HERMES_REGISTRATION_DOCUMENT_2017

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CORPORATE GOVERNANCE

SUPERVISORY BOARD’S REPORT ON CORPORATE GOVERNANCE

Duties and work of the Audit Committee in 2017

Duties of the Audit Committee

Work of the Audit Committee in 2017

The Audit Committee studies and prepares certain proceedings of the Supervisory Board and submits to the Board its opinions, proposals and recommendations. In accordance with Article L. 823-19 of the French Commercial Code and without prejudice to the powers of the Board, which it does not replace, the duties of the Audit Committee are to: 1. With regard to preparing accounting and financial information: s review and comment on the individual and consolidated financial statements before they are approved by Executive Management and presented to the Board; s ascertain that the accounting methods applied are relevant and consistent; s verify that internal data collection and control procedures guarantee the quality of the information provided; s review the work programme and results of internal and external audit assignments; s monitor the process of preparing financial information and, where appropriate, make recommendations to ensure its integrity; s monitor the effectiveness of internal control and risk management systems and internal audits regarding the procedures for preparing and processing accounting and financial information without jeopardising its independence. 2. With regard to auditing accounting and financial information and the Statutory Auditors: s make a recommendation to the Board, prepared in accordance with Article 16 of Regulation (EU) no. 537/2014, on the (re)appointment of the Statutory Auditors put to the General Meeting; s monitor the Statutory Auditors’ performance of their duties in light of the High Commission on Statutory Audit’s remarks and conclusions following audits conducted in accordance with Articles L. 821-9 et seq. of the French Commercial Code; s ensure the Statutory Auditors’ compliance with the independence requirements set out in Articles L. 821-9 et seq. of the French Commercial Code, take the necessary measures to apply Article 4 par. 3 of Regulation (EU) no. 537/2014 cited above, and ensure compliance with the conditions mentioned in Article 6 of said Regulation; s approve on a case-by-case basis the provision of the services mentioned in Article L. 822-11-2 of the French Commercial Code in accordance with the following rules: • the following services need not be approved beforehand: - audit of Group reporting by subsidiaries, - audit of local financial statements of subsidiaries, - mandatory services (such as equity transactions), • individual services worth less than €100,000 up to a combined ceiling of €800,000 a year are delegated to the Group finance department, • the approval of the Audit Committee is required for services beyond the above thresholds, • the Statutory Auditors must disclose all fees for the financial year to the Audit Committee, including those relating to services provided within the context of the procedure; s report on the results of the engagement regarding the certification of the financial statements, on the way the engagement contributed to the integrity of financial reporting and the role it has played in this process. 3. Other duties: s report regularly to the Board on the performance of its duties; s promptly inform the Board of any difficulties encountered;

In 2017 the Audit Committee reviewed the following matters:

s presentation of the 2017 budget;

s presentation of the new system for preventing market abuse within the Group; s prior approval by the Audit Committee of services other than the certification of financial statements provided by the Statutory Auditors; s presentation of the internal control and risk management system; s review of activities related to risk management, audit and internal control in 2016; s individual and consolidated financial statements for the year ended 31 December 2016; s proposed audit plan for 2017; s feedback on incidents in 2016; s update of the rules of procedure of the Audit Committee; s presentation of the consensus of financial analysts; s review of the press releases on 2016 revenue, 2016 results and interim 2017 results; s Statutory Auditors’ report on the consolidated financial statements; s challenges facing the Leather Goods and Saddlery purchasing department; s IT security - monitoring of IT risk mapping action plans. As part of its mission, the Audit Committee heard from the Group Finance Director, both with regard to the accounting data and the treasury data, the Consolidation Director, the Audit and Risk Director, and the Statutory Auditors. The work and workings of the Audit Committee were assessed in 2016 as part of the three-year formal self-assessment of the Supervisory Board and were deemed very satisfactory overall. s in camera meeting with the Statutory Auditors; s risk mapping; s update on tax issues; s three-year plan main messages and financial data; s hedging strategy and handling of foreign exchange positions; s sustainable development strategy;

s carry out special tasks assigned to it by the Board.

In carrying out its duties the Audit Committee may conduct site visits to appraise the overall consistency of the internal control and risk management system.

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2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL