CMA CGM S.A. Statutory Auditors report on the consolidated financial statements. Deloitte & Associés

Transcription

1 KPMG Audit Division of KPMG S.A. 480 avenue du Prado CS Marseille Cedex 08 Deloitte & Associés Les Docks Atrium place de la Joliette Marseille CMA CGM S.A. 4 Quai d Arenc Marseille Statutory Auditors report on the consolidated financial statements

2 KPMG Audit Division of KPMG S.A. 480 avenue du Prado CS Marseille Cedex 08 Deloitte & Associés Les Docks Atrium place de la Joliette Marseille CMA CGM S.A. 4 Quai d Arenc Marseille Statutory Auditors report on the consolidated financial statements This is a free translation into English of the statutory auditors report on the consolidated financial statements issued in the French language and is provided solely for the convenience of English-speaking users. This report should be read in conjunction with, and construed in accordance with French law and professional auditing standards applicable in France. To the Shareholders, In compliance with the assignment entrusted to us by your Shareholders General Meeting, we hereby report to you, for the year ended December 31, 2016, on: the audit of the accompanying consolidated financial statements of CMA CGM S.A.; the justification of our assessments; the specific verifications required by law. These consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these consolidated financial statements based on our audit. I. Opinion on the consolidated financial statements We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

3 CMA CGM S.A. Statutory Auditor s report on the consolidated financial statements 2 / 3 In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at December 31, 2016 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Without qualifying our opinion, we draw your attention to the acquisition of Neptune Orient Lines ( NOL ) presented in note related to the purchase price allocation to assets acquired and liabilities assumed as part of this transaction. II. Justification of our assessments In accordance with the requirements of article L of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring to your attention the following matters: - Note 2.3 Significant accounting judgments, estimates and assumptions to the consolidated financial statements discloses the significant accounting judgements, estimates and assumptions adopted by management. These significant estimates mainly relate to judgements and assumptions used for the determination of the operating segments, the accounting for investment premiums related to the financing of vessels with leveraged tax leases, the impairment testing of non-financial assets, the determination of the useful lives and residual values of the vessels, the measurement of deferred tax assets, demurrage receivables and accruals for port call expenses, transportation costs and handling services, the classification of leases, the analysis of interests in associates and joint ventures and the preparation of the consolidation scope. Our procedures consisted in assessing the data and assumptions underlying these judgements and estimates, reviewing, using sampling techniques, the calculations performed by the company and verifying the appropriateness of disclosures provided in the notes to the consolidated financial statements on the assumptions and options adopted by the company. As indicated in Note 2.3 to the consolidated financial statements, these estimates are based on assumptions that are by nature uncertain, and actual results may sometimes differ significantly from forecast data used. - Note Business combination: acquisition of Neptune Orient Lines ( NOL ) presents the valuation method and assumptions used by Management to determine the purchase price allocation to assets acquired and liabilities assumed as part of this transaction. Our work consisted in an assessment of the valuation model and assumptions used by Management as well as reviewing the accuracy of the amounts recorded. In compliance with the provisions of IFRS 3, the Company has twelve months after the effective date of the transaction, i.e. until June 13, 2017, to finalize the purchase price allocation.

4 CMA CGM S.A. Statutory Auditor s report on the consolidated financial statements 3 / 3 These assessments were made as part of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report. III. Specific verification As required by law, we have also verified in accordance with professional standards applicable in France the information presented in the Group s management report. We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements. Marseille, March 10, 2017 The Statutory Auditors French original signed by KPMG Audit Division of KPMG SA Deloitte & Associés Georges Maregiano Partner Vincent Gros Partner

5 CONSOLIDATED FINANCIAL STATEMENTS * * *

6 The accompanying notes are an integral part of these Consolidated Financial Statements. Contents Consolidated Statement of Profit & Loss... 3 Consolidated Statement of Comprehensive Income... 4 Consolidated Statement of Financial Position - Assets... 5 Consolidated Statement of Financial Position - Liabilities & Equity... 6 Consolidated Statement of changes in Equity... 7 Consolidated Statement of Cash Flows... 8 Notes to the Consolidated Financial Statements... 9 Note 1 - Corporate information... 9 Note 2 - General accounting principles Basis of preparation Change in accounting policies and new accounting policies Significant accounting judgments, estimates and assumptions Translation of financial statements of foreign operations Note 3 - Significant events occurred during the year Significant events in Significant events in Note 4 - Results for the year Operating segments Operating expenses Gains on disposal of property and equipment and subsidiaries Other income and (expenses) NPV benefits related to assets financed by tax leases Financial result Income and deferred taxes Note 5 - Invested capital and working capital Goodwill and other intangible assets Property and equipment Impairment of non-financial assets Working Capital Non-current assets held for sale Free cash flow Note 6 - Capital structure and financial debt Financial risk management objectives & policies Derivative financial instruments Other non-current financial assets - Securities and other current financial assets Cash, cash equivalents and liquidity Share capital, other reserves and earnings per share Borrowings Cash flow from financing activities Note 7 - Scope of consolidation Accounting principles and judgments used for the purpose of determining the scope of consolidation Judgments linked to structured entities Investments in associates and joint ventures List of companies or subgroups included in the consolidation scope Related party transactions Note 8 - Other Notes Provisions, employee benefits and contingent liabilities Commitments Significant transactions occurred after the date of the Consolidated Statement of Financial Position 75 Note 9 - Glossary CMA CGM / 2 Consolidated Financial Statements

