Additional Information Alcatel Lucent

Transcription

1 2015 Additional Information Alcatel Lucent

2 Table of contents 1 Key figures 1.1 Introduction Reported results and adjusted results Breakdown of 2015 revenues by operating segment Breakdown of 2015 revenues by geographical area Change in R&D expenses Adjusted operating income Change in net cash position Change in market capitalization 7 2 Parent company statutory accounts 2.1 Activities of the parent company Statutory accounts of Alcatel Lucent SA as of December 31, Notes to the annual statutory accounts Statutory Auditors report on the annual financial statements of Alcatel Lucent for the year ended December 31, Statutory Auditors special report on regulated agreements and commitments 35 3 Report of the chairman of the Board of Directors internal control and risk management 3.1 Global system of internal control and risk management Accounting and financial reporting Report on the President s report 53 Explanatory Note The information contained in this document, together with that set forth in the 2015 Annual Report on Form 20-F (the F ) filed with the U.S Securities and Exchange Commission, both of which documents are in English, is equivalent to the information provided in French in the Document de Référence filed with the Autorité des Marchés Financiers on April 28, (1). This document is a free translation from French to English of the information from the Document de Référence that is not included in the F. Should there be any difference between the French and the English versions, only the text in the French language shall be deemed authentic and considered as expressing the exact information published by Alcatel-Lucent. (1) Except for certain financial information concerning the fourth quarter of 2015, which may be found in English on our website: under the heading Investor Relations and then Financial Date February 11, 2016 Press release. 4 Sustainability 4.1 Alcatel-Lucent combines with Nokia Our approach to sustainability: Responsible business innovation Our engagement with stakeholders Ethical Business Environment Our people Society and philanthropy Supply chain Sustainability data Article 225 of France s Grenelle II Law (July 10, 2010) United Nations Global Compact Independent verification 105

3 Key figures Introduction Reported results and adjusted results Breakdown of 2015 revenues by operating segment Breakdown of 2015 revenues by geographical area Change in R&D expenses Adjusted operating income (loss) Change in net cash position Change in market capitalization 7 Alcatel Lucent Additional Information

4 1 KEY FIGURES Introduction 1.1 Introduction For purposes of this document, the term Group means the group comprised of Alcatel Lucent (hereafter Alcatel-Lucent ) after the combination of Alcatel (hereafter historical Alcatel or Alcatel ) and Lucent Technologies Inc. (hereafter Lucent ), together with all their consolidated subsidiaries. The expression the Company means either Alcatel when referring to a period ending on or prior to November 30, 2006, or Alcatel-Lucent when referring to a later period. 1.2 Reported results and adjusted results Reported results: in accordance with regulatory reporting requirements, reported results for the years 2013, 2014 and 2015 include the non-cash impacts from Purchase Price Allocation ( PPA ) entries following the business combination with Lucent. Adjusted results: in addition to the reported results and in order to provide meaningful comparable information, Alcatel-Lucent is providing adjusted results that exclude the main non-cash impacts from PPA entries resulting from the Lucent business combination. These non-cash impacts are material to us and non-recurring due to the different amortization periods depending on the nature of the adjustments, as detailed in Note 3 to the consolidated financial statements included in our 2009 document de référence. Reported figures are not comparable with those of our main competitors and many other business players in our field of activity who have not undergone a similar business combination. Condensed income statement for 2015 (in millions of euros, except per share data) Adjusted Reported Revenues 14,275 14,275 Operating income (loss) (1) 1,029 1,004 Restructuring costs (401) (401) Litigations (31) (31) Gain (loss) on disposal of consolidated entities (1) (1) Transaction-related costs (104) (104) Impairment of assets (193) (193) Post-retirement benefit plan amendments Income (loss) from operating activities Net income - group share Diluted earnings per share (in euros) Diluted earnings per ADS (in U.S $) (2) (1) Operating income (loss) refers here to the income (loss) from operating activities before restructuring costs, transaction-related costs, impairment of assets, gain (loss) on disposal of consolidated entities, litigations and post-retirement benefit plan amendments. (2) Earnings per ADS (American Depositary Share) in U.S. $ have been calculated using the U.S. Federal Reserve Bank of New York noon Euro/U.S. dollar buying rate of U.S. $ on December 31, Additional Information 2015 Alcatel Lucent

5 KEY FIGURES Reported results and adjusted results Condensed adjusted income statement for 2015 and 2014 (in millions of euros, except per share data) (1) Revenues 14,275 13,178 Operating income (loss) (2) 1, Restructuring costs (401) (574) Litigations (31) 7 Gain (loss) on disposal of consolidated shares (1) 20 Transaction-related costs (104) - Impairment of assets (193) - Post-retirement benefit plan amendment Income (loss) from operating activities Net income - group share 221 (75) Diluted earnings per share (in euros) 0.08 (0.04) Diluted earnings per ADS (in U.S.$) (3) 0.09 (0.05) (1) 2014 amounts are restated to reflect the impact of a change in accounting treatment (see note 4 to the 2015 consolidated financial statements). (2) Operating income (loss) refers here to the income (loss) from operating activities before restructuring costs, transaction-related costs, impairment of assets, gain (loss) on disposal of consolidated entities, litigations and post-retirement benefit plan amendments. (3) Earnings per ADS in U.S. $ have been calculated using the U.S. Federal Reserve Bank of New York noon Euro/U.S. dollar buying rate of U.S.$ as of December 31, 2015 and U.S.$ as of December 31, Alcatel Lucent Additional Information

6 1 KEY FIGURES Reported results and adjusted results Adjusted consolidated income statement (unaudited) In Euro million except per share data As reported PPA Adjusted Revenues 14,275-14,275 Cost of sales (9,132) - (9,132) Gross Profit 5,143-5,143 Administrative and selling expenses (a) (1,761) (2) (1,763) Research and Development costs (b) (2,378) 27 (2,351) Operating income (loss) (1) 1, ,029 Restructuring costs (401) - (401) Impairment of assets (193) - (193) Post-retirement benefit plan amendment Litigations (31) - (31) Gain/(loss) on disposal of consolidated entities (1) - (1) Transaction-related costs (104) - (104) Income (loss) from operating activities Financial result (net) (405) - (405) Share in net income (losses) of equity affiliates 2-2 Income tax benefit (expense) (c) (24) (10) (34) Income (loss) from continuing operations Income (loss) from discontinued activities (16) - (16) Net Income (loss) of which : Equity owners of the parent Non-controlling interests Earnings per share : basic Earnings per share : diluted (1) Income (loss) from operating activities before restructuring costs, transaction-related costs, impairment of assets, gain / (loss) on disposal of consolidated entities, litigations and post-retirement benefit plan amendment. It corresponds to the measure of the operating income (loss) of the segments (see note 5 to our consolidated financial statements at December 31, 2015). PPA : Purchase Price Allocation entries related to Lucent business combination Nature of PPA - non cash amortization charges included in Reported Accounts but excluded from Adjusted Accounts (see Note 5 to our Consolidated Financial Statements as of December 31, 2015) These impacts are non-recurring due to the different amortization periods depending of the nature of the adjustments, as indicated hereafter: (a) Amortization of intangibles assets - long term customer relationship (5-8 years) (b) Amortization of intangibles assets: Acquired technologies (5-10 years) and In Process R&D (5-7 years) (c) Normative tax impact at 38% on above PPA adjustments excluding goodwill impairment 4 Additional Information 2015 Alcatel Lucent

7 KEY FIGURES Breakdown of 2015 revenues by operating segment 1.3 Breakdown of 2015 revenues by operating segment The operations of the Group were organized in three operating segments in 2015 Core Networking, Access and Other. The Core Networking segment includes our IP Routing, IP Transport and IP Platforms divisions. The Core Networking segment accounted for 47% of revenues ( 6.8 billion) in The Access segment accounted for 52% of revenues ( 7.5 billion) in 2015 and includes our Wireless and Fixed Access businesses as well as Managed Services and Licensing. Lastly, the Other segment accounted for much less than 1% of revenues. Breakdown of 2015 revenues by operating segment Other less than 1% Access 52% Core Networking 47% Alcatel-Lucent had revenues of 14.3 billion in Breakdown of 2015 revenues by geographical area North America was flat as a percent of total revenues in 2015 compared to 2014, while Asia Pacific increased slightly, Europe declined slightly and the Rest of World region was flat. This balanced geographical presence can limit the Group s exposure to the investment cycles of its service provider clients in a particular area, unless those cycles are synchronized across all regions. Breakdown of 2015 revenues by geographical area Rest of World 13% Asia Pacific 21% North America 44% Europe 22% Alcatel Lucent Additional Information

8 1 KEY FIGURES Change in R&D expenses 1.5 Change in R&D expenses In 2015, reported R&D expenses were 2,378 million after a net impact of capitalization of 31 million of development expenses. Adjusted* R&D expenses were 2,351 million, or 16.5% of the Group s revenue (after capitalization of development expenses and excluding 27 million of amortization of acquired technologies and in-process R&D valued at fair value at the date of the Lucent business combination), an increase of 7.3% from 2,191 million, or 16.6% of revenues in Change in R&D expenses (in millions of euros) 3,000 2,500 2,000 2,191 2,351 1,500 1, * Excluding the impacts of the PPA entries in connection with the Lucent business combination. 1.6 Adjusted operating income Adjusted operating income, that is the income from operating activities before restructuring costs, transaction-related costs, gain on disposal of consolidated entities, impairment of assets, litigations and post-retirement benefit plan amendments, and excluding the negative non-cash impacts of the PPA entries in connection with the Lucent business combination, increased from an income of 623 million or 4.7% of revenues in 2014 to an income of 1,029 million or 7.2% of revenues in This increase reflects our efforts to reduce our fixed costs and improve the overall profitability across the Group. Adjusted operating income (in millions of euros) 1,200 1,000 1, Additional Information 2015 Alcatel Lucent

9 KEY FIGURES Change in net cash position 1.7 Change in net cash position On December 31, 2015, the Group had a net cash position of 1,409 million, which is an increase of 1,083 million compared to the net cash position of 326 million at the end of The improvement in net cash primarily reflects the improvement in overall levels of free cash flow. Change in net cash position (in millions of euros) 1,600 1,400 1,409 1,200 1, Change in market capitalization In 2015, Alcatel-Lucent s market capitalization increased compared to 2014, marked notably by the announcement that Nokia and Alcatel-Lucent would combine to create an innovation leader in next-generation technology and services for an IP connected world. Global financial markets showed mixed trends in 2015, as evidenced by Europe markets, such as CAC-40, a composite of the top 40 Euronext listed companies in France, which ended the year with strong growth, as compared to US markets, which showed mixed trends as both the Dow Jones Industrial Index and S&P 500, both showed declines while the NASDAQ grew. Change in market capitalization (in billions of euros) Alcatel Lucent Additional Information

10 1 KEY FIGURES 8 Additional Information 2015 Alcatel Lucent

11 Parent company statutory accounts Activities of the parent company Statutory accounts of Alcatel Lucent SA as of December 31, Notes to the annual statutory accounts Statutory Auditors report on the annual financial statements of Alcatel Lucent for the year ended December 31, Statutory Auditors special report on regulated agreements and commitments 35 Alcatel Lucent Additional Information

12 2 PARENT COMPANY STATUTORY ACCOUNTS Activities of the parent company 2.1 Activities of the parent company Alcatel-Lucent, the Group s parent company, has no operating activity. It is the direct and indirect holding company for all Group companies. Its principal missions are as follows: Š centralized treasury management and granting of guarantees to subsidiaries in respect of certain bank borrowings and operating contracts; Š clearing entity of the new research and development and intellectual property costs recharges mechanism; and Š management of the French tax group. As a result of the Nokia s public exchange offer, Alcatel-Lucent is currently controlled by Nokia Corporation Statutory accounts of Alcatel-Lucent SA as of December 31, 2015 Key figures The financial statements for the year ended December 31, 2015 show net million compared to million net gain the previous year. Appropriation of net income and dividend distribution The 2015 net gain of Alcatel-Lucent, the parent company, totaled 794,896, No dividend will be proposed to the Annual Shareholders Meeting approving the 2015 accounts. The following appropriation will therefore be proposed at the Annual Shareholders Meeting approving the 2015 accounts: Available for distribution (in euros) Income (loss) of the year 794,896, Retained earnings brought forward (12,306,827,303.36) TOTAL (11,511,930,776.36) Appropriation Transfer to legal reserve - Proposed dividend - Retained earnings (11,511,930,776.36) TOTAL (11,511,930,776.36) In accordance with French legal requirements, dividends per share for the past three years are detailed in the following table: 2015 (proposed) Number of shares eligible for dividends 3,036,337,359 2,820,432,270 2,808,554,197 2,326,563,826 Par value Net dividend per share Additional Information 2015 Alcatel Lucent

13 PARENT COMPANY STATUTORY ACCOUNTS Statutory accounts of Alcatel-Lucent SA as of December 31, 2015 Parent company income statements (in millions of euros) Notes Net sales Other revenues Operating revenues Purchases of services and other expenses (672.9) (406.1) (401.1) Taxes and similar payments, excluding income tax (1.7) (4.3) (2.2) Payroll costs (15.8) (33.6) (15.2) Operating expenses (690.4) (444.0) (418.5) Operating income (loss) (3) (57.7) (33.8) (12.3) Revenues from investments in subsidiaries and associates (4) Interest income and similar revenues Interest expense and similar expenses (204.3) (229.9) (283.8) Net change in financial provisions and amortization of bond premiums (3) 7, ,095.1 Other financial income (loss) Financial income (loss) (3) 7, ,035.0 Income (loss) before non-recurring items and income tax (3) 7, ,022.7 Non-recurring revenues 1, Non-recurring expenses (8,785.9) (111.2) (145.7) Non-recurring income (loss) (3) (7,094.5) (110.2) (138.1) Income tax (3)/(5) Net income (loss) after tax ,909.6 Alcatel Lucent Additional Information

14 2 PARENT COMPANY STATUTORY ACCOUNTS Statutory accounts of Alcatel-Lucent SA as of December 31, 2015 Parent company balance sheets at December 31 Notes ASSETS (in millions of euros) Gross value Depreciation Net value Net value Net value Intangible assets (7) (203.1) Investments in subsidiaries and associates (8) 30,741.7 (22,455.9) 8, , ,888.9 Receivables from subsidiaries and associates (9) 0.6 (0.6) Other financial assets (9) 11,135.4 (216.6) 10, , ,044.3 Investments and other non-current assets 41,877.7 (22,673.1) 19, , ,933.2 TOTAL NON-CURRENT ASSETS 42,401 (22,876.2) 19, , ,949.7 Accounts receivable and other current assets (15)/(16) Marketable securities (10) 1, , , ,679.4 Cash (10) 2, , , ,643.0 TOTAL CURRENT ASSETS 4, , , ,012.6 Prepayments and deferred charges TOTAL ASSETS (6) 47,235.4 (22,876.2) 24, , ,003.6 LIABILITIES AND STOCKHOLDERS EQUITY (in millions of euros) Notes Before appropriation After appropriation (1) After appropriation After appropriation Capital stock Additional paid-in capital 21, , , ,914.0 Reserves 2, , , ,237.9 Retained earnings (12,306.8) (11,511.9) (12,306.8) (13,196.9) Net income (loss) for the year Shareholders equity (12) 12, , , ,095.4 Reserves for liabilities and charges (13)/(19) Bonds convertible into new or existing shares ( OCEANE ) (14)/(15)/(16) 1, , , Other bonds and notes issued (14)/(15)/(16) Bank borrowings and overdrafts (15)/(16) Miscellaneous borrowings (15)/(16) 1, , , ,310.3 Financial debt 2, , , ,637.7 Taxation and social security (15)/(16) Other liabilities (15)/(16) 9, , , ,191.4 Liabilities 9, , , ,202.4 Unrealized foreign exchange gain TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 24, , , ,003.6 (1) Proposed. 12 Additional Information 2015 Alcatel Lucent

15 PARENT COMPANY STATUTORY ACCOUNTS Statutory accounts of Alcatel-Lucent SA as of December 31, 2015 Parent company statements of changes in financial position (after proposed appropriation of the 2015 net income) (in millions of euros) Sources of funds Net income (loss) ,909.6 Depreciation and amortization Changes in valuation allowances and other reserves, net (Notes 8, 9 and 13) (7,730.1) (481.5) (2,129.9) Net (gain)/loss on disposal of non-current assets (1) 7, Funds provided (used) by operations (122.9) Increase in capital stock (Note 12) Increase in other bonds (Note 14) - 1, Increase in long-term debt (Note 15) Property, plant and equipment sold Investments sold (1) 1, Other sources of funds TOTAL SOURCES 2, , ,216.4 Application of funds Increase in property, plant, equipment and intangible assets Increase in investments Dividend payable Conversion of bonds into shares Other application of funds 2,481.9 (32.9) 3,121.8 TOTAL APPLICATION 3,140.1 (32.9) 3,169.5 Analysis of changes in working capital Accounts receivable and other current assets (78.2) (4.3) (60.8) Other liabilities (453.9) (8.0) (114.4) Cash and cash equivalents: Š short-term financial debt (2) (904.9) 2,546.7 (2,277.6) Š cash (99.9) 1,190.4 Š marketable securities (609.9) Increase (decrease) in working capital (908.2) 1,825.5 (953.1) (1) Investments sold are essentially Coralec shares. (2) Group s Treasury Convention with subsidiaries (1,104.4) million. Alcatel Lucent Additional Information

16 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts 2.3 Notes to the annual statutory accounts Note 1 Accounting policies The annual financial statements have been prepared in accordance with French accounting rules and principles (as set forth in the French general chart of accounts CRC-regulation 99-03). The following accounting principles are described below: a/ Intangible assets Intangible assets are recorded at acquisition cost and mainly include intellectual property rights amortized over a straight-line basis over five years after acquisition. An impairment loss is recognized if the current value is less than the gross value. b/ Financial assets b1/ Investments in subsidiaries and associates: Investments in subsidiaries and associates are recorded at acquisition cost, excluding incidental expenses, subject to any revaluation in accordance with French law. When the carrying value of such investments is less than their gross value, a valuation allowance is set up for the difference. Carrying values are based on: Š value in use of the investment, in respect of subsidiaries and associates held for the long-term. Value in use is determined case by case based on the recoverable value of the underlying assets, re-evaluation of net assets, estimated market values, and, for listed companies, the stock market value; and Š estimated market value, in respect of associates that could be sold if market conditions proved favorable, and, in respect of listed companies, estimated market value based on the average stock market prices for the last month of the accounting period. As required, when the carrying value of the investment is negative, in addition to the valuation allowance set up, other assets are depreciated and, if necessary, a general risk reserve is recorded. b2/ Long-term receivables from investments: These are long-term loans granted to companies held directly or indirectly by the company. They are recorded at their nominal value. They are distinguished from current accounts received or granted to subsidiaries, used for daily cash management. An impairment loss is recognized in the event of risk of non recovery. b3/ Treasury stock Alcatel-Lucent shares owned by the parent company do not fulfill any particular classification criteria and, therefore, are recorded as other financial assets in the balance sheet. Their carrying value is calculated at year-end on the basis of the average stock market prices for the last month of the accounting period. If necessary, a valuation allowance is recorded. c/ Marketable securities Marketable securities are recorded at the lower of cost and net realizable value (either average market price for the last month of the period, or period-end sales value, or estimated market value). d/ Foreign currency transactions Foreign currency revenues and expenses are recorded at the equivalent euro value at the date of the transaction. Cash, short term financial assets and debts and related off balance sheet financial instruments denominated in foreign currency are translated at period-end rates of exchange. The resulting currency translation adjustments are shown in the income statement. A reserve for potential foreign exchange losses is set up for unrealized foreign exchange losses that are not offset by corresponding unrealized foreign exchange gains, unless related financial instruments are used that qualify as a hedge and are such that no significant loss will arise when they mature. e/ Interest rate derivatives Gains and losses on these contracts are calculated and recognized to match the recognition of revenues and expenses on the hedged debt. f/ Accounting for liabilities In accordance with the Comité de Réglementation Comptable CRC regulation n dated December 7, 2000 on accounting for liabilities, Alcatel-Lucent records a liability only when it has a present obligation towards a third party and that it is probable or certain that the obligation will result in an outflow of resources without at least an offsetting equivalent inflow of resources. The obligation must exist at the period end in order for a provision to be recognized. g/ Bonds issued Bonds issued at a premium or with a reimbursement premium are recorded in liabilities for their total value, including the premiums. The contra-entry for such premiums is recorded in the balance sheet as an asset. The premiums are amortized on a straight-line basis over the life of the corresponding bonds. This amortization is accelerated in case of partial buy-backs of issued bonds. 14 Additional Information 2015 Alcatel Lucent

17 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts The fees and expenses linked to the issuance of bonds are recorded in the income statement on a straight-line basis over the life of the corresponding bonds. h/ Taxes Alcatel-Lucent and its subsidiaries, held directly or indirectly more than 95%, form a tax group as defined in Article 223 A of the French General Tax Code. Each company belonging to this French tax group calculates its income tax charge on the basis of its own tax results for the year. Alcatel-Lucent, as parent company of the French tax group, takes into account its own results and the tax consolidation entries when determining the tax group s taxable result. The income tax charge or income recorded in the income statement by Alcatel-Lucent consists of the following items: Š the difference between the y-1 income tax receivable owed by tax profitable subsidiaries (whose taxable income, including the offsetting of carry forward tax losses, has been determined on a stand-alone basis) and the payable booked against the Treasury with respect to the income tax due by the French tax group headed by Alcatel-Lucent for y-1; Š potential adjustments to prior years tax charges; and Š potential reserves for tax risks. Actuarial gains and losses due to experience adjustments and effects of changes in actuarial assumptions existing at December 31, 2003 were transferred to shareholders equity, as allowed by the Conseil national de la comptabilité s press release dated July 22, Actuarial gains and losses computed between January 1, 2004 and December 31, 2006 were recorded using the corridor method. Consequently they were recorded as an adjustment to the pension reserve and they are amortized if they exceed a given amount. As from 2007, all actuarial gains and losses are recognized in the income statement relating to the financial year as incurred. The recommendation put in place on the 7th of November 2013 by the French Accounting Principles Authority was applied, by anticipation, on the financial year beginning the 1st of January The resulting changes from this first application were treated in accordance with the norms relating to changes in accounting methods. The application of this recommendation consequently leads to immediate income statement recognition of the amendments during their period of occurrence. The expenses budgeted for the assets value are now calculated using the discount rate instead of the assets expected rate of return. Alcatel has also confirmed its application of the immediate recognition of actuarial gains and losses on the income statement. This change in policy has no impact on the opening of prior accounting periods. i/ Pensions As from January 1, 2004, Alcatel-Lucent applies the Conseil national de la comptabilité s regulation no R01 on pensions and other long-term benefits. Note Major events Alcatel-Lucent pursued its activity of parent company of the Group and year 2015 was marked by the following items: Š Public Exchange Offer by Nokia ( Nokia Offer ) for Alcatel-Lucent s securities On April 15, 2015, Nokia and Alcatel-Lucent announced their intention to combine to create an innovation leader in next generation technology and services for an IP connected world. The two companies entered into a memorandum of understanding under which Nokia will make an offer for all of the equity securities issued by Alcatel-Lucent, through a public exchange offer in France and in the United States, subject to certain conditions, on the basis of 0.55 of a new Nokia share for every Alcatel-Lucent share. The all-share transaction valued Alcatel-Lucent at 15.6 billion on a fully diluted basis, corresponding to a fully diluted premium of 34% (equivalent to 4.48 per share), and a premium to shareholders of 28% (equivalent to 4.27 per share), on the weighted average share price of Alcatel-Lucent for the three months preceding the announcement. This was based on Nokia s closing share price of 7.77 on April 13, Each company s Board of Directors has approved the terms of the proposed transaction. On June 17, 2015, Nokia and Alcatel Lucent announced that the U.S. Department of Justice had granted early termination of the antitrust waiting period for the contemplated combination of Nokia and Alcatel-Lucent. On October 19, 2015, Nokia received clearance from the Chinese Ministry of Commerce. On October 21, 2015, following the decision by the French Ministry of Economy to approve the proposed transaction, Nokia announced receipt of all required regulatory approvals to proceed with the filing of its public exchange offer. On November 18, 2015, following the clearance decision of Nokia Offer by the AMF, Nokia launched its public exchange offer for all outstanding shares, American depositary shares and OCEANE of Alcatel-lucent. The deadline for tendering Alcatellucent shares and OCEANE was on December 23, Alcatel Lucent Additional Information

18 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts On December 2, 2015, Nokia s shareholders in an Extraordinary General Meeting adopted the resolution related to the proposed acquisition of Alcatel-Lucent. During the second quarter of 2015, Alcatel-Lucent informed employees that the conditions attached to the stock-option and performance shares plans granted to them would be modified so that all vesting and performance conditions would be deemed satisfied at the acquisition date, should the employees agree to tender their Alcatel-Lucent shares to the project of future exchange offer by Nokia. A specific share package contingent upon the closing of the exchange offer was also granted to Mr. Michel Combes, the Group CEO until September 1, On September 10, 2015, the Board of Directors modified the initial share package and made the following decisions: performance units: the performances of the 2013 and 2014 years under the 2013 and 2014 plans have already been assessed and represent 1,025,649 vested performance units level of achievement will be evaluated at the beginning of 2016 by the Board of Directors and pro-rated to Mr. Michel Combes presence during 2015 (i.e. 2/3) representing a maximum of 444,444 performance units; and stock-options: March 2014 agreement to grant Mr. Michel Combes 700,000 stock-options was replaced by 350,000 Alcatel-Lucent shares level of achievement will be evaluated at the beginning of 2016 by the Board of Directors and pro-rated to Mr. Michel Combes presence during 2015 (i.e. 2/3) representing a maximum of 58,333 shares. Both performance units and stock-options will be settled in cash within the month following the assessment of the performances beginning of On July 29, 2015, the Board of Directors, upon recommendation of the Compensation Committee and the Corporate Governance and Nominations Committee, in order to ensure the protection of the Company, requested the execution of a non-compete agreement with Mr. Michel Combes. On September 10, 2015, the Board of Directors maintained the main terms of the non-compete agreement but the amount was reduced to 3.1 million which will be paid in three installments with the first payment on October 30, An expense of 4.1 million, including payroll taxes, was recorded. Š License agreements On April 1, 2015, we terminated certain former license agreements and entered into new license agreements with Qualcomm over a 6 to 10-year period. Total commitments amounted to $400 million (see Note 7). Š Disposal of Coralec shares We disposed of our Coralec shares to Alcatel-Lucent Participations (see Note 8). Note 3 Income statement analysis Net loss is analyzed below: (in millions of euros) Operating revenues Operating expenses (690.4) (444.0) Operating income (loss) (57.7) (33.8) Financial income (loss) 7, Income (loss) before non-recurring items and income tax 7, Non-recurring items (7,094.5) (110.2) Income tax Net income (loss) after tax Operating activities Revenues increased by 186 million at million (compared to million in 2014). This increase is mainly due to the reinvoicing of the R&D expenses as part of our Cost Sharing agreement. Operating revenues amounted to 633 million, including specific costs related to the exchange offer launched by Nokia transferred to non-recurring expenses. The increase of our operating expenses for 246 million is mainly related to the amount of the R&D expenses received ( 182 million) and specific expenses linked to the public exchange offer. 16 Additional Information 2015 Alcatel Lucent

19 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Financial income/(loss) - Non-recurring items Financial gain was 7,917.8 million in 2015 compared to a gain of million in 2014 essentially due to the dividends received and the change in the valuation of investments in subsidiaries. Non-recurring losses of 7,094.5 million were mainly related to the disposal of our Coralec shares to our fully-owned company Alcatel- Lucent Participations; the correlative release of financial reserve amounted to 7,078.6 million. Net change in financial reserves and depreciation The net change in financial reserves and depreciation resulted in a gain of 7,727.4 million in 2015 compared to a gain of million in 2014: (in millions of euros) (Increase) Write-back Net movement (Increase) Write-back Net movement Depreciation of investments in subsidiaries and associates (Note 8) (8,040.7) (7,717.0) (316.8) Depreciation of other financial investments and other financial assets (Note 9) - (10.2) (10.2) Depreciation of marketable securities Reserves for financial risks - (0.2) (0.2) (0.4) - (0.4) Depreciation other current assets (Note 15) Depreciation L.T. loans (Note 9) Others risks (Note 13) (0.2) - (0.2) Interest rate risk & Others (Note 13) - (0.2) (0.2) (0.2) - (0.2) Amortization of premiums on bonds TOTAL (8,051.1) (7,727.4) (317.2) Depreciation of investments in subsidiaries The 2015 net gain resulted from the re-assessment of the inventory values of each investment and the release of the reserve on Coralec shares. (See valuation exercise in Note 8). Depreciation of other financial investments The release of 10.2 million of other financial investments related mainly to the depreciation in the valuation of treasury stock recorded at the closing December stock market prices. Depreciation of marketable securities No movement was recorded in Reserves for financial risks 0.2 million was recorded regarding the valuation of receivable in US dollars at December 31, Financial interest Net income from financial products and interest was a gain of million compared to a gain of million in 2014, which was mainly due to: Š the effects of the debt restructuring ( 16 million), Š the variation in the deposits of the subsidiaries : additional financial interests from the loan granted to Alcatel- Lucent Participation for ( million) ; and reduced financial interests on the deposit from Alcatel- Lucent USA for ( 25.9 million). Income tax Income tax represented a net benefit of 29.3 million of which: an income tax benefit of 20.0 million generated by the French tax group and a research credit tax for 2015 of 9.3 million (see Note 5). Dividends Dividends received from subsidiaries decreased from million in 2014 to 11.8 million in 2015 (see Note 4). Alcatel Lucent Additional Information

20 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Note 4 Revenues from investments in subsidiaries and associates (in millions of euros) Subsidiaries Electro Banque Alcatel-Lucent Norway TOTAL Note 5 Income tax French tax group 12 French subsidiaries belonged at December 31, 2015 (see Note 23). Tax benefit (charge) breakdown The tax benefit is analyzed as follows: (in millions of euros) Pre-tax amount Tax benefit (charge) Pre-tax amount Tax benefit (charge) Operating income (loss) (57.7) 9.3 (33.8) 9.0 Financial income (loss) 7, Income (loss) before non-recurring items and income tax 7, Non-recurring items (7,094.5) (110.2) 15.3 French tax Group Total tax benefit (charge) , Net income (loss) after tax Note: non tax-deductible expenses defined in Article 39.4 of the French General Tax Code amounted 26.3 thousand in 2015 for tax expenses of 10 thousand. Note 6 Balance sheet Total assets increased to 24,359 million after the valuation of investments in subsidiaries at the end of Note 7 Intangible assets Gross value (in millions of euros) 12/31/2014 Increases (1) Decreases 12/31/2015 Goodwill Patents, trademarks, intellectual property rights (1) Intangible assets (1) On April 1, 2015, Alcatel-Lucent terminated certain license agreements and entered into new license agreements with Qualcomm for an amount of 335 million accounted for as intangible assets. 18 Additional Information 2015 Alcatel Lucent

21 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Amortization and depreciation (in millions of euros) 12/31/2014 Decreases Increases 12/31/2015 Goodwill (25.1) - - (25.1) Patents, trademarks, intellectual property rights (1) (134.9) - (43.1) (178.0) Intangible assets (160.0) - (43.1) (203.1) (1) Amortization of licenses from Qualcomm. Net value (in millions of euros) 12/31/2014 Increases Decreases 12/31/2015 Goodwill Patents, trademarks, intellectual property rights (43.1) Intangible assets (43.1) Note 8 Investments in subsidiaries and associates Gross value (in millions of euros) 12/31/2014 Increases Decreases 12/31/2015 Subsidiaries 39, (8,726.7) 30,346.0 Associates TOTAL 39, (8,726.7) 30,741.7 Depreciation (in millions of euros) 12/31/2014 Decreases Increases 12/31/2015 Subsidiaries (29,799.3) 8,040.7 (303.0) (22,061.6) Associates (373.6) - (20.7) (394.3) TOTAL (30,172.9) 8,040.7 (323.7) (22,455.9) Net value (in millions of euros) 12/31/2014 Increases Decreases 12/31/2015 Subsidiaries 9, ,040.7 (9,029.7) 8,284.4 Associates (20.7) 1.4 TOTAL 9, ,060.7 (9,050.4) 8,285.8 Gross value The decrease of 8,727 million is related to the disposal of our Coralec shares to Alcatel-Lucent Participations. Reserves for depreciation Changes in reserves for depreciation of investments in subsidiaries and associates during the year were the following: Increase in reserves for depreciation is related to Alcatel-Lucent Submarine Networks ( 296 million), Electro Banque ( 7 million) and Alcatel-Lucent Holding Gmbh ( 20 million). Release of depreciations is related to Alcatel-Lucent Participations ( million). Reserves for depreciation that are related to Alcatel-Lucent Participations and Alcatel-Lucent Submarine Networks were based on the recoverable value of the Alcatel- Lucent Group, estimated on the basis of the enterprise values of the different business divisions. The approach consists in calculating for each business division a fair value excluding debt and taxes, based on discounted future cash flows for the period 2016 to 2020 and on a discounted terminal value in The discount rate used of 9.50% (9.80% in 2014) is based on the weighted average cost of the Group s capital. The sum of these recoverable values, adjusted for consolidated net cash and other balance sheet items, such as tax assets and liabilities, financial assets and other non-operating assets and liabilities, constitutes the fair value of the Group. The enterprise value is then allocated between the participating interests held by Alcatel-Lucent Participations, and the other subsidiaries of which Alcatel-Lucent Submarine Networks. The value obtained for each entity is then compared to the historical book value of each investment and, where necessary, a reserve for depreciation is recorded. Alcatel Lucent Additional Information

22 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Given a certain degree of volatility in our industry, changes in the estimates or assumptions used to determine the recoverable value of each business division could, therefore, affect the valuation of the investments portfolio. Note 9 Receivables from subsidiaries and associates and other financial assets The changes during the year were as follows: Gross value (in millions of euros) 12/31/2014 Increases Decreases 12/31/2015 Alcatel-Lucent shares held Long-term loans to subsidiaries 8, , ,871.4 Other financial assets TOTAL 8, , ,136.1 Depreciation (in millions of euros) 12/31/2014 Decreases Increases 12/31/2015 Alcatel-Lucent shares held (222.7) (212.5) Long-term loans to subsidiaries Other financial assets (4.8) - - (4.8) TOTAL (227.5) (217.3) Net value (in millions of euros) 12/31/2014 Increases Decreases 12/31/2015 Alcatel-Lucent shares held Long-term loans to subsidiaries 8, , ,871.4 Other financial assets TOTAL 8, , ,918.8 Long-term loans to subsidiaries Loans granted to Alcatel-Lucent Participations increased 2,406 million during the financial year. Treasury stocks The market value of Alcatel-Lucent shares owned by the company amounts to 47.3 million based on the last stock market prices of December 2015 ( 37.1 million at December 31, 2014). 20 Additional Information 2015 Alcatel Lucent

