the disclosures made by the Group in the financial statements taken as a whole. During our audit, we have identified adjustments that, although immaterial, affected the measurement and disclosure of tax receivables, which were accepted and recorded by management. Based on the evidence obtained through the procedures summarized above, we consider that the Group s judgments to be acceptable in determining the realization of ICMS ST tax credits in the financial statements taken as a whole. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity

31 Trade promotions (individual and consolidated) See note nº 6 to the individual and consolidated financial statements Why it is a KAM The Group receives significant trade promotions resulting from agreements negotiated with its suppliers. Trade promotions have a range of contractual terms that require an internal control structure to identify, measure and recognize the trade promotions when the conditions in the agreements are met. These trade promotions represent a significant component reducing the costs of goods sold. Due to the significant volume of transactions and amounts involved, and the degree of judgment that may affect the amount recognized as a reduction of inventory costs in the individual and consolidated financial statements, as well as the amount of investment recorded through the equity method in the Company s financial statements, we consider this subject as a key audit matter. How our audit addressed the matter We have evaluated the design, implementation and operating effectiveness of key internal controls related to the process of purchase and trade promotions. On a sample of rebates based on volume of purchases, we have recalculated the amounts recognized in relation to the corresponding purchase transactions based on the negotiated contractual terms stated on the trade agreements. On a sample of punctual commercial income, we have obtained the supporting documentation of the trade promotions. We have also evaluated the adequacy of the accounting for the selected items. We have analyzed the monthly variations of trade promotions recognized against costs of goods sold, considering trends, seasonality and historical information. Also, we have evaluated the adequacy of the amount recognized as a reduction of cost of sales, inventory costs and disclosures of the Group's accounting policies. We also evaluated the adequacy of the amount recognized as a reduction of inventory costs and disclosures of the Group's accounting policies. Our tests revealed deficiencies in the design of internal controls related to the recognition of trade promotions. As a result, we have extended our substantive procedures, beyond that originally planned, in order to obtain sufficient and adequate audit evidence regarding the recording of these transactions. During our audit, we have identified adjustments that, although immaterial, affected the measurement and disclosure of trade promotions, which have been partially accepted and recorded by management. Based on the evidence obtained through the procedures summarized above, we consider that the Trade promotions balances recorded and related disclosures are acceptable in the context of the financial statements taken as a whole. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity

32 Allowance for doubtful accounts on consumer credit (individual and consolidated) See notes nº 7.1 and 27.7 to the individual and consolidated financial statements Why it is a KAM The Group recognizes an allowance for doubtful accounts on consumer credit granted by the financial services company, when the Group believes there is a risk that all or part of the amount due will not be recovered. The allowance models developed by the Group consider the classification of outstanding loans in uniform risk categories based on the probability of default and a modeling of default loss based on historical data. Changes in the assumptions used by the Group to exercise such judgment, or changes in general economic conditions or financial agreements with consumers, may significantly affect the amount of the allowance for doubtful accounts recorded in the individual and consolidated financial statements, as well as the amount of investment recorded through the equity method in the Company s financial statements. Due to the significant amounts of consumer credit granted and the degree of judgment involved in determining the allowance for doubtful accounts, we have considered this subject as a key audit matter. How our audit addressed the matter We have evaluated the design, implementation and operating effectiveness of internal controls deemed as key related to the identification and recording of consumer credit granted by the financial services company. We have recalculated, by sampling, the allowance for doubtful accounts on consumer credit based on the policy established by the Group which includes, among other things, considerations regarding uniform risk categories, and analyzed the consistency of the models applied in previous years, as well as the supporting documentation prepared by the financial services company to support the calculation, the accounting and disclosure of balances. We have also evaluated the adequacy of the disclosures made by the Group in the financial statements regarding the sufficiency of information on the nature of the transactions, the exposure to credit risk and the amounts provided by the Group. Our tests revealed deficiencies in the design of internal controls related to the allowance for doubtful accounts on consumer credit granted. As a result, we have extended our substantive procedures, beyond that originally planned, in order to obtain sufficient and adequate audit evidence regarding the recording of these transactions. During our audit, we have identified adjustments that, although immaterial, affected the measurement and disclosure of trade promotions, which were accepted and recorded by management. Based on the evidence obtained through the procedures summarized above, we consider that the amount of Allowance for doubtful accounts on consumer credit granted and related disclosures are acceptable in the context of the financial statements taken as a whole. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity

33 Other matters The individual and consolidated statements of value added (DVA) for the year ended December 31, 2017, prepared under the responsibility of the Company s management, and presented herein as supplementary information for IFRS purposes, have been subject to audit procedures jointly performed with the audit of the Company's financial statements. In order to form our opinion, we assessed whether those statements are reconciled with the financial statements and accounting records, as applicable, and whether their format and contents are in accordance with criteria determined in the Technical Pronouncement 09 (CPC 09) - Statement of Value Added issued by the Committee for Accounting Pronouncements (CPC). In our opinion, the statements of value added have been fairly prepared, in all material respects, in accordance with the criteria determined by the aforementioned Technical Pronouncement, and are consistent with the overall individual and consolidated financial statements. Other information accompanying the individual and consolidated financial statements and the auditor's report Management is responsible for the other information comprising the management report. Our opinion on the individual and consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the 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. Responsibilities of Management and Those Charged with Governance for the Individual and Financial Statements Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with Accounting Practices Adopted in Brazil and with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the individual and consolidated financial statements, management 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 management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group s financial reporting process. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity

34 Auditors Responsibilities for the Audit of the individual and consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors 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 Brazilian and international standards on auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Brazilian and international standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: o o o o o o Identify and assess the risks of material misstatement of the individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s and its subsidiaries internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company and subsidiaries to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the individual and consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity

35 From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. São Paulo, February 27, KPMG Auditores Independentes CRC 2SP014428/O-6 (Original report signed in Portuguese) Carlos Eduardo Paulino da Silva Contador CRC 1SP197910/O-7 KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity

36 Statements of financial position Atacadão S.A. Statements of financial position As of December 31, 2017 and 2016 (In million of reais - R$) Note Parent Company December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Assets Current assets Cash and cash equivalents 5 3,166 2,042 4,804 3,242 Marketable securities Trade receivables , Consumer credit granted by our financial solutions - 5,265 4, company Inventories 8 3,271 3,178 4,999 4,751 Tax receivables Income tax and social contribution recoverable Derivative financial instruments Prepaid expenses Other accounts receivable ,352 5,855 16,758 13,761 Non-current assets Long term assets Consumer credit granted by our financial solutions company 7.1 Marketable securities Tax receivables , Deferred tax assets Prepaid expenses Judicial deposits and collateral ,170 1,952 Other accounts receivable ,790 3,305 Investment properties Investments in equity accounted companies 12 6,377 4, Property and equipment ,924 5,075 9,597 8,941 Intangible assets 14 1,404 1,402 2,236 2,166 14,523 11,533 17,120 14,567 Total assets 21,875 17,388 33,878 28,328 The explanatory notes are an integral part of these individual and consolidated financial statements. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

37 Statements of financial position Atacadão S.A. Statements of financial position As of December 31, 2017 and 2016 (In million of reais - R$) Note December 31, 2017 Parent Company December 31, 2016 December 31, 2017 December 31, 2016 Liabilities Current liabilities Suppliers 16 6,084 5,444 9,410 8,007 Borrowings , , Consumer credit financing 7.2-4,032 3,042 Tax payables Income tax and social contribution payable Payroll, vacation and related charges Dividends payable Deferred income Other accounts payable Derivative financial instruments ,761 6,545 16,284 13,321 Non-current liabilities Borrowings ,016 2,476 1,016 3,394 Consumer credit financing Deferred tax liabilities Dividends payable Provisions ,790 2,608 Deferred income Other accounts payable ,969 3,342 4,454 6,558 Shareholders Equity Share capital ,599 4,055 7,599 4,055 Capital reserve , , Income reserve ,658 3,061 2,658 3,061 Net effect of acquisition of minority interest (282) (282) (282) (282) Retained earnings Equity evaluation adjustment Shareholders equity group share 12,145 7,501 12,145 7,501 Non-controlling interest ,145 7,501 13,140 8,449 Total liabilities and shareholders equity 21,875 17,388 33,878 28,328 The explanatory notes are an integral part of these individual and consolidated financial statements. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

38 Income statements Atacadão S.A. Income statements For the year ended 2017 and 2016 (In million of reais - R$) Parent Company Note Net sales ,987 28,744 47,768 44,957 Other revenue ,512 2,577 Net operating revenue 31,134 28,799 50,280 47,534 Cost of goods sold, services and financial operations 23 (26,438) (24,797) (40,023) (38,033) Gross profit 4,696 4,002 10,257 9,501 Income (expense) Selling, general and administrative expenses 24 (2,648) (2,337) (6,765) (6,134) Depreciation and amortization 24 (266) (219) (657) (574) Net income from equity accounted company (1) Other income (expenses) (25) 269 (137) Income before net financial income (expense) and income tax and social contribution 2,540 1,949 3,104 2,655 Financial Result Financial income ,160 Financial expense (519) (1,242) (1,082) (1,941) Net financial expense 26 (259) (436) (660) (781) Income before income tax and social contribution 2,281 1,513 2,444 1,874 Income tax and social contribution - Current 17.2 (580) (534) (822) (877) Deferred 17.2 (102) Net income for the year 1,599 1,174 1,713 1,363 Attributable to: Controlling shareholders Non-controlling shareholders Basic and diluted earnings per share (in reais) 21 0,86 0,66 The explanatory notes are an integral part of these individual and consolidated financial statements. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

39 Statements of comprehensive income Atacadão S.A. Statements of comprehensive income For the year ended December, 2017 and 2016 (In million of reais - R$) Parent Company Net income for the year 1,599 1,174 1,713 1,363 Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods, net of tax Gains with derivative financial instruments used to hedge cash flow, net of tax Net other comprehensive income/(loss) not being reclassified to profit or loss in subsequent periods, net of tax Actuarial gains (losses) on benefits to employees, net of tax (1) - (1) - Total comprehensive income 1,601 1,175 1,716 1,364 Attributable to: Controlling shareholders 1,601 1,175 Non-controlling shareholders The explanatory notes are an integral part of these individual and consolidated financial statements. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

40 Statements of changes in shareholders equity Atacadão S.A. statements of changes in shareholders equity For the year ended December 31, 2016 (In million of reais R$) Note Share capital Capital reserve Income reserve Income reserve The explanatory notes are an integral part of these individual and consolidated financial statements. Net effect of acquisition of minority interest Retained earnings Equity evaluation adjustment Shareh olders equity - group share Non controlling interest Total Total shareholders' equity Shareholders' equity at January 1, , ,815 (282) - - 6, ,031 Net income for the year ,174-1, ,363 Other comprehensive income for the year Total comprehensive income , , ,364 Capital contribution from non controlling shareholders Allocation of net income: Legal reserve (59) Mandatory minimum dividends to distribute (1) - (1) (54) (55) Proposed addicional dividends (98) (98) Transfer of accumulated income to profit retention ,114 - (1,114) reserve Total transactions with shareholders ,114 - (1,174) Shareholders' equity at December 31, , ,929 (282) - 1 7, ,449 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

41 Statements of changes in shareholders equity Atacadão S.A. Statements of changes in shareholders equity For the year ended December 31, 2017 (In million of reais - R$) Note Share capital Capital reserve Income reserve Legal reserve Profit retention reserve Net effect of acquisition of minority interest Retained earnings Equity evaluation adjustment Shareholders equity - group share Non controlling interest Total shareholders' equity Shareholders' equity at January 1st, , ,929 (282) - 1 7, ,449 Net income for the year ,599-1, ,713 Other comprehensive income for the year Total comprehensive income for the year , , ,716 Capital increase with income reserve ,000 - (97) (1,903) Issuance of common shares ,544 1, ,088-3,088 Transaction costs attributable to issuance of common shares (60) (60) - (60) Effect of the equity-settled stock option plan Proposed additional dividends (36) (36) Allocation of net income: Legal reserve (80) Mandatory minimum dividends (2) - (2) (32) (34) Transfer of retained earnings to reserve ,517 - (1,517) Total transactions with shareholders 3,544 1,501 (17) (386) - (1,599) - 3,043 (68) 2,975 Shareholders' equity at December 31,2017 7,599 2, ,543 (282) , ,140 The explanatory notes are an integral part of these individual and consolidated financial statements. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

42 Statements of cash flow Atacadão S.A. Statements of cash flow For year ended December 31, 2017 and 2016 (In million of reais - R$) Parent Company Notes Cash flow from operating activities Net income for the year 1,599 1,174 1,713 1,363 Adjustments to reconcile net income for the year Depreciation and amortization Impairment & impairment provision reversal (6) Equity in earnings of subsidiaries 12 (300) (528) - 1 Current income tax and social contribution Deferred income tax and social contribution (195) (91) (366) Write-off assets and gain on disposals Unrealized interest income from marketable securities - - (23) (29) Interest and exchange variation on borrowings (632) 415 (804) Interest on payable dividends Derivative instruments loss , ,474 Inflation adjustments to of judicial deposits and provisions 26 (11) (16) 79 (41) Provision for contingencies, net of reversals Share-based Payment ICMS tax credits, net of depreciation (597) - (835) - Other provisions 12 5 (97) 242 (Increase) decrease in operating assets and increase (decrease) liabilities: Trade accounts receivable (151) (82) (130) (199) Consumer credit granted by our financial solutions - - (858) (401) Marketable securities - - (19) - Inventories (103) (523) (249) (763) Tax recoverable and payable (52) 25 (180) (143) Income tax and social contribution paid (503) (259) (836) (587) Prepaid expenses and deferred revenue (14) Judicial deposits and collateral 3 3 (96) (190) Other accounts receivable (48) (50) (59) (19) Suppliers ,467 1,585 Payroll, vacation and related charges 9 63 (1) 77 Payment of contingencies (19) (12) (470) (231) Use of provision for restructuring (21) Other accounts payable Consumer credit financing - - 1, Net cash from operating activities 1,920 1,895 2,887 2,957 Cash flow from investing activities Additions to intangible assets 14 (6) (6) (142) (166) Additions to property and equipment 13.2 (1,139) (965) (1,666) (1,591) Suppliers of fixed and intangible assets (66) (122) (64) (149) Disposal of Intangible assets Investments in consolidated companies (1,240) (593) - - Capital contributions in joint ventures - - (9) (21) Net cash flow from investing activities (2,451) (861) (1,881) (1,927) Cash flow from financing activities Capital contribution of non-controlling shareholders in subsidiary Proceeds of initial public offering net of transaction costs 3,028-3,028 - Proceeds from borrowings , ,750 1,687 Repayment of borrowings 27.4 (3,773) (890) (4,601) (1,575) Interest paid on borrowings 27.4 (98) (76) (126) (131) Settlement of derivative financial instruments 27.4 (251) (607) (290) (796) Distribution of dividends (1) (1) (205) (63) Net cash provided by (used in) financing activities 1,655 (968) 556 (670) Increase/(Decrease) in cash and cash equivalents 1, , Cash and cash equivalents at beginning of the period 5 2,042 1,976 3,342 2,882 Cash and cash equivalents at end of the period 5 3,166 2,042 4,804 3,242 Cash and cash equivalents variation 1, , Non-cash transactions: Addition to property and equipment and intangible assets Offset of provision for contingencies with judicial deposits Dividends declared but not paid Tax effect of transaction costs attributable to issuance of equity instruments Gain (losses) actuarial on benefits to employee Gain (losses) actuarial on financial derivative instruments (1) - (1) - The explanatory notes are an integral part of these individual and consolidated financial statements. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

43 Statements of Value Added Atacadão S.A. Statement of value added For the year ended December 31, 2017 and 2016 (In million of reais - R$) Parent Company Sales of goods and services rendered 34,165 31,632 55,073 51,881 Other revenue Allowance for doubtful accounts (6) (7) (9) (21) 34,278 31,625 55,117 51,873 Cost of bought in Material and Services Cost of goods sold, services and financial operations (28,175) (27,478) (42,929) (42,343) Raw material, energy, services and others (1,138) (1,020) (3,326) (3,157) Loss/Write-off of assets (25) (2) (53) (21) (29,338) (28,500) (46,308) (45,521) Gross value added 4,940 3,125 8,809 6,352 Depreciation and amortization Depreciation and amortization (272) (222) (681) (572) Net value added produced 4,668 2,903 8,128 5,780 Value added generated from transfers Equity evaluation adjustment (1) Financial income Total value added to distribute 5,040 3,984 8,348 6,686 Distribution of value added Personnel Direct Compensation (1,140) (971) (2,334) (2,077) Benefits (180) (164) (464) (422) Government Severance Indemnity Fund for (162) (70) (61) (156) Employees (F.G.T.S) (1,390) (1,196) (2,954) (2,661) Taxes and contributions Federal (988) (675) (1,584) (1,368) State (625) 162 (760) 748 Municipal (31) (44) (178) (79) (1,644) (557) (2,522) (699) Providers of capital Interests (329) (983) (873) (1,717) Rents (78) (74) (284) (246) Others - - (2) (407) (1,057) (1,159) (1,963) Distributions to shareholders Dividends (2) (1) (36) (56) Net income attributable to controlling shareholders (1,597) (1,173) (1,597) (1,172) Net income attributable to minority interests - - (80) (135) (1,599) (1,174) (1,713) (1,363) Total value added distributed (5,040) (3,984) (8,348) (6,686) The explanatory notes are an integral part of these individual and consolidated financial statements. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

44 Note 1: Operations Note 2: Basis of preparation of the individual and consolidated financial statements Note 3: Significant events of the year Note 4: Scope of consolidation Note 5: Cash and cash equivalents Note 6: Trade receivables Note 7: Financial solutions activities Note 8: Inventories Note 9: Tax receivables Note 10: Marketable securities Note 11: Judicial deposits and collateral Note 12: Investments in equity accounted companies Note 13: Investment properties and property equipment Note 14: Intangible assets Note 15: Leased property Note 16: Suppliers Note 17: Income tax and social contribution Note 18: Provisions and contingent liabilities Note 19: Deferred revenue (parent company) Note 20: Equity Note 21: Basic and diluited earnings per share (group share) Note 22: Net operating revenue Note 23: Cost of goods sold, services and financial operations Note 24: Selling, general and administrative expenses (sg&a), and depreciation and amortization Note 25: Other income (expenses) Note 26: Net financial expense Note 27: Financial assets and liabilities Note 28: Related parties Note 29: Segment information Note 30: Share-based payments Note 31: Number of employees, employee compensation and benefits Note 32: Off-balance sheet commitments Note 33: Insurance coverage Note 34: Subsequent events Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

45 NOTE 1: OPERATIONS Atacadão S.A. ("Atacadão" or the "Company"), directly or through its subsidiaries ( Group Carrefour Brazil, Group or We ) engages in the retail and wholesale of food, clothing, home appliances, electronics and other products through its chain of Cash & Carry stores, hypermarkets, supermarkets, convenience stores, gas stations, drugstores, and e-commerce, mainly under the trade names Atacadão and Carrefour. To support its core retailing business, the Group also offers banking services to customers, under the trade name Banco CSF, a company overseen and regulated by the Central Bank of Brazil (BACEN). The Banco Carrefour Soluções Financerias ( Banco CSF ) offers to its customers "Carrefour" and Atacadão credit cards that can be used in the Group Carrefour Brazil s stores and elsewhere, consumer loans and other products such as insurance policies. Group Carrefour Brazil s headquarter is located in the city of São Paulo, State of São Paulo, Brazil. The company ultimate parent is Carrefour S.A., a French company listed on the Paris Stock Exchange. As described in the note 3 Significant events of the year, on July 19, 2017, the Company started its initial public offering (IPO) with the issuance of 205,882,353 common shares. The initial offer price was R$ 15 per common share. The Company's shares are traded on Novo Mercado segment of Corporate Governance at the São Paulo Stock Exchange - B3, under the code "CRFB3. NOTE 2: BASIS OF PREPARATION OF THE INDIVIDUAL AND CONSOLIDATED FINANCIAL STATEMENTS These individual and consolidated financial statements for the year ended December 31, 2017 were authorized Board of Directors on February 27, The individual and consolidated financial statements for the year ended December 31, 2017 and 2016 comprise the individual and consolidated financial statements of the Company and its subsidiaries and the Group s share of the profits and losses and net assets of a joint venture accounted for by the equity method. The presentation currency of the individual and consolidated financial statements is the Brazilian real (BRL), which is the Company s functional currency. All financial information presented in Reais was rounded to the nearest million of Reais, unless otherwise stated. NOTE 2.1. Statement of compliance The Company s individual and consolidated financial statements ( Financial Statements ) have been prepared in accordance with accounting practices adopted in Brazil (BR GAAP) and also in accordance with the International Financial Reporting Standards ( IFRSs ), as issued by the International Accounting Standards Board ( IASB ). In conformity with OCPC 07 - Evidenciação na Divulgação dos Relatórios Contábil - Financeiros de Propósito Geral (General Purpose Evidencing the Disclosure of Financial Statements), relevant information regarding the financial statements has been disclosed and issued from those used by the Administration for its management. Accounting practices adopted in Brazil comprise the policies set out in the Brazilian Corporate Law and the pronouncements, guidance, and interpretations issued by the Accounting Pronouncements Committee (CPC), approved by the Brazilian Securities and Exchange Commission (CVM) and the Federal Accounting Council (CFC). International Financial Reporting Standards (IFRSs), comprise the International Accounting Standards (IASs), International Financial Reporting Standards Interpretation Committee (IFRIC), and Interpretations and Standing Interpretations Committee (SIC). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