7 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statement of Profit & Loss (in USD million, except for earnings per share) For the year ended December 31, Note REVENUE , ,674.1 Operating expenses 4.2 (15,442.4) (14,420.6) EBITDA BEFORE GAINS / (LOSSES) ON DISPOSAL OF PROPERTY AND EQUIPMENT AND SUBSIDIARIES ,253.5 Gains / (losses) on disposal of property and equipment and subsidiaries 4.3 (6.1) 9.8 Depreciation and amortization of non-current assets (571.0) (407.5) Other income and (expenses) 4.4 (81.6) (5.1) Net present value (NPV) benefits related to assets financed by tax leases EBIT BEFORE SHARE OF INCOME / (LOSS) FROM ASSOCIATES AND JOINT VENTURES (77.6) Share of income / (loss) from associates and joint ventures (22.3) (5.8) EBIT 4.1 (99.9) CORE EBIT Interests expense on borrowings (420.5) (277.7) Interests income on cash and cash equivalent Other net financial items FINANCIAL RESULT 4.6 (262.2) (223.3) PROFIT / (LOSS) BEFORE TAX (362.1) Income taxes (65.4) (85.4) PROFIT / (LOSS) FOR THE YEAR (427.4) of which: Non-controlling interests OWNERS OF THE PARENT COMPANY (452.2) Basic and diluted Earnings Per Share (EPS) attributable to owners of the parent company (in USD) 6.5 (29.9) 37.5 Consolidated financial statements CMA CGM / 3

8 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statement of Comprehensive Income (in USD million) For the year ended December 31, Note PROFIT / (LOSS) FOR THE YEAR (427.4) Other comprehensive income / (loss) reclassifiable to Profit and Loss Cash flow hedges: Gains / (losses) arising during the year Recycling to the income statement (26.6) 2.1 Currency translation adjustment related to foreign subsidiaries (74.5) (72.2) Tax on other comprehensive income reclassifiable to Profit and Loss - - Share of other comprehensive income of associates and joint ventures (15.4) (5.5) Tax on other comprehensive income reclassifiable to Profit and Loss 1.3 (0.1) Other comprehensive income / (loss) non reclassifiable to Profit and Loss Remeasurment of defined benefit pension plans 8.1 (0.1) (2.0) Remeasurment of defined benefit pension plans of associates and joint ventures Tax on other comprehensive income non reclassifiable to Profit and Loss 0.1 (0.5) (3.1) (0.3) TOTAL OTHER COMPREHENSIVE INCOME / (LOSS) FOR THE YEAR, NET OF TAX TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE YEAR, NET OF TAX (41.1) (62.0) (468.5) of which: Non-controlling interests Owners of the parent company (493.7) CMA CGM / 4 Consolidated financial statements

9 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statement of Financial Position - Assets (in USD million) ASSETS Note As at December 31, 2016 As at December 31, 2015 Goodwill , Other intangible assets , INTANGIBLE ASSETS 2, Vessels , ,496.3 Containers Lands and buildings Other properties and equipments PROPERTY AND EQUIPMENT , ,627.5 Deferred tax assets Investments in associates and joint ventures Derivative financial instruments Other financial assets NON-CURRENT ASSETS 12, ,402.4 Inventories Trade and other receivables , ,059.2 Income tax asset Securities and other financial assets Cash and cash equivalents , ,224.0 Prepaid expenses & Assets classified as held-for-sale CURRENT ASSETS 5, ,872.8 TOTAL ASSETS 18, ,275.3 Consolidated financial statements CMA CGM / 5

10 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statement of Financial Position - Liabilities & Equity (in USD million) LIABILITIES AND EQUITY Note As at December 31, 2016 As at December 31, 2015 Share capital Reserves and retained earnings 5, ,555.4 Profit / (Loss) for the year attributable to owners of the parent company (452.2) EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY 4, ,356.8 Non-controlling interests TOTAL EQUITY 4, ,405.5 Borrowings 6.6 6, ,414.0 Derivative financial instruments Deferred tax liabilities Provisions Employee benefits Deferred income & NON-CURRENT LIABILITIES 7, ,848.2 Borrowings 6.6 1, Derivative financial instruments Provisions Trade and other payables , ,756.6 Income tax liability Deferred income & Liabilities associated with assets classified as held-for-sale CURRENT LIABILITIES 6, ,021.6 TOTAL LIABILITIES & EQUITY 18, ,275.3 CMA CGM / 6 Consolidated financial statements