23 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Note 10 Marketable securities, cash and short-term financial debt The net amounts of short-term financial assets and debts (including short-term advances to or from subsidiaries in the context of the Group s Treasury Convention, which appear in the balance sheet in Accounts receivable and other current assets or Other liabilities ) were as follows: (in millions of euros) Cash 2, ,543.0 Group s Treasury Convention with subsidiaries (see note 15) Total cash and cash equivalents (1) 3, ,932.6 Marketable securities (2) 1, ,070.4 Short-term part of bonds - - TOTAL SHORT-TERM FINANCIAL ASSETS 4, ,003.0 Short-term bonds - - Short-term bank loans and overdrafts - - Other short-term financial debt (24.7) (31.5) Group s Treasury Convention with subsidiaries (see note 15) (8,337.9) (7,233.5) TOTAL SHORT-TERM FINANCIAL DEBT (3) (8,362.6) (7,265.1) TOTAL (3,908.4) (3,262.1) (1) Including bank deposits and short-term advances to subsidiaries resulting from the Group s Treasury Convention. (2) Including monetary UCITS (3) Including bank loans and overdrafts and short-term advances from subsidiaries resulting from the Group s Treasury Convention. The change in Alcatel-Lucent s short-term financial assets and debts reflects a large volume of transactions undertaken by the parent company on behalf of its subsidiaries. Note 11 Market-related exposures Currency risks and interest rate risks are analyzed below. Currency risks As of December 31, 2015, off-balance sheet financial instruments, held for hedging purposes, were as follows: (in millions of euros) Within one year Purchaser/Lender Principal amount Between 1 and 5 years Over 5 years Forward exchange contracts 1, (1.2) Forward exchange swaps 5, Cross currency swaps Currency option contracts: Š Call Š Put Fair value Alcatel Lucent Additional Information

24 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts (in millions of euros) Within one year Principal amount Seller/Borrower Between 1 and 5 years Over 5 years Forward exchange contracts (1,044.7) - - 0,1 Forward exchange swaps (1,571.6) - - (44,7) Cross currency swaps Currency option contracts: Š Call Š Put Fair value Interest rate risks At December 31, 2015, off balance sheet financial instruments held to manage interest rate risks were as follows: (in millions of euros) Within one year Principal amount Between 1 and 5 years Over 5 years Interest rate swaps: Pay fixed rate Pay floating rate Fair value Liquidity risk and credit rating As of December 31, 2015, Alcatel-Lucent credit ratings were as follows: Rating Agency Corporate Family rating Long-term Debt Short-term Debt Outlook Last update of CFR/Debt Last update of the outlook Moody s B2 B2/B3 (1) Not prime Review for upgrade August 28, 2015 April 20, 2015 Standard & Poor s B+ B+ B Review for upgrade August 5, 2015 April 17, 2015 (1) The OCEANE 2018, the OCEANE 2019 and the OCEANE 2020 are rated B3; all other long term debt issued by Alcatel-Lucent is rated B2. Rating clauses affecting Alcatel debt at December 31, 2015 Given its current short-term ratings and the lack of liquidity of the French commercial paper ( billets de trésorerie ) market, Alcatel-Lucent has decided not to participate in this market for the time being. Alcatel-Lucent outstanding bonds do not contain clauses that could trigger an accelerated repayment in the event of a lowering of its credit ratings. Liquidity risk on the financial debt As of December 31, 2015, the Group considers that its available marketable securities, cash and cash equivalents and the available syndicated bank credit facility are sufficient to cover its operating expenses and capital expenditures and its financial debt requirements for the next twelve months. Alcatel-Lucent syndicated bank credit facility On December 17, 2013, Alcatel-Lucent closed a 504 million three-year revolving credit facility with a syndicate of 12 international banks. The availability of this instrument is not dependent upon Alcatel-Lucent Credit Ratings. The availability of this facility is dependent upon Alcatel-Lucent meeting a financial covenant linked to its capacity to cover its interest charges. This credit facility was undrawn as of December 31, The syndicated bank facility signed in April 5, 2007 was cancelled following the closing of the Alcatel-Lucent USA Inc. Senior Secured Facility in January Additional Information 2015 Alcatel Lucent

25 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Note 12 Shareholders equity The changes in shareholders equity during the year 2015 were as follows: (in millions of euros) Number of shares outstanding Capital Additional Paid-in capital Legal reserve Statutory reserves Other reserves Retained earnings Net income for the period Total shareholders equity At December 31, 2014 before appropriation 2,820,432, ,928, , (13,196.9) ,000.2 Appropriation of net income (loss) (890.1) - Increases in capital: Š conversion of convertible bonds 173,073, Š subscriptions 4,236, (0.2) Š stock options exercised 38,595, Net income (loss) for the year At December 31, 2015 before appropriation 3,036,337, , , (12,306.8) ,168.7 Appropriation of net income (loss) (proposal) (794.9) - Dividend to be distributed relating to 2015 (proposal) At December 31, 2015 after appropriation (proposal) 3,036,337, , , (11,511.9) - 12,168.7 Capital stock, consisting of 3,036,357,359 ordinary shares of nominal value 0.05, amounted to million at the end of The distributable income comprises the net income of the year reduced by any losses brought forward and by any legal or statutory appropriations to reserves and increased by any positive retained earnings. In addition, the Shareholders Meeting is allowed to decide the distribution of available reserves and additional paid in capital. However, the legal reserve, unavailable reserves resulting from the enforcement of laws or company by-laws and revaluation reserves cannot be distributed. In view of the above-mentioned proposed appropriation for 2015, distributable reserves amounted to 11,647.3 million. Note 13 Reserves for liabilities and charges The movements on reserves for liabilities and charges in 2015 were as follows: (in millions of euros) 12/31/2014 Increases (Write-backs) (Utilizations) 12/31/2015 Reserve for unrealized foreign exchange losses (0.2) Reserve for financial risks (Note 4) Reserves for litigation, guarantees given on investments sold and other reserves 4.4 (1) 0.4 (1.0) Reserves for pensions and retirement indemnities (Note 17) (4.3) Reserves for risks relating to subsidiaries TOTAL (5.5) Income statement impact: Š operating income (loss) 2.5 (5.3) - Š financial income (loss) - (0.2) - Š non-recurring income (loss) (1) At December 31, 2015, the 3.7 million of Reserves for litigation, guarantees given in investment sold and other reserves consisted essentially of 3.4 million Saft liability guarantee. Alcatel Lucent Additional Information

26 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Note 14 Bonds At December 31, 2015, outstanding Alcatel-Lucent bonds amounted to 1,676.7 million compared to 1,969.8 million at December 31, These amounts are analyzed as follows: (in millions of euros) 12/31/2014 Conversion of bonds into shares Repayment New issuances 12/31/2015 Convertible bonds Š Senior Notes 8.50 % - 195M (1) due January (1.7) Š OCEANE 4.25% M due July 2018 (2) (211.4) Š OCEANE 0.00% M due 2019 (3) (48.9) Š OCEANE 0.125% M due 2020 (4) (31.1) TOTAL 1,969.8 (291.4) (1.7) - 1,676.7 (1) Guaranteed by Alcatel-Lucent USA Inc. and certain subsidiaries of Alcatel-Lucent. (2) Conversion 117,427,501 notes in shares as part of the exchange offer launched by Nokia. (3) Conversion 11,891,116 notes in shares as part of the exchange offer launched by Nokia. (4) Conversion 7,729,972 notes in shares as part of the exchange offer launched by Nokia. Note 15 Analysis by maturity date of liabilities and receivables and other current assets (in million of euros) Amount at 12/31/2015 Less than one year 1-5 years After 5 years Out of which accruals Financial debt Š convertible bonds (OCEANE) 1, , Š other bonds Š bank loans and overdrafts Š other financial debt 1, Tax and social liabilities Other liabilities (after appropriation) 9, , TOTAL LIABILITIES 12, , , Analysis of other liabilities at December 31, 2015 (in million of euros) Amount at 12/31/2015 Amount at 12/31/2014 Advances from subsidiaries - Group s Treasury Convention 8, ,233.5 Accounts payable (1) Other TOTAL 9, ,669.1 (1) In the total amount of vendors 18% are payable in 30 days and 82% are payable over 30 days. 24 Additional Information 2015 Alcatel Lucent

27 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts (in millions of euros) Receivables Amount at 12/31/2015 Less than one year 1-5 years After 5 years Out of which accruals Tax and social receivables Other accounts receivable and other current assets TOTAL Analysis of other accounts receivable and other current assets at december 31, 2015 (in million of euros) Amount at 12/31/2015 Amount at 12/31/2014 Advances to subsidiaries - Group s Treasury Convention Receivables Other Total Note 16 Related party transactions Outstanding balances at December 31, 2015 arising from related party transactions were as follows: (in millions of euros) Investments and other non-current assets Net balance sheet amount Of which consolidated or related companies Š Investments in subsidiaries and associates 8, ,285.8 Š Due from subsidiaries and associates - - Š Other financial assets (1) 10, ,864.7 Š Other investments Accounts receivable Marketable securities/cash 4, Financial debt Š Convertible bonds and other bonds 1, Š Bank loans and overdrafts Š Other financial debt 1, ,210.1 Tax and social liabilities 9, ,607.2 Other liabilities (after appropriation) - - (1) Of which 10,218.6 million loans granted to Alcatel-Lucent Participations. Related party transactions for the period were as follows: (in millions of euros) Financial income (loss) Net income statement amount Of which consolidated or related companies Š Revenues from investments in subsidiaries and associates Š Interest income and similar revenues Š Interest expenses and similar expenses (204.3) (114.1) Š Other financial income (loss) 7, ,727.1 No transaction has been concluded out of normal market conditions with related parties. Alcatel Lucent Additional Information

28 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Note 17 Pensions and retirement indemnities At December 31, 2015, Alcatel-Lucent s pensions and retirement indemnity obligations were either reserved (the reserve amounts to 31.3 million - see Note 13) or were covered by insurance contracts. The recommendation put in place on the 7th of November 2013 by the French Accounting Principles Authority was applied, by anticipation, on the financial year beginning the 1st of January The resulting changes from this first application were treated in accordance with the norms relating to changes in accounting methods. The application of this recommendation led to immediate recognition in the income statement of the amendments during their period of occurrence. The expenses budgeted for the assets value are now calculated using the discount rate instead of the assets expected rate of return. Alcatel-Lucent has also confirmed its application of the immediate recognition of actuarial gains and losses in the income statement. This change in policy had no impact on the opening of prior accounting periods. The actuarial assumptions used are as follows: Discount rate 2,00% Future salary increases including inflation rate, by age : Š Less year 44 years old : 10,00% Š Between 40 and 44 : 9,00% Š Between 45 and 49 : 6,00% Š Between 50 and 54 : 5,00% Š Between 55 and 59 : 3,50% Š More 59 years old : 0,00% The discount rate used is obtained by reference to market yields on high quality bonds (government and prime-rated corporations - AA or AAA) having maturity dates equivalent to those of the plans. Components of net periodic benefit (cost) of post-employment benefit plans are: (in millions of euros) Service cost (1.6) Interest cost (1.5) Interest income 0.9 Amendments - Recognized actuarial gain/(loss) 4.3 Effect of curtailments - Effect of settlements - Effect of adjustment on net assets - Net periodic benefit (cost) Additional Information 2015 Alcatel Lucent

29 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts The change in the obligation recorded in the balance sheet was as follows: (in millions of euros) Change in benefit obligation Benefit obligation at January 1 (86.6) Service cost (1.6) Interest cost (1.5) Plan participants contributions - Amendments - Curtailments - Settlements 3.5 Special termination benefits - Actuarial (gains) and losses 4.6 Benefits paid - Benefit obligation at December 31 (81.5) Benefit obligation excluding effect of future salary increases (80.6) Effect of future salary increases (0.9) Benefit obligation at December 31 (81.5) Change in plan assets Fair value of plan assets at January Interest income 0.9 Actuarial gains and (losses) (0.3) Employer s contributions - Plan participants contributions - Amendments - Curtailments - Settlements (3.5) Benefits paid/special termination benefits - Fair value of plan assets at December Present value of defined benefit obligations that are wholly or partially funded (81.5) Fair value of plan assets 50.2 Funded status of defined benefit obligations that are wholly or partially funded (31.3) Present value of defined benefit obligations that are wholly unfunded - Funded status (31.3) Net amount recognized (31.3) The plan assets of retirement plans were invested as follows: (in millions of euros and percentage) Market value % Bonds % Equity securities 1.7 3% Short-term investments 1.8 4% Property assets 3.5 7% TOTAL % Alcatel Lucent Additional Information

30 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Note 18 Contractual obligations and disclosure related to off-balance sheet commitments Presentation of here below financing commitments does not preclude the existence of significant off-balance sheet commitments in accordance with accounting principles. Other commitments Alcatel-Lucent has also given the following guarantees with regard to the Group s general operations: (in millions of euros) Amount at 12/31/2015 Less than one year 1-5 years After 5 years Guarantees granted to subsidiaries or other Group companies Assets pledged to secure Alcatel-Lucent s financial debt Guarantees given on: Š commercial contracts 1, Š loans 1, , Š other items TOTAL 3, , The guarantees given on commercial contract ( 1,663.4 million) included guarantees on businesses sold or contributed to Thales ( 46.9 million) for which Alcatel-Lucent received a counter-guarantee from the purchaser. Guarantees received (in millions of euros) Amount at 12/31/2015 Less than one year 1-5 years After 5 years Credit facility TOTAL Note 19 Contingencies In addition to legal proceedings incidental to the conduct of its business (including employment-related collective actions in France and the United States) which management believes are adequately reserved against in the financial statements (see Note 25e to the consolidated financial statements) or will not result in any significant costs to the Group, Alcatel-Lucent is involved in the following legal proceedings. a/ Governmental actions and investigations Costa Rican Actions In early October 2004, Alcatel-Lucent learned that investigations had been launched in Costa Rica by the Costa Rican prosecutors and the National Congress, regarding payments made by consultants allegedly on behalf of Alcatel CIT (CIT), a French subsidiary now called Alcatel-Lucent International, or other Alcatel-Lucent subsidiaries to various public officials in Costa Rica, two political parties in Costa Rica and representatives of Instituto Costarricense de Electricidad (ICE), the state-owned telephone company, in connection with the procurement by CIT of several contracts for network equipment and services from ICE. Alcatel-Lucent settled the Attorney General s social damages claims in return for a payment by CIT of approximately U.S.$10 million. On June 30, 2015, Alcatel-Lucent, Alcatel-Lucent International (that is, the former CIT) and Alcatel-Lucent Trade International AG signed a settlement agreement with ICE in full and final settlement of all litigation between the parties, and more specifically the following court proceedings: Š civil claim filed by ICE against CIT, among others, in the context of the criminal proceedings brought against various Costa Rican individuals as a consequence of the 2004 bribery allegations; Š claim filed by CIT against ICE in October 2008 regarding ICE s termination of the contract for CIT to install 400,000 GSM cellular telephone lines (the 400KL GSM contract ); and Š civil claim filed by ICE in May 2012 against Alcatel-Lucent, CIT and Alcatel-Lucent Trade International AG for damages on the basis of the corruption matter that was investigated by and settled with the Costa Rican and the United States authorities. 28 Additional Information 2015 Alcatel Lucent

31 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts As part of the settlement agreement, Alcatel-Lucent International agreed to pay ICE a total settlement amount of U.S.$10 million, through a combination of a cash payment and of set-off against certain accounts receivable. ICE and Alcatel- Lucent filed joint requests with the various Costa Rican Courts seeking dismissal of the three cases. The parties also requested the Court handling the claim relating to the 400KL GSM contract to release and transfer to Alcatel- Lucent International the U.S.$ 15 million performance bond posted by it that had been held in an escrow account by the Court. This amount was fully paid to Alcatel-Lucent International in August All three cases were dismissed by the respective competent Court. There is no longer any pending litigation with ICE concerning the 2004 bribery allegations in Costa Rica or anywhere else. Investigation and action in France French authorities are carrying out investigations into certain conduct by Alcatel-Lucent and/or its subsidiaries in Costa Rica and French Polynesia. With respect to Costa Rica, the French authorities are conducting an investigation with regard to alleged acts of corruption prior to 2004 (the same events that gave rise to criminal procedures in both Costa Rica and the United States and that were settled prior to 2012). The matter with respect to French Polynesia concerns the conduct of Alcatel-Lucent s telecommunication submarine system subsidiary, Alcatel-Lucent Submarine Networks (ASN), and certain former employees of Alcatel-Lucent in relation to a project for a telecommunication submarine cable between Tahiti and Hawaii awarded to ASN in 2007 by the state-owned telecom agency of French Polynesia (OPT). On September 23, 2009, four of those former employees were placed under formal investigation on suspicion of being accomplices to alleged favoritism in connection with the award by OPT of this public procurement project. On November 23, 2009, ASN was placed under formal investigation on suspicion of benefitting from favoritism. In March 2011, several current or former public officials of French Polynesia were placed under formal investigation on suspicion of either favoritism or being accomplices to favoritism. In a decision dated February 6, 2014, the investigating magistrate determined that ASN has to stand trial for allegedly benefitting from favoritism, which trial took place in early February of A decision is expected by the end of March If ASN were convicted of a criminal violation, the French court could, among other things, fine ASN and/or ban it from participating in French public procurement contracts for a certain period. ASN generated 8 million euros of revenues from French public procurement contracts in Accordingly, Alcatel-Lucent does not believe that a loss of business as a result of such a ban would have a material effect on the Alcatel- Lucent group as a whole. Investigations in Nigeria On February 21, 2013, we were advised that the Nigerian anticorruption authorities had commenced an investigation regarding the alleged mismanagement of the National Rural Telephony Project and the involvement of Alcatel-Lucent Nigeria Ltd (ALU Nigeria) and other vendors in such project. Our Chinese joint venture, Alcatel-Lucent Shanghai Bell (ASB), entered into a contract with the Nigerian government for Phase I of this project on June 5, By an amendment dated April 4, 2003, the contract was assigned to a consortium including ASB and a state-owned Chinese engineering company named China National Machinery and Equipment Import and Export Corporation (CMEC). ALU Nigeria was not a party to the consortium, but acted as a subcontractor for the project. Phase I of this project was accepted by the Nigerian government. On December 27, 2006, ASB and CMEC entered into a contract with the Nigerian government for Phase II of this project, and our portion of the contract was assigned to CMEC on February 1, Phase II of the project was never performed due to a lack of financing. We still do not have any more detail as to the nature of the alleged mismanagement. We are cooperating with this investigation and we conducted an internal review into this matter. b/ Other proceedings Legal proceeding on the pension fund in the Netherlands Upon termination of the administration agreement relating to the pension fund for the Alcatel-Lucent employees in the Netherlands on December 31, 2011, the pension fund administrator filed a claim against our Dutch subsidiary with the District Court in The Hague for up to 182 million in damages to compensate it for the wind-up costs allegedly to be incurred due to such termination. On October 11, 2012, the District Court dismissed the claim entirely. The pension fund filed an appeal with the Court of Justice in The Hague on January 8, 2013, increasing its principal claim to a maximum amount of 276 million, and asserting several alternative claims for lower amounts, the lowest amount being 14 million. On September 9, 2014, the Court of Justice upheld the District Court s decision to dismiss the lawsuit. On December 9, 2014 the pension fund filed a cassation request (to set aside the decision) with the Dutch High Council. A decision by the Council is expected in the second quarter of No reserve has been booked in this matter. c/ Effect of the various proceedings Governmental investigations and legal proceedings are subject to uncertainties and the outcomes thereof are difficult to predict. Consequently, Alcatel-Lucent is unable to estimate the ultimate aggregate amount of monetary liability or financial impact with respect to these matters. Because of the uncertainties of government investigations and legal proceedings, one or more of these matters could ultimately result in material monetary Alcatel Lucent Additional Information

32 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts payments by Alcatel-Lucent beyond those to be made by reason of the various settlement agreements described in this Note. Except for these governmental investigations and legal proceedings and their possible consequences as set forth above, the Company is not aware, as of the date this document is being published, of any legal proceeding or governmental investigation (including any suspended or threatened proceeding) against Alcatel-Lucent and/or its subsidiaries that could have a material impact on the financial situation or profitability of the Group. No significant new litigation has been commenced since December 31, Note 20 Compensations of directors and executive officers Directors fees for 2015 amounted to 1.1 million. The 2015 compensations paid by Alcatel-Lucent to executive officers amounted to 2.8 million. Note 21 Statutory auditors fees The amount of fees of our Statutory Auditors for the year ended December is not incorporated into the Notes to the parent company statutory accounts. However. the unaudited amount of audit fees is disclosed in section of the 20-F that is available on Internet at Note 22 Events after the statement of position date On January 4, 2016, the French financial regulator, the Autorité des marchés financiers (the AMF ), published the interim results of the public exchange offer initiated by Nokia for all outstanding ordinary shares, ADSs and OCEANE convertible bonds of Alcatel-Lucent, in exchange for Nokia shares or Nokia American depositary shares (the Nokia Offer ) and declared that the Nokia Offer was successful. On January 7, 2016, Nokia announced that its public exchange offer for Alcatel-Lucent securities in France and in the United States closed, that its new shares were entered into the Finnish Trade Register and that Nokia was included in the CAC 40 index. On January 8, 2016, the newly constituted Board of Directors of Alcatel-Lucent decided to terminate Alcatel-Lucent s program for ADSs following the closing of the initial Nokia Offer and to seek the delisting of Alcatel-Lucent s ADSs from The New York Stock Exchange following the closing of the reopened Offer. On January 11, 2016, Alcatel-Lucent announced that Alcatel- Lucent USA Inc. will exercise its option to redeem in full the entire outstanding $700 million principal amount of its 6.750% Senior Notes due 2020, the entire outstanding $500 million principal amount of its 8.875% Senior Notes due 2020, and the entire outstanding $650 million principal amount of its 4.625% Senior Notes due The Notes will be redeemed in full on February 10, 2016 at a make-whole redemption price. The make-whole amount is 110 million (U.S.$120 million). Nokia will provide a revolving credit liquidity support facility to Alcatel- Lucent concurrently with the redemption of the Notes. On January 15, 2016, which was the maturity date, Alcatel- Lucent repaid the 190 million outstanding under its 8.50% Senior Notes. On February 3, 2016, Nokia Corporation and Alcatel Lucent USA Inc. entered into a U.S.$2 billion Revolving Liquidity Support Facility divided in the following three tranches: Facility A, for U.S.$686 million with a maturity date of June 30, 2017, Facility B for U.S.$546 million, with a maturity date of December 31, 2019; and Facility C for U.S.$768 million, with a maturity date November 15, Applicable interest rate is 2.40% per annum on drawn amounts. The commitment fee is 30% of 2.40% on undrawn amounts available for drawing. On February 4, 2016, we sent a termination notice on our 504 million revolving credit facility we entered into December 17, On February 4, 2016, Qualcomm notified us that they were exercising their right to terminate one of our two license agreements (that were signed on April 1, 2015) with immediate effect upon the closing of the Nokia Offer. Pursuant to the license agreement, Qualcomm had the right to terminate the license agreement upon a change of control. The termination resulted in the acceleration of all remaining unpaid quarterly royalty payments of 278 million (U.S.$302.5 million) payable to Qualcomm within 30 days of termination. The full carrying amount of the patent rights recognized in other intangible assets will be impaired for 287 million in the first quarter ended March 31, We will now be covered by the license agreement in effect between Nokia and Qualcomm. On February 10, 2016, the AMF published the results of the reopened Nokia Offer for Alcatel-Lucent securities in France and in the United States. 426,695,572 Alcatel-Lucent ordinary shares, 52,286,499 ADSs, 4,795,096 OCEANE 2018 convertible bonds, 19,971,720 OCEANE 2019 convertible bonds, and 56,644,832 OCEANE 2020 convertible bonds were 30 Additional Information 2015 Alcatel Lucent

33 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts tendered into the reopened Nokia offer in France and/or in the U.S. The settlement of the reopened Nokia Offer occurred on February 12, The ownership of Nokia in Alcatel-Lucent corresponding to the numbers initially announced as resulting in Nokia holding 91.25% of the Alcatel-Lucent share capital and at least 91.17% of the voting rights, 99.62% of the outstanding OCEANE 2018 convertible bonds, 37.18% of the outstanding OCEANE 2019 convertible bonds, and 68.17% of the outstanding OCEANE 2020 convertible bonds, and on a fully diluted basis 88.07% of the share capital, was corrected afterwards. As a result, immediately following the settlement of the reopened Nokia Offer, Nokia held 90.34% of the share capital and at least 90.25% of the voting rights of Alcatel- Lucent, corresponding to 87.33% of Alcatel-Lucent s shares on a fully diluted basis. On March 21, 2016, the 421,910 OCEANE 2018 remaining outstanding were redeemed in full. On March 22, 2016, with respect to French Polynesia concerns, the Tribunal of Papeete acquitted all defendants for lack of evidence as to the existence of any unlawful act. The prosecutor has filed an appeal of the decision. Further to the reopened Offer, 207,585,358 OCEANE 2018, 46,274,021 OCEANE 2019 and 22,899,206 OCEANE 2020 were converted or repaid. As of March 31, 2016, the remaining outstanding OCEANE 2019 amount to 367 million and the remaining outstanding OCEANE 2020 amount to 109 million. On April 13, 2016, Nokia Corporation and Alcatel-Lucent Participations entered into a 1 billion Revolving Credit Facility for a two-year term. Applicable interest rate is EURIBOR plus a 0.95% margin per annum on drawn amounts. A utilization fee of 0.10%, 0.20% or 0.40% per annum depending on the level of use of the facility, is also applicable. There is a commitment fee of 35% of 2.40% on available undrawn amounts. Note 23 Information related to subsidiaries and associates (in millions of euros) Capital stock at year-end Components of shareholders equity other than capital stock (1) Alcatel- Lucent percentage of ownership (%) Gross value of investments held Net book value of investments held Outstanding loans and advances Guarantees given Net sales (1) Net income (loss) (1) Dividends received in 2014 by Alcatel- Lucent Detailed information relating to subsidiaries and associates with book value in excess of 1% of Alcatel-Lucent s capital stock Subsidiaries (at least 50% of capital stock held by Alcatel-Lucent) Electro Banque - 148/152 route de la Reine Boulogne-Billancourt Alcatel-Lucent Submarine Networks - 148/152 route de la Reine Boulogne-Billancourt , Alcatel-Lucent Participations -148/152 route de la Reine Boulogne-Billancourt 1, , , , , Alcatel-Lucent Norway AS Martin Linges vei SNAROYA(Nw) (1) Last financial year audited (2014) (in thousands of euros) Number of shares held Net book value Alcatel- Lucent percentage of ownership Alcatel- Lucent Group percentage of ownership I - Investment in subsidiaries and associates Alcatel-Lucent International (TG) 625, Electro Banque (TG) 10,600, , Alcatel-Lucent Holding GmbH (Deutschland) Alcatel-Lucent Submarine Networks (TG) 37,337, , Alcatel-Lucent Norway 1,600,000 18, Alcatel-Lucent Participations (TG) 120,036,232 7,073, Electro Re 7,000 5, Other II - Other financial investments Alcatel-Lucent 13,005,087 47, III - Investments in real estate companies (TG) Subsidiary belonging to the French tax group. Alcatel Lucent Additional Information

34 2 PARENT COMPANY STATUTORY ACCOUNTS Notes to the annual statutory accounts Five-year summary of financial data Capital stock at year end a) Capital stock (in thousands of euros) 151, , ,428 4,653,128 4,650,767 b) Number of shares 3,036,337,359 2,820,432,270 2,808,554,197 2,326,563,826 2,325,383,328 c) Number of new shares to be issued by conversion of bonds 628,147, ,378, ,912, ,636, ,543,871 Results (in thousands of euros) a) Revenues from investment portfolio 11, ,956 11,994 69,753 59,043 b) Income (loss) before tax, depreciation, amortization and provisions (6,851,613) 383,973 (212,927) 93,403 (2,452,870) c) Income tax 29,363 46,200 24,950 28,082 41,193 d) Employee profit sharing e) Income (loss) after tax, depreciation amortization and provisions 794, ,086 1,909,568 (2,894,686) (1,316,134) f) Dividends (including distribution tax) (1) Earnings per Share (in euros) a) Income (loss) after tax, but before depreciation amortization and provisions (2.25) 0.15 (0.07) 0.05 (1.04) b) Income (loss) after tax, depreciation amortization and provisions (1.24) (0.57) c) Dividend attributable to each Share having a nominal value of Personnel a) Average number of staff employed during the year b) Payroll (in thousands of euros) 11,992 7,861 11,931 4,786 6,579 c) Social security and employee benefits (in thousands of euros) 3,844 25,727 3,244 1,106 2,273 (1) Proposed. 32 Additional Information 2015 Alcatel Lucent

35 PARENT COMPANY STATUTORY ACCOUNTS Statutory Auditors report on the annual financial statements of Alcatel Lucent for the year ended December 31, Statutory Auditors report on the annual financial statements of Alcatel Lucent for the year ended December 31, 2015 This is a free translation into English of the statutory auditors report issued in French and is provided solely for the convenience of English speaking users. The statutory auditors report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the opinion on the financial statements and includes an explanatory paragraph discussing the auditors assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the financial statements. This report also includes information relating to the specific verification of information given in the management report and in the documents addressed to shareholders. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. To the Shareholders, In compliance with the assignment entrusted to us by your Shareholders Meeting, we hereby report to you, for the year ended December 31, 2015, on: Š the audit of the accompanying annual financial statements of Alcatel Lucent, Š the justification of our assessments; Š the specific verification and information required by law. The annual financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit. I Opinion on the financial statements We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the annual financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company as at December 31, 2015 and the results of its operations for the year then ended, in accordance with French accounting principles. II Justification of our assessments In accordance with the requirements of article L of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring to your attention the following matter: Š The carrying value of investments presented under assets on the balance sheet amounts to 8,285.8 million as of December 31, The carrying value of these investments is derived notably from a valuation of the Alcatel Lucent Group based on the recoverable value of the various product divisions. The approach lies in estimating, for each product division, a value free of debt and tax, based on discounted free cash flows projected for the years 2016 until 2020 and a 2020 discounted terminal value. We assessed the appropriateness of the methodology disclosed in notes 1.b1 and 8 to the annual financial statements, reviewed the data and assumptions used for its implementation and accordingly determined the reasonableness of these estimates. Alcatel Lucent Additional Information

36 2 PARENT COMPANY STATUTORY ACCOUNTS Statutory Auditors report on the annual financial statements of Alcatel Lucent for the year ended December 31, 2015 This assessment was made as part of our audit of the annual financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report. III Specific verifications and information We have also performed, in accordance with professional standards applicable in France, the specific verifications required by French law. We have no matters to report as to the fair presentation and the consistency with the annual financial statements of the information given in the Board of Directors report and in the documents addressed to shareholders with respect to the financial position and the annual financial statements. Concerning the information given in accordance with the requirements of article L of the French Commercial Code (Code de commerce) relating to remunerations and benefits received by the directors and any other commitments made in their favour, we have verified its consistency with the financial statements, or with the underlying information used to prepare these financial statements and, where applicable, with the information obtained by your company from companies controlling your company or controlled by it. Based on this work, we attest the accuracy and fair presentation of this information. In accordance with French law, we have verified that the required information concerning the purchase of investments and controlling interests and the identity of the shareholders and holders of the voting rights have been properly disclosed in the Board of Directors report. Neuilly-sur-Seine and Paris-La Défense, April 27, 2016 The statutory auditors French original signed by DELOITTE & ASSOCIES Bertrand Boisselier ERNST & YOUNG et Autres Frédéric Martineau 34 Additional Information 2015 Alcatel Lucent

37 PARENT COMPANY STATUTORY ACCOUNTS Statutory Auditors special report on regulated agreements and commitments 2.5 Statutory Auditors special report on regulated agreements and commitments This is a free translation into English of the Statutory Auditors special report on regulated agreements and commitments with third parties that is issued in the French language and is provided solely for the convenience of English speaking readers. This report on regulated agreements and commitments should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. It should be understood that the agreements reported on are only those provided by the French Commercial Code and that the report does not apply to those related party transactions described in IAS 24 or other equivalent accounting standards. To the Shareholders, In our capacity as statutory auditors of your Company, we hereby report to you on regulated agreements and commitments. The terms of our engagement require us to communicate to you, based on information provided to us, the principal terms and conditions of those agreements and commitments, and the reasons put forward for their benefit to the Company, brought to our attention or which we may have discovered during the course of our audit, without expressing an opinion on their usefulness and appropriateness or identifying such other agreements and commitments, if any. It is your responsibility, pursuant to article R of the French Commercial Code (Code de commerce), to assess the interest involved in respect of the conclusion of these agreements and commitments for the purpose of approving them. Our role is also to provide you with the information stipulated in article R of the French Commercial Code (Code de commerce) relating to the implementation during the past year of agreements and commitments previously approved by the Shareholders Meeting, if any. We conducted the procedures we deemed necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) relating to this engagement. Those procedures consisted in verifying the information provided to us with the relevant source documents. AGREEMENTS AND COMMITMENTS SUBMITTED TO THE APPROVAL OF THE SHAREHOLDERS MEETING 1. Agreements and commitments authorized during the year Pursuant to article L of the French Commercial Code, the following agreements and commitments, which were previously authorized by the Board of Directors, have been brought to our attention. Waiver of the presence condition and of the performance conditions related to the Performance Units plans of Mr. Michel Combes, resigning as Chief Executive Officer effective September 1, In connection with the Nokia Offer, the Company s Board of Directors decided, at its meeting of April 14, 2015, the principle of the acceleration of the Performance Units granted to Mr. Michel Combes and their payment with Company shares, including the waiver of the presence condition and of the future performance conditions related to the long-term compensation for 2013, 2014 and 2015 Performance Units, subject, in particular, to the completion of the Nokia Offer. After taking into account the new and exceptional circumstances of the contemplated transaction with Nokia, the Board of Directors considered that the waiver of the vesting and holding conditions applicable, under specific conditions, to long-term compensation plans of Group employees, as decided on the same day, should also apply to the Performance Units plans granted to Mr. Michel Combes. At its meeting held on September 10, 2015, the Board of Directors reviewed the elements of Mr. Michel Combes long-term compensation in light of the recommendations issued by the High Committee for Corporate Governance. Consequently, the Board of Directors reconsidered the treatment of Mr. Michel Combes Performance Units and decided that their acquisition are only related to the periods prior to his departure, meaning they are prorated. The number of granted Performance Units and the related amount paid in cash, after the review by the Board of Directors held on September 10, 2015 and February 10, 2016, are the following: Š for the 2013 and 2014 fiscal years of the 2013 and 2014 plans: 1,025,649 Performance Units for an amount of 3,251,307; Š for the 2015 fiscal year of the 2013 plan: 288,889 Performance Units for an amount of 915,778, it being specified that no 2014 Performance Units were vested for fiscal year Alcatel Lucent Additional Information

