Hermès - Registration Document 2016

5

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NON-CONTROLLING INTERESTS

NOTE 21

2016

2015

In millions of euros

Balance as at 1 January

6.7 3.9

9.5 4.6

Net income attributable to non-controlling interests

Dividends paid to non-controlling interests

(4.1) (0.2) (4.2)

(6.3)

Foreign currency translation adjustments on foreign entities

1.4

Other changes

(2.5)

Balance as at 31 December

2.2

6.7

EXPOSURE TO MARKET RISKS

NOTE 22

22.1 Counterparty risk Pursuant to the applicable internal control procedures, the Group only deals with leading banks and financial institutions that have signed FBF and ISDA agreements on trading in forward financial instruments, and it is not exposed to any material counterparty risk. In addition, counter- party risks on financial transactions are monitored on an ongoing basis by Hermès International’s Treasury Management Department. Lastly, theGroup has no exposure to anymaterial risk of dependence on a single counterparty. Moreover, the impact of the credit risk as recommended by IFRS 13 in the fair value of derivatives is close to 0 for the Group, given that all of the derivatives have a maturity of less than 12 months. 22.2 Foreign exchange risk Most of the Group’s foreign exchange risk exposure comes from sales denominated in foreign currencies. It hedges this exposure in order to minimise the impact of currency fluctuations on the Group’s profits. TheGroup’s foreign exchange risk exposuremanagement policy is based on the following principles: s the manufacturing subsidiaries invoice the distribution subsidiaries in their local currency, which automatically concentrates the foreign exchange risk on the manufacturing subsidiaries; s theGroup’s foreignexchange risk is systematically hedgedbyHermès International according to annual budgets, based on highly probable future operating cash flows, through firm foreign exchange transac- tions and/or optional ones eligible for hedge accounting;

s no speculative transactions in the economic sense of the term are authorised; s all other non-operating transactions are hedged against foreign exchange risk as soon as the commitment is firm and definitive. It corresponds to financial risks arising from intra-group loans and divi- dends in foreign currencies. These management rules have been validated by the Executive Committee and have also been endorsed by the Supervisory Board. The administrative management and control of these transactions are provided by the Middle & Back Office Department, notably by means of an integratedcashsoftwareprogram.Inaddition,HermèsInternational’s Internal Audit department ascertains compliance with the risk control and management procedures. Within this set of rules, management’s decisions are validated by the Executive Committee, via a Treasury Security Committee that meets on a regular basis. The Group’s foreign exchange risk is hedged annually by Hermès International, based on highly probable future cash flows derived from budget projections. In practice, as at 31 December, nearly 100% of the Group’s annual requirements for the previous year had been hedged. As part of its foreign exchange risk management procedure, the Group uses purchases and sales of put and call options and currency swaps to hedge future cash flows and firm commitments made in foreign currencies.

188

2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL