HERMES_REGISTRATION_DOCUMENT_2017

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NET FINANCIAL INCOME

NOTE 7

2017

2016

In millions of euros

Income from cash and cash equivalents

7.0 1.6 3.4 8.6

5.6

Cost of gross financial debt

(1.5)

s of which net income/(loss) on hedging instruments

0.6 4.2

Cost of net financial debt

Other financial income and expenses

(40.8) (57.8) (32.2)

(51.9) (52.7) (47.8)

s of which ineffective portion of cash flow hedges

TOTAL

The ineffective portion of cash flow hedges includes +€1.7 million in over-hedging, compared with -€1.1 million in over-hedging in 2016. The impact of the effective portion of the hedges recorded in equity is shown in Note 20.3.

INCOME TAX

NOTE 8

8.1 Breakdown of income tax

2017

2016

In millions of euros

Current tax Deferred tax

(689.6)

(612.5)

20.4

57.0

5

TOTAL

(669.3)

(555.5)

8.2 Rationalisation of income tax expense The effective tax rate was 35.4% as at 31 December 2017, compared with 33.7% as at 31 December 2016. The difference between the theoretical tax expense and the actual tax expense is explained as follows:

2017

2016

In millions of euros

Net income attributable to owners of the parent

1,221.5

1,100.3

Net income from associates

5.3

10.9 (3.9)

Net income attributable to non-controlling interests

(4.3)

Tax expense

(669.3) 1,889.8 35.4% 34.4% (650.6)

(555.5) 1,648.8 33.7% 34.4% (567.7)

Net income before tax

Effective tax rate

Current tax rate in France 1 Theoretical tax expense

Reconciliation items:

s differences relating to foreign taxation (primarily the tax rate)

79.3

64.6

s permanent and miscellaneous differences 2

(98.0)

(52.4)

TOTAL

(669.3)

(555.5)

(1) The tax rate applicable in France is the basic rate of 33.33% increased by the social contribution of 3.3%, i.e. a total of 34.43%. (2) This line includes permanent differences, the effect of reduced and majored rate on tax expense, of tax loss carry forward used/not activated, and of tax on distributed dividends and of prior year adjustments. This line also includes the impact of tax credits, distribution taxes, audits and tax risks. In October 2017, the French Constitutional Council invalidated the tax on dividends (3% of distributed amounts). Over the financial year, the two exceptional contributions of 15% each due in France (according to the threshold of revenue obtained), net of the reimbursement to receive from the tax on dividends, represent a net expense of €20 million.

2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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