38 2 PARENT COMPANY STATUTORY ACCOUNTS Statutory Auditors special report on regulated agreements and commitments Non-compete indemnity granted in favor of Mr. Michel Combes, resigning as Chief Executive Officer effective September 1, 2015 At its meeting held on July 29, 2015, the Board of Directors decided, upon the recommendation of the Compensation Committee and the Corporate Governance and Nominating Committee, to ask for the signature of a non-compete agreement with Mr. Michel Combes in the context of the termination of his functions as CEO ; the Board of Directors considered, in consideration of Mr. Michel Combes expertise in the field of Telecommunications and the experience he acquired within your company, it was in your Company s interest to sign such an agreement in order to protect Company s interests. The Board of Directors of Alcatel Lucent, at its meeting held on September 10, 2015, confirmed the importance of the non-compete agreement, and decided the following: Š The amount of the non-compete indemnity was set at 3,100,000, to be paid in three installments over a period of three years and with a first payment in November 2015; Š The duration of the non-compete agreement was set at 40 months, that is until December 31, 2018; Š This amount will be reduced by an amount corresponding to the employee portion of the social charges owed by the Company on behalf of Mr. Michel Combes on the date of payment. 2. Agreements and commitments authorized since the year-end closing The following agreement, authorized since the year-end closing, and previously authorized by the Board of Directors, has been brought to our attention. Master Services Agreement entered into with Nokia Corporation, a shareholder holding more than 10% of the Company s voting rights. On January 8, 2016, upon the recommendation made by the Committee of Independent Directors of Alcatel Lucent, the Board of Directors approved the signature by Alcatel Lucent of a Master Services Agreement (the MSA ) with Nokia Corporation to implement integration plans and have each company commit to provide the other company, or to ensure that their respective subsidiaries provide to the other company or its subsidiaries, with management services and other services according to the terms and conditions of the agreement, in particular brand cross-licensing and transfer of intellectual property. This master agreement states that services are to be provided at arm s length conditions, including fair and proportional allocation of commitments and revenues between Alcatel Lucent and Nokia (and their respective subsidiaries), and of synergies realized by the parties, including synergies achieved through product portfolio decisions. The pricing mechanisms applicable under this agreement are in line with the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations issued by the Organization for Economic Co-operation and Development (OECD). This agreement also contains provisions protecting the Alcatel Lucent Group from any significant increase in costs or fees incurred in connection with this agreement. In addition, the MSA provides for specific information rights to the members of your Company s Committee of Independent Directors. This agreement was entered into, on January 8, 2016, for a twelve-month period, and is automatically renewable for similar periods, except that it may be terminated by either party at any time with three-months prior notice. The Board of Directors considered that the purpose of this agreement is to give further effect to the strategic combination of Alcatel Lucent and Nokia, to enable synergies to be generated and distributed among the Alcatel Lucent group and the Nokia group and, as long as the Company s shares remain listed on a regulated market and/or to the extent that there are minority interests in your Company, to ensure that the services to be provided are clear and understandable, in the interest of your Company, on an arm s length basis, and that they do not infringe the right of the minority shareholders of your Company, given that your Company is, from then on, controlled by Nokia. Persons concerned: Mr. Risto Siilasmaa, Mr. Rajeev Suri, Mr. Timo Ihamuotila and Mr. Samih Elhage, and Mrs. Maria Varsellona, Directors of Alcatel Lucent appointed by Nokia Corporation, a shareholder holding more than 10% of your Company s voting rights. AGREEMENTS AND COMMITMENTS PREVIOUSLY APPROVED BY THE SHAREHOLDERS MEETING 1. Agreements and commitments approved in prior years which had effect during the year Pursuant to article R of the French Commercial Code (Code de Commerce), we have been informed that the following commitment, previously approved by Shareholders Meetings of prior years, had effect during the year. Supplemental Pension scheme commitment in favor of Mr. Michel Combes, resigning as Chief Executive Officer effective September 1, 2015 Since he took office, Mr. Michel Combes benefited from the private pension plan applicable to all corporate executives of the Alcatel Lucent Group s French subsidiaries (AUXAD plan) for the portion of compensation that exceeds eight times the annual French Social 36 Additional Information 2015 Alcatel Lucent

39 PARENT COMPANY STATUTORY ACCOUNTS Statutory Auditors special report on regulated agreements and commitments Security limit beyond which there is no legal or contractual pension scheme, subject to performance conditions pursuant to applicable law. The system and the method of calculation of the AUXAD plan are similar to those of the AGIRC plan. AUXAD does not require the beneficiary to be present in the Company at the time of retirement in order to receive the benefit. This commitment was authorized at the Board of Directors meeting held on March 7, 2013 and was approved by the Shareholders Meeting on May 7, Upon the departure of Mr. Michel Combes, the Board of Directors, at its meeting held on July 29, 2015, measured the overall performance rate against the performance criteria initially defined and considered that, in view of the annual results of the Company and its competitors, 100% of the rights accrued by Mr. Michel Combes under the AUXAD plan were definitively attributed to him. The final number of points will only be calculated after the payment of the variable compensation for 2015 and will amount to a maximum annuity of approximately 36,000 per year. These points will only be converted into an annuity when Mr. Michel Combes settles his rights under French supplementary pension schemes. 2. Agreements and commitments approved in prior years and not performed during the year In addition, we have been informed of the following commitment, previously approved by Shareholders Meetings of prior years, which was not implemented during the year. Benefit after termination of functions commitment in favor of Mr. Michel Combes, resigning as Chief Executive Officer, effective September 1, 2015 In compliance with the AFEP-MEDEF code, Mr. Michel Combes could benefit from a termination benefit equal to one year of the total target compensation (fixed and variable target) if the following conditions were met: (a) the Board of Directors terminated Mr. Michel Combes mandate as CEO in connection with a change of control or strategy and; (b) the performance condition in relation to the situation of the Company consisting in the Free Cash Flow (as reported in the Company s audited consolidated financial statements), being positive for at least one fiscal year before the end of Mr. Michel Combes term of office was fulfilled. This commitment was authorized at the Board of Directors meeting held on March 7, 2013 and was approved by the Shareholders Meeting on May 7, At its meeting held on July 29, 2015, the Board of Directors determined that none of the above conditions were satisfied at the time of Mr. Michel Combes s resignation and concluded that no termination benefit should be paid to Mr. Michel Combes. Neuilly-sur-Seine and Paris-La Défense, April 27, 2016 The statutory auditors French original signed by DELOITTE & ASSOCIES Bertrand Boisselier ERNST & YOUNG et Autres Frédéric Martineau Alcatel Lucent Additional Information

40 2 PARENT COMPANY STATUTORY ACCOUNTS 38 Additional Information 2015 Alcatel Lucent

41 Report of the Chairman of the Board of Directors internal control and risk management Global system of internal control and risk management Accounting and financial reporting Report on the President s report 53 Alcatel Lucent Additional Information

42 3 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management In accordance with the provisions of Article L of the French Commercial Code, we hereby submit the Report of the Chairman of the Board of Directors describing the internal control and risk management procedures which the company has implemented. In order to meet the requirements of the provisions of Article L of the French Commercial Code, the Chairman of the Board of Directors with the support of the Law Division and Corporate Audit Services prepares the Report, which is centered around the following topics: corporate governance, global system of internal control and risk management and accounting and financial reporting. After having proposed a general framework and having indicated all current applicable regulations, the Law Division consolidated the inputs received from the various departments involved. This report was presented to the Audit and Finance Committee at his meeting held on April 25, 2016, and approved by the Board of Directors at the meeting held on April 26, Regarding internal control and risk management, the procedures implemented by the company at the Group level, the responsibilities within the Group and the standards that have been set, are the subject of an explanatory report by the Chairman of the Board of Directors, in accordance with Article L of the French Commercial Code. The text of this report is set forth below. The internal control system for the processing of accounting and financial information has been specially developed, to take into account the regulation in this area, both in the United States with the Sarbanes-Oxley Act which applies to Alcatel Lucent due to the fact it was listed on the New York Stock Exchange, and in France, pursuant to the Financial Security Law (loi de sécurité financière), which requires the Statutory Auditors to issue an opinion on the report by the Chairman of the Board of Directors. Since end of 2014, the Alcatel Lucent group has entered a pluriannual partnership with Accenture. Under Alcatel-Lucent responsibility, Accenture delivers now part of the functions of Human Resources, Finance and IT Programs. Engagement and commitment of both parties were defined as per contract signed. Service Level Agreements and Key Performance Indicators have been defined and are regularly followed in the context of the agreed governance. It should be noted that the term Group used in the present section refers to Alcatel Lucent and all its consolidated subsidiaries. The elements presented below describe a situation aligned in the fiscal year ended as at December 31 st, Global system of internal control and risk management A. Objectives and control framework used The internal control system used by the Group follows a framework established by a recognized body, the Committee of Sponsoring Organizations of the Treadway Commission updated on 2013 (COSO 2013), applicable in The new framework identifies 17 principles beneath the existing components of former COSO 1992 which has been incorporated by the Autorité des Marchés Financiers (AMF) in its cadre de référence (reference framework). One of the aims of our internal control and risk management system is to prevent and manage business risks and the risks of errors and frauds, in particular regarding accounting and finance matters. This system is reviewed yearly, based on lessons learned process or new controls requirement. Like any other control system, it cannot provide absolute assurance that these risks will be entirely excluded. However, it provides the Board of Directors and management the means to make sure that the following objectives are met: Š optimization of operations; Š reliability of the financial information; The system is based on 3 main principles: Š shared responsibility: internal control relies on the resources of the different Group organizations and/or the responsibility of each employee, which is based on a system of delegation of authority, enabling to implement the Group s policies consistently. Each manager has the duty to control in an efficient manner the activities (s)he is responsible for; Š identification and compliance with common standards and procedures: formalizing standards and procedures and communication of the framework to all members of the Group is vital in the internal control process; Š segregation of duties: the general set-up of the system must reflect the distinction that exists between the people who execute the transactions and those who validate and control them. Providing discipline and structure, the control system is the foundation of all components of internal control and risk management of the Group. Š compliance with existing laws and regulations. 40 Additional Information 2015 Alcatel Lucent

43 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management The below chart represents the concept of the 3 lines of defense as laid out by the IFACI (French Chapter of the IIA -Institute of Internal Auditors), and applied to Alcatel Lucent. The related components of the chart are further detailed in the subsequent sections. BOARD OF DIRECTORS / AUDIT & FINANCE COMMITTEE MANAGEMENT COMMITTEE AND LEADERSHIP TEAM 1 ST LINE OF DEFENCE 2 ND LINE OF DEFENCE 3 RD LINE OF DEFENCE Business Operations Oversight Functions Corporate Audit Services Corporate Investigation Services Sales & Marketing Operations IP Routing & Transport IP Platforms Wireless Access Fixed Access Strategy & Innovation Submarine Finance Department Corporate Controlling Investment Office Corporate Accounting & Consolidation Financial Analysis and Risk Assessment Human Resources Department Law Division Procurement Department Business & Information Technology Transformation Compliance Global Security EXTERNAL AUDIT REGULATORS B. Risk management system Organization and components The Management Committee has an oversight and controlling responsibility for Enterprise Risk Management (ERM). The Chief Financial Officer (CFO) reviews the ERM Process regularly in addition to obtaining quarterly reports. The Audit & Finance Committee oversees the management of the ERM Process, and reviews the results independently. According to the Insurance & Risk Management Policy and the ERM Policy and Process Description, the (DAGRI) (Risk Management and Insurance department) within the Group Treasury is entrusted with the ERM identification, assessment, monitoring and reporting for Enterprise-level risks which comprise financial, operational, strategic, legal, compliance and human resources related risks. The acceptable risk limits are validated at Group level by the Management Committee and at Business Line level by the Leadership Teams. Identified risks and potential opportunity costs are evaluated and prioritized according to uniform scales for the severity of the impact (qualitative and quantitative, financial and non-financial scales), likelihood of occurrence and control effectiveness. Each key risk is addressed by a risk owner who defines in liaison with the Management Committee members, the action plans required to mitigate the exposure of the Group, to such key risk and performance indicators. Actions can be either recurrent or corrective ( ad hoc ). The action plans are monitored on a quarterly basis through the performance indicators. The reporting on key risks and their mitigating actions is complemented, where relevant, by the presentation of developing risk areas. Alcatel Lucent Additional Information

44 3 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management Completed corrective actions are turned into control activities, as needed, and the level of control of the relevant risk is reevaluated. The risk identification process and the key risks are regularly presented to members of the Management Committee as well as the Audit and Finance Committee. An appropriate communication on key risks and risk mitigating action is ensured with the network of risk and action plan owners. Financial Risk Management is coordinated within the Group Treasury as part of the overall ERM framework. Its purpose is to manage the liquidity, cash and pension investment, foreign exchange, credit and interest rate risks of the Group. Supporting this department are policies on: Š credit risk; Š project finance; Š collections; Š banking; Š cash management and investment; Š pension investment and governance; and Š interest rate risk. On a quarterly basis, these risks are discussed at the Financial Risk Management Meeting which includes participants from the various departments within Group Treasury (i.e. inclusive of Treasury, Project Finance, Credit, Trading Room, Risk Management & Insurance/DAGRI), Corporate Controlling, Corporate Accounting, Consolidation, Tax and Trade. The ERM process is fully integrated within the Insurance & Risk Management Policy maintained by the Group which is composed of: Š the Insurance and Risk Management Policy; and Š the ERM Policy and Process Description; and Š the Risk Engineering Principles, which aim at protecting employees, the assets and the environment, while ensuring the continuity and development of the Group s activities, and which address the following elements: Š identification and analysis through an on-going holistic risk and opportunity cost identification process involving the Leadership Team from the various organizational areas, namely the business lines (IP Routing & Transport, IP Platforms, Wireless Access and Fixed Access), transversal functions (Operations, Strategy & Innovation, Sales) and corporate functions (Finance & Legal, Human Resources, Marketing); Š evaluation and prioritization of key risks; Š identification of possible correlations between risks as well as possible knock-on effects; Š appraisal of risks with respect to the past experience and changes in the internal or external environment Š risk prevention and control policy to reduce the frequency and the magnitude of those risks that materialize; Š business impact analysis concerning the Group s activities to assess the potential impact of an adverse event affecting its industrial processes or resources; Š business continuity management; Š crisis management; Š a global approach to achieve the most cost-effective insurable risk transfer and alternative risk financing, for risks that are not retained by the Group. Insurance Insurance is fully integrated within the proactive Insurance and Risk Management Policy maintained by the Group. The coordinated risk identification and analysis and risk mitigation policy allows to properly design: Š an appropriate level of risk retention; Š a coordinated approach for cost-effective risk transfer or alternative risk coverage for risks that are not retained in full. However, there can be no assurance that actual losses will not exceed the limits nor that they would not fall within the exclusions of the insurance policies, due to the lack or limitation of coverage available at cost effective terms. DAGRI issues an internal executive report listing the key identified risks and their treatment. Processes The ERM team develops a list of risks based on two main processes in consideration of the global risk management standards developed by various policy organizations: 1) an identification process that covers business lines, regions, corporate et transversal functions and 2) reviews with members of the Management Committee or the designees. The ERM team then applies various filters to determine which risks to capture and address at an enterprise level and the nature of the actions and resource deployment required to mitigate identified risks. Specific monitoring procedures apply to the risks associated with the Group s businesses. With respect to the Group s Technology risk, for example, we try to mitigate the risks associated with our technology through a program geared to continuously scouting for new technologies, in order to detect them early, and make appropriate investment decisions. With respect to emerging external technologies we analyze their impact on our own technology choices. We also rely on an incubation/innovation internal structure we keep in place in order to monitor and eventually embrace new technologies that we believe would have an impact on ours. In addition, we have put in place a system monitoring important new technology, networking and market developments. 42 Additional Information 2015 Alcatel Lucent

45 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management With respect to our use of external manufacturing organizations, distribution centers and suppliers, we monitor on a regular basis supply risks related to single and critical sources. We have developed an overall contingency plan for mitigating risks with each of our transportation providers and for each major distribution site in our global logistics network. Risks associated with the international transportation of our materials are mitigated through the use of dual transportation companies on key lanes, involving a wide range of airlines and shipping lines that in turn use both direct and indirect routings. We have put in place a monitoring mechanism to try to minimize the risk of a major disruption, whether natural or man-made. With respect to customer credit approval process, we engage in a thorough credit approval process prior to providing financing to our customers or guarantees to financial institutions, which provide financing to our customers. Any significant undertakings have to be approved by the Project Finance and Credit departments, and in some cases, be assessed by a central Financial Analysis and Risk Assessment Team, each independent from our commercial departments. We monitor and manage the credit we have extended to our customers, and attempt to limit credit risks by, in some cases, obtaining security interests or by securitizing or transferring to banks or export credit agencies a portion of the risk associated with this financing. Interaction between risk management and internal control The ERM results are shared with Corporate Audit Services to prepare the annual internal audit plan. In turn, the audit results are taken into account for the evaluation of the Group s key risks. The recurrent mitigating actions identified to manage the key risks through the ERM process are integrated into the internal control activities. The controls and procedures that are part of the internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, applied in the preparation of accounting and financial information, are explicitly identified. The key risks are reviewed by the members of the Management Committee who ensure the deployment of specific mitigation plans and the adequacy of the internal control so that these risks are covered C. The key players involved in internal control and in the risk management The following describes the Group s organization as of December 31, The graph hereunder represents the departments associated with internal control and risk management. Each department has the resources, the information systems and the procedures which enable it to exercise control and monitor its own internal control and risk management system. Board of Directors and Audit & Finance Committee Management Committee Leadership Team Operations Human Resources Department Finance Department Business & Information Technology Transformation Corporate Controlling Investment Office Compliance Procurement Department Corporate Audit Services Group Treasury Global Security Corporate Accounting & Consolidation Law Division Alcatel Lucent Additional Information

46 3 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management Board of Directors and its Audit and Finance Committee As the role of the Board of Directors is one of management oversight and control, it contributes in ensuring the efficiency of the system of internal control through the competency and accountability of its members, the clarity and transparency of its decisions as well as through the vigilance expertise of its Audit and Finance Committee. In accordance with its Operating Rules, the Audit and Finance Committee plays a leading role in accounting and financial matters since it is responsible for monitoring issues relating to preparing and auditing financial reporting under the responsibility of the Board of Directors. More specifically it is in charge of monitoring (i) the financial reporting process, (ii) the effectiveness of the internal control and risk management systems, (iii) the statutory audit of the annual accounts and consolidated accounts and (iv) the independence of the statutory auditors. The Audit and Finance Committee, which is composed of four independent members of the Board of Directors, verifies, at meetings attended by the Chief Financial Officer and the Statutory Auditors, that internal procedures to collect and verify financial information are designed and effective. It regularly reviews the functioning and organization of the Internal Audit Department, its audit plan and main audit reports. It also examines the risks that the Group may be exposed to and assesses their monitoring. Management Committee and Leadership team The Leadership team includes the managers from the various organizational areas, namely the business lines (IP Routing & Transport, IP Plateforms, Wireless Access and Fixed Access), transversal functions (Operations, Strategy & Innovation, Sales) and corporate functions (Finance & Legal, Human Resources, Marketing). Within the Leadership team, the managers from the transversal and corporate functions together with the CEO form the Management Committee. The Management Committee is mainly in charge of the Group s strategy and organization, policies to be implemented, longterm financial planning and the human resources strategy. It is responsible for ensuring that the Group s plans and projects are implemented, controlling the performance of each business segment and allocating resources to the different business segments. The Management Committee is directly responsible for the internal control system and risk management. In this respect, the Chief Executive Officer ensures that effective internal controls and risk management exist within the Group. He makes sure that the strategic planning objectives are aligned with risk management findings. He defines the internal control policies and supervises the implementation of the various components of internal control. Within each entity of the Group, the senior executives are responsible. The Leadership team is accountable for executing and delivering the decisions taken by the Management Committee in the framework of the Shift plan; driving the businesses on a day to day basis; facing and anticipating the product needs of their business clients. Finance Department a. The Compliance Organization The Group has implemented and throughout 2015 continued to enhance a compliance and ethics program involving a set of methods, principles and controls to ensure, to the extent possible, that the current legislation and regulations, as well as the Group guidelines, principles and policies are respected. The Group s Chief Compliance Officer oversees the implementation and continuous enhancement of this program to reflect current and evolving legal requirements, international standards and the standards of behavior set forth in the Group s Code of Conduct. The Group Chief Compliance Officer function reports directly to the Chief Financial and Legal Officer, with direct access to the CEO and the Audit and Finance Committee. The Chief Compliance Officer oversees the Compliance Organization, which is responsible for enhancing existing compliance resources and centralizing key compliance functions, including the Anti-Corruption Program Office, Privacy and Data Protection, the Regional Compliance Leaders, and the Corporate Investigation Services. The Compliance Organization is responsible for coordinating and supervising implementation of the compliance and ethics systems within the Group, which are fully integrated into its commercial activities and are designed to avoid, monitor, detect and minimize commercial and legal risks. The Office of Business Integrity & Compliance serves as the key interface with the Group s employees, providing them with guidance on ethical business conduct and information about the Group s ethics and compliance policies and programs. The Corporate Investigation Services organization administers the Corporate Compliance Hotline and performs or facilitates investigations (globally) of all allegations impacting accounting, internal control & audit related issues, Compliance and Code of Conduct incidents, and selected security breaches. The Alcatel-Lucent Ethics and Compliance Council was established in February It is comprised of the Chief Compliance Officer and representatives from of the following departments: Law, Finance, Human Resources, Communications, Operations, Corporate Audit Services, Corporate Security Services, Corporate Investigation Services, and the Office of Business Integrity & Compliance. This Council meets quarterly and is responsible for overseeing the strategic design and implementation at the Group level of an integrated and robust ethics and compliance system, including review and approval of relevant policies. In the field, the Operating Unit Compliance Council is responsible for developing, implementing and monitoring 44 Additional Information 2015 Alcatel Lucent

47 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management compliance plans throughout the Group. This Council is comprised of the Compliance Leaders for the various business lines, Regions and Corporate Centers. The Council meets quarterly and is accountable for implementing the elements of the Group s ethics and compliance program. The 2015 program focused on the continued enhancement of the overall business integrity program, with particular attention to the following areas: Š Embedding and sustaining a culture of integrity across the Group by reinforcing a strong tone at the top, as supported by the Chief Executive Officer, and enhancing the role of people managers; Š reinforcing Senior Leader ownership of business integrity, as well as overall business accountability for program implementation and results; Š increasing regional leadership and oversight for ethics and compliance across the business. The Group continued to implement the zero tolerance policy consistent with established regional and corporate compliance resolution processes. In addition, the Group continued to focus on Anti-corruption as a top compliance priority, ensuring employee awareness of and compliance with the Group s internal policies and applicable laws, including, the Organization for Economic Co-operation and Development (OECD) treaty, the French criminal law against corruption, the U.S Foreign Corrupt Practices Act and the United Kingdom Bribery Act. The core of the program consists of the six main Anti-corruption policies: Š Global Policy on the Phase Out and Prohibition of Commercial Agents and Consultants; Š anti-corruption Third-Party Risk Management, Screening and Selection Policy and the accompanying on line screening and approval process; Š third Party Final Review Committee (escalation procedure); Š policy on Facilitation Payments; Š anti-corruption Policy on Corporate Hospitality and the accompanying online pre-approval process; and Š global Charitable Contributions Policy. Consistent with standard internal controls, these policies were reviewed and revised in 2015 to capture any changes in regulatory requirements, as well as lessons learned during the past year. The Group streamlined the Anti-Corruption Policy on Corporate Hospitality to simplify the rules for hospitality related expenses. The revised Policy, along with a new and improved on-line tool for pre-approval by Compliance of these types of expenses, was deployed in early Further, in accordance with the Third Party Screening Policy, a Third Party Risk Management Program has been implemented for the major Operational Organizations engaging with third parties, integrating the business, finance and anti-corruption compliance screening approval process for engaging new third parties. The on-line Third Party Screening Tool has enabled the Company to have a central registry of existing Third Parties as well as a standard process across the Company for screening of new Third Parties. In addition, the Group continued to implement and strengthen the Global Policy on the Phase-Out and Prohibition of Commercial Agents and Consultants as a managed process for the phase-out of agents and consultants except in those few countries where legally required. Implementation of this process is consistent with the Group s mandate to terminate the use of commercial agents and consultants. In 2015, the Group continued to implement a comprehensive global ethics and compliance training program, deploying a mandatory training course focused on our key compliance areas which also included review and acknowledgment to our Code of Conduct. In addition, four specialized compliance courses were mandatory for a target audience based upon job responsibility. Targeted compliance areas included: Information Security, National Security Agreement (NSA), Intellectual Property for R&D; and Harassment & Discrimination. In addition, mandatory training for new hires includes three training courses: Code of Conduct, Conflict of Interest and Anti-Fraud/Anti- Corruption. Additional recommended training was deployed in the following areas: Human Rights, Privacy By Design and Competitive Intelligence. Formal anti-fraud / anti-corruption training is delivered over the intranet and through in-person sessions. In 2015 the team updated the anti-corruption training to reflect recently enacted regulatory requirements and the resulting changes to our corporate policy, procedures and internal controls. Fully redesigned training for external Third Parties was developed and made available in the Third party Screening Tool in various languages. Similarly, the Group s web-based anticorruption training and ethics & integrity overview training were updated and are mandatory for all employees and contractors. In 2015, the Group continued to execute a comprehensive communication plan focused on enhancing a culture of business ethics. Under the leadership of the Office of Business Integrity & Compliance, the Group deployed a broad range of communications through various media, targeted around establishing and maintaining a corporate culture of integrity overall, and directed, in particular, at middle management. In addition, the Group was selected as the Dow Jones Sustainability Index Technology Industry Group Leader in the Communication Technology Sector for the fourth year in a row, achieving a significant score of 100/100 in the Codes of Conduct, Compliance, Corruption and Bribery Category. The bank Société Générale ranked the Group Top 30 Best in Universe, and Enterprise Société Générale rated the Group No. 1 for Technology Sector for the second year in a row. Compliance and Data Privacy are key rating criteria for this ranking. Alcatel Lucent Additional Information

48 3 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management The Group continued to implement the global compliance risk assessment process to identify potential compliance issues related to the Group s key compliance program areas. Annually, the program owners for each of the referenced compliance program areas provide an initial risk analysis, with related risk factor, to each business organization based upon their knowledge of the business and the nature of the risk overall across the company and within each business organization. With this information, each business organization then conducts a deep dive compliance risk assessment within their organization to validate and otherwise supplement the initial assessment. These deep dive assessments are focused on identifying potential program gaps and attendant risks across the business for each of the key compliance program areas. Working with the program owners, each business organization is responsible for developing and implementing detailed risk mitigation plans to address identified issues and to otherwise close the gaps. To ensure full alignment across the company, each business unit compliance risk assessment is reviewed, approved and signed-off annually by the respective Alcatel Lucent Leaders. b. The Group Controlling department The Corporate Controlling department is in charge of preparing the budget, the monthly, quarterly and annual consolidated financial data, and the financial data forecast. In coordination with the operational and financial management of the regions, business lines and subsidiaries, it provides regular monitoring of the operations of the Group. It includes also the Offer Control organization, at Central level and in the Business lines (BL), which validates the financials of Group s commercial bids, and ensures that their inherent risks are properly assessed and Integrated by the Business Lines in the business decision-making process. This function also manages the delegation of authority and the bids and contracts approval process by the Business Lines, aiming at strengthening the adherence to the approval process. When a deal is outside the delegations to the BL, the Management Committee Deal Review Panel (MCDRP consisting of COO (Chief Operating Officer), CFO, BL Head and Region Sales Head) provides the authorization to submit the offer. c. The Corporate Accounting and Consolidation department The mission of the Corporate Accounting and Consolidation department is, in particular, to prepare local published consolidated financial statements and to produce and disseminate applicable accounting policies and procedures within the Group, to ensure they conform to current laws and accounting standards concerning the preparation and publication of financial statements, and that such policies and procedures are properly applied, and also to ensure that the Alcatel Lucent parent company statutory accounts and consolidated financial statements are published. d. The Corporate Audit Services Corporate Audit Services (CAS) has direct access to the Chief Executive Officer and assists the Executive Committee in assessing the effectiveness of Enterprise Risk Management, System of internal controls and Corporate Governance. The Chief Audit Executive has also direct access to the Audit and Finance Committee (A&FC). To accomplish this activity and conduct its engagements, CAS has full access to all areas of the organization to assess risk within the enterprise. Its mission is centralized at Group level and was carried out in 2015 by a team of approximately 28 professionals, supported by external resources when necessary. The internal audit plan is developed annually with the approval of the A&FC and the Chief Financial Officer (CFO). The Chief Audit Executive reports to the A&FC and CFO on the status of the audit plan and specifically on the effectiveness of the internal controls of reviewed domains (including Sarbanes-Oxley compliance); results of Anti- Corruption reviews and staffing requirements. The results of the audit reports and the follow-up on the implementation of recommendations made by the audit team are closely monitored and results are shared with the A&FC and the Disclosure Committee. In 2015, the IFACI (French Branch of the Institute of Internal Auditors IIA) has renewed the internal audit certification, as recognition of the team professionalism. This certification, granted by external experts, confirms that the internal audit function is independent and objective, competent and rigorous, focuses on areas of major importance for the organization, constantly strives to optimize the quality of services rendered and plays an active role in the company s governance practices. e. The Group Treasury The Group Treasury is responsible for funding the Group, monitoring the financial and treasury risk management and the optimization of operational treasury and cash management. The Group Treasury is composed of the Risk Management and Insurance department (DAGRI), Global Treasury department, the Trading Room, the Corporate Finance department, the Project Finance department and Credit department. The Global Treasury team and the Trading Room manage all cash, investment, foreign exchange and interest rate risks. f. The Investment Office The Investment Office is responsible for managing US pensions. g. The Law Division Within the general framework of its mission, the Law Division, which reports to the CFO, provides legal advice and counsel to all entities of the Group with respect to the specific issues faced, over a wide range of areas and across multiple jurisdictions. Legal support to the various entities is provided by local lawyers. 46 Additional Information 2015 Alcatel Lucent

49 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management During the financial year, the Law Division has notably: Š reviewed the policy related to the enforcement, the updating and the storing of the insider trading list which defines who the insiders are and set up the process of following up, storing and communicating the list, as necessary; Š continued to draft, and otherwise update and enhance, key compliance policies and procedures and, in particular, policies and procedures related to Anti-Corruption compliance. As necessary, this program includes development and deployment of relevant awareness and training to give employees a clearer understanding of the laws and regulations which apply to the Group. The policies and procedures are generally translated into the standard Group languages, with additional languages as necessary to ensure understanding; Š reviewed the global information of the database named Governis which tracks the share ownership of the Group subsidiaries and investments, transactions affecting capital and securities, regulated agreements and plurality of directorships and offices. This review consisted in asking each identified manager to confirm or update the information of the database; Š re-organized the management of claims and litigation to centralize the function and further enhance our case handling and reporting capabilities. Operations a. The Global Security Corporate Security Services (CSS) ensures protection of people life safety, physical assets (buildings and premises, equipments), information, Business, PR impact, reputation against external and internal threats including cyber and loss prevention. It defines the security policies and procedures for the travels, events, operations and activities, and provides tools for the information, the training and protection of entities and employees of the Group. The Global Security (GS) implements the organization, training and policies for Incident management across the world as well as the marketing security kit, the security operational matrix, the risk dashboard, the automatic travel approval process. For that purpose, Security supports business travels with feature extension of travel tracking and the EMEA & AMERICAS Global Security Operation Centers (GSOC) development, sites and operations to ensure security of employees and nonemployed contract workers, in all countries and especially in the countries considered at high risk. We managed an increasing number of severe crisis that could have been dramatic to our people, in Yemen, in Burkina Faso, in Cameroon, in Mexico, in France, in Lebanon, in Mali, in India, in Thailand, and many other places. b. The Business & Information Technology Transformation (B&ITT) The B&ITT organization ensures the effective governance and execution of IT-enabled business transformation programs and IT operations. There is a significant IT component to meet the objectives of the Shift Plan and support the transformation of the business by simplifying, globalizing, modernizing and standardizing our Business Processes and supporting IT systems. In addition, B&ITT manages and assures an outsourced contract with HP to implement and support a large part of the Alcatel Lucent IT infrastructure and some key applications. We perform service delivery assurance of all IT applications and IT infrastructure, both HP and non-hp supported. The focus is to manage and minimize business risk by reducing outages, defining and improving change control and incident management procedures and performing key application upgrades to assure performance. In our multi-vendor environment, HP and Accenture s performance is monitored through contractual Service Level Agreements and Key Performance Indicators. There are monthly governance structures established to review delivery, operational, commercial, quality and risk mitigation matters. We also work in partnership with the Global Security organization to assure and safeguard our IT systems and information from the continued growth of a sophisticated, and global, cyber-security threat. We coordinate and monitor Sarbanes-Oxley compliance across the B&ITT organization and our IT outsourcing partners to ensure proper controls for IT users related to access right management systems, segregation of duties, back up and restoration and other critical control areas. c. The Procurement Department The Procurement function is still governed by a single Quality & Compliance Management System. The Procurement Departments have a singular internal control framework implemented and defined by the following policies: Š policy on subcontracting aims at ensuring that subcontractors are not used as vehicles to fund or to support fraudulent or illegal activities, and that, in accordance with the Group s general policies, all Group personnel must adhere to FCT43, the Global Policy on Phase-out and Prohibition of Commercial Agents and Consultants applicable when their intervention is legally required, and Alcatel-Lucent Procurement Policy when requiring the hiring and use of third parties as non-employee workers, service providers, contract employees, consultants or subcontractors of any kind ( Subcontractors ); Alcatel Lucent Additional Information

50 3 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management Š policy on Competitive Tendering covers the pre-selection and selection of the suppliers and specifies that the supplier selection should be made according to objective criteria, in line with the Alcatel-Lucent suppliers Code of Conduct and with the applicable Procurement Process Descriptions and Procedures. Š policy on Mitigating Supplier Risk covers the expectations for assessing and mitigating the risks associated with suppliers and sets the expectation for review, approval and recording of Directed Sourcing occurrences. The risk assessment of suppliers is managed through three independent and complementary reviews: supplier Anti-Corruption Screening which assesses the risks of doing business with third party business partners based on anti-corruption laws, to prevent knowingly or unknowingly engaging in damaging or commerciallydetrimental business conduct involving third parties; supplier Risk Assessment which assesses the risk of suppliers across 11 predefined operational criteria: financial strength, management and staff culture, pricing, risk management, manufacturing capacity and responsiveness, service and support, quality & reliability, logistics, sustainability, strategic fit with Alcatel-Lucent, and innovation, and sourcing Strategies which is a document giving a summary overview of which suppliers are Preferred, Allowed or Forbidden for a certain technology/commodity/service and summarizes the justification for use of a supplier identifying changes versus the previous sourcing strategy. Š policy on Sustainable Purchasing specifies that, in line with the Group s Corporate Responsibility undertaking and in accordance with its Code of Conduct with the principles and rules promoted by the International Labor Organization and by the UNO, the Group is fully committed to promote Sustainability in its relationship with its suppliers by: ensuring that all contractual documents signed with suppliers include a supplier commitment to adhere to the Electronic Industry Citizenship Coalition (EICC) code of conduct version 4, the United Nations Global Compact 10 principles and comply with environment, health and safety requirements as applicable to the business of the supplier, assessing suppliers on their sustainability practices, requesting improvements from suppliers who are not reaching the expected level by working on improvement plans and sharing our values and principles, integrating sustainability practices in the selection and management of suppliers; Š policy on Conflict Minerals states our commitment to protect human rights and to take steps to avoid contributing to issues connected with conflict minerals. We continue to implement the due diligence practices and processes to identify the source of the minerals used in company products; Š policies on Supplier Management enable the group to effectively manage (including providing feedback) its thirdparty resources, on predefined criteria such as quality, sustainability; Š policy on the implementation of the Alcatel-Lucent Code of Conduct in the supply chain establishes rules that all members of the procurement community worldwide must strictly comply with. These rules also apply to employees leaving or having left procurement, as well as to any Group employee in contact with suppliers or who could influence any supplier selection. Human Resources In 2015, Human Resources continued its journey to support the most significant financial, operational and cultural transformation program in the history of Alcatel-Lucent called The Shift Plan. This plan was a key driver for the transformation in Human Resources. The HR Shift continued as a key vision and priority in Faced with an aggressive cost reduction target (having already reduced significantly in prior years due to Alcatel Lucent financial and business challenges), our challenge was to turn a cost reduction plan into an opportunity to modernize the HR function, continuing to be highly relevant while shifting our focus and our investment into more added value HR work to support the business. Š HR Modernization Program The HR Modernization program was launched to support the delivery of an efficient, relevant and effective HR service offering at the right cost for the business. Started in 2013 and continuing as a key objective in 2015, the challenge of The Shift Plan required HR to execute 4 major transformations in parallel, which created a team spirit of focus, speed, professionalism and alignment to collectively achieve these objectives: execute & support the company s 1B EUR fixed or 10,000 net HC reductions execute the HR part of the Shift Plan with reduction of 400 HC during this same period transform and modernize the HR Operating Model including service delivery model, HR roles & responsibilities and self service tools for employees and managers 48 Additional Information 2015 Alcatel Lucent

