Hermès - Registration Document 2016

CORPORATE GOVERNANCE

REPORT FROM THE CHAIRMAN OF THE SUPERVISORY BOARD ON THE CORPORATE GOVERNANCE PRINCIPLES

• for the consolidation of financial information in accordance with IFRS accounting standards, • for the monitoring and coordination of activity during regular reviews (year-end and half-year accounts closure, estimation updates and budgets), • for the external communication of financial information in accor- dance with regulations. They are supported by consolidation, management control and inves- tor relations departments; s The managing directors and finance directors of the subsidiaries, who have primary responsibility for the quality of the financial infor- mation preparation processes applied by the entities they oversee. They are also responsible for circulating procedures drawn up and issued by Hermès International and for ensuring that these are pro- perly applied. Procedures for preparing published accounting and financial information The procedures that Hermès has implemented in drawing up the finan- cial statements aim to ensure the following: s that published accounting and financial information is impartial, objective and relevant in the light of user requirements, that it meets reporting deadlines ( via a timetable for closing the accounts), and that the information is understandable; s that year-end consolidated account closing procedures that meet these criteria are drawn up and circulated to all consolidated enti- ties, namely via the Group management manual, and instructions sent to the subsidiaries; s the traceability of closing accounting entries within the information systems; s that individual accounts are controlled to ascertain that they comply with Group accounting standards and practices and to verify their consistency prior to integration of the consolidation packages, inter alia ; s that systems are in place for analysing the accounts, such as reviews conducted by the auditors, verification of consolidation transac- tions, ascertaining that IFRS have been properly applied, analysis of internal transactions, etc. The reporting and consolidation proce- dures call for the controls required to ensure the reliability of financial information. Finally, in the context of these audits, A&RMD coordinates its work with the Statutory Auditors in order to ensure the consistency and effective- ness of their joint involvement.

The audit assignments represent the third control level. Upon comple- tion of the audits, reports are prepared containing the audit findings, identifying risks and recommending solutions to remedy any problems. Proper implementation of the recommendations is verified during fol- low-up audits. The audit reports are sent to the managers of the audited subsidiaries or departments and to Group management.

Internal control system for accounting and financial information

3.2.6.7

The internal control system applicable to accounting and financial infor- mation is a key component of Hermès International’s overall manage- ment system. It is designed to ensure stringent financial oversight of the Company’s business activities. It encompasses all processes involved in producing and reporting accounting and financial information for the parent company and the companies integrated into the consolidated financial statements. It meets the following objectives: s the prevention and identification of any accounting or financial fraud or inconsistencies, as much as possible; s the reliability of information circulated and used in-house by Group management; s the reliability of the published accounts and of other information reported to investors. Oversight of the accounting and financial organisation Hermès has set up an organised, documented system to ensure the consistency of reported consolidated accounting and financial data. This system is based on a Group management manual, strict division of res- ponsibilities, and on Hermès International’s tight controls on information produced by the subsidiaries. The internal control process for accounting and financial information involves the following parties: s the Group management, which is carried out by the Executive Committee, led by Executive Management. As part of the parent company and consolidated financial statement review and approval process, the Executive Management receives all information that it deems to be useful, such as information on the main options applied for the reporting period, accounting estimates and changes in accounting methods. It analyses the subsidiaries’ accounts on a regular basis and meets with their Senior Executives from time to time, particularly during the budget preparation and account closing periods. Lastly, it reviews the findings of the Statutory Auditors; s the Supervisory Board, which exercises ongoing control over the Company’s management. By consulting Group management, the Board can verify that oversight and control systems are adequate to ensure that the financial information published by the Company is reliable. It has the same powers as the Statutory Auditors and receives the same documents that they do, at the same time; s the Executive Vice President of Governance and Organisational Development, member of the Executive Committee, who ensures the implementation of adequate methods (organisation, skilled resources, tools) and oversees A&RMD responsible for the internal control and risk management initiative; s the Executive Vice President Finance, member of the Executive Committee, who ensures the implementation of an initiative:

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FINANCIAL RISKS RELATED TO CLIMATE CHANGE

3.2.7

The presentation of financial risks related to climate change and the steps the Company takes to reduce them by implementing a low-carbon strategy in all aspects of its business is not required in partnerships limited by shares, pursuant to Article L. 225-68 by reference to Article L. 226-10-1 of the French Commercial Code (Code de commerce), but is the subject of a presentation by the management (see Management report page 77). The Chairman of the Supervisory Board

2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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