SOLOCAL_Registration Document_2017

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RISK FACTORS 2.1 Risks Related to our Business and Strategy

In order to anticipate any regulatory development that could have a significantly unfavourable effect on its business, the SoLocal Group carries out permanent monitoring of the regulations. Similarly, the Group constantly checks that it complies with the national and European regulations. We are subject to tax risks. We must structure our organization and operations appropriately while respecting the various tax laws and regulations of the jurisdictions in which we operate. Such laws and regulations are generally very complex. Additionally, because tax laws may not provide clear-cut or definitive doctrines, the tax regime applied to our operations and intragroup transactions or reorganizations is sometimes based on our interpretations of tax laws and regulations. We cannot guarantee that such interpretations will not be questioned by the relevant tax authorities, which may adversely affect our financial condition or results of operations. Tax laws and regulations are subject to change, and new laws and regulations may make it difficult to restructure our operations in an advantageous manner. More generally, any failure to comply with the tax laws or regulations of the countries in which we operate may result in reassessments, interest on late payments, fines and penalties. Furthermore, we may record deferred tax assets on our balance sheet, reflecting future tax savings resulting from discrepancies between the tax and accounting valuation of the assets and liabilities or in respect of tax loss carry-forwards from our entities. The actual realization of these assets in future years depends on tax laws and regulations, the outcome of potential tax audits and the future results of the relevant entities. In particular, pursuant to Article 39, 1-5° of the French Tax Code, provisions for pensions and similar obligations that are deductible from an accounting standpoint should be added-back to the French taxable income, thus resulting in a deferred tax asset to be recorded in financial statements. As of 31 December 2017, our net deferred tax assets totaled €9.1 million, including an amount of €33.2 million of deferred tax assets corresponding to non-deductible provisions for pensions and similar obligations. In addition, QDQ Media, the Spanish subsidiary of the Group, had carry-forward tax losses in an amount of €217.9 million at the close of the fiscal year ended on 31 December 2017. As a basic principle, Spanish tax losses may be carried forward indefinitely but Spanish tax rules restrict the ability

to use Spanish tax losses carried-forward. For Spanish tax payers whose turnover for the 12-month period preceding the beginning of the relevant tax year is ranging from €20 million to €60 million, the fraction of Spanish tax losses that may be used to offset the taxable profit with respect to a given fiscal year will generally (subject to certain exceptions) be limited to 50%, it being noted that Spanish tax losses that do not exceed €1.0 million may be offset without any limitation. No deferred tax assets with respect to these Spanish tax losses have been recorded on our balance sheet. Any reduction in our ability to use these assets due to changes in laws and regulations, potential tax reassessments, or lower than expected results could have a negative impact on our business, results of operations and financial condition. Finally, the services we provide to our clients are subject to value added taxes, sales taxes or other similar taxes. Tax rates may increase at any time, and any such increase could affect our business and the demand for our services, and thereby reduce our operating profit, negatively affecting our business, results of operations and financial condition. We are subject to certain environmental risks. Our activities, particularly those of our Print & Voice business, can have an impact on the environment and we are subject to laws and regulations pertaining to the environment. As a result, we may be involved in administrative and judicial proceedings and investigations related to environmental issues. These proceedings and investigations could result in substantial costs and obligations and/or divert management’s attention from our core business. If it is determined that we are not in compliance with or have liabilities under applicable laws and regulations, we could be subject to fines or measures. Furthermore, any allegation that we or our subcontractors do not comply with environmental laws and regulations could damage our reputation. Although we devote attention to compliance with certain criteria when selecting our subcontractors, there can be no assurance that subcontractors will at all times comply with applicable environmental laws and regulations. In order to reduce these environmental impacts, we have implemented a number of measures. These actions are detailed in Section 3 – Corporate Social Responsibility.

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2017 Registration Document SOLOCAL