51 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management replace a 60+ different legacy applications, 15 year old HRIS system, into one single platform To allow HR to focus on core, value-add HR activities (talent, leadership, performance, coaching, culture) while allowing economies of scale optimization with an industry leader in business process outsourcing (also done in Finance and IT), an outsourcing option of transactional activities was positioned as a means to help our HR modernization ambition and to shift/increase our HR value. Building on our partnership with Accenture outsourcing all administrative and transactional activities we introduced a state of the art HRIS cloub based system and global HR portal, we standardized our HR processes to adapt to the global geographical spread of Alcatel-Lucent; while reinforcing the role of our people managers, The main outsourcing advantages were (i) benefit from state of the art process (core business of outsourcer) (ii) benefit from scalability (capability to increase/decrease teams depending upon activities and HR processes cycle) (iii) continuously drive efficiency (IV) transform fixed costs into variable costs. Before starting our HR Shift, internal Alcatel Lucent Shared Service Centers delivered roughly 25% of our HR activities. At year end 2015, roughly 50% of our activities are managed by Accenture for a value of 35% of our total HR costs. A single, global cloud based HRIS platform, SAP Success Factors, has been deployed in 62 countries. Today, HR now has 15 standard global processes defined as well as 19 standard HR roles. Service delivery performance levels (SLAs) based on accuracy, timeliness and customer satisfaction averaged 94% which exceeded the 90% target for In 2015, we continued deployment of a new Recruitment Model with Accenture to deliver the required talent to support Alcatel-Lucent s growth and it is still a work in progress which will require time to mature and evolve in Europe and in Asia Pacific (APAC). Our HR modernization, together with an outstanding partnership with Accenture, was achieved at an unprecedented pace (2 years vs 3 years) for a program of its complexity, size and scale. Š Culture Transformation In addition to The Shift Plan and the HR modernization journey described above, ALU embarked on a significant cultural shift, anchored around four values: accountability, speed, simplicity, & trust. This cultural transformation was a leader led and accountable leadership was a key cornerstone of this cultural shift which focused on 3 key areas: reconnecting Top 200 leaders to leading and to learning Mandatory attendance to a 1-day LeaderSHIFT workshop with the CEO attending each session, setting the tone, setting his leadership expectations and sharing his leadership learnings. The theme of the LeaderSHIFT workshop was self awareness as a leader and effectively leading change to drive business performance. In addition, reconnecting with the art of leadership continued with the mandatory attendance of all People Managers to a 2-day workshop on the role of a People Manager: Direction Setter, Change Leader, Motivator, Performance Manager and Coach. (to date, approximately 2000 People Managers around the globe have attended). measuring Top 200 leadership effectiveness vs employee engagement A simple, 12 question survey (The Leadership Index) to measure each Top 200 leader s effectiveness based on feedback from their directs and one level below. Each Top 200 leader received their Index and they were debriefed/coached by their Business HR. Overall results indicated a need to focus on performance specifically consequent management and on communicating vision/ direction in a compelling way to inspire and engage employees about the future. creating a community of Top 200 leaders Top 200 annual event, monthly Top 200 check in with the CEO, monthly HR updates from the CHRO, direct connections from the Leadership & Organization Effectiveness leader to involve Top 200 in leadership development initiatives including mentors for Top 10 women, kicking off People Manager workshops and attending high potential development workshops as guest speakers. These connections organically created a community where leaders felt better connected and silos & boundaries began to disappear. While continuing to focus on traditional HR deliverables, HR supported and accompanied this cultural shift through its very own transformation: focused and selective HR programs to support The Shift Plan; an integrated talent strategy; a shift to a global mindset, enhanced partnering with business clients breaking up HR silos, and creating an integrated and accountable HR network for greater collaboration; innovative communication. Š Alcatel-Lucent University Transformation In 2015, Alcatel-University introduced a number of innovative initiatives to enhance and simplify customer and employee learning experiences. An updated Learning Management System was introduced. A flexible workforce strategy to develop and deliver customer training resulting in 20% savings. A Learning Store (modeled after similar applications) for employees was launched to provide a single point of entry to learning, easier navigation and learning highlights with featured offerings. Since the Learning Store launch in midyear, more than 20,000 sessions have been accessed. To support the continued transformation of Alcatel-Lucent, people management skills were reinforced through a People Manager Effectiveness workshop introduced in with over 76 workshops offered in 11 different countries and Alcatel Lucent Additional Information

52 3 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management more than 2000 people managers attending. In addition, there was very strong endorsement and support from more than 40 Top 200 executives who kicked off workshops. Š Diversity Renewed as strategic priority in 2013, diversity continues to be a key driver for ensuring a rich talent mix in Alcatel- Lucent. Specific attention has been given to gender diversity since 2014, including career development initiatives (Top 10 Women) driven by leaders and HR to better leverage diversity into our organization s leadership. In 2015, results of these efforts have been reflected in 40% of our Top 10 women being promoted into larger, more senior level roles and 25% of ourtop 10 women taking new and broader roles in the new Nokia Group. Focus continues on increasing the 23% of overall female talent and diversity will continue to be a priority in the new Nokia. Š Innovation in Internal Communications While the Alcatel-Lucent/Nokia combination dominated 2015, employees continued to be informed of the progress of the Alcatel-Lucent Shift Plan with quarterly updates sent to each employee by push-mail and also published on the corporate intranet homepage. To maintain momentum, this topic was also regularly addressed by the CEO and CFO in their employee conference calls following each quarterly results announcement. Building on innovative communication approaches, Text-Me SMS service was used to push timely information to subscribing employees on their mobile phones. In 2015, roughly 25 SMS messages to 2,200 subscribers were sent also saw the continuation of the On the Air radio program. Now in its 40th episode averaging roughly 1,700 listeners per episode - the program highlights the latest company news, innovations, leadership interviews and questions from employees. The program is also available via Engage, our social networking platform, and as a downloadable MP3 format for mobile listening. A new innovation-focused webtv program, InnoZap was launched in 2015 with episodes covering topics like real-time analytics, powering sensors with motion, and other Bell Labs inventions. Disclosure Committee The Committee is composed of representatives of some of the central functions: the Chief Financial Officer, the General Counsel, the Director of Corporate Controlling, the Consolidation and Accounting Procedures Director, the Tax & Trade Director and the Head of Corporate Audit Services. The Regions and business organizations finance heads, the Group Treasurer, the Corporate Investigation Services Director as well as the Group s Statutory Auditors also attend the meetings of the Committee. The Committee gathers and reviews the information on all Group significant events in order for the Group to publish quarterly, half-yearly and annual financial statements that include all disclosures or communications that may be necessary to accurately reflect the Group s status. The Committee assists the Chief Financial Officer in his assessment of the effectiveness of the internal control system and its relevance to the Group s organization. In particular, the accounting principles that have a material impact on the presentation of the company s financial statements, the main accounting options and choices made and planned changes in accounting principles are presented in a specific memorandum communicated to the Audit & Finance committee and commented to its members if needed. D. Code of Conduct In 2009, the Group published a revised Alcatel Lucent Code of Conduct with the requirement for all employees and members of the Group s Board of Directors to review the document and acknowledge their understanding of its provisions. The revised Code of Conduct establishes, in a streamlined manner, the Group s standards for ethical business conduct and is binding on all employees globally in their daily activities, as well as in our relations with our competitors, suppliers, shareholders, partners and customers. The standards set forth in the Code of Conduct are not only based upon the laws and regulations in force, but on the notions of integrity, respect, equity, diversity and ethics. In 2015, to continue to support overall employee awareness of the global standards of conduct, employees and Non-Employee Contract Workers were required to review and acknowledge their understanding of the Group s Code of Conduct. The Code of Conduct is available on the Group Intranet website in twenty-two languages and can be viewed by third parties on the Alcatel-Lucent external website. 50 Additional Information 2015 Alcatel Lucent

53 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Global system of internal control and risk management E. Compliance hotline & compliance issue resolution process Corporate Investigation Services (CIS) has established a method of reporting actual or suspected violations of Group policies or laws and regulations through the implementation and management of a Compliance Hotline. The Compliance Hotline was implemented compliant with applicable local laws. Within the hotline intake process, all issues reported will be directed to the proper local or regional organizations for follow up and investigation. Final disposition of an incident is decided jointly by Local, Regional or Corporate Compliance, Human Resources, Law, departments and Line Management based on the facts presented by the investigating body representative. All calls/reports to the Compliance Hotline remain confidential and the identity of those reporting information will be protected in accordance with applicable laws and Group policy. The Group has a strict non-retaliation policy that protects anyone who, in good faith, reports whatever he or she believes to be a violation of law or company policy. The hotline intake process also allows for incidents to be reported anonymously where permitted by local laws and also allows for third party reporting. F. Delegations and sub-delegations of authority The implemented measures take into account the operational structure of the Group in order to meet, as far as possible, the hierarchical levels. Once the needs and risks regarding the various activity areas are defined, the delegatees are to be determined considering that they have the authority, the competence and the necessary means to accomplish their tasks. In Alcatel Lucent, each delegate signs an individual delegation of authority, which indicates precisely his/her tasks and relevant responsibilities and receives general information as a reminder of the guiding principles which should be complied with. This delegation of authority is accompanied with a guide elaborated to provide general information to increase awareness of delegatees on the stakes related to delegation of authority. 3.2 Accounting and financial reporting Description of the existing environment as per the French regulation requirements This system applies in particular to the internal control procedures relating to the preparation of financial statements and to the processing of financial and accounting information. A. Accounting standards The Group s accounting procedures and organization are compiled in a set of documents which enable an understanding of, and control over, the accounting and financial information processing system. These procedures are prepared under the CFO s responsibility and are updated regularly to reflect changes in the accounting standards and rules applicable to the Group. The Statutory Auditors review them prior to distribution. This also applies to other procedures aimed at controlling risks, in particular those regarding the Corporate and Regional Risk Assessment processes and off-balance sheet commitments. The application of International Financial Reporting Standards (IFRSs) is mandatory for all consolidated financial statements of the Group published after January 1, 2005, since the Group is listed in a European Union country. A special effort has been made to explain the choices made, where appropriate, regarding the interpretation or application of IFRSs, both internally (by means of accounting policies and procedures available on the Group s Intranet site) and externally (by means of notes to the consolidated financial statements), in order to apply consistently the accounting standards within the Group and in a transparent manner to outside third parties. B. The existing system The Finance Department is responsible for preparing the Alcatel Lucent parent company statutory accounts and the consolidated financial statements. The consolidated financial statements are used internally to monitor and analyze the performance of the Group s various businesses. A critical analysis of the historical and forecast financial data takes place at regular meetings with the financial and/or operational managers of the product segments and organizations. Alcatel Lucent Additional Information

54 3 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Accounting and financial reporting During these meetings, the financial data is analyzed and sensitive issues are discussed. This process is formally reflected in position papers on significant issues and is also particularly intended to ensure that financial information received from subsidiaries is controlled and reliable. The Corporate Accounting and Consolidation department ensures that the information included in the Alcatel Lucent parent company statutory accounts and the consolidated financial statements is presented fairly and complies with the Group s rules and procedures. The department is responsible for publishing the Alcatel Lucent parent company statutory accounts and the consolidated financial statements and at each closing makes sure that they comply, where appropriate, with the standards applicable to listed companies. The activities of the Finance Department cover in particular current transactions (sales, purchases, costs, capital employed, cash flows, etc.), valuations (testing of goodwill for impairment, etc.) and the processing of one-off transactions (financial transactions, changes in the consolidated group, etc.). The analyses carried out by the Corporate Controlling Department and the Corporate Accounting & Consolidation Department reinforce internal control over the financial and accounting information addressed to the shareholders. Both departments report material information to the Disclosure Committee at each quarterly closing. Internal Audit s assignments, which are directly or indirectly linked to financial reporting, represent an important part of the internal audit plan. These assignments are intended to ensure that relevant controls exist and are operating. At the end of each audit assignment, Internal Audit systematically follows up on the implementation of the corrective actions that are based on its audit recommendations. As a company listed in the United States, Alcatel Lucent is subject to Section 404 of the Sarbanes-Oxley Act, which requires the Chief Executive Officer and the Chief Financial Officer to annually assess the effectiveness of the internal controls and the procedures for preparing accounting and financial information. In close co-operation with legal entities, a top-down and riskbased approach is used to: Š select and identify the entities and processes that are key to the preparation of the Group s accounting and financial information; Š document processes (flowcharts and/or narratives) considered important for the preparation of the financial statements; Š identify the risks associated with these processes to help improve fraud prevention and avoid potential misstatements of the financial statements; Š define and document the existence of key controls covering these major risks; and Š assess the effectiveness and implementation of the controls through tests carried out by the Internal Audit Department. These actions are part of a process that aims at continually improving internal controls and they include the preparation of action plans. The approach was developed within the 20 most significant companies of the Group. It enabled us to conduct an in-depth assessment of our internal controls over financial and accounting reporting, pursuant to Section 404 of the Sarbanes- Oxley Act, a summary of which is given in Sub-Section below. An additional procedure was developed to verify the actual controls over the financial reporting process. This procedure was based on a self-assessment process and questionnaire involving 88 companies of the Group. This self-assessment questionnaire includes 72 control points, taken from the 17 principles embedded in the five components of the 2013 COSO framework applicable in 2015: Š the control environment: the culture of control within the company; Š risk assessment: assessment of internal and external factors likely to affect the company s objectives and performance; Š control activities: the rules and procedures that ensure implementation of the risk management policies instituted by senior management; Š information and communication: the process that ensures that relevant information is identified and passed on in a timely manner; and Š monitoring: process aimed at ensuring that the internal control system is properly designed, effectively applied and suitable for the organization. The Chief Financial Representative of each reporting entity is in charge of this self-assessment and keeps records of all identified deficiencies and implements corrective action plans. The purpose of this process, within the framework of the Disclosure Committee, is to give assurance to both the Chief Executive Officer and the Chief Financial Officer that procedures in force within the Group provide accurate and reliable financial information Assessments made in the context of the Sarbanes-Oxley Act In addition to the above described environment and in connection with the Annual Report on Form 20-F filed by Alcatel Lucent with the SEC, and in accordance with the provisions of Section 302 of the Sarbanes-Oxley Act, the Group s senior managers, and in particular the Chief Executive Officer and the Chief Financial Officer, have conducted an assessment of the effectiveness at December 31, 2015, of the disclosure controls and procedures, as defined by U.S. regulations, and have concluded that these disclosure controls and procedures were not effective because of two material weaknesses in our internal 52 Additional Information 2015 Alcatel Lucent

55 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Accounting and financial reporting controls over financial reporting relating to (1) the controls over the process of recognizing deferred tax assets on certain taxable temporary differences and tax losses carried forward in certain jurisdictions, and (2) controls over the revenue recognition process in the US. Regarding deferred tax, the group accounting policy, which has been regularly subject to the review of the external auditors, considered that, given the volatility of results and past losses of the Company, it was appropriate not to recognize deferred tax assets on existing taxable temporary differences when deferred tax liabilities were recorded. In the context of the closing of the 2015 financial statements, further specific reviews on deferred tax assets have been performed and it has been identified in April 2016 that certain IAS 12 guidance requires the recognition of deferred tax assets in such a situation even in loss-making entities. The group accounting policy has been immediately amended as reflected in our 2015 consolidated financial statements and prior periods (2013 and 2014) consolidated financial statements were restated accordingly in this Form 20-F filing. These measures allow for the remediation of the related material weakness at the date of issuance of this report. Regarding revenue recognition in our US subsidiary, control deficiencies were identified on a revenue process characterized by a complex environment with hundreds of thousands of immaterial transactions requiring significant manual input and several layers of controls. The control procedures covered a substantial portion of transactions and all large amount transactions. Errors were identified; however only on small amount transactions and in aggregate the amount of error was not significant. Thus there was no correction required of the consolidated financial statements. As a result of these measures, management concluded that the Company s consolidated financial statements included in this Annual Report on Form 20-F present fairly, in all material respects, the Company s financial position, results of operations and cash flows as of the dates, and for the periods, presented in conformity with IFRS as issued by the IASB. Pursuant to Section 404 of the Sarbanes-Oxley Act, the Chief Executive Officer and the Chief Financial Officer prepared a report on internal control over financial reporting within the Group, which states that: Š the Chief Executive Officer and the Chief Financial Officer are responsible for the establishment and maintenance of an appropriate internal control process for financial information; Š the Chief Executive Officer and the Chief Financial Officer carried out an assessment as of December 31, 2015 on the effectiveness of internal controls over financial reporting within the Group. This assessment was conducted in accordance with the criteria defined in the internal control framework selected by the Group (COSO 2013). Š the Chief Executive Officer and the Chief Financial Officer concluded that internal controls over financial reporting within the group was not effective at December 31, Š Statutory Auditors who audited the financial statements at December 31, 2015 included in Form 20-F reported that internal controls over financial reporting within the Group was not effective at December 31, Report on the President s report This is a free translation into English of the statutory auditors report issued in French prepared in accordance with Article L of French company law on the report prepared by the chairman of the Board of Directors on the internal control and risk management procedures relating to the preparation and processing of accounting and financial information. It is provided solely for the convenience of English-speaking users. This report should be read in conjunction with and construed in accordance with French law and professional standards applicable in France. Alcatel Lucent Additional Information

56 3 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS - INTERNAL CONTROL AND RISK MANAGEMENT Statutory Auditors report, prepared in accordance with article L of the French commercial code (Code de Commerce), on the report prepared by the chairman of the board of directors of Alcatel Lucent To the Shareholders, In our capacity as statutory auditors of Alcatel Lucent and in accordance with article L of the French commercial code (Code de Commerce), we hereby report on the report prepared by the chairman of your company in accordance with article L of the French commercial code (Code de Commerce) for the year ended December 31, It is the chairman s responsibility to prepare and submit for the Board of Directors approval a report on internal control and risk management procedures implemented by the company and to provide the other information required by article L of the French commercial code (Code de Commerce) relating to matters such as corporate governance. Our role is to: Š report on the information contained in the chairman s report in respect of internal control and risk management procedures relating to the preparation and processing of accounting and financial information, and Š confirm that the report also includes the other information required by article L of the French commercial code (Code de Commerce). It should be noted that our role is not to verify the fairness of this other information. We conducted our work in accordance with professional standards applicable in France. Information on internal control and risk management procedures relating to the preparation and processing of accounting and financial information The professional standards require that we perform the necessary procedures to assess the fairness of the information provided in the chairman s report in respect of internal control and risk management procedures relating to the preparation and processing of accounting and financial information. These procedures consist mainly in: Š obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of the accounting and financial information on which the information presented in the chairman s report is based and of the existing documentation; Š obtaining an understanding of the work involved in the preparation of this information and of the existing documentation; Š determining if any material weaknesses in internal control procedures relating to the preparation and processing of accounting and financial information that we would have noted in the course of our work are properly disclosed in the chairman s report. On the basis of our work, we have no matters to report on the information relating to the company s internal control and risk management procedures relating to the preparation and processing of the accounting and financial information contained in the report prepared by the chairman of the Board of Directors in accordance with article L of the French commercial code (Code de Commerce). Other information We confirm that the report prepared by the chairman of the Board of Directors also contains the other information required by article L of the French commercial code (Code de Commerce). Neuilly-sur-Seine and Paris-La Défense, April 27, 2016 The statutory auditors French original signed by DELOITTE & ASSOCIES Bertrand Boisselier ERNST & YOUNG et Autres Frédéric Martineau 54 Additional Information 2015 Alcatel Lucent

57 Sustainability Alcatel-Lucent combines with Nokia Our approach to sustainability: Responsible business innovation Our engagement with stakeholders Ethical Business Environment Our people Society and philanthropy Supply chain Sustainability data Article 225 of France s Grenelle II Law (July 10, 2010) United Nations Global Compact Independent verification 105 Alcatel Lucent Additional Information

58 4 SUSTAINABILITY Alcatel-Lucent combines with Nokia 4.1 Alcatel-Lucent combines with Nokia In April 2015, Nokia announced its plan to create a global leader in connectivity by acquiring Alcatel-Lucent. The two entities officially began operating as a combined company under the Nokia name on January 14, This report reviews only Alcatel-Lucent s 2015 sustainability performance; it does not include information related to Nokia s performance. 4.2 Our approach to sustainability: Responsible business innovation Sustainability at Alcatel-Lucent means responsible business innovation. It was integrated in all of our activities in As the leading specialist in IP networking, ultra-broadband access and cloud technology, Alcatel-Lucent remained focused on making global communications more innovative, sustainable and accessible for people, businesses and governments worldwide Alcatel-Lucent sustainability priorities Our sustainability activities in 2015 focused on five core priorities, aligned with the results of our materiality assessment in 2014 (see Section 9.2.2) of the key issues related to sustainability and validated by our Chief Executive Officer and the Leadership Team. Those priorities were: Eco-sustainability Š Lead in eco-innovation by providing energy efficient, environmentally sustainable networks and technologies that meet growing bandwidth demands Ethical business Š Reinforce ethical business in every action by every employee, contractor and subcontractor, with zero tolerance for compliance violations Supply chain Š Do business with suppliers and contractors who meet our sustainability requirements and work to improve performance Our people Š Create a diverse and highly skilled global workforce that is able to meet customer demands for reliable, quality service Digital inclusion The Alcatel-Lucent Foundation Š Help youth innovate in a digital world Sustainability materiality assessment Alcatel-Lucent carried out a materiality assessment in 2014 in line with its strategy for refocusing the business, The Shift Plan. The aim of the materiality assessment was to identify top issues and monitor and fine-tune our sustainability strategy, priorities and key performance indicators according to the expectations of material stakeholders internally and externally. The assessment looked at more than 35 business issues affecting our short-, medium- and long-term corporate strategy everything from products, services, customers, operations, employees, risk management and energy efficiency to ethics and governance, information security, human rights, digital inclusion, and diversity and philanthropy. Each issue was carefully defined and weighted both for impact on the Group s commercial success and stakeholder expectations. More than 30 key executives within Alcatel-Lucent were interviewed in depth over a four-month period along with all members of its Sustainability Advisory Panel. The materiality assessment identified key issues related to ecosustainability (with a focus on developing energy-efficient networks), ethical business practices (including the increasing need for data privacy and protection), our supply chain, employee wellbeing and diversity, and digital inclusion. 56 Additional Information 2015 Alcatel Lucent

59 SUSTAINABILITY Our approach to sustainability: Responsible business innovation Product innovation and environment Ethics and compliance 2. Product safety 1. Intellectual property (infringement, 7. Electromagnetic environment avoidance) 10. Product stewardship 14. Information security 17. Product energy efficiency 15. Anti-corruption / code of conduct 21. Management of hazardous substance 16. Anti-trust and fair business practices 22. Greenhouse gas emissions (operations) 19. Public policy on fair business practices 25. Non-GHG emissions (operations) 23. Data privacy 26. Waste management 27. Responsible marketing 32. Biodiversity and environmental protection 31. Freedom of expression and privacy 34. Taxation Digital inclusion 4. Local sustainability Impacts 8. Inclusion and access 20. R&D partnerships 30. Philanthropy and volunteering 35. Shared value community investment Supply chain 12. Supplier diversity 18. Sustainable practices in the supply chain 28. Material content traceability Our people 5. Professional development and talent retention 6. Employee satisfaction and engagement 9. Global diversity 11. Non-discrimination and equality 13. Health and safety / well-being at work 33. Freedom of association / collective bargaining Sustainability management 3. Customer Satisfaction 24. Corporate social responsibility vision and strategy 29. Transparency, accountability and reporting In 2015, we continued to apply the findings of our materiality assessment. With the validation of our CEO and Management Team, we recalibrated our sustainability strategy and approach to responsible business innovation. For each material priority, we established a dedicated action plan concentrating on addressing industry issues such as energy efficiency, ethics, human rights and freedom of expression, data privacy, supply chain transparency, employee well-being, gender diversity and social innovation via the Alcatel-Lucent Foundation. Alcatel Lucent Additional Information

60 4 SUSTAINABILITY Our approach to sustainability: Responsible business innovation Our sustainability strategy and reporting framework Alcatel-Lucent s sustainability strategy and reporting framework conformed to the following key regulatory, investor and customer requirements and globally recognized sustainability frameworks in 2015: Š Article 225 of French Grenelle II law (July 10, 2010): Grenelle II requires companies annual reports to include information on the environmental, social and societal impacts of their business activities and on their commitments to sustainable development, with independent, third-party verification of the information published. Š Global Reporting Initiative (GRI): Our sustainability report is prepared according to the GRI sustainability reporting guidelines. The 2010 report was prepared according to the GRI Guidelines, at Application Level B+. The 2011, 2012 and 2013 reports were prepared according to the GRI Guidelines, at Application Level A+. All these reports were submitted for the GRI Application Level Service. The 2014 report was prepared following GRI G4 Core Guidelines. The 2015 report will only focus on the Grenelle II legal requirements and the Principles of the United Nations Global Compact. Š United Nations Global Compact (UNGC): In 2015, Alcatel- Lucent based its sustainability activities and reporting on the 10 Principles of the UNGC. Š EcoVadis: Our sustainability strategy follows the EcoVadis framework, which is a mandatory annual evaluation of customer and supplier corporate social responsibility. It is based on the GRI, UNGC and ISO standards. In 2013, we were granted Gold Recognition with a score of 71/100, placing us in the top two percent of suppliers assessed in all industrial categories. In early 2015, we were granted Gold Recognition for the third year in a row with a score of 81/100 placing us in the top 1% of suppliers assessed in all industrial categories. Š Dow Jones Sustainability Indices (DJSI): Our sustainability strategy is closely based on the RobecoSAM DJSI framework. In 2015, for the fourth year in a row, we were named Industry Group Leader for the Communication Equipment Industry with a score of 92/100. This follows being named Leader of the Technology Supersector s CMT Communications Technology Sector in 2011, and recognized Group Leader for the Communication Equipment Industry in 2012, 2013, 2014 with scores of 86/100, 87/100 and 91/100, respectively. Š Carbon Disclosure Project (CDP): Alcatel-Lucent referred to the CDP framework relating to climate change strategy, governance, performance as well as supplier requirements, in preparing its 2015 sustainability report. In 2015, Alcatel- Lucent received a score of 100A for transparency and performance placing us in the A-List of companies. Alcatel- Lucent was also classified in the CDP Supplier Climate A-List. Š International Integrated Reporting Framework (IIRC): In 2014, Alcatel-Lucent performed a gap assessment to incorporate the IIRC framework into its corporate reporting. In 2015 we launched a dedicated analysis on quantifying value for one major product solution set based on energy efficiency requirements. The findings are being finalized at the time of the publication of this report Sustainability Achievements, progress and commitments We continued to measure our sustainability performance last year according to the 14 distinct indicators in the dashboard below, categorized by challenge. Together, these indicators reflect our commitment in 2015 to responsible business innovation in line with The Shift Plan and key sustainability frameworks Alcatel-Lucent dashboard Challenge: Reduce the impact of our products on the environment COMMITMENTS TIMEFRAME STATUS Improve the functional energy efficiency of our radio access technology, which is now part of the lightradio portfolio, by at least 75% by 2015 compared to By 2015 ACHIEVED: The energy efficiency of typical WCDMA configurations improved by 190% between 2008 and Eliminate PVC from all products (subject to the availability of technically, environmentally and economically sound alternatives). By 2015 ACHIEVED: We successfully eliminated PVC from our products where technically, environmentally and economically sound alternatives were identified. In 2015, we completed an exhaustive review of the remaining PVC used in our products, partnered with suppliers to identify and switch over to appropriate PVC-free alternatives. 58 Additional Information 2015 Alcatel Lucent

61 SUSTAINABILITY Our approach to sustainability: Responsible business innovation COMMITMENTS TIMEFRAME STATUS Measure how the Green portal (GWATT) demonstrates the energy challenge for ICT in the short/middle term and the impact on technology deployment choices. By 2015 ACHIEVED: More than 28,000 visitors accessed the GWATT (Global What if Analyzer of NeTwork Energy ConsumpTion) portal since its April 2014 launch. A third version for dedicated product evaluations is planned for Challenge: Reduce our eco-footprint COMMITMENTS TIMEFRAME STATUS Reduce our absolute carbon footprint (CO 2 equivalent) from our operations by 50% by 2020 (from 2008 baseline). By 2020 ON TRACK: Since 2008, we have reduced our carbon footprint by 46%. Challenge: Our people COMMITMENTS TIMEFRAME STATUS Launch employee awareness and training to deliver on The Shift Plan. By 2015 ACHIEVED: In 2014, we designed an online course on The Shift Plan for delivery through Alcatel-Lucent University and updated employees on a quarterly basis through pushmails, corporate intranet video messages and live progress reports during all-hands calls. 6. Introduce a new performance-based reward program (ABP) for management and employees based on corporate, business line/organization and individual KPIs to drive The Shift Plan. By 2015 ACHIEVED: The Achievement Bonus Plan (ABP) launched worldwide in February 2014 to more than 32,000 managers and individual contributors for that calendar year. Under the plan, employees were rewarded for corporate and business line KPIs achieved in alignment with The Shift Plan, and for KPIs reflecting individual performance measured through the performance management process. Challenge: Stakeholders COMMITMENTS TIMEFRAME STATUS Via the Central Marketing Organization ( CMO ), continue to promote public policies favoring ultra-broadband in key countries worldwide. By 2015 ACHIEVED: We actively promoted ultra-broadband and infrastructure investment policies via multilateral bodies such as the OECD, Broadband Commission, ITU, GSMA and B Via the CMO, continue to promote best-in-class CSR policies to public authorities (in particular, corporate governance) to enhance legislation and voluntary initiatives. By 2015 ACHIEVED: We participated actively in the B20 coalition on anti-corruption, which brought together key stakeholders and influential working groups from bodies such as the ICC, UN Global Compact and OECD. Challenge: Philanthropy COMMITMENTS TIMEFRAME STATUS Via the Alcatel-Lucent Foundation, create a company-wide strategy to guide corporate philanthropic activities aligned with The Shift Plan. By 2015 ACHIEVED: New mission statement, strategy and two key priorities defined in May 2014 by the Alcatel-Lucent Foundation, aligned with the company s industrial strategy, The Shift Plan. Alcatel Lucent Additional Information

62 4 SUSTAINABILITY Our approach to sustainability: Responsible business innovation Challenge: Ethics and compliance COMMITMENTS TIMEFRAME STATUS Deploy annual Code of Conduct review process to employees globally and target 90% and above completion. By 2015 ACHIEVED: More than 94% of global employees completed the Alcatel-Lucent Code of Conduct annual review. 11. Deploy business integrity training for deployment to employees globally in By 2015 ACHIEVED: More than 94% of employees globally completed Conducting Business with Integrity training in 2015, which included modules on conflicts of interest, anticorruption, harassment, fraud and other compliance topics. 12. Deploy human rights communications and education to enhance employees global awareness of human rights issues. By 2015 ACHIEVED: Information on the Group s human rights policy and program was included in business integrity training and Code of Conduct reviews in 2015 to raise awareness of human rights principles and actions within Alcatel-Lucent. Challenge: Supply chain COMMITMENTS TIMEFRAME STATUS Roll out our anti-corruption screening program with suppliers. By 2015 ACHIEVED: We completed the global rollout of a corruption risk screening control triggered by any request to create a new supplier account or add an additional location to an existing supplier account within our global supplier database. 14. Establish conflict minerals traceability from smelters to Alcatel-Lucent. By 2015 ACHIEVED: In 2015, 52% of suppliers who responded to our survey were able to fully trace the origins of their minerals compared to 27% in Sustainability governance The following bodies governed Alcatel-Lucent sustainability activities in 2015: Š Management Committee The Head of Brand and Corporate Sustainability participated in the Group s Management Committee. Management Committee validated sustainability priorities, strategy and key performance indicators, and tracked progress on commitments in collaboration with the CEO and Leadership team. The Head of Brand and Corporate Sustainability also reviewed potential risks and opportunities, providing oversight to the Board of Directors on emerging and critical sustainability issues as appropriate. Š Sustainability Council Led by the Head of Brand and Corporate Sustainability, this body of experts represented key corporate functions including Human Resources, the Office of Business Conduct, Operations, Strategy, Bell Labs and Quality and Risk. The Chief Technology Office and Chief Marketing Office representatives also sat on the council, along with various business line representatives. The Sustainability Council met virtually on a quarterly basis to help define and execute the Group s sustainability strategy, key performance indicators and commitments, and to identify key risks and commercial opportunities related to sustainability performance and activities. Š Sustainability Advisory Panel This panel engaged material stakeholders in Alcatel-Lucent s sustainability strategy and KPIs over the course of the year, providing insight into and guiding actions related to key risks and opportunities. The panel was made up of key customers, an investor, a key supplier, a government representative, a representative from an Non-governmental Organization (NGO) and a representative from a rating agency. It was led by the Head of Brand and Corporate Sustainability with the support of Management Committee and Sustainability Council members, and was moderated by an external advisor. The five meetings held in 2015 focused on the priorities arising from the previous year s materiality assessment: energy efficiency, data privacy, responsible supply chain management, diversity and digital inclusion/philanthropy. During each meeting, a designated panel member presented on activities and expectations related to a given material topic, prompting exploration of concrete partnership opportunities. 60 Additional Information 2015 Alcatel Lucent

