Safran

Interim / Quarterly Report • Aug 4, 2021

CONTENTS

DECLARATION BY THE PERSON RESPONSIBLE 3

2 RISK FACTORS 27

INTERIM 2021
ACTIVITY REPORT	4

1

	First-half 2021: revenue recovery in the second quarter and continued discipline on costs and cash. Full-year 2021
	outlook confirmed	4
	Key business highlights	5
	Foreword	6
	Reconciliation of the consolidated income statement with the adjusted income
	statement	7
1.1	First-half 2021 results	9
1.2	Business commentary	11
1.3	Interim 2021 consolidated income statement	14
1.4	Balance sheet and cash flow	15
1.5	Currency hedges	17
1.6	Full-year 2021 outlook confirmed for revenue and profitability, raised for free cash flow	17
1.7	Related-party transactions	17
1.8	Bonds convertible into new Safran shares and/or exchangeable for existing Safran shares	18

	INTERIM FINANCIAL
3	STATEMENTS	28
	Consolidated income statement	28
	Consolidated statement of comprehensive income	29
	Consolidated balance sheet	30
	Consolidated statement of changes in shareholders' equity	31
	Consolidated statement of cash flows	32
	Notes to the Group condensed interim consolidated financial statements	33

4 STATUTORY AUDITORS' REVIEW REPORT ON THE INTERIM FINANCIAL INFORMATION 67

5	CORPORATE GOVERNANCE
	Safran's Ordinary and Extraordinary Shareholders' Meeting of May 26, 2021	68
	Membership structure of the Board of Directors and its standing committees	69
	Share buyback program authorized by the Ordinary and Extraordinary Shareholders' Meeting of May 26, 2021	70

"The forecasts and forward-looking statements described in this document are based on the data, assumptions and estimates considered as reasonable by the Group as at the date of this document. These data, assumptions and estimates may evolve or change as a result of uncertainties related in particular to the economic, financial, competitive, tax or regulatory environment. The occurrence of one or more of the risks described in the Universal Registration Document may also have an impact on the business, financial position, results and prospects of the Group and thus affect its ability to achieve such forecasts and forward-looking statements. The Group therefore neither makes any commitment, nor provides any assurance as to the achievement of the forecasts and forward-looking statements described in this document."

safran-group.com

DECLARATION BY THE PERSON RESPONSIBLE

"I certify that, to the best of my knowledge, the condensed interim consolidated financial statements have been prepared in accordance with the applicable accounting standards, and give a true and fair view of the assets and liabilities, and of the financial position and results of the Company and all its consolidated subsidiaries, and that the accompanying interim activity report provides a true and fair view of the main events of the first six months of the year, their impact on the condensed interim consolidated financial statements and the significant transactions with related parties, and also describes the main risks and uncertainties for the next six months."

Paris, July 28, 2021 Chief Executive Officer,

Olivier Andriès

INTERIM 2021 ACTIVITY REPORT

1

FIRST-HALF 2021: REVENUE RECOVERY IN THE SECOND QUARTER AND CONTINUED DISCIPLINE ON COSTS AND CASH. FULL-YEAR 2021 OUTLOOK CONFIRMED

1. Air traffic data in first-half 2021

The recovery in traffic was mixed during the first half of 2021 and remained soft with a global upsurge in new Covid-19 variants during the first months of the year. The vaccine rollout across the world led to a traffic rebound through the second part of the half year, but at different paces across regions.

Narrowbody ASK(1) in first-half 2021

After starting the year at around 50% of their 2019 levels, narrowbody ASK reached a trough in February. From March onwards, narrowbody ASK have been improving. In June, narrowbody ASK were at 59.4% versus 2019.

2. Safran continues to adapt

To cope with the uncertainty in the pace of air traffic recovery, Safran is pursuing the efforts started in 2020:

• ◼ Continuing decrease in labor costs, consolidating savings achieved in 2020:
  • headcount decrease versus December 31, 2020: 2,250 (including temporary staff);
  • further short-time working in first-half 2021, but halved compared to last year: 7.9% on average worldwide and 10.4% on average in France in the first five months of the year, aligned with full-year 2021 assumptions.
• ◼ Continuous industrial footprint rationalization:
  • site closures announced at Aircraft Interiors (Bellingham and Ontario (US)) and Electrical & Power (Santa Rosa (US));
  • industrial plan optimization (Electrical & Power and Nacelles).

Most recent trends in narrowbody traffic

Since June, trends in traffic compared to 2019 have shown strong improvement in Europe and stability in North America after a steady increase since the end of February. In Asia excluding China, the deteriorating health situation resulted in decreasing traffic, with CFM engine cycles down by 71% compared to 2019. In China, weekly cycles of CFM engines were lower than 2019 in June, but regained their 2019 levels in mid-July.

Weekly CFM engine flight cycles

As of July 18, 2021, weekly cycles compared to the same week in 2019:

• ◼ CFM56 fleet cycles are down 35%, improving from a 46% lag at April 25, 2021;
• ◼ LEAP fleet cycles are up 101%, improving from 56% at April 25, 2021.
• ◼ Further very tight cost control in first-half 2021:
  • R&D expenses down 5% compared to first-half 2020 and flat compared to second-half 2020;
  • OPEX in first-half 2021 down 13% versus first-half 2020 and still 28% below the first-half 2019 level despite an increase compared to second-half 2020, notably due to lower short-time working;
  • CAPEX commitments kept under control, allowing a decrease in cash out compared to first-half 2020.

⁽¹⁾ Available Seat Kilometers.

1

KEY BUSINESS HIGHLIGHTS

1. Aerospace Propulsion

Narrowbody engine deliveries

At the end of June 2021, combined shipments of CFM56 and LEAP engines reached 448 units, compared with 534 in first-half 2020.

In first-half 2021, CFM International delivered:

• ◼ 399 LEAP engines compared with 450 engines in the year–ago period;
• ◼ 49 CFM56 engines (as planned) compared with 84 engines in first-half 2020.

CFM International LEAP-1A engines have been selected to power IndiGo's fleet of 310 new Airbus A320neo, A321neo and A321XLR aircraft. This agreement includes 620 new installed engines and associated spare engines, as well as a multi-year service agreement.

United Airlines announced that it will expand its Boeing 737 orders by purchasing an additional 200 737 MAX jets powered by CFM International LEAP-1B engines.

On June 14, 2021, GE Aviation and Safran announced a bold technology development program targeting more than 20% lower fuel consumption and CO² emissions compared to current LEAP engines, as well as ensuring 100% compatibility with alternative energy sources such as sustainable aviation fuels. The CFM RISE (Revolutionary Innovation for Sustainable Engines) program will demonstrate and mature a range of new, disruptive technologies for future engines that could enter service by the mid-2030s.

Safran and GE Aviation also signed an agreement extending their 50/50 partnership in CFM International to 2050, declaring their intent to lead the way for more sustainable aviation in line with the industry's commitment to halve CO² emissions by 2050.

Civil aftermarket(1)

First-half 2021 civil aftermarket revenue was down 25.5% in USD terms due to:

• ◼ lower spare parts sales for the latest generation of CFM56 engines, slightly down compared to second-half 2020 which benefited from year-end sales;
• ◼ decrease in high-thrust engine spare parts;
• ◼ slight decrease in service contracts activity.

In the second quarter, civil aftermarket revenue rebounded by 55% compared with second-quarter 2020 and by 15% compared with first-quarter 2021.

Helicopter turbines

Safran received FAA type certification for its Arrano 1A engine, installed in the Airbus H160 helicopter. The engine is now certified in both Europe and the United States.

2. Aircraft Equipment, Defense and Aerosystems

Safran has been chosen by Singapore Airlines (SIA) to provide wheels and carbon brakes for its entire fleet of Boeing 777-9 through a tailored brake landing service contract (31 aircraft are currently on order). Safran currently supports wheels and carbon brakes for 126 Airbus and Boeing aircraft at SIA and Scoot, the low-cost airline of the SIA Group, including A320, A350, 737-800 NG, 737-8 MAX and 787.

Safran signed a 12-year NacelleLife™ service contract with Corsair for the nacelles of its five Airbus A330neo. With this contract, the Group commits to providing repair services for the

3. Aircraft Interiors

Despite a low point which in all likelihood was reached for Aircraft Interiors revenue in first-half 2021, Safran is regaining customer interest in its products and achieved several commercial successes, in particular with:

◼ a German airline, to provide the crew rest areas (LDMCR – Lower Deck Mobile Crew Rest) and Skylounge Core business class seats for its future fleet of 16 A330neo aircraft;

nacelles and general servicing of the thrust reversers at the time of their programmed removals, with the support of its network of experts for on-site nacelle inspections and its Maintenance, Repair and Overhaul (MRO) centers.

Safran has launched Geonyx M, a new inertial unit for fast boats and amphibious vehicles. It complements the Geonyx land range as well as the Argonyx and Black-Onyx ranges intended respectively for first-rank surface vessels and submarines.

• ◼ a Middle Eastern airline, to provide new Vue business class seats for its Boeing 737 MAX;
• ◼ an Indian airline, to provide linefit Z200 economy class seats for 75 A320/A321.

⁽¹⁾ Civil aftermarket (expressed in USD): this non-accounting indicator (non-audited) comprises spare parts and MRO (Maintenance, Repair and Overhaul) revenue for all civil aircraft engines for Safran Aircraft Engines and its subsidiaries and reflects the Group's performance in the civil aircraft engines aftermarket.

FOREWORD

To reflect the Group's actual economic performance and enable it to be monitored and benchmarked against competitors, Safran prepares an adjusted income statement in addition to its consolidated financial statements.

Readers are reminded that Safran:

• ◼ is the result of the May 11, 2005 merger of Sagem and Snecma, accounted for in accordance with IFRS 3, "Business Combinations" in its consolidated financial statements;
• ◼ recognizes, as of July 1, 2005, all changes in the fair value of its foreign currency derivatives in "Financial income (loss)", in accordance with the provisions of IFRS 9 applicable to transactions not qualifying for hedge accounting (see Note 2.f of the 2020 Universal Registration Document).

Accordingly, Safran's consolidated income statement has been adjusted for the impact of:

• ◼ purchase price allocations with respect to business combinations. Since 2005, this restatement concerns the amortization charged against intangible assets relating to aircraft programs remeasured at the time of the Sagem–Snecma merger. With effect from the first–half 2010 interim financial statements, the Group decided to restate:
  • the impact of purchase price allocations for business combinations, particularly amortization and depreciation

charged against intangible assets and property, plant and equipment recognized or remeasured at the time of the transaction and amortized or depreciated over extended periods due to the length of the Group's business cycles, and the impact of remeasuring inventories, as well as

• gains on remeasuring any previously held equity interests in the event of step acquisitions or asset contributions to joint ventures;
• ◼ the mark-to-market of foreign currency derivatives, in order to better reflect the economic substance of the Group's overall foreign currency risk hedging strategy:
  • revenue net of purchases denominated in foreign currencies is measured using the effective hedged rate, i.e., including the costs of the hedging strategy,
  • all mark-to-market changes on instruments hedging future cash flows are neutralized.

The resulting changes in deferred tax have also been adjusted.

RECONCILIATION OF THE CONSOLIDATED INCOME STATEMENT WITH THE ADJUSTED INCOME STATEMENT

The impact of these adjustments on the first-half 2021 income statement items is as follows:

		Currencyhedges Business combinations
				Amortization of intangible
	First-half2021		Deferred	assets from	PPA impacts –
	consolidated	Remeasurement	hedging	Sagem-Snecma	otherbusiness	First-half2021
(in € millions)	data	of revenue(1)	gain/loss(2)	merger(3)	combinations(4)	adjusteddata
Revenue	6,769	107	-	-	-	6,876
Other operating income and expenses	(6,454)	6	(2)	20	162	(6,268)
Share in profit from joint ventures	36	-	-	-	15	51
Recurring operating income	351	113	(2)	20	177	659
Other non-recurring operating income and expenses	(195)	-	-	-	-	(195)
Profit from operations	156	113	(2)	20	177	464
Cost of net debt	(51)	-	-	-	-	(51)
Foreign exchange gain/loss	860	(113)	(775)	-	-	(28)
Other financial income and expense	(5)	-	-	-	-	(5)
Financial income (loss)	804	(113)	(775)	-	-	(84)
Income tax benefit (expense)	(273)	-	221	(6)	(42)	(100)
Profit (loss) for the period	687	-	(556)	14	135	280
Profit for the period attributable to non-controlling interests	(13)	-	2	-	-	(11)
PROFIT (LOSS) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	674	-	(554)	14	135	269

(1) Remeasurement of foreign-currency denominated revenue net of purchases (by currency) at the hedged rate (including premiums on unwound options) through the reclassification of changes in the fair value of instruments hedging cash flows recognized in profit or loss for the period.

(2) Changes in the fair value of instruments hedging future cash flows that will be recognized in profit or loss in future periods (a negative €775 million excluding tax), and the impact of taking into account hedges when measuring provisions for losses on completion (a negative €2 million at June 30, 2021).

(3) Cancellation of amortization/impairment of intangible assets relating to the remeasurement of aircraft programs resulting from the application of IFRS 3 to the Sagem-Snecma merger.

(4) Cancellation of the impact of remeasuring assets at the time of the Zodiac Aerospace acquisition for €145 million excluding deferred tax and cancellation of amortization/impairment of assets identified during other business combinations.

Readers are reminded that the condensed interim consolidated financial statements are subject to review by the Group's Statutory Auditors. The condensed interim consolidated financial statements include the revenue and operating profit indicators set out in the adjusted data in Note 5, "Segment information".

Adjusted financial data other than the data provided in Note 5, "Segment information" are subject to the verification procedures applicable to all of the information provided in the interim report.

INTERIM ²⁰²¹ ACTIVITY REPORT 1 Reconciliation of the consolidated income statement with the adjusted income statement

The impact of these adjustments in first-half 2020 was as follows:

		Currencyhedges Business combinations
				Amortization of intangible
	First-half2020		Deferred	assets from	PPA impacts –
	consolidated	Remeasurement	hedginggain/	Sagem-Snecma	otherbusiness	First-half2020
(in € millions)	data	of revenue(1)	loss(2)	merger(3)	combinations(4)	adjusteddata
Revenue	8,902	(135)	-	-	-	8,767
Other operating income and expenses	(8,072)	6	2	24	172	(7,868)
Share in profit from joint ventures	29	-	-	-	19	48
Recurring operating income	859	(129)	2	24	191	947
Other non-recurring operating income and expenses	(144)	-	-	-	-	(144)
Profit from operations	715	(129)	2	24	191	803
Cost of net debt	(20)	-	-	-	-	(20)
Foreign exchange gain/loss	(1,181)	129	1,001	-	-	(51)
Other financial income and expense	(46)	-	-	-	-	(46)
Financial income (loss)	(1,247)	129	1,001	-	-	(117)
Income tax benefit (expense)	207	-	(321)	(8)	(47)	(169)
Profit (loss) for the period	(325)	-	682	16	144	517
Profit for the period attributable to non-controlling interests	(15)	-	-	(1)	-	(16)
PROFIT (LOSS) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	(340)	-	682	15	144	501

(1) Remeasurement of foreign-currency denominated revenue net of purchases (by currency) at the hedged rate (including premiums on unwound options) through the reclassification of changes in the fair value of instruments hedging cash flows recognized in profit or loss for the period.

(2) Changes in the fair value of instruments hedging future cash flows that will be recognized in profit or loss in future periods (a positive €1,001 million excluding tax), and the impact of taking into account hedges when measuring provisions for losses on completion (a positive €2 million at June 30, 2020).

(3) Cancellation of amortization/impairment of intangible assets relating to the remeasurement of aircraft programs resulting from the application of IFRS 3 to the Sagem-Snecma merger.

(4) Cancellation of the impact of remeasuring assets at the time of the Zodiac Aerospace acquisition for €155 million excluding deferred tax and cancellation of amortization/impairment of assets identified during other business combinations.

Readers are reminded that the condensed interim consolidated financial statements are subject to review by the Group's Statutory Auditors. The condensed interim consolidated financial statements include the revenue and operating profit indicators set out in the adjusted data in Note 5, "Segment information".

Adjusted financial data other than the data provided in Note 5, "Segment information" are subject to the verification procedures applicable to all of the information provided in the interim report.

1.1 FIRST-HALF 2021 RESULTS

All figures concerning the first-half income statement and commented in sections 1.1 and 1.2 represent adjusted data, except when noted otherwise. Comments on the interim consolidated income statement are provided in section 1.3 of this document.

Adjusted interim income statement

	First-half2020	First-half2021
(in € millions)	Adjusteddata	Adjusteddata
Revenue	8,767	6,876
Other income	109	166
Income from operations	8,876	7,042
Change in inventories of finished goods and work-in-progress	(39)	34
Capitalized production	152	155
Raw materials and consumables used	(4,670)	(3,645)
Personnel costs	(2,760)	(2,494)
Taxes	(203)	(151)
Depreciation, amortization and increase in provisions, net of use	(442)	(477)
Asset impairment	(85)	30
Other operating income and expenses	70	114
Share in profit from joint ventures	48	51
Recurring operating income	947	659
Other non-recurring operating income and expenses	(144)	(195)
Profit from operations	803	464
Cost of net debt	(20)	(51)
Foreign exchange gain (loss)	(51)	(28)
Other financial income and expense	(46)	(5)
Financial income (loss)	(117)	(84)
Profit before tax	686	380
Income tax expense	(169)	(100)
PROFIT FOR THE PERIOD	517	280
Attributable to:
◼ owners of the parent	501	269
◼ non-controlling interests	16	11
Earnings per share attributable to owners of the parent (in €)
Basic earnings per share	1.18	0.63
Diluted earnings per share	1.14	0.61

Adjusted revenue

First-half 2021 revenue amounted to €6,876 million, a decrease of 21.6%, or €1,891 million, compared to the year-ago period. Changes in scope had a negative net impact of €4 million. The net impact of currency variations was a negative €366 million, reflecting a negative translation effect on non-euro revenues, notably USD.

The average EUR/USD spot rate was 1.21 to the euro in first–half 2021, compared to 1.10 in the year-ago period. The Group's hedge rate was USD 1.16 to the euro in first-half 2021, flat compared to first-half 2020.

On an organic basis, revenue decreased by 17.3%, reflecting a 34.6% drop in first-quarter 2021 and 10.0% growth in second–quarter 2021.

Second-quarter 2021 revenue improved by 6.0% on an organic basis compared to first-quarter 2021, driven by all divisions.

Segmentbreakdownofadjustedrevenue (in € millions)	First-half2020	First-half2021	% change	% change inscope	% change currency	% change organic
Aerospace Propulsion	4,047	3,249	-19.7%	-	-4.0%	-15.7%
Aircraft Equipment, Defense and Aerosystems	3,638	2,972	-18.3%	-	-4.4%	-13.9%
Aircraft Interiors	1,072	646	-39.7%	-0.3%	-4.2%	-35.2%
Holding company and other	10	9	-	-	-	-
TOTAL GROUP	8,767	6,876	-21.6%	N/A	-4.3%	-17.3%

Adjusted recurring operating income

First-half 2021 recurring operating income(1) reached €659 million, down 30.4% compared to first-half 2020. It includes negative scope changes of €4 million as well as a negative currency impact of €7 million.

On organic basis, recurring operating income decreased by 29.3% due to lower volumes and despite savings from the adaptation plan.

One-off items, which amounted to a negative €195 million, are related to impairment for several programs (€180 million) and to restructuring costs (€31 million).

Group recurring operating income margin stood at 9.6% of revenue, above the second-half 2020 underlying margin of 8.2%.

Adjusted profit from operations

One-off items
(in € millions)	First-half2020	First-half2021
Adjusted recurring operating income	947	659
% of revenue	10.8%	9.6%
Total one-off items	(144)*	(195)
Capital gain (loss) on asset disposals	-	19
Impairment reversal (charge)	(66)	(180)
Other infrequent and material non-operating items	(78)	(34)
ADJUSTED PROFIT FROM OPERATIONS	803	464
% of revenue	9.2%	6.7%

* One-off items, which amounted to a negative €144 million, are related to restructuring costs (€77 million) and impairment for two programs.

Adjusted net income – Group share

First-half 2021 adjusted net income – Group share was €269 million (basic EPS of €0.63 and diluted EPS of €0.61) compared with €501 million in first-half 2020 (basic EPS of €1.18 and diluted EPS of €1.14).

It includes:

• ◼ a net adjusted financial loss of €84 million, including foreign exchange losses of €28 million and cost of debt of €51 million;
• ◼ an adjusted tax expense of €100 million (26.2% apparent tax rate).

The reconciliation between the first-half 2021 consolidated income statement and the adjusted income statement is provided and commented on page 7 of this report.

⁽¹⁾ Operating income before capital gains or losses on disposals/impact of changes of control, impairment charges, transaction and integration costs and other items.

1.2 BUSINESS COMMENTARY

First-half 2021 key figures

Segment breakdown of adjusted revenue

Segmentbreakdownofadjustedrevenue				% changein	% change	% change
(in € millions)		First-half2020 First-half2021	% change	scope	currency	organic
Aerospace Propulsion	4,047	3,249	-19.7%	-	-4.0%	-15.7%
Aircraft Equipment, Defense and Aerosystems	3,638	2,972	-18.3%	-	-4.4%	-13.9%
Aircraft Interiors	1,072	646	-39.7%	-0.3%	-4.2%	-35.2%
Holding company and other	10	9	-	-	-	-
TOTAL GROUP	8,767	6,876	-21.6%	N/A	-4.3%	-17.3%

Segment breakdown of adjusted recurring operating income

Segmentbreakdownof recurringoperatingincome (in € millions)	First-half2020	First-half2021	% change
Aerospace Propulsion	699	504	-27.9%
% of revenue	17.3%	15.5%
Aircraft Equipment, Defense and Aerosystems	343	270	-21.3%
% of revenue	9.4.%	9.1%
Aircraft Interiors	(101)	(110)	-8.9%
% of revenue	-9.4%	-17.0%
Holding company and other	6	(5)	-
TOTAL GROUP	947	659	-30.4%
% of revenue	10.8%	9.6%

2021 adjusted revenue by quarter

2021revenuebyquarter
(in € millions)	First-quarter2021	Second-quarter2021	First-half2021
Aerospace Propulsion	1,561	1,688	3,249
Aircraft Equipment, Defense and Aerosystems	1,464	1,508	2,972
Aircraft Interiors	313	333	646
Holding company and other	4	5	9
TOTAL GROUP	3,342	3,534	6,876

Segment operations review

Aerospace Propulsion

First-half 2021 revenue was €3,249 million, down 19.7% compared to €4,047 million in 2020. On an organic basis, revenue decreased by 15.7% compared to first-half 2020. Second-quarter 2021 revenue showed an 8.5% organic improvement compared to first-quarter 2021.

OE revenue dropped by 15.6% (or 11.1% organically) compared with first-half 2020, due to lower narrowbody engine deliveries (LEAP and CFM56). Installed engine deliveries decreased compared to first-half 2020 and spare engines remained flat compared to the year-ago period. High-thrust engine volumes were down by 30% during first-half 2021 compared to first-half 2020. As planned, M88 engine deliveries were up and amounted to 31 units in first-half 2021 compared with 19 in first-half 2020, notably thanks to export contracts. Helicopter turbine OE sales faced a slight headwind during the first-half of the year.

Services revenue decreased by 22.2% (in euros, or 18.5% organically) and represented 60.1% of sales. Civil aftermarket revenue decreased during the first half of 2021 by 25.5% (in USD). This drop was mainly due to lower spare parts sales for the latest generation of CFM56 engines and for widebody platforms.