46 The accounting policies adopted in the preparation of these individual and consolidated financial statements are consistent with those followed in the preparation of the annual individual and consolidated financial statements for the year ended December 31, 2016, except for the standards, amendments and interpretations applicable in accounting periods beginning on January 1 st, 2017, as follows: Amendments to IAS 7/CPC 03 Disclosure Initiative: the information relative to the reconciliation of liabilities arising from financing activities required by those amendments is presented in the note Amendments to IAS 12/CPC 32 Recognition of Deferred Tax Assets for Unrealized Losses: the Company considered this amendment as part as its year-end closing process, which did not have any significant impacts on its financial statements. NOTE 2.2. New standards issued but not yet effective A number of new standards are effective for annual periods beginning on or after January 1st The early adoption of standards, although encouraged by IASB, is not allowed by Brazil Accounting Pronouncement Committee (CPC). The estimated impact of the adoption of these standards on the Company's equity on the effective date of application is based on assessments undertaken to date and may be subject to change until the Group presents its first individual and consolidated financial statements that include the initial date of application. Standards, amendments and interpretations : IFRS 9/CPC 48 Financial instruments, and amendments to IFRS 4/CPC 11 Insurance Contract Application date for the Group : January 1st, 2018 Main dispositions and consequences for the Group : This new standard, which describes the principles to be applied for the classification and measurement of financial assets and liabilities, replaces IAS 39/CPC 38 Financial Instruments: Recognition and Measurement. IFRS 9/CPC 48 establishes: A new classification and measurement approach for financial assets that reflect the business model in which assets are managed and their cash flow characteristics (Part I) A new impairment loss model for financial assets, based on expected losses. as opposed to the current applicable incurred loss model currently applicable under IAS 39/CPC 38 (Part II) New principles and simplified requirements regarding hedge accounting (Part III), to align them with Group risk management strategy. However, IFRS 9/CPC 48 does not replace the macro hedge accounting requirements. The Group is mainly impacted by the changes introduced by the second part of IFRS 9/CPC 48 on the impairment of financial assets, which will primarily affect its financial solutions segments (Banco CSF S.A.). (a) Part II Expected losses for the Financial Solution Segment The Group, conjointly with its parent company, Carrefour S.A., has developed a new comprehensive methodology frame applicable to the Financial Solution Segment, which defines the rules applicable for the assessment of credit risk deterioration, calculation of expected losses (within one year and at maturity) and the inclusion of prospective information. The implementation of these new principles will lead to an increase in the depreciation of the credits portfolio of the Financial Solution segment. This increase will be mainly related to the booking of expected losses on credits for which there was no objective depreciation trigger according to IAS 39/CPC 38, and on the given but not used credit line (booking of expected loss as from the moment the credit agreement is granted). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

47 Standards, amendments and interpretations : Application date for the Group : The application of this standard for the Financial Solution segment will have a negative impact as of January, 1st, 2018 around 1.6% the total equity of the Company (of which 51% related to controlling shareholders, as define by the ownership % of the parent company on its subsidiary BSF Holding S.A.), net of tax effect, without restatement of comparative figures for prior periods. (b) Part II Expected losses on trade and other receivables The application of the new impairment model, based on expected losses, to trade receivables and other receivables, including rent receivables, will generate an additional provision for credit loss on the first-time application date (primarily corresponding to credit losses on receivables not yet due). The Group will apply the simplified approach provided by IFRS 9/CPC 48 (lifetime expected credit losses on receivables, determined by an average default period). (c) Parts I and III Financial instruments classification and hedge accounting IFRS 9/CPC 48 defines three classification categories for financial assets, which determine their measurement basis: amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The standard eliminates the existing IAS 39/CPC 38 categories. From evaluation carried out, the Company does not believe that the new classification requirements will have a material impact on its individual and financial statements considering that its financial assets classified as Loan and receivables will remain at amortized costs under IFRS 9/CPC 48 and its investments classified as available-for-sale will be measured at FVOCI (all fair value gains and losses will remain reported in other comprehensive income). The Group also evaluated that the change in hedge accounting (Part III) will not have significant impacts on its individual and financial statements, considering that all existing hedge relationship assigned as effective hedge relation will continue to be qualified for hedge accounting purposes in accordance with IFRS 9/CPC 48. Transition Changes in accounting policies resulting from the adoption of IFRS 9 will generally be applied retrospectively. However, the Group will take advantage of the exemption allowing it not to restate comparative information for prior periods. Differences in the carrying amounts of financial assets and liabilities resulting from the adoption of IFRS 9/CPC 48 will be recognized in retained earnings and reserves as at 1 January IFRS 15/CPC 47 Revenue from Contracts with Customers (including Clarifications to IFRS 15/CPC 47 published in April 2016) January 1, 2018 Main dispositions and consequences for the Group : IFRS 15/CPC 47 established a comprehensive framework for determining whether, how much and when the revenue is recognized. It replaces existing revenue recognition guidance (IAS 18/CPC 30 - Revenue, IAS 11/CPC 17 - Construction Contracts and IFRIC 13 - Customer Loyalty Programs). It will apply to all the contracts with customers, except rental contracts (rental income), financial instruments (interests revenues) and insurance contracts, for which specific standards apply. IFRS 15/CPC 47 establishes a single model for revenue recognition, with new concepts and principles regarding mainly the identification of performance obligation and the price allocation for multi-items contracts. Most of the Group s revenue comes from the sale of goods to final customers in its stores, drugstores and gas stations. For those sales, considered without subsequent performance obligation, revenue is currently recognized at the Group customers payment and check-outs in the stores, drugstores and gas station, i.e. when the goods are delivered to the customers, which is currently taken to be the point in time at which the customers accept the goods and related risks and rewards of ownership transfer in accordance with IAS 18/CPC 30 and also corresponds to the Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

48 Standards, amendments and interpretations : Application date for the Group : point in time the customers obtains control of the goods (timing of revenue recognition under IFRS 15). Based on its assessment, the Group does not expect the application of IFRS 15/CPC 47 to result in a significant impact on its individual and consolidated financial statements. Transition The Group plans to adopt IFRS 15 using the cumulative effect method, with the effect of initially applying this standard recognized at the date of initial application (i.e. January 2018). As a result, the Group will not apply the requirements of IFRS 15 to the comparative period presented. IFRS 16/CPC 06 (R2) Leases January 1st 2019 Main dispositions and consequences for the Group : IFRS 16/CPC 06 (R2) Leases, that will replace IAS 17/CPC 06 (R2) and the related interpretation, sets out the principles for recognizing leases, and introduces important changes in lessees accounting model, setting out a single model and eliminating the distinction between operating and finance leases. According to IFRS 16/CPC 06 (R2), the lessee will recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the accounting requirements under the current standard. Additionally, it will affect the presentation of (i) the income statement, as the nature of the expenses will change. IFRS16/CPC 06 (R2) replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interests expenses on lease liabilities, (ii) the cash flow statement (with repayment of the lease liability and the finance charge now reported under net cash from/(used in) financing activities) and (iii) the statement of financial position (with a right of use asset recorded in assets and the corresponding lease liability recorded in liabilities). Consequently, the Group understands that the implementation of IFRS 16/CPC 06 (R2) will lead to a significant increase in its financial debt, and an improvement its EBIT and operating cash flows. The Group has initiated in 2016 a project aiming at the evaluation and implementation of this standard, which will be extended until the effective application, as of January 1, The contracts inventory and analyses, as well as the collect of all the data necessary to a firm estimation of all the equity impacts for the first time application of IFRS 16/CPC 06 are under evaluation. The Group has not yet determined the transition method. The impact in the period of initial application will depend on future economic conditions, including the Company's borrowing rate at January, 1st 2019, the composition of the lease portfolio at that date, the Company latest assessment of whether it will exercise any lease renewal options, the transition method chosen and the extent to which the Group choose to use recognition exemption. Considering those assumptions, leased commitments described in the notes 15 and 32 of the Company individual and consolidated financial statements may not be fully representative of the lease debt that should be accounted for under IFRS 16/CPC 06. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

49 The following standards, interpretations and / or changes in standards have been evaluated by the Company that understood that they will not significantly impact its individual and consolidated financial statements: IFRS/CPC Annual Improvements Cycle (IFRS 1 to IAS 28), Amendments to IFRS 2/CPC 10 Classification and Measurement of Share-based Payment Transactions, Amendments to IAS 40/CPC 28 Transfers of Investment Property Amendments to IFRS 10/CPC 36 and IAS 28/CPC 18 Sales or Contributions of Assets Between an Investor and its Associate/Joint Venture, IFRIC 22/ ICPC 21 Foreign Currency Transactions and Advance Consideration, Amendments to IFRS 4/CPC 11 Applying IFRS 9 'Financial Instruments' with IFRS 4/CPC 11 'Insurance Contracts', IFRIC 23 Uncertainty over Income Tax Treatments (applicable in annual periods beginning on or after January 1st, 2019). There are no other IFRS or IFRIC interpretations that have not yet entered into effect that could have significant impact on the Group s individual and consolidated financial statements. NOTE 2.3 Use of estimates and judgments Preparation of individual and consolidated financial statements involves the use of management estimates and assumptions that may affect the reported amounts of certain assets, liabilities, income and expenses, as well as the disclosures contained in the notes. The settlement of the transactions involving these estimates may result in differences from the one registered in the financial statements, due to the propabilistic part of the estimative process. Estimates and assumptions are reviewed at least once a year to ensure that they are reasonable in light of past experience and the current economic situation. In addition to using estimates, Group management is required to exercise judgment when determining the appropriate accounting treatment of certain transactions and activities and how it should be applied. The main estimates and judgments applied in the preparation of these consolidated financial statements related to: Note 8 - the main assumptions underlying the net realizable value of inventories. Note 9 - provision for impairment in the value of State VAT (ICMS) and ICMS Tax Substitution (ICMS-ST). Note 13.2, 14.1 and recoverable amount of goodwill, other intangible assets and property and equipment. Note 17 recognition of deferred tax asset and availability of the future taxable income for the use of the carry forward tax losses. Note 18 - measurement of provisions for contingencies and other business-related provisions and the main assumptions on the likelihood and scale of any outflow of funds. Note Allowance for doubtful accounts of financial solutions. NOTE 2.4 Measurement methods The individual and consolidated financial statements have been prepared using the historical cost convention, except for certain financial assets and liabilities measured using the fair value model. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Based on the hierarchy defined in IFRS 13/CPC 46 Fair Value Measurement, fair value may be measured using the following inputs: Level 1 inputs: unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date; Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

50 Level 2 inputs: models that use inputs that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. price-based data), except quoted prices included in level 1; and Level 3 inputs: information for assets and liabilities, inputs that are not based on observable market data for the asset or liability (non observable input). NOTE 2.5 Statements of Value Added ( DVA ) The Group prepared the Statements of Value Added ( DVA ) in respect with the CPC 09 Demonstração do Valor Adicionado, such statements are mandatory part of the BRGAAP financial statements for listed entities but should be considered as a supplementary financial information for the IFRS ones. NOTE 3: SIGNIFICANT EVENTS OF THE YEAR Note 3.1. Initial public offering ( IPO ) On June 28th, 2017, Atacadão filed its Preliminary Prospectus with the Brazilian Securities Commission (CVM), in connection with its initial public offering (IPO) aiming at listing the shares of the Company on the Novo Mercado segment of the São Paulo stock exchange. This second filing followed the first filing executed on May 24th, On July 18th, the Company set a price of R$ 15 per common share for its IPO, determined after completion of the book building process, and filed the Final Prospectus on the next day with the CVM. a) Structure of the offering The IPO consisted of a primary offering of 205,882,353 common shares issued by the Company, and a secondary offering of 34,461,489 and 56,800,000 common shares of Grupo Carrefour Brasil by Carrefour Group and Peninsula Participações ( Peninsula ), respectively. Grupo Carrefour Brasil s common shares began trading on July 20th, 2017, on the B3 under the symbol CRFB3. The offering was settled on July 24th, Based on the price mentioned before, the gross proceeds of the IPO totaled R$ 3,088 million before fees and expenses, and about R$ 3,028 million after. Furthermore, the Company has granted an option to the Brazilian underwriters to place up 44,571,576 additional common shares held by Carrefour Group (Carrefour Nederland B.V.) to cover over-allotments ( Secondary Greenshoe ). This option was exercisable up to 30 days after the starting date of trading of Grupo Carrefour Brasil s common shares on the B3 (Brasil Bolsa Balcão), i.e. until August 18th, The Grupo Carrefour Brasil s Greenshoe was subscribed up to 34,369,876 common shares. b) Peninsula Call Option On June 15th, 2017, Peninsula declared its intention to exercise its call option through the delivery of a written notice to Carrefour Nederland B.V. and Carrefour SA, Atacadão S.A. majority shareholders, whereby Peninsula informed that it will take the necessary steps to acquire from Carrefour Nederland B.V. 71,003,063 of the Company common shares, representing 4% of the capital stock prior to the completion of the IPO. The transfer of the shares to Peninsula was completed on July 26th after the settlement of the offering. The purchase price per common share was established on December 17, 2014, the date Peninsula became Atacadão s shareholder at R$ 9.92 adjusted for inflation. The actual purchase price amounted to R$ 13.7 per share. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

51 c) Shareholding structure after the IPO and exercise of Peninsula call option Upon the completion of the events described above (a and b), the Grupo Carrefour Brasil s new shareholding structure is as follows: Before the offering After the offering common shares % common shares % Carrefour Nederland BV 910,667, % 770,832, % Carrefour S.A. 651,400, % 651,400, % Peninsula II FIP (*) 213,009, % 227,212, % Free-Float ,513, % TOTAL 1,775,076, % 1,980,958, % (*) Fundo de Investimentos em Participações Carrefour Group (Carrefour Nederland B.V. and Carrefour S.A.) holds 71.79% of the shares, Peninsula holds 11.47% and the free float is 16.74%. d) Use of proceeds The net proceeds from the primary offering (R$ 3,028 million after commissions and expenses) were used in the third semester of 2017 to repay 650 million (R$ 2,410 million) in intercompany debt to Carrefour Finance SA. The following loans were repaid on July 25th and 26 th, 2017: Party Amount Annual interest rate Debt repaid Maturity date (in million) in R$ million (*) Carrefour Finance S.A. 135 Euribor % 499 February 5, 2018 Carrefour Finance S.A. 125 Euribor % 461 August 22, 2018 Carrefour Finance S.A. 240 Euribor % 887 July 24, 2018 Carrefour Finance S.A. 150 Euribor % 563 May 4, 2018 TOTAL 650 2,410 The Company has also paid off its outstanding external loan of US $86 million (R$ 277 million) with an initial maturity on August The remaining of the proceeds were used to improve Carrefour Comércio e Indústria Ltda.(CCI) working capital. Finally, Atacadão increased capital of R$ 800 million in CCI at the end of July 2017, allowing the settlement of CCI financial debt. Also, two additional capital contribution of R$ 200 million were made on August 10 and 18, in a total amount of R$ 1,200 million. Note 3.2. Emission of commercial promissory notes In October 13, 2017, Atacadão S.A. issued commercial promissory notes for a total of R$ 2 billion. Four series of notes were issued and the proceeds obtained were used to pay-off the promissory notes issued by the Company in January 2017, with an initial maturity date in December 2017, and two intercompany loans in foreign currency (EUR) that the Company had with its affiliated Carrefour Finance (Belgium). The maturity and interest rate of the notes issued are presented below: Serie Issue date Maturity date Interest rate Value Accrued Interests Total value for the year /13/ /11/ % do CDI /13/ /12/ % do CDI /13/ /10/ % do CDI /13/ /13/ % do CDI TOTAL 2, ,031 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

52 The loans settled between October 18 th and 20 th, with the proceeds of the emission of the four notes are presented below: Type of contract Currency Nominal Maturity date Interests Total In the contract currency In R$ on the settlement date original paid paid Comercial promissory note Real /12/ Intercompany loan Euro /03/ Intercompany loan Euro /04/ Intercompany loan Euro /12/ TOTAL 1, ,625 Note 3.3. ICMS credits recognition In the third quarter of 2017, the Company concluded the assessment of the ICMS-ST (Tax substitution regime) matters, particularly, the analysis and the measurement of the right to offset the ICMS-ST credits, related to the ruling of the Federal Supreme Court ( STF ) in October 2016, which recognized the right of the taxpayers to refund the ICMS-ST paid in advance when the effective basis of calculation is lower than the presumed basis of calculation. The STF also modulated the effects of the ruling in order to apply it to all pending lawsuits. The ruling had a general repercussion and this decision was published in March, Consequently, based on the ruling of the STF, the opinion of its legal advisors, as well as on the information available and on its best estimate of the possible offset of ICMS-ST credits calculated since 2012, the Company recognized R$ 959 million, of which R$ 597 million in its parent company, and R$ 362 million in its subsidiaries. The ICMS credits recognized are related to the period According to its accounting policies, the Company recognized the credits related to the period prior to 2017 on the line other income (expenses), as these credits are extemporaneous items, related to 2012 until 2016, clearly identifiable, non recurring and that had a material impact on consolidated results, which amounted to R$ 750 million, of which R$ 442 million in the parent company and R$ 308 million in the subsidiaries (cf. note 25). Furthermore, the ICMS-ST credits related to the year ended in December 2017, totaled R$ 209 million, of which R$ 155 million in the parent company, and R$ 54 million in the subsidiary and recognized on the line Cost of goods sold, in gross profit of the year. Seasonality Like most retail companies, the Group experiences seasonal variations in its sales, operating results and cash flows. We historically have a higher volume of sales in the fourth quarter of each year, which includes the busy Black Friday and Christmas periods, whilst our costs and expenses are distributed evenly throughout the year, resulting in a higher results and net income at the end of the year. This seasonality also influences our pattern of cash generation, since purchases made in the fourth quarter to build up inventory prior to the busy Christmas period are generally paid for at the beginning of the following year, which negatively impacts our cash flow in the first semester of each year. The sales and quarterly results of our operations may also vary significantly depending on the calendar. For example, should be considered when comparing the year 2017 with of 2016, one less day of sales in February 2017 due to 2016 being a leap year. As a result of those fluctuations, the administration believes the Group operating result between different quarters in the same year are not necessarily comparable. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

53 NOTE 4: SCOPE OF CONSOLIDATION Accounting policies The individual and consolidated financial statements include the financial statements of subsidiaries from the date of acquisition (the date when the Group gains control) up to the date when the Group ceases to control the subsidiary, and the Group's equity in joint ventures accounted for by the equity method. (i) Subsidiaries A subsidiary is an entity over which the Group exercises control, directly or indirectly. An entity is controlled when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group considers all facts and circumstances when assessing whether it controls an investee, such as rights resulting from contractual arrangements or substantial potential voting rights held by the Group. The profit or loss of subsidiaries acquired during the year is included in The individual and consolidated financial statements from the date when control is acquired. The profit or loss of subsidiaries sold during the year or that the Group ceases to control, is included up to the date when control ceases. (ii) Associates and joint ventures Entities in which the Group exercises significant influence (associates), and entities over which the Group exercises joint control and that meet the definition of a joint venture, are accounted for by the equity method, as explained in Note 13 "Investments in equity-accounted companies". Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. As of December 31, 2017, the Group does not participate in any associate. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities required the unanimous consent of the parties sharing control. Business combinations Business combinations, defined as transactions where the assets acquired and liabilities assumed constitute a business, are accounted for by the purchase method. Business combinations carried out since January 1, 2010 are measured and recognized as described below, in accordance with IFRS 3 (CPC 15) Business Combinations. As of the acquisition date, the identifiable assets acquired and liabilities assumed are recognized and measured at fair value. Goodwill corresponds to the excess of (i) the sum of the consideration transferred (i.e., the acquisition price) and the amount of any non-controlling interest in the acquiree, over (ii) the net of the acquisitiondate amounts of the identifiable assets acquirer and the liabilities assumed. It is recorded directly in the statement of financial position of the acquiree and is subsequently tested for impairment at the level of the group of Cash Generating Units ( CGU ) which corresponds to the Group s segment reporting, by the method described in Note Any gain from a bargain purchase (i.e., negative goodwill) is recognized directly in profit or loss. For business combinations on a less than 100% basis, the acquisition date components of non-controlling interests in the acquiree (i.e., interests that entitle their holders to a proportionate share of the acquirer s net assets) are measured at either: fair value, such that part of the goodwill recognized at the time of the business combination is allocated to non-controlling interests ("full goodwill" method), or the proportionate share of the acquirer s identifiable net assets, such that only the goodwill attributable to the Group is recognized ("partial goodwill" method). The method used is determined on a transaction-by-transaction basis. The Group measured the non-controlling interest for its acquisitions based on the partial goodwill method. The provisional amounts recognized for a business combination may be adjusted during a measurement period that ends as soon as the Group receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable, or at the latest 12 months from the acquisition date. Adjustments during the measurement period to the fair value of the identifiable assets acquired and liabilities assumed or the consideration transferred are offset by a corresponding adjustment to goodwill, provided they result from facts and circumstances that existed as of the acquisition date. Any adjustments identified after the measurement period ends are recognized directly in profit or loss. For a business combination achieved in stages (step acquisition), when control is acquired the previously held equity interest is remeasured at fair value through profit or loss. In the case of a reduction in the Group's equity interest resulting in a loss of control, the remaining interest is also remeasured at fair value through profit or loss. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