63 SUSTAINABILITY Our approach to sustainability: Responsible business innovation Š Corporate Sustainability Team This group defined and drove the implementation of Alcatel- Lucent s sustainability strategy and initiatives worldwide, with accountability for regulatory and reporting requirements and for leading proactive stakeholder dialogue. The Alcatel- Lucent Foundation was an integral part of the corporate sustainability function Environment, Health and Safety (EHS) management Through our Environment, Health and Safety (EHS) policy, we remained committed to operating in a way that protected the environment as well as the health and safety of employees, contractors, customers and the communities in which we did business in Meeting this commitment was a primary management objective as well as an individual and collective responsibility. Our EHS Management System Last year, Alcatel-Lucent continued to rely on its Environment, Health & Safety Management System (EHSMS) to facilitate the use of a common EHS management model. The EHSMS was designed to identify risks, maintain compliance and promote EHS excellence. It provided an efficient and effective way to manage EHS issues with products, services and activities while we cost-effectively pursued continuous improvement in our EHS performance. The EHSMS met the needs of customers insistent on thirdparty-certified EHS systems. Decisions regarding third-party certification were made locally based on risk, the nature of hazards, customer requirements and competitive advantage. We drove this EHS management approach throughout our supply chain to minimize the overall impact of our operations. Centralizing environmental information Assigned contributors at Alcatel-Lucent facilities used an on-line cloud-based reporting tool to collect, analyze and report on sustainability metrics and account for the Group s energy use, water consumption, direct greenhouse gas (GHG) emissions last year (applicable invoices and bills authenticated this data.) Using the tool improved the accuracy and completeness of the data used in our annual sustainability reporting. In addition, we used an online survey that was sent to assigned contributors at Alcatel-Lucent facilities for collecting, reporting and analyzing waste indicators data. At the beginning of 2015, 429 sites were contained within our real estate portfolio, representing a total area of 2,528,951 square meters. Over the course of the year, 38 sites were added to and 77 sites were removed from our portfolio. At year-end, 390 sites were contained within our real estate portfolio for a total area of 2,245,769 square meters. As a result of these changes to our portfolio, in 2015 we achieved a 11% reduction of our worldwide real estate area. 100% of facilities contained within our real estate portfolio were accounted for in the reporting tool. Carbon footprint: Of the 467 sites in our real estate portfolio during the year, 196 were directly responsible for inputting data on applicable Scope 1 and Scope 2 activities using the reporting tool. These sites accounted for 87% of our worldwide annual average real estate area and 80% of our total annual average headcount. For the remaining sites that we did not have operational control, we estimated their electricity and natural gas usage, electricity transmission/distribution loss and refrigerant loss using company-specific algorithms, to obtain a 100% accounting for all worldwide locations. Scope 3 Category information was obtained from both Alcatel-Lucent groups along with our suppliers. Waste management: 173 of our 467 sites in 2015 were responsible for completing the Group s online waste survey. The response rate to this survey represented 72.3% of Alcatel- Lucent s total headcount; these data were extrapolated based on per-employee ratios to account for the organization s full employee base. To account for 100% of our employees, extrapolation procedures were applied based on calculated ratios per employee. For more detail on Alcatel-Lucent s environmental performance in 2015, see the Environment indicators section (See Section 4.9.1). OHSAS Alcatel-Lucent maintained EHSMS certification to the Occupational Health and Safety Management Systems (OHSAS) 18001:2007 standard and the International Organization for Standardization (ISO) 14001:2004 standard. In 2015, the Group expanded its EHSMS to include Alcatel-Lucent New Zealand, where operations in Wellington obtained OHSAS 18001:2001 certification. The EHSMS in the United Kingdom was consolidated from three locations to a new, single location in Bristol. EHS Compliance Audit Program The aim of this program was to confirm that EHS programs at Alcatel-Lucent facilities and field worksites were implemented properly and effectively, and to assure management that the organization was operating consistently with our EHS Policy. Facilities and fieldwork were evaluated against a number of criteria including Alcatel-Lucent standards, international norms and country-specific federal and local regulations. As part of our EHS audit strategy in 2015, subcontractor field audits were completed in the United States, Spain, Portugal, France, Belgium, Argentina, Mexico, Ecuador, Peru, Chile, Qatar, South Africa, Australia and China. Facility audits included Alcatel- Lucent Vermicate (Italy), Murray Hill (United States), Villarceaux (France), RFS Shanghai (China) and ASB Shanghai (China). Alcatel Lucent Additional Information

64 4 SUSTAINABILITY Our approach to sustainability: Responsible business innovation Environmental risks Risks related to climate change Any company with global operations faces extreme weatherrelated risks resulting from climate change. Alcatel-Lucent designed many of its products to withstand extreme conditions, and worked with customers to develop and customize product specifications to meet their needs. We maintained procedures throughout the year to ensure the safety of installation and engineering workforces in the field, factoring conditions encountered due to climate change. These procedures were reviewed periodically and adjusted as needed. Provisions and guarantees for environmental risks We continued to comply with all applicable environmental requirements and maintained our commitment to provide safe, environmentally sound workplaces that will not adversely affect the health or safety of the communities in which we operate. The Group believes it is in material compliance with all environmental, health and safety laws and regulations, and that it has obtained all material environmental permits and authorizations required for its operations and products. However, we may need to incur future expenditures significantly in excess of current expectations and forecasts to cover environmental liabilities, maintain compliance with current or future environmental, health and safety laws and regulations, or undertake any necessary remediation. The future impact of environmental matters, including potential liabilities, changes in carbon and environmental reporting requirements and the pricing of carbon emissions, is often difficult to estimate. We modeled the potential pricing of carbon on our financial statements and, while it is not possible to predict the outcome of remedial and investigatory activities with absolute certainty, we believe the ultimate financial impact of these activities net of applicable reserves will not have a material adverse effect on our consolidated financial position or our income (loss) from operating activities. As of December 31, 2015, Alcatel-Lucent s remaining outstanding balance related to its main provisions for environmental risks was 67 million. Contingency planning and adaptation to environmental risks In 2015, Alcatel-Lucent had 64 real estate business continuity plans (BCPs) in place to address environmental and other risks related to the potential loss of critical functions. These BCPs targeted locations with more than 500 employees (or more than 200 employees in areas with elevated risks) and covered all critical real estate functions for a given location enabling the Group to respond to diverse threats mitigate risks. Certain plans were managed centrally as part of the Group s corporate crisis management process for response to regional or global events such as pandemics while local emergency response plans supported individual facilities. Laws and regulations Alcatel-Lucent s operations, facilities and products remained subject to international, national and local laws and regulations in every jurisdiction where it operated last year. These laws and regulations impose various limits (including on the discharge of pollutants into the air and water) and establish standards for treating, storing and disposing of solid and hazardous waste that required the Alcatel-Lucent Group to remediate certain sites. We continued to incur annual costs to comply with these laws and regulations in Throughout 2015, Alcatel-Lucent monitored legal, regulatory and other developments that might affect the environmental, health and safety aspects of its activities, products or services. Compliance reviews were performed regularly and appropriate remedial measures were implemented once applicable legal, regulatory and other requirements were identified. Remedial and investigative activities Remedial and investigative activities continued in 2015 at numerous current and former facilities owned or operated by the former Alcatel and Lucent entities. In 2015, Lucent Technologies Inc. (Alcatel-Lucent USA Inc.) remained a potentially responsible party at numerous Superfund sites, pursuant to the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) or comparable state statutes in the United States (Lucent Technologies Inc. had been named as a successor to AT&T with respect to certain Superfund sites liabilities, as described below). Under a Separation and Distribution Agreement with AT&T and NCR Corporation (a former subsidiary of AT&T), Alcatel-Lucent USA Inc. agreed to assume responsibility for certain liabilities resulting primarily from or relating to its assets and the operation of its business as conducted at any time before or after separating from AT&T, including related businesses discontinued or disposed of prior to its separation from AT&T. Under the Separation and Distribution Agreement, Alcatel- Lucent USA Inc. is required to pay a portion of contingent liabilities in excess of certain amounts paid out by AT&T and NCR, including environmental liabilities. For more information, including our anticipated remedial costs associated with the cleanup of the Fox River Superfund Site in Wisconsin, please see Section 6.5 Contractual obligations and off-balance sheet contingent commitments, subtitle Specific commitments Alcatel-Lucent USA Inc. of the 2015 Annual Report on Form 20-F. In Alcatel-Lucent USA Inc. s Separation Agreements with Agere and Avaya, those companies have agreed, subject to certain exceptions, to assume all environmental liabilities related to their respective businesses. 62 Additional Information 2015 Alcatel Lucent

65 SUSTAINABILITY Our approach to sustainability: Responsible business innovation Taxation risks Alcatel-Lucent strove to comply with tax law and regulations in all countries where we operated last year. We published our tax policy (along with all major company policies) on our website. Alcatel-Lucent used a third-party online application to track tax litigations and areas of tax uncertainty around the world, and reported any significant changes internally to management and also to external auditors at least once every calendar quarter. The company s tax team contributed to enterprise risk management (ERM) efforts and had one file on the group s ERM dashboard at year-end, relating to a complex tax audit underway since mid Throughout the year we actively followed developments at the OECD related to Base Erosion & Profit Shifting (BEPS), especially for intellectual property remuneration and country-bycountry tax reporting requirements. 4.3 Our engagement with stakeholders Dialogue and action Stakeholder dialogue remained the cornerstone of our approach to sustainability in We engaged actively with material stakeholders in the public and private sectors (customers, investors and members of civil society) and with employees to collectively address the global challenges of climate change, digital inclusion, human rights (e.g., freedom of expression and privacy), ethical business practices and the evolution of digital economies. All our interactions with partners were constructive, completely transparent and premised on meaningful action. These included direct discussions via the Alcatel-Lucent Sustainability Advisory Panel, joint initiatives, global forums and conferences. We also hosted online conversations via the Alcatel-Lucent Blog, Twitter, YouTube and our internal social media platform, Engage. In all such interactions, we applied relevant stakeholder governance structures and ethics and compliance policies Stakeholder engagement highlights Below are select highlights of Alcatel-Lucent s stakeholder engagement approach in 2015, including the frequency of engagement by type and stakeholder group, key topics and concerns, and how they were addressed: STAKEHOLDER ENGAGEMENT VEHICLES 2015 RESULTS Employees Engage, our social networking platform Talent Dialogue tool Š Our award-winning social networking platform had more than 47,000 registered users and 2015 saw a 6.8% increase in interaction per piece of content. Engage is open to all employees, including management, and enables open, transparent and horizontal communication company-wide. Town hall meetings Annual Top 200 Leadership meeting Top10 Women Intranet communications You Made My Day digital initiative Text-Me SMS service On the Air radio program InnoZap WebTV program Tip of the Month intranet series Podcasts and videos The Blog, Twitter, YouTube Š Š Š Š Š Š Our Talent Dialogue tool helped employees connect with managers bi-annually on objectives and track individual progress From April to December 2015 members of our leadership team travelled to nearly 30 major sites around the world to talk with employees about the Nokia deal and integration progress in person. These Town Hall meetings included live Q&A sessions. The annual Top 200 leadership meeting was held in September 2015 in Paris. The theme was: Proud of our Past, Inspired by our Future. The meeting featured a highly informative keynote address and Q&A session with Nokia CEO, Rajeev Suri. The TOP10 Women leadership program continued its second year, providing customized career-development support to 10 women in each region. As part of our global employee recognition program, a new digital initiative called You Made My Day was launched in mid The idea is to show how grateful we are to a colleague who offered a much appreciated helping hand by sending them a personalized message telling them so. The company maintained best-in-class open communications with employees, including social media and the Text-Me and On the Air tools to keep employees informed of the latest company news saw the launch of a new innovation-focused webtv program known as InnoZap and a best practice series known as Tip of the Month Alcatel Lucent Additional Information

66 4 SUSTAINABILITY Our engagement with stakeholders Customers Sustainability Advisory Panel BT Better Future Supplier Forum The Shift Plan Customer Satisfaction Survey Program Quality Management System (QMS) Dedicated meetings at major industry events such as Mobile World Congress and Broadband World Forum Dedicated operational reviews and audits on sustainability Ad hoc initiatives such as the Telecommunications Industry Dialogue on Human Rights Š Š Š Three global service provider customers members of the Alcatel-Lucent Sustainability Advisory Panel continued to provide feedback on our strategy and performance, shared their own programs and KPIs, and sought concrete opportunities for partnership. In Spring 2015 Alcatel-Lucent was invited to participate in BT s Better Future Supplier Forum (BFSF), dedicated to helping our customer meet its sustainability objectives of reducing its overall carbon footprint by a factor of 3. The first part of this program consisted of a deep evaluation of Alcatel-Lucent s sustainability activities according to BFSF metrics both at corporate and local levels. Following this first step evaluation, BT ranked Alcatel-Lucent among its top-performing suppliers. This program will continue in 2016 with a focus on supply chain process improvements, quantifying the eco-sustainability value of Alcatel-Lucent flagship products deployed in BT s networks and exploring how to challenge the sustainability of BT s communications solutions leveraging Bell Labs innovation. Alcatel-Lucent continued to work with customers including service providers, extra-large enterprises, network platform players, cable providers and certain sectors of government investing in IP networking, ultra-broadband access and cloud to address their communications needs. Š Through our Customer Satisfaction Survey Program we interviewed 333 customers in person, representing our top 34 accounts (80% of our total revenue). Our QMS includes TL 9000 standards quality certification in 108 locations, 49 countries and 35 different product categories. We renewed our certification Š Š Š Š Over 1100 customer meetings and tours were held at Mobile World Congress in customer events hosted at our global Executive Briefing Centers. We responded to more than 50 customer questionnaires on sustainability, supported audits in facilities globally, and participated in dedicated operational reviews on our sustainability performance and activities. We continued to work with seven of our customers to exchange best practices on human rights, freedom of expression and privacy via the Telecoms Industry Dialogue. Suppliers Require, Assess, Improve approach EICC Code of Conduct and UN Global Compact Principles Anti-corruption requirements Conflict Minerals Traceability Program Š Š Š Š Š Š We continued to pursue sustainable purchasing through contracts with our suppliers, assessing their sustainability performance via ratings and onsite audits and supporting the remediation efforts of suppliers whose performance is not at the expected level. 80% of our active suppliers rated satisfactory or above for their sustainability performance. We worked with suppliers to ensure compliance with the UN Global Compact Principles and EICC Code of Conduct. We implemented a compliance screening process for all suppliers, with two levels of screening depending on risk profiles. We surveyed more than 360 suppliers on conflict minerals to determine the origin of key components, and published our second conflict minerals report. We invited a Tier 1 supplier to join our Sustainability Advisory Panel and provide dedicated feedback on our strategy and performance. Public institutions and regulators Promotion of ultra-broadband access plans Š Alcatel-Lucent worked with approximately 40 governments and regulators many in emerging countries to promote the benefits of ultra-broadband action plans and digital inclusion. Š We invited a major regional public representative to join our Sustainability Advisory Panel and provide feedback on our strategy and performance. 64 Additional Information 2015 Alcatel Lucent

67 SUSTAINABILITY Our engagement with stakeholders Multilateral and industry organizations Promotion of ultra-broadband access plans Energy efficiency and climate change Digital Health Compliance and fair business practices for the telecommunications sector Š Š Š We worked within the UN Broadband Commission and International Telecommunication Union on key topics including ultra-broadband access, energy efficiency, climate change and sustainable development goals at large. In the context of the COP21, we worked with the European Round Table (ERT) to contribute to the global debate on carbon pricing, and more specifically, how carbon pricing can incentivize low carbon innovation and investment in industry, while supporting the achievement of the UNFCCC worldwide 2 C goal. We partnered with the United Nations (UN, ITU) and the Inter-American Development Bank on large scale digital health initiatives in Senegal and Mexico. We work closely with other organizations to promote and scale digital health to developing and emerging countries such as GSMA, UN Foundation, USAID and World Bank. Š We engaged in dialogue with the UN Global Compact and Transparency International on compliance and fair business practices for the telecoms sector following our signing of the UNGC s Call to Action on Anti-Corruption in 2014, and participating in the UNGC s Annual Summit and Work Group in New York City. NGOs and civil society Alcatel-Lucent Foundation Human rights, privacy and freedom of expression Š Š We invited a major NGO to join our Sustainability Advisory Panel and feedback on our strategy and performance. The Alcatel-Lucent Foundation launched 22 partnerships with non-profit organizations to develop digital education for youth in key geographies of strategic value to our business and significant for our employees. Š We launched a major Youth Innovation program in October 2015 in partnership with UNESCO and MakeSense. Š We communicated with key NGOs such as Access Now, CDT, GNI, IHRB, CDT and Privacy International on human rights issues. This was done both directly and through the Telecoms Industry Dialogue, which continued to collaborate with GNI on issues of freedom of expression and privacy. Š Alcatel-Lucent chaired the Telecoms Industry Dialogue between April and October to finalize the merger of the Industry Dialogue and GNI, enabling a truly multi-stakeholder ICT organization dedicated to mitigating risks related to freedom of expression and privacy worldwide. Investors Regular meetings Quarterly announcements Annual shareholder meeting earnings Annual Financial Report on Form 20-F Sustainability Report Š Š Š Š Alcatel-Lucent regularly updated shareholders and prospective investors on its business strategy, activities and financial performance with a focus on The Shift Plan through quarterly earnings announcements. We interacted regularly with investors in one-on-one meetings to discuss specific aspects of our sustainability performance in all five priority areas identified by the materiality assessment. We invited a key investor to join our Sustainability Advisory Panel and provide dedicated feedback on our strategy and performance. We reported our financial performance and activities through our Annual Financial Report on Form 20-F (with a dedicated chapter on sustainability under 20-F Additional Information ) and through our 2014 Sustainability Report and Annual Review. Local communities Philanthropy Digital literacy of youth, with a focus on young women, in disadvantaged communities Š Š The Alcatel-Lucent Foundation provided US$0.9 million to charitable programs benefitting 47,000 individuals in communities around the world. More than 2,500 employees donated 10,400 volunteer hours to these programs. We continued to support local organizations and grassroots programs dedicated to education, the digital literacy of youth and especially innovation. Our ConnectEd program concluded in 2015: over 4 years it provided training to 22,575 youth, 58% of whom were girls. Alcatel Lucent Additional Information

68 4 SUSTAINABILITY Ethical Business 4.4 Ethical Business Our approach to ethics and compliance Alcatel-Lucent maintained a zero-tolerance policy for compliance violations and reinforced full integrity in every business action from every employee in The Group s ethics and compliance activities were overseen by an Ethics and Compliance Council established in February 2007 and composed of the Chief Compliance Officer as well as representatives from Law, Finance, Operations, Human Resources, Communications, Corporate Audit Services, Corporate Investigation Services Operations, and the Office of Business Integrity & Compliance. The Council met quarterly and oversaw Alcatel-Lucent s Group-level design and implementation of an integrated ethics and compliance system Ethics and Compliance Management System We began implementing a comprehensive Ethics and Compliance Management System in 2007 to promote compliance and ethical behavior consistent with the highest standards of our customers, shareholders and employees. This system aims to prevent and detect violations of law, regulation and company policy, and to cultivate an ethical business culture throughout the company. Key elements of the Ethics and Compliance Management System include: Š a comprehensive compliance governance structure; Š the Alcatel-Lucent Code of Conduct; Š a Compliance Hotline and other reporting vehicles; Š policies, procedures and controls; Š monitoring and auditing practices; Š an annual compliance risk assessment (with related mitigation plans and processes for continuous improvement); Š education and training; Š ethics and compliance communications focusing on maintaining a speak-up culture; and Š a global compliance-resolution process Alcatel-Lucent Code of Conduct and Compliance Hotline Alcatel-Lucent Code of Conduct The Code of Conduct is available in 22 languages on our intranet and can be viewed by third parties on our external website. In 2015, all employees and non-employee workers were required to review the Alcatel-Lucent Code of Conduct to understand their obligation to abide by it. The company achieved greater than 94% compliance globally for this review and acknowledgment process. Compliance Hotline Alcatel-Lucent s Compliance Hotline is available in 114 countries 24 hours a day, seven days a week. Our nonretaliation policy specifically prohibits adverse action against employees who report suspected violations of law or company policy in good faith. All reports made to the Compliance Hotline are subject to due diligence to determine the organization best suited to respond. Most are investigated by Corporate Investigation Services with help from other bodies, as appropriate, such as Law, Regional Compliance, Human Resources and Corporate Audit Services. In 2015, 425 issues/allegations were reported to the Compliance Hotline. During the year, 90 allegations (49 of which were opened prior to 2015) were substantiated with cause found after investigation. Of these, 80 resulted in disciplinary action up to and including termination. Last year, 30 cases involved allegations of potential harassment or discrimination (including those categorized as sexual harassment), and 36 potential harassment or discrimination cases were closed in the year (16 of which were opened prior to 2015). Of the 36 cases closed, six resulted in a cause found determination. Zero cases involved violations related to our commitments on human rights freedom of expression and privacy Compliance with competition and anti-trust laws Alcatel-Lucent has a clear policy to obtain business solely on the merits of its products, services and people. Compliance with laws that promote and protect competition in the marketplace ( competition laws and anti-trust laws ) is 66 Additional Information 2015 Alcatel Lucent

69 SUSTAINABILITY Ethical Business carefully spelled out in our Code of Conduct and competition/ anti-trust law policy and guidelines. We comply with all international trade laws, including applicable export, import and sanction laws, and regulations in the countries where we do business. Suppliers and contractors from whom we purchase goods and services are also required to comply with our competition/antitrust law policy. Competition/anti-trust law violations can be reported via the Alcatel-Lucent Compliance Hotline. Employees whose jobs are affected by this policy participate in relevant in-person and online training programs Ethics and compliance training In 2015, Alcatel-Lucent s Compliance and Business Integrity Training Program continued to educate employees about their personal and professional responsibilities under the Alcatel- Lucent Code of Conduct, fostering commitment to the highest levels of ethical business conduct. Courses were updated as needed to reflect current business requirements and evolving regulations. We also continued to implement a comprehensive global ethics and compliance training program, deploying seven mandatory, specialized compliance courses based on job responsibility. Targeted compliance areas included export control, national security agreements, data privacy for Information System/Information Technology, free/open source software, environment health and safety, and harassment and discrimination. Additional recommended training was delivered on information security, data privacy for human resources, environment, and health and safety. This complemented the requirement for all employees and non-employee contract workers to complete the Conducting Business with Integrity training, which reviewed the Alcatel-Lucent Code of Conduct Actions taken to prevent corruption Anti-corruption is a key compliance priority for Alcatel-Lucent. Our policy is to conduct business only on the merits of our products, services and people. We never pay, offer or promise to provide anything of value to obtain or retain business or to secure any improper advantage, and we never allow a representative or business partner to make illegal payments or promises on our behalf. Our position on anti-corruption comes from the highest level of the company, is unmistakable and definitive, and applied with zero tolerance for non-compliance. We maintain processes and training to prevent and detect potential business risk regarding bribery and corruption. Alcatel- Lucent strictly prohibits bribes in any form and continues to enhance policies, programs and procedures to include a clear requirement to comply with anti-corruption requirements. Our Anti-Corruption Compliance Program focuses on ensuring employee awareness of and compliance with our 6 company policies and applicable laws such as the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act. Key pillars of our anti-corruption program include: Š ongoing monitoring of legislative and regulatory activities; Š annual program self-assessment and development of related enhancement plans; Š annual compliance risk assessment with related mitigation plans; Š regular status reporting to senior management; Š continued implementation of a web-based tool to ensure gifts, travel and hospitality events are granted in accordance with anti-corruption policies; and Š enhanced risk management of sales and other third parties through the application of new third-party screening and selection processes, and globally implementing a third-party registry and online screening tool. The Anti-Corruption Third-Party Risk Management, Screening and Selection Policy (and its accompanying approval processes) are subject to annual review and revision to capture any changes in regulatory requirements and lessons learned during the year. Consolidated risk assessment results are shared regularly with all interested stakeholders including senior management. Compliance Committees composed of management from Sales, Finance, Legal, HR and Compliance have been established in the regions and business units to regularly review anti-corruption compliance. In addition, unit compliance leaders provide quarterly status reports to the Office of Business Integrity & Compliance detailing ongoing implementation of their action plans highlights Every part of our business (including regions, business groups and central functions) was analyzed for risks related to corruption. To ensure full alignment, each operating unit s compliance risk assessment report was reviewed, approved and documented by the Management Committee member responsible for that organization. Alcatel-Lucent updated eight policy documents connected to Anti-Corruption, to align with the stricter policies and tool procedures introduced in Full deployment of the Gifts, Travel and Entertainment online tool, and related training occurred in early Alcatel Lucent Additional Information

70 4 SUSTAINABILITY Ethical Business Protecting privacy Alcatel-Lucent remained committed to respecting individual privacy rights and expectations, and to protecting personal data against unauthorized access, use, retention or disclosure in We set up a comprehensive organizational structure in charge of privacy and data protection (P&DP) compliance that includes the following: Š Chief Privacy Officer (CPO) The CPO served as primary senior sponsor and leader responsible for ensuring Alcatel-Lucent had a consistent and effective P&DP strategy in line with the overall business strategy, as well as an associated P&DP compliance program. Š P&DP Compliance Program Owner The Compliance Program Owner s primary responsibility was to establish and execute the P&DP Compliance Program (including chairing the P&DP Steering Committee). Š P&DP Lead Counsel This person ensured the various P&DP players had all necessary legal advice and support throughout the year. Š P&DP Steering Committee Established in 2010, this committee s role was to provide overall cross-functional oversight of the design and implementation of Alcatel-Lucent s privacy program. It met several times during the year and was composed of the CPO, the Lead Counsel and other senior leaders from CTO, Corporate Security, Corporate Sustainability, Human Resources and IS/IT. Š Data Privacy Team (DPT) This multi-disciplinary team carried out daily operational tasks and activities in support of the various business units and their project teams assessing and mitigating P&DP risks. It also worked to ensure members of the Data Privacy Network (DPN), which represented Alcatel-Lucent affiliates, had the necessary information to conduct their own compliance assessments with local laws, and to implement necessary local actions such as submitting filings to data protection authorities or preparing needed communications to works councils and users. As part of its annual activities, the P&DP Compliance Program last year: Š conducted an assessment and developed a related enhancement plan; Š developed policies, procedures and guidelines to meet regulatory and customer requirements; Š designed and deployed training modules for specific audiences (e.g., HR, IS/IT, Sales, R&D) to complement the Code of Conduct; Š made available various awareness and educational resources including FAQs and what if? scenarios, some of which were produced for specific occasions such as the annual international data privacy day; and Š continuously monitored data privacy regulatory developments as well as changes in regulations pertaining to areas such as the Internet of Things, cloud and Big Data. Specific to 2015, the P&DP Compliance Program also: Š conducted an internal review to identify how this corporate team could further support to Alcatel-Lucent entities in complying with applicable local data privacy laws; Š analyzed data privacy-related requirements from a sample of customers Request for Information (RFI), Request for Proposal (RFP) and Request for Quotation (RFQ) documents to better understand customer expectations and prepare standardized responses on behalf of our pre-sales and sales teams; and Š introduced the Alcatel-Lucent approach on P&DP to the Sustainability Advisory Panel during a session focused on Ethics & Compliance (a representative from Orange reciprocally presented how that company handles similar issues with end users and consumers). As Alcatel-Lucent operates in a business-to-business model, its privacy activities continued to focus on its own employees. Nonetheless Alcatel-Lucent has a public Global Privacy and Data Protection Policy, which can be viewed at the bottom of every page of our website. This policy applies to all business activities of Alcatel-Lucent S.A., Alcatel- Lucent International and all of their subsidiaries, and to all Alcatel-Lucent websites that are operated by or on behalf of Alcatel-Lucent and/or link to the Global Privacy and Data Protection Policy. This policy does not apply to consumer activities as Alcatel-Lucent does not have direct business relations with consumers. In April 2015, Nokia announced the intention to acquire Alcatel- Lucent to create a global leader in connectivity. Working sessions about Data Privacy compliance took place throughout the second half of the year between Nokia and Alcatel-Lucent as a specific sub-stream under the overall Legal & Compliance integration stream, for the two companies to understand the values, policies, governance model and other aspects in order to prepare a successful integration of Alcatel-Lucent into Nokia upon Closing of the Offer Telecoms Industry Dialogue on freedom of expression and privacy The United Nations Guiding Principles on Business and Human Rights the so-called Ruggie Principles that led to the establishment of the UN Protect, Respect and Remedy Framework were endorsed in June They clarify the responsibility of governments to protect human rights and the responsibility of the business community to respect human 68 Additional Information 2015 Alcatel Lucent

71 SUSTAINABILITY Ethical Business rights in its global operations and ecosystems. In 2012, Alcatel- Lucent updated its Global Human Rights Policy to align with the UN Guiding Principles on Business and Human Rights, and designated the Chief Compliance Officer as the company s representative on human rights at the executive level. In 2013, as part of our internal processes, we developed human rights due diligence requirements for material commercial proposals and extended our human rights commitments to resellers. We also designed and deployed a multilingual employee training module to build awareness of human rights principles throughout the company. These measures were deployed in The Group continued to broaden its security geographic screening processes and compliance screening of third parties, and to engage in ongoing monitoring of its supply chain to assess key aspects of human rights. Externally, we deepened our collaboration with the Telecommunications Industry Dialogue (ID) a group of nine global telecommunications operators and vendors that has been meeting since 2011 to discuss freedom of expression and privacy rights in the telecommunication sector. In 2013, ID members jointly launched the 10 Guiding Principles on Telecommunications and Freedom of Expression and Privacy of which Alcatel-Lucent s implementation measures can be found in the table below. In 2015, Alcatel-Lucent chaired the ID from April to October, bringing greater visibility to vendor issues relating to freedom of expression and privacy such as encryption, and furthering collaboration with the Global Network Initiative (GNI) to create a united multi-stakeholder ICT approach to human rights. We also chaired the publication of ID s Annual Report (available at wp-content/uploads/telco-industry-dialogue-annual-report pdf) and hosted a major stakeholder event in April 2015 presenting ID s achievements and milestones to more than 30 organizations from investors and multilateral bodies such as OECD and UNESCO to individual rating agencies and peers from the telecoms sector. Implementing the Industry Dialogue Guiding Principles GUIDING PRINCIPLE 1. Create and revise relevant policies with Board oversight or equivalent, outlining our commitment to prevent, assess and mitigate to the best of our ability the risks to freedom of expression and privacy associated with designing, selling and operating telecommunications technology and services. 2. Conduct regular human rights impact assessments and use due diligence processes (as appropriate to the company) to identify, mitigate and manage risks to freedom of expression and privacy in relation to particular technologies, products, services or countries according to the Guiding Principles for the Implementation of the UN Protect, Respect and Remedy Framework. 3. Create operational processes and routines to evaluate and handle government requests that may have an impact on freedom of expression and privacy. ALCATEL-LUCENT 2015 ACTIVITIES: Alcatel-Lucent published a revised version of its Human Rights policy in line with UN Guiding Principles. The Chief Compliance Officer (CCO) served as the designated company executive for human rights, freedom of expression and privacy activities. In 2015, the CCO, Corporate Investigation Services and legal counsel, with the assistance of the Head of Sustainability and involvement from the Anti-Corruption Program Office, progressively deployed company-wide implementation measures focused on commercial due diligence. These measures were reviewed by senior management and our Sustainability Advisory Panel, and included: Š screening for commercial due diligence; Š creating legal clauses for resellers; Š designing employee-wide training; Š ensuring implementation across our supply chain; and Š continuing advocacy and stakeholder engagement via the Industry Dialogue and in one-on-one sessions with investors, members of civil society and public institution representatives. With the help of Compliance legal counsel, we broadened our company-wide export control and compliance processes to identify freedom of expression and privacy risks. Two major cases were identified and reviewed. We also monitored potential technology, commercial and geographical risks via our Compliance Hotline and enterprise risk management processes. As a vendor of telecommunications equipment, we usually receive government requests at the operator service level (i.e., from our customers). Our compliance and export control processes offer mechanisms to report and evaluate requests that affect our business. Alcatel Lucent Additional Information

72 4 SUSTAINABILITY Ethical Business 4. Adopt, where feasible, strategies to anticipate, respond to and minimize the potential impact on freedom of expression and privacy in the event that a government demand or request is unlawful, or where governments are believed to be misusing products or technology for illegitimate purposes. 5. Always seek to ensure the safety and liberty of company personnel who may be placed at risk. 6. Raise awareness of and train employees in relevant policies and processes. 7. Share knowledge and insights with all relevant and interested stakeholders to improve understanding of the applicable legal framework and the effectiveness of these principles in practice, and provide support for the implementation and further development of the principles. 8. Report externally on an annual basis, and whenever circumstances make it relevant on progress implementing the principles, and as appropriate on major events occurring in this regard. 9. Inform the development of policy and regulations that support freedom of expression and privacy including, alone or in cooperation with other entities, using our leverage to mitigate potential negative impacts from policies or regulations. 10. Collectively examine options for implementing relevant grievance mechanisms as outlined in Principle 31 of the UN Guiding Principles for Business and Human Rights. The Alcatel-Lucent Code of Conduct encourages reporting of suspected or observed violations of law or company policy, including unlawful use or misuse of products, through the Compliance Issues Reporting Methods Initiative. During 2015, we implemented further screening at the regional level to anticipate, respond to and minimize the potential impact on freedom of expression and privacy related to a government demand or request. We also continued to work with key stakeholders (i.e., investors, NGOs and multilateral organizations) to provide awareness of unlawful or misuse of telecommunications products and technology via the Telecommunications Industry Dialogue. The Alcatel-Lucent Code of Conduct includes a zero-tolerance commitment to protect the health, safety and security of employees during their operational activities. Dedicated material on human rights, freedom of expression and privacy was included in the company s mandatory employee training on business integrity. This was extended to non-employee contract workers. A dedicated module was also included in Alcatel-Lucent University in English, French and simplified Chinese. As an individual company and member of the Industry Dialogue, we participated in regular meetings with key stakeholders and met with investors, government and civil society representatives to share our progress and challenges relating to human rights. Where possible, we actively participated in key global forums via the Industry Dialogue, exchanged ideas at bilateral meetings and leveraged social media platforms such as Twitter. Alcatel-Lucent also chaired the Industry Dialogue from April-October 2015 with a particular focus on advancing collaboration between ID and the Global Network Initiative (GNI). We also spoke in the November 2015 Ethical Corporation conference to share best practices relating to human rights. Through our Sustainability Report and associated website, we transparently reported on our implementation of the Industry Dialogue s Guiding Principles. Through the Industry Dialogue and its GNI collaboration, we spoke with members of the ICT industry last year to inform the development of policies and regulations supporting freedom of expression and privacy. We also engaged in conversations with multilateral organizations including UNESCO, investors, rating agencies and individual members of the telecoms industry to share challenges and best practices relating to freedom of expression and privacy. In 2015, the Industry Dialogue exchanged best practices and tools on grievance mechanisms. Alcatel-Lucent continued to provide a comprehensive grievance mechanism to all employees via its Compliance Hotline. 70 Additional Information 2015 Alcatel Lucent

73 SUSTAINABILITY Environment 4.5 Environment Overall environmental policy Our approach to eco-sustainability The information and communications technology (ICT) sector has the potential to play a critical role in addressing challenges related to climate change. In 2015, Alcatel-Lucent continued to leverage its technological innovations to help customers respond to their environmental challenges, while reducing its own direct environmental impact following a three-part approach: Š Developing eco-sustainable networks: Creating and bringing to market products, services and solutions that contribute to environmentally responsible end-to-end networks. Š Leading the telecoms industry: Finding new responses to today s climate change challenges through open, collaborative research partnerships and forums (such as the GreenTouch consortium) as well as our own Bell Labs research on energy efficiency. Š Reducing our carbon footprint: Decreasing our absolute carbon footprint from operations by 50% by 2020 compared to our 2008 baseline. By the end of 2015, our carbon footprint had decreased by 46% compared to the 2008 baseline. Eco-sustainability governance Environmental activities at Alcatel-Lucent fell under the responsibility of three bodies in 2015: Š The Green Operations Sustainability Team, which managed operational initiatives linked to the environment and climate change, and leveraged a network of local Green team leaders to ensure reliable, on-time carbon footprint reporting and proper implementation of local action plans. Š The Environment, Health & Safety (EHS) Office, which developed compliance assurance programs and policies to meet legal, customer and company requirements. It also provided technical support to local EHS representatives for the implementation of EHS programs, and used the EHS Management System (EHSMS) to ensure compliance, continual improvement and performance in line with industry best practices. Š The Chief Technical Office (CTO) and Bell Labs, which addressed environmental initiatives and goals linked to products, services and solutions. In collaboration with product and research teams, the CTO and Bell Labs looked for ways to minimize the environmental impact of our products throughout their life cycle by developing and deploying eco-conscious design processes, practices and tools. It also sought to identify ways in which ICT can be used to enable a low-carbon economy. Employee eco-awareness To inspire all employees to be aware of EHS issues, we: Š shared updates on sustainability progress through blog posts, podcasts and Twitter sessions; Š offered web-based EHS training; Š held an Earth Day awareness campaign through the Alcatel- Lucent intranet and on-site events; Š distributed EHS employee news via , our internal Engage social media platform and our EHSMS intranet website; and Š renovated our facilities to ensure all new offices implemented cost-effective, eco-efficient standards for heating, cooling and recycling. In 2015, a survey was sent to 20,317 employees around the world to learn more about the commuting habits of Alcatel- Lucent employees. With a response rate of 24%, the survey allowed us to estimate the carbon emissions associated with employee commuting. In addition, our efforts related to environmental protection were rated as good or excellent by 57% of employees Developing networks with sustainable use of resources Managing materials: Measures to improve efficiency of raw materials use We use a life cycle assessment (LCA) approach to evaluate the consumption of raw materials throughout the life cycles of our products. Data and results from LCA assessments inform continual improvements to achieve more efficient use of raw materials and energy at every stage of product life: raw material extraction, pre-processing, intermediate material and component manufacturing, final manufacturing and assembly, packaging, distribution and installation, use, and end-of-life Alcatel Lucent Additional Information

