MAROC_TELECOM_REGISTRATION_DOCUMENT_2017

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FINANCIAL REPORT Statutory financial statements

PROVISIONS FOR CONTINGENCIES AND LOSSES These include long-term and other provisions for contingencies and losses: – long-term provisions for contingencies and losses correspondto provisions for translation differences and life annuities; – other provisions for contingencies and losses comprise provisions for restructuring, loyalty programs, and disputes and legal risks known at period end. These provisions are measured on the basis of the advancement of procedures underway and estimated risks at period end; – no provision for postretirement benefits has been recorded in the financial statements, because pension expenses are covered by statutory pension plans established for employees in Morocco. ACCRUALS (LIABILITIES) This item contains deferred revenue concerning mainly prepaid subscriptions and unusedbminutes sold. RECEIVABLES AND PAYABLES IN FOREIGN CURRENCIES Receivables in foreign currencies are translated into the presentation currency using the exchange rate on the transaction date. At period end, receivables and payables in foreign currencies are translated into the presentation currency using the exchange rate on the closing date; unrealized gains or losses are recorded on the statement under “Accruals (assets)” or “Accruals (liabilities).” Unrealized losses are accrued in full. In accordance with the principles of clarity and prudence, no exceptions shall be made between unrealized gains and unrealized losses, unless otherwise specified in the CGNC. To this end, the translation differences on the USDb200bmillion loan granted by Golden Falcon to IAM to finance investments in the new IAM Subsidiaries were offset against the loans granted to the subsidiaries. REVENUES Revenues are recorded on the basis of consumption by subscribers and customers at the end of the period, net of subsidies and commissions. – Sales of goods and services correspond to income fromoutgoing and incoming communications and are recognized at the time they occur (telephone communications and line-activation costs). Subscriptions are billed in advance eachbmonth and recognized

under deferred revenue as a liability on the statement, before being transferred to revenues for the period. For prepaid services, revenues are recognized at the time of consumption. They also include income from sales of advertising in paper and electronic telephone directories; this revenue is recognized when the advertisements are published. They also include the proceeds from the sale of advertising inserts in the printed and electronic directories which are taken into account in the result when they are published. – Sales of merchandise concern revenues fromhandset sales, which are recognized either at the time of delivery or upon line activation. – Customer acquisition and loyalty costs include discounts on Mobile handsets and promotional offers of free airtime granted to new customers. Discounts onMobile handsets are deducted from revenues on the date of delivery to the customer or distributor. Discounts granted to distributors as remuneration for services are recognized mainly under revenues, at the time of delivery. OTHER INCOME Other income from operations includes: – expense reclassifications (mainly telecommunication costs specific to IAM, recognized under “Other external expenses”); – reversal of operating provisions (inventories and provisions for contingencies and losses). OTHER EXTERNAL EXPENSES In addition to rental expenses, maintenance costs, advertising expenses, and general expenses, other external expenses include: – ANRT regulatory fees for radio-frequency assignment, in accordance with actb24–96 andOrder 310-98 of Februaryb25, 1998; – expenses related to the universal service obligation, in accordance with actb24–96 and Orderb2.00.1333 of Octoberb9, 2000 (IAM contract specifications); – costs related to research, training, and telecommunications standardization, in accordance with actb24–96 andOrderb2.00.1333 of Octoberb9, 2000 (IAM contract specifications). FINANCIAL INSTRUMENTS Except the operation of purchase of foreign currency (dollar against euro) set up in late 2015 to cover the loan of USDb200bmillion granted by Golden Falcon to IAM for investment financing of the new subsidiaries, the Company does not use any financial instrument, including any currency hedge.

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MAROC TELECOM ____ 2017 Registration Document