LOREAL_Registration_Document_2017

4 2017 Consolidated Financial Statements* NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The actuarial assumptions used to calculate these obligations take into account the economic conditions specific to each country or Group company. The main weighted average assumptions for the Group are as follows:

31.12.2017

31.12.2016 31.12.2015

In %

Discount rate (commitment)

2.2% 2.5% 3.6%

2.4% 2.4% 3.9%

2.9% 2.9% 4.5%

Discount rate (cost of services rendered)*

Salary increases

Used for the cost of services rendered for the following financial year. *

31.12.2017

31.12.2016

31.12.2015

Application of final

Application of final

Application of final rate

Initial

rate Final rate

rate Initial rate Final rate

rate Initial rate Final rate

Expected rate of health care inflation

5.7% 4.2% 2023

5.7% 4.2% 2021

5.8% 4.3% 2021

The discount rates are obtained by reference to market yields on high quality corporate bonds having maturity dates equivalent to those of the obligations. Bond quality is assessed by reference to the AA-/Aa3 minimum rating provided by one of the three main credit-rating agencies. Discount rates can be broken down by geographic zone as follows:

2017 2.2%

2016 2.4%

2015 2.9%

In %

Weighted average (all countries) based on the benefit obligation

of which: euro zone (1)

Discount rate (commitment)

1.6% 1.9%

1.8% 1.8%

2.4% 2.4%

Discount rate (cost of services rendered)*

USA

Discount rate (commitment)

3.3% 3.5%

3.5% 3.5%

3.8% 3.8%

Discount rate (cost of services rendered)*

United Kingdom

Discount rate (commitment)

2.5% 2.5%

2.5% 2.5%

3.8%

Discount rate (cost of services rendered)* 3.8% The weighted average for 2017 consists of a 1.7% discount rate on annuity plans with an average term of 19.6 years and a 1.5% discount rate on capital plans with an (1) average term of 13.3 years. Used for the cost of services rendered for the following financial year. * A 50 basis point decrease in the discount rates would increase the projected defined benefit obligation by €201.6 million for the euro zone, €62.7 million for the United States and €80.4 million for the United Kingdom. The expected returns on plan assets are based on the discount rates used. The breakdown of plan assets is as follows:

31.12.2017

31.12.2016 31.12.2015

In %

Equity securities (1)

42.1% 49.3% 4.4% 2.6% 1.7% 100%

38.5% 54.0% 4.1% 1.7% 1.7% 100%

39.2% 52.4% 4.3% 2.7% 1.4% 100%

Bonds

Property assets (2)

Monetary instruments

Other TOTAL

Of which L’Oréal shares: nil. (1) Of which property assets occupied by Group entities: nil. (2)

The allocation of plan assets has to comply with specific investment limits for the different classes of assets and meet minimum rating criteria for monetary instruments and bonds.

REGISTRATION DOCUMENT / L'ORÉAL 2017

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