technicolor - 2020 Universal Registration Document

FINANCIAL STATEMENTS STATUTORY AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020

Accounting treatment of the financial restructuring Notes 1.1.1 and 8.3 to the consolidated financial statements

RISK IDENTIFIED As described in Note 1.1.1 to the Technicolor SA company financial statements, on February 13, 2020, the Group announced the roll-out of a 3-year strategic plan (2020-2022) including a series of financial restructuring transactions. However, the emergence of the Covid-19 crisis in the first half of 2020 prevented the share capital increase, the last step in this strategic plan, and increased the Group’s liquidity requirements. Given the Group’s position, Group management believed that new sources of financing were needed, particularly from its historical financial partners or new investors and initiated a more comprehensive restructuring of the Group’s debt. To secure this financial restructuring, on May 26, 2020, the company announced the opening of a conciliation procedure after having obtained approval from the Group’s lenders on June 1, 2020. However, due to the urgency of the situation that was complicated by the impacts of the current crisis, this refinancing could not be set up. On June 22, 2020, the Paris Trade Court initiated a 1-month accelerated financial safeguard procedure for Technicolor Group. On the same date, the company and some of its creditors reached an agreement in principle on the main terms and conditions of the Group’s financial restructuring. The draft safeguard plan which formalizes the main terms and conditions of the Group’s financial restructuring was approved by the lenders’ committee ( comité des établissements de crédit et assimilés ) on July 5, 2020. On July 28, 2020, the Paris Trade Court approved the safeguard plan. On September 22, 2020, Technicolor finalized the implementation of its financial restructuring plan. This financial restructuring gave rise to: the contribution of a sum equivalent to around €420 million (net of costs and fees) to cover the continuation of the 2020-2022 strategic plan, • taking into account the estimated impacts of Covid-19, finance the Group’s everyday operations and fully refinance the bridge loan of US$110 million payable on July 31, 2020 (the “ New Money ”); in consideration of the New Money funds, the lenders were granted share subscription warrants that can be exercised over a period of 3 months • (the “ Equity kickers ”); a restructuring of the current debt, i.e. 46.5% of the credit facilities initially payable by the Company via the set-up of new term credit facilities • for an amount equivalent to €574 million, ultimately maturing in 2024, in consideration for the granting of new collateral on certain Group assets (the “ Debt restructuring ”); the repayment of Group’s debt in the amount of €660 million via a share capital increase, with retention of preferential subscription rights • for shareholders (for €330 million) and cancellation of preferential subscription rights reserved for the lenders of the restructured credit facilities by offsetting the balance of their debts (the “ Debt-equity conversion ”). Furthermore, this financial restructuring also required the reorganization of the Group’s legal structure, through the set-up of three fiducies by way of security to secure the New Money for the shares held by the sub-holding companies which, after restructuring, will hold most of the Group’s subsidiaries. The impacts on the Technicolor SA company financial statements for the year ended December 31, 2020 of the financial restructuring and the combination of the assets and the relating securities are presented in Notes 1.1.1. and 9.2.2. Considering the major financial impacts of the financial structuring transactions on the Technicolor SA company financial statements and the accounting treatments based on major estimates and judgements by Management, we considered the finalization of the financial restructuring plan to be a key audit matter. OUR RESPONSE We assessed the compliance of the methods used to recognize all the financial restructuring transactions in the Technicolor SA company financial statements with prevailing French standards. We focused in particular on the fiducie agreements set up and the absence of any enforcement events provided for in these agreements. Our work mainly consisted in: assessing the compliance of the methods used to recognize all the equity transactions and transactions relating to the subscriptions of new loans with • French accounting standards, by including financial instrument transaction specialists in our team; verifying the correct accounting treatments for the derecognition of the former debt and the costs attributable to the transactions, in relation • to the restructuring plan; following the set-up of the “Tech 7”, “Gallo 8” and “Créances Tech” fiducie agreements, verifying the absence of any enforcement events • as stipulated in clause 12.1 of the fiducie agreements described in Note 9.2.3 to the financial statements; verifying the disclosures on the financial restructuring in the company financial statements. •

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TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2020 309