Military services also faced a headwind compared to the year–ago period due to a high comparison basis created by an export contract in first-half 2020. Helicopter turbine support activities (Per Hour contracts as well as Time & Material) contributed positively during the period.

Recurring operating income was €504 million, a decrease of 27.9% compared with €699 million in first-half 2020. Recurring operating margin dropped from 17.3% to 15.5%, close to the end-2020 margin. The decrease in profitability was driven by a lower level of sales, despite the effect of the measures implemented under the adaptation plan and an exceptional positive impact from repayable advances.

Aircraft Equipment, Defense and Aerosystems

First-half 2021 revenue was €2,972 million, down 18.3% compared with €3,638 million in the year-ago period. On an organic basis, revenue was down 13.9% compared to first–half 2020. Second-quarter 2021 revenue slightly improved (up 3.0% organically) compared to first-quarter 2021.

OE revenue decreased by 20.1% (or 15.6% organically) in first–half 2021, mainly driven by wiring and power distribution activities, landing gears for Boeing 787 and A350 and nacelles for A330neo. Deliveries of nacelles for LEAP-1A powered A320neo increased to 264 units in first-half 2021 (248 units in first-half 2020). Aerosystems (fluid, evacuation, oxygen) and avionics activities negatively impacted the division's revenue, partially offset by an increase in Fadec activities and in fuel control systems. Defense activities (notably sighting, guidance systems and optronics) decreased slightly during first-half 2021.

The decline in services of 14.5% (or 10.3% organically) in first–half 2021 was driven by carbon brakes, landing gear MRO activities, nacelles support activities and, to a lesser extent, Aerosystems. Defense services activities increased during the first half of the year.

Recurring operating income was €270 million, a decrease of 21.3% compared to €343 million in first-half 2020. Recurring operating margin was 9.1% versus 9.4% in first-half 2020. The decrease in profitability during first-half 2021 was driven by lower sales, despite the positive impact of the measures implemented under the adaptation plan and a lower R&D impact on P&L.

Aircraft Interiors

First-half 2021 revenue was €646 million, down 39.7% compared to €1,072 million in first-half 2020. On an organic basis, revenue decreased by 35.2%. Second-quarter 2021 revenue was up 8.0% on an organic basis compared to first–quarter 2021.

OE revenue dropped by 37.6% (or 32.1% organically) in first–half 2021. Seats was impacted by a strong decrease on business seats programs and Cabin activities by lower volumes for galleys and lavatories (A320 and A350 programs), floor–to-floor activity (Boeing 787), catering and inserts.

Services revenue decreased by 44.8% (or 42.3% organically) in first-half 2021, mainly due to the Seats aftermarket as well as Cabin spare sales and MRO activities.

The recurring operating loss was €110 million, a decrease of €9 million compared to the €101 million loss reported in first–half 2020. Cabin profitability strongly decreased due to the drop in volumes both for OE and services. Despite a negative contribution, Seats improved its performance compared to first-half 2020 thanks to the positive impacts of the restructuring plan started in 2020 and extended in 2021.

Holding company and other

The "Holding company and other" reporting segment includes costs of general management as well as transverse services provided for the Group and its subsidiaries, including central finance, tax and foreign currency management, Group legal, communication and human resources. In addition, the holding company invoices subsidiaries for shared services, including administrative service centers (payroll, recruitment, IT, transaction accounting), a centralized training organization and Safran's R&T center.

Research & Development

Total R&D expenses, including R&D sold to customers, reached €640 million, compared with €597 million in first–half 2020. This increase of €43 million, notably due to an increase in works carried out with public funding, will ensure that Safran continues to foster the environmental priorities of its Research & Technology (R&T) and Innovation roadmap in order to contribute to the decarbonization of aviation.

R&D expenses before research tax credit were €426 million, compared with €447 million for first-half 2020, a decrease of €21 million. Given the back-end weighting of the Group's activity and profitability, self-funded R&D expenses were carefully managed and decreased by 5% compared with first–half 2020.

Gross capitalized R&D was €133 million compared with €124 million for first-half 2020.

Amortization and depreciation of R&D was €110 million compared with €124 million for first-half 2020.

The impact on recurring operating income of expensed R&D was €321 million compared with €373 million in the year-ago period.

1.3 INTERIM 2021 CONSOLIDATED INCOME STATEMENT

(in € millions)	First-half2020	First-half2021
Revenue	8,902	6,769
Other recurring operating income and expenses	(8,072)	(6,454)
Share in profit from joint ventures	29	36
Recurring operating income	859	351
Other non-recurring operating income and expenses	(144)	(195)
Profit from operations	715	156
Financial income (loss)	(1,247)	804
Profit (loss) before tax	(532)	960
Income tax benefit (expense)	207	(273)
Profit (loss) from continuing operations	(325)	687
Profit from discontinued operations and disposal gain	-	-
Profit for the period attributable to non-controlling interests	(15)	(13)
PROFIT (LOSS) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	(340)	674

Consolidated revenue

For first-half 2021, revenue was €6,769 million, compared to €8,902 million in the same period a year ago.

The difference between adjusted revenue and consolidated revenue is due to the exclusion of foreign currency derivatives from the adjusted figures. Neutralizing the impact of foreign currency hedging decreased first-half consolidated revenue by €107 million in 2021 and increased consolidated revenue by €135 million in 2020. The year-on-year change in the impact of foreign currency hedging on revenue results from movements in average exchange rates with regard to

Consolidated recurring operating income

Recurring operating income came in at €351 million for first–half 2021, compared to €859 million for first-half 2020. The difference between recurring operating income and adjusted recurring operating income, which came in at €659 million, results in particular from:

• ◼ amortization charged against intangible assets measured when allocating the purchase price for the May 2005 Sagem–Snecma business combination, representing €20 million for first-half 2021 (versus €24 million for first–half 2020);
• ◼ amortization charged against intangible assets measured when allocating the purchase price for other business combinations, representing €177 million for first-half 2021

Consolidated profit from operations

Profit from operations came in at €156 million for first-half 2021, compared to €715 million for first-half 2020.

Profit from operations includes recurring operating income of €351 million (versus €859 million for first-half 2020) and a non-recurring expense of €195 million (versus an expense of €144 million for first-half 2020).

the effective hedged rates for the period on the portion of foreign-currency denominated flows hedged by the Group. For example, the hedged EUR/USD rate for first-half 2021 was 1.16 against an average rate of 1.21, which explains why netting out the effect of foreign currency hedging results in a consolidated revenue figure that is lower than adjusted revenue.

Year-on-year changes in revenue by operating segment are analyzed above (see sections 1.1 and 1.2).

(versus €191 million for first-half 2020), and including the impact of remeasuring assets at fair value as part of the provisional allocation of the Zodiac Aerospace purchase price for €145 million;

◼ a negative €113 million impact resulting from foreign currency transactions (compared to a positive impact of €129 million for first-half 2020), including the remeasurement of foreign–currency denominated revenue (a negative €107 million impact) and of "Other recurring operating income and expenses" (a negative €6 million impact).

Changes in recurring operating income, excluding the impact of adjusting items, are analyzed above (see sections 1.1 and 1.2).

Changes in profit from operations in adjusted data as well as the non-recurring items are analyzed above (see section 1.1).

1.4 BALANCE SHEET AND CASH FLOW

Consolidated balance sheet

Assets

(in € millions)	Note	Dec.31,2020	June30,2021
Goodwill	11	5,060	5,086
Intangible assets	12	8,676	8,580
Property, plant and equipment	13	4,055	3,972
Right-of-use assets	14	623	609
Non-current financial assets	15	431	659
Investments in equity-accounted companies	16	2,126	2,049
Non-current derivatives (positive fair value)	23	52	39
Deferred tax assets		316	177
Other non-current financial assets		4	10
Non-current assets		21,343	21,181
Current financial assets	15	126	130
Current derivatives (positive fair value)	23	694	1,335
Inventories and work-in-progress		5,190	5,270
Contracts costs		486	524
Trade and other receivables		5,769	5,281
Contracts assets		1,695	1,768
Tax assets		481	567
Cash and cash equivalents	17	3,747	3,927
Current assets		18,188	18,802
TOTAL ASSETS		39,531	39,983

Equity and liabilities

(in € millions)	Note	Dec.31,2020	June30,2021
Share capital	18	85	85
Consolidated reserves and retained earnings	18	11,912	12,279
Profit for the period		352	674
Equity attributable to owners of the parent		12,349	13,038
Non-controlling interests		401	413
Equity		12,750	13,451
Provisions	19	1,942	1,922
Borrowings subject to specific conditions	20	426	328
Non-current interest-bearing financial liabilities	21	4,082	5,035
Non-current derivatives (negative fair value)	23	18	20
Deferred tax liabilities		1,285	1,360
Other non-current financial liabilities	22	2	109
Non-current liabilities		7,755	8,774
Provisions	19	905	869
Current interest-bearing financial liabilities	21	2,509	1,497
Trade and other payables		4,353	4,501
Contracts liabilities		9,838	9,594
Tax liabilities		118	88
Current derivatives (negative fair value)	23	1,244	1,153
Other current financial liabilities	22	59	56
Current liabilities		19,026	17,758
TOTAL EQUITY AND LIABILITIES		39,531	39,983

Cash flow highlights

(in € millions)	First-half2020	Full-year2020	First-half2021
Recurring operating income	947	1,686	659
One-off items	(144)	(466)	(195)
Depreciation, amortization, provisions (excluding financial)	613	1,256	610
EBITDA	1,416	2,476	1,074
Income tax and non-cash items	(262)	(602)	(341)
Cash flow from operations	1,154	1,874	733
Changes in working capital	168	(8)	297
Capex (property, plant and equipment)	(273)	(449)	(183)
Capex (intangible assets)	(21)	(57)	(10)
Capitalization of R&D	(127)	(287)	(136)
Free cash flow	901	1,073	701
Dividends paid	(3)	(4)	(188)
Divestments/acquisitions and other	134	253	(287)
NET CHANGE IN CASH AND CASH EQUIVALENTS	1,032	1,322	226
Net cash/(Net debt) at beginning of period	(4,114)	(4,114)	(2,792)
Net cash/(Net debt) at end of period	(3,082)	(2,792)	(2,566)

Cash flow and net debt

Operations generated €701 million of free cash flow(1) . Free cash flow generation was driven by cash from operations of €733 million, an improvement of €297 million in working capital and lower investments (at €329 million, down 22% versus first-half 2020). The change in working capital was essentially driven by a strong decrease in receivables and a final payment received in first-half 2021 for some LEAP-1B engines delivered in 2019. This positive impact was partially offset by lower prepayments. Inventories were stable in first–half 2021.

Net debt was €2,566 million at June 30, 2021, compared to net debt of €2,792 million at December 31, 2020. This decrease was primarily due to positive free cash flow generation.

Financing

At end-June, Safran's cash and cash equivalents stood at €3,927 million, versus €3,747 million at end-December 2020.

During the first half of the year, Safran continued to diversify and optimize its debt maturity profile with several new transactions:

◼ A new €500 million bank loan signed with the European Investment Bank on March 4, 2021 dedicated to Safran's research into innovative propulsion systems for the next generation of single-aisle commercial aircraft, a core part of Safran's roadmap towards carbon-free air transport.

It remains undrawn as at July 28, 2021 and is available for drawdown until September 2022, at Safran's discretion. It has a maturity up to ten years, at Safran's discretion, starting when funds are made available.

• ◼ First rated bond issue of €1.4 billion across 5- and 10-year maturities: a €700 million 5-year tranche bearing a 0.125% coupon and a €700 million 10-year tranche bearing a 0.750% coupon. The transaction was oversubscribed by 3.2x. The bonds are rated BBB+ and listed on Euronext Paris. Consequently, Safran cancelled on March 16, 2021 the remaining €1.4 billion of the €3 billion bridge facility set up
• ◼ Restructuring of the €700 million of bonds convertible into new shares and/or exchangeable for existing shares (OCÉANEs) due June 2023 into €730 million of OCÉANEs due April 1, 2028 via a repurchase and new issue offer launched on June 8, 2021.

in April 2020, which had remained undrawn since inception.

The hit ratio of the repurchase was 96.2% and the remaining 3.8% were redeemed early on July 19, 2021. The new issue has a conversion price of €180.89, with a negative YTM of 0.50%. This restructuring provides an additional 5-year maturity (from 2023 to 2028) with excellent financial conditions and replaces the original transaction with much more favorable terms for existing shareholders, including lower dilution.

⁽¹⁾ This non-accounting indicator (non-audited) is equal to cash flow from operating activities less change in working capital and acquisitions of property, plant and equipment and intangible assets.

The EUR/USD rate has stabilized since February, with a stronger USD lately. Safran continued to add hedges for 2024 and lower the risk of knock-out. The book is composed of options with knock-out barriers spanning from USD 1.2350 to USD 1.31, representing a risk on the size of the book and on targeted rates in case of a sudden increase in the euro.

2021 is hedged at a targeted hedge rate of USD 1.16 through knock-out options, for an estimated net exposure of USD 8.5 billion.

2022 is hedged at a targeted hedge rate from USD 1.14 to USD 1.16 through knock-out options, for an estimated net exposure of USD 9.0 billion.

2023 is hedged at a targeted hedge rate from USD 1.14 to USD 1.16 through knock-out options, for an estimated net exposure of USD 10.0 billion.

2024 is partially hedged through knock-out options; USD 5.9 billion hedged out of an estimated net exposure of USD 11.0 billion.

1.6 FULL-YEAR 2021 OUTLOOK CONFIRMED FOR REVENUE AND PROFITABILITY, RAISED FOR FREE CASH FLOW

Safran confirms its full-year 2021 outlook and the underlying assumptions in a context in which uncertainty over the timing of recovery continues to prevail. A delay in the pace of civil aftermarket recovery during the second half of the year constitutes an element of risk to the outlook.

As a reminder, Safran expects for full-year 2021 (compared with the full-year 2020 figures):

• ◼ adjusted revenue to decrease in the low single digits in organic terms. At an estimated spot rate of USD 1.22 to the euro, adjusted revenue to decrease in the high single digits;
• ◼ adjusted recurring operating margin to increase above 100 bps, at least a 300 bps improvement versus second–half 2020 (based on a hedge rate of USD 1.16 to the euro and adjusted revenue based on a spot rate of USD 1.22 to the euro), thanks to structural savings already achieved and additional measures to be implemented.

Safran now expects:

◼ free cash flow generation to increase above the 2020 level (previously "at least at the same level as in 2020"), including the Rafale export contract advance payments recently announced.

1.7 RELATED-PARTY TRANSACTIONS

Readers are invited to refer to section 3, Note 24 of this report and section 7.1.4 of the 2020 Universal Registration Document filed with the French financial markets authority (Autorité des marchés financiers – AMF) on March 31, 2021 under number D.21-0238.

1.8 BONDS CONVERTIBLE INTO NEW SAFRAN SHARES AND/OR EXCHANGEABLE FOR EXISTING SAFRAN SHARES

1.8.1 Adjustment to the conversion ratio of the bonds convertible into new Safran shares and/or exchangeable for existing Safran shares, due May 15, 2027 (2027 OCÉANEs)

As a reminder, on May 15, 2020 Safran issued 7,391,665 bonds (the "Initial Bonds") convertible into new shares and/or exchangeable for existing shares, due May 15, 2027. On October 12, 2020, Safran carried out a tap issue of 1,847,916 bonds (the "New Bonds") convertible into new shares and/or exchangeable for existing shares. The New Bonds carry the same terms and conditions as the Initial Bonds, with the exception of the issue price. They are fungible with the Initial Bonds, with which they form a single series (the "2027 OCÉANEs"). The background, terms and conditions and purpose of the 2027 OCÉANE bond issues are presented in section 7.2.3.2, section 3.1, Note 27 and section 3.3, Note 3.9 of the 2020 Universal Registration Document and section 3, Note 18.d, "Consolidated shareholders' equity" and Note 21, "Interest-bearing financial liabilities" of this interim report. The reports on the 2027 OCÉANEs are presented in section 8.4.2 of the 2020 Universal Registration Document.

At the Annual General Meeting of May 26, 2021, the shareholders approved a dividend payment of €0.43 per share. The ex-dividend date was May 31, 2021 and the record date was June 1, 2021. Consequently and in accordance with the terms and conditions of the 2027 OCÉANEs, the bond conversion ratio – previously 1 Safran share for 1 OCÉANE bond – was adjusted to 1.004 Safran shares for 1 OCÉANE bond, effective June 1, 2021. Readers are also invited to refer to section 3, Note 18.d, "Consolidated shareholders' equity" of this report.

At June 30, 2021, all of the 9,239,581 OCÉANEs issued were still outstanding.

1.8.2 New issue of bonds convertible into new Safran shares and/or exchangeable for existing Safran shares, due April 1, 2028 (2028 OCÉANEs)

Pursuant to the 21st and 22nd resolutions approved by the Extraordinary Shareholders' Meeting of May 26, 2021, on June 14, 2021 Safran issued bonds convertible into new shares and/or exchangeable for existing shares, due April 1, 2028 (the "2028 OCÉANEs"), in a nominal amount of €729,999,864.89, represented by 4,035,601 bonds with a par value of €180.89 each.

The bonds were issued through an offering exclusively for qualified investors within the meaning of Article 2(e) of the Prospectus Regulation in France, the European Economic Area (EEA) and outside the EEA (excluding, in particular, the United States, Canada, South Africa, Australia, Japan and any other jurisdiction where registration or approval would be required by the applicable laws and regulations).

The background and terms and conditions of the issue are presented in the reports in sections 1.8.4 and 1.8.5 below. Readers are also invited to refer to section 3, Note 18.d, "Consolidated shareholders' equity" and Note 21, "Interest–bearing financial liabilities" of this report.

At the issue date of the 2028 OCÉANEs, the number of new shares that would be issued by the Company in the event of the conversion of all the 2028 OCÉANEs, divided by the number of shares making up Safran's share capital, represented unrealized dilution of 0.94% based on a "conversion price" of €180.89. At the same date, the 2023 OCÉANEs repurchased or redeemed thanks to the 2028 OCÉANE bond issue (see section 1.8.3 below) represented unrealized dilution of 1.17% based on a "conversion price" of €139.96.

1.8.3 Repurchase and early redemption of the bonds convertible into new Safran shares and/or exchangeable for existing Safran shares, due May 15, 2027 (2023 OCÉANEs)

As announced on June 8, 2021, the proceeds from the 2028 OCÉANE bond issue were used to (i) repurchase (on June 15, 2021) the outstanding bonds convertible into new shares and/or exchangeable for existing shares issued in 2018 and maturing on June 21, 2023 (the "2023 OCÉANEs", see section 3.1, Note 27 of the 2020 Universal Registration Document) and (ii) redeem of the remainder of the series.

Concurrent with the issue of the 2028 OCÉANEs, Safran launched a reverse bookbuilding process to collect irrevocable orders from 2023 OCÉANE bondholders wishing to sell their 2023 OCÉANEs. The repurchase price for the 2023 OCÉANEs was set at €154.95 per bond. Following the settlement of the repurchase, the repurchased 2023 OCÉANEs were canceled and the total number of outstanding 2023 OCÉANEs represented less than 15% of the initial 2023 OCÉANE bond issue. On June 17, 2021, Safran announced that said outstanding 2023 OCÉANEs would be redeemed early at par (i.e., €140.10 per bond) on July 19, 2021 in accordance with their terms and conditions, for the purpose of their cancellation.

At June 30, 2021, 189,614 of the 2023 OCÉANEs were still outstanding, with a conversion rate of 1.001 shares for 1 bond.

They were all redeemed early on July 19, 2021, since no 2023 OCÉANE bondholders had chosen to exercise their conversion rights.

Readers are also invited to refer to section 3, Note 18.d, "Consolidated shareholders' equity" and Note 21, "Interest–bearing financial liabilities" of this report.

1.8.4 Board of Directors' report on the use of the authorizations granted to the Board of Directors in the 21st and 22nd resolutions adopted at the May 26, 2021 Annual General Meeting

Report by the Board of Directors on the terms and conditions of the issue of bonds convertible into new ordinary shares and/or exchangeable for existing ordinary shares, due April 1, 2028

(drawn up in accordance with Article R.225-116 of the French Commercial Code)

To the Shareholders,

In accordance with Articles L.225-129-5 and R.225-116 of the French Commercial Code (Code de commerce), we hereby report to you on the use of the authorizations granted to the Board of Directors of Safran (the "Company") in the twenty-first and twenty–second resolutions of the May 26, 2021 Ordinary and Extraordinary Shareholders' Meeting (the "Annual General Meeting") in order to carry out an offering governed by Article L.411-2, 1° of the French Monetary and Financial Code (Code monétaire et financier) (exclusively for qualified investors or a restricted group of investors), without pre-emptive subscription rights for existing shareholders, of bonds convertible into new ordinary shares and/or exchangeable for existing ordinary shares (OCÉANEs), due April 1, 2028 (the "Bonds"), with an overallotment option where applicable.

On this basis, and in accordance with the above-mentioned legal and regulatory provisions, the report below (i) describes the final terms and conditions of the Bond issue and (ii) explains the impact of those terms and conditions on the Company's shareholders and holders of securities carrying rights to Company shares.

1. Background

1.1. Annual General Meeting of May 26, 2021

In the twenty-first resolution of the Annual General Meeting, in accordance with the applicable laws and regulations, in particular Articles L.225-129-2, L.225-135, L.225-136, L.22-10-49, L.22-10-51 and L.22-10-52 of the French Commercial Code as well as Articles L.228-91 et seq. of said Code and Article L.411-2, 1° of the French Monetary and Financial Code, the shareholders granted the Board of Directors a twenty-six month authorization to increase the Company's share capital by issuing ordinary shares and/or securities carrying immediate or deferred rights to new or existing ordinary shares of the Company, through an offering governed by Article L.411-2, 1° of the French Monetary and Financial Code, without pre-emptive subscription rights for existing shareholders.

The shareholders set the following ceilings in the resolution: (i) the maximum nominal amount of any capital increases carried out pursuant to the authorization – either immediately and/or on the exercise of rights to shares of the Company – was set at €8 million (not including the nominal amount of any ordinary shares that may be issued to protect the rights of holders of securities carrying rights to Company shares), and (ii) the maximum principal amount of debt securities that may be issued pursuant to the authorization was set at €2 billion.

In the twenty-second resolution of the Annual General Meeting of May 26, 2021, the shareholders also granted the Board of Directors an authorization to increase the initial nominal amount of the issue, as decided pursuant to the twenty-first resolution, through the exercise of an overallotment option (the "Overallotment Option"), within the limits set out in the twenty-first resolution (i.e., the additional securities must be issued at the same price as for the original issue, within 30 days of the close of the original subscription period and may not represent more than 15% of the original issue amount, in accordance with the applicable legal and regulatory provisions).

1.2. Meeting of the Board of Directors of May 26, 2021

At its meeting of May 26, 2021, on the basis of the authorizations granted in the twenty-first and twenty-second resolutions of the Annual General Meeting of May 26, 2021 (no portion of which had been used), the Board of Directors unanimously decided:

• (i) (i) to authorize in principle:
  • a. the issue of OCÉANEs without pre-emptive subscription rights for existing shareholders, through an offering of financial securities to a restricted group of investors acting on their own account or to qualified investors, with a request for the admission to trading of the OCÉANEs on a regulated or organized market, subject to an overall ceiling of a maximum nominal amount of €800 million after the exercise, where applicable, of the Overallotment Option in full, for a maturity or maturities not exceeding eight years after the date of issue of the OCÉANE bonds (the "Issue"),
  • b. any increase in the Company's share capital that may be necessary due to the issue, on one or more occasions, of new Company shares as a result of holders of the OCÉANEs (the "Bondholders") exercising their Conversion Rights subject to a ceiling representing a maximum nominal amount of €999,736 after the exercise, where applicable, of the Overallotment Option in full, not including the nominal amount of any shares that may be issued, in accordance with the applicable laws and the terms and conditions of such securities, to protect the rights of holders of securities carrying rights to Company shares in the event of any subsequent corporate actions;
• (ii) to grant the Chief Executive Officer the necessary powers to carry out the Issue, determine the terms and conditions thereof and decide on the final characteristics and timing of the Issue, within the limitations of the authorization granted by the shareholders and the delegation granted by the Board of Directors;
• (iii) to authorize the Chief Executive Officer to delegate the implementation of the Issue to any person of his choosing.