11 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statement of changes in Equity (in USD million) Attributable to owners of the parent Reserves, retained earnings and Profit for the year Share capital (*) Bonds redeemable in shares (**) Premium, legal reserves, Profit / (Loss) for the year and other comprehensive income non reclassifiable to profit and loss Other comprehensive income reclassifiable to profit and loss TOTAL Noncontrolling interests Total Equity Balance as at January 1, ,536.8 (82.4) 4, ,995.3 Profit for the year Other comprehensive income / (expense), net of tax - - (2.0) (59.2) (61.2) (0.8) (62.0) Total comprehensive income / (expense) for the year (59.2) Transaction with non-controlling interests - - (24.1) 0.2 (23.9) 8.6 (15.3) Equity component of bonds redeemable in shares (**) 65.5 (275.2) Dividends - - (80.0) - (80.0) (19.2) (99.2) Total transactions with Shareholders 65.5 (275.2) (103.9) (10.6) (114.5) Balance as at December 31, ,207.1 (141.4) 5, ,405.5 Balance as at January 1, ,207.1 (141.4) 5, ,405.5 Profit / (Loss) for the year - - (452.2) - (452.2) 24.8 (427.4) Other comprehensive income / (expense), net of tax - - (3.5) (37.9) (41.5) 0.4 (41.1) Total comprehensive income / (expense) for the year - - (455.8) (37.9) (493.7) 25.2 (468.5) Acquisition of subsidiaries (***) Transaction with non-controlling interests (***) - - (5.1) (0.0) (5.1) (430.8) (435.8) Dividends (20.5) (20.5) Total transactions with Shareholders - - (5.1) (0.0) (5.1) (4.4) (9.5) Balance as at December 31, ,746.2 (179.3) 4, ,927.6 (*) The share capital is constituted of (i) 10,578,355 ordinary shares held by MERIT Corporation, its shareholders and related persons, (ii) 3,626,865 preference shares held by Yildirim and (iii) 1 preference share held by the Banque Publique d Investissement (Bpifrance formerly FSI) for a total of 14,205,221 shares. (**) As at December 31, 2015, the bonds held by Yildirim have been redeemed in preferred shares as per their terms and conditions. The amount originally recognized as an equity component for USD million has been splitted into a share capital increase for USD 65.5 milion and a share premium for USD million (see Note 6.5). (***) As disclosed in Note 3.1.1, the acquisition of NOL occurred in several stages, resulting in an impact of USD million in non-controlling interests at acquisition date (June 14, 2016), composed of USD million of fair value of non controlling interests and USD 19.1 million of non controlling interests in NOL s subsidiaries. Subsequent to acquisition date, the Group acquired full ownership of NOL and hence, the noncontrolling interests were derecognized. Consolidated financial statements CMA CGM / 7

12 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statement of Cash Flows (in USD million) For the year ended December 31, Note Profit / (Loss) for the year (427.4) Reconcilation of profit / (loss) for the year to cash generated from operations : - Depreciation and amortization Net present value (NPV) benefits related to assets financed by tax leases (46.2) (50.4) - Other income and expense Increase / (Decrease) in provisions (7.3) Loss / (Gains) on disposals of property and equipment and subsidiaries (9.8) - Share of (Income) / Loss from associates and joint ventures Interest expenses on net borrowings Income tax Other non cash items (130.1) 32.9 Changes in working capital 5.4 (151.7) Cash flow from operating activities before tax , Income tax paid (75.7) (96.0) Cash flow from operating activities net of tax ,381.8 Purchases of intangible assets (56.0) (55.6) Purchase of NOL, net of cash acquired and including transaction costs 3.1 (2,323.9) - Purchases / disposals of subsidiaries, net of cash acquired / divested (63.2) (48.7) Purchases of property and equipment (257.8) (507.6) Proceeds from disposal of property and equipment 4.3 1, Dividends received from associates and joint ventures Cash flow resulting from other financial assets (952.0) Variation in securities (12.0) 9.8 Net cash (used in) / provided by investing activities (236.0) (1,437.2) Free Cash Flow (55.4) Dividends paid to the owners of the parent company and non-controlling interest (18.9) (99.1) Proceeds from borrowings, net of issuance costs 6.6 2, Repayments of borrowings 6.6 (2,170.6) (1,212.2) Principal repayments on finance leases 6.6 (217.0) (121.7) Interest paid on net borrowings (313.7) (258.6) Refinancing of assets, net of issuance costs Other cash flow from financing activities Net cash (used in) / provided by financing activities (588.9) Effect of exchange rate changes on cash and cash equivalents and bank overdrafts (36.0) (46.6) Net increase / (decrease) in cash and cash equivalents and bank overdrafts 83.0 (690.8) Cash and cash equivalents and bank overdrafts at the beginning of the year 1, ,741.7 Cash and cash equivalents as per balance sheet 1, ,224.0 Bank overdrafts (79.5) (173.1) Cash and cash equivalents and bank overdrafts at the end of the year , ,050.9 Net increase / (decrease) in cash and cash equivalents and bank overdrafts 83.0 (690.8) Supplementary information: non cash investing or financing activities: - Assets acquired through finance lease or equivalents Supplementary information: - Interests received Interests paid (343.5) (283.4) CMA CGM / 8 Consolidated financial statements

