LEGRAND_REGISTRATION_DOCUMENT_2017

08 CONSOLIDATED FINANCIAL INFORMATION CONCERNING

THE GROUP’S ASSETS, LIABILITIES, FINANCIAL POSITION AND RESULTS Consolidated financial statements in accordance with IFRS for the years ended December 31, 2017 and December 31, 2016

4.3

RETAINED EARNINGS AND TRANSLATION RESERVES

The weighted average market price of the Company stock upon exercise of stock options in 2017 was €58.01. If all these options were to be exercised (i.e., 1,497,721 options), the Company’s capital would be diluted at most by 0.6% (which is a maximum dilution as it does not take into account the exercise price of these options) as of December 31, 2017. 4.2.3 Share-based payments: IFRS 2 charges In accordance with IFRS 2, a charge of €13.1 million was recorded in 2017 (€7.9 million in 2016) for all of these plans combined. See also Note 4.5.2 for cash-settled long-term employee benefit plans implemented from 2013.

4.3.1 Retained earnings Consolidated retained earnings of the Group as of December 31, 2017 amounted to €3,644.6 million. As of the same date, the Company had retained earnings including profit for the period of €1,005.4 million available for distribution. Translation reserves Assets and liabilities of Group entities whose functional currency is different from the presentation currency are translated using the exchange rate at the balance sheet date. Statements of income are translated using the average exchange rate for the period. Gains or losses arising from the translation of the financial statements of foreign subsidiaries are recognized directly in equity, under “Translation reserves”, until such potential time as the Group no longer controls the entity. 4.3.2

Translation reserves record the impact of fluctuations in the following currencies:

December 31, 2017

December 31, 2016

(in € millions)

US dollar

(189.7)

38.0

Other currencies

(383.5)

(278.0)

TOTAL

(573.2)

(240.0)

recognized in translation reserves in 2017 amounted to €44.9 million, resulting in a net negative balance of €45.8 million as of December 31, 2017. In addition, to hedge a portion of the net investment in British pounds, the Group has entered into a derivative contract. Foreign exchange gains and losses on this derivative financial instrument are recognized in translation reserves. Gains on this derivative financial instrument recognized in translation reserves in 2017 amounted to €3.9 million, resulting in a net positive balance of €17.3 million as of December 31, 2017. Finally, in accordance with IAS 21, translation gains and losses on receivables or payables considered as part of a net investment in a foreign Group entity are recognized in translation reserves. Losses recognized in translation reserves in 2017 amounted to €1.6 million, resulting in a net positive balance of €7.8 million as of December 31, 2017.

The Group operates in more than 90 countries. It is mainly exposed to a dozen currencies other than the euro and US dollar, including the Indian rupee, Chinese yuan, Brazilian real, British pound, Russian ruble, Australian dollar, Mexican peso, Turkish lira and Chilean peso. Under IAS 39, non-derivative financial instruments may be designated as hedges only when they are used to hedge foreign currency risk and provided that they qualify for hedge accounting. Accordingly, in the case of hedges of a net investment in a foreign operation, the portion of the gain or loss on the hedging instrument that is deemed to be an effective hedge is recognized in equity, as required under paragraph 102 of IAS 39. Consequently, unrealized foreign exchange gains and losses on US dollar-denominated 8½% Debentures (Yankee bonds) are recognized in translation reserves. Gains on these bonds

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REGISTRATION DOCUMENT 2017 - LEGRAND