1.3. Decision of the Chief Executive Officer of June 8, 2021

On June 8, 2021, using the delegation granted by the Board of Directors on May 26, 2021, the Chief Executive Officer decided to issue the Bonds in accordance with the terms and conditions described in section 2 below.

2. Termsand conditionsof theIssue

2.1. Characteristics of the Issue

Nominal amount of and gross proceeds from the Issue	€729,999,864.89
Net proceeds from the Issue	€750,256,402.68
Number of Bonds issued	4,035,601
Par value per Bond	€180.89, representing an issue premium of 45% over the reference price of ordinary shares of the Company, corresponding to the volume-weighted average price of the ordinary Company shares listed on Euronext Paris during the day of June 8, 2021.
Public offering	Carried out on June 8, 2021 in France, the European Economic Area (EEA) and outside the EEA (excluding, in particular, the United States, Canada, South Africa, Australia, Japan and any other jurisdiction where registration or approval would be required by the applicable laws and regulations), for qualified investors within the meaning of Article 2(e) of the Prospectus Regulation only (falling within the scope of Article L.411-2, 1° of the French Monetary and Financial Code).
Issue price of the Bonds	103.5% of par.
	On the Bond Issue Date (as defined below), the price of new ordinary shares of the Company issued at the Company's discretion on the exercise of the Conversion Right (as defined below) shall, based on the Conversion Ratio (as defined below) applicable at the Bond Issue Date, be equal to the par value per Bond defined above, in accordance with the provisions of Articles L.225-136 and R.22-10-32 of the French Commercial Code.
Issue and settlement-delivery date of the Bonds	June 14, 2021 (the "Bond Issue Date")
Listing of the Bonds	During the month following the Bond Issue Date, on Euronext Access™, under ISIN code FR0014003Z32.
Clearing	Euroclear France, Euroclear Bank S.A./N.V., Clearstream Banking S.A.
Global Coordinators –	Deutsche Bank AG and HSBC – joint global coordinators and joint bookrunners.
Bookrunners	Natixis and BofA Securities – joint bookrunners.
Securities services and centralizing and calculation agents	HSBC – settlement-delivery of the Bonds.
	CACEIS Corporate Trust – securities services and centralizing agent.
	Aether Financial Services – calculation agent.
Blackout period	Undertaking not to issue shares of the Company or securities carrying rights to Company shares for a period of 90 calendar days as from the Bond Issue Date, apart from certain standard exceptions or prior consent from the Global Coordinators.

1

2.2. Characteristics of the Bonds

Ranking of the Bonds	The Bonds constitute unsecured, direct, general, unconditional and unsubordinated debt obligations, ranking equally among themselves and, subject to mandatory legal exceptions, pari passu with all other present or future unsecured debts and guarantees of the Company.
Negative pledge	Only applies in the event that the Company or one of its principal subsidiaries grants a guarantee, indemnity or collateral to the holders of other bonds or other marketable instruments representing new or existing debt securities issued by the Company or one of its principal subsidiaries.
Nominal rate – Coupon	The Bonds do not carry any coupon.
Term of the Bonds	6 years, 9 months and 18 days
Maturity date of the Bonds	April 1, 2028 (the "Maturity Date of the Bonds")
Redemption at maturity	Redemption in full at par on the Maturity Date of the Bonds (or the following business day if this date is not a business day).
Early redemption, at the Company's discretion	(i) The Company may redeem all or some of the Bonds at any time before the Maturity Date of the Bonds, without any limitation on price or number, either by repurchasing them through on-market or off-market transactions, or through repurchase or exchange offers.
	(ii) The Company may redeem all of the outstanding Bonds at par, at any time from April 1, 2025 until the Maturity Date of the Bonds, subject to a minimum prior notice period of 30 calendar days (and a maximum notice period of 45 calendar days), if the arithmetic mean, calculated over a period of 20 consecutive trading days chosen by the Company out of the 40 consecutive trading days preceding the publication of the early redemption notice, of (a) the daily proceeds of the volume-weighted average daily price of Company shares traded on Euronext Paris, and (b) the Conversion Ratio (as defined below) applicable at each corresponding date, exceeds 130% of the par value of the Bonds.
	(iii) The Company may redeem all of the outstanding Bonds at par, at any time, subject to a minimum prior notice period of 30 calendar days, if the total number of Bonds still outstanding represents less than 20% of the number of Bonds originally issued.
	In the event of (ii) or (iii) above, the Bondholders retain the possibility to request the exercise of their Conversion Right (defined below) until the seventh business day (exclusive) preceding the early redemption date.
Obligatory early redemption of the Bonds	Possible at par, notably in the event of default by the Company.
Early redemption at the Bondholders' discretion	Possible at par, in the event of a change in control of the Company.

Rights attached to the
Bonds/Conversion Right

Nature of the Conversion Right

The Bonds carry a conversion right (the "Conversion Right"), whereby the Bondholders will be entitled to receive a number of new or existing ordinary shares (at the Company's discretion) equal to the Conversion Ratio (as defined below) applicable at the Exercise Date (as defined below), multiplied by the number of Bonds for which the Conversion Right has been exercised.

On the Bond Issue Date, the "Conversion Ratio" was 1 ordinary share to 1 Bond (subject to any subsequent adjustments carried out to protect the rights of Bondholders).

Exercise Period of the Conversion Right

The Bondholders may request to exercise their Conversion Right at any time from the Bond Issue Date (inclusive) until the seventh trading day (exclusive) preceding (i) the Maturity Date of the Bonds or, where applicable, (ii) the relevant early redemption date of the Bonds, it being specified that any Bonds for which the Bondholders have requested the exercise of their Conversion Right will not entitle their holders to any redemption at either the Maturity Date of the Bonds or, where applicable, at their early redemption date.

Any Bondholder who has not requested the exercise of their Conversion Right during the time period indicated above will be reimbursed in cash at the Maturity Date of the Bonds or, where applicable, at their early redemption date.

Terms of allocation of ordinary shares pursuant to the exercise of the Conversion Right

On exercise of their Conversion Right, each Bondholder will receive new and/or existing ordinary shares of the Company.

The total number of new and/or existing ordinary Company shares (the allocation of which will be decided by the Company) will be determined by the calculation agent and will be equal, for each Bondholder, to the Conversion Ratio applicable at the Exercise Date (as defined below) multiplied by the number of Bonds transferred to the centralizing agent and for which the Conversion Right has been exercised.

Suspension of the Conversion Right

In the event of a capital increase or the issue of new Company shares or securities carrying rights to Company shares, or any other financial transactions conferring pre‑emptive subscription rights or reserving a priority subscription period for the benefit of the Company's shareholders, the Company will be entitled to suspend the exercise of the Conversion Right for a period which may not exceed three months or any other period provided for in the applicable regulations.

However, in no circumstances may such suspension cause the Bondholders to lose their Conversion Right. Any decision by the Company to suspend the Bondholders' Conversion Right will be published in a notice in the French legal gazette (Bulletin des Annonces Légales Obligatoires – BALO). This notice must be published at least seven calendar days before the suspension of the Conversion Right becomes effective and must specify the dates on which the suspension period begins and ends. This information will also be published by the Company on its website (www.safran-group.com).

Conditions of exercise of the Conversion Right

To exercise their Conversion Right, Bondholders must make a request to the financial intermediary that holds their Bonds in a securities account. Any such request is irrevocable once received by the relevant financial intermediary. The centralizing agent will ensure the centralization of the request.

The date of the request will correspond to either (i) the business day on which both of the conditions described below are satisfied, if they are satisfied by 5:00 p.m. (Paris time), or (ii) the following business day, if said conditions are satisfied after 5:00 p.m. (Paris time) (the "Date of the Request"):

• ◼ the centralizing agent has received the exercise request transmitted by the financial intermediary that holds the Bonds in a securities account;
• ◼ the Bonds have been transferred to the centralizing agent by the relevant financial intermediary.

Any request for the exercise of a Conversion Right sent to the centralizing agent will be effective as of the first trading day following the Date of the Request (the "Exercise Date"). All requests for the exercise of the Conversion Right must be received by the centralizing agent (and the Bonds transferred to the centralizing agent) before the seventh trading day (exclusive) preceding the Maturity Date of the Bonds or their early redemption date.

All Bondholders with Bonds having the same Exercise Date will be treated equally and will each receive the same proportion of new and/or existing ordinary shares for their Bonds, subject to rounding.

The Bondholders will receive delivery of their new and/or existing ordinary shares no later than the seventh trading day following the Exercise Date.

Dividend rights and listing of the underlying shares	The new or existing ordinary shares issued or delivered on the exercise of the Conversion Right will carry dividend rights and entitle their holders to all the rights attached to the ordinary shares as from their delivery date, it being specified that in the event that a record date for a dividend (or interim dividend) occurs between the Exercise Date and the delivery date of the shares, the Bondholders will not be entitled to such dividend (or interim dividend) nor to any compensation therefor, subject to the right to an adjustment of the Conversion Ratio – a right to which the Bondholders are entitled until the delivery date of the ordinary shares (exclusive).
	Applications will be made for the admission to trading on Euronext Paris of the new ordinary shares issued upon the exercise of the Conversion Right. Accordingly, the new shares will immediately become fungible with the existing ordinary shares listed on Euronext Paris and will be tradable, as from the date on which they are admitted to trading, on the same listing line as said existing ordinary shares under the same ISIN code (FR0000073272).
	Any existing ordinary shares allocated upon the exercise of the Conversion Right will be immediately tradable on Euronext Paris.
Currency of the Issue	Euro

Currency of the Issue	Euro
Governing law	French law

3. Purposeof theIssue

The net proceeds from the issue of the Bonds were used to refinance the OCÉANEs issued by the Company in 2018 and maturing on June 21, 2023.

4. Impactof theissueof the Bondsand theexerciseof the Conversion Righton existing holdersof Companysharesand securities carrying rightsto Companyshares

4.1. Dilution in the event that new ordinary shares of the Company are issued on the exercise of the Conversion Right – Impact on attributable equity for shareholders and holders of securities carrying rights to shares

The table below, provided for information purposes only, shows the impact that the issue of new ordinary shares would have on attributable equity per share if the Conversion Right were exercised for all Bonds, assuming that the Company opted to grant only new ordinary shares.

This impact was calculated based on the following:

• (i) parent company equity as reported in the parent company financial statements for the year ended December 31, 2020, adjusted to reflect the capital increases since January 1, 2021 in an aggregate amount of €535.40 following the exercise of stock subscription options between said date and May 31, 2021, representing a total issue amount of €213,748.31 including the premium, and 426,309,373 undiluted shares at May 31, 2021, i.e., 427,238,616 shares making up the Company's share capital at that date, less 929,243 shares held in treasury at May 31, 2021;
• (ii) consolidated equity (attributable to owners of the parent) as reported in the consolidated financial statements for the six–month period ended June 30, 2021, adjusted to reflect the impact of the issue of the Bonds on June 14, 2021, i.e., a negative adjustment of €28.71 million (as shown in the before and after calculations in the table below), and 426,261,996 undiluted shares at June 30, 2021, i.e., 427,238,616 shares making up the Company's share capital at that date, less 976,620 shares held in treasury at June 30, 2021; and
• (iii) an assumption that the Conversion Ratio equals 1.

	Beforeissue	After issue
Parent company equity	€11,710,652,000	€12,466,197,000(1)
Number of shares – undiluted	426,309,373	430,344,974
Number of shares – diluted(3)(4)	435,585,912	439,621,513
Parent company equity per share – undiluted	€27.47	€28.97
Parent company equity per share – diluted(3)(4)	€29.22	€30.67
Consolidated equity (attributable to owners of the parent)		€13,009,546,000 €13,759,802,000(2)
Number of shares – undiluted	426,261,996	430,297,597
Number of shares – diluted(3)(4)	435,538,535	439,574,136
Attributable consolidated equity per share – undiluted	€30.52	€31.98
Attributable consolidated equity per share – diluted(3)(4)	€32.08	€33.49

(1) Assuming the Conversion Right is exercised at the time of the Issue (gross proceeds from the Issue: €755,545,000).

(2) Assuming the Conversion Right is exercised at the time of the Issue (net proceeds from the Issue: €750,256,000).

(3) Assuming that all 9,239,581 OCÉANEs issued by the Company in 2020 and maturing in 2027 are converted and that 9,276,539 new ordinary Company shares are issued based on a Conversion Ratio of 1.004 shares for 1 OCÉANE bond (gross proceeds from the OCÉANEs: €1,018,054,000; liability component at June 30, 2021: €963,582,000).

(4) Not including any of the 4,996,431 OCÉANEs issued by the Company in 2018 and maturing in 2023, of which 4,806,817 were repurchased by the Company on June 15, 2021 and 189,614 were redeemed early on July 19, 2021. Accordingly, none of these OCÉANE bonds are outstanding at the date of this report.

4.2. Dilution in the event that new ordinary shares of the Company are issued on the exercise of the Conversion Right – Impact on existing shareholders and holders of securities carrying rights to shares

The table below, provided for information purposes only, shows the impact of the issue of new ordinary shares on the ownership interest of a shareholder holding 1% of the Company's share capital prior to May 31, 2021.

This impact was calculated based on the following:

(i) 427,238,616 shares making up the Company's share capital at May 31, 2021; and

(ii) an assumption that the Conversion Ratio equals 1.

Shareholder's % ownershipinterest	Beforeissue	After issue
Undiluted basis	1.000%	0.991%
Diluted basis(1)(2)	0.979%	0.970%

(1) Assuming that all 9,239,581 OCÉANEs issued by the Company in 2020 and maturing in 2027 are converted and that 9,276,539 new ordinary Company shares are issued based on a Conversion Ratio of 1.004 shares for 1 OCÉANE bond.

(2) Not including any of the 4,996,431 OCÉANEs issued by the Company in 2018 and maturing in 2023, of which 4,806,817 were repurchased by the Company on June 15, 2021 and 189,614 were redeemed early on July 19, 2021. Accordingly, none of these OCÉANE bonds are outstanding at the date of this report.

5. Impactof theissueof the Bondsand theexerciseof the Conversion Righton Safran'sshare priceand marketcapitalization

The theoretical impact of the issue and conversion of the Bonds on Safran's share price and market capitalization is a positive 0.49% on an undiluted basis and a positive 0.25% on a diluted basis.

This impact was calculated based on the following:

• ◼ a price of €122.13 per Safran share, corresponding to the average of the opening Safran share prices over the 20 trading days preceding the date on which the Issue was launched;
• ◼ the issue of 4,035,601 Bonds with a par value of €180.89 per Bond, which could potentially be converted into an aggregate 4,035,601 ordinary Safran shares (at a ratio of 1 ordinary share for 1 Bond); and
• ◼ net issue proceeds of €750,256,402.68.

Based on the above, the following table shows the theoretical impact of the issue and conversion of the Bonds on Safran's share price and market capitalization:

Theoretical impactof theissueandconversionof the Bondson Safran's sharepriceand market capitalization
ISSUE OF THE BONDS
Number of Bonds issued	4,035,601
Conversion Ratio	1
Net proceeds from the issue of the Bonds	€750,256,402.68
Total number of ordinary Safran shares that could potentially be issued on conversion of the Bonds	4,035,601
SITUATION BEFORE THE ISSUE OF THE BONDS (UNDILUTED BASIS)
Number of Safran shares outstanding before the issue of the Bonds	427,238,616
Safran share price before the issue of the Bonds	€122.13
Safran's market capitalization before the issue of the Bonds	€52,178,652,172
SITUATION AFTER THE ISSUE AND CONVERSION OF THE BONDS (UNDILUTED BASIS)
Total number of Safran shares after the issue and conversion of the Bonds	431,274,217
Safran's theoretical market capitalization after the issue and conversion of the Bonds	€52,928,908,575
Theoretical value of one Safran share after the issue and conversion of the Bonds	€122.73
Theoretical impact of the issue and conversion of the Bonds	+0.49%
SITUATION AFTER THE ISSUE AND CONVERSION OF THE BONDS (DILUTED BASIS)(1)(2)
Total number of Safran shares after the issue and conversion of the Bonds	440,550,756
Safran's theoretical market capitalization after the issue and conversion of the Bonds	€53,939,508,404
Theoretical value of one Safran share after the issue and conversion of the Bonds	€122.44
Theoretical impact of the issue and conversion of the Bonds	+0.25%

(1) Assuming that all 9,239,581 OCÉANEs issued by the Company in 2020 and maturing in 2027 are converted and that 9,276,539 new ordinary Company shares are issued based on a Conversion Ratio of 1.004 shares for 1 OCÉANE bond (net proceeds from the OCÉANEs: €1,010,599,829.51).

(2) Not including any of the 4,996,431 OCÉANEs issued by the Company in 2018 and maturing in 2023, of which 4,806,817 were repurchased by the Company on June 15, 2021 and 189,614 were redeemed early on July 19, 2021. Accordingly, none of these OCÉANE bonds are outstanding at the date of this report.

French original signed in Paris, on July 28, 2021 For the Board of Directors Ross McInnes (Chairman)

1

1.8.5 Statutory Auditors' additional report on the issue, without pre-emptive subscription rights, of bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs")

Board of Directors' meeting of July 28, 2021

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. 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 capacity as Statutory Auditors of your Company and in accordance with Article R.225-116 of the French Commercial Code (Code de commerce), and further to our report of March 26, 2021, we hereby report to you on the issue, with or without pre‑emptive subscription rights for existing shareholders, of ordinary shares or securities carrying rights to shares, as authorized by the Extraordinary Shareholders' Meeting of May 26, 2021.

The Extraordinary Shareholders' Meeting of May 26, 2021 authorized the Board of Directors – or any duly empowered representative – to issue ordinary shares of the Company or securities carrying rights to new and/or existing ordinary shares of the Company, within the scope of an offering governed by Article L.411-2, 1° of the French Monetary and Financial Code (Code monétaire et financier), without pre-emptive subscription rights for existing shareholders, for a period of twenty-six months from the date of the Meeting (twenty-first resolution). The Meeting set (i) the maximum principal amount of debt securities that may be issued at €2 billion, and (ii) the maximum nominal amount of the capital increases that could be carried out at €8 million. The maximum nominal amount of any capital increases carried out pursuant to the twenty-first resolution could not represent more than 20% of the Company's share capital per year. In the twenty-second resolution, the shareholders also granted the Board of Directors an authorization to increase the initial nominal amount of any issue as decided pursuant to the twenty-first resolution, through the exercise of an overallotment option that may not represent more than 15% of the original issue amount.

At its meeting of May 26, 2021, using the authorization granted by the Extraordinary Shareholders' Meeting, the Board of Directors (i) decided on the principle of the issue, on one or more occasions, without pre-emptive subscription rights, of bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs") (the "Bonds") in a maximum nominal amount of €800 million, through an offering of financial securities to a restricted group of investors acting on their own account or to qualified investors, and (ii) set the maximum nominal amount of the capital increases that could be carried out as a result of the issue at €999,736. Also at its meeting of May 26, 2021, the Board of Directors decided to grant the Chief Executive Officer the necessary powers to issue the Bonds, determine the terms and conditions thereof and decide on the final characteristics.

Using said delegation, on June 8, 2021 the Chief Executive Officer decided to carry out a Bond issue under the following terms and conditions:

• ◼ the nominal amount of the issue was €729,999,864.89, represented by 4,035,601 Bonds;
• ◼ the par value of the Bonds was €180.89, issued at 103.5% of par;
• ◼ on the Bond issue date (June 14, 2021), the price of new ordinary shares of the Company issued at the Company's discretion on the exercise of the conversion right shall, based on the conversion ratio (the "Conversion Ratio") as defined in the Board of Directors' additional report and applicable at the Bond issue date, be equal to the par value of the Bonds as described above. The Bonds carry a conversion right (the "Conversion Right"), whereby the bondholders will be entitled to receive a number of new or existing ordinary shares (at the Company's discretion) based on the Conversion Ratio applicable at the Exercise Date. At the Bond issue date, the Conversion Ratio was 1 share for 1 Bond.

At its meeting of July 28, 2021, the Board of Directors placed on record the issue of 4,035,601 Bonds with a par value of €180.89, representing a total issue amount of €750,256,402.68. The maximum amount of the share capital increase that may be carried out as a result of the issue may not exceed €999,736.

It is the responsibility of the Board of Directors to prepare an additional report in accordance with Articles R.225-115 et seq. and R.22-10-31 of the French Commercial Code. Our role is to report on the fairness of the financial information taken from the financial statements, on the proposed cancellation of pre-emptive subscription rights and on certain other disclosures relating to the share issue contained in this report.

We performed the procedures that we deemed necessary in accordance with the professional guidance issued by the French national auditing body (Compagnie nationale des commissaires aux comptes) for this type of engagement. These procedures mainly consisted in verifying:

• ◼ the fairness of the financial information taken from the annual consolidated financial statements authorized for issue by the Board of Directors and audited by us in accordance with professional standards applicable in France;
• ◼ the fairness of the financial information taken from the interim consolidated financial statements prepared under the responsibility of the Board of Directors at June 30, 2021, using the same methods and based on the same presentation as the most recent consolidated financial statements. Our work on the interim consolidated financial statements consisted of making inquiries of the persons responsible for financial and accounting matters, verifying that they were prepared using the same accounting principles, measurement methods and presentation as those used for the preparation of the most recent consolidated financial statements, and applying analytical procedures;
• ◼ the compliance of the terms and conditions of the issue with the authorization granted by the Meeting;
• ◼ the information provided in the Board of Directors' additional report on the choice of constituent elements used to determine the issue price and on its final amount.

We have no matters to report as to:

• ◼ the fairness of the financial information taken from the interim consolidated financial statements and included in the Board of Directors' additional report;
• ◼ the compliance of the terms and conditions of the issue with the authorization granted by the Extraordinary Shareholders' Meeting of May 26, 2021 and with the information provided to the shareholders;
• ◼ the choice of constituent elements used to determine the issue price and its amount;
• ◼ the presentation of the impact of the issue on the situation of the holders of shares and securities carrying rights to shares, as expressed in relation to shareholders' equity, and on the Company's share price;
• ◼ the proposed cancellation of pre-emptive subscription rights, upon which you have voted.

Courbevoie and Paris-La Défense, July 28, 2021

The Statutory Auditors

Mazars Ernst & Young et Autres

Gaël Lamant Jérôme de Pastors Jean-Roch Varon Philippe Berteaux

There has been no significant change in the risk factors identified and presented in the 2020 Universal Registration Document. Readers are invited to refer to chapter 4 of the 2020 Universal Registration Document filed with the French financial markets authority (Autorité des marchés financiers – AMF) on March 31, 2021 under number D.21-0238.

INTERIM FINANCIAL STATEMENTS

3

The Board of Directors' meeting of July 28, 2021 adopted and authorized the publication of Safran's consolidated financial statements and adjusted income statement for the six-month period ended June 30, 2021.

CONSOLIDATED INCOME STATEMENT

(in € millions)	Note	First-half2020	First-half2021
Revenue	6	8,902	6,769
Other income	7	109	166
Income from operations		9,011	6,935
Change in inventories of finished goods and work-in-progress		(39)	34
Capitalized production		152	155
Raw materials and consumables used	7	(4,677)	(3,649)
Personnel costs	7	(2,759)	(2,496)
Taxes		(203)	(151)
Depreciation, amortization and increase in provisions, net of use	7	(639)	(659)
Asset impairment	7	(86)	31
Other recurring operating income and expenses	7	70	115
Share in profit from joint ventures	16	29	36
Recurring operating income		859	351
Other non-recurring operating income and expenses	7	(144)	(195)
Profit from operations		715	156
Cost of net debt		(20)	(51)
Foreign exchange gain (loss)		(1,181)	860
Other financial income and expense		(46)	(5)
Financial income (loss)	8	(1,247)	804
Profit (loss) before tax		(532)	960
Income tax benefit (expense)	9	207	(273)
PROFIT (LOSS) FOR THE PERIOD		(325)	687
Attributable to:
◼ owners of the parent		(340)	674
◼ non-controlling interests		15	13
Earnings per share attributable to owners of the parent (in €)	10
Basic earnings (loss) per share		(0.80)	1.58
Diluted earnings (loss) per share		(0.80)	1.53

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in € millions)	Note	First-half2020	First-half2021
Profit (loss) for the period		(325)	687
Other comprehensive income
Items to be reclassified to profit		(55)	200
Translation adjustments		(51)	187
Remeasurement of hedging instruments		(6)	(1)
Income tax related to components of other comprehensive income to be reclassified to profit		2	(1)
Share in other comprehensive income of equity-accounted companies to be reclassified to profit (net of tax)	16	-	15
Items not to be reclassified to profit		4	69
Actuarial gains and losses on post-employment benefits		11	91
Income tax related to components of other comprehensive income not to be reclassified to profit		(6)	(22)
Share in other comprehensive income (expense) of equity-accounted companies not to be reclassified to profit (net of tax)		(1)	-
Other comprehensive income (expense) for the period		(51)	269
TOTAL COMPREHENSIVE INCOME (EXPENSE) FOR THE PERIOD		(376)	956
Attributable to:
◼ owners of the parent		(392)	939
◼ non-controlling interests		16	17

In first-half 2021, other comprehensive income relating to translation adjustments includes:

• ◼ €187 million in translation gains (€46 million in translation losses in first-half 2020) arising in the period on foreign operations;
• ◼ zero translation adjustments (€5 million in translation losses in first-half 2020) arising in the period on long-term financing granted to foreign subsidiaries. This financing meets the criteria for classification as a net investment in a foreign operation, and is treated in accordance with the applicable provisions of IAS 21.

In first-half 2021, other comprehensive income resulting from the remeasurement of hedging instruments includes negative fair value adjustments totaling €1 million (€6 million in first–half 2020) relating to cash flow hedges of interest payments on senior unsecured notes (i) as of the end of first–quarter 2019 and (ii) as of July 2020. The outstanding balance of the ongoing cash flow hedging reserve is a negative €1 million (see the consolidated statement of changes in shareholders' equity).

Other comprehensive income relating to equity-accounted companies (net of tax) includes (see Note 16, "Investments in equity-accounted companies"):

• ◼ €18 million in foreign exchange gains arising in the period on foreign joint ventures (€2 million in foreign exchange gains in first-half 2020);
• ◼ a negative amount of €3 million relating to cash flow hedges of joint ventures (a negative amount of €2 million in first-half 2020).

In accordance with the amended IAS 19, changes in actuarial gains and losses are shown in "Other comprehensive income" and are not subsequently reclassified to profit.

The discount rates used to calculate post-employment benefit obligations are determined by reference to the yield on private investment-grade bonds (AA), using the Iboxx index. The main discount rate assumptions used to calculate post-employment benefit obligations at the dates shown were revised as follows:

	Dec.31,2019	June30,2020	Dec.31,2020	June30,2021
Eurozone	0.60%	0.90%	0.50%	0.90%
UK	1.95%	1.70%	1.45%	2.00%

The inflation rate assumption used to calculate obligations in the United Kingdom was as follows:

	Dec.31,2019	June30,2020	Dec.31,2020	June30,2021
UK inflation rate	2.90%	2.75%	2.80%	3.15%

CONSOLIDATED BALANCE SHEET

Assets

(in € millions)	Note	Dec.31,2020	June30,2021
Goodwill	11	5,060	5,086
Intangible assets	12	8,676	8,580
Property, plant and equipment	13	4,055	3,972
Right-of-use assets	14	623	609
Non-current financial assets	15	431	659
Investments in equity-accounted companies	16	2,126	2,049
Non-current derivatives (positive fair value)	23	52	39
Deferred tax assets		316	177
Other non-current financial assets		4	10
Non-current assets		21,343	21,181
Current financial assets	15	126	130
Current derivatives (positive fair value)	23	694	1,335
Inventories and work-in-progress		5,190	5,270
Contract costs		486	524
Trade and other receivables		5,769	5,281
Contract assets		1,695	1,768
Tax assets		481	567
Cash and cash equivalents	17	3,747	3,927
Current assets		18,188	18,802
TOTAL ASSETS		39,531	39,983

Equity and liabilities

(in € millions)	Note	Dec.31,2020	June30,2021
Share capital	18	85	85
Consolidated reserves and retained earnings	18	11,912	12,279
Profit for the period		352	674
Equity attributable to owners of the parent		12,349	13,038
Non-controlling interests		401	413
Total equity		12,750	13,451
Provisions	19	1,942	1,922
Borrowings subject to specific conditions	20	426	328
Non-current interest-bearing financial liabilities	21	4,082	5,035
Non-current derivatives (negative fair value)	23	18	20
Deferred tax liabilities		1,285	1,360
Other non-current financial liabilities	22	2	109
Non-current liabilities		7,755	8,774
Provisions	19	905	869
Current interest-bearing financial liabilities	21	2,509	1,497
Trade and other payables		4,353	4,501
Contract liabilities		9,838	9,594
Tax liabilities		118	88
Current derivatives (negative fair value)	23	1,244	1,153
Other current financial liabilities	22	59	56
Current liabilities		19,026	17,758
TOTAL EQUITY AND LIABILITIES		39,531	39,983

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Share	Additional paid-in	Treasury	Remeasurement ofhedging	Translation	Consolidated reservesand retained	Actuarialgains andlosses onpost employment	Profit (loss) forthe		Equity attributableto ownersofthe	Non controlling
(in € millions)	capital	capital	shares	instruments	adjustments	earnings	benefits	period	Other	parent	interests	Total
At January 1, 2020	85		4,688 (303)	-	405	5,371	(552)	2,447	230	12,371	377	12,748
Comprehensive income (expense) for the period	-	-	-	(6)	(51)	(2)	11	(340)	(4)(a)	(392)	16	(376)
Acquisitions/disposals of treasury shares(b)	-	-	267	-	-	(176)	-	-	53	144	-	144
Dividends	-	-	-	-	-	-	-	-	-	-	(3)	(3)
OCÉANE 2020-2027 bonds	-	-	-	-	-	24	-	-	-	24	-	24
Other movements, including appropriation of profit	-	-	-	-	-	2,447		- (2,447)	10	10	-	10
At June 30, 2020	85	4,688	(36)	(6)	354	7,664	(541)	(340)	289	12,157	390	12,547
Comprehensive income (expense) for the period	-	-	-	(7)	(512)	6	(30)	692	16(a)	165	13	178
Dividends	-	-	-	-	-	-	-	-	-	-	(1)	(1)
OCÉANE 2020-2027 bonds	-	-	-	-	-	15	-	-	-	15	-	15
Delivery of shares under employee shareholding plans: Safran Sharing 2020 and other	-	-	-	-	-	10	-	-	-	10	-	10
Other movements, including appropriation
of profit	-	-	-	-	-	-	-	-	2	2	(1)	1
At December 31, 2020	85	4,688	(36)	(13)	(158)	7,695	(571)	352	307	12,349	401	12,750
Comprehensive income (expense) for the period	-	-	-	(1)	202	(3)	89		674 (22)(a)	939	17	956
Acquisitions/disposals of treasury shares	-	-	(77)	-	-	-	-	-	-	(77)	-	(77)
Dividends	-	-	-	-	-	(183)	-	-	-	(183)	(5)	(188)
OCÉANE 2021-2028
bonds	-	-	-	-	-	29	-	-	-	29	-	29
Buyback of OCÉANE 2023 bonds(b)	-	-	-	-	-	(50)	-	-	-	(50)	-	(50)
Other movements, including appropriation of profit	-	-	-	-	-	352	-	(352)	31	31	-	31
AT JUNE 30, 2021	85	4,688	(113)	(14)	44	7,840	(482)	674	316	13,038	413	13,451

(a) See table below:

	Tax impactonactuarial	Tax impactonforeign
(in € millions)	gainsandlosses	exchangedifferences	Total
Comprehensive income (expense) for first-half 2020 (attributable to owners of the parent)	(6)	2	(4)
Comprehensive income (expense) for second-half 2020 (attributable to owners of the parent)	11	5	16
Comprehensive income (expense) for first-half 2021 (attributable to owners of the parent)	(21)	(1)	(22)

(b) Buyback of OCÉANE 2023 bonds representing an outflow of €71 million (comprising €42 million relating to the reversal of 96.21% of the equity component and a €29 million loss on the equity component) and a €21 million tax effect.

CONSOLIDATED STATEMENT OF CASH FLOWS

(in € millions)		Note	First-half2020	First-half2021
I. CASH FLOW FROM OPERATING ACTIVITIES
Profit attributable to owners of the parent			(340)	674
Depreciation, amortization, impairment and provisions(1)			833	698
Share in profit/loss from equity-accounted companies (net of dividends received)		16	5	114
Change in fair value of currency and interest rate derivatives(2)		23	957	(734)
Capital gains and losses on asset disposals			1	(22)
Profit attributable to non-controlling interests			15	13
Other(3)			(317)	(10)
Cash flow from operations, before change in working capital			1,154	733
Change in inventories and work-in-progress			(103)	(15)
Change in operating receivables and payables			3	577
Change in contract costs			(33)	(28)
Change in contract assets and liabilities			422	(324)
Change in other receivables and payables			(121)	87
Change in working capital			168	297
	TOTAL I		1,322	1,030
II. CASH FLOW USED IN INVESTING ACTIVITIES
Capitalization of R&D expenditure(4)		12	(127)	(136)
Payments for the purchase of intangible assets, net(5)			(21)	(10)
Payments for the purchase of property, plant and equipment, net(6)			(273)	(183)
Payments for the acquisition of investments or businesses, net			(13)	(10)
Proceeds arising from the sale of investments or businesses, net			1	74
Proceeds (payments) arising from the sale (acquisition) of investments			18	(210)
and loans, net(7)
Other movements			-	-
	TOTAL II		(415)	(475)
III. CASH FLOW FROM (USED IN) FINANCING ACTIVITIES
Change in share capital – owners of the parent			-	-
Change in share capital – non-controlling interests			-	-
Acquisitions and disposals of treasury shares		18.b	91	(77)
Repayment of borrowings and long-term debt(8)		21	(73)	(1,293)
Increase in borrowings(9)		21	1,373	2,151
Change in repayable advances		20	3	(8)
Change in short-term borrowings		21	(547)	(1,005)
Dividends and interim dividends paid to owners of the parent		18.e	-	(183)
Dividends paid to non-controlling interests			(3)	(5)
	TOTAL III		844	(420)
EFFECT OF CHANGES IN FOREIGN EXCHANGE RATES	TOTAL IV		(10)	45
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	I+II+III+IV		1,741	180
Cash and cash equivalents at beginning of period			2,632	3,747
Cash and cash equivalents at end of period		17	4,373	3,927
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			1,741	180

(1) Including in first-half 2021: depreciation and amortization for €677 million (€723 million in first-half 2020), impairment charges for €29 million (€136 million in first-half 2020) and provision reversals for €8 million (€26 million in first-half 2020).

(2) Including in first-half 2021: a negative €732 million arising on currency derivatives (a positive €940 million in first-half 2020) (see Note 23, "Management of market risks and derivatives").

(3) Including in first-half 2021: cancellation of deferred tax expense arising on changes in the fair value of currency derivatives for a positive €221 million (a negative €321 million in first-half 2020), cancellation of tax expense for €52 million (€114 million in first-half 2020), €110 million in taxes paid (€39 million in first-half 2020), €50 million in interest paid (€34 million in first-half 2020), and €7 million in interest received (€16 million in first-half 2020).

(4) Including in first-half 2021: capitalized interest of €3 million (€3 million in first-half 2020).

(5) Including in first-half 2021: €121 million in disbursements for acquisitions of intangible assets (€19 million in first-half 2020), €9 million in proceeds from disposals (zero in first-half 2020), changes in amounts payable on acquisitions of non-current assets representing a positive €108 million (a negative €2 million in first-half 2020), and changes in amounts receivable on disposals of non-current assets representing a negative €6 million (zero in first-half 2020).

(6) Including in first-half 2021: €193 million in disbursements for acquisitions of property, plant and equipment (€226 million in first–half 2020), changes in amounts payable on acquisitions of non-current assets representing a negative €7 million (a negative €52 million in first-half 2020), €17 million in proceeds from disposals (€5 million in first-half 2020), and zero changes in amounts receivable on disposals of non-current assets (zero in first-half 2020).

(7) Including €200 million in investments that do not qualify as cash and cash equivalents.

(8) Including in first-half 2021: an outflow of €745 million relating to the repurchase of 2023 OCÉANEs and of €500 million relating to the redemption of the June 28, 2017 bond issue.

(9) Including in first-half 2021: €756 million resulting from the issue of the 2028 OCÉANEs and €1,400 million relating to the March 16, 2021 bond issue.

NOTES TO THE GROUP CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

NOTE 1	Comments regarding the health crisis	34
NOTE 2	Accounting policies	35
NOTE 3	Main sources of estimates	36
NOTE 4	Scope of consolidation	38
NOTE 5	Segment information	38
NOTE 6	Revenue	40
NOTE 7	Breakdown of the other main components of profit from operations	41
NOTE 8	Financial income (loss)	43
NOTE 9	Income tax	43
NOTE 10	Earnings per share	44
NOTE 11	Goodwill	44
NOTE 12	Intangible assets	46
NOTE 13	Property, plant and equipment	47
NOTE 14	Leases	48
NOTE 15	Current and non-current financial assets	49

NOTE 16	Investments in equity-accounted companies	50
NOTE 17	Cash and cash equivalents	51
NOTE 18	Consolidated shareholders' equity	52
NOTE 19	Provisions	55
NOTE 20	Borrowings subject to specific conditions	55
NOTE 21	Interest-bearing financial liabilities	56
NOTE 22	Other current and non-current financial liabilities	59
NOTE 23	Management of market risks and derivatives	60
NOTE 24	Related parties	63
NOTE 25	Off-balance sheet commitments and contingent liabilities	64
NOTE 26	Disputes and litigation	66
NOTE 27	Subsequent events	66

Safran (2, boulevard du Général-Martial-Valin – 75724 Paris Cedex 15, France) is a société anonyme (joint-stock corporation) incorporated in France and permanently listed on Compartment A of the Euronext Paris Eurolist market.

The condensed interim consolidated financial statements reflect the accounting position of Safran SA and the subsidiaries it controls, directly or indirectly and jointly or exclusively, as well as entities over which it exercises significant influence (the "Group").

The condensed interim consolidated financial statements and accompanying notes are drawn up in euros and all amounts are rounded to the nearest million unless otherwise stated.

The Board of Directors' meeting of July 28, 2021 adopted and authorized for issue the 2021 condensed interim consolidated financial statements.

NOTE1 COMMENTS REGARDING THE HEALTH CRISIS

First-half 2021 confirmed the sluggish level of activity, which remains affected by the health crisis and was down on first–half 2020 and second-half 2020.

Countries are facing very different health situations and the vaccine rollout is progressing at different speeds around the world, with impacts on the air traffic conditions that underlie Safran's business.

In light of the uncertainty as to the recovery in the Group's business, cost-cutting plans have been put in place to continue the previous year's cost-reduction efforts. These plans include:

• ◼ ongoing furlough and short-time working arrangements in companies where business remains sluggish;
• ◼ site closures;
• ◼ optimization of production plans;
• ◼ voluntary early retirement plans;
• ◼ strict control of operating costs and capital expenditure;
• ◼ tight rein on investment commitments.

On February 25, 2021, Safran was rated for the first time by Standard & Poor's, which assigned the Company a rating of BBB+ with a stable outlook. This rating gives Safran enhanced access to debt capital markets when needed, notably through a broader investor base and tighter spreads.

At June 30, 2021, consolidated cash and cash equivalents amounted to €3,927 million.

Further efforts were undertaken during first-half 2021 to preserve the Group's liquidity, through three new operations:

• ◼ on March 4, 2021, the European Investment Bank (EIB) granted Safran a €500 million bank loan with a maturity of up to ten years as from when the funds are provided, between now and September 2022, at the date of the Group's choosing. This credit line has not yet been drawn down;
• ◼ on March 16, 2021, Safran issued bonds for €1.4 billion, comprising €700 million in five-year bonds and €700 million in ten-year bonds;
• ◼ on June 14, 2021, Safran issued bonds convertible into new shares and/or exchangeable for existing shares, maturing on April 1, 2028 ("2028 OCÉANEs"), for an issue price of €756 million. The proceeds from this issue were used to buy back 96.2% of the OCÉANE 2023 bond issue maturing on June 21, 2023.

For more information on the above operations, see Note 21, "Interest-bearing financial liabilities".

Following these refinancing operations, the bridge facility set up in April 2020 and undrawn at December 31, 2020 – representing a residual amount of €1.4 billion – was canceled in full on March 16, 2021.

Based on the above, the Group has sufficient liquidity to fund its operations going forward.

NOTE2 ACCOUNTING POLICIES

The consolidated financial statements of Safran and its subsidiaries have been prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and adopted by the European Union at the date the condensed interim consolidated financial statements were approved by the Board of Directors. They include standards approved by the IASB, namely IFRS, International Accounting Standards (IAS), and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or its predecessor, the Standing Interpretations Committee (SIC).

The condensed interim consolidated financial statements at June 30, 2021 have been prepared in accordance with IAS 34, "Interim Financial Reporting" and with all the standards and interpretations adopted by the European Union and applicable to accounting periods beginning on or after January 1, 2021.

In preparing these condensed interim consolidated financial statements at June 30, 2021, Safran applied the same accounting rules and methods as those applied in the preparation of its consolidated financial statements for the year ended December 31, 2020 (see section 3.1, Note 2 of the 2020 Universal Registration Document), except as regards the specific requirements of IAS 34 (use of projected annual rates in calculating the Group's income tax, adjusted for the main permanent differences) and the changes described below.

Changes in accounting policies

New IFRS standards, amendments and interpretations effective as of January 1, 2021

• ◼ Amendments to IFRS 4, "Insurance Contracts" Extension of the Temporary Exemption from Applying IFRS 9.
• ◼ Amendments to IFRS 9, "Financial Instruments" and IFRS 7, "Financial Instruments: Disclosures" – Interest Rate Benchmark Reform Phase 2.

During the period, the Group continued its analyses in view of the transition to the new benchmark rates. The adoption of the Phase 2 amendments had no impact on the consolidated financial statements, since there was no change in the benchmark rates used in the Group's contracts at June 30, 2021.

Interest rate derivatives designated as hedges of borrowings indexed to a benchmark rate are described in Note 23, "Management of market risks and derivatives".

The Group has noted the IFRIC decision of April 2021 regarding IAS 19, specifically concerning the attribution of benefits to periods of service. At June 30, 2021, analyses were underway to assess the possible consequences of the IFRIC decision at Group level.

The other standards, amendments and interpretations effective for reporting periods beginning on or after January 1, 2021 do not have a material impact on the Group's consolidated financial statements.

New published IFRS standards, amendments and interpretations early adopted by the Group as of January 1, 2021

None.

New published IFRS standards, amendments and interpretations not yet effective or not early adopted by the Group

• ◼ IFRS 17, "Insurance Contracts".
• ◼ Amendments to IAS 1, "Presentation of Financial Statements" – Classification of Liabilities as Current or Non–Current.
• ◼ Amendments to IAS 1, "Presentation of Financial Statements" and IFRS Practice Statement 2 – Disclosure of Accounting Policies.
• ◼ Amendments to IAS 28, "Investments in Associates and Joint Ventures" and IFRS 10, "Consolidated Financial Statements" – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.
• ◼ Annual Improvements to IFRSs published in May 2020 (2018-2020 cycle).
• ◼ Amendments to IAS 16, "Property, Plant and Equipment" Proceeds before Intended Use.
• ◼ Amendments to IFRS 3, "Business Combinations" Reference to the Conceptual Framework.
• ◼ Amendments to IAS 37, "Provisions, Contingent Liabilities and Contingent Assets" – Onerous Contracts – Cost of Fulfilling a Contract.
• ◼ Amendments to IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors" – Definition of Accounting Estimates.
• ◼ Amendments to IFRS 16, "Leases" Covid-19-Related Rent Concessions beyond June 30, 2021.
• ◼ Amendments to IAS 12, "Income Taxes" Deferred Tax related to Assets and Liabilities arising from a Single Transaction.

These new standards, amendments and interpretations have not yet been adopted by the European Union and cannot therefore be applied ahead of their effective date even where early adoption is permitted by the texts concerned.

NOTE3 MAIN SOURCES OFESTIMATES

The preparation of consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) described above requires management to make certain estimates and assumptions that affect the reported amounts of consolidated assets, liabilities, income and expenses.

The assumptions used vary from one business to the next, but are considered reasonable and realistic in all cases. The resulting estimates are based on the Group's past experience and factor in the economic conditions prevailing at the end of the reporting period and any information available as of the date of preparation of the financial statements, in particular of a contractual or commercial nature.

Estimates and underlying assumptions are reviewed on an ongoing basis, and take into account the impacts of the health crisis identified to date.

When unforeseen developments in events and circumstances occur, particularly as regards global economic trends and the Group's own business environment, actual results may differ from these estimates. In such cases, the assumptions and, where appropriate, the reported amounts of assets and liabilities concerned are adjusted accordingly.

The Group also tests its sensitivity to changes in the assumptions underlying its main estimates in order to analyze the impact of volatility and lack of visibility in the global economic environment and particularly in certain Group segments. These analyses are regularly reviewed by management.

The main accounting policies which require the use of estimates are described below.

a) Estimates relating to programs and contracts

The main material estimates used by the Group to prepare its financial statements relate to forecasts of future cash flows under programs and contracts (business plans). Forecast future total cash flows under programs and contracts represent management's best estimate of the rights and obligations expected to derive from the program or contract.

The assumptions applied and resulting estimates used for programs and contracts cover periods that are sometimes very long (up to several decades), and take into account the technological, commercial and contractual constraints as well as the impacts of the climate strategy of each such program and contract.

These estimates primarily draw on assumptions about the volumes, output and selling prices of products sold, associated production costs, exchange rates for foreign-currency denominated sales and purchases as well as normal risks and uncertainties in respect of forecast cost overruns and, for discounted future cash flows, the discount rate adopted for each program and contract.

The Group's volume assumptions are prepared internally for each market in which Group companies are present (e.g., commercial, business and military aviation; helicopters, etc.). For short-term estimates, these assumptions are based on available inputs (programs, orders, etc.), while external inputs (publications, airframer press releases, IATA announcements, market surveys, etc.) are used for estimates covering the medium to long term. The assumptions are regularly revised, particularly those used for short-term estimates, in order to reflect the latest developments in the Group's programs, and all assumptions used for medium- to long-term forecasts are validated by management at least once a year.