54 Transaction costs are recorded directly as an operating expense for the period in which they are incurred. Changes in ownership interest not resulting in a change of control Any change in the Group's ownership interest in a subsidiary after the business combination that does not result in control being acquired or lost is qualified as a transaction with owners in their capacity as owners and recorded directly in equity, in caption named net effect of acquisition of minority interest, in accordance with IFRS 10 (CPC 36) Financial Statements. The corresponding cash outflow or inflow is reported in the consolidated statement of cash flows under "Net cash from / (used in) financing activities". Translation of foreign currency transactions Transactions by Group entities in a currency other than their functional currency are initially translated at the exchange rate on the transaction date. At each period-end, monetary assets and liabilities denominated in foreign currency are translated at the period-end closing rate and the resulting exchange gain or loss is recorded in the income statement. Transactions eliminated in consolidation Intra-group transactions and balances and any unrealized income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with investees recorded under equity pickup are eliminated against investments proportionally to the interest held in that investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment loss. NOTE 4.1. Main changes in scope consolidation No acquisitions or divestments were carried out during the year ended December 31, NOTE 4.2. Scope of consolidation at December 31, 2017 and at December 31, 2016 The list of consolidated companies (subsidiaries) is presented below: December 31, 2017 December 31,2016 Companies % of interest % of interest Direct Indirect Direct Indirect Carrefour Comércio e Indústria Ltda. Subsidiaries ( Carrefour or CCI ) Comercial de Alimentos Carrefour Ltda Imopar Participações e Administração Imobiliária Ltda Nova Tropi Gestão de Empreendimentos Ltda CMBCI Investimentos e Participações Ltda BSF Holding S.A. Subsidiaries Banco CSF S.A Pandora Participações Ltda Rio Bonito Assessoria de Negócios Ltda Verparinvest S.A In 2017, there were no changes in the facts and circumstances considered by the Group to assess whether it has control over the subsidiaries. NOTE 5: CASH AND CASH EQUIVALENTS Accounting policies Cash and cash equivalents comprise cash balances and short-term highly liquid investments that are readily convertible into a known amount of cash and subject to an insignificant risk of any change in value. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

55 (in R$ million - R$) Parent Company December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Cash Cash equivalents 2,614 1,609 4,034 2,607 Total Cash and cash equivalents 3,166 2,042 4,804 3,242 Cash equivalents substantially refer to bank deposit certificates (CDB) and debentures which are remunerated at the weighted average buyback rate of 93% of the interbank deposit certificate rate ( CDI ) at the parent company (91% as of December 31, 2016), and at the weighted average buyback rate of 87% in consolidated (97% as of December 31, 2016). There are no material restrictions on the ability to recover or use the aforementioned assets. The Group s exposure to interest rate risks and a sensitivity analysis for financial assets and liabilities is disclosed in Note NOTE 6: TRADE RECEIVABLES Accounting policies Trade receivables correspond for the most part to receivables from wholesale and cash and carry activities, credit cards receivables, and shopping mall rental receivables. They represent financial instruments classified as "Loans and receivables" (Note 27). Trade receivables are initially recognized for the invoice amount and adjusted to present value (when applicable), including the respective direct taxes for which the Group is responsible. Allowance for doubtful accounts is recognized when necessary, based on an estimate of the debtor s ability to pay the amount due and the age of the receivable (Note 27). The Group operates receivables discounting programs. In accordance with IAS 39 (CPC 38) - Financial Instruments: Recognition and Measurement, receivables sold under these programs are derecognized as the Company surrenders control and transfers to the buyer all the related risks and rewards. (in R$ million - R$) Parent Company December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Wholesale and cash and carry receivable Credit card receivable Shopping malls rental receivable Meal voucher Commercial funds receivable (a) Commercial funds receivable from related parties (a) and (b) Allowance for doubtful accounts (15) (13) (35) (37) Total Trade receivables, net , (a) (b) It is basically represented by receivables from suppliers as a result of trade agreements made at the time of purchase of goods for resale. The counterpart is recorded in profit or loss for the year, reducing the cost of goods sold, at the time of the sale. Balance receivable from related parties, as part of global agreements negotiated by the ultimate parent company in France (see Note 28). Assignment of trade accounts receivable The subsidiaries Carrefour and Eldorado (Comercial Carrefour de Alimentos Ltda.) assigned, without right to recourse, part of their trade accounts receivable to external banks, against the payment of interests, in order to anticipate its cash collection. The balance corresponding to these operations amounting to R$ 1,858 million as of December 31 st, 2017, with R$ 1,087 million realized in Carrefour credit cards and R$ 771 with other card brands (R$ 1,416 million as of December 31 st, 2016, with R$ 881 million realized in Carrefour credit cards and R$ 555 with other card brands). The amount was written off from trade receivable in the statement of financial position as the companies have substantially transferred all risks related to these receivables. The cost of these discounted receivables is classified as Charges on financial transactions (cf. note 26 Financial Result) Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

56 NOTE 7: FINANCIAL SOLUTIONS ACTIVITIES Accounting policies To support its core retailing business, the Group offers financial solutions to customers. The financial solutions offered to the customers of "Carrefour" and more recently "Atacadão" include credit cards that can be used in the Group s stores and elsewhere, and consumer credit loans. Due to its contribution to the Group's total assets and liabilities and its specific financial structure, this secondary business is presented separately in the consolidated financial statements: - Consumer credit granted by our financial solutions (payment credit card receivables, personal loans, etc.) is presented in the statement of financial position under "Consumer credit granted by our financial solutions non-current" and "Consumer credit granted by our financial solutions current", as appropriate. - Financing for these loans is presented under "Consumer credit financing non-current" and "Consumer credit financing current", as appropriate. - The other assets and liabilities of the financial solutions (property and equipment, intangible assets and goodwill, cash and cash equivalents, accrued taxes and payroll costs, etc.) are presented on the corresponding lines of the statement of financial position. - Net revenue from financial solutions is reported in the income statement under "Other revenue". - The change in the financial solutions activities' working capital is reported in the statement of cash flows under "Consumer credit financing". NOTE 7.1. Consumer credit granted by our financial solutions company (assets) At December 31, 2017, consumer credit totaled R$ 5,494 million (December 31, 2016: R$ 4,563 million), as follows: (in R$ million - R$) December 31, December 31, Payment card receivable (a) 4,205 3,324 Loans (b) 2,021 2,021 Other financing Allowance for doubtful accounts (c) (794) (867) Total consumer credit granted by the financial solutions company 5,494 4,563 Current 5,265 4,435 Non-current a) On January 26, 2017, the Brazilian Central Bank (BACEN) published the resolution 4.549, which disposes about the financing of the amount due of credit card and other means of payment. According with this resolution, the outstanding balance of the credit card and other means, when not completely liquidated on the due date, the outstanding amount can only continue as a revolving credit, until the next credit card invoice. According with this new rule, the remaining balance of the revolving credit can be financed by a new line of credit for payment in installments, provided that the conditions are more advantageous for the client. The Bank CSF S/A is in compliance with this new rule, that started to be implemented on April 03, b) The balance receivable refers primarily to transactions arising from Banco CSF S.A. credit card for customers who have unpaid balances on their credit card bills. c) The Group exposure to credit risk from consumer credit granted by our financial solutions company is disclosed on note Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

57 NOTE 7.2. Consumer credit financing (liabilities) The related consumer credit financing amounted to R$ 4,148 million at December 31, 2017 (December 31, 2016: R$ 3,080 million), as follows: (in R$ million - R$) December 31, December 31, Debt securities (interbank deposits) Merchant debt 3,867 3,047 Related to acquirers 2,769 2,174 Sales of credit card receivables made on Carrefour Card (i) 1, Total Consumer credit financing 4,148 3,080 Current 4,032 3,042 Non-current (i) Referring to values of credit card receivables sold to external bank by Carrefour Comércio e Indústria Ltda. NOTE 8: INVENTORIES Accounting policies In accordance with IAS 2 (CPC 16) Inventories, inventories are recorded at average cost and includes all components of the purchase price and takes into account the rebates and commercial income negotiated with suppliers. Inventories are measured at the lower of average cost and net realizable value. Net realizable value corresponds to the estimated selling price in the ordinary course of business, less the estimated additional costs necessary to make the sale. The Group regularly adjusts the realization of inventories value due to losses and breakages. Provision for inventory losses are recorded based on percentages applied to goods with low inventory turnover and on the average inventory losses for the last 12 months. (in R$ million - R$) Parent Company December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Food 3,073 2,983 3,866 3,745 Non food Other products Total Inventories, net 3,271 3,178 4,999 4,751 Provision for inventory losses increased by R$ 9 million to R$ 15 million compared to December 2016 in the parent company (R$ 6 million in December 31, 2016), and R$ 1 million in the consolidated to R$ 69 million. (R$ 68 million in December 31, 2016). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

58 NOTE 9: TAX RECEIVABLES (in R$ million - R$) Parent Company December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 State VAT (ICMS) ICMS-ST - tax substitution (a) , ICMS recoverable on property and equipment Social Integration Program (PIS) and Contribution to Social Security (COFINS) Others Provision for ICMS and ICMS-ST losses (28) (28) (276) (299) Total Tax receivables , (a) Current Non-current , The Group maintains distribution centers located in certain States and in the Federal District, which receive goods with ICMS and ICMS-ST already prepaid by suppliers or the Group. Then, part of the goods is sent to locations in other States. Such interstate operations allow the Group to refund the prepaid ICMS and ICMS- ST, i.e. the ICMS and ICMS-ST paid on the acquisitions become a tax credit to be refund/offset, based on the State laws. As the number of acquired items, subject to ICMS-ST has been increasing, the tax credits to be refunded/offset by the Group also grown. The Group has been realizing part of these credits with authorization of offsetting, based on special regimes and also for complying with others procedures issued by the states. Related to the credits which cannot be offset immediately, the Group understands that the realization will occur in short or long term, based on a credit recoverability study for each State which includes, among others, history of realization, changes in supply chain, additional special regimes requests, growth future expectation and consumed against debts deriving from its operations. These studies were prepared based on information extracted from strategically planning report previously approved by the Group s Board of Directors. Conformed detailed in the note 3.3, in the last semester of 2017, the Group recognized a total value of R$ 959 million of ICMS-ST credits, with R$ 597 million in its parent company and R$ 362 in its subsidiaries. The Group expects to consume the ICMS tax credits presented in non-current assets over the 5 to 6 years. NOTE 10: MARKETABLE SECURITIES The Banco CSF and its Holding BSF acquire marketable securities as part of their liquidity strategy, with the purpose of maintain them at medium term. In this way, the securities portfolio was classified in the "available for sale" category. The portfolio of securities was composed as follows: Securities Updated cost value December 31, 2017 Values by Maturity (in R$ million - R$) Within 365 days Above 365 days Total Portfolio: Financial Treasury Bill LFT Other (BSF Holding) Total Securities Updated cost value December 31, 2016 Values by Maturity (in R$ million - R$) Within 365 days Above 365 days Portfolio: Treasury bills Total Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

59 NOTE 11: JUDICIAL DEPOSITS AND COLLATERAL Accounting policies The Group s judicial deposits and collateral are stated and recorded by the amount paid when the deposit or collateral are required and subsequently adjusted to reflect monetary correction adjustments. They are presented as Non-current assets, once those are expected to be utilized more than 12 months after the end of the reporting period. The Group is contesting the payment of certain taxes, contributions and labor-related obligations and has made court restricted deposits in the corresponding amounts, as well as escrow deposits related to the provision for legal proceedings. They are classified in the following categories: Parent Company (in R$ million - R$) December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Tax ,022 1,777 Labor Civil Collateral Total Judicial deposits and collateral ,170 1,952 Tax judicial deposits are mainly composed of: Carrefour Comércio e Indústria Ltda. - CCI s lawsuit on non cumulative Pis-Cofins representing a total of R$ 1,232 million at December 31, 2017 (R$ 1,040 million as of December 31, 2016). Banco CSF s lawsuit on the constitutionality of the additional social contribution on profits (CSLL) for an amount of R$ 329 million at the end of December 31, 2017, (R$ 285 million as of December 31, 2016). Provisions for the same matters are booked at each closing, see notes and Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

60 NOTE 12: INVESTMENTS Accounting policies The individual and consolidated statements of financial position includes the Group s share of the change in the net assets of companies accounted for by the equity method (joint ventures), as adjusted to comply with Group accounting policies, from the date when joint control is acquired until the date when it is lost. The company accounted for by the equity method are an integral part of the Group's operations and the Group's share of their net profit or loss is therefore reported as a separate component in the consolidated financial statements. Parent Company Companies Interest directly held Assets Liabilities December 31, 2017 Shareholder s Equity Net Income Equity Evaluation adjustment Investments Carrefour Comércio e Indústria Ltda % 13,106 6,637 6, ,469 Comercial de Alimentos Carrefour Ltda. 0.01% Imopar Part. Adm. Imob. Ltda. 0.10% (8) (8) - - Nova Tropi Empreend. Imob. Ltda. 0.01% Pandora Participações Ltda % CMBCI Invest. e Particip. Ltda. (b) 0.01% (2) - - (-) Intragroup elimination (a) (394) Total Investments 14,630 7,582 7, ,377 Companies Interest directly held Assets Liabilities December 31, 2016 Shareholder s Equity Net Income Equity Evaluation adjustment Investments Carrefour Comércio e Indústria Ltda % 9,967 4,974 4, ,993 Comercial de Alimentos Carrefour Ltda. 0.01% Imopar Part. Adm. Imob. Ltda. 0.10% Nova Tropi Empreend. Imob. Ltda. 0.01% Pandora Participações Ltda % CMBCI Invest. e Particip. Ltda. (b) 0.0% (1) - - (-) Intragroup elimination (a) (421) Total Investments 10,861 5,342 5, ,829 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

61 Shareholders equity statement 01/01/2016 December 31, 2016 December 31, 2017 Capital Increase Equity evaluation adjustment Total shareholders equity Capital Increase Stock options grant Equity evaluation adjustment Total shareholders equity Carrefour Comércio e Indústria Ltda. 3, ,993 1, ,469 Pandora Participações Ltda (-) Intragroup elimination (a) - (420) - (421) (394) Total 4, ,829 1, ,377 (a) Elimination of the intragroup value relating to the acquisition of the exclusivity right of the financial services distribution disclosed in note 19. (b) The R$ 75 million value (R$ 66 million in December 31, 2016) related to the 50% participation of CMBCI Investimentos e Participações Ltda. in a joint venture, Cosmopolitano Shopping Empreendimentos S.A., accounted for by the equity method. The loss reported in the year ending December 31, 2017 was of R$ 444 thousand (loss of R$ 528 thousand in December 31, 2016). Cosmopolitano Shopping Empreendimentos S.A. operates (i) development, implementation of administrative and commercial operations, including leasing of commercial and advertising spaces, operational parking area and other related activities, and also real estate management in its shopping center located in São Paulo, named Cosmopolitano Shopping; (ii) purchase and sale of its rental constructions without the involvement of a third-parties or brokers, and (iii) participation in other companies. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

62 NOTE 13: INVESTMENT PROPERTIES AND PROPERTY EQUIPMENT NOTE Investment properties Accounting policies IAS 40 (CPC 28) Investment Property defines investment property as property (land or a building or both) held to earn rentals or for capital appreciation or both. Based on this definition, investment property held by the Group consists of shopping malls (retail and service units located behind the stores check-out area) that are exclusively subject to a finance lease and represent a surface area of at least 2,500 square meters. These assets generate cash flows that are largely independent of the cash flows generated by the Group's other retail assets. The assets classified as investment property have useful lives of 40 years and are recognized at cost. Rental revenue generated by investment property is reported in the income statement under "Other revenue" on a straight-line basis over the lease term. The rewards granted by the Group under its leases are an integral part of the net rental revenue and are recognized over the lease term (Note 15). The fair value of investment property is measured twice a year: - by applying a multiple that is a function of (i) each shopping mall s profitability and (ii) a Brazil specific capitalization rate, to the gross annualized rental revenue generated by each property, or - by obtaining independent valuations prepared using two methods: the discounted cash flows method and the yield method. Values generally also compare the results of applying these methods to market values per square meter and to recent transaction values. In view of the limited external data available, particularly concerning capitalization rates, the complexity of the property valuation process and the fact that valuations are based on passing rents for the Group s own properties, the fair value of investment property, as disclosed below, is determined on the basis of level 3 inputs. (in R$ million - R$) December 31, 2017 December 31, 2016 Investment property at cost Depreciation (99) (66) Total Investment properties, net Changes in investment properties As of January 1, Depreciation (3) As of December 31, Additions Transfers Depreciation (4) As of December 31, In 2017, the Company transferred R$ 333 million (R$ 361 million of gross value, and R$ 28 million of depreciation) related to the land and constructions of its Shopping mall Pamplona (which opened in November, 2017) and Butantã, previously classified as tangible assets (Note 13.2) to investments property as defined by the CPC 28/IAS 40. Rental revenue generated by investment properties, reported in the income statement under "Other revenue", amounted to R$ 34 million for year ended December 31, 2017 (year ended December 31, 2016: R$ 27 million). Operating costs directly attributable to the properties amounted to R$ 13 million (year ended December 31, 2016: R$ 10 million). The fair value of investment properties at December 31, 2017 amounted to R$ 478 million (December 31, 2016: R$ 159 million). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

63 NOTE Property and equipment Accounting policies Property and equipment mainly comprise buildings, store fixtures and fittings and land. Initial recognition In accordance with IAS 16 (CPC 27) Property, Plant and Equipment, land, buildings and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. The cost includes expenditures that are directly attributable to the acquisition of an asset and any other costs required to prepare that asset at the location and in the condition required to operate in the manner intended by management, as well as the costs to dismantle the site where these assets are located. Software acquired forming an integral part of the function of equipment is capitalized as part of that equipment. Assets under construction are recognized at cost less any identified impairment losses. Subsequent costs The cost of replacing a property and equipment item is recognized in the carrying amount of that item in the event that it is probable that the economic benefits incorporated in the component shall flow to the Group and its cost can be reliably measured. The carrying amount of the component that has been replaced with another is writtenoff. Maintenance costs from property and equipment ( P&E ) items are recognized in the statement of income as incurred. Gain and losses from the disposal of a P&E item are calculated through comparison between the proceeds received from that disposal with the P&E book value and are recognized net under Other (expense) income in the income statement. Reclassification to Investment properties When the use of the property changes from owner-occupied to an Investment property, the Group maintains this asset at historical cost and reclassifies it as Investment property. Useful lives Depreciation of property and equipment begins when the asset is available for use and ends when the asset is sold, scrapped or reclassified as held for sale in accordance with IFRS 5 (CPC 31) Non-current Assets Held for Sale and Discontinued Operations. Land is not depreciated. Other property and equipment, or each significant part of an item of property or equipment, are depreciated by the straight-line method over the following estimated useful lives: Buildings Building 40 years Leasehold improvements 20 to 25 years Equipment, fixtures and fittings 4 to 15 years Other 5 to 10 years In light of the nature of its business, the Group considers that its properties and equipment have no residual value. The depreciation of leasehold improvements is calculated and recorded over the lease agreement period or overestimated useful life, whichever is shorter. Depreciation periods are reviewed at each period-end and, where appropriate, adjusted prospectively in accordance with IAS 8 (CPC 23) Accounting Policies, Changes in Accounting Estimates and Errors. Impairment tests See note Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

64 Parent Company (in R$ million - R$) Land Buildings and improvements Equipment, fixtures and fittings Construction in progress Total Cost Balance as of January 1, ,921 1, ,191 Additions Write-offs - (2) (50) - (52) Transfers (163) 1 Net balance at December 31, ,051 3,489 1, ,105 Additions ,139 Write-offs - (13) (60) - (74) Transfers (237) - Balance as of December 31, ,207 4,214 1, ,170 Depreciation and impairment Balance as of January 1, (318) (537) - (855) Additions - (78) (141) - (219) Write-offs Balance as of December 31, (396) (634) - (1,030) Additions - (96) (171) - (268) Write-offs Balance as of December 31, (490) (756) - (1,246) Net balance at January 1, , ,336 Net balance at December 31,2016 1,052 3, ,075 Net balance at December 31,2017 1,207 3, ,924 (in R$ million - R$) Cost Land Buildings and improvements Equipment, fixtures and fittings Construction in progress Balance as of January 1, ,868 5,393 4, ,099 Additions ,591 Write-offs (7) (6) (395) (5) (413) Transfers (232) - Net balance at December 31, ,956 6,154 4, ,277 Additions ,662 Write-offs - (37) (99) - (136) Transfers (440) (361) Net balance at December 31, ,992 6,913 5, ,442 Total Depreciation and impairment Balance as of January 1, (1,562) (2,620) - (4,182) Additions - (147) (386) - (533) Write-offs Transfers - 7 (7) - - Provision for recoverable value - - (1) - (1) Reversal of provision for recoverable value Net balance at December 31, (1,698) (2,638) - (4,336) Additions - (174) (431) - (606) Additions - Impairment - (9) (17) - (26) Write-offs Transfers Net balance at December 31, (1,841) (3,004) - (4,845) Net balance at January 1,2016 1,868 3,831 1, ,917 Net balance at December 31,2016 1,956 4,456 2, ,941 Net balance at December 31,2017 1,992 5,072 2, ,597 The Company identified the need of a provision for the impairment of specific tangible assets of its subsidiaries for R$ 26 million as of December 31, 2017 (R$ 1 million as of December 31, 2016). The related expense has been registered in the line other income (expenses). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

65 In December 31, 2017, the Group does not own property and equipments items pledged as collateral in proceedings, following the transfer to the judicial sphere of its Parent Company goodwill amortization deductibility process (see Note ). As of December 31, 2016, the Group had R$ 2,480 million of property and equipments items pledged as collateral in proceedings, with R$ 2,464 million relating to a tax proceeding involving non-deductibility of goodwill (see Note ). NOTE 14: INTANGIBLE ASSETS Accounting policies Goodwill Goodwill is initially recognized on business combinations as explained in Note 4. The goodwill recorded in the Group s financial statements was generated prior to the adoption of IFRS by the Group, and are based on the difference between the amount paid and the book value of the net assets on the acquisition date. At the IFRS transition date, the Group elected to maintain the accounting treatment for business combinations applied under previous accounting standards, in line with the option available to first-time adopters under IFRS 1 First-time Adoption of International Financial Reporting Standards (CPC 37). In accordance with IAS 36 (CPC 1) Impairment of Assets, goodwill recognized on business combinations is not amortized but is tested for impairment every year, or more frequently if there is an indication that its carrying amount may not be recovered, by the method described in Note Other intangible assets Intangible assets consist mainly of software, key money payment and other intangible assets. Separately acquired intangible assets and goodwill are initially recognized at cost and intangible assets and goodwill acquired in business combinations are recognized at fair value (see Note 4). Software and other intangible assets are amortized by the straight-line method over the following periods: Class of assets Useful life Software and other intangible assets Key money payment (fundo de comércio) 5 years 10 to 25 years The amortization methods, useful lives and net book values are reviewed at each reporting date and adjusted if appropriately. The amortization of key money payment is performed in accordance with the contractual lease period. Subsequent expenditure is only capitalized when it increases the future economic benefits embedded in the specific asset to which it is related. All other expenses, including spending on internally generated goodwill and trademarks are recognized in profit and loss as incurred. (in R$ million - R$) Parent Company December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Goodwill, net 1,390 1,390 1,823 1,823 Software Key money and other intangible assets Intangible assets in progress Intangible assets, net 1,404 1,402 2,236 2,166 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

66 NOTE Goodwill The recoverable amount of goodwill is monitored at the level of the group of cash-generating units (CGUs) which correspond to reporting segments. (in R$ million - R$) December 31, 2017 Net amount Parent Company December 31, 2016 Net amount Atacadão (a) 1,390 1,390 Total 1,390 1,390 (in R$ million - R$) December 31, 2017 Net amount December 31, 2016 Net amount Retail Cash and carry (a) 1,390 1,390 Total 1,823 1,823 (a) On April 30, 2007, the Carrefour Group in France acquired the totality of the shares of the Company through its subsidiary, Korcula Participações Ltda. ("Korcula"). The goodwill was calculated as per the difference between the net equity of the Company at the date of the acquisition of R$ 453 million and the purchase price of R$ 2,233 million, subsequently adjusted to R$ 2,163 million. At January 31, 2008, it was approved the merger through the incorporation of the parent company Korcula, based on the accounts as of December 31, For purposes of the merger, the value of the investment held by Korcula in the Company was eliminated from net assets, resulting in the recognition of a goodwill of R$ 1,702 million in the Company. In accordance with the accounting standard applicable in that period, this goodwill was amortized until to December 31, 2009, resulting in a net value of R$ 1,390 million. NOTE Other intangible assets and goodwill Parent Company (in R$ million - R$) Goodwill Software Total Cost Balance as of January 1, , ,731 Additions Balance as of December 31, , ,737 Additions Balance as of December 31, , ,743 Amortization Balance as of January 1, 2016 (312) (20) (332) Additions - (3) (3) Balance as of December 31, 2016 (312) (23) (335) Additions - (4) (4) Balance at December 31, 2017 (312) (27) (339) Net balance at January 1, , ,399 Net balance at December 31, , ,402 Net balance at December 31, , ,404 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

67 (in R$ million - R$) Goodwill Software Key money and other intangible assets Intangible assets in progress Cost Balance as of January 1, , ,247 Additions Transfers (54) - Balance as of December 31,2016 3, ,413 Additions Write-offs - (1) - - (1) Transfers (61) - Net balance at December 31, ,284 1, ,554 Amortization Balance as of January 1, 2016 (1,461) (690) (43) - (2,194) Additions - (50) (3) - (53) Net balance at December 31, 2016 (1,461) (740) (46) - (2,247) Additions - (68) (3) (71) Balance at December 31, 2017 (1,461) (808) (49) (2,318) Net balance at January 1, , ,053 Net balance at December 31,2016 1, ,166 Net balance at December 31, , ,236 Total NOTE Impairment of goodwill and sensitivity analysis Accounting policies In accordance with IAS 36 (CPC 1) Impairment of Assets, intangible assets and goodwill and property and equipment are tested for impairment whenever events or changes in the market environment indicate that the recoverable amount of an individual asset and/or a cash-generating unit (CGU) may be less than its carrying amount. For assets with an indefinite useful life mainly goodwill the test is performed at least once a year. Individual assets or groups of assets are tested for impairment by comparing their carrying amount to their recoverable amount, defined as the higher of their fair value less costs of disposal and their value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. If the recoverable amount is less than the carrying amount, an impairment loss is recognized for the difference. Impairment losses on property and equipment and key money and intangible assets (other than goodwill) may be reversed in future periods provided that the asset s increased carrying amount attributable to the reversal does not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years. Impairment of assets other than goodwill Impairment tests on property and equipment are performed at the level of the individual stores (CGUs), for all formats. In accordance with IAS 36 (CPC 1), intangible assets and goodwill and property and equipment are tested for impairment whenever there is an indication that their recoverable amount may be less than their carrying amount. All stores that report a recurring operating loss before depreciation and amortization in two consecutive years (after the start-up period) are tested. Recoverable amount is defined as the higher of value in use and fair value less costs of disposal. Value in use is considered to be equal to the store s discounted future cash flows over a period of up to five years plus a terminal value. Fair value is estimated based on the prices of recent transactions, industry practice, independent valuations or the estimated price at which the store could be sold to a competitor. The discount rate applied is the same as for impairment tests on goodwill. Goodwill impairment IAS 36 (CPC 1) requires impairment tests to be performed annually at the level of each CGU or group of CGUs to which the goodwill is allocated. According to the standard, goodwill is allocated to the CGU or group of CGUs that is expected to benefit from the synergies of the business combination. Each CGU or group of CGUs to which the goodwill is allocated should represent the lowest level within the entity at which the goodwill is monitored for internal management purposes and should not be larger than an operating segment as defined in IFRS 8 (CPC 22) Operating Segments before Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

68 aggregation. For the purpose of analyzing the recoverable amount of goodwill, each individual operating segment is considered to represent a separate group of CGU. Value in use corresponds to the sum of discounted future cash flows for a period generally not exceeding five years, plus a terminal value calculated by projecting data for the final year to perpetuity at a perpetual growth rate. Future cash flows are estimated based on financial projections drawn up by operating segment level and approved by Executive Management. The discount rate for each operating segment corresponds to the weighted average cost of equity and debt, determined using the median gearing rate for the sector. The cost of debt is determined by applying the same logic. Additional tests are performed at the interim period-end when there is an indication of impairment. The main impairment indicators used by the Company are as follows: - internal impairment indicator: a material deterioration in the ratio of EBITDA/ LADIJA (Earnings before Income tax, financial result, depreciation and amortization) excluding other income and expenses to net operating revenues, the budget and the most recent forecast; - external impairment indicator: a material increase in the discount rate and/or a severe downgrade in the IMF s GDP growth forecast. Impairment losses recognized on goodwill are irreversible, including those recorded at an interim period-end. Valuation of recoverable amount: In determining the recoverable value of the operating reporting segments of the Group (Retail & Cash&Carry), to which a goodwill is allocated, the company used the projection of future cash flows before after income taxes, based on a 3-year financial projections drawn up by operating segment level Executive Management, considering the following assumptions: (i) (ii) (iii) (iv) (v) (vi) (vii) Net operating revenues: projected from 2018 to 2020 considering the historical growth in volumes, and inflation projections from macroeconomics assumption of external Banks. Expansion of stores is not considered; Gross profit is considered stable in percentage of net operating revenue; Expenses are projected considering the dynamic of the stores and considering productivity and efficiency gains, detailed for each line of expense; Working capital is projected using the historical working capital expressed in days of cost of goods sold; Capital expenditure spending is projected considering the average investment necessary for the maintenance of the existing stores as of the date of the impairment test; Terminal value was computed using the last year of the 3-year plan and applying the perpetual growth rate defined below; Discount rate used was determined as described in our accounting policies above. The discount rate used as of December 31, 2017 was 12,7% p.a. (13,6% p.a. as of December 31 st, 2016); (viii) Perpetual growth rate: the rate considered was 4,4% p.a. as of December 31, 2017 (4,8% p.a. as of December 31, 2016). The company carried out the impairment test of the goodwill as of December 31, 2017 and reached the conclusion that the recoverable amount was higher than the book value of the goodwill and that no impairment was necessary. Analyze of sensitivity: The impairment tests on goodwill and other intangibles assets were performed at December 31, 2017 and 2016 in accordance with IAS 36/CPC 01. The perpetual growth rates and discount rates (corresponding to the weighted average cost of capital WACC) applied for impairment testing purposes in 2017 and 2016 are presented below: Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

69 Parent Company & December 31, 2017 December 31, 2016 Pre-tax discount rate Perpetual growth rate Pre-tax discount rate Perpetual growth rate Retail 12,70% 4,4% 13,60% 4,8% Cash & Carry 12,70% 4,4% 13,60% 4,8% The analysis of sensitivity to a simultaneous change in the key inputs based on reasonably possible assumptions did not reveal any probable scenario according to which the recoverable amount of any of the groups of CGU s would be less than its carrying amount. The impairment tests based on December 31, 2017 and 2016 on the Group assets did not lead to the recognition of any impairment losses on these assets NOTE 15: LEASED PROPERTY Accounting policies Leases New long-term leases particularly property leases are analyzed in accordance with IAS 17 (CPC 6) Leases to determine whether they represent operating leases or finance leases, (i.e., leases that transfer substantially all the risks and rewards incidental to ownership of the asset to the lessee). For property leases, the analysis is performed separately for the land on the one hand and the building on the other. Finance leases are accounted for as follows: - The leased assets are recognized in the statement of financial position at fair value or, if lower, the present value of the minimum lease payments. They are depreciated over their useful life, in the same way as assets owned outright, or, if shorter, over the lease term. - The liability for the future lease payments is recognized in the statement of financial position under Borrowings (Note 27.3). - Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. Leases that do not transfer substantially all the risks and rewards incidental to ownership of the asset to the lessee are classified as operating leases. Operating lease payments are recognized in the income statement (under "selling, general and administrative expenses property rentals") on a straight-line basis over the life of the lease (Note 15.2). All property leases have been reviewed to determine whether they are operating or finance leases. NOTE Financial Leases As of December 31, 2017, the Group does not have any finance lease agreements. As of December 31, 2016, the future minimum lease payment amounted to R$ 186 thousand. NOTE Operating lease Group as lessee The Group has entered into lease agreements with third parties. The Group reviewed such agreements and concluded that they are operating lease agreements. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

70 These agreements are effective for 5 to 20 years and may be renewed automatically for the same period. As of December 31, 2017 R$ 54 million (R$ 74 million as of December 31, 2016) were paid in relation to our operating lease agreements by the Parent Company, and R$ 243 million (R$ 225 million as of December, 2016) for the Group. As of December 31, 2017 and 2016, the future minimum lease payments schedule was as follow: (in R$ million - R$) December 31, 2017 Parent Company December 31, 2016 December 31, 2017 December 31, 2016 Within 1 year From 1 to 5 years Above 5 years Total Group as lessee ,777 1,685 Group as lessor Our subsidiary Carrefour leases its investment properties and shopping arcades located in its stores. As of December 31, 2017 and 2016, the future minimum lease payments to be received under Carrefour s non-cancellable operating leases was as follows: (in R$ million - R$) December 31, December 31, Within 1 year From 1 to 5 years Above 5 years 1 8 Total Group as lessor NOTE 16: SUPPLIERS Accounting policies Suppliers correspond primarily to trade payables. They also include payables that suppliers have transferred to financial institutions as part of factoring programs with no recourse. There is no difference in the nature or terms of the liabilities before and after factoring. They are classified in the category of "Financial liabilities measured at amortized cost", as defined in IAS 39 (CPC 38) - Financial Instruments: Recognition and Measurement (Note 27). Suppliers are initially recognized at their nominal amount, which represents a reasonable estimate of fair value in light of their short maturities. (in R$ million - R$) Parent Company December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Third parties: Trade accounts payable, goods 5,877 5,179 8,598 7,304 Trade accounts payable, sundry Trade accounts payable property and equipment Related parties: Carrefour Import S.A Sociedad Compras Modernas Carrefour Argentina Total Suppliers 6,084 5,444 9,410 8,007 The Group acts as intermediary between the supplier and financial institutions in providing its suppliers with a service of anticipation of their receivables from Carrefour originating from the sale of goods and services.the supplier debt remains qualified in the same line in the balance sheet as there is no difference in the nature and terms of payment of the liabilities before and after the anticipation. The Group is remunerated by a commission for this service, registered in the other revenue line. The balance of trade negotiated as of December 31, 2017 was R$ 1,946 million (R$ 1,754 million as of December 31, 2016). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

71 NOTE 17: INCOME TAX AND SOCIAL CONTRIBUTION Accounting policies Income tax expense comprises current and deferred income tax and social contribution. Current and deferred taxes are recognized in profit or loss, unless they are related to either a business combination or items recognized directly in equity, or in other comprehensive income. Retail and Cash & Carry segments Current and deferred income tax and social contribution for the year are calculated at statutory rates of 15%, plus a surtax of 10% on taxable income exceeding R$240 thousand for income tax and 9% on taxable income for social contribution, and take into account the offset of income tax and social contribution losses, limited to 30% of taxable income. Our subsidiary Imopar opted to calculate taxable profits as a percentage of gross sales ( lucro presumido / assumed profit ). Accordingly, Imopar calculates income and social contribution taxes at the rate of 32% on gross revenue (general activities) and 100% on financial income, on which the statutory rates of income tax and social contribution apply (25% and 9% respectively). Financial Solutions segment Current and deferred income tax and social contribution at financial institutions BSF Holding S.A. and Banco CSF S.A. are calculated at statutory rates of 15%, plus a surtax of 10% on taxable income exceeding R$240 thousand for income tax and 15% on taxable income for social contribution tax, up to August 2015, and take into account the offset of income and social contribution tax losses, limited to 30%. In addition, tax credits were recognized at the same rates for income tax and at 20% for social contribution tax, on temporary differences, except for those where projection for realization is after These were set up at the rate of 15% on the assumption of generation of future taxable income, sufficient to offset those tax credits. In accordance with Law No /15, the social contribution tax rate for financial institutions increased from 15% to 20% in the period from September 2015 to December The social contribution tax rate will remain at 20%, returning to 15% as from January Current income tax and social contribution expense The current income tax and social contribution expense is the tax payable or receivable estimated on taxable income or loss for the year and any adjustment to tax payable in respect to prior years. The amount of current tax payable or receivable is recognized in the statement of financial position as a tax asset or a tax liability at the best estimate of the projected value of the taxes to be paid or received and reflects the uncertainties relating to its calculation, if any. It is measured based on the tax rate enacted, or substantively enacted, at the statement of financial position date. Deferred income tax and social contribution expense Deferred income tax and social contribution are calculated on all temporary differences between the carrying amount of assets and liabilities in the consolidated statement of financial position and their tax basis (except in the specific cases referred to in IAS 12 (CPC 32), and carried-forward tax losses. They are measured at the tax rates that are expected to apply to the period when the asset will be realized or the liability will be settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are not discounted and are classified in the statement of financial position under "Noncurrent assets" and "Non-current liabilities". Deferred tax assets are recognized in relation to on all temporary differences and unused tax losses, to the extent that it is probable that future taxable income will be available against which these shall be used. Deferred tax assets are reviewed at each statement of financial position date and are reduced to the extent that realization is no longer likely. The recoverability of deferred income tax and social contribution assets is assessed separately for each legal entity, based on estimates of future taxable income contained in the business plan and the amount of deferred tax liabilities at the period-end. A valuation allowance is recorded to write down deferred tax assets whose recovery is not considered probable. Deferred taxes are measured based on the tax rates that are expected to be applied to the temporary differences when reversed, based on tax rates in force up to the statement of financial position date. The recognition or reversal of deferred taxes are recognized in the statement of income, except when these refer to tax bases where effects are recorded directly under Equity. Deferred income tax and social contribution assets and liabilities are offset when there are legal grounds to offset current tax assets or liabilities and when these relate to an income tax imposed by the same tax authority as the entity that is subject to that taxation. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

72 NOTE Income tax and social contribution recoverable Parent Company (in R$ million - R$) December 31, December 31, December 31, December , 2016 Withholding income tax (IRRF) Income tax recoverable Total Income tax and social contribution recoverable NOTE Income tax and social contribution expense for the year Parent Company (in R$ million - R$) Current income tax and social contribution expense (580) (534) (822) (877) Deferred income tax and social contribution expense (102) Total income tax and social contribution expense (682) (339) (731) (511) Reconciliation of effective tax rate The consolidated effective tax rate year ended December 31, 2017 was 30% (year ended December 31, 2016: 27%). The difference between the effective tax rate and the Company's and Group s nominal rate was mainly due to the following factors: Parent Company (in R$ million - R$) Income before income tax and social contribution 2,281 1,513 2,444 1,874 Combined tax rate at the parent company 34% 34% 34% 34% Income tax and social contribution expense at combined tax rate (776) (514) (831) (637) Permanent differences Inflation adjustments to judicial deposits Net income from equity accounted company Other permanent differences 1 (13) (31) (17) Other items Effect of deferred tax not recognized Tax rate difference in the subsidiary Banco CSF (nominal rate of 45%) - - (46) (73) Others Total income tax and social contribution expense (682) (339) (731) (511) Effective Rate 30% 22% 30% 27% NOTE Deferred tax assets and liabilities Parent company had a net deferred liability of R$ 473 million as of December 31, 2017, i.e. an increase of R$ 103 million compared to December of last year. The Group had a net deferred tax liability of R$ 150 million as of December 31, 2017, i.e. a decrease of R$ 91 million compared with the previous year end. Parent Company December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Deferred tax assets Deferred tax liabilities (473) (370) (502) (399) Net balance of deferred tax assets (liabilities) (473) (370) (150) (241) Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

73 The following table shows the main sources of deferred taxes: (In R$ million R$) January 1, 2016 Parent Company Statement of income Recognize d in other comprehen - sive income December 31, 2016 Statement of income Recognize d in other comprehe n- sive income December 31, 2017 Depreciation of property and equipment (74) (16) - (90) (18) - (108) Goodwill amortization allowed for tax purpose (472) - - (472) - - (472) Derivative financial instruments (97) Total deferred tax liabilities (643) 81 - (562) (18) - (580) Derivative financial instruments - 88 (1) 87 (86) (1) - General provisions Other administrative provisions Provision for profit sharing (2) - 33 Provision for sales discounts in inventory Stock-option plan Other provisions (3) - 3 Total deferred tax assets (1) 192 (83) (1) 108 Total net balance of deferred taxes (563) 195 (1) (370) (102) (1) (473) (in R$ million - R$) January 1, 2016 Statemen t of income Recognize d in other comprehe n- sive income December 31, 2016 Statemen t of income Recognize d in other comprehe n- sive income December 31, 2017 Depreciation of property and equipment (149) (3) - (152) (16) - (168) Goodwill amortization allowed for tax purpose (620) 1 - (619) 1 - (618) (-) Impairment of fixed assets 7 (3) Derivative financial instruments (136) (3) - (3) Finance leases (1) - - (1) - - (1) Total deferred tax liabilities (899) 81 - (768) (10) - (778) Derivative financial instruments - 95 (1) 94 (93) (1) - Provisions for contingencies (18) Tax losses carry-forward 920 (26) (24) Provision for profit sharing Provision for sales discounts in inventory Other administrative provisions Stock-option plan Total deferred tax assets (1) (38) (1) Total deferred taxes assets and liabilities (1) (48) Unrecognized deferred taxes assets (1.875) (1.712) (1.573) Total net balance of deferred taxes (606) 366 (1) (241) 91 (1) (150) NOTE 17.4: Unrecognized deferred tax assets (DTA) Unrecognized deferred income tax and social contribution assets (DTAs) amounted to R$ 1,573 million at December 31, 2017 (December 31, 2016: R$ 1,712 million), including R$ 713 million related to tax loss carry forward (December 31, 2016: R$ 696 million) and R$ 860 million on temporary differences (December 31, 2016: R$ 1,016 million). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

