SAINT_GOBAIN_REGISTRATION_DOCUMENT_2017

Financial and accounting information 2017 Consolidated financial statements

Net debt 8.3. Long- and short-term debt 8.3.1. Long-term debt a)

To limit the Group’s exposure to credit risk, the Treasury and Financing Department deals primarily with counterparties with a long-term rating of A- or above from Standard & Poor’s or A3 or above from Moody’s. Concentrations of credit risk are also closely monitored to ensure that they remain at reasonable levels, taking into account the relative CDS (“Credit Default Swap”) level of each counterparty. Net financial expense 8.2. Net financial expense includes borrowing and other financing costs, income from cash and cash equivalents, interest cost for pensions and other employee benefits, net of the return on plan assets, and other financial income and expense such as exchange gains and losses and bank charges. (inɸ€ millions) 2017 2016 Borrowing costs, gross (298) (376) Income from cash and cash equivalents 23 27 NET BORROWING COSTS (275) (349) Interest cost – pensions and other employee benefits (327) (387) Return on plan assets 247 278 NET INTEREST COST – PENSIONS (80) (109) Other financial expense (118) (111) Other financial income 25 28 OTHER FINANCIAL INCOME AND EXPENSE (93) (83) NET FINANCIAL EXPENSE (448) (541)

Long-term debt includes bonds, perpetual bonds, participating securities, long-term securitizations and all other types of long-term financial liabilities, including finance lease liabilities and the fair value of interest rate hedging derivatives. Under IAS 32, the distinction between financial liabilities and equity is based on the substance of the contracts concerned rather than their legal form. As a result, participating securities are classified as debt. At the end of the reporting period, long-term debt (excluding interest rate derivatives) is measured at amortized cost. Premiums and issuance costs are amortized using the Short-term debt includes the current portion of long-term debt described above, short-term financing programs such as commercial paper, short-term securitizations, bank overdrafts and other short-term bank borrowings, the fair value of derivatives related to debt, and accrued interest on borrowings. Short-term debt, excluding derivatives related to debt, is measured at amortized cost at the end of the reporting period. Premiums and issuance costs are amortized using the effective interest rate method. Cash and cash equivalents c) Cash and cash equivalents mainly consist of bank accounts and marketable securities that are short-term (i.e., generally with maturities of less than three months), highly liquid investments readily convertible into known amounts of cash and subject to an insignificant risk of changes in value. Marketable securities are measured at fair value through profit or loss. effective interest method. Short-term debt b)

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