Cash flow forecasts, which may or may not be discounted, are used to determine the following:

• ◼ impairment of non-current assets: goodwill and assets allocated to programs (aircraft programs, development expenditures and property, plant and equipment used in production) are tested for impairment as described in section 3.1, Note 2.m of the 2020 Universal Registration Document. The recoverable amount of these assets is generally determined using cash flow forecasts;
• ◼ capitalization of development expenditures: the conditions for capitalizing development expenditures are set out in section 3.1, Note 2.j of the 2020 Universal Registration Document. Determining whether future economic benefits are expected to flow to the Group is instrumental in deciding whether project costs can be capitalized. This analysis is carried out based on future cash flow forecasts. The Group also uses estimates when determining the useful life of its projects;
• ◼ profit (loss) on completion of contracts accounted for on a percentage-of-completion basis: the Group accounts for contracts on a percentage-of-completion basis (cost-to-cost method). Under this method, revenue is recognized based on the percentage of work completed, calculated by reference to the costs incurred. This method requires an estimate of results on completion using future cash flow forecasts that take into account contractual indexes and commitments as well as other factors inherent to the contract based on historical and/or forecast data. This method also requires an estimate of the contract's stage of completion.

When the total costs that are necessary to cover the Group's risks and obligations under the contract are likely to exceed total contract revenue, the expected loss (i) is recognized within provisions for losses on completion or (ii) leads to the write-down of contract fulfillment costs (if any) and to the subsequent recognition of a provision for losses on completion for the remaining amount of the loss;

• ◼ timing of revenue recognition: the recognition of revenue under certain contracts is based on delivery volume assumptions. These assumptions therefore influence the timing of revenue recognition;
• ◼ variable consideration: the transaction price may be comprised of both a fixed amount and a variable amount. This variable amount may, in particular, depend on volume assumptions which therefore require the use of estimates;
• ◼ losses arising on delivery commitments: sales contracts (or combinations of contracts) may be onerous. For all sales contracts or combinations of contracts, the Group estimates the volume of goods to be delivered as well as spare parts and services directly related to the delivery commitment, which may be contractual or highly probable. Accordingly, the Group recognizes a provision for losses arising on delivery commitments when the combination of contracts is onerous and a loss is likely to be incurred. It uses estimates, notably as regards the volume of goods to be produced and delivered under the sales contracts or combinations of contracts, as well as the volume of directly-related spare parts and services, projected production costs and the expected economic benefits;
• ◼ repayable advances: the forecast repayment of advances received from public bodies is based on revenue from future sales of engines, equipment and spare parts, as appropriate. As a result, the forecasts are closely related to the business plans prepared by the operating divisions.

Any changes in estimates and assumptions underlying cash flow forecasts for programs and contracts could have a material impact on the Group's future earnings and/or the amounts reported in its balance sheet. Consequently, the sensitivity of key estimates and assumptions to such changes is systematically tested and the results of these tests reviewed by management on a regular basis.

b) Provisions

Provisions reflect management's best estimates using available information, past experience and, in some cases, estimates by independent experts.

When estimating provisions relating to the Group's contractual commitments on timeframes and technical specifications in connection with the development phase, the general stage of development of each of the Group's programs is taken into account, particularly as regards changes made to specifications during the development phase. Contractually defined liability limits are also taken into account.

Provisions for restructuring costs represent the best estimate of the costs at the end of the reporting period.

Contractual provisions relating to performance warranties given by the Group take into account factors such as the frequency and estimated cost of repairs. The value of these commitments may be based on a statistical assessment.

Provisions relating to financial guarantees given by the Group are based on the estimated value of the underlying assets, the probability that the customers concerned will default, and, where appropriate, the discount rate applied to cash flows.

The costs and penalties actually incurred or paid may differ significantly from these initial estimates when the obligations unwind, and this may have a material impact on the Group's future earnings.

At the date of this report, the Group has no information suggesting that these inputs are not appropriate taken as a whole.

c) Post-employment benefits

The Group uses statistical data and other forward-looking inputs to determine assets and liabilities relating to post-employment benefits. These inputs include actuarial assumptions such as the discount rate, salary increase rate, retirement age, and employee turnover and mortality. Actuarial calculations are performed by independent actuaries. At the date of preparation of the consolidated financial statements, the Group considers that the assumptions used to measure its commitments are appropriate and justified.

However, if circumstances or actuarial assumptions – especially the discount rate – prove significantly different from actual experience, the amount of post-employment liabilities shown in the balance sheet could change significantly, along with equity.

d) Trade receivables, contract assets and other receivables

The Group estimates any collection risks based on commercial information, prevailing economic trends, and information concerning the solvency of each customer, in order to determine any necessary write-downs on a case-by-case basis. These write-downs are in addition to any allowances recognized for expected losses, which are calculated on a collective basis for all customers except major customers deemed low risk and the government.

The specific nature of any receivables from government-backed entities is taken into account when determining bad debt risk for each receivable and therefore when estimating the amount of any impairment loss.

e) Allocation of the cost of business combinations

Business combinations are recorded using the acquisition (purchase) method. Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at fair value at the date control is acquired.

One of the most important areas in which estimates are used in accounting for a business combination concerns the calculation of fair value and the underlying assumptions applied. The fair value of certain items acquired in a business combination can be measured reliably, for example property, plant and equipment using market prices. However, the fair value of other items such as intangible assets or contingent liabilities may prove more difficult to establish. These complex measurements are usually performed by independent experts based on a series of assumptions. These experts are generally required to estimate the impact of future events that are uncertain at the date of the combination.

f) Disputes and litigation

Certain Group subsidiaries may be party to regulatory, legal or arbitration proceedings which, because of their inherent uncertainty, could have a material impact on the Group's financial position (see Note 26, "Disputes and litigation").

The Group's management takes stock of any outstanding proceedings and monitors their progress on a regular basis. It also decides whether to book a provision or adjust the amount of any existing provision if events arise during the proceedings that require a reassessment of the risk involved. The Group consults legal experts both within and outside the Group in determining the costs that may be incurred.

The decision to book a provision in respect of a given risk and the amount of any such provisions are based on an assessment of the risk associated with each individual case, management's estimate of the likelihood that an unfavorable decision will be issued in the proceedings in question, and the Group's ability to estimate the amount of the provision reliably.

NOTE4 SCOPE OF CONSOLIDATION

Main changes in the scope of consolidation in 2021

On June 1, 2021, Safran sold the operating businesses of EVAC GmbH, its German subsidiary, and of Monogram Train LLC, its subsidiary based in the United States.

These disposals had no material impact on the consolidated financial statements.

Main changes in the scope of consolidation in 2020

There were no significant changes in the scope of consolidation in 2020.

NOTE5 SEGMENT INFORMATION

Segments presented

In accordance with IFRS 8, "Operating Segments", segment information reflects Safran's different businesses.

The Group's operating segments reflect the organization of subsidiaries around tier-one entities ("consolidation sub-groups").

For monitoring purposes, Safran has three operating segments which are organized based on the type of products and services they sell and the markets they serve.

Aerospace Propulsion

The Group designs, develops, produces and markets propulsion and mechanical power transmission systems for commercial aircraft, military transport, training and combat aircraft, civil and military helicopters, and drones. This segment also includes maintenance, repair and overhaul (MRO) activities and the sale of spare parts.

Aircraft Equipment, Defense and Aerosystems

Safran covers the full life cycle of systems and equipment for civil and military aircraft and helicopters.

The Group is involved in landing gear and brakes, nacelles and reversers, avionics (flight controls and onboard information systems), security systems (evacuation slides, emergency arresting systems and oxygen masks), onboard computers and fuel systems.

It also operates at the different phases of the electrical cycle and provides electrical power management systems and associated engineering services.

This segment includes all activities serving the naval and land defense markets, including optronic equipment and sights, navigation equipment and sensors, modernized infantry and drones.

This segment also includes maintenance, repair and overhaul (MRO) activities and the sale of spare parts.

Aircraft Interiors

The Aircraft Interiors business includes all operations related to the buyer-furnished equipment (BFE) market, whose direct customers are mostly airline companies. The Group designs, develops, manufactures and markets, for example, aircraft seats for passengers (First, Business and Economy Class) and crew, as well as cabin equipment, overhead bins, class dividers, passenger service units, cabin interior solutions, chilling systems, galleys, electrical inserts and trolleys and cargo equipment.

This segment also includes complex cabin equipment and passenger comfort-focused solutions such as water distribution, lavatories, air systems and in-flight entertainment and connectivity (IFEC).

Holding company and other

In "Holding company and other", the Group includes Safran SA's activities and holding companies in various countries.

Business segment performance indicators

Segment information presented in the tables on page 12 is included within the information presented to the Chief Executive Officer who – in accordance with the Group's governance structure – has been designated as the "Chief Operating Decision Maker" for the assessment of the performance of business segments and the allocation of resources between the different businesses.

The assessment of each business segment's performance by the Chief Executive Officer is based on adjusted contribution figures as explained in the Foreword (see page 6).

Data for each business segment are prepared in accordance with the same accounting principles as those used for the consolidated financial statements (see section 3.1, Note 2 of the 2020 Universal Registration Document), except for the restatements made in respect of adjusted data (see Foreword).

Inter-segment sales are performed on an arm's length basis.

Free cash flow represents cash flow from operating activities less any disbursements relating to acquisitions of property, plant and equipment and intangible assets.

Quantified segment information for 2020 and 2021 is presented on pages 9 to 11.

NOTE6 REVENUE

Breakdown of revenue by business

First-half 2021

	Aerospace	AircraftEquipment, Defenseand		Holdingcompany
(in € millions)	Propulsion	Aerosystems	Aircraft Interiors	andother	Total
DESCRIPTION OF PRODUCTS/SERVICES
Sales of original equipment and other equipment	1,220	1,790	453	-	3,463
Services	1,923	976	174	-	3,073
Sales of studies	44	137	12	6	199
Other	11	20	-	3	34
TOTAL REVENUE	3,198	2,923	639	9	6,769
TIMING OF REVENUE RECOGNITION
At a point in time	2,404	2,556	635	6	5,601
Over time	794	367	4	3	1,168
TOTAL REVENUE	3,198	2,923	639	9	6,769

First-half 2020

	AircraftEquipment,
	Aerospace	Defenseand		Holdingcompany
(in € millions)	Propulsion	Aerosystems	Aircraft Interiors	andother	Total
DESCRIPTION OF PRODUCTS/SERVICES
Sales of original equipment and other equipment	1,499	2,334	735	-	4,568
Services	2,553	1,171	321	-	4,045
Sales of studies	42	108	13	6	169
Other	38	70	8	4	120
TOTAL REVENUE	4,132	3,683	1,077	10	8,902
TIMING OF REVENUE RECOGNITION
At a point in time	3,372	3,275	1,067	8	7,722
Over time	760	408	10	2	1,180
TOTAL REVENUE	4,132	3,683	1,077	10	8,902

Revenue is broken down into four categories which best reflect the Group's main businesses:

◼ Sales of original equipment and other equipment

These sales reflect quantities delivered under contracts or aircraft, helicopter and defense programs as well as contractual financing received from customers to develop these products.

◼ Services, which include deliveries of spare parts and maintenance contracts

These sales are contingent on repairs and maintenance requested by airline or helicopter companies and correspond to services and volumes that are less predictable since they depend on the condition of fleets.

◼ Sales of studies, research and development

Contracts are drawn up for all such development work, which represents separate performance obligations. This category relates to specific work carried out for a given project or program.

◼ Other

In terms of revenue recognition, it should be noted for each of the business segments that:

• most revenue within the Group is recognized "at a point in time";
• revenue recognized on a percentage-of-completion basis ("over time") mainly concerns service and after–sales support contracts in the Propulsion segment and aerospace activities in the Aircraft Equipment, Defense and Aerosystems segment.

Revenue from contract-related activities accounted for as an overall performance obligation is also recognized on a percentage-of-completion basis.

NOTE7 BREAKDOWN OFTHE OTHER MAIN COMPONENTS OF PROFITFROM OPERATIONS

Other income

(in € millions)	First-half2020	First-half2021
Research tax credit	74	82
Other operating subsidies	25	73
Other operating income	10	11
TOTAL	109	166

Raw materials and consumables used

This caption breaks down as follows for the period:

(in € millions)	First-half2020	First-half2021
Raw materials, supplies and other	(2,135)	(1,582)
Bought-in goods	(12)	(12)
Changes in inventories	142	(19)
Contract costs	33	28
Sub-contracting	(1,511)	(1,128)
Purchases not held in inventory	(229)	(177)
External service expenses	(965)	(759)
TOTAL	(4,677)	(3,649)

The decrease in raw materials and consumables used reflects the downturn in business.

Personnel costs

(in € millions)	First-half2020	First-half2021
Wages and salaries	(1,798)	(1,716)
Social security contributions	(699)	(628)
Statutory employee profit-sharing	(58)	(41)
Optional employee profit-sharing	(65)	(10)
Additional contributions	(38)	(5)
Corporate social contribution	(33)	(16)
Other employee costs	(68)	(80)
TOTAL	(2,759)	(2,496)

The decrease in employee profit-sharing items (optional profit-sharing, additional contributions and the corporate social contribution) is attributable to the Activity Transformation Agreement signed on July 8, 2020. The expense recognized in first-half 2020 was canceled in the second half of that year to take into account the consequences of the agreement.

Depreciation, amortization and increase in provisions, net of use

(in € millions)	First-half2020	First-half2021
Net depreciation and amortization expense
◼ intangible assets	(365)	(337)
◼ property, plant and equipment	(302)	(291)
◼ right-of-use assets	(56)	(49)
Total net depreciation and amortization expense(1)	(723)	(677)
Net increase in provisions	84	18
DEPRECIATION, AMORTIZATION AND INCREASE IN PROVISIONS, NET OF USE	(639)	(659)

(1) Of which depreciation and amortization of assets measured at fair value at the time of the Sagem-Snecma merger: €20 million in first-half 2021 and €24 million in first-half 2020; during the acquisition of the former Zodiac Aerospace: €145 million in first-half 2021 and €155 million in first-half 2020; and during other acquisitions: €18 million in first-half 2021 and €17 million in first-half 2020.

Asset impairment

	Impairmentexpense		Reversals
(in € millions)	First-half2020	First-half2021	First-half2020	First-half2021
Intangible assets, property, plant and equipment, and right-of-use assets	(4)	(11)	2	7
Financial assets	(4)	-	-	-
Contract costs	(3)	-	1	4
Inventories and work-in-progress	(119)	(113)	81	143
Receivables	(64)	(39)	24	41
Contract assets	-	(1)	-	-
TOTAL	(194)	(164)	108	195

Allowances recognized against receivables essentially relate to expected and identified credit losses on amounts owed by airline companies.

Other recurring operating income and expenses

(in € millions)	First-half2020	First-half2021
Capital gains and losses on asset disposals	(1)	3
Royalties, patents and licenses	(16)	(12)
Losses on irrecoverable receivables	(4)	(6)
Other operating income and expenses(1)	91	130
TOTAL	70	115

(1) Of which income of €49 million in 2020 and €99 million in 2021 relating to the revised repayment probability for borrowings subject to specific conditions (see Note 20, "Borrowings subject to specific conditions").

Other non-recurring operating income and expenses

(in € millions)	First-half2020	First-half2021
Capital gains on asset disposals	-	19
Asset impairment net of reversals	(66)	(180)
Other non-recurring items	(78)	(34)
TOTAL	(144)	(195)

In first-half 2021, €180 million in write-downs taken in respect of intangible assets can be analyzed as follows:

• ◼ €56 million relating to aircraft programs in the Aircraft Equipment segment;
• ◼ €124 million (net of tax) relating to the intangible assets of an equity-accounted company.

Other non-recurring items mainly correspond to:

• ◼ restructuring costs totaling €31 million, including €15 million relating to adaptation plans and €16 million in costs relating to the Activity Transformation Agreement;
• ◼ transaction and integration costs totaling €3 million.

In first-half 2020, other non-recurring items chiefly comprised restructuring costs for €77 million related essentially to the Covid-19 pandemic. Impairment primarily consisted of the write-down of intangible assets relating to an aircraft program in the amount of €48 million.

NOTE8 FINANCIAL INCOME(LOSS)

(in € millions)	First-half2020	First-half2021
Financial expense on interest-bearing financial liabilities	(30)	(61)
Financial income on cash and cash equivalents	10	10
Cost of net debt	(20)	(51)
Gain (loss) on foreign currency hedging instruments	(1,001)	775
Foreign exchange gain (loss)	(178)	112
Net foreign exchange gain (loss) on provisions	(2)	(27)
Foreign exchange gain (loss)	(1,181)	860
Gain (loss) on interest rate hedging instruments	(6)	-
Change in the fair value of assets at fair value through profit or loss	(8)	3
Dividends received	1	1
Other financial provisions	-	1
Interest component of IAS 19 expense	(3)	(3)
Impact of unwinding the discount	(20)	(3)
Other	(10)	(4)
Other financial income and expense	(46)	(5)
FINANCIAL INCOME (LOSS)	(1,247)	804
◼ Of which financial expense	(1,258)	(98)
◼ Of which financial income	11	902

In first-half 2021, the €775 million gain on foreign currency hedging instruments reflects changes in the fair value of these instruments attributable to cash flows that will be recognized in profit or loss in future periods.

The €112 million foreign exchange gain includes:

• ◼ a €113 million foreign exchange gain, reflecting the gain on unwinding currency derivatives hedging operating cash flows recognized in profit or loss in the period. This foreign exchange gain reflects the difference between the EUR/ USD exchange rate guaranteed by the currency derivatives unwound in the period (USD 1.16 for €1) and the actual EUR/USD exchange rate observed during the period;
• ◼ a net foreign exchange loss of €1 million primarily attributable to the remeasurement of monetary items at the closing exchange rate.

Net foreign exchange losses amounting to €27 million on provisions carried in USD were recorded in the Propulsion segment and result from the impact of fluctuations in the EUR/USD exchange rate between the start of the period (USD 1.23 to €1 at December 31, 2020) and the end of the period (USD 1.19 to €1 at June 30, 2021) on the opening amount of the provision.

NOTE9 INCOMETAX

Group tax is calculated by using the projected annual rates in each of the Group's tax jurisdictions, adjusted for the main permanent differences identified.

Further to the gradual decrease in the income tax rate introduced in France, the income tax rate for France (including the additional contribution) is 28.41% for 2021 and will be 25.83% for 2022.

A projected income tax rate of 26.15% was used to calculate the effective tax rate applicable to French entities in first-half 2021.

The tax expense in first-half 2021 amounts to €273 million.

In first-half 2021, changes in the fair value of outstanding currency derivatives generated a deferred tax expense of €213 million.

In first-half 2020, such fair value changes generated deferred tax income of €317 million.

NOTE10 EARNINGS PER SHARE

	Index	First-half2020	First-half2021
Numerator (in € millions)
Profit (loss) for the period attributable to owners of the parent	(a)	(340)	674
Denominator (in shares)
Total number of shares	(b)	427,235,939	427,238,616
Number of treasury shares held	(c)	363,521	976,620
Number of shares excluding treasury shares	(d)=(b-c)	426,872,418	426,261,996
Weighted average number of shares (excluding treasury shares)	(d')	425,155,180	426,622,547
Potentially dilutive ordinary shares	(e)	12,590,064	14,168,106
Weighted average number of shares after dilution	(f)=(d'+e)	437,745,244	440,790,653
Ratio: earnings per share (in €)
Basic earnings (loss) per share	(g)=(a*1 million)/(d')	(0.80)	1.58
Diluted earnings (loss) per share	(h)=(a*1 million)/(f)	(0.80)	1.53

At June 30, 2021, potentially dilutive ordinary shares essentially comprise shares that may be issued if all of the bonds convertible into new shares and/or exchangeable for existing shares issued by the Group (2018-2023 OCÉANEs, 2020-2027 OCÉANEs and 2021-2028 OCÉANEs: see Note 18.d, "Convertible bond issues") are converted.

NOTE11 GOODWILL

Goodwill breaks down as follows:

(in € millions)	Dec.31,2020 Net	Changes inscope of consolidation	Reallocation	Impairment	Effectof changes inforeign exchangerates andother	June30,2021 Net
Safran Aircraft Engines	392					392
Safran Helicopter Engines	308	-	-	-	-	308
Safran Aero Boosters	47	-	-	-	-	47
Other Propulsion	1	-	-	-	-	1
Safran Electronics & Defense	344	-	-	-	1	345
Safran Nacelles	213	-	-	-	-	213
Safran Engineering Services	76	-	-	-	-	76
Safran Electrical & Power	681	(2)	-	-	10	689
Safran Landing Systems	190	-	-	-	-	190
Safran Aerosystems	798	-	-	-	-	798
Safran Seats	764	-	-	-	-	764
Safran Cabin	736	(22)	510	-	39	1,263
Safran Passenger Solutions	510	-	(510)	-	-	-
TOTAL	5,060	(24)	-	-	50	5,086

As from January 1, 2021, the Safran Passenger Solutions and Safran Cabin CGUs were combined following changes to the Group's operational management structure. This change within the Aircraft Interiors operating segment has no impact on the operating segments as defined in Note 5.

Impairment tests

As every year, the Group tested all its cash-generating units (CGUs) for impairment in second-half 2020 as part of its annual impairment testing exercise.

Given the continuing repercussions of the health crisis on the aerospace industry and the Group's operations, at June 30, 2021 the Group reviewed the CGUs for which there could be an indication of impairment because their activities continue to be particularly affected by the changes in air traffic and by airlines' financial situation.

This included the Safran Seats, Safran Cabin and Safran Aerosystems CGUs, which were tested for impairment.

The measurement method used to determine the value in use of the CGUs was the same as that used in second-half 2020.

The value in use of the CGUs was determined based on the following assumptions:

• ◼ expected future cash flows are determined over a period consistent with the useful life of the assets in each CGU. This is generally estimated at 10 years but may be extended for businesses with longer development and production cycles;
• ◼ operating projections used to determine expected future cash flows take into account general economic data, specific inflation rates for each geographic area, a USD exchange rate based on available market information and mid- to long-term macroeconomic assumptions.

The projections and assumptions used by the Group are drawn from the medium-term business plan for the next four years, as prepared in second-half 2020, while the projections and assumptions beyond this period are based on the best estimate (prepared by management and validated by the Board of Directors) of the long-term scenario. For the CGUs tested for impairment, the projections and assumptions were adjusted for any new delivery rates known at the reporting date;

• ◼ the value in use of the CGUs is equal to the sum of these discounted estimated future cash flows plus a terminal value, calculated by applying the growth rate expected for the relevant businesses to standardized cash flows representing long-term business activity, which usually corresponds to the last year of available forecasts;
• ◼ the growth rate used to calculate terminal value was set at 2% for the three CGUs tested;
• ◼ the average hedged USD exchange rate adopted for years 2021 to 2024 is between 1.16 and 1.19. These exchange rate assumptions take into account the available foreign currency hedging portfolio (see Note 23, "Management of market risks and derivatives"). A rate of 1.30 is adopted thereafter;
• ◼ the benchmark post-tax discount rate used is 7.5% (updated at June 30, 2021, with no change versus 2020) and is applied to post-tax cash flows.

Based on these tests, the recoverable amount of each CGU wholly justifies its net asset value, including any goodwill balances recorded in Group assets.

No impairment of goodwill was recognized as a result of the annual impairment tests in 2020.

The Group tested the sensitivity of its main goodwill balances to the following changes in the main assumptions used for its forecasts as from 2024:

• ◼ a 5% increase or decrease in the USD/EUR exchange rate;
• ◼ a 0.5% increase in the benchmark discount rate;
• ◼ a 0.5% decrease in the perpetual growth rate.