74 4 SUSTAINABILITY Environment reuse and recycling. These improvements are then incorporated into our best practices for environmentally conscious product design. Examples of Alcatel-Lucent processes for improving the efficiency of raw materials use are as follows: Š Designing for standardization reduces parts inventories by increasing the use of golden catalogs and reuse of golden parts. The use of golden catalogs ensured adherence to our list of preferred/allowed suppliers and compliance with our policies on restricted substances and other factors. Golden parts were selected after comprehensive analysis, confirmed by preferred suppliers and approved by a forum of technical, business and quality experts. The primary purpose of a golden catalog for a family of materials, components or products is to minimize the variety of parts across business lines and product divisions, which in turn reduces costs, improves quality and flexibility, and accelerates time-tomarket. At Alcatel-Lucent, golden catalogs were refreshed on either a 12- or 18-month cycle (depending on how fast the technology changes) to ensure accuracy and relevance in our very dynamic environment. At year-end 2015, Alcatel- Lucent was using approximately 4,030 golden parts in its product components. For new product development in 2015, golden parts comprised 61% of all items used in a bill of materials a significant achievement from a standardization and complexity reduction perspective. Š Eco-efficient product designs provide increased functionality (e.g., capacity, service, performance) per unit of energy consumed while occupying less physical space, weighing less and using fewer types of raw materials. As an example, the latest release of the 7950 Extensible Routing System (XRS) offered efficiency gains through its drastically reduced resource footprint as well as its energy and thermally efficient design. Despite its minimal footprint, the 7950 XRS-30 with 400 G slots can scale up to 16 terabits in a standard rack. As network traffic continues to grow, this type of scalability will be essential to providing extended longevity in the network. Š Improved materials selection guidance supports optimal materials selection during the design phase. For example, we developed a database and search tool to help designers know about and avoid using substances of concern in their component and materials selection. This tool allowed designers to quickly look up information on thousands of substances, providing key details on current and pending restrictions, hazards and issues of concern. Designers could then take appropriate steps to avoid using those substances in the components and materials being selected for a product under development. Other stakeholders such as researchers also used the database to learn about any concerns related to the potential use of a particular substance. The tool was updated on a regular basis as new information emerged regarding a substance s environmental, health and safety impacts. Š Accelerated innovation delivers technological and environmental innovations to market more quickly, increasing access to resource-efficient equipment that uses less energy and material resources. For example, network functions virtualization (NFV) enables both network automation and the rapid scaling up and down of services, allowing service providers to innovate more quickly and make more efficient use of their resources for a better return on their investments. NFV can optimize the delivery of services such as voice over LTE, web real-time communications and machine-to-machine communications and can cut the time and costs of bringing other new services to market. Shifting from dedicated hardware to virtualized or shared hardware also helped us reduce the use of material resources. Š Product packaging has a direct impact on the raw materials consumed and waste generated from our manufacturing processes. It also affects the amount of transport space required to deliver our products and, as a result, the energy efficiency of product transportation. Alcatel-Lucent worked with a leading North American customer to optimize the packaging and delivery of remote radio head (RRH) kits to the customers locations. Pallet containers that used a simple tray tube configuration allow easier packing and unpacking, a higher stacking strength that minimizes the need for protective materials, and more efficient loading into a standard trailer along with minimal shifting during transit. Product materials content In 2015, Alcatel-Lucent delivered 135,425 metric tons of equipment to market. We were committed to analyzing the composition of our products component materials and recycled content to ensure our design process made the most efficient use of materials. 72 Additional Information 2015 Alcatel Lucent

75 SUSTAINABILITY Environment The following chart breaks down the materials content of some of our finished products: Š Polyvinyl chloride (PVC): We voluntarily reduced our use of PVC over the past several years in recognition of its associated environmental and human health risks. In 2015, we achieved our goal to eliminate PVC from our products where it was technically, economically and environmentally feasible. Š Heavy metals: Our products are fully compliant with the requirements for heavy metals as specified in RoHS and REACH. We adopted this EU-focused compliance globally with all new network infrastructure products implemented since 2010 being lead-free soldered by design, well in advance of the expiration of the RoHS lead-in-solder exemption for network infrastructure equipment. We also worked closely with our components and materials suppliers to use a high percentage of recycled input materials in raw materials processing and manufacturing. The following chart illustrates the percentage of recycled metals typically contained within our feedstock materials: Percentage of recycled metals in product Typical configuration 27% IP Routing (7750 SR12) 21% IP Transport (1830 PSS4) Restricted substances 36% Wireless Access (9234 BS) 28% Wireline Access (7360 ISAM FX8) Our EHS design policies outlines our global mandates, requirements and standards related to the use of hazardous substances. We also maintain similar standards for our suppliers: our contracts included clauses mandating specific requirements for substances that are banned, restricted, to be avoided or reportable to us (See Section 4.8.2). We make eco-declarations for all new product introductions available to our customers. These include information on hazardous substances affected by regulations such as the Restriction of Certain Hazardous Substances (RoHS) Directive and the Restriction, Evaluation and Authorization of Chemicals (REACH) Regulation. Each eco-declaration also states the availability of relevant information on the treatment of pertinent parts at recycling facilities. We regularly update our hazardous substances requirements to include new requirements and voluntary targets. For example: Š Halogen: Our products were free of hexabromocyclododecane (HBCD), a brominated flame retardant, ahead of the ban by the Stockholm Convention that came into force in late We continued to investigate halogen-free printed wiring board materials for lead-free assembly in 2015, leading to the approval of several halogen-free materials for use in our designs. Our radio frequency systems (RFS) product group continued its development and deployment of the recently introduced HybriFlex and RadiaFlex RF cabling, with the end result being a low-smoke, zero-halogen cable product family that can meet customers technical needs as well as the harsh environment of the sites where the cables are installed. We invest in R&D, partnerships and externally-funded projects to identify and evaluate alternative materials with reduced environmental impact (whether through reduced toxicity or prolonged product life cycle). These included PVC alternatives, halogen- and lead-free materials, fluxes and corrosion protection. Our history of leading-edge, lead-free R&D both internally and via industry partnerships was crucial in establishing a critical understanding of lead-free assembly reliability, and addressing key risk areas such as device attachment, surface finishes, solder alloys and tin whiskers. R&D projects in this area included collaboration with Tier 1 contract manufacturers, component and material suppliers, industry consortia (e.g., inemi, UNOVIS AREA, HDPUG) and universities. These collaborations ensure the broadest and deepest possible technical perspectives are leveraged to help drive industry progress and change in reducing the environmental impact of electronics products and materials. Product energy efficiency The rapid increase of broadband traffic, along with the skyrocketing number of connected consumers, end-user devices and services, is putting pressure on the ICT sector to introduce more power-efficient technologies. At Alcatel-Lucent, increased energy efficiency is an ongoing objective that covers our entire product portfolio. Some recent examples of energy efficiency initiatives and achievements across our business lines include: Š Fixed networks: Over the past few years we were able to improve the energy efficiency of our gigabit passive optical Alcatel Lucent Additional Information

76 4 SUSTAINABILITY Environment network (GPON) line cards by more than 40% through the development and deployment of our in-house applicationspecific integrated circuits (ASICs). In addition, passive optical LANs (POL) using GPON technology provide better network performance than traditional copper-based LANs while reducing deployment and operational costs. Specifically, POL with GPON consumes less energy by using equipment that requires less power and cooling, cutting energy consumption by more than 50% compared to legacy networks making it the most cost-effective and ecosustainable option for deploying a LAN infrastructure. Š IP routing: Environmental concerns were front of mind when we designed the 7950 XRS core router, with numerous aspects of its cooling and power systems being industry firsts. In addition to exceptional power efficiency resulting from its FP3 silicon building blocks, the 7950 XRS system design incorporates intelligent power-management capabilities. This allows operators to monitor the power consumption of individual components to assure power safety thresholds and manage power-up/down priorities in the event of degraded power availability. Other key enhancements included clock-gating techniques that dynamically reduce power to system components not in use as well as modular fans that adjust to provide appropriate cooling as needed. With these kinds of innovations, the 7950 XRS helps network operators to reduce their environmental impact while saving on total cost of ownership: a fully loaded 7950 XRS-20, for example, consumes only one watt per gigabit of traffic switched and occupies only 39 RU in a standard 19-inch rack. Š IP transport: Combining state-of-the-art routing and optical transport technologies delivers significant cost and performance synergies for a more agile, dynamic and integrated network. Alcatel-Lucent expanded its 1830 Photonic Service Switch (PSS) portfolio with cloud-optimized metro platforms the next-generation1830 PSS-4 and PSS-16 along with the new 1830 PSS-8 to meet escalating video, cloud and data center traffic demands. These high-capacity transport platforms double the capacity of optical metro solutions available today, reducing their size by up to 50% and power consumption by up to 40%. The re-design of our 10 Gb/s and 40 Gb/s line cards with new ASICs resulted in energy efficiency improvements of up to 58% for some 1830 PSS platform configurations. Significant improvements were also achieved in our microwave transport solutions. The Alcatel-Lucent 9500 Microwave Packet Radio (MPR) was designed with packet technology at its foundation to provide the lowest total cost of ownership along with the smallest footprint and can be, for some long-haul configurations, up to 109% more energy efficient than the previous 9600 Long-Haul System (LSY). Š IP platforms: Our IP platforms leveraged the new generation of ENERGY STAR certified IT servers to deliver increased processing capacity without an equivalent increase in power consumption. With the 8620 SurePay, for example, the target with these new servers is to improve energy efficiency by more than 50% compared to the previous server generation. Š Wireless networks: We developed a holistic approach to increasing the energy efficiency of our radio access portfolio. At the site and system architecture levels, we promoted the implementation of distributed site architectures based on remote radio head and the deployment of heterogeneous networks, leveraging features that can switch macro cell carriers or small cells on or off depending on traffic load. At the product design level, our macro base station radio modules can adjust power consumption based on traffic load. Energy efficiency also drove our small cell product designs. We focused on identifying energy efficient hardware architectures, selecting components with low power consumption and providing increased functionality for similar power-consumption level. Our internal evaluation found that the functional energy efficiency of our WCDMA radio access technology in 2015 had improved by 190% compared to a 2008 baseline, significantly exceeding our target of 75%. Impacts of our products on health and safety Alcatel-Lucent remained committed to meeting the needs of its customers and ensuring the safety of its employees and the general public throughout 2015, continuing its program of assessing the health and safety impacts of all products at all stages of their life cycles. During the design phase, we worked with suppliers to avoid the use of hazardous materials. We also ensured that all materials were prepared for transportation according to nationally or internationally accepted regulations. Our technical documentation provided specific guidance for the safe use of our products, and mandatory training for Alcatel- Lucent Services personnel covered a range of topics to ensure a safe workplace. All Alcatel-Lucent products that emit radio frequency (RF) energy were required to comply with country-specific regulations for human exposure to RF emissions during manufacturing and product use. Compliance was determined either by analytical assessment or measurement of propagated RF energy. Electronic waste was shipped only to processing facilities that had passed our EHS liability assessment. Unless otherwise specified, all electronic waste was processed to recover as much recyclable material as possible. Safety within the electromagnetic environment We continued to closely follow all health and regulatory issues related to wireless communications, including those associated with the electromagnetic environment. This effort has been recognized by third parties such as the Dow Jones Sustainability Index (DJSI), which since 2006 has assigned Alcatel-Lucent the highest score achievable in the electromagnetic fields category. We actively contributed to the international standardization bodies that develop exposure assessment standards. Our entire product portfolio including macro cells, small cells and Wi-Fi complied with all national and international standards and regulations on RF exposure. Our position regarding human exposure to RF transmissions was based on the opinion of more than 150 expert committees mandated by national and international authorities to assess the 74 Additional Information 2015 Alcatel Lucent

77 SUSTAINABILITY Environment advancement of scientific knowledge. All have concluded consistently that there is no established health effect from exposure to RF fields below the limits set by the International Commission on Non-Ionizing Radiation Protection (ICNIRP), the international commissions recognized by the World Health Organization (WHO) or similar recommendations from the Institute of Electrical and Electronics Engineers (IEEE). As described in the WHO s Fact Sheet 304: Considering the very low exposure levels and research results collected to date, there is no convincing scientific evidence that the weak radio frequency signals from base stations and wireless networks cause adverse health effects. This statement applies to all mobile and wireless network technologies implemented by Alcatel-Lucent, including CDMA, GSM, WCDMA/UMTS, LTE and Wi-Fi. Harmonizing RF exposure limits We tracked the evolution of the scientific knowledge on which present exposure limits are based. Expert committees such as Europe s Scientific Committee on Emerging and Newly Identified Health Risks concluded that there is no established health effect at exposure levels below the guidelines developed by ICNIRP. Contributing to international standardization initiatives We supported the development of global standards for exposure assessment through international standardization bodies and industry associations such as the GSM Association. We contributed in particular to the International Electrotechnical Commission (IEC), the International Telecommunication Union (ITU) and the European Committee for Electrotechnical Standardization (CENELEC). Pollution and waste management Monitoring and reduction Waste We have reduced the amount of waste generated by 42% (i.e., 7,167 metric tons) between 2013 and In 2012, we established an objective to reduce the amount of landfilled waste to 15% by 2015 (down from 36% in 2009). ( Waste refers to all hazardous and non-hazardous waste from our operations, excluding electronic waste.) Total estimated amount of landfilled hazardous and nonhazardous waste % % % Note: Waste data based on total extrapolated hazardous and non-hazardous waste production, recycling and landfilling weights. All Alcatel-Lucent and joint-venture facilities and operations that generated or managed waste and waste byproducts including hazardous waste and electronic scrap were required to evaluate the possibility of reusing Alcatel-Lucentbranded equipment for maintenance or resale purposes, and to reduce waste and scrap generation by applying pollutionprevention and waste-minimization principles and mechanisms at both the process and facility levels. Discharges, emissions and releases In compliance with local laws and regulations, we maintained reporting processes for air emissions and water and soil discharges that seriously harm the environment in the countries in which we operate. No air emissions or water and soil discharges above any legal reportable quantities took place in Noise We monitored our operations and activities with regard to occupational noise and community noise regulations. In 2015, no noise-related issues were reported or regulatory citations written regarding either community or occupational noise. Takeback, remanufacturing and recycling Alcatel-Lucent offered global product takeback, remanufacturing and recycling services for any type of telecom products regardless of vendor. Members of our global network of approved recycling vendors collected and recycled products that have reached their end of life. Customers were provided with an online request form to arrange equipment pick-up. Where possible, we participated in public recovery systems. In 2015, Alcatel-Lucent managed 4,579 metric tons of electronic waste. Of this, 95.4% was recycled or resold, 1.3% was treated by incineration and 3.3% was disposed of via secure landfill. Of the recycled or resold electronics, 294 metric tons of equipment and components were remanufactured and/ or resold, of which 84,721 circuit packs and 514 configured pieces of equipment were remanufactured internally at Alcatel- Lucent. Approved recycling partners recycled 4,077 metric tons. We also avoided producing more than 7,189 metric tons of CO 2 e by remanufacturing new equipment and components. In 2015, 6 new product families were added to our remanufacturing and resale operations. The overall number of Alcatel-Lucent product families under this remanufacturing/ resale process grew from 45 in 2008 to 103 in Telecommunication networks operated by our customers require significant amounts of batteries to maintain the backup power to run a stable network. Alcatel-Lucent operated a battery maintenance, installation, removal, transportation and recycling program across the United States to ensure the batteries in its equipment were properly managed and recycled. The goal was to prevent the potentially harmful chemicals in lead-acid batteries from entering the waste stream and instead make available for use in new batteries. Alcatel-Lucent recycled metric tons of lead-acid batteries from customers networks in 2015, resulting in the recovery of metric tons of lead for use in the manufacture of new batteries. Alcatel Lucent Additional Information

78 4 SUSTAINABILITY Environment Green innovation Bell Labs Network energy consumption is one of the major industrial challenges facing customers and the Information and Communication Technology (ICT) industry at large. With exponential traffic growth predicted for communication networks accompanied by increased energy costs service providers operational expenses will increase significantly without the development of more energy efficient technologies. A further concern is access to stable, reliable power, which cannot be taken for granted in the case of off-grid or poor-grid deployments in developing countries and rural areas, or where massive deployments of network equipment like small cells present significant operational challenges and expenses. The Network Energy Research program of Bell Labs, Alcatel- Lucent s research arm, focused on optimizing network energy utilization and on developing innovative solutions for Alcatel- Lucent products. The program s research efforts spanned all major areas of the network, including wireless and fixed access, metro and core networks, and optical transmission. It investigated technologies, architectures and solutions aiming at: Š reducing required energy per bit (that is, increase energy efficiency) for data transmission, processing or storage; Š reducing power wastage from inefficiencies and overhead (for example, through more efficient thermal management and cooling); and Š enabling off-grid deployments through new energy harvesting solutions and high-density energy storage technologies. This program also investigated innovative applications of ICT technologies such as connected and smart city applications (e.g., smart grids, electric mobility, etc.). In January 2015, Bell Labs launched the second version of the GWATT (Global What if Analyzer of NeTwork Energy ConsumpTion) application, which forecasts the impact future network traffic volume will have on ICT networks energy consumption. GWATT aims to drive intelligent dialogue about the sustainability potential of new technologies and the relative importance of different architectures and technologies on endto-end energy consumption. It is based on forecasts and network modeling from: Š Bell Labs; Š GreenTouch consortium; Š Cisco Visual Networking Index (VNI); and Š Global e-sustainability Initiative (GeSI). More than 28,000 users have accessed the second version of GWATT since its launch. It offers several new features compared with the original GWATT, including the modeling of applications traffic flows and network transformations (such as software-defined networking and network functions virtualization). GreenTouch consortium Given that network energy consumption and carbon emissions affect the entire ICT industry, the Bell Labs vision of zero-power networking is based on extensive collaboration with service providers, equipment manufacturers, research institutes and universities. This kind of collaboration was at the core of the GreenTouch consortium founded under Bell Labs leadership in 2010 as a pre-competitive research initiative to improve network energy efficiency by a factor 1,000 compared to a state-of-the-art 2010 reference network. GreenTouch s five-year mission concluded at a public meeting in June 2015 with the presentation of final results for all of its research projects and a comprehensive roadmap of technologies that will dramatically improve the energy efficiency of mobile access, fixed access and core networks. The proposed architectures, technologies, algorithms and protocols along with the underlying modeling and evaluation methods developed by GreenTouch will set the stage for a more sustainable ICT infrastructure that can support future applications, services and traffic growth while consuming less overall energy than conventional networks today. Two interactive applications were also publicly launched to help industry stakeholders better understand and build on the GreenTouch technologies. The results presented by GreenTouch show it is possible to improve network energy efficiency by: a factor of 254 in fixed access networks, a factor of 316 in core networks and a factor of 10,000 in mobile networks (compared to the 2010 reference networks). In practical terms, this means the net energy consumption of communication networks can be cut by 98% equivalent to the greenhouse gas (GHG) emissions from 5.8 million passenger vehicles, even accounting for the tremendous network traffic growth since The findings from the GreenTouch research projects are publicly available at They include: Š the GWATT interactive application for modeling ICT network energy consumption; Š a power model tool for wireless base stations ( Š a series of white papers and scientific papers; Š a series of project videos. 76 Additional Information 2015 Alcatel Lucent

79 SUSTAINABILITY Environment Reducing our carbon footprint and the environmental impact of our operations Tracking and reporting on carbon emissions Reporting on Scope 1, 2 and 3 sources We continue to report emissions from all sources including facilities, fleet operations, mobile sources of combustion and all other Scope 1 and 2 sources resulting directly from our business operations. We also report Scope 3 emissions from outsourced activities such as leased vehicles and vessels, product logistics, company business travel, contract manufacturing, employee commuting, product use and purchased goods and services. In 2015, we consolidated facilities to utilize resources more efficiently this action along with our efforts to implement energy efficiency projects and conduct energy efficiency awareness programs for employees resulted in obtaining over a 9% reduction in CO 2 e emission levels from our facilities compared to Alcatel-Lucent followed the Greenhouse Gas Protocol (GHGP) to determine which elements to measure, reporting on 10 of the 15 GHGP categories (four categories were not applicable to our business activities and with respect to Scope 3 category 2 Capital Goods is currently being evaluated for future addition). We committed to reduce our absolute carbon footprint (CO 2 e) from Scope 1 and Scope 2 operations by 50% by 2020 (compared to our 2008 baseline of 827 tco2e). According to the 2015 operational data available at the time of filing this report, the carbon footprint associated with our operations showed an approximate 46% reduction from 2008 levels. Carbon Disclosure Project In 2015, Alcatel-Lucent participated in the Carbon Disclosure Project (CDP) supply chain and investor questionnaires, scoring 100 out of a possible 100 points on disclosure and being assigned to the A band on performance. Alcatel-Lucent was also classified in the CDP Supplier Climate A-List. We also continue to utilize an enterprise carbon accounting tool that helps streamline and automate our GHG data-collection process, identify additional opportunities for reductions, and reveal best practices for reducing the carbon footprint of our operations and supply chain partners. All of this helps maintain our leadership position in carbon footprint measurement and reporting. Reducing the environmental impact of our operations Energy consumption Electricity accounted for 81% of our worldwide operational carbon footprint. In 2015, we decreased our worldwide total electricity consumption by 7%, with an associated 11% reduction in CO2e from the previous year. Despite these noticeable reductions, our energy usage by building area increased by 6% (from 0.38 MWh/m2 to 0.41 MWh/m2). We will continue to implement projects and invest in our facilities to achieve further energy reductions. Š Energy optimization projects: We made several major capital investments in recent years to reduce energy consumption and related emissions in our buildings. In 2015, a number of energy optimization projects were underway or completed in our largest facilities, including projects related to efficient illumination, occupancy sensors, time-of-day adjustments and alternative energy use. Š Use of alternative energy: Approximately 22% of our utility provided electrical power came from renewable sources in 2015 In Belgium, Austria and Switzerland, 92% of the electricity purchased (based on total building area) came from hydroelectric sources. As availability and financial conditions warrant, we will expand our direct purchases of renewable energy. Electric utility sources that include increases in renewable and nuclear resources resulted in a worldwide average reduction of 4% tco2e/mwh from 2014 emission factors. Š Electricity usage for laboratory equipment: Based on recent energy studies at facilities that contain laboratory operations, we have determined that over 80% of electricity usage is attributable directly to laboratory equipment. We are working with laboratory personnel in developing energy usage policies that will minimize this impact. This activity will result in a significant reduction of energy usage per building area once more laboratories start reducing the operating period of equipments which do not have to be operating constantly throughout the year. Water consumption We have reduced our water consumption by 47% since On a worldwide basis, consumed water has been reduced by 5% since Based on the determination that a more robust watermonitoring program was needed within our facilities, we continued throughout 2015 to revise our internal guidelines and establish specific timelines for: Š installing sub-meters within targeted facilities; and Š tracking water consumption by usage category (domestic, irrigation, process) and facility type (office, laboratory, warehouse, manufacturing). Biodiversity protection On the ground Alcatel-Lucent continued to assess its real estate portfolio, creating natural habitat enhancements at its locations and for remediation/cleanup projects. Alcatel Lucent Additional Information

80 4 SUSTAINABILITY Environment Under the sea Anytime we laid submarine cable on the ocean floor, we complied with specific environmental standards (including eliminating hazardous constituents in our cable) and obtained all necessary permits from authorities (including specific ecocertifications). Our cables are small between 17 and 40 mm in diameter and have a 25-year design life. 4.6 Our people Employment Employees Our total worldwide employee headcount at the end of 2015 was 50,047 in more than 100 countries worldwide. The figures take into account all employees who worked for fully consolidated companies (including long-term absences/notice period) as well as for companies in which we own 50% or more of the equity. The numbers were restated for the last two years due to the sale of our Enterprise activities on September 30, Enterprise headcount was 2,795 in 2013, and 463 in Contractors and temporary workers In 2015, the average number of contractors and temporary workers was 2,607 in the aggregate. The number of contractors is composed of employees of third parties performing work subcontracted by Alcatel-Lucent. The number of temporary workers is, in general, composed of employees of third parties seconded to perform work at our premises due, for example, to a short-term shortfall in our employees or in the availability of a certain expertise. Pursuing our commitment to create a diverse and highly skilled global workforce, in 2015 we provided a stimulating work environment and continuous learning opportunities, fostering diversity and open dialogue by sharing knowledge and celebrating differences. Our goals last year were to continue to drive the transformation of human resources and the expansion of Alcatel-Lucent University, enhance the effectiveness of our leadership programs and further diversify our workforce to foster future growth Employee health and safety Our commitment to employee health and safety We honored the commitments under our Environment, Health and Safety (EHS) policy to operate in a way that protects the environment and the health and safety of employees, contractors, customers and the communities where we did business in 2015 by: Š identifying EHS hazards and assessing the related risks; Š putting appropriate controls in place; Š assigning competent, experienced and, if required, appropriately certified employees to perform specific work activities; and Š harmonizing EHS requirements globally and establishing key performance indicators (KPIs) across the company. To ensure a healthy and safe work environment for employees, we placed high priority on training and guidance. In 2015, Alcatel-Lucent University delivered about 8764 training hours on EHS issues. (It should be noted that these training hours do not take into account other EHS awareness channels such as workplace ergonomic guidelines or the EHS topics covered by mandatory Code of Conduct training). In 2015, we introduced a new EHS awareness course for our top 200 leaders. This course was designed to help them better understand the hazards and risks associated with our business, their own personal liability and the correct steps to avoid injuries and fatalities. We also continued to focus on high-risk operations such as work performed at elevated heights or that involving electrical safety. Given that the majority of this work was performed by outsourced personnel, in 2014 we turned the spotlight onto our subcontractor community, launching a global initiative to qualify and mentor subcontractors involved in this type of high-risk work. With a message of zero tolerance for non-compliance, the qualification process reinforces the fact that all subcontractors are held accountable to the same standards we apply internally. Our team then mentored those who needed guidance to raise their level of safety awareness. To date, more than 500 subcontractors have been evaluated by the Global Procurement and local EHS teams to ensure they are qualified to meet our business needs. Absenteeism Employee absenteeism was managed and tracked at the country level in accordance with all relevant local legal 78 Additional Information 2015 Alcatel Lucent

81 SUSTAINABILITY Our people requirements and regulations. This ensured the fastest, most appropriate actions could be taken to respond to fluctuations outside the norm for each respective country. At a global level, we continued to publish the number of days of absence due to work-related accidents (including occupational diseases) per employee. Š illness, meaning any work-related health condition whether acute (e.g., contact dermatitis) or chronic (e.g., chronic obstructive pulmonary disease) that develops through single or multiple exposures (e.g., poison ivy, lead poisoning, asbestosis) or repetitive stress (e.g., carpal tunnel syndrome). Occupational accidents An occupational accident is any unexpected occurrence in the course of or in relation to work that results in: Š injury (e.g., cuts, fractures, sprains or amputations resulting from a single exposure to the work environment); or Our reporting requirements for serious incidents and occupational accidents ensured all business groups provided the information to support effective trend analysis and rootcause identification and continuously improve our safety performance in pursuit of zero lost workdays due to injury or illness. Frequency rate for work-related accidents (including occupational diseases) Number of days of absence due to work-related accidents (including occupational diseases) per employee Evolution since 2012 The frequency rate for work-related accidents has decreased since 2012 due to our EHS programs as well as to the fact that contractors and/or subcontractors are increasingly performing high-risk operations. In 2015, the subcontracting of high risk activities in USA helped to further decrease the frequency rate. Notes: Employees, students, trainees, apprentices and directly supervised contractors make up the workforce considered for work-related accidents (including occupational diseases such as work-related stress). Due to local regulatory frameworks and other specificities, not all establishments use the same methodology to calculate days of absence due to work-related accidents, including occupational diseases per employee. Our figures have been adjusted by each consolidating entity for countries reporting in calendar days instead of working days to ensure disclosed data are homogeneous. While occupational accidents are typically connected to highrisk field activities, we also continued to promote proactive safe work procedures for office employees. For example, we revised our ergonomics guidelines to better suit today s work environment (such as the increasing use of laptop versus desktop computers). Because we did not use any heavy industrial manufacturing processes, we were not required to calculate or follow an indicator on the severity of these kinds of occupational accidents. Global occupational accident trends focus on an employee s professional activity and the corresponding risks associated with it. Improvements are made at the program level based on trends identified, irrespective of the number of lost workdays. It has always been our approach to view the potential of the occurred accident and what we can learn to prevent its further occurrence. Fatalities and injuries The only acceptable number of work-related fatalities is zero. We reinforced our zero-tolerance policy with all subcontractors to foster a safety culture in This included collecting subcontractor data on lost workday cases and near misses, and using that information to continuously improve our safety programs. In 2015, we recorded zero subcontractor fatalities. In 2011, a strategic Health and Safety Improvement Program was put into place and as a result there has been a consistent decrease in fatalities each year and finally in 2015, we reached our ZERO fatalities goal. Integrating SA8000 assessments Building on several year of strengthening our social accountability, in 2015 we introduced an SA8000 maturity level self-assessment in 11 locations in Brazil, Egypt, India, Romania, Russia, Saudi Arabia and Turkey. Consisting of a set of questions based on the SA8000 standard as well as our own EHS requirements, this assessment allowed for the rapid analysis of our social accountability programs in three key areas: human resources, EHS and purchasing. Alcatel Lucent Additional Information

82 4 SUSTAINABILITY Our people Work organization and management Strategic workforce planning In 2015, we continued to execute The Shift Plan, our three-year strategic plan launched in For workforce evolution this meant strengthening our capacity for short- and long-term workforce planning across different business segments. With respect to our product portfolio and financial performance, it was strategically essential that we align our workforce by: Š translating the strategy behind The Shift Plan into an executable workforce plan; Š adopting a bottom-up approach that took into account country-specific legal and social constraints as well as business needs, leading to a realistic and feasible implementation plan in the countries in which we operate; Š controlling and monitoring the evolution of each country s net headcount (through recruitment, attrition, transfer, mobility etc.); and Š planning our future geographic distribution in a consistent way (and in line with our real estate plan) at the global, country and sites levels. For further information on our strategic plan, please refer to Section 6.1 Overview of 2015 of the 2015 Annual Report on Form 20-F. Internal mobility and recruitment We executed a new global approach to recruitment in Our internal processes were standardized on a global scale and our support structure was changed to a team concept with multiple recruiters available to assist as needed. These changes were focused on establishing more consistent ways of working across all our locations worldwide, improving the level of responsiveness with the recruiting team and ensuring overall stronger customer satisfaction. We also rebranded the Internal Job Opportunity Market (IJOM) to Build Your Future. Distributed across our internal social media platform and throughout various recruitment materials, the new brand was designed to have our employees reflect on their own personal growth and development. In addition, our internal job market newsletter expanded into additional regions for broader visibility. Leadership Pipeline Alcatel-Lucent continued to invest in the identification and development of leadership potential to support succession management. This included conducting business talent reviews to identify future leaders and refresh our existing pipeline of high-potential talent (e.g., emerging leaders, high potentials and future top leaders). In 2015, a total of 1,080 future leaders and 3,203 critical talents were identified to support our talent needs moving forward. Focused on preparing future leaders and bringing diversity to our top 200 leadership roles, the Leadership Pipeline relied on three pillars: Š consistent identification of leadership talent; Š movement of talent across geographical, functional or business boundaries; and Š development of leaders using a broad variety of methods. Human resources professionals, in partnership with their business leaders, ensured the execution of this strategy by supporting managers and talent through each phase. In 2015, 128 future leaders attended customized and dedicated development tracks focusing on the company s business needs as well as the individual s leadership-development needs, preparing them to take on bigger leadership roles. In addition, emerging leaders in more than 10 countries were invited to attend the newly developed Talent Awakening workshops, which were designed to build self-awareness through a detailed personality profile combined with one-on-one debriefings from certified human resources practitioners. More than 900 individual debriefings were completed by the end of Performance management The Alcatel-Lucent performance-management process, OurTalent Dialogue, focused on the importance of continuous, person-to-person dialogue between managers and employees to support direction setting, goal clarity and performance feedback. This allowed employees to drive their own performance and manage their career development in alignment with the company s business strategy. This approach also let employees have continuing conversations with their managers on developmental areas to ensure continued growth and to manage their career development. In 2015 we continued to implement a targeted learning approach for managers to develop their skills in setting direction, coaching, motivating, managing performance and leading change. More than 120 workshops were held globally, involving some 3,500 managers Compensation Alcatel-Lucent continued its policy to pay all employees fairly regardless of gender, ethnic origin or disability. We remain committed to provide a competitive compensation package in line with other major companies in the technology sector and place particular emphasis on ensuring employee development, rewarding the skills that drive innovation and ensuring long-term employee engagement through appropriate policies, processes and recognition tools. 80 Additional Information 2015 Alcatel Lucent