13 Notes to the Consolidated Financial Statements Note 1 - Corporate information The Consolidated Financial Statements ( CFS ) of CMA CGM and its subsidiaries (hereafter referred to together as the Group or the Company ) for the year ended December 31, 2016 were approved by the Board of Directors on March 10, The Group is headquartered in France and is the third largest container shipping company in the world. The Group operates primarily in the international containerized transportation of goods. Its activities also mainly include container terminal operations and transport by rail, road and river. CMA CGM is a limited liability company ( Société Anonyme ) incorporated and located in France. The address of its registered office is 4, Quai d Arenc, Marseille, France. Note 2 - General accounting principles Starting from Note 4, the accounting principles have been highlighted in blue. 2.1 Basis of preparation The consolidated financial statements of CMA CGM have been prepared under the historical cost basis, with the exception of available-for-sale financial assets, securities, derivative financial instruments and net assets acquired through business combinations which have all been measured at fair value. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all periods Statement of compliance The CFS of CMA CGM have been prepared in accordance with IFRS as adopted by the European Union ( EU ). IFRSs can be found at: IFRSs include the standards approved by the IASB, that is, IAS and accounting interpretations issued by the IFRIC or the former SIC Basis of consolidation The CFS comprise: the financial statements of CMA CGM; the financial statements of its subsidiaries, including NOL and its subsididiaries (see Note 3.1.1); and the share in the net result and the net asset of associates and joint ventures. The CFS are presented in U.S. Dollars ( USD ), which is also the currency of the primary economic environment in which CMA CGM operates (the functional currency ). The functional currency of the shipping activities is U.S. Dollars. This means that, among other things, the carrying amounts of property, plant and equipment and intangible assets and, hence, depreciation and amortization are maintained in USD from the date of acquisition. For other activities, the functional currency is generally the local currency of the country in which such activities are operated. All values are rounded to the nearest million (USD 000,000) with a decimal unless otherwise indicated. Consolidated financial statements CMA CGM / 9

14 2.2 Change in accounting policies and new accounting policies The accounting policies adopted in the preparation of these CFS have been applied consistently with those described in the annual financial statements for the year ended December 31, 2015, except as outlined in the paragraphs below Adoption of new and amended IFRS and IFRIC interpretations from January 1, 2016 The adoption of the following new or amended Standards did not have any material impact on the Group s CFS : Amendment to IAS 1: Disclosure Initiative : early applied in 2015 CFS Annual improvements to IFRS Amendments to IFRS 11: Accounting for acquisition of interests in joint operations Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of depreciation and amortization Amendments to IAS 27: Equity method in separate financial statements Amendments to IFRS 10, IFRS 12 and IAS 28: Investment entities Applying the consolidation exception New IFRS and IFRIC interpretations effective for the financial year beginning after January 1, 2016, endorsed by the European Union and not early adopted The following new standards have been recently endorsed by the European Union with an effective date on January 1, IFRS 9: Financial instruments This new standard replaces the existing guidance in IAS 39 Financial instruments: Recognition and measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating imparment on financial assets, and new general hedge accounting requirements. The guidance on recognition and derecognition of financial instruments is carried forward from current IAS 39 principles. Management assessed that this new standard will not have material impacts on the CFS on the following main aspects of the standard: Classification and measurement of financial assets and liabilities : the implementation of IFRS 9 will not materially affect the current classification and measurement of the Group s financial instruments; Depreciation of financial assets : the effect of the change from the incurred loss model under IAS 39 to the expected credit loss model under IFRS 9 is not considered to materially affect the valuation of the Group s financial instruments due to the low credit risk in the Group; Hedge accounting : the new standard does not materially change the hedging relationships. Management will pursue the detailed assessment of the disclosure requirement of this new standard which will be applied starting from January 1, IFRS 15: Revenue from contracts with customers IFRS 15 was initially issued in May 2014 by the IASB on the recognition of revenue from contracts with customers. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new Standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. CMA CGM / 10 Consolidated financial statements