The above changes in the main assumptions taken individually do not result in values in use lower than the carrying amounts of goodwill balances. For the Safran Seats CGU, a 0.5% increase in the discount rate would result in a recoverable amount approximating the carrying amount of its assets.

3

In addition to the above sensitivity analyses, two additional assumptions described below were tested on these CGUs:

• ◼ an across-the-board decrease of 10% in future cash flows as from 2021 and in the terminal value. Based on these tests, the recoverable amount of each CGU wholly justifies the goodwill balances recorded in Group assets. The recoverable amount of the Seats CGU is in line with the carrying amount of the CGU's assets;
• ◼ an across-the-board decrease of 20% in future cash flows as from 2021 and in the terminal value. The change in this assumption would lead to the recognition of impairment before tax of €180 million against the value of the Seats and Aerosystems CGUs.

NOTE12 INTANGIBLE ASSETS

Intangible assets break down as follows:

	Dec.31,2020			June30,2021
		Amortization/			Amortization/
(in € millions)	Gross	impairment	Net	Gross	impairment	Net
Aircraft programs	2,334	(1,777)	557	2,334	(1,813)	521
Development expenditures	6,510	(2,631)	3,879	6,660	(2,792)	3,868
Commercial agreements	791	(179)	612	899	(195)	704
Software	720	(644)	76	734	(669)	65
Trademarks(1)	703	-	703	703	-	703
Commercial relationships	1,889	(479)	1,410	1,907	(552)	1,355
Technology	1,341	(461)	880	1,358	(543)	815
Other	833	(274)	559	840	(291)	549
TOTAL	15,121	(6,445)	8,676	15,435	(6,855)	8,580

(1) As trademarks are not amortized, they are tested for impairment based on their respective CGUs.

Movements in intangible assets break down as follows:

		Amortization/
(in € millions)	Gross	impairment	Net
At December 31, 2020	15,121	(6,445)	8,676
Capitalization of R&D expenditure(1)	136	-	136
Capitalization of other intangible assets	5	-	5
Acquisitions of other intangible assets	116	-	116
Disposals and retirements	(11)	3	(8)
Amortization	-	(337)	(337)
Impairment losses recognized in profit or loss	-	(56)	(56)
Reclassifications	(5)	8	3
Changes in scope of consolidation	(2)	1	(1)
Foreign exchange differences	75	(29)	46
AT JUNE 30, 2021	15,435	(6,855)	8,580

(1) Including €3 million in capitalized interest on R&D expenditure at June 30, 2021 (€3 million at June 30, 2020).

Research and development expenditure recognized in recurring operating income for the period totaled €403 million including amortization (€447 million in first-half 2020). This amount does not include the research tax credit recognized in the income statement within "Other income" (see Note 7, "Breakdown of the other main components of profit from operations").

Amortization recognized in the period includes €133 million relating to the remeasurement of intangible assets within the scope of the acquisition of the former Zodiac Aerospace, €20 million relating to the remeasurement of aircraft programs in connection with the Sagem-Snecma merger, and €18 million relating to assets identified as part of other business combinations.

The impairment tests carried out at June 30, 2021 on assets allocated to programs, projects or product families were based on the approach described in section 3.1, Note 2.m of the 2020 Universal Registration Document.

Expected future cash flows were updated to reflect the latest information available at the reporting date. A 7.5% discount rate was used, plus a risk premium depending on the programs tested.

As a result of the impairment tests carried out at June 30, 2021, intangible assets relating to various aircraft programs were written down by €56 million, the total amount of which was charged against non-recurring operating income.

Furthermore, analyses of sensitivity to the following changes in the main assumptions were also carried out across all the programs, projects and product families tested:

• ◼ a 1% increase in the benchmark discount rate;
• ◼ a 10% decrease in volumes.

Neither of these changes in assumptions would give rise to an impairment loss for the CGU programs not written down.

As a result of the impairment tests carried out at June 30, 2020, intangible assets relating to a program were written down by €48 million.

NOTE13 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment break down as follows:

	Dec.31,2020			June30,2021
(in € millions)	Gross	Depreciation/ impairment	Net	Gross	Depreciation/ impairment	Net
Land	226	-	226	227	-	227
Buildings	2,048	(1,015)	1,033	2,096	(1,071)	1,025
Technical facilities, equipment and tooling	6,347	(4,268)	2,079	6,504	(4,475)	2,029
Assets in progress, advances	551	(62)	489	534	(66)	468
Site development and preparation costs	69	(36)	33	72	(38)	34
Buildings on land owned by third parties	80	(42)	38	91	(45)	46
Computer hardware and other equipment	685	(528)	157	699	(556)	143
TOTAL	10,006	(5,951)	4,055	10,223	(6,251)	3,972

Movements in property, plant and equipment break down as follows:

		Depreciation/
(in € millions)	Gross	impairment	Net
At December 31, 2020	10,006	(5,951)	4,055
Internally produced assets	17	-	17
Additions	176	-	176
Disposals and retirements	(53)	35	(18)
Depreciation(1)	-	(291)	(291)
Impairment losses recognized in profit or loss	-	(4)	(4)
Reclassifications	(5)	2	(3)
Changes in scope of consolidation	(8)	8	-
Foreign exchange differences	90	(50)	40
AT JUNE 30, 2021	10,223	(6,251)	3,972

(1) Including €12 million relating to the remeasurement of property, plant and equipment as part of the acquisition of the former Zodiac Aerospace.

NOTE14 LEASES

a) Right-of-use assets

Right-of-use assets break down as follows:

	Dec.31,2020 Depreciation/			June30,2021
				Depreciation/
(in € millions)	Gross	impairment	Net	Gross	impairment	Net
Right-of-use assets relating to property	781	(175)	606	815	(223)	592
Right-of-use assets relating to transport equipment	7	(4)	3	6	(3)	3
Right-of-use assets relating to other assets	20	(6)	14	20	(6)	14
TOTAL	808	(185)	623	841	(232)	609

Movements in right-of-use assets break down as follows:

		Depreciation/
(in € millions)	Gross	impairment	Net
At December 31, 2020	808	(185)	623
Increases	54	-	54
Disposals and retirements	(30)	3	(27)
Depreciation	-	(49)	(49)
Changes in scope of consolidation	(3)	2	(1)
Foreign exchange differences	12	(3)	9
AT JUNE 30, 2021	841	(232)	609

b) Lease liabilities

The maturity of lease liabilities can be analyzed as follows at June 30, 2021:

(in € millions)	Dec.31,2020	June30,2021
Maturing in:
◼ 1 year or less	114	100
◼ More than 1 year and less than 5 years	329	305
◼ Beyond 5 years	165	180
TOTAL	608	585

c) Lease items presented in the income statement

In first-half 2021, rental expenses recognized in "Profit from operations" (see Note 7, "Breakdown of the other main components of profit from operations") under "External services" totaled €35 million. These expenses have not been restated due to the application of the practical expedients allowed under IFRS 16 (exemption for short-term leases, leases of low-value assets and licensing agreements, such as for IT equipment), or because they relate to a "service" component identified in the lease.

Interest expense on lease liabilities recognized in "Financial income (loss)" under "Cost of net debt" amounted to €4 million in first-half 2021 (see Note 8, "Financial income (loss)").

d) Lease items presented in the cash flow statement

In first-half 2021, disbursements under leases recognized in the cash flow statement and relating to the repayment of lease liabilities represented €60 million and are shown within "Cash flow from (used in) financing activities". These are increased by payments of interest on lease liabilities, which are included within "Cash flow from operating activities".

NOTE15 CURRENT AND NON-CURRENTFINANCIAL ASSETS

Financial assets include:

		Dec.31,2020			June30,2021
(in € millions)	Gross	Impairment	Net	Gross	Impairment	Net
Non-consolidated investments			268			273
Other financial assets(1)	407	(118)	289	636	(120)	516
TOTAL			557			789

(1) Including a €200 million increase in investments that do not qualify as cash and cash equivalents.

Equity investments in non-consolidated companies are classified at fair value through profit or loss.

Other financial assets are measured at amortized cost.

The Group reviewed the value of its other financial assets in order to determine whether any items needed to be written down based on available information. No write-downs were recognized in 2021.

Other financial assets

Other financial assets break down as follows:

(in € millions)	Dec.31,2020	June30,2021
Loans to non-consolidated companies	141	348
Loans to employees	37	37
Deposits and guarantees	14	14
Other	97	117
TOTAL	289	516
◼ Non-current	163	386
◼ Current	126	130

Loans to non-consolidated companies correspond to revolving credit agreements.

The table below shows movements in other financial assets:

(in € millions)
At December 31, 2020	289
Increase(1)	216
Decrease	(10)
Effect of changes in foreign exchange rates	2
Reclassifications	23
Changes in scope of consolidation	(4)
AT JUNE 30, 2021	516

(1) Including €200 million in investments that do not qualify as cash and cash equivalents.

The fair value of other financial assets approximates their carrying amount.

NOTE16 INVESTMENTS IN EQUITY-ACCOUNTED COMPANIES

The Group's share in the net equity of equity-accounted companies breaks down as follows:

(in € millions)	Dec.31,2020	June30,2021
Associates	-	-
ArianeGroup	1,481	1,350
Other joint ventures	645	699
TOTAL	2,126	2,049

Movements in this caption during the period break down as follows:

(in € millions)
At December 31, 2020	2,126
Share in profit (loss) from ArianeGroup	(5)
Share in profit from other joint ventures	41
Joint venture impairment losses	(124)
Dividends received from joint ventures	(26)
Foreign exchange differences	26
Other movements	11
AT JUNE 30, 2021	2,049

The Group's off-balance sheet commitments with joint ventures are described in Note 24, "Related parties".

The Group has interests in the following joint ventures which are accounted for using the equity method:

• ◼ ArianeGroup: space launchers and military activities;
• ◼ Shannon Engine Support Ltd: leasing of CFM56 and LEAP engines, modules, equipment and tooling to airline companies;
• ◼ Lynred: manufacture of infrared detectors;
• ◼ Safran Martin-Baker France: manufacture of ejectable seating;
• ◼ A-Pro: repair of landing gear for regional and business jets;
• ◼ CFM Materials LP: sale of used CFM56 parts;
• ◼ Roxel SAS: holding company;
• ◼ Roxel France SA: motors for tactical missiles;
• ◼ Roxel Ltd: motors for tactical missiles;
• ◼ SAIFEI: electrical wiring;
• ◼ Fadec International LLC: digital engine control systems;
• ◼ Xi'an Cea Safran Landing Systems Co., Ltd: landing gear maintenance;
• ◼ EZ Air Interior Ltd: cabin interiors;
• ◼ Initium Aerospace: design and manufacture of auxiliary power units.

ArianeGroup is the Group's sole material joint venture.

Financial information for ArianeGroup can be summarized as follows:

(in € millions)	Dec.31,2020	June30,2021
Non-current assets	1,667	1,628
Current assets	6,260	6,939
of which: cash and cash equivalents	642	925
Non-current liabilities	(1,152)	(1,164)
of which: non-current financial liabilities	(483)	(479)
Current liabilities	(7,075)	(7,690)
of which: current financial liabilities	(53)	(124)
Non-controlling interests	-	1
Net assets of ArianeGroup (excl. goodwill and PPA) – Attributable to owners of the parent (based on a 100% interest)	(300)	(286)
Equity share in net assets of ArianeGroup (excl. goodwill and PPA) (based on a 50% interest)	(150)	(143)
Purchase price allocation, net of deferred taxes	455	317
Safran equity share – Net assets of ArianeGroup	305	174
Goodwill	1,176	1,176
Carrying amount of investment in ArianeGroup	1,481	1,350

INTERIM FINANCIAL STATEMENTS

Notes to the Group condensed interim consolidated financial statements

(in € millions)	First-half2020	First-half2021
Profit for the period attributable to owners of the parent	6	20
Other comprehensive income (expense)	(4)	(5)
Total comprehensive income attributable to owners of the parent	2	15
Safran equity share – Profit for the period	3	10
Amortization of purchase price allocation, net of deferred taxes	(19)	(15)
Safran equity share – Profit (loss) of ArianeGroup	(16)	(5)
Impairment losses	(18)	(124)
Safran equity share – Other comprehensive income (expense)	(2)	(3)
Safran equity share – Comprehensive income (expense) of ArianeGroup	(36)	(132)

ArianeGroup did not pay any dividends in 2021.

No impairment was recognized in first-half 2021 against the value of the equity-accounted investments following the impairment test performed by the Group. Projected cash flows were discounted at a rate of 7.5%.

The Group analyzed the sensitivity of the investments to a 0.5% increase in the benchmark discount rate used (i.e., a rate of 8%). Based on this test, the recoverable amount of the equity-accounted investments remains just above the carrying amount shown in the Group's consolidated financial statements.

The carrying amount of ArianeGroup includes assets allocated to programs.

An impairment test was carried out on the assets allocated to the Ariane 6 program. In light of the situation concerning the program, projected cash flows were discounted at a higher rate of 8.5%. A net write-down of €124 million was recognized and charged against non-recurring operating income.

The contribution of other joint ventures to the Group's comprehensive income was as follows:

(in € millions)	First-half2020	First-half2021
Profit for the period	46	41
Impairment losses	-	-
Other comprehensive income	1	18
TOTAL COMPREHENSIVE INCOME	47	59

NOTE17 CASH AND CASH EQUIVALENTS

(in € millions)	Dec.31,2020	June30,2021
Money-market funds	41	43
Short-term investments	1,692	2,338
Sight deposits	2,014	1,546
TOTAL	3,747	3,927

Money-market funds are classified within Level 1 of the IFRS 13 fair value hierarchy.

The table below presents changes in cash and cash equivalents:

(in € millions)
At December 31, 2020	3,747
Movements during the period	135
Foreign exchange differences	45
AT JUNE 30, 2021	3,927

NOTE18 CONSOLIDATED SHAREHOLDERS'EQUITY

a) Share capital

At June 30, 2021, Safran's share capital amounted to €85,447,723.20, comprising 427,238,616 fully paid-up shares with a par value of €0.20 each, all in the same class.

Safran's equity does not include any equity instruments issued other than its shares.

b) Breakdown of share capital and voting rights

Changes in the breakdown of share capital and voting rights are as follows:

December 31, 2020

Shareholders	Numberof shares	% sharecapital	Numberof votingrights(1)	% votingrights(1)
Free float	347,973,999	81.45%	406,760,265	72.47%
French State	47,983,131	11.23%	95,966,262	17.10%
Employees(2)	30,959,525	7.25%	58,567,145	10.43%
Treasury shares	319,284	0.07%	-	-
TOTAL	427,235,939	100.00%	561,293,672	100.00%

(1) Exercisable voting rights.

(2) Employee shareholding within the meaning of Article L.225-102 of the French Commercial Code (Code de commerce).

June 30, 2021

			Numberof
Shareholders	Numberof shares	% sharecapital	votingrights(1)	% votingrights(1)
Free float	347,966,104	81.44%	397,719,443	72.11%
French State	47,983,131	11.23%	95,966,262	17.40%
Employees(2)	30,312,761	7.10%	57,827,731	10.49%
Treasury shares	976,620	0.23%	-	-
TOTAL	427,238,616	100.00%	551,513,436	100.00%

(1) Exercisable voting rights.

(2) Employee shareholding within the meaning of Article L.225-102 of the French Commercial Code.

Each share carries entitlement to one vote. Shares held in registered form for over two years have double voting rights.

The 976,620 treasury shares have no voting rights.

At June 30, 2021, the total number of shares includes 2,677 shares issued during the first half of the year further to the exercise of stock subscription options resulting from employee commitments undertaken by Zodiac Aerospace, transferred to Safran following the Zodiac Aerospace merger on December 1, 2018 based on the exchange ratio used for the merger.

Treasury shares

The number of treasury shares has increased since December 31, 2020 following:

• ◼ the purchase of 7,377 shares under the Group's liquidity agreement, net of shares sold;
• ◼ the purchase of 650,000 shares in connection with the implementation of a share buyback program as part of employee shareholding plans;
• ◼ the delivery of 41 shares under employee shareholding plans.

The Annual General Meeting has authorized the Board of Directors to buy and sell shares in the Company in accordance with the applicable laws and regulations.

An authorization granted by the Annual General Meeting of May 26, 2021 set the maximum purchase price at €165 per share, thereby superseding the authorization granted at the Annual General Meeting of May 28, 2020.

Pursuant to these authorizations and to the liquidity agreement signed in 2012 with Oddo BHF, in first-half 2021 the Company purchased 1,337,283 shares for €158 million, and sold 1,329,906 shares for €158 million.

At June 30, 2021, 273,377 shares were held in connection with the liquidity agreement.

of the 2020 Universal Registration Document).

including the year in which the performance shares are granted. In addition, the shares will only vest if the beneficiaries still form part of the Group at the vesting date (see section 6.6.4.2

The Group set up a performance share plan on March 24, 2021 covering 731,000 shares. Shares under this plan will only vest if certain internal and external performance conditions are met, as assessed over three fiscal years, and provided the beneficiaries still form part of the Group at the vesting date.

c) Share-based payment

Performance shares

The Board of Directors periodically grants performance shares to Group employees and corporate officers.

The vesting of these performance shares is subject to the achievement of internal and external performance conditions, which are assessed over three full consecutive fiscal years,

Key details of outstanding performance share plans at June 30, 2021 are shown below:

2018 performanceshares 2019 performanceshares 2020 performanceshares 2021 performanceshares Shareholder authorization May 25, 2018 May 25, 2018 May 23, 2019 May 23, 2019 Grant date by the Board of Directors July 24, 2018 March 27, 2019 March 26, 2020 March 24, 2021 Vesting date July 26, 2021 March 29, 2022 March 27, 2023 March 26, 2024 Share price at the grant date €107.05 €116.90 €91.92 €116.65 Number of beneficiaries at the grant date 440 589 797 760 Number of performance shares granted 574,712 732,130 759,360 730,940 Number of shares canceled or forfeited (34,274) (87,370) (15,800) - NUMBER OF PERFORMANCE SHARES OUTSTANDING AT JUNE 30, 2021 540,438 644,760 743,560 730,940

The share-based payment expense for these performance share plans, recognized within personnel costs under "Other employee costs" (see Note 7, "Breakdown of the other main components of profit from operations"), totaled €15 million in first-half 2021, versus €8 million in first-half 2020.

d) Convertible bond issues

2018-2023 OCÉANEs

On June 21, 2018, Safran issued 4,996,431 bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs"), each with a par value of €140.10, i.e., representing a total nominal amount of €700 million.

The bonds do not carry any coupon.

Bondholders have the option of converting their bonds into shares. This option can be exercised at any point after the issue date and up to the seventh trading day preceding the standard or early redemption date. Following the May 27, 2019 dividend payment and in accordance with the terms and conditions of the bond issue, the bond conversion ratio has been 1.001 shares for 1 bond since May 29, 2019. This adjusted conversion ratio was calculated by the bond calculation agent in accordance with the calculation formula stipulated in the terms and conditions of the bonds based on the following inputs:

• ◼ previous bond conversion ratio: 1 share for 1 bond;
• ◼ share price: €121.54719;
• ◼ dividend per share paid in 2019: €1.82;
• ◼ dividend per share threshold for 2019: €1.70.

The bonds come with an early redemption option that the bearer may trigger in the event of a change of control and that the issuer may trigger if (i) as from June 21, 2021, the share price multiplied by the bond conversion ratio exceeds 130% of the par value of the bonds or (ii) at any time, the number of bonds outstanding represents less than 15% of the number of bonds originally issued.

Unless converted, redeemed or repurchased and canceled prior to maturity, the bonds were set to be redeemed at par on June 21, 2023.

OCÉANEs are deemed a hybrid instrument comprising equity and debt.

After deducting issuance fees, a total of €653 million was recognized under interest-bearing financial liabilities, corresponding to the present value of cash flows from a similar bond with no conversion rights (see Note 21, "Interest–bearing financial liabilities").

The effective annual interest rate on the liability component is 1.40% including issuance fees.

Following an offer made by Safran on June 8, 2021, 96.2% of the OCÉANEs were repurchased on June 15, 2021. Following the repurchase, 3.8% of the OCÉANEs remained outstanding at June 30, 2021. At the Group's initiative, the bonds outstanding were redeemed early at par on July 19, 2021, since no bearers had chosen to exercise their conversion rights.

The option component recognized in equity was valued at €44 million on the issue date, or €31 million after the deferred tax impact. Following the June 15, 2021 repurchase, the option component recognized in equity represented €2 million at June 30, 2021.

2020-2027 OCÉANEs

On May 15, 2020, Safran issued 7,391,665 bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs") (the "initial bonds"), each with a par value of €108.23, i.e., representing a total nominal amount of €800 million. The initial bonds were issued at 100% of par.

On October 12, 2020, Safran carried out a tap issue of 1,847,916 bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs") (the "additional bonds"), each with a par value of €108.23, i.e., representing a total nominal amount of €200 million. The additional bonds were issued at a price of €118 per bond, representing a total issue amount of €218 million.

The additional bonds carry the same terms and conditions (with the exception of the issue price) as the initial bonds, with which they are fully fungible and with which they form a single series.

The bonds bear interest at an annual rate of 0.875%, payable annually in arrears.

Bondholders have the option of converting their bonds into shares. This option can be exercised at any point after the issue date and up to the seventh trading day preceding the standard or early redemption date.

Following the June 2, 2021 dividend payment and in accordance with the terms and conditions of the bonds, the bond conversion ratio has been 1.004 shares for 1 bond since June 1, 2021. This adjusted conversion ratio was calculated by the bond calculation agent in accordance with the calculation formula stipulated in the terms and conditions of the bonds based on the following inputs:

• ◼ previous bond conversion ratio: 1 share for 1 bond;
• ◼ share price: €122.26563;
• ◼ dividend per share paid in 2021: €0.43.

The bonds come with an early redemption option that the bearer may trigger in the event of a change of control and that the issuer may trigger if (i) as from June 5, 2024, the share price multiplied by the bond conversion ratio exceeds 130% of the par value of the bonds or (ii) at any time, the number of bonds outstanding represents less than 20% of the number of bonds originally issued.

Unless converted, redeemed or repurchased and canceled prior to maturity, the bonds are redeemable at par on May 15, 2027.

OCÉANEs are deemed a hybrid instrument comprising equity and debt.

After deducting issuance fees, a total of €760 million was recognized under interest-bearing financial liabilities for the initial bonds on the issue date, corresponding to the present value of cash flows from a similar bond with no conversion rights (see Note 21, "Interest-bearing financial liabilities").

The effective annual interest rate on the liability component is 1.63% including issuance fees.

After deducting issuance fees, a total of €197 million was recognized under interest-bearing financial liabilities for the additional bonds on the issue date, corresponding to the present value of cash flows from a similar bond with no conversion rights (see Note 21, "Interest-bearing financial liabilities").

The effective annual interest rate on the liability component is 1.154% including issuance fees.

The option component recognized in equity for the initial bonds was valued at €33 million on the issue date, or €24 million after the deferred tax impact (see the consolidated statement of changes in shareholders' equity for first-half 2020). The option component recognized in equity for the additional bonds was valued at €20 million on the issue date, or €15 million after the deferred tax impact (see the consolidated statement of changes in shareholders' equity for second-half 2020).

2021-2028 OCÉANEs

On June 14, 2021, Safran issued 4,035,601 bonds convertible and/or exchangeable for existing shares ("OCÉANEs"), each with a par value of €180.89, i.e., representing a total nominal amount of €730 million.

The bonds do not carry any coupon.

The bonds were issued at a price of €187.22 per bond, representing a total issue amount of €756 million.