83 SUSTAINABILITY Our people A new variable incentive plan (excluding the sales population) was implemented in It included corporate, business unit and individual key performance indicators to enable employees to have greater visibility into and influence over their achievement and rewards. In 2015, our compensation strategy was aligned with The Shift Plan to strike a balance among the following elements: speed, simplicity, trust and accountability. This included the implementation of common bonus plans, sales incentives and equity grants to ensure a consistent, global approach to compensation; the clear communication of performance achievement levels and policies; and having employees set and review yearly performance targets with their managers. The grants of long-term incentives (e.g., stock options and performance shares) are decided by our Board of Directors upon recommendation of the Compensation Committee. The implementation of long-term incentives serves several purposes, including: Š involving employees in Alcatel-Lucent s results and in the achievement of The Shift Plan; Š encouraging and rewarding performance; and Š attracting and retaining talent in a highly competitive industry where quality and employee motivation are key factors for success. Long-term incentives were typically subject to presence and/or performance conditions. In the context of our combination with Nokia, the Board of Directors decided, in April 2015, to waive the presence and performance criteria under certain conditions. This was subject to the success of Nokia s public exchange offer. For further information, please refer to Section Mechanisms put in place with respect to long-term compensation instruments in the context of Nokia s public exchange offer of the 2015 Annual Report on Form 20-F. Employee compensation evolution (that is, wages and salaries) over the past three years is set forth in Note 23 to our consolidated financial statements. Training: Alcatel-Lucent University The mission of Alcatel-Lucent University is to improve the performance of our employees, partners and customers and build the skills required for business success through: Š learning and development initiatives aligned with Alcatel- Lucent s strategic priorities; Š state-of-the-art learning facilities and e-learning components; Š technical certifications for customers, partners and employees that offer professional standing in key technologies; Š programs targeting key Alcatel-Lucent jobs; Š a learner-centric approach that enables individuals to achieve proficiency in areas relevant to their particular organization, job role and career interests. All learning hours are tracked through a formal learning management system that provides auditable learning volume reports. Alcatel-Lucent University leverages a personal, community-based learning application called My Personal Learning Experience (or My PLE), which allows students to better drive and manage their own learning programs. Designed around learning communities and the sharing of best practices, My PLE makes it easier for students to learn from their peers and from content experts which, in turn, makes learning more relevant to the job. Achievements In 2015, Alcatel-Lucent University delivered a total of 1.2 million hours of training to approximately 80,000 students from 136 countries. Of these hours, 43% were delivered to external learners (that is, customers and partners) and 57% were delivered to internal learners (that is, employees and contractors). In 2015, the University delivered an average of 11 hours of training per internal learner. About 74.3% of internal learning was delivered online in 2015, an increase of 1.3% compared with the previous year. In addition, 373 employees received IP/ service routing certification and 399 received LTE certification. In June 2015, the University launched the Learning Store, making it easier for employees to find and access relevant training to foster their development. By the end of the year, the Learning Store had received 25,000 visitors. Teleworking Teleworking reduces commuting time and costs, real estate costs, operating expenses and our overall environmental impact. To demonstrate our support for an agile workforce and a better work/life balance for our employees, teleworking policies remained in place across all regions in Alcatel-Lucent. We had worked with our main trade unions in Europe since 2008 to define collective agreements on teleworking. As a result, employees in France, Belgium, Spain, Italy and Germany, for example, could telework if an organizational analysis of the employee s job activities was positive and there was mutual agreement between the employee, his/her manager and the HR function. Since 2013, we extended the number of countries with teleworking policies by defining agreements across the Middle East, Africa and Asia-Pacific, including in China and India. Building on our expanded teleworking deployments, a global teleworking policy was developed in 2013, respecting all local laws in this matter. In 2015, a survey was sent to 20,317 employees around the world to learn more about the commuting habits of Alcatel- Lucent employees. With a response rate of 24%, the survey allowed us to estimate the carbon emissions associated with employee commuting. Based on this survey, 47% of our Alcatel Lucent Additional Information

84 4 SUSTAINABILITY Our people employees teleworked at least one day per week and some countries had even higher rates, such as the Netherland (79%), the United States (75%), Belgium (67%), Argentina (66%), France (64%), Spain (63%), Australia (60%), the United Kingdom (60%) and Mexico (58%). Restructuring: The Shift Plan The three-year aim of The Shift Plan was to refocus Alcatel- Lucent industrially, operationally and financially as a specialist in IP and cloud networking and ultra-broadband access and to deliver innovations that would shape the future of the industry and ensure profitable growth as follows: Industrial The Shift Plan reflected fast-changing trends in the telecommunications industry, where service providers and large-scale Internet companies are handling ever-expanding volumes of data. Under The Shift Plan, Alcatel-Lucent adapted to the evolving market by placing its IP networking, cloud and ultra-broadband portfolio at the center of its operations. R&D became concentrated on IP networking and ultra-broadband access, while our customer focus shifted to new products and platforms for our most profitable market segments (including Tier 2 to Tier 4 service providers) along with web-scale and extra-large enterprise customers. Financial Aiming to restore the Group s profitability and competitiveness in the marketplace, The Shift Plan included a reduction of Alcatel-Lucent s fixed-cost base by 1 billion between 2013 and 2015 through the adoption of direct-channel operations, a refocusing of R&D capacity, and the additional consolidation of sales, general and administration (SG&A) functions. Other actions were undertaken to reduce the company s real estate footprint and drive efficiencies in project delivery, back-office IT systems, supply chain management, manufacturing and procurement. These actions led to a reduction of 13,626 jobs by the end of 2015 (compared to a year-end 2013 baseline), with 2,618 stemming from the sale of our Enterprise activity. The Shift Plan also included a 2 billion reprofiling of the company s debt between 2013 and 2015 by actively capitalizing on attractive international debt market opportunities. The Group s debt was reduced by 2.2 billion (from 0.8 billion net debt by end of Q2 2013, to 1.4 billion net cash by end of 2015). Operational A new operating model was put in place with full profit-and-loss (P&L) and cash accountability for businesses. At the end of 2015, Alcatel-Lucent had achieved the following targets as part of The Shift Plan: Š a workforce of 50,047 people, a decrease of 2,626 compared to the previous year; Š repositioning as a specialist in IP and cloud networking and ultra-broadband fixed and mobile access, with key wins and market share gains in these areas; Š fixed costs savings of 356 million in 2015 and cumulatively of 1031 million since 2013; Š a stronger balance sheet closing on a net cash position of 1.4 billion; and Š completion of debt reprofiling Social relationships Union discussions Organizations for social dialogue We worked to foster an open dialogue with employees on any decisions that directly affected them. Discussions with employee representatives concerning organizational changes and workforce reductions were managed on a regional and/or country basis. During the launch of the Alcatel-Lucent Performance Program in 2012 and The Shift Plan in 2013, we regularly engaged with our social partners on the impact of these initiatives in full compliance with local rules and regulations. These discussions continued throughout 2014 and 2015 in conjunction with the ongoing implementation of The Shift Plan and the announcement of the merger of Alcatel- Lucent and Nokia. Š Dialogue with trade unions: We informed or consulted with union representatives before making any major change in the organization. Matters affecting individuals, particularly those involving relocation or the transfer of work to a new location, often required up to six months of discussions. Š European Committee: The European Committee for Information and Dialogue (ECID) is a dialogue body where senior management and European employee representatives can share their views. Composed of 30 members as well as a Coordinating Committee led by the ECID Secretary (France) and four other representatives (Germany, Italy, Belgium and Romania), the European Committee meets at least twice a year. In 2015, it met on April 16 to discuss sustainable development, on April 17 to discuss the announcement of the Alcatel-Lucent/Nokia merger and The Shift Plan, and on October 14 for its final plenary meeting of the year dedicated to questions on The Shift Plan and the Alcatel-Lucent/Nokia transaction. In addition to these meeting with ECID, Alcatel-Lucent management and the Coordinating Committee met twice (March 10 and 82 Additional Information 2015 Alcatel Lucent

85 SUSTAINABILITY Our people September 14) to prepare the plenary meetings and by audioconference (November 12 and December 15) in advance of the Nokia integration announcements. Š French Committee: In France, a group-level committee representing unionized employees has been operating since Composed of 30 trade union representatives, the French Committee (Comité de Groupe France) meets at least twice a year; in 2015, it met four times. Review of collective agreements Some of the major collective agreements signed in 2015 include the following. France Š Accord Handicap is a three-year collective agreement ( ) covering not only the employment of people with disabilities but also their day-to-day life inside Alcatel- Lucent. This agreement was signed on December 18, 2014 by all unions (CFDT, CFE-CGC, CGT). Š Accord Egalité Professionnelle is a two-year collective agreement ( ) on gender diversity, helping women break through the glass ceiling while balancing their personal and professional lives. It was signed on July 3, 2014 by CFDT. Netherlands Š Two collective bargaining agreements were signed in 2015: Collective Bargaining Agreement on Employment Conditions (focusing on salary increases, salary ranges, vacation days, retirement, and illness and disability) and the Social Plan (redundancy plan). Belgium Š Two collective bargaining agreements were signed in Belgium: one on April 17, 2015, regarding the collective bonuses in application of the National Collective Bargaining Agreement N 90, and another on April 27, 2015, regarding measurement for older (45+) employees. Italy Š Two agreements were signed to deliver employee training along with one agreement to deliver management training. An additional agreement was then signed to fund leadership training for women. Š An agreement was signed in Milan for the outsourcing of 29 employees to SESAnv (Madagascar Project). Š An agreement signed in Rome with union and government representatives for restructuring procedures related to The Shift Plan (Mobilità, CIG in Deroga). Š An agreement was signed in Rome with union and government representatives for the outsourcing to Flextronics of manufacturing activities in Trieste. Romania Š An agreement was signed to reflect changes to benefits package and holidays. United States Š In February 2015, Alcatel-Lucent USA Inc. entered into the 2014 Installation Effects Agreement with the Communications Workers of America (CWA). This agreement covers the handling of local union board members who were affected by the closing of their location of employment. Brazil Š In November 2015, Alcatel-Lucent Brazil entered into a new collective bargaining agreement with the Sao Paolo Metalworkers Union for the period November 1, 2015 to October 31, This agreement covers salaries, benefits and other conditions of employment for employees represented by the union and includes an amendment for salary increase each year. A similar agreement was also signed with the Rio de Janeiro Metalworkers Union for the period of November 1, 2015 to October 31, Percentage of employees covered by collective bargaining agreements in 2015 Sample of main countries where we operate Percentage of employees covered France 100% Italy 100% China 100% Belgium 100% Netherlands 100% Norway 100% Sweden 100% Finland 100% Spain 100% Germany 100% Romania 100% Poland 100% Slovakia 100% Czech Republic 100% Alcatel Lucent Additional Information

86 4 SUSTAINABILITY Our people Review of workplace health and safety agreements Alcatel-Lucent in Germany implemented a stress-management plan in 2015 based on a 20-month pilot project completed the previous year. The plan included stress measurement and evaluation based on biofeedback analysis and heart rate variability, workshops with external partners on stress measurement and reduction strategies, and the installation of on-site equipment for stress relief and proactive health checkups. Internal communication and dialogue Motivated, committed employees are critical to the success of any business. Our high-performance, high-speed culture required us to provide regular, up-to-date information to our workforce. We provided a variety of tools and programs to foster active, ongoing and targeted dialogue between management and employees to ensure everyone understood the company s objectives and their role in achieving them. This past year was especially intense for employee communications. On April 15, Nokia announced its intention to acquire Alcatel-Lucent. This news (and the integration work that began almost immediately) changed much of the content of our internal communications and made communicating with employees more important than ever before. Communicating about Nokia Within a few days of the Offer announcement, we created a mini-site on our corporate intranet homepage (EyeOn Alcatel- Lucent and Nokia) to publish and store documents (e.g., press releases, internal announcements, PowerPoint presentations) related to the deal and integration work. Starting in June, the newly formed Integration Management Office (IMO) began publishing a monthly progress report on different aspects of the deal and the combined work with Nokia (e.g., legal, organizational, administrative, human resources). The newsletter was sent to all Alcatel-Lucent employees by push-mail and is also published on the intranet mini-site. Our executives also communicated with employees about the Nokia Offer and integration progress in person. Between April 15 and December 4, different members of our leadership team made nearly 30 stops to our major sites around the world. At these different locations whether in Argentina, Russia, Canada, China, India or France our leaders, sometimes in pairs, held all hands meetings to give employees the latest news and answer questions. Supporting strong leadership In view of the Nokia Offer, we held our annual end-of-year top 200 leadership meeting in September in Paris a little earlier than usual. The theme was Proud of our Past, Inspired by our Future. It included a highly informative keynote address and Q&A session from Nokia CEO, Rajeev Suri. In addition to the annual top 200 meeting, our CEO holds monthly one-hour conference calls with our top 200 leaders. The first half of each call is devoted to hot topics and the second half to Q&A. We also continued our Leaders Portraits video series; published to our intranet homepage, it features interviews with top 200 leaders to hear about their priorities and how things are going in his or her part of the business. We have now published nearly 50 videos since the series launched, all of them visible through the Alcatel-Lucent video-sharing service. Developing our managers The implementation of The Shift Plan required line managers to play a larger role in supporting their teams through change, cultivating employee engagement and developing a culture of high performance. In 2014, we started a company-wide People Managers Essentials Program; this program was further developed throughout 2015, with the existing People Manager Essentials workshops complemented by new People Manager Advanced workshops designed specifically for senior leaders. Approximately 2,500 managers have participated in one of the 120 workshops that have been delivered in 26 countries since Fall A People Manager Index (PMI) was also created to provide workshop participants with feedback on their leadership effectiveness. The PMI shows how the manager s team members see him or her living by the five essential roles: direction setter, change leader, motivator, performance manager and coach. The communication platform launched in 2014 also continued to grow in 2015: the monthly information bulletin is now read by 65% of all managers, the digital playbook describing managers roles and responsibilities reached more than 12,000 page views and the dedicated online community for managers now numbers some 800 members. Communicating about The Shift Plan Although news about the Alcatel-Lucent/Nokia combination dominated 2015, it was also the final year of The Shift Plan implementation. We continued to inform employees of progress through quarterly updates sent by push-mail and published on the corporate intranet homepage. The Shift Plan was also regularly addressed by the CEO and CFO in their employee conference calls following each quarterly results announcement. Innovative communication platforms We continued to offer our Text-Me SMS service to push timely information to subscribing employees on their mobile phones. In 2015, we sent roughly 25 SMS messages to 2,200 subscribers. We also continued our On the Air radio program. Now at its 40 th episode averaging roughly 1,700 listeners per installment the program highlights the latest company news, innovations, leadership interviews and questions from employees. On the Air is available via Engage, our social networking platform, and as a downloadable MP3 for mobile listening. We also launched a new innovation-focused webtv program called InnoZap in Episodes covered topics like real-time analytics, motion sensors and other Bell Labs inventions. A new addition to our intranet homepage this year was the Tip of the Month series, where employees were asked to submit tips through the Engage platform on how to save time, reduce costs, improve the quality of our work and generally make work 84 Additional Information 2015 Alcatel Lucent

87 SUSTAINABILITY Our people life easier. Six tips were spotlighted on our intranet homepage on topics such as printing confidential documents with a password, recovering a deleted item in Outlook and how to display a virtual keyboard on your computer screen. This new initiative received positive feedback from readers who found the practical tips to be very useful. While the Engage social networking platform is often used to support internal communication initiatives, it is available to all employees for worldwide dialogue and information sharing. Engage s membership now numbers more than 47,000 registered users and 2015 saw a 6.8% increase in interaction per piece of content. In 2015, the Digital Workplace Infocenter, accessible from our intranet homepage, continued to be a resource to help employees select and optimize the way they use the many communication tools at their disposal. It helps employees collaborate, communicate and share information to better accomplish their business activities. As part of our global employee recognition program, a new digital initiative called You Made My Day was launched mid-2015 on our intranet homepage. This easy-to-use template provides a quick and fun way to say thank you to a colleague who offered a much-appreciated helping hand. Promoting this initiative was also an opportunity to highlight the full-range of recognition tools available to managers and employees. Face-to-face communications the most effective and personal communication channel remains face-to-face meetings. These can range from largescale events like the annual meeting for our top 200 leaders to multi-stop worldwide roadshows (like the one carried out by our executive team in 2015). They also include smaller local events like the Coffee & Connect sessions held at our Murray Hill, New Jersey campus (with three sessions in 2015 attended by an average of 150 employees) or our monthly Rendez-vous de Boulogne (nine sessions in 2015) held at our corporate headquarters in Boulogne-Billancourt (near Paris), France. Employee engagement To increase employee engagement and shape our leadership culture, a Leadership Index (measuring leadership effectiveness based on 12 dimensions ) was launched in 2014 and two measurement cycles were completed in 2014 and More than 170 senior level leaders were measured during this period and were given the opportunity to be debriefed and coached by their HR business partner. Since launch, the positive perception score (i.e., the percentage of direct reports and one layer below who strongly agree or agree with the effectiveness of the top 200 leaders) increased from 77% to 80% on average, with an average participation rate of 67%. Building on this success, a People Manager Index (PMI) was launched in 2014 with 1,485 managers being measured on similar leadership dimensions. The PMI had an average positive perception score of 83% and an average response rate of 76%. While much of our internal communications and dialogue takes place through digital tools, we never lose sight of the fact that Promotion and enforcement of ILO core conventions Alcatel-Lucent Global Human Rights Policy Our Global Human Rights Policy addresses the four primary roles we play in our business operations and ecosystem: employer, supplier of telecommunications infrastructure, business partner and corporate citizen. Following the 2012 update to this policy to ensure alignment with the UN Guiding Principles on Business and Human Rights (the so-called Ruggie Principles ), in 2015 we dedicated our efforts to implementing company measures according to the 10 Guiding Principles of the Telecommunications Industry Dialogue on Human Rights, Freedom of Expression and Privacy. These principles are designed to ensure proper treatment of our workforce and external stakeholders around the world, and to address our corporate role as a supplier of telecommunications infrastructure which supports transparency on freedom of expression and privacy. In parallel, we continued to dialogue with key industry stakeholders, including our customers as well as civil society, on our common responsibilities to human rights around the world. Excerpt of the Alcatel-Lucent Global Human Rights Policy It is the policy of Alcatel-Lucent to protect and enhance the human dignity of everyone who works for the company and anyone who has dealings with it. We conduct business in many countries and believe that our products, services and jobs improve the quality of life in each of these countries. Alcatel-Lucent supports and respects, within its sphere of influence, the principles of human rights as embodied in internationally recognized principles and guidelines, including: the UN Declaration of Human Rights; the Ten Principles of the UN Global Compact; the UN Guiding Principles on Business and Human Rights; the International Labor Organizations (ILO) Declaration of Fundamental Principles and Rights at Work; and the OECD Guidelines for Multinational Enterprises (which refer to the UN Principles). We also respect and comply with all human rights legislations, regulations or standards in the countries in which we operate. Alcatel Lucent Additional Information

88 4 SUSTAINABILITY Our people As an employer, Alcatel-Lucent: Š prohibits discrimination against any employee or job applicant on the basis of age; disability; race; sex; color; religion; creed; national origin; citizenship; sexual orientation; gender identity, characteristics or expression; marital status; covered veteran status; or any other protected class and will treat everyone with dignity and with full respect for their private lives; Š helps ensure that employment with Alcatel-Lucent is by freedom of choice; Š upholds freedom of association and the right of any individual to be fairly represented by a labor organization of their choosing, pursuant to local laws; Š offers employees remuneration packages that meet or exceed the legally required minimum; Š complies with maximum hours of daily labor set by local laws and complies with overtime pay legal requirements; Š supports the effective elimination of all forms of compulsory labor and child labor and will make this a criterion in the selection and management of our suppliers and contractors; and Š prohibits: actions that create an intimidating, hostile work environment, including corporal punishment, harassment, verbal, written, physical or psychological abuse, threats or intimidation, as these are inconsistent with a respect for human dignity; actions that threaten or insinuate that an employee s or applicant s submission to or rejection of sexual advances will influence any personnel decision regarding that employee s or applicant s employment, wages, advancement, job assignment or any other condition of employment or career development; and retaliation or other adverse actions against those who report, in good faith, suspected violation of the law or policy. Violations of this policy by employees may be reported using the appropriate compliance issue reporting mechanism, as described on the Office of Business Integrity & Compliance website. As a supplier of telecommunications infrastructure, we offer products and services in compliance with international standards, and support transparency in the way telecommunications technology is used by sovereign countries. As a business partner we maintain the highest levels of business ethics, personal integrity and compliance with suppliers, subcontractors and business partners and expect them to adhere to these in their practices as well. We ask suppliers and subcontractors to respect human rights by complying with the Alcatel-Lucent Suppliers Code of Conduct (Electronic Industry Citizenship Coalition Code of Conduct Revision 3) and all applicable human rights laws and regulations, and ensure these are respected throughout the supply chain. As a corporate citizen, we respect and comply with all human rights legislation, regulations and standards in the countries where we operate, and conduct business and sales activities in strict compliance with international conventions regarding human rights. We respect indigenous rights and civil society in the countries where we operate, and act in full recognition of our social and environmental responsibilities. We also play an active role, via the Alcatel-Lucent Foundation, in charitable activities and support our commitment to social responsibility. (The full version of the Alcatel-Lucent Global Human Rights Policy is available on the company s website) Diversity and equal opportunity As a global enterprise, we actively seek to ensure our employees reflect the diversity of our business environment. Our Global Human Rights Policy confirms our responsibility to provide equal opportunities for all employees and to recognize and respect the diversity of people and ideas. Our commitment to advancing equality and non-discrimination is also reflected in specific initiatives against harassment and discrimination. Global strategy for gender diversity Although women comprised 24% of our workforce in 2015 (+3% points since 2013), they did not have comparable representation on our management teams. We make it a business imperative to nurture the skills and talents of women and to build management teams that reflect the diversity of our Company. In 2015, we continued to implement a global strategy and action plan put in place in 2014 that assigned responsibility for gender diversity at the organizational, corporate and country levels, and identified actions to be carried out in two main focus areas: Š Awareness building: For managers: In 2015 we continued our series of interactive sessions on gender diversity, addressing around 250 managers and leaders to help them understand why diversity is a business imperative for Alcatel-Lucent and to build their awareness of workplace gender dynamics all with the aim to better tap our existing talent and improve organizational performance. For employees: We continued to support the worldwide StrongHer employee network in In addition, our employees could attend events organized at Alcatel-Lucent 86 Additional Information 2015 Alcatel Lucent

89 SUSTAINABILITY Our people and in collaboration with partner networks and institutions such as UNESCO, the European Professional Women Network in Madrid, Areva s WE Network, HPE s WoMen@Work, Women@HP, Printemps des Femmes BP Petrochemicals Women s Network, and Sodexo : Diverse and Unis-vers networks. Š Leadership: Supporting female leaders: In 2015, we renewed the TOP10 Women Program, which supports women s career development by offering to 10 participants in each region a mix of business sponsorship, executive coaching, mentoring and networking over a one-year period. Participants were mentored in finance, strategy and business practices as well as personal branding, executive communications, leadership styles and organizational savviness. As a result of this coaching and mentoring, 40% of our TOP10 Women Program participants have already grown in their professional careers. Leadership Pipeline: As of December 2015, women accounted for 23% of our Leadership Pipeline. Gender diversity initiatives Women s Empowerment Principles Alcatel-Lucent was a signatory to the United Nations CEO Statement of Support for the Women s Empowerment Principles (WEP): a worldwide initiative launched by the United Nations, UNIFEM (now UN Women) and the UN Global Compact. Our gender initiatives were also included in the UN s Companies Leading the Way: Putting the Principles into Practice, a publication that lists examples of actions and initiatives that companies are undertaking to empower and advance women. We were also an active participant in the WEP Leadership Group, including participation in the 2015 WEP CEO Award Committee. PRINCIPLE Leadership promotes gender equality Equal opportunity, inclusion and non-discrimination Health, safety and freedom from violence Education and training Enterprise development, supply chain and marketing practices Community leadership and engagement Transparency, measuring and reporting OUR ACTION At the beginning of 2014, under the leadership of our CFO and Diversity Sponsor, we renewed our global commitment to, strategy and action plan for assigning gender diversity responsibility at the corporate and regional levels. We established a comprehensive global strategy focused on women s leadership development and increased awareness of gender dynamics. In 2015, as we celebrated five years as a founding member and signatory of the WEP, our CEO Michel Combes renewed our commitment to gender diversity by signing the WEP CEO statement of support on June 11, As a global enterprise, we actively sought to ensure our employees reflect the diversity of our business environment. Our Global Human Rights Policy confirmed our responsibility to ensure equal opportunities for employees and to recognize and respect the diversity of people and ideas. As stated in our Environment, Health and Safety (EHS) Policy, we were committed to operating in a way that protects the environment as well as the health and safety of our employees, contractors, customers and communities in which we conduct business. As part of our global strategy and action plan, in 2015 we continued our TOP10 Women Program. We also continued to provide dedicated training for managers and employees through our Global Day of Learning and promote employee-driven initiatives such as StrongHer. Alcatel-Lucent worked to maintain a diverse supply chain and always had high expectations for performance in this area. For the eighth year in a row we were named among the Top Corporations by the Women s Business Enterprise National Council (WBENC). The Alcatel-Lucent Foundation contributed to digital inclusion through philanthropy in the communities where our employees and customers work and live. It developed and promoted programs and activities that prepare youth (with a focus on young women) to participate and innovate in the connected world. In 2015, the Foundation supported two global signature programs and 22 multi-year programs in 18 countries, with some 2,260 youth (48% girls) benefiting from our ConnectED training in Indonesia. Through our Campus in the Cloud program, the videos developed on the topic of women in the workplace received approximately 1,500 views. Our Annual Financial Report on Form 20-F reports the percentage of women on the Board of Directors and in our overall headcount, recruitment figures and Leadership Pipeline. These data are reproduced in the Social indicators section of this report. Each of these indicators is externally verified on an annual basis. StrongHer A gender empowerment program launched in 2011, StrongHer helps female employees unleash their potential and amplify their contribution to business. StrongHer advocates for more balanced representation between women and men across all organizational levels and job functions within the company. Led by employees and dedicated to employees, StrongHer offers networking, personal development and gender awareness support. Starting from just six women working for Alcatel-Lucent in France, StrongHer has grown to include some 1,300 members in 51 countries. In 2015, the program launched the StrongHer Alcatel Lucent Additional Information

90 4 SUSTAINABILITY Our people Manager Charter, which helps managers choose and commit to actions that enable gender balance within their own teams. Commitment to non-discrimination Our commitment to advancing equality and non-discrimination was reflected in specific initiatives against harassment and discrimination in several countries (in particular, France and the United States). In 2015, we continued to offer to our employees and managers resources and best practices to support lesbian, gay, bisexual and transgender (LGBT) people in the workplace. For the fourteenth consecutive year, Alcatel-Lucent was recognized by the Human Rights Campaign Foundation with a perfect score on the Corporate Equality Index, which rates American workplaces on LGBT equality. Integration of disabled people into our workforce We are committed to fostering the integration of people with disabilities into our workforce and creating access solutions for them. Mission Handicap Designed in 2006 to better integrate disabled employees into the workplace, the primary purpose of Mission Handicap is to ensure Alcatel-Lucent meets the legal quota requiring disabled people to make up at least 6% of a French company s employment ratio (direct and indirect). If a company does not comply with this requirement, it is forced to make a contribution to AGEFIPH, an organization that promotes the employment of disabled workers. The amount of this contribution depends on the gap between the actual number of disabled employees and the 6% target. Mission Handicap includes several action plans focused on areas such as hiring activities, equipment adaptations, tool or facility accessibility, training of employees (including managers and colleagues), and communications and awareness sessions for all employees. According to the 2015 operational data available at the time of filing this report, disabled employees made up 3.5% of the Alcatel-Lucent direct and indirect workforce in France at year-end A non-profit association created by Alcatel-Lucent in helps post-graduate students with disabilities find employment by providing them with training, internships, mentoring and other supports. In helped 29 disabled students. The program celebrated its fifth anniversary in 2015, an occasion that saw us bring together most of the partners involved to share with them all the success of the past five years. Support for disabled employees in Spain In 2015, Alcatel-Lucent continued its collaboration with Spain s AMÁS group, which creates and promotes centers and institutions that work toward the recovery and rehabilitation of those with mental illness. 4.7 Society and philanthropy Our approach to digital inclusion We are committed to making global communications more innovative, sustainable and accessible for people, businesses and governments worldwide. We address digital inclusion through innovative products and solutions in ultra-broadband access, IP networking and cloud enabling global connectivity. Digital inclusion is about giving people everywhere access to information, education and economic opportunities while encouraging environmental sustainability and innovation. It remained a key pillar of our product and solution portfolio in 2015, reinforcing our commitment to making global communications more innovative, sustainable and accessible for people, businesses and governments worldwide. Digital inclusion was also a primary focus of the Alcatel-Lucent Foundation, dedicated to helping youth innovate in a digital world. Our approach to digital inclusion focused on four key areas: Š Technology and innovation: Our focus on IP networking, cloud and ultra-broadband access under The Shift Plan, along with the innovation assets of Bell Labs and other partners (including our customers and industry peers), will help shape the future of the ICT industry by making communications more innovative, sustainable and accessible. Specific technology areas of advancement include ultra-broadband wireless and fixed access (e.g., VDSL vectoring, small cells), IP routing, and transport and IP platforms. Š Ultra-broadband access: In 2015, Alcatel-Lucent worked with governments, public authorities and regulators worldwide particularly in emerging countries to promote the benefits of ultra-broadband access plans and to support digital inclusion. We also worked with a number of international organizations and institutions. Š Education and promotion: In 2015, Alcatel-Lucent maintained a very active role in the United Nations Broadband Commission, the International Telecommunications Union (ITU) and the Affordable Internet Alliance to dialogue with public authorities and regulators in developing and emerging economies. 88 Additional Information 2015 Alcatel Lucent

91 SUSTAINABILITY Society and philanthropy Š Philanthropy: The Alcatel-Lucent Foundation continued to execute on its mission to prepare youth from disadvantaged communities (with a focus on young women) to participate and innovate in a connected world. In 2015, it launched a major innovation program to help youth innovate in key regions around the world Impact on communities A robust telecommunications infrastructure fosters equality by democratizing information and enabling the promotion of fundamental human rights. Alcatel-Lucent had a positive effect in the communities in which it operates by following policies and procedures that emphasized hiring local personnel, evaluating local suppliers, minimizing environmental impact and, through our digital inclusion strategy, developing actions that enhance people s lives. We continued to measure the impact of our actions according to a range of social, environmental and economic indicators for example, assessing philanthropic initiatives based on the numbers of beneficiaries and volunteers, volunteer hours, improvements to quality of life, improvements in people s technology-related skills and more. In 2015, on top of our partnerships with non-profit organizations in key regions around the world, we continued to promote Campus in the Cloud (which helps youth learn about the world of work directly from ICT professionals) and extended the reach of our We Care portal to encourage more Alcatel-Lucent employees to volunteer in their communities Philanthropy Building a generation of digital innovators The Alcatel-Lucent Foundation contributed to digital inclusion through philanthropic efforts in our employees and customers communities. It developed programs that prepare youth (especially young women) to participate and innovate in the connected world. Pursuing two strategic priorities digital literacy and fostering innovative thinking among youth the Foundation sought to ensure the next generation benefits from the opportunities of the digital economy. Leveraging Alcatel- Lucent s technology, global presence and employee expertise and skills, the Foundation s contributions included employee volunteerism, partnerships with non-profit organizations and inkind donations to communities around the world. Governance The Alcatel-Lucent Foundation was organized under the laws of the U.S. State of Delaware as a non-governmental, non-profit, private organization. As of December 31, 2015, the Alcatel- Lucent Foundation Board of Trustees included a chairperson, 11 company executives, an executive director and an external trustee: Š Chair: Philippe Keryer Š External trustee: William Reese (CEO of the International Youth Foundation) Š Alcatel-Lucent trustees: Barbara Landmann (Vice Chair), Richard Campbell (Treasurer), Alex Yip (Secretary and Legal Counsel), Sandy Motley, Theodore Sizer, Radwa Hafez, Christine Diamente (ex officio), Frederic Chapelard, Marco Malfavon, Jeanmarie Grisi and Guiyang Lin Š Director: Elisabeth Eude 2015 highlights In 2015, the Alcatel-Lucent Foundation: Š provided USD $0.9 million to carefully selected charitable programs around the world, touching the lives of 47,000 beneficiaries; Š provided in-kind donations (such as refurbished computers, school supplies, clothing and food donations) to selected charities; Š launched a new program with UNESCO to help youth learn to innovate with technology and create their own solutions for improving education in key regions around the world; Š funded 34 grassroots programs (in line with The Shift Plan s strategy for guiding philanthropic activities), benefiting 40,700 children and young adults from disadvantaged communities in 18 countries worldwide; Š facilitated the engagement of 2,500 employee volunteers, who gave 10,400 hours volunteering; and Š continued the worldwide deployment of the We Care volunteering management web tool to better monitor and structure our reporting on volunteer activities company-wide. The Foundation also continued to support two global signature programs: Š ConnectEd was a digital education partnership between World Education and the Alcatel-Lucent Foundation to provide educational and digital skills training opportunities for youth in disadvantaged communities worldwide. Launched in April 2011, this program put a special focus on the use of technology to transform youth education, work and life. The program arrived to completion as planned in June 2015, providing training to 22,575 youth (58% of them girls) during its lifespan. Alcatel Lucent Additional Information

92 4 SUSTAINABILITY Society and philanthropy Š Campus in the Cloud was an Alcatel-Lucent employee inkind initiative that aimed to bridge the knowledge gap for those who have no or little access to education by leveraging our in-house skills, talent and communications technology. Launched in 2013, this program encouraged employees to share their knowledge by creating short educational videos on their work, giving advice on career advancement and how to prepare for the world of work. These videos were then shared with the beneficiaries of Alcatel-Lucent Foundation programs. A new version of the Campus in the Cloud website was launched in April 2015 and generated close to 16,000 video views by the end of the year. The Alcatel-Lucent Foundation measures results using the London Benchmarking Group (LBG) standards to assess the overall impact of its philanthropic activities. 4.8 Supply chain About our supply chain Supply chain organization Comprising three global internal organizations procurement, manufacturing and logistics in 2015, our global supply chain operation continued to: Š develop the global demand and build plan for hardware equipment; Š manage all internal and contracted manufacturing platforms; Š support product industrialization; and Š develop associated testing strategies. Procurement Throughout 2015, Alcatel-Lucent continued to develop and update strategies to identify primary technologies and supply sources for purchased components, finished goods, services and solutions. To the greatest extent possible, we multisourced a large number of industry-standard components and materials, and used multiple predefined sources for a number of components and finished goods families allowing us to access additional inventories in case of a disruptive event or increased end-customer demand. We further sought to mitigate disruptions by concentrating mostly on preferred suppliers for new products and volume production. These suppliers were deemed to meet our requirements and were subject to quality and performance monitoring as well as periodic business reviews and executive management meetings. Our goal is to source components in a way that optimizes the total cost of ownership and delivers high quality to our customers. Our procurement organization leveraged a global network of approximately 2,000 suppliers to source the goods and services necessary to manufacture our products and meet customer demand. With our finished products requiring a wide range of electronic, electromechanical and radio-frequency components including notably semiconductors, printed circuit boards, connectors, racks, cables and batteries, We also purchased finished IT and telecommunications equipment (including servers, middleware and software) from original equipment manufacturers (OEMs) to complement our own products when delivering complete solutions to our customers. Last year we worked with roughly 1,300 OEMs around the world. To deploy our products and solutions in the field, we relied on a network of 4,500 local engineering and installation services suppliers. Manufacturing Our manufacturing strategy involved both external and internal production sources. When external manufacturing was required, the external manufacturer was the primary owner of inventory, standard manufacturing equipment and common test equipment. In the vast majority of cases, however, we used our own custom-made test equipment at internal manufacturing locations, allowing us to change manufacturing locations more easily if necessary. The Alcatel-Lucent facilities used for product introduction, surface mount assembly, module assembly and system integration were located in China (Shanghai, Qingdao), France (Eu), Italy (Trieste) and Poland (Bydgoszcz). Key contract manufacturer sites were located in: Š Guadalajara, Mexico (Flextronics; Sanmina SCI) Š Timisoara, Romania (Flextronics) Š Wuzhong, China (Flextronics) Logistics Our logistics organization managed the delivery of our products as time- and cost-efficiently as possible while reducing carbon emissions. Using direct order fulfillment, we shipped products directly to customers from our manufacturing locations. We also appointed a lead logistics provider to move our products in a consolidated way. 90 Additional Information 2015 Alcatel Lucent