74 The following schedule presents the expected recovery of deferred tax assets of the Company based on (i) future reversal of tax differences, and (ii) expected future taxable income, adjusted at present value, by legal entity, given that for the companies of the Retail segment, the 3 years recoverability study was approved by the Management: Recognized deferred tax assets Unrecognized deferred tax assets (In R$ million R$) Parent company Parent company em diante (*) Total ,573 (*) The deferred tax assets recognized over 10 years related to taxable temporary differences and fiscal amortization of the goodwill (recognition limited to 30% of the reversal). NOTE 18: PROVISIONS AND CONTINGENT LIABILITIES Accounting policies In accordance with IAS 37 (CPC 25) Provisions, Contingent Liabilities and Contingent Assets, a provision is recorded when, at the period-end, the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount of the provision is estimated based on the nature of the obligation and the most probable assumptions, on a case by case analysis, except for a portion of labor claims which are estimated based on historical losses. Contingent liabilities, which are not recognized in the statement of financial position, are defined as: - possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or - present obligations that arise from past events but are not recognized because (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or (ii) the amount of the obligation cannot be measured with sufficient reliability. Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized. The Group discloses a contingent asset where an inflow of economic benefits is probable. However, when the realization of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate. NOTE Changes in provisions Parent Company Parent Company (in R$ million - R$) December 31, December 31, Increases Reversals Utilizations Tax (5) 43 Labor (8) (16) 57 Civil 26 8 (4) (6) 24 Post-employment benefits Total Provisions (12) (27) 128 (in R$ million - R$) December 31, December 31, Increases Reversals Utilizations Tax 1, (86) (67) 2,057 Labor (240) (340) 397 Civil (96) (63) 325 Post-employment benefits Total Provisions 2,608 1,074 (422) (470) 2,790 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

75 Group companies are involved in a certain number of administrative and judicial proceedings and claims in the normal course of business. They are also subject to tax audits that may result in assessments. The main claims and judicial proceedings are described below. In each case, the risk is assessed by Group management and their advisors. Disputes and legal proceedings The Group is involved in tax, labor, social securities and civil disputes. NOTE Tax The Group has received assessments and legal proceedings relating to tax matters in the municipal, state and federal spheres. For those with a probable likelihood of loss, provisions were set up in an amount deemed sufficient to cover court decisions expected to be unfavorable. As of December 31, 2017, the main tax contingencies subject to provisions were: NOTE PIS and COFINS Non-cumulative PIS and COFINS payment system has been in place since Under such regime, the taxpayer became entitled to deduct a given amount of PIS and COFINS paid in preceding stages of the productive chain from the amounts payable in the current stage. In 2004, Carrefour filed a lawsuit to argue the limitations imposed by the law related to credits on the inputs and necessary expenses. Carrefour recognizes PIS and COFINS credits on items under dispute and, as the output of the mentioned lawsuit seems uncertain, Carrefour also books a provision and make Judicial deposits on a monthly basis, for given credits. As of December, 2017, the total amount of provisions recorded was R$ 1,253 million (R$ 1,090 million as of December 31, 2016). NOTE Income tax (CSLL) Banco CSF filed a lawsuit to argue the constitutionality of the additional social contribution on profits financial entities are subjected to. This discussion is still pending at Supreme Court level. As of December 31, 2017, the total amount of provisions recorded was R$ 333 million (R$ 286 million as of December 31, 2016). NOTE Other taxes The Company and its subsidiaries received other tax assessments that, after analysis, have been classified as probable losses. The main topics involved are (i) ICMS matters, such as undue credits, tax war, electricity, lack of payment and formal obligations, (ii) Application of the Accident Prevention Factor FAP, (iii) Incorrect Statement of offsetting PERD/COMP, and (iv) other less relevant issues. NOTE Employee-related disputes (Labor) The Group is a party to several labor lawsuits and administrative proceedings, initiated by former employees, third parties, professional associations and the Public Prosecutor's Office, involving, basically, matters regarding work period, among other obligations provided by labor law. Such judicial and administrative proceedings involve requests for the mischaracterization of bona fide position and effects thereof, requests for payment of overtime, acknowledgement of employment bond to outsourced workers and effects thereof, besides requests, from professional associations and the Public Prosecutor's Office, for proof of compliance with labor law and change practices. Lawsuits filed by former employees or subcontractors employees Due to the significant number of labor lawsuits, the amount of the provision is estimated based on historical losses for those claims below R$ 1 million (R$ 2 million for the year ended 2016) and in progress in the second level of court instance. Based on the last two years closed cases database and segregating main categories of employees, an average actual payment over claimed amount rate is calculated and applied to every new claim received. Besides, for cases where labor claims exceed R$ 1 million (R$ 2 million for the year ended 2016), the expectation of loss, including the amount to be registered, is individually analyzed by our internal and external legal advisors. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

76 None of the lawsuits filed by former employees or subcontractors employees is regarded as individually material by the Company. Collective lawsuits filed by associations or Public Prosecutor s Office The judicial or administrative actions brought by professional associations and the Public Prosecutor's Office, are evaluated on a case by case and provisions are booked in sufficient amounts when needed. None of the lawsuits filed by associations or Public Prosecutor s Office is regarded individually material by the Company. As of December 31, 2017, the total provision for labor claims amounted to R$ 397 million (R$ 550 million as of December 31, 2016). NOTE Legal and commercial disputes (Civil) The Group is subject to regular audits by the authorities responsible for overseeing compliance with the laws applicable to the retail industry and by the Antitrust regulator (Conselho Administrativo e Defesa Econômico CADE). Disputes may also arise with suppliers as a result of differing interpretations of legal or contractual provisions. NOTE Contingent liabilities As of December 31, 2017, the Group is involved in other tax, civil and social security contingencies, in the amount of R$ 9,163 million (R$ 8,665 million as of December 31, 2016) for which losses were assessed as possible by management with the support from legal counsel. The most relevant cases are set forth below: NOTE TAX Goodwill amortization deductibility at Atacadão S.A. (Income tax and social contribution) The Company has been challenged since June 2013 regarding the amortization of goodwill for tax purposes related to the acquisition of Atacadão occurred in The main questioning of Brazilian tax authorities is related to goodwill amortization deductibility, in relation to Atacadão acquisition. The Group used a Brazilian holding company to make the acquisition which was subsequently merged into Atacadão. Furthermore, the infraction notices also claim IRPJ/CSL values related to (a) the financial expenses related to the debt that was initially subscribed by the acquisition vehicle and then transferred to Atacadão, and (b) the amount of Interest on Net Equity ("IOE" or JCP ) paid by Atacadão to its shareholders, disproportionately to the interest held by the shareholders. During the first semester of 2016, a partial favorable decision was rendered, in administrative level, reducing total risk of assessment. As a consequence, excluding amount related to favorable decision, the risk amount decrease to R$ 1,827 million. In addition, in July 2017, the Company received a final unfavorable decision at administrative level related to the remaining matters (goodwill amortization deductibility and penalties). In October 2017, the Company filed an appeal at Judicial sphere, as well as, presented as insurance guarantee. Related to same operation, the Company also received a complementary tax assessment for the periods from 2012 to As of December, 2017 the total updated amount was R$ 743 million (R$ 685 in December 2016). No additional year can be assessed by the tax authorities in relation to this matter. As of December 31, 2017, the total amount under dispute was R$ 2,570 million (R$ 2,465 million as of December 31, 2016), considering the deferred income tax and social contribution recorded during the fiscal amortization period, the net risk for the Company is 2,098 million (R$ 1,993 as of December 31, 2016). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

77 Tax calculation on cancelled coupons at Carrefour (ICMS) Carrefour received tax assessments in the State of São Paulo for calendar years, due to supposed lack of payment of the Tax on Distribution of Goods and Services - ICMS, related to tax coupon items declared as cancelled. Such cancellations result from situations in which the subsidiary Carrefour customers give up taking the products at the cashier line because the eventually end up not wanting the product or due to a program offered by the subsidiary Carrefour so called Compromisso Público Carrefour which Carrefour accepted the proven lower price presented by customer on an identical product which would be bought on a Carrefour store. Carrefour s defense has been consisting in demonstrating, on a sample basis, that every cancellation registered was justified. At the date of issuance of these financial statements, only one case had been judged at Judicial sphere, with favorable decision to Carrefour. The others cases are waiting for judgment, in administrative sphere. As of December 31, 2017, the total amount remaining under dispute was R$ 1,808 million (R$ 1,697 million as of December 31, 2016). Tax credits arising from certain expenses (PIS and COFINS) The subsidiary Carrefour received tax assessments mainly related to the recognition of tax credits on certain expenses. The total amount of tax assessments classified as possible loss was R$ 978 million as of December 31, 2017 (R$ 914 million as of December 31, 2016). Credits calculation on basic products (ICMS) On October 16, 2014, the Federal Supreme Court ( Supremo Tribunal Federal or STF ) ruled that part of tax credits calculated on basic products items should be reverted. This decision was published on February 13, 2015 and is to be applied to every similar case. The tax payers involved in this case presented appeals, asking in particular for a prospective application ( modulação dos efeitos ) of the Court s interpretation. As of the date of issuance of these financial statements, the STF had not judged these petitions, making though impossible to assess the consequences of such a decision and then any recognition in the Group s financial statements. As of December 31, 2017, the total amount of tax assessments received by the Group was R$ 986 million (R$ 890 million as of December 31, 2016). Disputed tax credits at Carrefour (ICMS) ICMS São Paulo The São Paulo s Warehouses received tax assessments related to undue credits ICMS. The Authorities argued that these credits had been recognized in 2008 in GIAs ("ICMS Information and Assessment Forms") and had also been recorded in fiscal accounting books without the proper documentation (invoices). As of December 31, 2017, the total amount of tax assessments received by the Group was R$ 431 million (R$ 408 million as of December 31, 2016). Goodwill amortization deductibility at Carrefour (IRPJ) In the course of its economic activities, Carrefour acquired nine supermarket chains in the years 1998 to 2001, which were subsequently transferred to Carrefour through a merger operation. These transactions generated a goodwill which was amortized for tax purposes. In this matter, and for the calendar years , the administrative tax proceedings discuss the legitimacy of the goodwill amortization booked by Carrefour after the acquisition of the supermarkets, considering the legal grounds established by Law n. 9,249/1995, Decree n. 1,598/1977 and accounting standards. The main point of the discussion is the proof of the payment supported by Carrefour to acquire the companies and the allocation of the goodwill expenses. Furthermore, the tax assessment also claims IRPJ/CSLL values related to expenses related to non-deductible provisions and reduction of profit subject to taxation. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

78 In January 2017, the Administrative Court (CARF) unanimously decided in favor of Carrefour regarding the goodwill related to two of the nine acquisitions and related to the reduction of profit subject to taxation. In September, 2017, the Superior Administrative Court (CARF), maintained, for the 2007 period, the partial favorable decision related to (i) the deductibility of the goodwill amortization for two acquisitions and (ii) also the reduction of profits. However, the Superior Administrative Court (CARF) kept the unfavorable decision related to the deductibility of the goodwill amortization of the remaining seven acquisitions. In October 2017, the decision was published and Carrefour presented a Motion for Clarification that was judged and the Superior Chamber of CARF maintained the decision partially favorable to the Company. Considering that after this decision will be closed the administrative sphere, the Company will continue with the discussion in the judicial sphere. As of December 31, 2017 the total amount under dispute was R$ 539 million (R$ 508 million as of December 31, 2016). Rebates received by the subsidiary Carrefour As a common practice in retail, Carrefour receives rebates from its suppliers and considers these rebates as a reduction of costs. Carrefour has received tax assessments in which the tax authorities considered that part of these rebates should be treated as revenue and therefore subjected to PIS and COFINS. As of December 31, 2017, the total amount of tax assessments received by the subsidiary Carrefour was R$ 523 million (R$ 494 million as of December 31, 2016). Tax on Transfer of Real Estate (ITBI) The subsidiary Carrefour There are tax enforcements of ITBI filed by the Municipality of São Paulo against the subsidiary Carrefour, supposedly incident on the transfer of real estate to legal entities as capital increase (capital contribution). Basically, the main point of the discussion is the ITBI tax immunity granted by the federal constitution (article 156) to the operations of real estate transfer as capital increase. In the defenses, the subsidiary Carrefour demonstrated that all the properties were transferred as capital increase and should not be subject to ITBI taxation due to the statute of limitation. As of December 31, 2017, the total amount of tax assessments received by the subsidiary Carrefour was R$ 243 million (2016: R$ 205 million). NOTE 18.6 Contingent Assets The Company has filed lawsuits to argue the unconstitutionality to include the ICMS in the basis of PIS and COFINS taxes and also to argue the over payment of ICMS due to the ICMS-ST methodology, that is based on a deemed price for the final costumer. Related to such matters, Federal Supreme Court - "STF" ruled favorable understanding to the taxpayers. The lawsuits cover, at least, the past five years. NOTE PIS and COFINS On non-cumulative PIS and COFINS methodology basis, the Group required the right to exclude value of the ICMS from the calculation basis of these two contributions. In March 2017, the Federal Supreme Court STF, in general repercussion, ruled that ICMS should not compose the calculation basis of PIS and COFINS. The STF decision was published in September Based on this decision and the legal opinions of the external advisors, the Company understands that it is not probable that the result of the judgment of the Supreme Court on the merit will change, reason why it no longer includes ICMS in the calculation bases of PIS and COFINS in the year ending Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

79 December 31, The Group is currently evaluating and quantifying the value to be eventually recognized as credits for the periods anterior at the financial exercise NOTE 19: DEFERRED REVENUE (Parent Company) In June 2016, the Company concluded, with its indirect subsidiary, Banco CSF S.A., an operational agreement, with a sixteen year maturity, to create a new credit card, Cartão Atacadão, and authorizing the offer, distribution and commercialization of Banco Carrefour financial products and solution to the Company customers. This partnership provided an R$ 825 million income in cash for the Company in September The value was paid in Exchange of the exclusivity right and the use of the Company customers database for the duration of the operational agreement, and for the visibility of these services related operations and offers in the Atacadão stores. The income resulting from the proceeds received will be appropriated in the result alongside the duration of the agreement, with the booking of a prepaid income of R$ 825 million in December As the transaction was concluded with an indirect subsidiary, the prepaid income value booked in Atacadão financial statements up did not include the one related to the participation of the minority interest BSF Holding S.A, direct controlling shareholders. The value booked in the liabilities of the Parent Company as of December 31, 2017 was of R$ 378 million (R$ 26 million in current liabilities and R$ 352 million in non current liabilities). The remaining value of R$ 33 million is related to other prepaid income. As of December 31, 2016 the value registered in the Prepaid Income line was of R$ 404 million (R$ 26 million in current liabilities and R$ 378 million in non current liabilities). NOTE 20: EQUITY NOTE Capital management Capital management objectives (equity and debt capital) are to: - Ensure that the Group can continue operating as a going concern, in particular by maintaining high levels of liquid resources; - Optimize shareholder returns; - Keep gearing at an appropriate level, in order to minimize the cost of capital and maintain the Group solvency at a level that allows it to access a wide range of financing sources and instruments. In order to maintain or adjust its gearing, the Group may take on new borrowings or retire existing borrowings, adjust the dividend paid to shareholders, return capital to shareholders, issue new shares, buy back shares or sell assets in order to use the proceeds to pay down debt. Banco CSF must have sufficient equity capital to comply with capital adequacy ratios and the minimum capital rules set by the Central Bank of Brazil ( BACEN ). NOTE 20.2: Share capital and treasury stock NOTE Share capital Reverse stock split At the general shareholders meeting held on May 19, 2017, the Company's shareholders approved the 1:2 (one for two) reverse stock split for all the outstanding shares. As a result of the reverse stock split the Company s historical financial statements have been revised to reflect share counts and per share data as if the reverse stock split had been in effect for all periods presented. As a result of such stock split, the total number of shares issued by Company was reduced from 3,550,153,178 to 1,775,076,589. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

80 Capital increase As of December 31, 2017 the value of the capital social was of R$ 7,599 million, composed of 1,980,958,942 common shares without nominal value (R$ 4,055 million and 1,775,076,589 as of December 31, 2016). At the general shareholders meeting held on June 27, 2017, the Company s shareholders approved a capital increase with profit reserve in amount of R$ 2 billion, without impact on the number of shares. Issuance of common shares The Group issued 205,882,353 new common shares, at a negotiated price of R$ 15, with the conclusion of its IPO Process in July 19, 2017 (see Note 3). The gross proceeds of the primary offer totaled R$ 3,088 million, registered as capital increase for R$ 1,544 million, and as capital reserve for R$ 1,484 million (note ), net of the costs and related tax effects (respectively R$ 91 million of costs, R$ 31 for the tax effect). The composition of the capital social following the conclusion of the IPO process, the exercise of Península call option and the Greenshoe (described in note 3) is presented in the chart below: (in R$ million, except %s.) December 31, 2017 December 31, 2016 Shareholders Carrefour Nederland B.V. 2, % 2, % Carrefour S.A. 2, % 1, % Península II Fundo de Investimento em Participações % % Free Float 1, % - - 7, % 4, % NOTE Capital reserve Capital reserve comprises amounts received by the Group and not recorded in the statement of income as revenue, since the purpose of such amounts is to strengthen the capital, without any efforts by the Group in terms of delivery of goods or provision of services. These are capital transactions with shareholders. Capital reserve is used exclusively for the following purposes: (i) absorb losses, when they exceed income reserves; (ii) redeem, reimburse or purchase shares; (iii) redeem from beneficiaries; (iv) incorporate into capital and (v) pay cumulative dividends. As of December 31, 2017 the capital reserve totaled R$ 2,167 million. With the conclusion of the IPO process, the Company constituted a capital reserve with half of the gross proceeds obtained, i.e. R$ 1,544 million. Transactions costs attributable to the issuance of common shares As determined by the IFRS 2 / CPC 08 Custos de Transação e Prêmios na Emissão de Títulos e Valores Mobiliários, the Company registered as a reduction of capital reserve the costs of the IPO process for R$ 91 million, net of the tax effects of R$ 31 million. The net value registered were of R$ 60 million as of December Effect of the stock options plan The value registered in the equity for R$ 17 million as of December 31, 2017 corresponds to the effect of the stock options plan detailed in the note 30. NOTE Net effect of acquisition of minority interest The balance of this account arose from the merger of Brepa Comércio e Participações Ltda. by The Company in 2014 and related to the acquisition of Carrefour Comércio e Indústria Ltda. minority interests by Brepa. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

81 NOTE Income reserve Legal reserve It is set up at 5% of the net income for the year, under the terms of Law No. 6404/76, article 193, as amended ( Brazilian Corporation Law ) up to the limit of 20% of the capital. The net value registered were of R$ 115 million as of December 2017 (R$ 132 million as of December 31, 2016). Profit retention reserve The profit retention reserve was set up under the terms of article 196 of Law No. 6404/76, for the constitution of a reverse of investments and working capital need, to fund the growth and expansion, and finance the working capital need of the Group. On April 28, 2017, the Company submitted its proposal for the allocation of the excess of the profits reserve for approval at the Annual Shareholders Meeting, pursuant to article 199 of Law No. 6404/76. NOTE Equity evaluation adjustment and other comprehensive income Equity evaluation adjustment includes: (i) The effective portion of the accumulated net variation of fair value of hedging instruments used in cash flow hedge up to the recognition of hedged cash flows (see Note 27.8). (ii) Accumulated net variation of fair value of financial assets available for sale until these assets are derecognized or impaired. (iii) Accumulated net variation of provision for post-employment benefits paid to the Group employees. The amounts recorded under equity valuation adjustments are reclassified to the statement of income for the period, either wholly or partially, upon disposal of the assets/liabilities to which they refer. (in R$ million - R$) Gains (losses) with derivative financial instruments used to hedge cash flow Parent Company December 31, 2017 December 31, 2016 Tax Tax Pre- tax (expense) Net Pre- tax (expense) Net benefit benefit (4) 1 (3) Actuarial Gain (2) 1 (1) Equity evaluation adjustment effect - Subsidiaries 6 (2) 4 6 (2) 4 Total 4 (1) 3 2 (1) 1 (in R$ million - R$) Gains (losses) with derivative financial instruments used to hedge cash flow December 31, 2017 December 31, 2016 Tax Tax Pre- tax (expense) Net Pre- tax (expense) Net benefit benefit (5) 1 (4) Actuarial Gain 4 (1) 3 7 (2) 5 Total 4 (1) 3 2 (1) 1 NOTE TREASURY STOCK Accounting policies Treasury stock is recorded as a deduction from shareholders equity, at cost. Gains and losses from sales of treasury stock (and the related tax effect) are recorded directly in shareholders equity without affecting net income for the year. There is no treasury stock at the end of December 31, 2017 and December 31, Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