Bondholders have the option of converting their bonds into shares. This option can be exercised at any point after the issue date and up to the seventh trading day preceding the standard or early redemption date.

At June 30, 2021 and since the bond issuance date, the bond conversion ratio represents 1 share for 1 bond.

The bonds come with an early redemption option that the bearer may trigger in the event of a change of control and that the issuer may trigger if (i) as from April 1, 2025, the share price multiplied by the bond conversion ratio exceeds €235.157 (i.e., 130% of the par value of the bonds) or (ii) at any time, the number of bonds outstanding represents less than 20% of the number of bonds originally issued.

Unless converted, redeemed or repurchased and canceled prior to maturity, the bonds are redeemable at par on April 1, 2028.

OCÉANEs are deemed a hybrid instrument comprising equity and debt.

After deducting issuance fees, a total of €712 million was recognized under interest-bearing financial liabilities, corresponding to the present value of cash flows from a similar bond with no conversion rights (see Note 21, "Interest–bearing financial liabilities").

The effective annual interest rate on the liability component is 0.376% including issuance fees.

The option component recognized in equity was valued at €39 million on the issue date, or €29 million after the deferred tax impact (see the consolidated statement of changes in shareholders' equity).

e) Dividend distribution

At the Annual General Meeting of May 26, 2021, the shareholders approved a dividend payment of €0.43 per share in respect of 2020, representing a total payout of €183 million. The dividend was paid in full on June 2, 2021.

Notes to the Group condensed interim consolidated financial statements

NOTE19 PROVISIONS

Provisions break down as follows:

				Reversals		Changes inscopeof
(in € millions)	Dec.31,2020	Additions	(1) Utilizations	Reclassifications(1)	Surplus(2)	consolidation		Other June30,2021
Performance warranties	1,110	94	(76)	-	(9)	(1)	1	1,119
Financial guarantees	2	-	-	-	-	-	-	2
Post-employment benefits	994	34	(48)	-	-	-	(63)	917
Sales agreements	189	12	(9)	-	(11)	-	4	185
Provisions for losses on completion and losses arising on delivery commitments	180	27	(17)	-	-	-	6	196
Disputes and litigation	25	5	(4)	-	(1)	-	-	25
Other	347	62	(62)	-	(5)	-	5	347
TOTAL	2,847	234	(216)	-	(26)	(1)	(47)	2,791
◼ Non-current	1,942							1,922
◼ Current	905							869

(1) These reversals in respect of expenses for the period or reclassifications had no impact on profit for the period. (2) Including the foreign exchange difference resulting from fluctuations in the EUR/USD exchange rate in 2021.

The impacts on the income statement of overall movements in provisions can be analyzed as follows:

TOTAL	8
Additions (-)/Reversals (+) recognized in financial income (loss)	(25)
Additions (-)/Reversals (+) recognized in non-recurring operating income	15
Utilization of provisions against operating expenses and therefore with no income statement impact	186
Additions (-)/Reversals (+) recognized in recurring operating income with income statement impact	(168)
(in € millions)	June30,2021

Movements in provisions had a €168 million negative impact on recurring operating income.

NOTE20 BORROWINGS SUBJECT TO SPECIFIC CONDITIONS

This caption includes repayable advances granted by public bodies.

Movements in this caption break down as follows:

(in € millions)
At December 31, 2020	426
New advances received	4
Advances repaid	(12)
Sub-total: changes with a cash impact	(8)
Cost of borrowings and discounting	8
Foreign exchange differences	1
Adjustments to the probability of repayment of advances	(99)
Sub-total: changes with no cash impact	(90)
AT JUNE 30, 2021	328

Estimates as to the repayable amounts and the timing of repayments are made regarding borrowings subject to specific conditions.

The Group revised the probability of repayment for its repayable advances, mainly with regard to civil aircraft programs.

NOTE21 INTEREST-BEARING FINANCIAL LIABILITIES

Breakdown of interest-bearing financial liabilities:

(in € millions)	Dec.31,2020	June30,2021
Bond issue	212	1,598
Convertible bonds (OCÉANEs)	1,641	1,676
Senior unsecured notes in USD	1,430	987
Lease liabilities	494	485
Long-term borrowings	305	289
Total non-current interest-bearing financial liabilities (portion maturing in more than 1 year at inception)	4,082	5,035
Bond issue	500	-
Convertible bonds (OCÉANEs)	-	26
Senior unsecured notes in USD	-	469
Lease liabilities	114	100
Long-term borrowings	347	367
Accrued interest not yet due	10	8
Current interest-bearing financial liabilities, long-term at inception	971	970
Negotiable European Commercial Paper (NEU CP)	1,322	175
Short-term bank facilities and equivalent	216	352
Current interest-bearing financial liabilities, short-term at inception	1,538	527
Total current interest-bearing financial liabilities (less than 1 year)	2,509	1,497
TOTAL INTEREST-BEARING FINANCIAL LIABILITIES(1)	6,591	6,532

(1) The fair value of interest-bearing financial liabilities amounts to €6,722 million (€6,762 million at December 31, 2020).

Movements in this caption break down as follows:

(in € millions)
At December 31, 2020	6,591
Increase in long-term borrowings at inception (excluding lease liabilities)	2,151
Decrease in long-term borrowings at inception	(1,293)
Change in short-term borrowings	(1,005)
Sub-total: changes with a cash impact	(147)
Net increase in lease liabilities	28
Accrued interest	-
Changes in scope of consolidation	(13)
Foreign exchange differences	56
2023 OCÉANEs repurchase(1)	71
Option component of the 2028 OCÉANEs(2)	(39)
Change in the fair value of borrowings hedged with interest rate instruments(3)	(13)
Reclassifications and other	(2)
Sub-total: changes with no cash impact	88
AT JUNE 30, 2021	6,532

(1) Corresponding to the loss recognized in respect of the equity component of the 2023 OCÉANEs following the repurchase on June 15, 2021.

(2) See Note 18.d, "Convertible bond issues".

(3) See Note 23, "Management of market risks and derivatives".

Analysis by maturity:

(in € millions)	Dec.31,2020	June30,2021
Maturing in:
◼ 1 year or less	2,509	1,498
◼ More than 1 year and less than 5 years	2,410	1,934
◼ Beyond 5 years(1)	1,672	3,100
TOTAL	6,591	6,532

(1) Mainly relating to USPP, OCÉANE and other bond issues.

Notes to the Group condensed interim consolidated financial statements

Analysis by currency before hedging:

	Dec.31,2020		June30,2021
(in millions of currency units)	Currency	EUR	Currency	EUR
EUR	5,072	5,072	4,957	4,957
USD	1,704	1,389	1,715	1,443
CAD	8	5	6	4
GBP	22	24	20	23
Other	N/A	101	N/A	105
TOTAL		6,591		6,532

Analysis by currency after hedging:

	Dec.31,2020		June30,2021
(in millions of currency units)	Currency	EUR	Currency	EUR
EUR	6,216	6,216	6,127	6,126
USD	298	245	323	274
CAD	8	5	6	4
GBP	22	24	20	23
Other	N/A	101	N/A	105
TOTAL		6,591		6,532

Analysis by type of interest rate:

◼ Analysis by type of interest rate (fixed/floating), before hedging:

		Total Non-current					Current
		Dec.31,2020 June30,2021		Dec.31,2020	June30,2021		Dec.31,2020		June30,2021
				Average		Average		Average		Average
(in € millions)	Base	Base	Base	interest rate	Base	interest rate	Base	interest rate	Base	interest rate
Fixed rate	5,594	6,037	3,941	2.45%	4,906	1.63%	1,653	0.27%	1,131	1.99%
Floating rate	997	495	142	1.29%	129	1.23%	855	0.40%	366	1.00%
TOTAL	6,591	6,532	4,083	2.41%	5,035	1.62%	2,508	0.31%	1,497	1.75%

◼ Analysis by type of interest rate (fixed/floating), after hedging:

		Total	Non-current				Current
		Dec.31,2020 June30,2021		Dec.31,2020	June30,2021		Dec.31,2020					June30,2021
(in € millions)	Base	Base	Base	Average interest rate	Base	Average interest rate	Base	Average interest rate	Base	Average interest rate
Fixed rate	5,382	5,828	3,729	1.71%	4,696	1.26%	1,653	0.27%	1,132	0.85%
Floating rate	1,209	704	354	1.13%	339	1.08%	855	0.40%	365	1.00%
TOTAL	6,591	6,532	4,083	1.66%	5,035	1.25%	2,508	0.31%	1,497	0.89%

The Group's net debt position is as follows:

(in € millions)	Dec.31,2020	June30,2021
Cash and cash equivalents (A)	3,747	3,927
Interest-bearing financial liabilities (B)	6,591	6,532
Fair value of interest rate derivatives used as fair value hedges of borrowings (C)	52	39
TOTAL (A) - (B) + (C)	(2,792)	(2,566)

The Group's gearing ratio is shown below:

(in € millions)	Dec.31,2020	June30,2021
Net debt	(2,792)	(2,566)
Total equity	12,750	13,451
GEARING RATIO	21.90%	19.08%

Main long-term borrowings at inception

• ◼ US private placement (USPP) of senior unsecured notes issued by the Group on February 9, 2012, under which USD 1.045 billion was outstanding at June 30, 2021, comprising:
  • USD 540 million of 10-year notes due February 2022 at a 4.28% fixed-rate coupon; and
  • USD 505 million of 12-year notes due February 2024 at a 4.43% fixed-rate coupon.

An interest rate hedge in the form of a cross currency swap (USD floating-rate borrower at inception, followed by EUR fixed-rate borrower from March 2019) was set up on these two tranches, allowing the USD fixed-rate debt to be fully swapped for EUR fixed-rate debt.

In first-half 2021, the average interest rate of the issue came out at 1.64% after taking into account the impact of interest rate derivatives.

• ◼ US private placement (USPP) of senior unsecured notes issued by the Group on June 29, 2020 for a nominal amount equivalent to €564 million, comprising:
  • USD 181 million of 10-year notes due June 2030 at a 3.10% fixed-rate coupon (tranche A);
  • USD 133 million of 12-year notes due June 2032 at a 3.30% fixed-rate coupon (tranche B);
  • €122 million of 10-year notes due June 2030 at a 2.00% fixed-rate coupon (tranche C);
  • €164 million of 12-year notes due June 2032 at a 2.05% fixed-rate coupon (tranche D).

A EUR/USD cross currency swap (EUR fixed-rate borrower and USD fixed-rate lender) was set up on tranches A and B on July 21, 2020, swapping USD fixed-rate debt for EUR fixed-rate debt.

After taking this hedge into account, tranche A bears fixed-rate interest at 2.04% and has a notional amount of €158 million, while tranche B bears fixed-rate interest at 2.22% and has a notional amount of €116 million.

After taking this hedge into account, the 10-year notes (tranches A and C) of the USPP carry an effective coupon of 2.02% and have a notional amount of €280 million, while the 12-year notes (tranches B and D) carry an effective coupon of 2.12% and have a notional amount of €280 million.

• ◼ Issuance on April 11, 2014 of 10-year, 2.875% fixed-rate bonds for €200 million (maturing in April 2024). The bonds were issued at 99.529% of par. A floating-rate swap was set up on this issue. The effective coupon in 2021 is 1.02% after taking into account the impact of interest rate derivatives.
• ◼ Issuance on March 16, 2021 of:
  • 5-year, 0.125% fixed-rate bonds for €700 million (maturing on March 16, 2026). The bonds were issued at 99.231% of par. Upon issuance, the bonds were rated BBB+ by Standard & Poor's;
  • 10-year, 0.750% fixed-rate bonds for €700 million (maturing on March 17, 2031). The bonds were issued at 99.349% of par. Upon issuance, the bonds were rated BBB+ by Standard & Poor's.
• ◼ Euro private placement ("Euro PP") in the form of a syndicated loan with an original maturity of seven years, contracted by the former Zodiac Aerospace group on March 10, 2016 and falling due on March 10, 2023, on which €180 million was outstanding at June 30, 2021 at an adjustable rate of 2.902%.
• ◼ Bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs") on June 21, 2018 for a nominal amount of €700 million. The bonds do not carry a coupon and were offered at an issue price representing 100% of par, or a gross yield to maturity of 0%. The effective annual interest rate on the liability component of the OCÉANEs is 1.40% including issuance fees (see Note 18.d, "Convertible bond issues"). Following an offer made by Safran on June 8, 2021, 96.2% of the OCÉANEs were repurchased on June 15, 2021. Following the repurchase, 3.8% of the OCÉANEs remained outstanding at June 30, 2021. They were redeemed early at par on July 19, 2021.
• ◼ Bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs") on May 15, 2020 for a nominal amount of €800 million. The bonds bear interest at 0.875% and were offered at an issue price representing 100% of par, or a gross yield to maturity of 0.875%. Unless converted, redeemed or repurchased and canceled prior to maturity, the bonds are redeemable at par on May 15, 2027. The effective annual interest rate on the liability component of the OCÉANEs is 1.63% including issuance fees (see Note 18.d, "Convertible bond issues").
• ◼ Tap issue of bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs") on October 12, 2020 for a nominal amount of €200 million. The bonds bear interest at 0.875% and were offered at an issue price representing 109.03% of par, or a gross negative yield to maturity of 0.419%. The bonds carry the same terms and conditions as those issued on May 15, 2020, with which they are fully fungible and with which they form a single series. The effective annual interest rate on the liability component of the OCÉANEs issued on October 12, 2020 is 1.154% including issuance fees (see Note 18.d, "Convertible bond issues").
• ◼ Bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs") on June 14, 2021 for a nominal amount of €730 million. The bonds do not carry a coupon and were offered at an issue price representing 103.5% of par, or a gross negative yield to maturity of 0.50%. Unless converted, redeemed or repurchased and canceled prior to maturity, the bonds are redeemable at par on April 1, 2028. The effective annual interest rate on the liability component of the OCÉANEs is 0.38% including issuance fees (see Note 18.d, "Convertible bond issues").
• ◼ Negotiable European Commercial Paper (NEU CP) subscribed by a corporate mutual fund of the Group employee savings plan and amounting to €431 million at June 30, 2021. The average interest rate payable by Safran on this commercial paper was 0.99% at June 30, 2021. The sums managed by the corporate mutual fund and reinvested in Safran NEU CP are frozen for an initial period of five years. In view of the fund's commitments, the NEU CP is classified within long-term borrowings. At June 30, 2021, 82% of the sums managed by the corporate mutual fund will be available within one year. Accordingly, 82% of the €431 million in NEU CP is classified within the current portion of long-term borrowings.
• ◼ Lease liabilities recognized in accordance with IFRS 16 (including former finance lease liabilities) totaling €585 million at June 30, 2021.

The Group's other long- and medium-term borrowings are not material taken individually.

During first-half 2021, the following borrowings were redeemed at maturity or bought back:

• ◼ Four-year floating-rate bonds issued on June 28, 2017 at 3‑month Euribor +57 basis points (coupon floored at 0%) for €500 million, redeemed on June 28, 2021.
• ◼ 96.2% of the bonds convertible into new shares and/or exchangeable for existing shares ("OCÉANEs") issued on June 21, 2018 for a nominal amount of €700 million, repurchased on June 15, 2021 for €745 million.

Main short-term borrowings

• ◼ Negotiable European Commercial Paper (NEU CP): €175 million (€1,322 million at December 31, 2020), reflecting a priority given to longer-term debt instruments.
• ◼ Financial current accounts with non-consolidated subsidiaries and joint ventures: €328 million (€180 million at December 31, 2020). Interest is indexed to Euribor.

Other short-term borrowings consist mainly of bank overdrafts.

Sale of receivables without recourse

Net debt at both June 30, 2021 and December 31, 2020 does not include trade receivables sold without recourse, including the two lines below relating to CFM International Inc. (joint operation):

• ◼ The confirmed facility renewed in December 2020 and maturing in December 2022 for USD 1,430 million, contracted with a syndicate of seven banks led by Crédit Agricole CIB, increased to USD 1,780 million at end–January 2021 with a syndicate of eight banks, and set to be reduced to USD 625 million in December 2021, had been drawn in an amount of USD 1,623 million at June 30, 2021 (USD 811.5 million based on a 50% interest) versus USD 546 million at December 31, 2020 (USD 273 million based on a 50% interest) and USD 1,244 million at June 30, 2020 (USD 622 million based on a 50% interest).
• ◼ The confirmed facility renewed at end-December 2020 and maturing in June 2021 for USD 180 million, contracted with a syndicate of three banks led by Crédit Agricole CIB and now maturing in September 2021, or conditionally in December 2021, further to being renewed for the same amount with Crédit Agricole CIB, had been drawn in an amount of USD 164 million at June 30, 2021 (USD 82 million based on a 50% interest) versus USD 167 million at December 31, 2020 (USD 83.5 million based on a 50% interest) and USD 297 million at June 30, 2020 (USD 149 million based on a 50% interest).

NOTE22 OTHER CURRENT AND NON-CURRENTFINANCIAL LIABILITIES

(in € millions)	Dec.31,2020	Movements during theperiod	Changes inscopeof consolidation	Foreign exchange	differences Reclassifications	June30,2021
Payables on purchases of property, plant and equipment and intangible assets	61	101	-	-	3	165
TOTAL	61	101	-	-	3	165
◼ Non-current	2					109
◼ Current	59					56

These liabilities are not included in the Group's net financial position at June 30, 2021.

NOTE23 MANAGEMENT OF MARKET RISKS AND DERIVATIVES

The main market risks to which the Group is exposed are foreign currency risk, interest rate risk, counterparty risk and liquidity risk. The carrying amount of derivatives used to manage market risks is shown below:

	Dec.31,2020		June30,2021
(in € millions)	Assets	Liabilities	Assets	Liabilities
Interest rate risk management	52	(18)	39	(20)
Floating-for-fixed interest rate swaps	-	(18)	-	(20)
Fixed-for-floating interest rate swaps	52	-	39	-
Foreign currency risk management	694	(1,244)	1,335	(1,153)
Currency swaps	-	(95)	-	(59)
Purchase and sale of forward currency contracts	98	(33)	110	(115)
Currency option contracts	596	(1,116)	1,225	(979)
TOTAL	746	(1,262)	1,374	(1,173)

All derivatives are categorized within Level 2 of the fair value hierarchy set out in IFRS 13 (as at December 31, 2020).

Credit valuation adjustment (CVA) and debt valuation adjustment (DVA) are taken into account when measuring the fair value of derivatives.

Foreign currency risk management

Most Group revenue is denominated in US dollars, which is virtually the sole currency used in the civil aviation industry. The net excess of revenues over operating expenses for these activities totaled USD 3 billion in first-half 2021 (USD 4.5 billion in first-half 2020).

To protect its earnings, the Group implements a hedging policy (see below) with the aim of reducing uncertainty factors affecting operating profitability and allowing it to adapt its cost structure to an unfavorable monetary environment.

Hedging policy

The Group's foreign currency risk management policy is described in section 3.1, Note 31 of the 2020 Universal Registration Document.

Foreign currency derivatives

The portfolio of foreign currency derivatives breaks down as follows:

		June30,2021
		Notional	Less than			Notional	Less than
(in millions of currency units)	Fair value(1)	amount(1)	1year		1to5years Fair value(1)	amount(1)	1year	1to5years
Forward exchange contracts	65				(5)
Short USD position	34	2,413	2,413	-	(25)	1,789	1,789	-
Of which against EUR	34	2,413	2,413	-	(25)	1,789	1,789	-
Long USD position	(19)	(163)	-	(163)	(14)	(163)	-	(163)
Of which against EUR	(19)	(163)	-	(163)	(14)	(163)	-	(163)
Short EUR position against GBP	4	107	-	107	26	207	50	157
Short EUR position against CAD	-	-	-	-	-	-	-	-
Long MXN position against EUR	46	(12,245)	(3,604)	(8,641)	8	(18,441)	(3,977)	(14,465)
Currency swaps	(95)				(59)
Cross currency swaps	(95)	1,359	-	1,359	(59)	(1,359)	(540)	(819)
Currency option contracts	(520)				246
USD put purchased	481	30,975	25,675	5,300	1,022	41,035	35,725	5,310
USD call purchased	16	(1,900)	(1,900)	-	23	(1,400)	(1,400)	-
USD call sold	(210)	71,210	61,110	10,100	(430)	78,420	70,100	8,320
USD put sold	(105)	(3,800)	(3,800)	-	(25)	(2,800)	(2,800)	-
EUR put purchased	68	1,480	1,000	480	108	1,378	1,231	147
EUR call sold	(27)	2,760	2,000	760	(35)	2,455	2,160	295
Accumulators – sell USD for EUR(2)	6	1,963	537	1,426	64	1,042	(195)	1,237
Accumulators – buy USD for EUR(2)	(661)	(7,808)	(5,002)	(2,805)	(481)	(6,782)	(4,963)	(1,819)
Accumulators – sell EUR for GBP(2)	(10)	(105)	(105)	-	-	-	-	-
Accumulators – sell EUR for CAD(2)	(34)	(230)	(230)	-	-	-	-	-
Accumulators – sell EUR for MXN(2)	(44)	(335)	(335)	-	-	-	-	-
TOTAL	(550)				182

(1) Fair values are expressed in millions of euros; notional amounts are expressed in millions of currency units.

(2) Notional amounts for accumulators represent the maximum cumulative amount until the instrument is unwound.

In the balance sheet, changes in the fair value of outstanding currency hedging instruments between December 31, 2020 and June 30, 2021 represent a positive €732 million.

In the income statement, the Group has chosen not to apply hedge accounting to these derivatives. As a result, any changes in the fair value of these instruments are recognized in full in "Financial income (loss)".

Interest rate risk management

The Group's interest rate risk management policy is described in section 3.1, Note 31 of the 2020 Universal Registration Document.

Exposure to EUR interest rate risk

Interest rate swaps were taken out to convert the fixed rate payable on the €200 million bond issue carried out in first-half 2014 and maturing in April 2024 to a floating rate.

These swaps are eligible for fair value hedge accounting.

	Dec.31,2020						June30,2021
(in € millions)	Fair value	Notionalamount (€)	Less than 1year	1to5years	Morethan 5years	Fair value	Notionalamount (€)	Less than 1year	1to5years	Morethan 5years
Interest rate swaps
Fixed-for-floating	13	200	-	200	-	10	200	-	200	-
TOTAL	13					10

Exposure to USD interest rate risk

The interest rate on the two outstanding tranches of the US private placement (USPP) set up on February 9, 2012 was converted to a floating rate at inception. Floating-rate borrower/fixed-rate lender USD swaps were set up on these 10-year and 12-year tranches for USD 540 million and USD 505 million, respectively. These swaps are eligible for fair value hedge accounting.

In March 2019, these 10-year and 12-year tranches for USD 540 million and USD 505 million, respectively, were reset to euros by means of a cross currency swap (USD floating-rate lender/EUR fixed-rate borrower).

The interest rate portion of the cross currency swap was eligible for hedge accounting.

On July 21, 2020, a cross currency swap (USD fixed-rate lender/EUR fixed-rate borrower) was set up on two USD tranches of the June 29, 2020 senior unsecured notes issue on the US private placement market (USPP), amounting to USD 181 million bearing fixed-rate interest over a period of 10 years (tranche A) and USD 133 million bearing fixed-rate interest over a period of 12 years (tranche B). The interest rate portion of the cross currency swap was eligible for hedge accounting.

Fixed-rate borrower/floating-rate lender swaps were set up in connection with the sale of trade receivables without recourse. The swaps are for a nominal amount of USD 1,150 million and a term of up to 12 months, and were taken out on behalf of a joint arrangement 50%-owned by the Group. This transaction gives rise to a floating-rate borrower/fixed-rate lender swap for a nominal amount of USD 575 million after elimination of intragroup items. These swaps are not eligible for hedge accounting. The aim of these transactions is to fix the borrowing cost applicable to the customer.

