TECHNICOLOR_REGISTRATION_DOCUMENT_2017

- 6 FINANCIAL STATEMENTS

Notes to the consolidated financial statements

Transaction risk on commercial exposures is measured by consolidating the Group’s exposures and doing sensitivity analyses on the main exposures. RISK ON INVESTMENTS IN FOREIGN SUBSIDIARIES The Group’s general policy is to examine and hedge on a case by case basis the currency risk on its investments in foreign subsidiaries. The variations in the euro value of investments in foreign subsidiaries are booked under “Cumulative translation adjustment” in the Group’s consolidated statement of financial position. At December 31, 2017, no hedges of this type were outstanding. CURRENCY SWAPS In order to match the currencies that Technicolor’s Group Treasury Department borrows with the currencies that it lends, Technicolor may enter into currency swaps primarily (i) to convert euro borrowings into U.S. dollars and British pounds which are lent to the Group’s U.S. and U.K subsidiaries respectively and (ii) to convert U.S. dollars

borrowed externally or from the Group’s U.S. subsidiaries into euros. The forward points on these currency swaps which are accounted for as interest, resulted in income of 2 million euro in 2017 and were a charge of 1 million euro in 2016. SENSITIVITY ANALYSIS The Group’s main exposure is the fluctuation of the U.S. dollar against the euro. The Group believes a 10% fluctuation in the U.S. dollar versus the euro is reasonably possible in a given year and thus the tables below show the impact of a 10% increase in the U.S. dollar versus the euro on the Group’s Profit from continuing operations before tax and net finance costs and on the currency translation adjustment component of equity. A 10% decrease in the U.S. dollar versus the euro would have a symmetrical impact in the opposite amount. These calculations assume no hedging is in place.

2017 (in million euros)

Transaction

Translation

Total

Profit from continuing operations before tax and net finance costs (1)

(12)

0

(12) 108

Equity Impact (cumulative translation adjustment) (2)

-

-

2016 (in million euros)

Transaction

Translation

Total

Profit from continuing operations before tax and net finance costs (1)

6

(5)

0

Equity Impact (cumulative translation adjustment) (2)

-

-

107

Profit impact: (1) transaction impact calculated before hedging by applying a 10% increase in the U.S. dollar/euro exchange rate to the net U.S. dollar exposure (sales minus purchases) of ■ affiliates which have the euro as functional currency. translation impact calculated before hedging by applying a 10% increase in the U.S. dollar/euro exchange rate to the profits of the affiliates with the U.S. dollar as functional ■ currency. Equity impact: calculated by applying a 10% increase in the U.S. dollar/euro exchange rate to the unhedged net investments in foreign subsidiaries that are denominated in U.S. (2) dollar.

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TECHNICOLOR

REGISTRATION DOCUMENT 2017