BIC_REGISTRATION_DOCUMENT_2017

GROUP PRESENTATION Risk factors

Interest Rate exposure Exposure to interest rate fluctuations is very limited. All local funding needs are directly indexed on a short-term variable rate. Borrowers’ positions are insignificant at Group level and are of a too limited timescale to require any hedging. We do not hold any financial instruments dedicated to the hedging of the interest rates in our books as of December 31, 2017. See Note 24 to the consolidated financial statements, page 216. Counterparty risk All financial instruments are set up with top-ranking banking institutions, making counterparty risk very low. The minimum Standard & Poor’s long-term rating of our main banking counterparties is A-. The rating range goes from A+ to A-. It should nevertheless be noted that the rating is one of the elements we follow to understand the counterparty risk, but it is not the only criterion we use. The risk is calculated following the recommendation of the IFRS 13 norm at each half-yearly closing, and until now the result has never been significant enough to generate a specific accounting booking. Counterparty risk of cash investment decisions is strictly studied (nature of assets, depositaries and custodians). Counterparty risk is estimated not to be significant as of December 31, 2017. Liquidity risk BIC Group manages its equity to keep a cash position positive and available, and to achieve its development and/or external growth strategy. The excess cash and the funding needs of the Group are managed by the Group Treasury Department, following a secure policy guideline that aims for capital security and liquidity. The excess cash is mainly invested in monetary mutual funds, commercial paper or time deposits, and cash equivalent assets whose volatility is below 0.5, with a recommended holding period of less than three months. The excess cash positions belonging to non-centralized countries, mainly Brazil and India, are following the same policy, under the decisional control of Group Treasury. The more structural portion of the cash can be invested in financial assets with a duration above six months. All the investments are valued mark-to-market twice a month by the Group Treasury Department and the target is to reach an average yearly performance above the Eonia capitalized rate. The Group Treasury has an on-going relationship with the asset management companies, so as to get the best level of information on asset managers’ decisions and identify the impact of market movements on the funds' valuation behaviors. Throughout 2017, a high level of control on our investment portfolio performance and on the composition of the funds in which we invest, has been maintained. The Group Treasury Department pays great attention to the diversification of our investments and counterparties in order to improve the pooling of risks and reduce the amount invested per counterparty. As of December 31, 2017, the total invested by Group Treasury amounted to 4.7 million euros divided into three individual positions. They consist in mutual funds not benefiting from the “Cash and Cash

Equivalent” qualification. It must be noted that considering the negative rates applying on short term investments in euro nowadays, it is relevant not to invest but to keep the available cash on a checking account. In this respect, as of December 31, 2017, Group Treasury had 30.1 million euros in cash position on its principal operational checking account. Legal risks To the best of the Company’s knowledge, there is no information (regulation, authorizations, confidentiality, dependence links, tax measures) or exceptional fact susceptible to have or having had in the recent past a significant impact on the financial position, the result, the activity and the assets of the Company and the Group. Moreover, there are no governmental, judicial or arbitration procedures, including all procedures of which the Company is aware, that are pending or threatening the Company, and which may or might have had during the last 12 months significant effects on the financial position or the profitability of the Company and/or the Group. Industrial risks BIC faces certain industrial risks linked to its production operations around the world and its manufacturing processes. The Group is committed to ensure health and safety to its employees through safe and healthy working conditions. The “ Writing the future, Together ” Program formalizes this commitment. Over the past 10 years, the Group performance has illustrated this long-term engagement and the various actions that are continuously implemented. In addition to the generic risks inherent to any industrial activity, BIC Group is exposed to specific risks linked to the storage and use of hazardous products and substances, both inflammable and non-inflammable. Among these are: gas for lighters; ● solvents for permanent markers and dry-wipe markers; ● solvents for industrial cleaning processes. ● For this reason, at all BIC factories: constant attention is paid to the implementation and monitoring of ● preventive measures and safety systems for gas and solvent storage areas. Suitable control devices and equipment are in place to minimize physical and chemical risks posed by hazardous substances. Priority is given to the use of appropriate fire prevention systems and appropriate fire detection and control equipment; hazard and risk assessments are conducted in the Group ● factories; procedures are established to identify, assess, and prevent incidents and accidents; the workforce is trained to recognize potential hazards, as well as ● to take preventive and corrective actions; compliance with local regulatory requirements is an integral part ● of the daily management of the sites. Industrial and environmental risks

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BIC GROUP - 2017 REGISTRATION DOCUMENT