MAROC_TELECOM_REGISTRATION_DOCUMENT_2017

FINANCIAL REPORT

Statutory financial statements

A1 — MAIN VALUATION METHODS USED BY THE COMPANY

ACCOUNTING POLICIES The Company’s financial statements have been prepared in accordance with generally accepted accounting practices and, in particular, with the principles related to historical costs, separation of accounting periods, prudence, and consistent accounting methods from onebyear to the next, and no netting. INTANGIBLE ASSETS AND PROPERTY, PLANT, ANDEQUIPMENT The assets transferred by theMoroccan government on Februaryb26, 1998, to establish Itissalat Al Maghrib (MarocTelecom), were recorded as a net amount in the opening, which was approved by: – Postal Services and Information Technology Act no.b24–96; – joint order no.b341–98 of the Ministry of Telecommunications and the Ministry of Finance, Commerce, and Industry, approving the inventory of assets transferred to Itissalat Al-Maghrib Itissalat Al- Maghrib. Assets acquired thereafter are recorded at their acquisition or production cost, which for networks essentially comprises design and planning costs, construction costs, site development costs, network-rollout costs, customs duties, and internal costs related to network development. Financial expenses corresponding to interest on capital borrowed to finance property, plant, and equipment are not expensed as production costs during the production period. Expenses of maintenance and network maintenance are expensed for thebyear. Capital assets are amortized evenly according to their nature (intangibleb– tangible) and according to their destination (transmission, network equipment,…). The depreciation and amortization are calculated using the straight- line method over the estimated useful life lives of the assets, as follows: – intangible assets: — Licenses from 4 to 25 years – property, plant, and equipment: — constructions and buildings 20byears — civil engineering 15byears — network equipment: — transmission (Mobile) 10byears — switching 8byears — transmission (Fixed-line) 10byears – other property, plant, and equipment: — furniture and fittings 10byears — computer equipment 5byears — office equipment 10byears — transportation equipment 5byears An additional provision is recorded for technical obsolescence, reduction in estimated useful life, or asset impairment. Assets not yet in service are recorded as work-in-progress.

FINANCIAL ASSETS Investment securities are recorded at their purchase price. An impairment charge is recorded for the difference if this value is higher than the carrying value. The carrying value is determined on the basis of the Group’s proportionate share of equity as represented by the securities. This figure may be adjusted to reflect the companies’growth and earnings outlooks. Other financial assets, which include receivables, loans, and deposits, are recognized on the basis of their nominal value. Provisions may be recorded to reflect collection risk. INVOTORIES Inventories comprise: – Mobile handsets and accessories intended for sale to customers upon line activation; – technical support required for network rollout and maintenance other than cable and spare parts. Inventories of Mobile handsets and accessories are accounted for using the weighted average cost method; a provision is recorded to account for obsolescence risk and for unsold inventory. Technical-equipment inventories are measured at cost (including customs duties and other costs) and are depreciated on the basis of their value in use or obsolescence.

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ACCOUNTS RECEIVABLE Accounts receivable are recorded at nominal value.

Trade receivables: impairment provisions are recorded to cover collection risk, which is estimated on the basis of the age of the receivable. Government receivables: Provisions are recorded to cover the risk of the Moroccan government not recognizing these receivables. These provisions are evaluated statistically. Other receivables: where appropriate, other provisions are recorded on the basis of estimated collection risk.

ACCRUALS (ASSETS) This line item includes mainly prepaid expenses.

CASH AND INVESTMENT SECURITIES Cash and investment securities comprise highly liquid assets and short-term investments measured at historical cost.

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MAROC TELECOM ____ 2017 Registration Document