15 CMA CGM current practice for revenue recognition, based on the percentage of completion, will still be an appropriate method under the new standard. Hence, the new standard is not expected to have a material impact on the the Group s financial position and performance. The Company will pursue an in-depth analysis of the requirements of the new standard, notably but not exclusively in relation to additional disclosures New IFRS and IFRIC interpretations effective for the financial year beginning after January 1, 2016 and not yet endorsed by the European Union The impacts of the following new or amended Standards are currently being assessed by the Company: IFRS 14: Regulatory Deferral Accounts Amendments to IAS 7: Disclosure Initiative Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses Amendments to IAS 40: Transfer of Investment Property Amendments to IFRS 2: Classification and Measurement of Share-based payments transactions Amendments to IFRS 4: Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Amendments to IFRS 15: Revenue from contracts with customers Annual improvements to IFRS IFRIC 22: Foreign Currency Transactions and Advance Consideration IFRS 16: Leases The IASB published IFRS 16 in January 2016 regarding the accounting for leases, which will have a significant impact on the Company s Statement of Financial Position and Statement of Profit & Loss as it suppresses the distinction between operating leases and finance leases. It will be applicable for annual periods beginning on or after 1 January 2019 if endorsed by the European Union which is expected during This new lease standard would lead to the recognition as a liability in the Statement of Financial Position of certain lease commitments currently disclosed as commitments in the Notes to the CFS. Certain operating lease expenses currently recorded within operating expenses would be split into a depreciation expense of an intangible asset and a financial expense, except for the running costs which would remain treated as an operating expense. Information related to the Company s outstanding commitments under operating leases, mainly related to vessels and containers, is presented within Note Commitments on vessels and containers, allowing a preliminary rough measurement of the impacts that IFRS 16 would have had on the CFS. However, the number and complexity of lease contracts in which the Group will be committed at application date is hardly predictable, hence the expected impact of the new standard cannot be estimated in detail. Management also has not yet decided the transition option to be applied at application date. 2.3 Significant accounting judgments, estimates and assumptions The preparation of the CFS requires the use of judgments, estimates and assumptions that affect the reported amount of revenues, expenses, assets, liabilities and the disclosure of contingent liabilities at the reporting date. Except for the specific information related to NOL acquisition disclosed in Note 3.1.1, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty have been disclosed in the following Notes and have been highlighted in green: Judgments used for the purpose of determining the operating segments (see Note 4.1); Judgements and estimates used for the accounting of NPV benefits related to assets financed by tax leases (see Note 4.5); Consolidated financial statements CMA CGM / 11

16 Deferred income tax (see Note 4.7.2); Impairment of non-financial assets (see Note 5.3); Determination of the vessels useful lives and residual values (see Note 5.2); Demurrage receivables, accruals for port call expenses, transportation costs and handling services (see Note 5.4); Classification of lease contracts between operating lease and finance lease (see Note 5.2); Judgments used for the purpose of determining the consolidation scope (see Note 7.1);and Significant judgments and assumptions made in determining the nature of the interests in significant associates and joint ventures (see Note 7.3.1). Although these CFS reflect management's best estimates based on information available at the time of the preparation of these financial statements, the outcome of transactions and actual situations could differ from those estimates due to changes in assumptions or economic conditions. 2.4 Translation of financial statements of foreign operations Translation of financial statements of foreign entities The financial statements of foreign entities are translated into the presentation currency on the following basis: Assets and liabilities are translated using the closing exchange rate; The Statement of Profit & Loss is translated at the average exchange rate for the reporting period; The results of translation differences are recorded as Currency translation differences within other comprehensive income; and Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate. Exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are recorded within other comprehensive income. When a foreign operation is disposed of, such exchange differences are recognized in the statement of Profit & Loss as part of the gain or loss on sale Foreign currency transactions Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in other comprehensive income when qualified as cash flow hedges or net investment hedge. Foreign exchange gains and losses relating to operational items (mainly trade receivables and payables) are recorded in the line item Operating exchange gains / (losses), net within Operating expenses. Foreign exchange gains and losses relating to financial items are recorded in the line item Foreign currency income and expense within the financial result. Exchange rates used for the translation of significant foreign currency transactions against one USD are as follows: Closing rate Average rate Euro British pound sterling Australian Dollar Chinese Yuan Singapore Dollar CMA CGM / 12 Consolidated financial statements