82 NOTE DIVIDENDS The Company s Bylaws determine the distribution of a mandatory minimum dividend of 0,1% of the result of the year. The dividends to be paid were transferred from the Company s equity statement at the closing of the period and registered as a debt in liabilities. Parent Company (In R$ million) Net income of the period 1,599 1,174 (-) legal reserve (5%) (80) (59) Net income before dividends 1,519 1,115 Minimum dividends 2 1 In December 31, 2017, the subsidiary BSF Holding S.A. registered R$ 66 million of dividends to be paid (R$ 32 million for non controlling interests) as mandatory minimum dividends (corresponding to the 30% defined in its Bylaws), resulting from the income generated during the year 2017, and registered as current liabilities. The balance of dividends to be paid registered in the parent company and consolidated position are presented below: Parent Company (in R$ million - R$) December 31, December 31, December 31, December 31, Mandatory minimum dividends Extraordinary dividends Total Current Non-current NOTE NON-CONTROLLING INTERESTS In December 31, 2017 and 2016, non-controlling interests concern to an interest of 49% of voting capital stock of our financial solutions controlled entity (Banco CSF S.A.) held by Banco Itaú Unibanco S.A., the purpose of which is the supply, distribution and trade of financial products and services to customers. NOTE 21: BASIC AND DILUITED EARNINGS PER SHARE (GROUP SHARE) Accounting policies In accordance with IAS 33 (CPC 41) Earnings Per Share, basic earnings per share is calculated by dividing net income, Group share by the weighted average number of shares outstanding during the period. Treasury stock are described in Note 20.3, are not considered to be outstanding and are therefore deducted from the number of shares used for earnings per share calculations. Contingently issuable shares are treated as outstanding and included in the calculation only from the date when all necessary conditions are satisfied. Diluted earnings per share is calculated by adjusting net income, Group share and the weighted average number of shares outstanding for the effects of all dilutive potential ordinary shares. The weighted average number of shares outstanding has been calculated giving effect to the reverse stock split to all periods presented approved on May 19, 2017 (see note ). The weighted average number of shared as of December 31, 2017 was changed to reflect the effects of the initial public offering of July 19 th 2017 (see note 3). The following table shows the calculation of income or loss per common share: Net income for period attributable to controlling shareholders (in million of reais) 1,599 1,174 Weighted average number of shares outstanding (in million) 1,868 1,775 Basic EPS denominator (in million) 1,868 1,775 Stock options (in million) 1 - Diluted EPS denominator (in million) 1,869 1,775 Basic and diluted earnings per share (in R$) 0,86 0,66 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

83 NOTE 22: NET OPERATING REVENUE Accounting policies Revenue ("Net Operating Revenue") comprises net sales and other revenue. Net sales correspond exclusively to sales via the Group's stores (Cash & Carry and Retail), e-commerce platform, gas stations and drugstore sales. Other revenue comprises revenue from our Financial Solutions segment (including bank card fees and interest from consumer credit activities), shopping mall rents and commissions related to other services provided in the stores, fast cash and handling fees. Net Operating Revenue is measured at the fair value of the consideration received or receivable in exchange for goods or services, excluding sales taxes and net of any benefits granted to customers (returns and trade discounts). Net Operating Revenue is recognized if: - On sales of goods, when (i) the risks and rewards of ownership of the goods are transferred to the customer, (ii) it is probable that the economic benefits will flow to the Group, (iii) the associated costs and possible return of goods can be estimated reliably, (iv) there is no continuous involvement in the goods sold, and (v) the amount of revenue can be reliably measured. - On sales of services, (i) in the period in which the service is rendered (services and commissions: in extended warranty insurance policies, financial protection insurance, personal accident insurance, as a sales broker of technical assistance and cell phone operator payments are presented on a net basis and recognized in the statement of income when it is probable that the economic benefits shall flow to the Group, and when amounts can be reliably measured, (ii) financial solutions revenues from Banco CSF S.A. (bank card fees and interest consumer credit activities, among others, that are authorized and regulated by the Central Bank of Brazil-BACEN) are recognized over the life of the contract, and (iii) rental revenue is recognized on a straight-line basis over the effective term of the lease agreement. NOTE Net Sales Parent Company (in R$ million - R$) Gross sales 34,179 31,690 52,648 49,415 Discounts and returns (91) (114) (272) (318) Taxes on sales (3,101) (2,832) (4,608) (4,140) Total Net sales 30,987 28,744 47,768 44,957 NOTE Other Revenues Parent Company (in R$ million - R$) Gross other revenue ,315 Taxes and deductions - - (252) (148) Revenue from financial transactions - - 2,040 2,167 Gross services and commissions Gross rental income Taxes on other revenue (15) (3) (82) (58) Total Other revenue ,512 2,577 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

84 NOTE 23: COST OF GOODS SOLD, SERVICES AND FINANCIAL OPERATIONS Accounting policies Cost of goods sold, services and financial operations corresponds to the cost of purchases net of rebates and commercial income, changes in inventory (including impairments), logistics costs and other costs (primarily the cost of products sold by the financial solutions companies). Suppliers rebates are measured based on the agreements negociated with them. Rebates and commercial income are measured based on the contractual terms negotiated with suppliers. The Company recognizes rebates only when there is evidence of arrangements with the suppliers, the amount can be measured reliably and receipt is probable. Based on historical data of rebates over purchases, the Company estimates the amount accounted for as a reduction of cost of inventories. The cost of goods sold, services and financial operations includes the cost of logistics operations administered or outsourced by the Group, including the costs of storage, handling and freight charges incurred up to the moment the goods are provided for sale. Shipping costs are included in the cost of acquisition. The cost of services rendered comprises the personnel expenses and the depreciation of assets related to services. The cost of financial transactions comprises losses on the allowance for doubtful accounts and operating losses. Parent Company (in R$ million - R$) Cost of goods sold (26,427) (24,781) (39,292) (37,588) Depreciation (6) (3) (24) (15) Other costs (5) (13) (707) (430) Total costs of goods sold, services and financial operations (26,438) (24,797) (40,023) (38,033) NOTE 24: SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A), AND DEPRECIATION AND AMORTIZATION Parent Company (in R$ million - R$) Sales, general and administrative expenses (2,648) (2,337) (6,765) (6,134) Depreciation and amortization (266) (219) (657) (574) Total SG&A and depreciation and amortization (2,914) (2,556) (7,422) (6,708) Selling, general and administrative expenses Selling, general and administrative expenses break down as follows: Parent Company (in R$ million - R$) Salaries, wages and benefits (1,574) (1,337) (3,493) (3,079) Equity-settled share-based payments expense (18) - (32) - Property rentals (69) (65) (238) (225) Thirty part services (89) (264) (1,065) (1,122) Maintenance and repair costs (209) (88) (509) (320) Energy and utilities (246) (245) (481) (520) Credit card commissions (61) (50) (188) (187) Other SG&A expenses (382) (288) (759) (681) Total SG&A expenses (2,648) (2,337) (6,765) (6,134) The expense recognized as share-based payment corresponds to (i) the fair value of the equity instruments on the grant date (R$ 17.3 million in the consolidated, R$ 9.5 million in the parent company) and (ii) the amount of withholding tax to be paid by the Group on behalf of the employees and of social charges (R$ 15.1 million for the consolidated value and R$ 8.3 million in the parent company). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

85 Depreciation and amortization Including supply chain depreciation recognized in cost of sales, total depreciation and amortization expense recognized in the individual and consolidated income statement amounted respectively to R$ 272 million and R$ 681 million in December 31, 2017 (R$ 222 milions and R$ 589 milions in December 31, 2016), as follows: Parent Company (in R$ million - R$) Property and equipment (262) (216) (587) (511) Intangible assets (4) (3) (66) (60) Investment property - - (4) (3) Depreciation and amortization of tangible and intangible assets and investment property (266) (219) (657) (574) Depreciation of logistic activity (6) (3) (24) (15) Total depreciation and amortization (272) (222) (681) (589) NOTE 25: OTHER INCOME (EXPENSES) Accounting policies Other income and expenses are reported on a separate line of the income statement. Other income and expenses are items that could not be classified in other income statement line items and may include items that are limited in number, clearly identifiable, unusual and that have a material impact on individual and consolidated results. Parent Company (in R$ million - R$) Net gains (losses) on sales of assets 30 (2) (30) (45) Restructuring costs (iii) (14) (23) (104) (83) ICMS tax credits recovered related to prior years (i) Depreciation and provisions on non recurring ICMS credits (ii) - - (287) (15) Income and expenses related to litigations - - (71) (20) Total Other income and expenses, net 458 (25) 269 (137) Other income Other expense (14) (25) (492) (163) As of December 31, 2017, consolidated Other income (expenses) totaled R$ 269 million (R$ 458 million for the parent company), mainly related to the non-current portion of the ICMS-ST tax credits in the amount of R$ 442 million for the parent company and R$ 750 million for the consolidated, depreciations and provisions on ICMS-ST tax credits of R$ 287 million and restructuring costs of R$ 14 million for the parent company and R$ 104 million for the consolidated. (i) The Company recognized R$ 750 million of ICMS-ST tax credits (see note 3) in the other income and expenses related to the years 2012 to R$ 442 million were booked in the parent company while R$ 308 million in the subsidiaries. The other R$ 11 million in this line refer to credits on other taxes. (ii) In addition to the recognition of ICMS-ST tax credits, the Company also booked R$ 287 million of provisions, R$ 123 million of credit depreciation and R$ 164 million as contengencies, given the reassessment of the risks on credits recognized on specific outputs and inputs. (iii) The restructuring costs are related to efficiency gains projects, and mainly include fees of consulting firms as well as lay-off costs. Following a fire in the Cash&Carry store located in Rondonopolis in the second quarter of 2017, the Company recognized in other income and expenses both the loss related to inventories and fixed assets write-off of R$ 37 million and the insurance compensation received for R$ 43 million (with a counterpart in the other receivables). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

86 NOTE 26: NET FINANCIAL EXPENSE This item breaks down as follows: Parent Company (in R$ million - R$) Financial income Revenues from short-term investments Interest and discounts obtained Inflation adjustments to judicial deposits Derivatives gains related to foreign exchange Foreign exchange gain Other financial income Total financial income ,160 Financial expenses Interest on loan (114) (71) (172) (95) Interest on derivative financial instrument (206) (440) (248) (548) Commission from letter of guarantee - (61) (49) Charges on financial transactions - (134) (128) Inflation adjustments to contingencies 2 (8) (201) (143) Derivatives losses related to foreign exchange (710) (926) Tax on financial transactions (5) (6) (9) (10) Foreign exchange gain (195) - (243) - Other financial expenses (1) (7) (14) (42) Total financial expense (519) (1,242) (1,082) (1,941) Financial results (259) (436) (660) (781) The Group has foreign currency denominated loans hedged against currency movements through forward purchases of currencies (Non deliverable forwards or NDFs in Euro and U.S. Dollar) with maturities generally of 3 months entered into with banks. The Group discloses below its net foreign exchange result, which is mainly composed of the foreign exchange gains and losses on the foreign currency denominated loans, which are compensated by the foreign exchange gains and losses on the derivative instruments. The purpose of this disclosure is to show the net effect on the income statement after taking into account the effect of the hedging structure. Our hedge strategy is disclosed in note Parent Company (in R$ million - R$) Foreign exchange gain (195) 698 (243) 898 Derivatives losses related to foreign exchange 202 (710) 237 (926) Foreign exchange and derivatives, net impact 7 (12) (6) (28) NOTE 27: FINANCIAL ASSETS AND LIABILITIES Accounting policies Non-derivative financial assets In accordance with IAS 39 (CPC 38) Financial Instruments: Recognition and Measurement, the main financial assets are classified in one of the following four categories: - financial assets at fair value through profit or loss; - loans and receivables; - held-to-maturity investments; - available-for-sale financial assets. Their classification determines their accounting treatment. They are classified by the Group upon initial recognition, based on the type of asset and the purpose for which it was acquired. Purchases and sales of financial assets are recognized on the trade date, defined as the date on which the Group is committed to buying or selling the asset. (i) Financial assets at fair value through profit or loss Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

87 These are financial assets held for trading, i.e., assets acquired principally for the purpose of selling them at a profit in the short term, or financial assets designated at the outset as at fair value through profit or loss. They are measured at fair value with changes in fair value recognized in the income statement, under financial income or expense. Financial assets measured at fair value through profit or loss include cash and cash equivalents. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that do not meet the criteria for classification as either held for trading or available for sale. They are initially recognized at fair value and are subsequently measured at amortized cost by the effective interest method. For short-term receivables with no specified interest rate, fair value is considered to be equal to the original invoice amount. These assets are tested for impairment when there is an indication that their recoverable amount may be less than their carrying amount. If this is found to be the case, an impairment loss is recorded. This category includes trade receivables, other loans and receivables and consumer credit granted by the financial solutions companies. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets other than loans and receivables with fixed or determinable payments and a fixed maturity that the Group has the positive intention and ability to hold to maturity. They are initially recognized at fair value and are subsequently measured at amortized cost by the effective interest method. The Group did not hold any assets classified as held-to-maturity at December 31, 2017 and (iv) Available-for-sale financial assets Available-for-sale financial assets are financial assets that do not meet the criteria for classification in any of the other three categories. They consist mainly of marketable securities. Available-for-sale financial assets are measured at fair value, with changes in fair value recognized in "Other comprehensive income", under "Changes in the fair value of available-for-sale financial assets". When the assets are sold, the gains and losses accumulated in shareholders equity are reclassified to the income statement. However, in the event of a prolonged or significant fall in value of an equity instrument or a decline in estimated cash flows from a debt instrument, an impairment loss is recognized in the income statement. If, in a subsequent period, the impairment decreases, the previously recognized impairment loss is released as follows: - for equity instruments (shares and other): through "Other comprehensive income"; - for debt instruments (bonds, notes and other): where an increase is observed in estimated future cash flows, through profit or loss for an amount not exceeding the previously recognized impairment loss. The fair value of the marketable securities was determined based on information provided by ANBIMA (Associação Brasileira das Entidades dos Mercados Financeiros e de Capitais). Non-derivative financial assets held by the Group The main non-derivative financial assets held by the Group are as follows: - trade receivables (Note 6); - consumer credit granted by our financial solutions companies (Note 7); - other accounts receivable. Non-derivative financial liabilities Non-derivative financial liabilities are initially recognized at fair value plus transaction costs and premiums directly attributable to their issue. They are subsequently measured at amortized cost. Non-derivative financial liabilities held by the Group The main non-derivative financial liabilities held by the Group are as follows: - borrowings: "Non-current borrowings" include bonds and notes issued by the Group, finance lease liabilities, other bank loans and overdrafts, and financial liabilities related to securitized receivables for which the credit risk is retained by the Group (Note 27.3); - suppliers (Note 16); - consumer credit financing (Note 7.2); - dividends to be paid (Note 20.4) - other payables: other payables classified in current liabilities correspond to all other operating payables (mainly accrued employee benefits expense and amounts due to suppliers of non-current assets) and miscellaneous liabilities. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

88 Derivative financial instruments The Group holds derivative instruments such as forward contracts and swaps to hedge risk exposure to foreign exchange variation on the import of goods. These instruments do not classify as hedge accounting. The Group uses non deliverable forwards (NDFs) for fixed rates for managing its cash flow in foreign currency loans and designated those instruments as hedge accounting. The Group formally designates and documents a hedge relationship to which it desires to apply hedge accounting, as well as its risk management objective and strategy established to contract the hedge. The documentation includes the identification of the hedge instrument, the hedged item or operation, the nature of the risk being hedged and the means by which the Group shall assess the effectiveness of any changes in the fair value in the hedge instrument in the neutralization of any changes in the fair value of the hedged item or cash flow attributable to the risk being hedged. It is expected that these hedges are highly effective at neutralizing foreign exchange volatility and are continually assessed to determine whether these actually are highly effective throughout all periods of the financial statements to which they were designated. Derivatives are initially recognized at fair value. They are subsequently measured at fair value with the resulting unrealized gains and losses recorded as explained below. (i) Derivatives designated as hedging instruments Hedge accounting is applied if, and only if, the following conditions are met: - at the inception of the hedge, there is formal designation and documentation of the hedging relationship; - the effectiveness of the hedge is demonstrated at inception. The derivatives used by the Group may be qualified as cash flow hedges. Cash flow hedges For instruments qualified as cash flow hedges, the portion of the change in fair value determined to be an effective hedge is recognized directly in "Other comprehensive income" and accumulated in shareholders equity until the hedged transaction affects profit. The ineffective portion of the change in fair value is recognized in the income statement, under "Financial income and expense". The Group uses non deliverable forwards (NDFs) for fixed rates for managing its cash flow in foreign currency loans and designated those instruments as hedge accounting. (ii) Other derivative instruments Other derivative instruments are measured at fair value, with changes in fair value recognized in profit or loss. The Group holds derivative instruments such as forward contracts and swaps to hedge risk exposure to foreign exchange variation on the import of goods. These instruments do not classify as hedge accounting. Fair value calculation method For measurement of fair value of derivative financial instruments (NDFs), the discounted cash flow method was applied based on information obtained from Bloomberg. The Group assessed the possibility of using BM&FBovespa rates; however, considering the maturities of outstanding transactions at the reporting date and the current economic scenario, BM&FBovespa s information presented a volatility that did not reflect the facts, and the Group decided to use information from Bloomberg. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

89 NOTE Financial instruments by category At December 31, 2017 (in R$ million - R$) Carrying amount Fair value through profit or loss Assets Loans and receivables Parent Company Breakdown by category Available for sale Fair value through profit or loss Liabilities Liabilities at amortized cost Fair Value Cash and cash equivalents 3,166 3, ,166 Account receivables Other account receivables - - Current Non-current Assets 3,970 3, ,970 Suppliers 6, ,084 6,084 Borrowings Current 1, ,015 1,016 Non-current 1, ,016 1,018 Dividends payables Other accounts payable Liabilities 8, ,239 8,242 At December 31, 2016 (in R$ million - R$) Carrying amount Fair value through profit or loss Assets Loans and receivables Parent Company Breakdown by category Available for sale Fair value through profit or loss Liabilities Liabilities at amortized cost Fair Value Cash and cash equivalents 2,042 2, ,042 Account receivables Other account receivables Current Non-current Assets 2,650 2, ,650 Suppliers 5, ,444 5,444 Borrowings Current Non-current 2, ,476 2,424 Dividends payables Other accounts payables Derivative financial instruments Liabilities 8, ,368 8,652 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

90 (in R$ million - R$) Carrying amount Fair value through profit or loss Assets Loans and receivables Available for sale Fair value through profit or loss Liabilities Liabilities at amortized cost Fair Value Cash and cash equivalents 4,804 4, ,804 Derivative financial instruments Trade receivable 1,033 1, ,033 Consumer credit granted by our financial Current 5,265-5, ,265 Non-Current Other accounts receivables Current Non-current Marketable Securities Current Non-current Assets 11,830 4,809 6, ,830 Suppliers 9, ,410 9,410 Consumer credit financing Current 4, ,032 4,032 Non-current Borrowings Current 1, ,461 1,495 Non-current 1, ,016 1,018 Dividend payable Other accounts payable Current Non-current Liabilities 16, ,384 16,422 At December 31, 2016 (in R$ million - R$) Carrying amount Fair value through profit or loss Assets Breakdown by category Loans and receivables Available for sale Fair value through profit or loss Liabilities Liabilities at amortized cost Fair Value Cash and cash equivalents 3,242 3, ,242 Trade receivable Consumer credit granted by our financial solutions Current 4,435-4, ,435 Non-Current Other accounts receivables Current Non-current Marketable Securities Assets 9,111 3,242 5, ,111 Derivative financial instruments Suppliers 8, ,007 8,007 Consumer credit financing Current 3, ,042 3,042 Non-current Borrowings Current Non-current 3, ,394 3,352 Dividend payable Current Non-current Other accounts payable Current Non-current Liabilities 15, ,545 15,898 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

91 Assets and liabilities measured at fair value based on the hierarchy provided for in IFRS 13/CPC 46 Fair Value Measurement At December 31, 2017 (in R$ million - R$) Parent Company Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Cash and cash equivalents 3,166-3,166-4,804-4,804 Derivative financial instruments Marketable securities - - Current Non-current Assets - 3,166-3,166-5,086-5,086 At December 31, 2016 (in R$ million - R$) Parent Company Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Cash and cash equivalents - 2,042-2,042-3,242-3,242 Marketable securities Assets - 2,042-2,042-3,477-3,477 Derivative financial instruments (251) - (251) - (276) - (276) Liabilities - (251) - (251) - (276) - (276) No assets or liabilities measured at fair value were reclassified between December 31, 2017 and December 31, NOTE Description of the main financial risks we are exposed to Our main risks associated with the financial instruments that we use are liquidity, interest rate, currency and credit risks. Due to the specificity and to their existence of a specific set of regulations provided by the Central Bank of Brazil (BACEN), financial risks arising from our banking activities (Banco CSF) are managed separately from those related to our Retail and Cash & Carry businesses. Our Corporate Treasury and Financing Department oversees the treasury and financing needs of our six businesses segments and liaise with their specific Treasury and Financing Department of each of our business segments. Our Corporate Treasury and Financing Department is in charge of implementing the strategy defined by our Management (Administração), establishing and analyzing the reporting of our financial positions, monitoring the financial risks arising among our various businesses segments, defining and overseeing the proper implementation of the rules governing our financial exposure. NOTE Liquidity risk Liquidity risk is the risk that we will be unable to settle our financial liabilities when they fall due. We manage our liquidity risk by ensuring, to the extent possible, that we have sufficient liquid assets at any time to settle our liabilities when they fall due, whatever the market conditions are. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

