SOMFY - Annual financial report 2018

08 PARENT COMPANY FINANCIAL STATEMENTS

NOTES TO THE SOMFY SA FINANCIAL STATEMENTS

The financial statements have been prepared for the 12-month period from 1 January 2018 to 31 December 2018.

As the process and documentation provided by UTC currently stand, Somfy SA continues to contest the entirety of UTC’s demands and remains confident regarding the outcome of this dispute. It has qualified the risk as a contingent liability and no provision was recognised at 31 December 2018. At 31 December 2018, Somfy SA’s financial statements include a receivable for deferred settlement in relation to the sale of the CIAT shares for the sum of €9.7 million with payment spread until 2019. In early July 2017, Somfy SA and the other sellers brought an action against UTC before the Paris Commercial Court seeking the fulfilment of the acquisition contract and the settlement of the deferred payments falling due. These proceedings are still ongoing. Somfy SA remains confident regarding the settlement of these sums and therefore no writedown in relation to these receivables was recognised at 31 December 2018.

A - SIGNIFICANT EVENTS OF THE FINANCIAL YEAR — RENEGOTIATION OF SOMFY PROTECT BY MYFOX’S EARNOUTS Negotiations with the former shareholders of Somfy Protect by Myfox were finalised on 26 July 2018 in order to redefine both the amount of the earnouts and their maturity. They resulted in a €9.7 million reduction in securities and financial liabilities.

B - CONTINGENT LIABILITIES — SPIREL

C - POST-BALANCE SHEET EVENTS —

The dispute between Spirel employees and Somfy SA is still ongoing before the Chambéry Court of Appeals. The employees seek annulment of the transfer of the Spirel securities, which took place in 2010, and to have Somfy SA ordered to pay them damages for the alleged deliberate bankruptcy of Spirel and non-material damage caused as a result of the anxiety, disappointment and vexation they deem to have been victim of, for a total of approximately €8.2 million. In April 2017, the Court ruled in favour of Somfy SA, dismissing the employees’ claims. However, the plaintiffs immediately appealed this decision. Proceedings are still underway and a resolution is expected during 2019. In addition, during 2016 the liquidator of the company Spirel also sought to have Somfy SA ordered to refund advances of €2.9 million paid by the AGS (Guarantee Fund for the Payment of Salary Claims) in the event the disposal was declared null and void. Initial proceedings before the Labour Court – involving the employees contesting the grounds for their dismissal and claiming damages of a substantially similar amount to that sought before the Court of Appeals – were dismissed in November 2016. The employees applied to the Albertville Labour Court once again in early July 2017 and these applications were also rejected in 2018. These factors do not alter Somfy SA’s risk evaluation. Therefore, it continues to qualify these risks as contingent liabilities and no provision was recognised in relation to these disputes at 31 December 2018. On 5 January 2015, Somfy SA transferred its 44.49% equity investment in the share capital of CIAT Group to United Technologies Corporation . On 31 March 2016, United Technologies Corporation filed a claim against the sellers of the CIAT shares under the liability guarantee for a total of €28.6 million (Somfy’s share being €13.2 million). Somfy SA considers these requests to be unfounded, and insufficiently detailed and justified. In mid-November 2017, UTC brought an action against the sellers before the Paris Commercial Court for the liability guarantee. Proceedings before the Commercial Court and the Court of Appeals are ongoing. CIAT

To the best of Somfy SA’s knowledge, no event has occurred since 31 December 2018 that is likely to have a material impact on the business and financial position of the company.

D - ACCOUNTING RULES AND METHODS —

The 2018 financial statements have been prepared in accordance with the general accounting rules prescribed by the French Chart of Accounts derived from ANC regulations. The general bases of accounting have been applied in respect of the principle of prudence, in accordance with the following basic assumptions: going concern; – consistency of accounting methods from one year to the next; – separate accounting periods; – and in compliance with the general rules for the preparation and – presentation of annual financial statements. The method used to value the items in the accounts is the historical cost method.

EQUITY INVESTMENTS

The gross value of equity investments comprises their acquisition cost less related expenses. Writedown is recognised when the book value falls below historical cost. Book value is determined based on several assessment items, such as year-end net assets, profitability level, future prospects and share price for listed companies.

OTHER SECURITIES

The initial value of other securities comprises their acquisition cost less associated expenses. When the estimated realisable value is lower than cost, an impairment provision is recorded for the difference.

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SOMFY – ANNUAL FINANCIAL REPORT 2018