17 Note 3 - Significant events occurred during the year 3.1 Significant events in Business combination: acquisition of Neptune Orient Lines ( NOL ) Description of the transaction As disclosed in the 2015 annual CFS, on December 7, 2015, the Company announced a pre-conditional voluntary general cash offer for NOL, Company listed on Singapore SGX, to be financed via a combination of (i) a USD 1,652 million dedicated acquisition facility previously committed by a syndicate of international banks on December 5, 2015 (see Note 6.6.7) and (ii) the Group s own cash including approximately USD 750 million which had been deposited in escrow accounts since December On April 29, 2016, the European Commission approved the proposed acquisition of NOL by CMA CGM. On May 25, 2016, CMA CGM received confirmation that the Anti-monopoly Bureau of the Chinese Ministry of Commerce ( MOFCOM ) had cleared the proposed acquisition of NOL by CMA CGM. Following the clearing of the regulatory approvals stated above, CMA CGM announced on May 30, 2016, the launch of a voluntary general cash offer at a price of SGD 1.30 per share, representing an amount of approximately USD 2.5 billion (based on applicable SGD-USD exchange rate at transaction date). The offer was opened for acceptance from June 6, 2016 to July 18, NOL s majority shareholders (Temasek and its affiliates) had irrevocably undertaken on December 7, 2015 to tender all of their shares, representing 67% of NOL share capital, in acceptance of the offer and effectively tendered them on June 9, As a consequence, the offer became unconditional from that date leading to a change in the composition of the Board of Directors. The acquisition date retained by the Management is June 14, 2016 when (i) the first Board of Directors ( BoD ) of NOL including board members nominated by CMA CGM was held and approved the appointment of the new CEO, (ii) the whole internal control procedures were updated and implemented according to new responsibilities and (iii) the official announcement of the takeover and implied organization were presented in NOL head-office. On June 14, 2016, CMA CGM had received valid acceptances representing 83.06% of NOL share capital and the ownership including valid acceptances reached 97.83% on July 18, At such date, the Company announced that its all-cash voluntary unconditional general offer for Neptune Orient Lines Limited (NOL) was closed. Afterwards, CMA CGM launched the process to compulsorily acquire all remaining NOL shares at a price equal to the Offer Price of SGD 1.30 per share. On September 2, 2016, the Company announced the completion of compulsory acquisition of shares in NOL (100% acquired). NOL was delisted from the SGX-ST on September 6, As at December 31, 2016, the dedicated acquisition facility has been fully refinanced through various financing operations, notably sale and lease backs operations (see Note 6.6.7). Consolidated financial statements CMA CGM / 13

18 Consideration paid, purchase price allocation ( PPA ) and goodwill At the acquisition date of June 14, 2016, the consideration paid, the measurement of fair values recognised for the assets acquired and liabilities assumed and the resulting goodwill can be presented as follows (in USD milion) : (In USD million) Total consideration transferred for 83.06% stake in NOL A 2,036.7 Cash and cash equivalents of NOL B Cash consideration paid for 83.06% stake in NOL, net of cash acquired C = A (-) B 1,876.1 Identifiable assets acquired Intangible assets 1,486.7 Vessels 2,896.0 Containers Lands and buildings 46.7 Other property and equipment Associates and joint ventures Deferred tax assets 32.7 Other non current assets 63.4 Inventories Working capital - assets Other current assets 9.0 Liabilities assumed Non controlling interests 19.1 Non current borrowings 1,910.1 Non current derivatives Deferred tax liabilities 58.8 Non current provisions Other non current liabilities Current provisions 29.5 Current borrowings Current derivatives 28.7 Working capital - liabilities 1,113.2 Fair value of net assets acquired D 1,567.7 Fair value of non controling interests (subsequently acquired) E Remeasurement of previously acquired shares treated as available for sale F 6.9 Goodwill C (+) E (+) F (-) D The table above is based on the number of shares for which a valid acceptance was received on acquisition date, the payment of which being effective a few days after the acquisition date. Subsequently to the acquisition date, the Company acquired the remaining part of NOL share capital to reach 100% as at September 2, 2016 for a total amount of USD 2,461 million which is shown in the table above under the line items A and E. In the Consolidated Statement of Cash Flows, the total reported includes transaction costs and is reduced by the amount of cash and cash equivalents of NOL as at acquisition date reported above. In the below Notes of the statement of financial position, the contribution of NOL has not been presented systematically. As a consequence, these Notes shoud be read in conjunction with the information provided in the table above. CMA CGM / 14 Consolidated financial statements

19 The main estimates and principles used for the purpose of performing the purchase price allocation are as follows: The consideration transferred for the acquisition corresponds to the cash paid or payable at the time of acquisition corresponding to the number of shares acquired or for which a valid acceptance was obtained, as adjusted by the effect of cash flow hedge transactions described below. No equity instrument has been issued as part of the transaction. As the intention of CMA CGM was to obtain the full control of NOL, which has been fully achieved, Management decided to apply the full goodwill option on NOL s acquisition in accordance with IFRS 3 Business combinations. The shares acquired after the acquisition date have been treated as transactions with non-controlling interests. Excluding debt issuance costs, acquisition-related costs were incurred in the course of the transaction; these were recognised as other income and expenses in accordance with IFRS 3 Business combinations (see Note 4.4), out of EBITDA and Core EBIT. Debt isssuance costs amounting to USD 48.6 million related to the acquisition facility have been treated using the effective interest rate method in accordance with IAS 39 Financial instruments: Recognition and Measurement. As the acquisition facility has been fully repaid by mid-november 2016, the whole amount of debt issuance costs has been recycled as a financial expense. Prior to the acquisition date, the Company had purchased a certain number of NOL s shares on the Singapore stock exchange, such shares being treated as financial assets (available for sale) till acquisition date. The revaluation reserve as of acquisition date, amounting to USD 6.9 million, previously recorded in Other Comprehensive Income ( OCI ), has been recycled into the consolidated statement of Profit & Loss. Due to the fact that the purchase price was committed to be paid in Singapore dollar (SGD), the Company entered into certain derivative financial instruments prior to the acquisition date in order to fix the USD/SGD exchange rate at the closest date compared to the acquisition date to the extent possible. Such instruments have been treated as cash-flow hedge till acquisition date and the positive revaluation reserve, previously deferred in OCI, has been recycled into the transaction price as a basis adjustment in accordance with IAS 39, for an amount of USD 31.5 million. In accordance with IFRS 3, all acquired assets, liabilities and contingent liabilities assumed have been measured at fair value. The valuation methods used to determine the fair values of the main assets and liabilities are as follows: Market comparison method: This valuation method considers the prices observable on the principal market of similar assets if these are available. This method was mainly used for the valuation of the Group s vessels and containers, as well as for the measurement of advantageous and disadvantageous contracts; Discounted cash flow method: This valuation method considers future cash flows and appropriate discounting valuation to measure the present value of assets and liabilities for which there are no market datas. Such valuation is based on observable datas to the extent possible. Such valuation method has been used mainly for unquoted financial debt; Income approach: this valuation consists in both (i) the relief from royalty method applied to the valuation of brands and (ii) the excess earnings method applied to the valuation of customer contracts and terminal concession rights. US Government contract has been individually valued with a specific useful life, as well as the remaining customer list, using an appropriate churn rate. Consolidated financial statements CMA CGM / 15