92 Retail and Cash & Carry business Borrowings by maturity are detailed in the schedule below: Current Parent Company (in R$ million - R$) Local currency Commercial promissory notes Commercial promissory notes December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Charges Maturity % CDI % CDI 2018 Foreign currency Carrefour Finance % p.a. + Euribor 6 months + FX 2018 Carrefour Finance % p.a. + Euribor 6 months + FX 2018 Carrefour Finance % p.a. + Euribor 6 months + FX 2017 Banco Société Générale % p.a + Libor USD 6 months + FX 2017 Carrefour Finance % p.a. + Euribor 6 months + FX 2018 Financial transactions Financial bills % CDI p.y , , Non-current Parent Company (in R$ million - R$) Local currency Commercial promissory notes Commercial promissory notes December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Charges Maturity % CDI % CDI 2019 Foreign currency Carrefour Finance - 1,169-1, % p.a. + Euribor 6 months + FX 2018 Carrefour Finance % p.a. + Euribor 6 months + FX 2018 Carrefour Finance % p.a. + Euribor 6 months + FX 2018 Carrefour Finance % p.a. + Euribor 6 months + FX 2018 Financial transactions Financial bills ,016 2,476 1,016 3,394 Total 2,031 2,837 2,477 4,039 Historically, the Company has refined itself with Carrefour Finance, the Group Carrefour financiang holding, based in Brussels. As of December 31, 2017, however, the company did not have any more intercompany loans (R$ 3,354 million as of December 31, 2016). The IPO proceeds were used to payoff the intercompany debt for R$ 2,4 billion. In October 13 th, the Company emitted commercial promissory notes for a total value of R$ 2 billion. Four series were emitted and the proceeds were used to pay-off both commercial promissory notes emitted in January 2017, with a maturity date in December 2017 and the outstanding balance of intercompany loans in foreign currency that the Company had with its third-party, Carrefour Finance (Belgium). In December 31, 2016, these loans from related parties were denominated in Euros and priced at markets conditions. They were hedged against currency movements through forward purchases of Euros and U.S. dollar (Non deliverable forwards or NDFs) with maturities generally of 3 months entered into with banks. This hedging structure results in us having a synthetic Reais-denominated debt with local market conditions. As of December 31, 2017, there was no financial covenants embedded in these agreements. Cash flow projections are monitored and updated on a continuous basis, in order to better adjust available resources, as well as anticipate any events that could affect our liquidity. We diversified our sources of funding, through the conclusion of loans and the sale of receivables with banks. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

93 As of December 31, 2017, our cash equivalents and current marketable securities amounted to R$ 5,082 million (2016: R$ 3,477 million). The aging list of the Group s financial liabilities as of December 31, 2017 and 2016, is as follows: December 31, 2017 Parent Company (in R$ million - R$) Carrying amount Contractual amount Within 1 year 1 to 2 years 2 to 5 years Suppliers 6,084 6,084 6, Other accounts payable (current and non-current) Borrowings and Consumer Credit Financing 2,031 2,147 1,045 1,102 - Derivative financial instruments Total liabilities 8,236 8,353 7,251 1,102 - December 31, 2016 Parent Company (in R$ million - R$) Carrying amount Contractual amount Within 1 year 1 to 2 years 2 to 5 years Suppliers 5,444 5,444 5, Other accounts payable (current and non-current) Borrowings and Consumer Credit Financing 2,838 2, ,495 - Derivative financial instruments Total liabilities 8,618 8,690 6,195 2,495 - December 31, 2017 Carrying Contractual Within 1 (in R$ million - R$) amount amount year 1 to 2 years 2 to 5 years Suppliers 9,410 9,464 9, Other accounts payable (current and non-current) Borrowings and Consumer Credit Financing (current and non-current) 6,625 6,741 5,639 1,102 - Dividends payable (current) Total liabilities 16,384 16,554 15,438 1,116 - December 31, 2016 (in R$ million - R$) Carrying Contractual Within 1 amount amount year 1 to 2 years 2 to 5 years Suppliers 8,007 8,007 8, Other accounts payable (current and non-current) Borrowings and Consumer Credit Financing 7,119 7,217 3,759 3,458 - Dividends payable (current and non-current) Derivative financial instruments Total liabilities 15,821 15,919 12,355 3, Financial Solutions segment Banco CSF s liquidity risk is monitored within the liquidity strategy approved by our Management. Banco CSF s refinancing situation is assessed based on internal standards, early warning indicators and regulatory ratios. Liquidity risk management objectives are to: ensure that refinancing needs are met, based on monthly assessments of projected cash surpluses or shortfalls over a six-year period performed by comparing static forecasts of committed financing facilities with dynamic lending forecasts, achieve compliance with the BACEN rules, enhancing liquidity coverage ratios, through a process that is designed to deliver a sustainable improvement in asset quality by investing in a dedicated fund eligible for inclusion in the ratio calculation and extending the maturity of liabilities in order to improve the net stable funding ratio, and diversify refinancing sources to include bank lines of credit, money market issues and issues of interbank notes (letra financeira). Part of Banco CSF s liquidity strategy consists in investing in public bonds, highly liquid, offering a satisfactory return and available for sale if needed. As of December 31, 2017, Banco CSF was holding R$ 277 million of public bonds (2016: R$ 235 million). Banco CSF also had an undrawn credit line of R$ 170 million (2016: R$ 170 million). Banco CSF considered its liquidity position as solid. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

94 NOTA Reconciliation of liabilities resulting from financing activities Parent Company Consolidado Loans and borrowings Derivatives financial instruments (assets)/liabil ities Total Loans and borrowings Derivatives financial instruments (assets)/liabili ties (in R$ million - R$) Balance as of January 1, , ,089 4, ,315 Proceeds from borrowings 2,750-2,750 2,750-2,750 Settlement of derivatives instruments - (251) (251) - (290) (290) Repayment of borrowings (3,773) - (3,773) (4,601) - (4,601) Interests paid on borrowings (98) - (98) (126) - (126) Variation in cash flow from financing activities (1,121) (251) (1,372) (1,977) (290) (2,267) Interests expenses Foreign exchange gain / losses (5) 379 Variation not cash Balance as of December 31, ,031-2,031 2,477 (5) 2,472 Total NOTE Interest rate risk We have financial assets and liabilities exposed to the risk of variation of interest rates. A sensitivity analysis has been conducted considering the exposure to the CDI variation. The impacts of this analise for assets and liabilities subject to interest rate risk are reported in the table below: December 31, 2017 Parent Company (in R$ million - R$) Exposure Decrease in CDI by Increase in CDI by 10% 25% 50% 10% 25% 50% Cash equivalents 2,614 (17) (42) (83) Borrowings (2,031) (13) (32) (65) Net exposure 583 (4) (10) (18) (in R$ million - R$) Exposure Decrease in CDI by Increase in CDI by 10% 25% 50% 10% 25% 50% Cash equivalents 4,034 (25) (63) (125) Marketable securities 277 (2) (4) (9) Borrowings (2,477) (15) (38) (77) Net exposure 1,834 (11) (28) (56) December 31, 2017 Parent Company (in R$ million - R$) Exposure Decrease in CDI by Increase in CDI by 10% 25% 50% 10% 25% 50% Cash equivalents (22) (55) (110) Borrowings (2,837) (39) (97) (193) Net exposure (1,228) (17) (42) (83) (in R$ million - R$) Exposure Decrease in CDI by Increase in CDI by 10% 25% 50% 10% 25% 50% Cash equivalents 2,607 (36) (89) (178) Marketable securities 235 (3) (8) (16) Borrowings (4,039) (61) (152) (304) Dividend payable (106) (1) (4) (7) Net exposure (1,303) (23) (59) (117) Exclusively for sensitivity analysis purposes, our Management considered possible scenarios of deterioration/improvement of CDI by 10%, 25% and 50%, respectively, in risk variables until the maturity date of financial instruments. The Company had no more loans denominated in foreign currency at the end of December Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

95 NOTE Foreign exchange risk As of December 31, 2017, the Group does not have loan in foreign currency, nor the related derivatives instruments. As of December 31, 2016, the Group was mainly financed through foreign currency denominated loans, either in Euros for its intercompany loans, or in US Dollar. The Group s financing structure was not sensitive to the exchange rate fluctuation, since our exposure to foreign currency financings is fully hedged by derivative instruments namely forward purchases of currency (Non deliverable Forward or NDFs) as shown in the table below. Financial instruments exposed to foreign exchange risk and their corresponding hedging instruments are presented in the schedule below. Hedged item Hedge Instrument Counterparty Currency Begnning date Maturity Notional in million Contract closing rate Counterparty Begnnin g date Maturity Notional in million Contract closing rate Forwar d rate Carrefour Finance Euros 01/21/ /24/ ,0105 Citibank NDF 07/20/ /24/ ,5899 3,8227 BNP NDF 07/20/ /24/ ,5899 3,8218 Carrefour Finance Euros 03/10/ /09/ ,3609 Itaú NDF 09/06/ /10/ ,6466 3,8808 Carrefour Finance Euros 04/28/ /27/ ,1626 ING NDF 12/21/ /28/ ,5230 3,6693 Carrefour Finance Euros 12/16/ /18/ ,3029 Bradesco NDF 12/16/ /16/ ,5222 3,7293 Carrefour Finance Euros 02/02/ /05/ ,3588 ING NDF 08/02/ /02/ ,6470 3,8869 Carrefour Finance Euros 08/18/ /22/ ,6512 CACIB NDF 08/18/ /21/ ,6512 3,8913 Carrefour Finance Euros 25/04/ /05/ ,9894 JP Morgan NDF 19/12/ /05/ ,5230 3,7074 Total in Euros ( ) 970 Total in Euros ( ) 981 Sociéte Generále US Dolar 08/18/ /18/ ,4966 NDF 08/16/ /21/ ,1749 3,3566 Total in Dolar ($) 86 Total in Dolar ($) 87 We have also a few import transactions denominated in Euro and US Dollar. For those transactions, our internal policy consists in purchasing hedging instruments, such as NDFs or swaps, when placing the orders, so that we do not have any foreign exchange risk exposure. The underlying foreigncurrency denominated supplier (imports) were R$ 265 million as of December 31, 2017 (R$ 132 million as of December ). NOTE Credit risk Our estimated exposure to credit risk is presented below: Parent Company (in R$ million - R$) December December December December 31, , , , 2016 Cash and cash equivalents Fair value through profit or loss 3,166 2,042 4,804 3,242 Trade receivables Receivables , Consumer credit granted by our financial solutions Current Loans and receivables - 5,265 4,435 Non-current Loans and receivables Marketable securities Current Available for sale Non-current Available for sale Other accounts receivable Current Loans and receivables Non-current Loans and receivables Derivative financial instruments Fair value through profit or loss Maximum exposure to credit risk 3,944 2,656 11,865 9,134 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

96 Retail and Cash & Carry business segment Trade receivables Trade receivables correspond mainly to amounts receivable from our customers (for delivered goods and credit cards), suppliers (mainly rebates) and tenants of shopping mall units (rent). Impairment losses are recognized where necessary, based on an estimate of the debtor s ability to pay the amount due and the age of the receivable. At December 31, 2017, trade receivables net of allowance for doubtful accounts (excluding receivables from suppliers) amounted to R$ 704 million for the parent company and R$ 1,033 million for the Group. Analysis of due and past due trade receivables (in R$ million - R$) December 31, 2017 Parent Company December 31, 2016 December 31, 2017 December 31, 2016 Overdue Until 14 days Until -90 days days Above 180 days Total Overdue Not due Allowance for doubtful accounts (15) (13) (25) (37) Total Trade Receivables , The allowance for doubtful accounts is calculated when evidence shows that that a loss may have an impact on future cash flows that can be estimated reliably. Investments (cash equivalents and other current financial assets) The credit risk arises from the possibility of not receiving the amounts recorded in our current investments, in trade accounts receivable, marketable securities, derivative financial instruments and other accounts receivable. In order to minimize possible losses with default of its counterparts, we adopt strict management policies, including analysis of the counterpart and diversification rules. As regards the credit risk relating to marketable securities, our Management believes that it is limited, since the financial institutions involved received high ratings from credit rating agencies. Financial solutions business segment Credit risk management To protect against default from customers, the Banco CSF has set up systems and processes to check their quality and repayment capacity. These include but are not limited to: decision-making tools such as credit scoring applications, income/debt simulation tools and credit history checking procedures; interrogation of positive and negative credit history databases, where they exist; active existing customers management (e.g. line increases/decreases, authorizations, crossselling, etc.); active management of collection processes. credit risk monitoring and control systems; A Credit Risk Department is responsible for all of these processes, and the Board of Directors receives copies of all Credit Risk Management Committee reports. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

97 Provisions for non-performing consumer loans Consumer loans are classified as non-performing when we believes that there is a significant risk that all or part of the amount due will not be recovered (for example, because of overdue balances or litigation procedures). Provision models are developed in accordance with CPC 38 / IAS 39 Financial Instruments: Recognition and Measurement and observes also the Brazilian banking regulation, according to a twostep process: - classification of outstanding loans in sub-segments according to the characteristics of each portfolio; - evaluation of historical behavior of rollovers and default rates in each sub-segment; - modeling of the loss given default and recovery rates based on historical data; - calculate the allowance for doubtful accounts according to estimated portfolio losses on the reporting date, based on the parameters detailed above. Analysis of due and past due consumer credit granted by our financial solutions (in R$ million - R$) December 31, 2017 December 31, 2016 Overdue Until 14 days days days Above 180 days Total Overdue 884 1,011 Not due Until 90 days 3,541 3, days 1,625 1,229 Above 360 days Total Not due 5,404 4,419 Allowance for doubtful accounts (794) (867) Total 5,494 4,563 NOTE Transactions with derivative financial instruments 1 - Swap transactions The Group contracted swap financial transactions to hedge against the impact of foreign exchange fluctuation in import of goods and financial borrowings, in which the exchange fluctuation and fixed interest rates were swapped against financial charges pegged to the Interbank Deposit Certificate (CDI) variation. 2 - Non-deliverable forwards The Group has derivative financial instruments related to non-deliverable forwards (NDFs) for management of its cash flow in the import of goods and financial borrowings. 3 - Cash flow hedging For the year ended 2016, The Group used derivative financial instruments related to NDFs to hedge its exposure to foreign currency fluctuation and designated these financial instruments for cash flow hedge accounting. For measurement of fair value of derivative financial instruments (NDFs), the discounted cash flow method was applied based on information obtained from Bloomberg. As of December 2017, the Group does not have derivative financial instruments for cash flow hedge accounting, after the pay-off of its loans in foreign currency (see note 3). Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

98 Hedging instrument in place as of 31 December 2016 Counterparty Nature Trade date Maturity Notional in million Contract closing rate Forward rate MTM R$ million Citibank NDF 07/20/ /24/ (43) BNP NDF 07/20/ /24/ (43) Itaú NDF 09/06/ /10/ (37) ING NDF 12/19/ /28/ (12) Bradesco NDF 12/14/ /16/ (11) ING NDF 02/08/ /02/ (56) CACIB NDF 08/18/ /21/ (49) Total in Euros ( ) 827,9 Liabilities (251) Parent Company and consolidated Hedging instrument in place as of December 31, 2017 Imports Nature Trade date Maturity Euro Dollar NDF NDF From 04/25/2017 to 12/18/2017 From 02/20/2017 to 12/18/2017 From 02/02/2018 to 03/26/2018 From 01/02/2018 to 10/18/2018 Notional in million Hedging instrument in place as of 31 December 2016 Counterparty Nature Trade date Maturity Notional in million Contract closing rate Average Average Contract closing rate Forward rate Average Average MTM R$ million Assets 5 Forward rate 1 4 MTM R$ million Citibank NDF 07/20/ /24/ (43) BNP NDF 07/20/ /24/ (43) Itaú NDF 09/06/ /10/ (37) ING NDF 12/19/ /28/ (12) Bradesco NDF 12/14/ /16/ (11) ING NDF 02/08/ /02/ (56) CACIB NDF 08/18/ /21/ (50) JP Morgan NDF 12/19/ /25/ (16) Total in Euros ( ) 981,0 (268) Société Générale Imports Euro Dollar NDF 02/17/ /18/ , (5) NDF NDF/sw ap Total in US Dollar ($) 87,3 (5) From 09/30/2016 To 12/28/2016 From: 01/29/2016 To: 12/28/2016 From 01/03/2017 To 07/28/ From: 01/04/2017 To: 10/04/ Average Average Average Average Total Liabilities (1) (2) (3) (276) 4 - Hedge accounting with impact on the equity The contracts designated to hedge accounting with impact on equity are presented below: Derivative financial instruments Institution Reference value (notional) in million Forward exchange rate Parent Company & Net adjustment in equity * Final maturity Parent Company NDF Credit Agricole EUR 126 R$ /21/ (1) NDF ING Bank EUR 137 R$ /02/ (1) NDF Itaú BBA EUR 101 R$ /10/ (2) (4) Subsidiaries NDF JP Morgan EUR 150 R$ /25/ (1) (*) Net balance of income and social contribution taxes. - (5) As of December 31, 2017, Atacadão S.A. s subsidiaries do not own any NDF contract used as hedge. The contracts were liquidated together with the related loans in foreign currency (see note 3). The Group has not taken out derivative instruments demanding margin deposits in guarantee. Derivative contracts have no penalty clause in case the Group decides to cancel contracts. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

99 NOTE 28: RELATED PARTIES The Company s direct controlling shareholder is Carrefour Nederland B.V., registered in The Nederlands, and its ultimate controlling shareholder is Carrefour S.A., registered in France. Transactions between related parties mainly comprise commercial operations for the purchase and sale of goods, personnel expenses, loans and financing arrangements, cost sharing agreement & IT services. The balances of accounts receivable and accounts payable referring to related-party transactions are as under: Trade receivables commercial fund receivables - These amounts mainly relate to commercial benefits remitted by Carrefour World Trade ( CWT ) to the Company and CCI, based on the achievement of conditions and commitments established in International agreements negotiated by CWT, with suppliers with the objective to generate synergies for the Carrefour Group companies by adopting a harmonized strategy on suppliers selection; Suppliers and other payables - these amounts refer to the purchase of goods and products and/or provision of services directly related to operational activities; Borrowings - These amounts refer to loan agreements granted by Carrefour Finance as stated in Note 27.3; Management compensation correspond to the amounts and disclosures relating to the key management compensation presented in Note 31.2; Cost sharing agreement correspond to administrative and management support services rendered by Carrefour SA. to the Group; IT Services - Carrefour Systèmes d'information provides the Company and CCI with services of maintenance, operation and team support in relation to information technology applications; Correspondent banking services - The Company and CCI act as banking correspondents of Banco CSF, proposing financial solutions to the customers in the stores, and are remunerated as such by Banco CSF; Pursuant to a trademark license agreement, Carrefour S.A. grants to CCI the right to use the trademarks and logos with the name Carrefour for a fee depending on a percentage of turnover but also on certain thresholds to be met and after deducting publicity expenses. No amount was invoiced last year. Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

100 December 31, 2017 (in R$ million - R$) Assets Liabilities Parent Company Currents Assets Current Liabilities Non-current Liabilities Cash and Other Other Accounts Deferred Deferred cash accounts Total Dividends accounts receivables Revenue Revenue equivalents receivables payables Total Company Carrefour S.A Carrefour Nederlands BV Controlled Banco CSF S.A Carrefour Indústria e Comércio S.A Affiliates Carrefour World Trade Carrefour Finance Carrefour Systèmes d`information Other related parties Cooperativa Atacadão Total December 31, 2016 (in R$ million - R$) Assets Parent Company Currents Assets Current Liabilities Non-current Liabilities Cash and Other Other Accounts Deferred cash accounts Total Borrowings Dividends accounts Borrowings receivables Income equivalents receivables payables Liabilities Deferred Income Total Company Carrefour S.A Carrefour Nederlands BV Controlled Banco CSF S.A Carrefour Comércio e Indústria Ltda Affiliates Carrefour World Trade Carrefour Systèmes d Information Carrefour Finance ,476-2,838 Other related parties Cooperativa Atacadão Total , ,286 Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

101 December 31, 2017 (in R$ million - R$) Assets Liabilities Currents Assets Current Liabilities Other Accounts Deferred accounts Total Suppliers Dividends receivables Income receivables Other accounts payables Company Carrefour S.A Carrefour Nederlands BV Affiliates Carrefour Management Carrefour Systèmes d`information Carrefour Import S.A Carrefour Argentina Carrefour World Trade Carrefour Finance Carrefour Hong Kong Socomo S.A Other related parties Cooperativa Atacadão Total Total Company December 31, 2016 (in R$ million - R$) Assets Liabilities Current Assets Non-Current Assets Current Liabilities Non-current Liabilities Cash and Other Other Accounts cash Accounts Total Suppliers Dividends Borrowing accounts Borrowing receivables equivalents receivable payables Carrefour S.A Carrefour Nederlands BV Controlled Banco CSF S.A Carrefour Indústria e Comércio S.A Affiliates Carrefour Marchandises Internationales Carrefour Management Carrefour Import S.A Carrefour Argentina Sociedad Compras Modernas Carrefour World Trade Carrefour Finance ,992 3,354 Carrefour Systèmes d`information Other related parties Cooperativa Atacadão Total ,992 3,520 Total Transactions in the income statement Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