93 SUSTAINABILITY Supply chain Responsible purchasing Our commitment We were committed to promoting sustainability throughout our supply chain and among the third-party suppliers providing us with components, products, software, support or services. The three pillars of our comprehensive approach to responsible purchasing were: Š Communicate clear sustainability requirements to suppliers through contractual purchasing requirements and product or service specifications; Š Evaluate suppliers sustainability performance through ratings and on-site audits; Š Push and support the improvement efforts of suppliers whose performance is not at the expected level. Requirements for suppliers and subcontractors As a mandatory element of all agreements, Alcatel-Lucent requires suppliers to comply with clearly defined principles based on international and sector standards. Our key references are the United Nations Global Compact s Ten Principles and the Electronics Industry Citizenship Coalition (EICC) Code of Conduct. Specifically, all suppliers have to commit to the EICC Code of Conduct and to ensure that their supply chains meet the associated requirements. All new suppliers are required to adhere to the Ten Principles of the UNGC. We encourage suppliers to meet international standards for environment, safety and sustainability including ISO and OHSAS As part of our risk analysis and assessment processes, we track supplier compliance with these standards. Enforcing anti-corruption among suppliers In 2013 and 2014, we established the following supplier-related anticorruption procedures: Š all requests to use new suppliers are channeled through a screening process; Š there are two levels of screening depending on business level and the corruption risk associated with the supplier location and activity; and Š suppliers can be accepted, accepted with conditions, or rejected for reasons of corruption risk. In April 2015, we embarked on a program to screen our entire existing supplier base. By the end of 2015 approximately 20,000 suppliers had been screened to the extent of identifying potential issues. Assessment of supplier sustainability performance Supplier risk assessments We performed risk assessments when evaluating new suppliers in 2015 and continued our annual reassessment of risk levels for our major suppliers on an annual basis. These assessments measured levels of risk according to a supplier s type of activity, location and other factors. If the overall risk level was excessive, either the supplier was rejected or actions such as a formal sustainability rating process were taken to ensure the supplier s practices met our requirements. EcoVadis sustainability ratings Supplier assessments were performed by EcoVadis, a company specializing in sustainable supply chain management solutions. Based on internationally recognized standards such as the Global Reporting Initiative, the UN Global Compact and ISO 26000, the EcoVadis rating system focuses on suppliers social, ethical, environmental, health and safety, and human rights practices, and on how they manage their own supply chains. Ratings are determined by EcoVadis experts based on supplier questionnaire responses, supporting documentation, third-party information and risk factors mapped according to industrial sector and country. EcoVadis ratings gave Alcatel- Lucent a clear, external and objective point of reference for assessing suppliers. Suppliers can decide to share their assessment results with any EcoVadis platform member and thereby capitalize on their sustainability rating. Health and safety qualification screening and audits In 2015, we consolidated the health and safety qualification process for the services of suppliers performing high-risk activities (e.g., work at heights or on high-voltage devices) and improved the process with governance, sustainability and consequence management provisions. In 2015, we screened 551 additional suppliers. To ensure requirements were implemented on the field, we also performed 59 on-site EHS audits. No fatalities were reported among our subcontractors or Alcatel-Lucent staff in Alcatel-Lucent sustainability audits We continued to conduct two types of supplier audits: quality audits (which include sustainability criteria) and more comprehensive sustainability-dedicated audits covering environment, labor, human rights, fair business practices and sustainable procurement. On-site sustainability audits were typically done for suppliers with unsatisfactory EcoVadis ratings and high sustainability risk Alcatel Lucent Additional Information

94 4 SUSTAINABILITY Supply chain profiles. Quality audits were a supplier selection element performed by our Supplier Quality team. Improving suppliers sustainability performance We continued to require suppliers with unsatisfactory EcoVadis ratings or audit results to draft and implement remedial plans addressing the identified weaknesses. In support, we provided recommendations and determined if the overall improvement plans were sufficient. Both high-spend and high-risk suppliers were covered by assessments and pushed to improve. In 2015, we maintained our 2014 figure of 80% of active suppliers rated satisfactory or above on their assessment of sustainability by EcoVadis. This number was up from 53% at the end of ( Active suppliers refers to key, preferred and other suppliers who may require assessments because of their risk level.) Establishing conflict minerals traceability In 2015, we surveyed more than 360 suppliers on conflict minerals to determine the origin of the tin, tantalum, tungsten and gold included in their components. By having our suppliers trace and report on where they source their minerals, this program aimed to push our supply chain to use legitimate minerals sources and to address the human rights and environmental violations occurring in the mining and trading activities of Africa s Great Lakes region. In 2015, we recommended that our suppliers be conflict-free for Tantalum, strive to become conflict free for Tin, Tungsten and Gold, and improve their own supply chain s conflict minerals due diligence practices and requirements. We combined mineral smelters conflict-free audit status (provided by the Conflict-Free Sourcing Initiative industry associations) with traceability information from our suppliers to determine mineral origin status. We reported this program s progress on our website. 92 Additional Information 2015 Alcatel Lucent

95 SUSTAINABILITY Sustainability data 4.9 Sustainability data Environmental indicators Definitions and methodology Our 2015 energy and water consumption, carbon footprint assessment and waste-generation reporting perimeter included all sites owned or leased by Alcatel-Lucent as of December For the 2015 assessment, 196 facilities were directly responsible for managing energy and water consumption along with the carbon footprint assessment at their particular site. Sites with direct facility data input responsibility accounted for 87% of the total average annual real estate building area and 80% of the total average annual Alcatel-Lucent headcount. In order to have environmental indicators accounting for 100% of our employees, extrapolation procedures were applied based on calculated ratios per area. We continued to attempt to obtain utility information from landlords in leased situations where the utility usage can be allocated accurately to our leased space (for example, via a separate electric meter). If such information cannot be obtained, electricity and/or natural gas usage is estimated utilizing energy intensity factors as stipulated within our EHS Program Reporting Plan. For the 2015 assessment, 173 facilities were directly responsible for managing waste-generation reporting at their particular site. Sites with direct facility waste data input responsibility accounted for 83% of the total Alcatel-Lucent headcount. From this scope, the number of facilities that reported effectively resulted in the following corresponding percentages of total Alcatel-Lucent employees: Š Energy consumption and CO 2 e emissions: 196 sites (accounting for 80% of our employees) provided actual facility-specific energy consumption and CO 2 e emissions information. This included inputting utility billings, fuel purchases and emitted GHG chemical emissions data directly entered into a web-based tool by facility personnel. To account for 100% of our employees, facility energy consumption usage and CO 2 e emissions estimation algorithms were employed for sites that could not obtain such information. In addition, fuel usage data for marine vessels, along with fuel and mileage data for leased automobiles were obtained to account for 100% of worldwide Alcatel-Lucent mobile source operations. Š Water consumption: 101 sites (accounting for 63% of our employees) provided water usage information. To account for 100% of our employees, extrapolation procedures were applied based on calculated ratios per employee. Š Hazardous waste production: 96 sites (accounting for 71% of our employees) provided information on hazardous waste production. To account for 100% of our employees, extrapolation procedures were applied based on calculated ratios per employee. Š Non-hazardous waste production: 71 sites (accounting for 67% of our employees) provided information on nonhazardous waste production. To account for 100% of our employees, extrapolation procedures were applied based on calculated ratios per employee. Š Waste electrical and electronic equipment production: 177 sites (accounting for 79% of our employees) provided information on waste electrical and electronic equipment. To account for 100% of our employees, extrapolation procedures were applied based on calculated ratios per employee. The EHS Reporting Protocol is available upon request at: [email protected]. Evolution in 2015 All facilities that were able to obtain energy usage information, regardless of building area or employee headcount, were required to use our internal web-based tool. As a result, more actual facility operational data were obtained, requiring less estimation to obtain the 100% world-wide assessment. Energy efficiency: In 2015, we consolidated facilities to utilize resources more efficiently this action along with our efforts to implement energy efficiency projects and conduct energy efficiency awareness programs for employees resulted in obtaining over a 9% reduction in CO 2 e emission levels from our facilities compared to Waste management: In 2015, we increased the number of facilities providing waste data which resulted in greater accuracy in the data reported and less estimation in our assessment. The decrease reported for non-hazardous waste production was the result of several factors: most notably corporate restructuring and facility consolidation which resulted in reductions in headcount and facility surface areas as well as increase in virtual office headcount. Alcatel Lucent Additional Information

96 4 SUSTAINABILITY Sustainability data 2015 environmental indicators Units Perimeter Carbon footprint assessment: Worldwide operations (1) Scope 1 (18) Stationary source fuel combustion t CO 2 e (4) 44,816 34,948 34, % Mobile source fuel combustion t CO 2 e (4) 63,036 47,116 44, % Facility and mobile source refrigerant losses t CO 2 e (4) 4, , % Direct emissions of GHGs from manufacturing, R&D and product development t CO 2 e (4) % Fire suppression system losses t CO 2 e (4) 1, % Total 113,159 82,908 80, % Scope 2 (18) Electricity usage t CO 2 e (4) 439, , , % Purchased hot water/steam t CO 2 e (4) 7,356 6,079 5, % Purchased chilled water t CO 2 e (4) % Total 446, , , % Scope 3 (2) Contracted manufacturing services (15, 16) tco 2 e (4,15) 2,937,000 2,831,000 2,916, % Contracted marine services t CO 2 e (4) 76,765 61,881 68, % Purchased paper (7) tco 2 e (4) % Fuel- and energy-related activities not included in Scope 1 and 2 t CO 2 e (4) 29,208 30,637 27, % Upstream transportation and distribution (8) tco 2 e (4) 145, ,565 87, % Waste generated in operations (9) tco 2 e (4) Business travel t CO 2 e (4) 68,378 73,574 62, % Employee commuting t CO 2 e (4) 130, ,741 75, % Downstream transportation and distribution (8) tco 2 e (4) 3,966 3,106 2, % Use of sold products (16) tco 2 e (4) 26,436,000 25,483,000 25,103, % End-of-life treatment of sold products (10, 16) tco 2 e (4) (294,000) (283,000) (291,606) 100% Total 29,534,328 28,428,896 28,053, % TOTAL (Scope ) t CO 2 e (4) 30,094,065 28,921,777 28,501, % 94 Additional Information 2015 Alcatel Lucent

97 SUSTAINABILITY Sustainability data Units Perimeter Carbon footprint assessment: Facility operations only (1,5,18) Indirect emissions of CO 2 e, linked to consumed electricity kt CO 2 e (3) % Indirect emissions of CO 2 e per employee t CO 2 e (4) % Direct emissions of CO 2 e, linked to consumed fossil energy kt CO 2 e (3) % Direct emissions of CO 2 e per employee t CO 2 e (4) % Total emissions of CO 2 e kt CO 2 e (3) % Total emissions of CO 2 e per employee t CO 2 e (4) % Consumed energy: Facility operations only (1,5,18) Consumed electricity GWh % Consumed electricity by employee MWh % Consumed fossil energy GWh % Consumed fossil energy by employee MWh % Total consumed energy GWh 1,209 1,083 1, % Total consumed energy by employee MWh % Carbon footprint assessment: Worldwide Scope 1 and Scope 2 (1,6,18) Indirect emissions of CO2e, worldwide Scope 2 operations kt CO 2 e (3) % Indirect emissions of CO2e per employee t CO 2 e (4) % Direct emissions of CO2e, worldwide Scope 1 operations kt CO 2 e (3) % Direct emissions of CO2e per employee t CO 2 e (4) % Total emissions of CO2e kt CO 2 e (3) % Total emissions of CO2e per employee t CO 2 e (4) % Consumed energy: Worldwide Scope 1 and Scope 2 (1,6,18) Purchased electricity, worldwide Scope 2 operations GWh % Purchased electricity by employee MWh % Total purchased, worldwide Scope 2 operations GWh % Total consumed Scope 2 energy by employee MWh % Consumed fossil energy, worldwide Scope 1 operations GWh % Total consumed Scope 1 energy by employee MWh % Total consumed energy, worldwide Scope 1 and 2 operations GWh 1, , % Total consumed energy by employee MWh % Alcatel Lucent Additional Information

98 4 SUSTAINABILITY Sustainability data Units Perimeter Water and wastes (17,19) Consumed water m 3 2,123,851 1,923,667 1,836, % Consumed water per employee m % Production of hazardous waste t 1, % Production of hazardous waste per employee kg % Percentage of hazardous waste recycled (11) % % Production of non-hazardous waste t 15,896 16,600 9, % Production of non-hazardous waste per employee kg % Percentage of non-hazardous waste recycled (11) % % Production of Waste Electrical & Electronic Equipment (WEEE) (12) t 7,463 5,825 4, % Percentage of WEEE recycled/reused % % Other emissions Solvents No significant quantities, indicator not relevant and not consolidated Halogenated hydrocarbon No significant quantities, indicator not relevant and not consolidated Discharge into water (heavy metals) No significant quantities, indicator not relevant and not consolidated Ozone-depleting substances No significant quantities, indicator not relevant and not consolidated NOx, SOx and other criteria air contaminants (13) tonnes % Miscellaneous Alcatel-Lucent headcount, ISO certified % % New products covered by ecodeclarations (14) % % (1) Emission factors based on initial values issued by the Intergovernmental Panel on Climate Change (IPCC) and kept constant for data consistency. (2) The presentation of our Scope 3 indicators follows the categories and guidance provided by the GHG Protocol Corporate Value Chain (Scope 3) Accounting & Reporting Standard, published in November (3) kt CO 2 e: Metric kilotons of CO 2 equivalency (includes the following GHGs: CO 2,CH 4,N 2 O, SF 6, HFCs and PFCs). (4) t CO 2 e: Metric tons of CO 2 equivalency (includes the following GHGs: CO 2,CH 4,N 2 O, SF 6, HFCs and PFCs). (5) CO 2 e values include Scope 1 and Scope 2 emissions for facility operations only (includes facility mobile combustion). (6) Complete Scope 1 and 2 activities worldwide. (7) Purchased paper includes 100% of paper used in operations and purchased under corporate contract; does not include externally printed marketing collateral. (8) Product transport includes 100% of emissions from air and marine transport worldwide, as well as truck transport from available areas. (9) Energy usage at environmental remediation sites. (10) Recycled electronic equipment. (11) Recycled: not released in a landfill or not burned without energy recovery. (12) WEEE data includes electronic waste generated by Alcatel-Lucent operations and WEEE takeback. Not reported as production per employee since production includes takeback. (13) Products of combustion from facility stationary operations. (14) Associated with new products released during the cited year. (15) Contracted manufacturing services calculation procedure was revised in 2013 to include all production activities. (16) 2013 data are restated for the disposal of our Enterprise activities and for corrected equipment delivery to market. (17) To account for 100% of Alcatel-Lucent employees, extrapolation procedures were applied using a site-specific monthly headcount assessment. This calculation procedure results in a different overall headcount then the total headcount as of December 31 (disclosed in the Social indicators section of the present chapter). (18) To account for 100% of Alcatel-Lucent employees, extrapolation procedures were applied. Sites with direct input responsibility account for 87% of the total average annual real estate building area and 80% of the total average annual Alcatel-Lucent headcount. (19) To account for 100% of Alcatel-Lucent employees, extrapolation procedures were applied as follows: Š Water consumption: Sites with direct input responsibility account for 63% of our employees. Š Hazardous waste production: Sites with direct input responsibility account for 71% of our employees. Š Non-hazardous waste production: Sites with direct input responsibility account for 67% of our employees. Š Waste electrical and electronic equipment production: Sites with direct input responsibility account for 79% of our employees. 96 Additional Information 2015 Alcatel Lucent

99 SUSTAINABILITY Sustainability data Direct energy consumption by primary energy source Total direct energy consumption Amount Units tco2e MWh By non-renewable primary energy sources Facility operations: Coal gas 77 MWh Facility operations: Distillate fuel oil (#1, 2, 4 and diesel) 811,627 l 2,196 8,071 Facility operations: Natural Gas 179,553 MWh 32, ,553 Facility operations: Propane 30,361 l Facility mobile sources: Diesel 470,166 l 1,280 4,676 Facility mobile sources: Gasoline 544,957 l 1,275 4,898 Facility mobile sources: Propane 50,278 l TOTAL non-renewable primary energy sources 37, ,801 By renewable primary source GRAND TOTAL 37, ,801 Indirect energy consumption by primary source Total indirect energy consumption Total MWh Renewable MWh Non-renewable MWh Purchased Electricity 796, , ,393 Purchased Hot Water/Steam 26,464 6,131 20,333 TOTAL 822, , ,725 Alcatel Lucent Additional Information

100 4 SUSTAINABILITY Sustainability data Social indicators Global headcount The tables below show the breakdown by business segment, geographic area, age and gender of our employees for 2013 to The figures take into account all employees who worked for fully consolidated companies (including long-term absences/notice period) as well as companies in which we own 50% or more of the equity. The numbers below were restated for 2013 and 2014 due to the sale of our Enterprise activities on September 30, Enterprise headcount was 2,795 in 2013 and 463 in With the convergence of our HR information systems, data on all social indicators were collected and consolidated at the corporate level. The only exception is health and safety data, which were issued from our sustainability reporting tool. The 2015 health and safety survey covered 68 countries Perimeter 1. Headcount Excluding Enterprise, including non-operational headcount (long term absences/notice period) Headcount total, recruitments and reduction Total headcount as of December 31 59,516 52,673 50, % Number of recruits 2,860 6,599 4, % Headcount increase due to the full consolidation of previously non-fully consolidated companies % Headcount increase due to acquisitions and insourcing 2, % Headcount reduction (15,759) (13,479) (7,140) 100% Headcount reduction due to businesses transferred or sold (7,913) (4,614) 0 100% Headcount reduction due to outsourcing and transfers (118) (2 195) (833) 100% Headcount reduction due to redundancies (3,542) (2,242) (2,845) 100% Headcount reduction due to normal departures (retirements, end of temporary work contracts, resignations, deaths) (4,186) (4,428) (3,462) 100% Breakdown of employees by business segment Data are restated for the disposal of our Enterprise activities Core 24,128 23,367 23, % Access 33,156 28,048 25, % Enterprise & LGS % Other (PNA included) 1,548 1,258 1, % Total group 59,516 52,673 50, % Breakdown of employees by geographic area Restated for the disposal of our Enterprise activities France 7,613 7,098 6, % Other Western Europe 9,940 8,300 7, % Rest of Europe 2,772 2,703 2, % Asia-Pacific 19,306 16,967 16, % North America 14,820 13,128 12, % Rest of world 5,065 4,477 4, % Total group 59,516 52,673 50, % 98 Additional Information 2015 Alcatel Lucent

101 SUSTAINABILITY Sustainability data PERIMETER Breakdown of employees by age Restated for the disposal of our Enterprise activities Europe, Middle East and Africa Below % 6.9% 6.8% 100% % 66.4% 64.3% 100% Above % 26.7% 28.8% 100% Americas Below % 4.9% 5.2% 100% % 53.3% 50.3% 100% Above 50 40% 41.8% 44.5% 100% Asia-Pacific Below % 18.9% 18.3% 100% % 76.8% 77.2% 100% Above % 4.3% 4.5% 100% Total group Below % 10.3% 10.3% 100% % 66.1% 64.7% 100% Above % 23.6% 25.0% 100% Breakdown of employees by gender Restated for the disposal of our Enterprise activities Europe, Middle East and Africa Female 19% 19% 19% 100% Male 81% 81% 81% 100% Americas Female 23% 23% 23% 100% Male 77% 77% 77% 100% Asia-Pacific Female 23% 31% 31% 100% Male 77% 69% 69% 100% Total group Female 21% 24% 24% 100% Male 79% 76% 76% 100% Alcatel Lucent Additional Information

102 4 SUSTAINABILITY Sustainability data Perimeter 2. Diversity Percentage of women/headcount 21% 24% 24% 100% Percentage of men/headcount 79% 76% 76% 100% Percentage of women (Leadership Pipeline) 23% 22% 23% 100% Number of disabled employees France (1) 3. Training Training budget (as a percentage of payroll) 1.00% 1.00% 1.03% 100% Average hours of training provided per internal learner (i.e. employees and contractors) % Total hours of training per employee NA % Percentage of training time via e-learning technologies 70% 73% 74.3% 100% 4. Mobility Number of expatriates worldwide % Expatriates by host region (Europe) % Expatriates by host region (North America) % Expatriates by host region (South America) % Expatriates by host region (Middle East, Africa and India) % Expatriates by host region (Asia-Pacific) % 5. Health and safety Number of days of absence due to work-related accidents (including occupational diseases) per employee % (2) Frequency rate for work-related accidents (including occupational diseases) (number of accidents per year, per one million hours worked) % (1) For Alcatel-Lucent International in France. (2) Based on country legislations. Additional notes In 2015, the number of days absence due to work-related accidents (including occupational diseases) per employee by region was 0.04 in Asia-Pacific, 0.05 in Europe, the Middle East and Africa, and 0.05 in the Americas. Š In 2015, the distribution of frequency rate for work-related accidents (including occupational diseases) for total employee headcount by region was 0.43 in Asia-Pacific, 1.59 in Europe, the Middle East and Africa, and 0.54 in the Americas. Š The workforce considered for work-related accidents (including occupational diseases such as work-related stress) are employees, students, trainees and apprentices. The numbers of days of absence due to work-related accidents (including occupational diseases) per employee are not all calculated with the same methodology because of specificities or local regulatory frameworks. Adjustments have been made by the consolidating entity for countries reporting in calendar days instead of working days to ensure homogeneity of the disclosed data. 100 Additional Information 2015 Alcatel Lucent

103 SUSTAINABILITY Article 225 of France s Grenelle II Law (July 10, 2010) 4.10 Article 225 of France s Grenelle II Law (July 10, 2010) (ARTICLE R OF THE CODE DE COMMERCE) Grenelle II requires France-based companies to include information in their annual report on the environmental, social and societal impacts of their business activities, and on their commitments to sustainable development. It also requires an independent third party to verify that information. The data presented here summarize the social, environmental and societal aspects of Alcatel-Lucent s business activities in accordance with French decree No of April 24, 2012, which requires companies to report on the social and environmental impacts of their businesses. (That decree implements article 225 of law No of July 12, 2010, known as Grenelle II, which requires companies to publish social, environmental and governance information in the annual report of their Board of Governors or Management Board pursuant to law No of May 15, 2001 relating to France s so-called NRE (New Economic Regulations Act) and article 12 of law No of 22 March 2012 relating to the simplification and easing of legal and administrative procedures, which modified article L of the French Commercial Code.) Grenelle II correspondence table AREA TOPIC REQUIRED INFORMATION REFERENCE Environment Overall environmental policy Company organization to take into account environmental issues (including policy, assessment approach or certification) Environment, health and safety (EHS) management Environment Overall environmental policy Employee awareness training and communication activities on environmental protection Overall environmental policy / Employee eco-awareness Environment Overall environmental policy Allocation of resources to prevent environmental risks and pollution Environmental risks Environment Overall environmental policy Amount of provisions and guarantees to address environmental risks, provided such information is not likely to cause serious harm to society in an ongoing dispute Environmental risks / Provisions and guarantees for environmental risks Environment Pollution and waste management Prevention, reduction or compensation measures for air emissions or water and soil discharges that seriously affect the environment Environmental risks / Provisions and guarantees for environmental risks Developing networks with sustainable use of resources / Pollution and waste management Environment Pollution and waste management Actions taken to support prevention, recycling and waste disposal Developing networks with sustainable use of resources / Pollution and waste management Environmental indicators Environment Pollution and waste management Inclusion of noise pollution and any other form of pollution specific to the activity in question Developing networks with sustainable use of resources / Pollution and waste management Environment Sustainable use of resources Water consumption and water supply based on local conditions Reducing our carbon footprint and the environmental impact of our operations / Water consumption Environmental indicators Environment Sustainable use of resources Consumption of raw materials and measures taken to improve the efficiency of their use Developing networks with sustainable use of resources / Measures to improve efficiency of raw materials use Developing networks with sustainable use of resources / Product materials content Alcatel Lucent Additional Information

104 4 SUSTAINABILITY Article 225 of France s Grenelle II Law (July 10, 2010) AREA TOPIC REQUIRED INFORMATION REFERENCE Environment Sustainable use of resources Energy consumption, measures taken to improve energy efficiency and renewable energy use Developing networks with sustainable use of resources / Product energy efficiency Reducing our carbon footprint and the environmental impact of our operations / Energy consumption Environmental indicators Environment Sustainable use of resources Soil use Environment Climate change Greenhouse gas emissions Environment Climate change Adaptation to the impact of climate change Reducing our carbon footprint and the environmental impact of our operations / Biodiversity protection Reducing our carbon footprint and the environmental impact of our operations / Tracking and reporting on carbon emissions Environmental indicators Overall environmental policy Green innovation Environment Biodiversity protection Measures taken to protect or develop biodiversity Reducing our carbon footprint and the environmental impact of our operations / Biodiversity protection Social Employment Total number and breakdown of employees by gender, age and geography Social indicators Social Employment Hirings and dismissals Social indicators Social Employment Compensation and evolution Work organization and management / Compensation Social Work organization Work time organization Work organization and management Social Work organization Absenteeism Employee health and safety / Absenteeism Social indicators Social Social relationships Organization of social dialogue, including procedures for consultation and negotiation with staff Social relationships / Union discussions Social Social relationships Review of collective agreements Social relationships / Review of collective agreements Social Health and safety Health and safety work conditions Employee health and safety Social Health and safety Review of agreements signed with trade unions or staff representatives on workplace health and safety Social relationships / Review of workplace health and safety agreements Social Health and safety Occupational accidents (including frequency and severity rates) and occupational diseases Employee health and safety / Occupational accidents Social indicators Social Training Training policies Social Training Total number of hours trained Work organization and management / Training Work organization and management / Training Social indicators Social Equal opportunity Measures in favor of equality between women and men Diversity and equal opportunity Social Equal opportunity Measures for employment and integration of disabled people Diversity and equal opportunity Social Equal opportunity Policies against discrimination Diversity and equal opportunity 102 Additional Information 2015 Alcatel Lucent

105 SUSTAINABILITY Article 225 of France s Grenelle II Law (July 10, 2010) AREA TOPIC REQUIRED INFORMATION REFERENCE Social Promotion and enforcement of ILO core conventions Freedom of association and collective bargaining rights Promotion and enforcement of ILO core conventions Social Promotion and enforcement of ILO core conventions Measures toward the elimination of discriminatory treatment in employment and occupation Promotion and enforcement of ILO core conventions Social Promotion and enforcement of ILO core conventions Measures toward the elimination of forced or compulsory work Promotion and enforcement of ILO core conventions Responsible purchasing Social Promotion and enforcement of ILO core conventions Measures toward the effective abolition of child labor Promotion and enforcement of ILO core conventions Societal Territorial, economic and social impact of the company: On employment and regional development 4.7 Society and philanthropy Societal Territorial, economic and social impact of the company: On local population Impact on communities Societal Relationships with persons or organizations interested in the company s business, including: Dialogue conditions with those persons or organizations 4.3 Our engagement with stakeholders Societal Relationships with persons or organizations interested in the company s business, including: Actions of partnership or philanthropy Philanthropy Societal Subcontractors and suppliers Consideration of social and environmental issues in the company s procurement policy Responsible purchasing Societal Subcontractors and suppliers Importance of subcontracting and the social and environmental responsibility of suppliers and subcontractors Responsible purchasing Societal Fair practices Actions taken to prevent corruption Actions taken to prevent corruption Societal Fair practices Measures taken for consumer health and safety Developing networks with sustainable use of resources / Impacts of our products on health and safety Societal Human rights Actions taken to support human rights Telecoms Industry Dialogue on freedom of expression and privacy Promotion and enforcement of ILO core conventions Alcatel Lucent Additional Information

106 4 SUSTAINABILITY United Nations Global Compact 4.11 United Nations Global Compact A longstanding signatory to the United Nations Global Compact (UNGC), Alcatel-Lucent remained committed to integrating the UNGC s 10 principles into its activities in UNGC correspondence table PRINCIPLE # DESCRIPTION REFERENCE Human rights 1 To support and respect the protection of internationally proclaimed human rights Promotion and enforcement of ILO core conventions Telecoms Industry Dialogue on freedom of expression and privacy Human rights 2 Labor 3 Labor 4 To make sure that we are not complicit in human rights abuses. To uphold the freedom of association and the effective recognition of the right to collective bargaining. To support the elimination of all forms of forced and compulsory labor Promotion and enforcement of ILO core conventions Telecoms Industry Dialogue on freedom of expression and privacy Social relationships Promotion and enforcement of ILO core conventions Responsible purchasing Labor 5 To support the effective abolition of child labor Promotion and enforcement of ILO core conventions Responsible purchasing Labor 6 Environment 7 Environment 8 Environment 9 Anti-corruption 10 To support the elimination of discrimination in respect to employment and occupation. To support a precautionary approach to environmental challenges. To undertake initiatives to promote greater environmental responsibility. To encourage the development and diffusion of environmentally friendly technologies. To work against corruption in all its forms, including extortion and bribery Diversity and equal opportunity 4.5 Environment 4.5 Environment 4.5 Environment 4.4 Ethical Business Actions taken to prevent corruption Responsible purchasing 104 Additional Information 2015 Alcatel Lucent

107 SUSTAINABILITY Independent verification 4.12 Independent verification Alcatel-Lucent S.A. Year ended the 31 st December 2015 Independent verifier s report on consolidated social, environmental and societal information presented in the management report This is a free translation into English of the original report issued in the French language and it is provided solely for the convenience of English speaking users. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France. To the shareholders, In our quality as an independent verifier accredited by the COFRAC 1, under the number n , and as a member of the network of one of the statutory auditors of the company Alcatel-Lucent S.A., we present our report on the consolidated social, environmental and societal information established for the year ended on the 31 st December 2015, presented in chapter 9 of the 2015 annual report of the 20-F and chapter 4 of the F additional information, hereafter referred to as the CSR Information, pursuant to the provisions of the article L of the French Commercial Code (Code de commerce). Responsibility of the company It is the responsibility of the Managing Director to establish a management report including CSR Information referred to in the article R of the French Commercial Code (Code de commerce), in accordance with the protocols used by the company including protocols for Environment, Health and Safety (EHS) and Human Resources (HR) in their versions dated respectively on February 2016 and August 2009 (hereafter referred to as the Criteria ), available on request at the company s headquarters. Independence and quality control Our independence is defined by regulatory requirements, the Code of Ethics of our profession as well as the provisions in the article L of the French Commercial Code (Code de commerce). In addition, we have implemented a quality control system, including documented policies and procedures to ensure compliance with ethical standards, professional standards and applicable laws and regulations. Responsibility of the independent verifier It is our role, based on our work: Š to attest whether the required CSR Information is present in the management report or, in the case of its omission, that an appropriate explanation has been provided, in accordance with the third paragraph of R of the French Commercial Code (Code de commerce) (Attestation of presence of CSR Information); Š to express a limited assurance conclusion, that the CSR Information, overall, is fairly presented, in all material aspects, in accordance with the Criteria; Š To express, at the request of the company, a limited assurance conclusion that the information selected by the company and identified in chapter 9 of the 2015 annual report on form 20-F and chapter 4 of the F additional information, has been established, in all material aspects, in accordance with the Criteria. Our verification work was undertaken by a team of five people between October 2015 and February 2016 for an estimated duration of seventeen weeks. We conducted the work described below in accordance with the professional standards applicable in France and the Order of 13 May 2013 determining the conditions under which an independent third-party verifier conducts its mission, and in relation to the opinion of fairness and the reasonable assurance report, in accordance with the international standard ISAE Scope available at 2 ISAE 3000 Assurance engagements other than audits or reviews of historical information Alcatel Lucent Additional Information

108 4 SUSTAINABILITY Independent verification 1. Attestation of presence of CSR Information We obtained an understanding of the company s CSR issues, based on interviews with the heads of relevant departments, a presentation of the company s strategy on sustainable development based on the social and environmental consequences linked to the activities of the company and its societal commitments, as well as, where appropriate, resulting actions or programmes. We have compared the information presented in the management report with the list as provided for in the Article R of the French Commercial Code (Code de commerce). In the absence of certain consolidated information, we have verified that the explanations were provided in accordance with the provisions in Article R , paragraph 3, of the French Commercial Code (Code de commerce). Based on this work, we confirm the presence in the management report of the required CSR information. 2. Limited assurance on CSR Information Nature and scope of the work We undertook about twelve interviews with the people responsible for the preparation of the CSR Information in the different departments including Responsible purchasing, Human Resources, Foundation, EHS, Privacy and data protection, Global compliance, CTO & Bell Labs, Green Research, in charge of the data collection process and, if applicable, the people responsible for internal control processes and risk management, in order to: Š Assess the suitability of the Criteria for reporting, in relation to their relevance, completeness, reliability, neutrality, and understandability, taking into consideration, if relevant, industry standards; Š Verify the implementation of the process for the collection, compilation, processing and control for completeness and consistency of the CSR Information and identify the procedures for internal control and risk management related to the preparation of the CSR Information. We determined the nature and extent of our tests and inspections based on the nature and importance of the CSR Information, in relation to the characteristics of the Company, its social and environmental issues, its strategy in relation to sustainable development and industry best practices. For the CSR Information we considered the most important 3 : At the level of the consolidated entity, we consulted documentary sources and conducted interviews to corroborate the qualitative information (organisation, policies, actions, etc.), we implemented analytical procedures on the quantitative information and verified, on a test basis, the calculations and the compilation of the information, and also verified their coherence and consistency with the other information presented in the management report; At the level of the representative sample of entities we selected 4, based on their activity, their contribution to the consolidated indicators, their location and a risk analysis, we undertook interviews to verify the correct application of the procedures and undertook detailed tests on the basis of samples, consisting in verifying the calculations made and linking them with supporting documentation. The sample selected therefore represented on average 28% of the total workforce and 20% of the carbon footprint (scope 1 and scope 2). For the other consolidated CSR information, we assessed their consistency in relation to our knowledge of the company. Finally, we assessed the relevance of the explanations provided, if appropriate, in the partial or total absence of certain information. We consider that the sample methods and sizes of the samples that we considered by exercising our professional judgment allow us to express a limited assurance conclusion; an assurance of a higher level would have required more extensive verification work. Due to the necessary use of sampling techniques and other limitations inherent in the functioning of any information and internal control system, the risk of non-detection of a significant anomaly in the CSR Information cannot be entirely eliminated. 3 Environmental and societal information: sustainable use of resources and climate change (energy consumption, measures undertaken to improve energy efficiency and to promote the use of renewable energy, raw material consumption and measures undertaken to enhance resource efficiency) ;, relation with stakeholders (conditions for dialogue, partnership or sponsorship), importance of subcontracting and the consideration of environmental and social issues in purchasing policies and relations with suppliers and subcontractors, business ethics (actions undertaken to prevent bribery and corruption), actions undertaken to promote and guarantee Human Rights. Social information: employment (total headcount and breakdown, hiring and terminations), work accidents, notably their frequency and their severity, as well as occupational diseases, training policies, number of days of training, diversity and equality of treatment and opportunities (measures undertaken for gender equality), promotion and respect of the ILO core conventions. 4 Tokyo (Japan), Ning Quiao Rd (China), Villarceaux (France), Timisoara (Romania), Mountain View (USA), Ottawa (Canada) 106 Additional Information 2015 Alcatel Lucent

109 SUSTAINABILITY Independent verification Conclusion Based on our work, we have not identified any significant misstatement that causes us to believe that the CSR Information, taken as a whole, has not been fairly presented, in compliance with the Criteria. Paris-La Défense, April 4 th, 2016 French original signed by: Independent Verifier ERNST & YOUNG et Associés Partner, Sustainable Development Eric Mugnier Partner Bruno Perrin Alcatel Lucent Additional Information

110 Design and production: Photo credits: Peter ALLAN, Arnaud OLSZAK, istock

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