LEGRAND_REGISTRATION_DOCUMENT_2017

MANAGEMENT REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2017

Off balance sheet commitments

5.5.2 – Debt

The Group’s gross debt (defined as the sum of long-term and short-term borrowings, including negotiable commercial paper and bank overdrafts) came to €3,042.5 million at December 31, 2017 compared to €1,897.1 million at December 31, 2016. Cash and cash equivalents and marketable securities amounted to €823.0 million at December 31, 2017 compared to €942.6 million at December 31, 2016. Net debt (defined as gross debt less cash and cash equivalents and marketable securities) totaled €2,219.5 million at December 31, 2017 compared to €954.5 million at December 31, 2016. The ratio of net debt to shareholders’ equity was around 54% at December 31, 2017 compared with 23% at December 31, 2016. At December 31, 2017, the Group’s gross debt consisted of the following: W €2,500.0 million in bonds issued in March 2011 (€400.0 million), April 2012 (€400.0 million), December 2015 (€300.0 million), July 2017 (€1.0 billion) and October 2017 (€400.0 million);

W €324.4 million in Yankee bonds; and W €218.1 million in other debt, consisting mainly of negotiable commercial paper, bank borrowings, overdrafts and debt related to acquisitions, net of debt issuance costs. The repayment schedule for the non-current portion of this borrowing appears in note 4.6.1 to the consolidated financial statements referred to in chapter 8 of this Registration Document. Cash and cash equivalents (€823.0 million at December 31, 2017 and €940.1 million at December 31, 2016) consist primarily of very short-term bank deposits and so, counterparty risk is monitored very closely. A description of credit facility contracts is presented in note 4.6.1 to the consolidated financial statements referred to in chapter 8 of this Registration Document.

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5.6 – CAPITAL EXPENDITURE

3.2% of consolidated net sales is consistent with long-term Group ambitions (3% to 3.5% of net sales). Capital expenditure consistsmainly of investment innewproducts, in productivity and in commercial resources. Meanwhile, the Group is pursuing ongoing initiatives to control capital employed.

Capital expenditure includes the capitalization of some development costs pursuant to IAS 38. In 2017, capital expenditure and capitalized development expense amounted to €178.2 million or 3.2% of consolidated net sales, compared with €160.9 million and also 3.2% in 2016.

5.7 – OFF BALANCE SHEET COMMITMENTS

The Group does not have any off balance sheet arrangements that have or can be considered reasonably likely to have a current or future impact on its finances, revenues, expenses, results, operating income, cash, capital expenditure or capital reserves,

and that would be material to investors. (See note 5.3 to the consolidated financial statements referred to in chapter 8 of this Registration Document). There is no significant off balance sheet commitment given linked to acquisitions.

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REGISTRATION DOCUMENT 2017 - LEGRAND