102 Related party transactions recorded in the statement of income for the year ended December 31, 2017 and 2016 are as follows: Parent Company December 31, 2017 (in R$ million - R$) Sell Other income Rebates Rent expenses Labor costs Procurement Expenses re-invoicing Other income and expenses Financial result Company Carrefour S.A (25) - - (25) Carrefour Nederlands BV Controlled Carrefour Comércio e (55) (22) (37) Indústria Ltda. Banco CSF S.A (6) Affiliates Carrefour Systèmes (13) (13) - - d Information Carrefour World Trade Carrefour Finance (35) (35) Total (22) (37) (6) (38) 26 (35) 26 TOTAL Parent Company December 31, 2016 (in R$ million - R$) (in R$ million - R$) Other income Rebates Rent Expenses reinvoicing and expenses result Other income Financial Labor costs Procurement expenses TOTAL Company Carrefour S.A (14) - - (14) Carrefour Nederlands BV Controlled Carrefour Comércio e Indústria - (30) 2 - (11) (21) Ltda. Banco CSF S.A (27) - (17) Affiliates Carrefour Systèmes - (7) (7) - d Information Carrefour World Trade (50) 47 Carrefour Finance (50) Total (11) (21) 1 (21) (27) (50) (71) Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

103 Transactions in the income statement December 31, 2017 (in R$ million - R$) Rebates Expenses re-invoicing Purchase Financial result Total Company Carrefour S.A. - (57) - - (57) Affiliates Carrefour Import S.A. - - (148) - (148) Carrefour World Trade Carrefour Finance (44) (44) Maison Joaness Boubée - - (1) - (1) Sociedad Compras Modernas - - (4) - (4) Carrefour Systèmes (52) - (52) - - d Information Carrefour Argentina - - (13) - (13) Total 119 (109) (166) (44) (200) December 31, 2016 (in R$ million - R$) Rebates Expenses re-invoicing Purchase Financial result Total Company Carrefour S.A. - (33) - - (33) Affiliates Carrefour Import S.A. - - (124) - (124) Carrefour World Trade Carrefour Finance (61) (61) Sociedad Compras Modernas - - (6) - (6) Carrefour Systèmes (38) - (38) - - d Information Carrefour Argentina - - (7) - (7) Total 71 (71) (137) (61) (198) Grupo Carrefour Brasil Individual and Financial Statements as of December 31,

104 NOTE 29: SEGMENT INFORMATION Accounting policies IFRS 8 (CPC 22) Operating Segments requires the disclosure of information about an entity s operating segments derived from the internal reporting system and used by the entity s chief operating decision-maker to make decisions about resources to be allocated to the segment and assess its performance. The Group s operating segments consist of the Retail, Cash & Carry, and Financial Solutions segments, the results of which are reviewed periodically by the Group s Board of Directors which is the chief operating decision-maker within the meaning of IFRS 8 (CPC 22). The operations of each of our segments are as follows: (i) our Retail segment, which comprises the operations of our Carrefour-branded hypermarket, supermarket and convenience store formats, as well as our drugstores, gas stations and e-commerce platform for the sale of non-food goods; (ii) our Cash & Carry segment, which comprises the operations of wholesale and cash and carry stores that operate under the Atacadão brand; and (iii) our Financial Solutions segment, which provides credit cards and consumer financing to our customers. The Group does not own other segments than the one reported above. We also incur, as Global Functions, central costs in relation to our central functions and headquarters. These comprise the activities of (i) The cost of our holding divisions, (ii) certain expenses incurred in relation to certain support functions of our parent company which are allocated to the various segments proportionately to their sales, and (iii) cost allocations from our parent company, which are not specific to any segment. The Financial solutions segment offers its customers "Carrefour" and recently "Atacadão" credit cards that can be used in the Group s stores and elsewhere, and consumer loans. The segment reports its financial income from lending and credit operations as Other revenue, as these constitute the primary activity of the segment. The cost of capital funding of the Financial solutions segment is presented as Cost of financial operations The Financial solutions segment also provides consumer credit to our customers for purchases made in installments at our stores in the Retail and Cash & Carry segments. Segment capital expenditure corresponds to the acquisitions of property and equipment and Intangible. Other segments assets correspond to (i) Trade working capital, which includes trade receivables, inventories and trade accounts payable, (ii) working capital from the Financial solutions segment, (iii) other working capital including other receivables and payables, prepaid expenses and revenues, tax receivables and payables. Substantially all of the Group s revenues derive from operations in Brazil. The Group has no material noncurrent assets located outside of Brazil NOTE Segment results December 31, 2017 (in R$ million - R$) Total Retail Cash & Carry Financial Solutions Global Functions Net sales 47,768 16,784 30, Other revenue 2, ,040 Net operating revenue 50,280 17,160 31,080 2,040 - Cost of goods sold, services rendered and financial operations (40,023) (12,833) (26,435) (755) Gross profit 10,257 4,327 4,645 1,285 - Sales, general and administrative (6,765) (3,404) (2,524) (728) (109) Depreciation and amortization (657) (375) (266) (16) Equity in results (0) (0) 0 - Other income (expense) 269 (159) 485 (57) Income before (expenses) net financial income and taxes 3, , (109) Financial result (660) Income before income and social contribution taxes 2,444 Net income for the year 1,713 Acquisition of fixed and intangible assets (capex) 1, , Grupo Carrefour Brasil - Individual and Financial Statements as of December 31,

105 December 31, 2016 (in R$ million - R$) Total Retail Cash & Carry Financial Solutions Global Functions Net sales 44,957 16,220 28, Other revenue 2, ,167 - Net operating revenue 47,534 16,575 28,792 2,167 - Cost of goods sold, services rendered and financial operations (38,033) (12,367) (24,797) (869) - Gross profit 9,501 4,208 3,995 1,298 - Sales, general and administrative (6,134) (3,164) (2,268) (606) (96) Depreciation and amortization (574) (343) (219) (12) Equity in results (1) (1) - - Other income (expense) (137) (111) (27) 1 Income before (expenses) net financial income and taxes 2, , (96) Financial result (781) Income before income and social contribution taxes 1,874 Net income for the year 1,363 Acquisition of fixed and intangible assets (capex) 1, , NOTE Segment assets and liabilities December 31, 2017 (in R$ million - R$) Total Retail Cash & Carry Financial Solutions Global Functions ASSETS Goodwill 1, , Other intangible assets Property and equipment 9,597 3,645 5, Investment property Other segment assets 13,928 3,542 4,103 6,284 - Total segment assets 26,183 8,334 11,431 6,419 - Unallocated assets 7,695 Total Assets 33,878 LIABILITIES (excluding equity) Segment liabilities 14,556 3,702 6,452 4, Unallocated liabilities 6,182 Total Liabilities 20,738 December 31, 2016 (in R$ million - R$) Total Retail Cash & Carry Financial Solutions Global Functions ASSETS Goodwill 1, , Other intangible assets Property and equipment 8,941 3,852 5, Investment property Other segment assets 11,477 2,943 3,913 4,621 - Total segment assets 22,673 7,568 10,389 4,716 - Unallocated assets 5,655 Total Assets 28,328 LIABILITIES (excluding equity) Segment liabilities 12,445 3,035 5,876 3, Unallocated liabilities 7,434 Total Liabilities 19,879 Grupo Carrefour Brasil - Individual and Financial Statements as of December 31,

106 NOTE 30: SHARE-BASED PAYMENTS Accounting policies In the first trimester of 2017, the Company has settled up a stock option plan. In this share-based payment, equity instruments are cash-settleable only on the non-occurrence of a contingent event (IPO before January 1, 2020). The Group considers the event's likelihood of occurrence is probable and classifies this share-based payment as equity-settled. The cost recorded in employee benefits expense comprises i) the fair value of the equity instruments on the grant date (i.e., the date on which grantees are informed of the plan s characteristics and ii) the withholding income tax paid by the Group on behalf of the employees and social charges. The benefit represented by the fair value of the instruments on the grant date is recorded in employee benefits expense with a corresponding increase in shareholders equity (equity-settled) in accordance with IFRS 2 Share-based Payment, during the period in which employees unconditionally acquire the right to the options. The corresponding withholding income tax and social charges are recorded in employee benefits expenses with a corresponding increase in liabilities (portion of the plan treated as cash-settled). Fair value is determined using the Binomial option pricing model for stock options on the grant date. Performance conditions that are not based on market conditions are not taken into account to estimate the fair value of stock options. However, they are taken into account in estimates of the number of shares that are expected to vest, as updated at each period-end based on the expected achievement rate for the non-market performance conditions. The cost calculated as described above is recognized on a straight-line basis over the vesting period. Details of the stock option purchase plan set up for executive management and selected employees are presented below. NOTE Stock option purchase plans a) Description of stock option plan (i) First stock option approved plan ( Pre-IPO ) The pre-ipo stock options plan was approved in the Shareholders General Meeting on March 21, The Group main objective of this plan, implemented according the Law #º 6.404, from 15/12/1976, is to retain a group of key executives for the planning and execution of the initial public offering (IPO), creating an alignment of its interests with the Shareholders interest. The eligible executives are nominated by the Board of Directors, who is employed by the parent company and its subsidiaries. The plan is managed by the Board of Directors, according the plan rules formally approved. The Board of Directors has the ability to, anytime: (i) change or terminate the plan; and/or (ii) establish the rules applicable to matters which are not provided for under these plans, provided that it does not amend or adversely affect, without the beneficiary s consent, any rights or obligations under each of these plans. The terms and conditions of this plan are regulated in an individual contract with the eligible employees. This contract according the rules approved at the Shareholders General Meeting defines: (i) the eligible executives and their individual amount of grants, (ii) the strike price of the options granted, (iii) the vesting schedule and (iv) individual conditions to access the grants at the vesting date or other events would impact the vesting date. These conditions do not include performance conditions that were not based on market conditions. Grupo Carrefour Brasil - Individual and Financial Statements as of December 31,

107 Details of stock option purchase plan are presented below: Number of options granted (1) 9,283,783 Life of the options 6 years Number of grantees 48 Exercise period (2) From IPO date up to March 21, 2023 Exercise price in R$ (1) after giving effect to the reverse stock split disclosed at note , and an increase in the number of options granted from 9,282,705 to 9,283,783 approved at the Shareholders' General Meeting on June 27, 2017 (2) the options vested only if the occurrence of an IPO and the grantee is still employed by the Group at the start of the exercise period, in the following tranches: - 1/3 (one third) in the occurrence of the IPO - 1/3 (one third) after 12 months from the occurrence of the IPO - 1/3 (one third) after 24 months from the occurrence of the IPO For employees hired after the approbation date of the pre-ipo plan (March 21, 2017) the stock options granted under this pre-ipo stock option plan shall vest as follows: - 1/3 (one third) of the granted options will vest 12 months after the date of this offering - 1/3 (one third) of the granted options will vest 24 months after the date of the offering - 1/3 (one third) of the granted options will vest 36 months after the date of the offering The vesting of the first one third of the options granted of the Pre-Ipo plan occurred on July 21 st, 2017, with the achievement of the IPO process. As of December 31, 2017, none of the option has been exercised. (ii) Second stock options approved plan ( Regular ) Our shareholders approved, in a general extraordinary shareholders meeting held on June 26, 2017, our Regular Stock Option Plan setting forth annual grants of stock options subject to the following guidelines: Eligible persons: our management and employees, as well as the management and employees of the entities controlled by us; Beneficiaries: executives officers to be selected by our Board of Directors; Vesting Period for these stock options: 36 months after each grant; Maximum term for exercise of the stock options: up until the end of the 6 th year counted as of the date of the stock option plan; Maximum equity dilution: 2.5% of the total amount of common shares of our capital stock, considering, in this total, the dilutive effect resulting from the exercise of all granted but not exercised options under this stock option plan, as well as our pre-ipo Stock Option Plan; and Exercise price: to be determined by our Board of Directors at the time the stock options are granted, which will consider, at most, the 30 trading days preceding the date of the stock option grant. As of December 31, 2017, no stock options have been granted under this Regular Stock Option Plan. b) Fair value measurement (Pre-IPO stock option plan) The following tables list the inputs to the model used: Fair value option at grant date (R$ per option) 3.73 Estimated fair value of the share (R$ per share) Dividend yield (%) 1.35 Expected volatility (%) Risk-free interest rate (%) Expected life of share option (Years) 2.72 Model Binomial Volatility and dividend yield: as the Company was not listed at the date of the approbation of this plan, the basic parameters we defined as a proxy to 5 retail listed companies peer group. Considering the difference in market cap, we adopted the average values for volatility and dividend yield, as the most appropriate proxy for the valuation exercise. The risk free interest rate was based on long term central bank bonus rates for similar length, establishing the annual risk free rate at 10.25%. Grupo Carrefour Brasil - Individual and Financial Statements as of December 31,

108 c) Movements in stock options (Pre-IPO stock option plan) Movements in stock options plan in 2017 were as follows: Options outstanding as of January 1, Options granted as of December 31, 2017 (1) 7,838,783 Options exercised as of December 31, Options cancelled or that expired as of December 31, Options outstanding as of December 31, ,838,783 (1) As of December 31, 2017, there were 1,445,000 options authorized, but not granted yet to executives hired after approbation pre-ipo plan (March 21, 2017), or in recruitment. d) Expenses recognized in the period See more details about stock option expenses (share-based payments) on note 24. NOTE 31: NUMBER OF EMPLOYEES, EMPLOYEE COMPENSATION AND BENEFITS Accounting policies Group employees receive short-term benefits (such as paid vacation, paid sick leave and statutory profitsharing bonuses), long-term benefits (such as long-service awards and seniority bonuses) and postemployment benefits (such as length-of-service awards and supplementary pension benefits). Post-employment benefits may be paid under defined contribution or defined benefit plans. All of these benefits are accounted for in accordance with IAS 19 (CPC 33) Employee Benefits. Short-term benefits (i.e., benefits expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services) are classified as current liabilities (under "Other accounts payable") and recorded as an expense for the year in which the employees render the related services (Note 24). Post-employment benefits and other long-term benefits are measured and recognized as described in Note NOTE Description of defined contribution plans Accounting policies Post-employment benefits are employee benefits that are payable after the completion of employment. The Group's post-employment benefit plans include both defined contribution plans and defined benefit plans. Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into a separate entity that is responsible for the plan s administrative and financial management as well as for the payment of benefits, such that the Group has no obligation to pay further contributions if the plan assets are insufficient. A liability for contributions to private pension plans for defined contribution is recognized as expenses with benefits to employees in the statement of income for the periods during which services are provided to employees. Contributions paid in advance are recognized as an asset if cash is to be reimbursed or if future payments may be reduced. Health care programs The existing defined benefit plan refers to the post-employment health care, as defined by the obligation provided in Law No. 9656/98. The calculation of the defined benefit plan obligation is realized annually by a qualified actuary using the projected unit credit method. Our subsidiary Carrefour and its subsidiaries maintain a defined contribution pension plan for their employees, which is administered by Carrefourprev Sociedade de Previdência Complementar. The Grupo Carrefour Brasil - Individual and Financial Statements as of December 31,

109 expenses contributions for December 31, 2017 amounted to R$ 2.5 million (R$ 2.4 million as of December 31, 2016). NOTE Management compensation (related parties) The Board of Directors (8 members) did not received compensation. The following table shows the compensation paid by the Group to serving members of the Executive Directors for December 31, 2017 and Parent Company (in R$ million - R$) December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Compensation for the period Stock option expense for the period Bonus Benefits in kind (accommodation and company car) Total compensation paid during the period Employer payroll taxes Termination benefits Number of executives NOTE Number of employees Parent Company December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Senior Directors Directors Managers ,017 Employees 40,359 37,890 80,031 78,710 Average number of Group employees 39,591 36,100 80,510 77,063 Number of Group employees at the period end 41,244 38,584 81,545 80,006 Grupo Carrefour Brasil - Individual and Financial Statements as of December 31,

110 NOTE 32: OFF-BALANCE SHEET COMMITMENTS Accounting policies Commitments given and received by the Group that are not recognized in the statement of financial position correspond to contractual obligations whose performance depends on the occurrence of conditions or transactions after the period-end. There are two types of off-balance sheet commitments, related to (i) cash transactions, and (ii) retail operations. The Group is also party to leases that give rise to future commitments such as for the payment of rent on retail units leased by the Group from owners (commitments given), and the payment of rent on retail units in shopping malls owned by the Group and leased to other parties (commitments received). Commitments given (in R$ million - R$) December 31, 2017 Due within 1 year By maturity Due in 1 to 5 years Due beyond 5 years December 31, 2016 Related to cash management 14,515 14, ,964 transactions Financial solutions companies 14,339 14, ,857 Other companies ,107 Related to operations/real 4,633 2,404 2,229-5,929 estate/expansion, etc. Related to leases 1, ,685 TOTAL 20,925 17,016 3, ,578 Commitments received (in R$ million - R$) December 31, 2017 Due within 1 year By maturity Due in 1 to 5 years Due beyond 5 years December 31, 2016 Related to cash management transactions Financial solutions companies Other companies Related to operations/real estate/expansion, etc. Related to leases TOTAL ,130 Off-balance sheet commitments related to cash transactions include: credit commitments given to customers by CSF, the financial solutions company in the course of its operating activities. CSF has the possibility to review the credit lines offered to its clients at any time, hence it is classified as short term; mortgages and other guarantees given or received, mainly in connection with the Group's real estate activities; committed lines of credit available but not drawn down by the Group at the period-end. Off-balance sheet commitments related to operations include: Commitments to purchase energy up to 5 years; Commitment to purchase fuel in connection with the gas stations activity; miscellaneous commitments arising from commercial contracts; other commitments given or received. Grupo Carrefour Brasil - Individual and Financial Statements as of December 31,

111 Operating leases: As of December 31, 2017, 147 stores of Atacadão segment, 73 hypermarket stores and 6 supermarkets stores (out of a total of 169 stores of Atacadão segment, 103 hypermarkets, and 40 supermarkets) were owned by de Group. Of the total of future minimum leases due on operating and financial leases, 17% are due within one year, 50% from one to five years and 33% beyond five years. Future minimum rentals under operating leases - determined based on the Group's maximum commitment in terms of both duration and amount for each of the property leases in progress at the period-end - amounted to R$ 1,774 million as of December 31, 2017 (R$ 1,685 million in December 31, 2016). The Group also owns various shopping malls and galleries built mainly on the same sites as its hypermarkets and supermarkets and leased to third parties. Rental revenues from these retail units amounted to R$ 180 million as of December 31, 2017 (R$ 184 million as of December, 31, 2016). Future minimum rentals receivable from these retail units - determined based on the tenants' maximum commitment in terms of both duration and amount for each of the leases in progress at the period-end - amounted to R$ 467 million as of December 31, 2017 and R$ 504 million at December 31, NOTE 33: INSURANCE COVERAGE As of December 31, 2017, the insurance coverage of Grupo Carrefour Brasil comprised: millioncovered risks (in R$ million R$) Parent Company Operational risks 6,814 16,524 Loss of profit 2,959 6,384 Civil liability maximum indemnification limit NOTE 34: SUBSEQUENT EVENTS Future conversion and opening of Cash&Carry stores On January 23, 2018, the Company informed its shareholders and the market in general that the Carrefour Global Group announced in its presentation of the transformation plan that Carrefour Group plans to accelerate the expansion of the Cash&Carry store model, with the opening of 20 new stores of Atacadão per year from 2018, including the conversion of 5 hypermarkets in The Company also informed that there was no specification of the period or deadline for closing this expansion plan. Acquisition of relevant ownership interest In January 31, 2018, the shareholders of the Company, Oppenheimer Funds, Inc. ( Oppenheimer ), increased its participation in the capital of Atacadão S.A., starting to detain a total of common shares of the Company, corresponding to 5,14% of the capital at that date. Oppenheimer also declared that, (i) the purpose of the above mentioned equity interest is exclusively investment, and does not intend to change the stock control or the administrative structure of the Company (ii) there was not any agreement or term which regulate the exercise of voting rights or the purchase and sale of securities issued by the Company. Payment of Interest on Shareholders Equity (IOE) Our Board of Directors approved, on February 27, 2018, proposal to distribute the gross amount of R$317 million in the form of interest on equity to its shareholders throughout This amount is equivalent to R$0.16 per share and represents a total remuneration equivalent to 25.0% of the adjusted net income for the period. The proposal to allocate 2017 results will be submitted for shareholders approval at the Annual Shareholders Meeting to be held in April The remaining amount shall be declared by our Board of Directors during the year of Grupo Carrefour Brasil - Individual and Financial Statements as of December 31,

112 Statement from the Board of Directors ATACADÃO S.A. Corporate Taxpayers Registry (CNPJ/MF) No / Company Registry (NIRE) No Statement from the Board of Directors on the Financial Statements and Report of Independent Auditors In conformity with article 25 of CVM Instruction N 480/09, of December 7, 2009, the undersigned, Directors of ATACADÃO S.A. ( The Compapny ), state that they: (i) reviewed, discussed and agreed the Company s individual and consolidated Financial Statements for the year 2017; (ii) reviewed, discussed and agreed the content and opinion expressed in the report of the Independent Auditors on the Company's Financial Statements for the year 2017, issued on this date. São Paulo, February 27, 2018, Noël Prioux Chief Executive Officer Grupo Carrefour Brasil José Roberto Meister Müssnich Chief Executive Officer Atacadão Sebastien Durchon Vice-president of Finance and Investor Relations Director Grupo Carrefour Brasil Marco Aparecido de Oliveira Vice-president of Finance Atacadão Grupo Carrefour Brasil - Individual and Financial Statements as of December 31,