20 Status of the purchase price allocation According to IFRS 3, the measurement period to adjust the purchase price allocation ends as soon as the acquirer 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. The measurement period shall not exceed one year from the acquisition date. As of June 30 and September 30, 2016, the purchase price allocation related to the acquisition of NOL was provisional, especially because potential customer relationships and brands had not been valued. As of December 31, 2016, the Company reflected in the purchase price allocation new information that were made available, more particularly in connection with items that were not previously valuated i.e. customer relationships and brands. The Company may subsequently fine tune the purchase price allocation, including in relation to customer relationships with an opposite impact on residual goodwill. As a consequence, provisional amounts may be subsequently adjusted to reflect any new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date of acquisition. As at December 31, 2016, the purchase price allocation resulted in the recognition of a goodwill of USD million. This goodwill consists in, among others, the buyer-specific synergies expected as a result of the integration of NOL such as assembled workforce, potential customer relationships which have been excluded as a consequence of churn effect, as well as further potential terminal concession renewals not taken into account in the terminal concession rights recognized in intangible assets. Contribution of NOL, stand-alone variation and proforma information as if the acquisition date had occurred on January 1, 2016 Contribution of NOL to the Consolidated Statement of Profit & Loss For the year ended December 31, Proforma information CMA CGM stand alone Profit & Loss For the year ended December 31, Consolidated Statement of Profit & Loss NOL contribution from acquisition date to December 31, 2016 CMA CGM stand alone Profit & Loss excluding NOL contribution NOL Proforma Profit & Loss for yearended December 31, 2016 Proforma Consolidated Statement of Profit & Loss CMA CGM stand alone Profit & Loss excluding NOL contribution Published Consolidated Statement of Profit & Loss Variance A B C = A (-) B D C (+) D C REVENUE 15, , , , , , ,674.1 (2,308.2) Operating expenses (15,442.4) (2,386.2) (13,056.1) (4,361.8) (17,417.9) (13,056.1) (14,420.6) 1,364.5 CMA STA-NOL intercompany operations - (135.6) (135.6) EBITDA BEFORE GAINS / (LOSSES) ON DISPOSAL OF PROPERTY AND EQUIPMENT AND SUBSIDIARIES ,253.5 (808.2) EBIT (99.9) (66.1) (33.8) (230.6) (264.3) (33.8) (929.1) CORE EBIT 28.9 (41.1) 69.9 (127.5) (57.6) (840.7) FINANCIAL RESULT (262.2) (77.5) (184.7) (202.8) (387.5) (184.7) (223.3) 38.6 Income taxes (65.4) 19.4 (84.8) 14.4 (70.4) (84.8) (85.4) 0.6 PROFIT / (LOSS) FOR THE PERIOD (427.4) (124.2) (303.3) (419.0) (722.2) (303.3) (889.9) In the below notes related to the statement of Profit and Loss, the contribution of NOL is not presented systematically. As a consequence, these Notes shoud be read in conjunction with the information provided in the table above. Based on the outlined assumptions, the presented proforma net result does not necessarily equate to the net result that the Group would have generated if the acquisition of NOL had been completed on January 1, Additionally, commenting on the future development of the Group net result is only possible to a very limited extent due to the one-time factors. CMA CGM / 16 Consolidated financial statements

21 3.1.2 Shipping Alliance On April 20, 2016, CMA CGM, COSCO Container Lines, Evergreen Line and Orient Overseas Container Line signed a Memorandum of Understanding ( MOU ) to form a new Alliance named OCEAN Alliance enabling each of them to offer competitive products and comprehensive service networks covering the Asia-Europe, Asia-Mediterranean, Asia-Red Sea, Asia-Middle East, Trans-Pacific, Asia-North America East Coast, and Trans-Atlantic trades. On October 24, 2016, the Federal Maritime Commission ( FMC ) announced it had concluded its review of the proposed Ocean Alliance. With this agreement, FMC said that its members can share vessels, charter and exchange space on each other s ships, and enter into cooperative working agreements in international trade lanes between the United States and ports in Asia, Northern Europe, the Mediterranean, the Middle East, Canada, Central America, and the Caribbean. On November 3, 2016, the 3 partners (Cosco, OOCL and Evergreen) signed the OCEAN Alliance agreements in Shanghai. Such alliance has been signed for a 10 year period and plans to begin operations in April Terminal & Logistics development Singapore terminal with Port of Singapore Authority ( PSA ) As at June 15, 2016, CMA CGM and PSA Singapore Terminals announced the establishement of a joint venture company named CMA CGM PSA LION TERMINAL PTE.ltd ( CPLT ), owned in proportions of 49% and 51% respectively, to lease and operate four container berths in the port of Singapore. With an estimated annual handling capacity of over TEUs 3 million, the joint venture s facilities will be used as a dedicated container terminal in the region for the Group and its shipping affiliates, including NOL. The group s initial equity contribution for the set-up of the joint venture, amounting to SGD million, has been performed in July An additional amount of equity will have to be suscribed by the Group for an amount of SGD 42.3 million within 6 months of the joint-venture completion date. First phase operations in the terminal started in July on 2 berths. Based on the analysis of the power of the parties over the relevant activities of the joint venture, Management concluded the Group had a joint control over the terminal. Hence, it has been consolidated under equity method (see Note 7.3) since July Kingston Freeport Terminal limited ( KFTL ) On April 7, 2015, the Company signed an agreement with the Port Authority of Jamaica ( PAJ or Jamport ) for a 30-year concession of KFTL. CMA CGM intends to develop KFTL as a strategic hub on the context of the widened Panama canal and the use of larger vessels for the lines operated in the area. The handover of the terminal s operations from PAJ to the Company occurred on June 30, 2016, triggering the transfer of certain assets and liabilities against a payment of USD 75 million. The assets transferred to the Company, as well as assets purchased by KFTL after the handover and capitalized costs, can be summarized as follows: In USD million Assets Terminal equipments o/w Crane 49.0 Straddle carrier 19.3 Dredging 17.2 Capitalized costs 9.2 Other various equipments 8.7 Consolidated financial statements CMA CGM / 17

22 In order to develop the terminal facilities and operations, the Company has obtained from certain banks a financing amounting to USD 265 million, maturing in June 2031 and bearing variable interest during the construction period (with no principal repayment during this phase) and fixed interest after the construction period. As at December 31, 2016, such financing has been partially drawn for an amount of USD 56.4 million. The Company is committed to pay fixed annual concession fee amounting to USD 15 million during the concession period, variable concession fees representing 8% of the annual turnover, and has also granted certain commitments to banks, the purpose of which being to secure the lenders regarding (i) the level of gearing of the project during construction phase and (ii) the level of the terminal s revenue allowing the debt s repayment Rating On April 1, 2016, Standard & Poor s ( S&P ) downgraded CMA CGM s long-term corporate credit rating from B+ to B, mainly due to challenging conditions in overall container shipping sector, with a negative outlook. 3.2 Significant events in Business combinations Closing of LCL Logistix On April 29, 2015, the Company finalized its acquisition of 60% in the company LCL Logistix, one of India s independent third-party logistics leaders. The Company reinforces its position in India and will leverage on LCL Logistix s Indian network as well as its presence in Canada, in the United States and in East Africa to accelerate its development. The investment was made through CMA CGM Logistics France, the wholly owned subsidiary of the Group specialized in forwarding and logistics solutions. The goodwill related to this acquisition has been recorded and amounts to USD 8.4 million. Non controlling interests have been valued at their proportionate share in the recognized identifiable net assets. As part of the transaction, the Company entered into certain option agreements with non controlling interests allowing the Group to acquire their shares, and granted a put option to the non controlling interests. These options may be exercised in 3 to 5 years from acquisition date. The put option resulted in the recognition of a liability at its fair value, which is not disclosed as being not material at Group level. Closing of OPDR GmbH On July 1, 2015, the Company finalized the acquisition of 100% of OPDR GmbH following the approval of the transaction by the European Commission without any condition. OPDR is a sea carrier specialized in short sea maritime services and door to door logistics solutions between North Europe, the Canary Islands, the Iberian Peninsula and Morocco. The goodwill related to this acquisition has been recorded and amounted to USD 15.4 million New bond issue and early repayment of 2011 Senior Notes In June 2015, the Company issued 2021 Senior Notes for an amount of EUR 725 million which have been privately placed with international institutional investors (see Note 6.6.2). The 2021 Senior Notes issue has allowed to call the 2011 Senior Notes. On July 8, 2015, the Company finalized the early redemption of the 2011 Senior Notes for an amount of USD million. CMA CGM / 18 Consolidated financial statements