	Dec.31,2020				June30,2021
(in € millions)	Fair value	Notionalamount (USD)	Less than 1year	1to5years	Morethan 5years	Fair value	Notionalamount (USD)	Less than 1year	1to5years	Morethan 5years
USD interest rate swaps
Fixed-for-floating	39	1,620	575	1,045	-	29	1,620	1,115	505	-
Floating-for-fixed	(18)	2,509	1,150	1,045	314	(20)	2,509	1,690	505	314
TOTAL	21					9

Counterparty risk management

The Group is exposed to counterparty risk on the following:

• ◼ short-term financial investments;
• ◼ derivatives;
• ◼ trade receivables;
• ◼ financial guarantees granted to customers;
• ◼ undrawn borrowings or lines of credit.

Financial investments are diversified and consist of blue-chip securities that are traded with top-tier banks.

The sole purpose of the Group's derivative transactions is to reduce the overall exposure to foreign currency and interest rate risks resulting from its ordinary business activities. Transactions are either carried out on organized markets or over-the-counter with top-tier intermediaries.

The Group's borrowings and credit facilities are taken out with top-tier banks.

The Group has stepped up the monitoring of its bad debt risks to ensure the collection of its current and future receivables.

In the context of the health crisis, the Group paid particular attention to the situation of its airline customers, especially those placed in insolvency proceedings (procédure collective) or that had announced restructuring plans.

A provision was accrued for any receivables or assets considered at risk (i.e., payment default at maturity, insolvency proceedings, etc.), based on a case-by-case analysis.

The impairment rate for expected credit losses was increased to 0.52% at June 30, 2021 (versus 0.36% at December 31, 2020), based on the approach described in section 3.1, Note 2.n of the 2020 Universal Registration Document.

At June 30, 2021, the net amount of impairment losses recognized in this respect against trade and other receivables was €2 million.

Liquidity risk management

Treasury management is centralized within the Group. Where permitted by local legislation, all surplus cash is invested with, and financing requirements of subsidiaries met by, the parent company on an arm's length basis. The central cash team manages the Group's current and forecast financing requirements, and ensures it has the ability to meet its financial commitments while maintaining a level of available cash funds and confirmed credit facilities commensurate with its scale and debt repayment profile.

The Group has a confirmed €2,520 million liquidity line. This line was set up in December 2015 and had an original maturity of December 2020, with two successive one-year extension options. Both these options have been exercised, meaning that the line is currently set to expire in December 2022. This line is not subject to any financial covenants. It was undrawn at June 30, 2021.

On April 22, 2020, the Group set up an additional confirmed liquidity line for an initial amount of €3,000 million. This line was canceled in full on March 16, 2021 further to the various refinancing operations carried out by the Group between April 22, 2020 and March 16, 2021 (see Note 21, "Interest-bearing financial liabilities"),

On March 4, 2021, Safran signed a new €500 million bank loan agreement with the European Investment Bank (EIB). The loan will be made available to Safran, at the date of its choosing, within 18 months of the date of signature of the agreement, and will have a maturity of up to ten years, as from when the funds are provided. The loan will be used to finance some of the Group's research into innovative propulsion systems for the next generation of single-aisle commercial aircraft, marking a major step forward in Safran's roadmap towards achieving carbon free air transportation. This loan is not subject to any financial covenants. It was undrawn at June 30, 2021.

Issues of senior unsecured notes on the US private placement market (USPP) on February 9, 2012 and June 29, 2020 are subject to a financial covenant which states that the net debt to EBITDA ratio must be 2.5 or less at all times (see Note 21, "Interest-bearing financial liabilities"). The covenant is tested every six months and the Group complied with the applicable ratio at June 30, 2021.

The following annual covenant applies to the euro private placement ("Euro PP") in the form of a syndicated loan, set up by the former Zodiac Aerospace on March 10, 2016 and with an original maturity of seven years (see Note 21, "Interest-bearing financial liabilities"): net debt to EBITDA ratio of 3.5 or less.

NOTE24 RELATED PARTIES

In accordance with IAS 24, the Group's related parties are considered to be its owners (including the French State), companies in which these owners hold equity interests, associates, joint ventures and management executives.

The French State also holds a golden share in Safran Ceramics allowing it to veto any change in control of the company or sale of company assets.

The following transactions were carried out with related parties other than joint ventures:

(in € millions)	First-half2020	First-half2021
Sales to related parties other than joint ventures	2,168	2,023
Purchases from related parties other than joint ventures	(48)	(47)

(in € millions)	Dec.31,2020	June30,2021
Amounts receivable from related parties other than joint ventures	1,815	2,027
Amounts payable to related parties other than joint ventures	2,377	2,517

(in € millions)	Dec.31,2020	June30,2021
Commitments given to related parties other than joint ventures(1)	2,005	2,163

(1) See Note 25.a, "Off-balance sheet commitments and contingent liabilities relating to the Group's operating activities".

Transactions with related parties other than joint ventures primarily concern the delivery of aviation products to Airbus and the French Directorate General of Weapons Procurement (DGA).

The following transactions were carried out with joint ventures:

First-half2020 (in € millions)	First-half2021
Sales to joint ventures(1) 63	55
Purchases from joint ventures (39)	(33)

(1) Mainly with Shannon Engine Support Limited.

(in € millions)	Dec.31,2020	June30,2021
Amounts receivable from joint ventures	106	96
Amounts payable to joint ventures	56	54

(in € millions)	Dec.31,2020	June30,2021
Commitments given to joint ventures	252	231

The terms "net debt" and "EBITDA" used in the aforementioned covenants are defined as follows:

• ◼ net debt: interest-bearing borrowings (excluding borrowings subject to specific conditions) less marketable securities and cash and cash equivalents;
• ◼ EBITDA: the sum of profit (loss) from operations and the net charge to depreciation, amortization and provisions for impairment of assets (calculated based on adjusted data).

NOTE25 OFF-BALANCE SHEET COMMITMENTS AND CONTINGENT LIABILITIES

a) Off-balance sheet commitments and contingent liabilities relating to the Group's operating activities

a.1) Commitments given and contingent liabilities

The Group granted the following commitments in connection with its operating activities:

(in € millions)	Dec.31,2020	June30,2021
Purchase commitments on intangible assets	10	11
Purchase commitments on property, plant and equipment	141	110
Guarantees given in connection with the performance of operating agreements	5,493	6,016
Lease commitments	112	78
Financial guarantees granted on the sale of Group products	9	9
Other commitments given	494	547
TOTAL	6,259	6,771

Guarantees given in connection with the performance ofoperating agreements

These guarantees relate mainly to guarantees granted by Safran to customers and principals (essentially aircraft manufacturers) in which Safran or the subsidiary provide a joint and several guarantee that its subsidiaries will perform their duties under their contractual obligations. These guarantees are given in respect of research, design, development, manufacturing, marketing and product support programs in place at Group subsidiaries. They are generally granted for the term of the program concerned, and are capped at a certain amount.

Guarantees granted to Airbus are shown within "Guarantees granted to related parties" in Note 24, "Related parties".

Leasecommitments

As of January 1, 2019, lease commitments given concern leases qualifying for the IFRS 16 exemption criteria (short-term leases or leases of low-value assets), as well as leases signed but not yet started.

Financial guarantees granted on thesale of Group products

The financial guarantees shown in this table concern aerospace financing arrangements in place at the end of the reporting period, granted to support sales of civil engines. These arrangements take the form of aircraft financing or guarantees covering the value of assets.

The Group's gross exposure in respect of these financing commitments in their transaction currency represents USD 10 million at June 30, 2021 (USD 11 million at December 31, 2020), or €8 million (€9 million at December 31, 2020). However, these amounts do not reflect the actual risk to which Safran is exposed. In view of the value of the underlying assets pledged as security, the net exposure represents USD 2 million at June 30, 2021 (USD 2 million at December 31, 2020), for which a provision, based on an assessment of the risk, is booked in the financial statements (see Note 19, "Provisions").

Financing commitments granted to clients alongside aircraft manufacturers in connection with certain civil engine sales campaigns form part of financing packages proposed by aircraft manufacturers to airline companies and generally correspond to the share represented by Group engines in the financing of the aircraft concerned. These commitments are not included in the gross exposure since (i) the probability that they will be called by the airline companies is too uncertain because the deliveries are too far in the future, and (ii) in the past, few commitments have been called due to their dissuasive conditions and to the fact that they represent a "last recourse" after the active rental, banking, credit insurance and investor markets.

Othercommitments given

In connection with the French government's aerospace support plan, Safran undertook to subscribe to the Ace Aéro Partenaires investment fund in an amount of €58 million.

Following the various funding rounds completed, the amount of Safran's commitment was reduced to €53 million at June 30, 2021.

Contingent liabilitiesarising on ordinaryactivities

As part of their ordinary activities, Safran, some of its subsidiaries, or certain joint arrangements or consortia in which they are shareholders or members, may be subject to various claims from customers. These claims usually consist of compensation claims for failing to meet technical specifications, a delay in the development phase, late completion and/or for additional work in connection with product performance and reliability falling outside the scope of the warranties and commitments provisioned or included within contract costs (see Note 3.b, "Provisions", and Note 19, "Provisions"). While the initial amount of any such claim may be material in certain cases, it does not necessarily have any bearing on the costs that may be ultimately incurred to satisfy the customer. As these claims represent contingent liabilities, no provision has been recognized beyond contractual liability limits, if any.

In the absence of an agreement between the parties, some of these claims may give rise to litigation, the most significant of which are indicated in Note 26, "Disputes and litigation".

a.2) Commitments received

The Group was granted the following commitments in connection with its operating activities:

(in € millions)	Dec.31,2020	June30,2021
Commitments received from banks on behalf of suppliers	8	9
Completion warranties	8	6
Endorsements and guarantees received	2	1
Other commitments received	44	44
TOTAL	62	60

b) Off-balance sheet commitments and contingent liabilities relating to the Group's scope of consolidation

Vendor warranties are given or received on the acquisition or sale of companies.

b.1) Vendor warranties given

Dec.31,2020 (in € millions)	June30,2021
Vendor warranties given(1) 277	281

(1) Vendor warranties, the amount of which may be fixed or determinable.

b.2)Vendor warranties received

(in € millions)	Dec.31,2020	June30,2021
Vendor warranties received	-	-

Vendor warranties granted in connection with the disposalof the Security businesses

In connection with the sale of the identity and security businesses on May 31, 2017, Safran granted Advent International a vendor warranty valued at €180 million at June 30, 2021, as well as a specific indemnity capped at BRL 200 million (€34 million at June 30, 2021) to cover any financial consequences arising from the dispute between Morpho do Brasil and the Brazilian tax authorities concerning the calculation method for value added tax on certain products.

In connection with the sale of the detection businesses on April 7, 2017, Safran granted Smiths Group PLC a vendor warranty valued at USD 73 million (€61 million at June 30, 2021).

In connection with the sale of Structil on October 2, 2017, Safran Ceramics granted the Hexcel group a vendor warranty initially valued at €37 million, reduced to €1 million at June 30, 2021.

c) Off-balance sheet commitments and contingent liabilities relating to the Group's financing

Commitments received in respect of financing relate to:

• ◼ any unused portion of trade receivables factoring facilities, under which the related receivables are deconsolidated (see Note 21, "Interest-bearing financial liabilities");
• ◼ the confirmed, undrawn syndicated credit line for €2,520 million set up in December 2015 (see Note 23, "Management of market risks and derivatives"); and
• ◼ the €500 million bank loan signed with the European Investment Bank (EIB) on March 4, 2021 and undrawn at June 30, 2021 (see Note 23, "Management of market risks and derivatives").

NOTE26 DISPUTES AND LITIGATION

Safran and certain Group subsidiaries are party to regulatory, legal or arbitration proceedings arising in the ordinary course of their operations. Safran and certain Group subsidiaries are also party to claims, investigations, legal action and regulatory proceedings outside the scope of their ordinary operations.

The amount of the provisions booked is based on the level of risk for each case, as assessed by Safran and its subsidiaries and largely depends on their assessment of the merits of the claims and defensive arguments, bearing in mind that the occurrence of events during the proceedings can lead to a reassessment of the risk at any time.

A provision is only booked to cover the expenses that may result from such proceedings when the expenses are probable and their amount can be either quantified or reasonably estimated.

Safran considers that the provisions booked are adequate to cover the risks it incurs.

The most important proceedings are described below.

• ◼ A number of civil and/or criminal lawsuits have been filed against certain Safran subsidiaries in connection with aviation accidents. The Group's insurance policy would cover any civil damages payable by Safran or its subsidiaries under these proceedings.
• ◼ In the course of implementation of its compliance program, Safran detected a situation with regards to an activity located in a company belonging to the previously Zodiac business perimeter acquired in 2018. This activity has been divested and sold on June 1, 2021.

After having conducted its internal investigation, Safran concluded that suspicion of non-compliance during a period between 2004 and 2015 could not be ruled out. Safran decided to self-disclose these elements to the competent authorities in Germany and the US in accordance with applicable regulations and in France. As of to date, the authorities in each of the countries concerned have opened an investigation, but at this stage it is not possible to determine exactly the decision they may take nor the impacts for the company.

To the best of Safran's knowledge and that of its subsidiaries, there are no other ongoing regulatory, legal or arbitration proceedings that could have a material impact on the financial position of the Company and/or Group.

NOTE27 SUBSEQUENTEVENTS

None.

STATUTORY AUDITORS' REVIEW REPORT ON THE INTERIM FINANCIAL INFORMATION

4

FOR THE SIX MONTHS ENDED JUNE 30, 2021

Statutory Auditors' review report on the interim financial information

This is a free translation into English of the Statutory Auditors' review report on the interim financial information issued in French and is provided solely for the convenience of English speaking users. This report includes information relating to the specific verification of information given in the Group's interim activity report. 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 compliance with the assignment entrusted to us by your Annual General Meeting and in accordance with the requirements of Article L.451-1-2 III of the French Monetary and Financial Code (Code monétaire et financier), we hereby report to you on:

• ◼ the review of the accompanying condensed interim consolidated financial statements of Safran for the six months ended June 30, 2021;
• ◼ the verification of the information contained in the interim activity report.

Due to the global crisis related to the Covid-19 pandemic, the condensed interim consolidated financial statements of this period have been prepared and reviewed under specific conditions. Indeed, this crisis and the exceptional measures taken in the context of the state of sanitary emergency have had numerous consequences for companies, particularly on their operations and their financing, and have led to greater uncertainties on their future prospects. Those measures, such as travel restrictions and remote working, have also had an impact on the companies' internal organization and the performance of our work.

These condensed interim consolidated financial statements are the responsibility of the Board of Directors. Our role is to express a conclusion on these financial statements based on our review.

1. Conclusion on the financial statements

We conducted our review in accordance with professional standards applicable in France.

A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with professional standards applicable in France and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim consolidated financial statements have not been prepared, in all material respects, in accordance with IAS 34, "Interim Financial Reporting", as adopted by the European Union.

2. Specific verification

We have also verified the information presented in the interim activity report on the condensed interim consolidated financial statements subject to our review.

We have no matters to report as to its fair presentation and consistency with the condensed interim consolidated financial statements.

Courbevoie and Paris-La Défense, July 28, 2021

The Statutory Auditors

Mazars Ernst & Young et Autres

Gaël Lamant	Jérôme de Pastors	Jean-Roch Varon	Philippe Berteaux

CORPORATE GOVERNANCE

5

SAFRAN'S ORDINARY AND EXTRAORDINARY SHAREHOLDERS' MEETING OF MAY 26, 2021

Safran's Ordinary and Extraordinary Shareholders' Meeting was held on May 26, 2021 at the Safran Campus (32, rue de Vilgénis, 91300 Massy, France), exceptionally behind closed doors, without any shareholders being physically present, in order to protect the health and safety of both the Group's shareholders and its employees, in line with the specific regulations introduced in response to Covid-19 as part of the efforts to stem the spread of the epidemic(1) .

The customary procedures were adapted to the circumstances. The Annual General Meeting was broadcast live on a specific page of the Company's website and via telephone conferencing. The full video recording of the Meeting is also available on the same page. In order to enable shareholders to participate in the Meeting, which provides a valuable opportunity for discussion with the Company's management, various arrangements were put in place. In addition to their legal right to submit written questions, shareholders could ask their questions in writing in advance (up until the day of the Meeting) through a dedicated module on the "Annual General Meeting" page of the Company's website or by telephone during the Meeting.

The resolutions submitted to the vote of the Annual General Meeting were approved, notably financial authorizations allowing Safran to seize opportunities arising on the financial markets, except for authorizations that could only be used during a public offer.

In particular, shareholders approved:

• ◼ the financial statements for the year ended December 31, 2020 and voted for the payment of a dividend of €0.43 per share, to be paid as of June 2, 2021;
• ◼ all of the resolutions concerning the membership structure of the Board of Directors, i.e., the appointment of Olivier Andriès as a Director, the re-appointment of Hélène Auriol Potier, Patrick Pélata and Sophie Zurquiyah as Directors, and the appointment of Fabienne Lecorvaisier as a new independent Director;
• ◼ all of the resolutions relating to corporate officer compensation (2020 compensation, disclosures on compensation, 2021 compensation policies);
• ◼ the new authorization allowing Safran to buy back its own shares at a price not exceeding €165 per share;
• ◼ proposed amendments to the Company's bylaws.

⁽¹⁾ French government ordonnance (order) 2020-321 of March 25, 2020 and Decree no. 2020-418 of April 10, 2020, extended by Decree no. 2021-255 of March 9, 2021.

MEMBERSHIP STRUCTURE OF THE BOARD OF DIRECTORS AND ITS STANDING COMMITTEES

The Board of Directors

Following the approval by the shareholders at the May 26, 2021 Annual General Meeting of all the resolutions relating to its membership structure, the Board of Directors still comprises 18 members, including:

• ◼ nine independent Directors;
• ◼ one representative of the French State and one Director put forward by the French State;
• ◼ two Directors representing employee shareholders and two Directors representing employees.

The proportion of independent Directors remains at 64.3%(1) and the proportion of women on the Board at 42.8%(1) .

Stéphanie Besnier, Deputy Chief Executive Officer of the French State Investments Agency (APE), was named as representative of the French State on Safran's Board of Directors by way of a ministerial decree dated May 12, 2021, replacing Suzanne Kucharekova Milko.

At the filing date of this report, the Board of Directors is thus composed of the following members:

Directors	Independent
Ross McInnes, Chairman of the Board of Directors
Olivier Andriès, Chief Executive Officer
Anne Aubert, Director representing employee shareholders
Marc Aubry, Director representing employee shareholders
Hélène Auriol Potier	X
Patricia Bellinger	X
Stéphanie Besnier, representative of the French State
Hervé Chaillou, Director representing employees
Jean-Lou Chameau	X
Monique Cohen, Lead Independent Director and Chair of the Appointments and Compensation Committee	X
Didier Domange
F&P, represented by Robert Peugeot	X
Laurent Guillot, Chairman of the Audit and Risk Committee	X
Vincent Imbert, Director put forward by the French State
Fabienne Lecorvaisier	X
Daniel Mazaltarim, Director representing employees
Patrick Pélata, Director responsible for monitoring climate issues and Chairman of the Innovation, Technology & Climate Committee	X
Sophie Zurquiyah	X
18 members, of which 64.3% independent(1)

(1) In accordance with the AFEP-MEDEF Corporate Governance Code for Listed Companies, Directors representing employee shareholders and Directors representing employees are not taken into account when calculating the percentage of independent Directors.

⁽¹⁾ In accordance with the AFEP-MEDEF Corporate Governance Code for Listed Companies and French law, Directors representing employee shareholders and Directors representing employees are not included in the calculation.

The standing committees of the Board of Directors

Further to decisions made by the Board of Directors:

• ◼ Laurent Guillot took over as the Chairman of the Audit and Risk Committee on expiration of the term of office of Odile Desforges. He also joined the Innovation, Technology & Climate Committee.
• ◼ Fabienne Lecorvaisier joined the Audit and Risk Committee.
• ◼ Stéphanie Besnier, the representative of the French State on the Board of Directors, joined the Audit and Risk Committee and the Appointments and Compensation Committee, replacing Vincent Imbert.

At the filing date of this report, the standing committees of the Board of Directors are composed as follows:

Auditand Risk Committee	Independent
Laurent Guillot, Chairman	X
Marc Aubry (Director representing employee shareholders)
Stéphanie Besnier (representative of the French State)
Fabienne Lecorvaisier	X
Robert Peugeot (permanent representative of F&P)	X
Sophie Zurquiyah	X

6 members, of which 80% independent (4/5(1))

(1) In accordance with the AFEP-MEDEF Corporate Governance Code for Listed Companies, Directors representing employee shareholders and Directors representing employees are not taken into account when calculating the percentage of independent Directors.

Appointmentsand Compensation Committee	Independent
Monique Cohen, Chair – Lead Independent Director	X
Hélène Auriol Potier	X
Patricia Bellinger	X
Stéphanie Besnier (representative of the French State)
Jean-Lou Chameau	X
Didier Domange
Daniel Mazaltarim (Director representing employees) – "appointments" discussions
Patrick Pélata	X
8 members, of which 71.43% independent (5/7(1))

(1) In accordance with the AFEP-MEDEF Corporate Governance Code for Listed Companies, Directors representing employee shareholders and Directors representing employees are not taken into account when calculating the percentage of independent Directors.

Innovation, Technology & Climate Committee	Independent
Patrick Pélata, Chairman – Director responsible for monitoring climate issues	X
Hélène Auriol Potier	X
Hervé Chaillou (Director representing employees)
Jean-Lou Chameau	X
Vincent Imbert (Director put forward by the French State)
Laurent Guillot	X

6 members, of which 80% independent (4/5(1))

(1) In accordance with the AFEP-MEDEF Corporate Governance Code for Listed Companies, Directors representing employee shareholders and Directors representing employees are not taken into account when calculating the percentage of independent Directors.

SHARE BUYBACK PROGRAM AUTHORIZED BY THE ORDINARY AND EXTRAORDINARY SHAREHOLDERS' MEETING OF MAY 26, 2021

In its 16th resolution, the Annual General Meeting of May 26, 2021 authorized a new share buyback program.

Shares may not be purchased at a price of more than €165 per share and the maximum amount that may be invested in the program is €7 billion.

The program description, drafted in accordance with the provisions of Article 241-2 of the General Regulations of the French financial markets authority (Autorité des marchés financiers – AMF), is available on the Company's website (www.safran-group.com, in the Finance/Publications/Regulated information section).

CONTACT

FINANCIAL COMMUNICATIONS DEPARTMENT

Analysts and institutional investors	Individual shareholders
◼ Tel.: +33 (0)1 40 60 80 80	◼ Toll-free number (mainland France only): 0 800 17 17 17 Monday to Friday, 9 a.m. to 5 p.m.
◼ E-mail: investor.relation@safrangroup.com	◼ E-mail: actionnaire.individuel@safrangroup.com

SAFRAN

2, boulevard du Général-Martial-Valin 75724 Paris Cedex 15 – France

All financial information pertaining to Safran is available on the Group's website at www.safran-group.com, in the Finance section.

© Photo credits: Front cover: Adrien Daste / Safran.

Pierre Soissons / Safran • Adrien Daste / Safran • Frank Rogozienski / CAPA Pictures / Safran • Pascal Le Doare / Safran.

Design and production: Tel.: +33 (0)1 55 32 29 74

Safran 2, boulevard du Général-Martial-Valin – 75724 Paris Cedex 15 – France Tel.: +33 (0)1 40 60 80 80 www.safran-group.com