PSA_GROUP_REGISTRATION_DOCUMENT_2017

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2017 Notes to the consolidated financial Statements at December 2017

Assumptions B.

Euro zone

United-Kingdom

Discount Rate 2017

1.60% 1.50%

2.60% 2.80%

2016

Inflation Rate 2017

1.80% 1.80%

3.20% 3.25%

2016

Average Duration (in years) 2017

17 12

15 14

2016

Sensitivity of assumptions : a 0.25-point increase or decrease in the discount rate and in the inflation rate in France, Germany or the United Kingdom would lead to the following increases or decreases in projected benefit obligations:

At each period-end, the discount rate is determined based on the most representative returns on prime corporate bonds with a life that approximates the duration of the benefit obligation. Prime corporate bonds are defined as bonds awarded one of the top two ratings by a recognised rating agency (for example, bonds rated AA or AAA by Moody’s or Standard & Poor’s). The assumptions regarding future salary increases take into account inflation and forecast individual pay rises in each country. The assumption for French plans is inflation plus individual pay rise according to the employee’s age. The assumption for the United Kingdom plans is inflation plus 1%. In Germany, the assumption is for inflation plus 0.5% for hourly employees and 0.75% for salaried employees. Mortality and staff turnover assumptions are based on the specific economic conditions of each host country.

Discount rate +0.25 PT

Inflation rate +0.25 PT

France

-2.75% -4.17% -4.94%

1.91%

United Kingdom

3.70%

Germany

1.13%

A 1-point increase or decrease in the expected return on external funds would have led to an increase or decrease in the investment income recognised in 2017 of €9 million for French plans, €28 million for the United Kingdom plans and €12 million for the German plans. In 2012, the Group arranged an interest rate swap for the United Kingdom within the pension fund, making it possible to vary hedging assets in response to changes in the liability at the discount rate.

Information on external funds C. The projected benefit obligation is partially covered by dedicated external funds. The breakdown of external funds is as follows:

31 December 2017

31 December 2016

Equities

Bonds

Equities

Bonds

France

19%

81%

17% 19%

83% 81%

United Kingdom

12% 88% 0% 100%

Germany

-

-

The fair value of shares and bonds was at level 1 in 2016 and 2017. In 2017, the actual return on external funds managed by the Group in France, in Germany and by the pension trusts in the United Kingdom was +4% for the French funds, +2.8% for the German funds and +5.6% for the United Kingdom funds. In France, equity funds consist of MSCI EMU Euro index tracker funds and international index tracker funds, while bond funds are invested in prime European government bonds, in European corporate bonds rated A or higher and in European inflation-linked government bonds. In the United Kingdom, all the equities are invested in global equity funds. 69% of the bond portfolio are comprised of inflation-linked government bonds denominated in pounds sterling. The remaining 31% are comprised mainly of corporate bonds rated A or higher.

In Germany, bond investments are 80% in corporate bonds with an average rating of A-, 12% in EU government bonds (minimum investment grade) and 8% in short-term money market instruments. In France, the Group is free to decide the amount of its contributions to the external funds. At 31 December 2017, no decision had been made as to the amount of contributions to be paid in 2018. In the United Kingdom, the Group’s annual contribution (excluding Faurecia) amounted to £34 million (€39 million) in 2017. It is estimated at £33 million (€37 million) for 2018, although this sum may change in light of the negotiations planned for 2018. In Germany, the Group’s annual contribution (excluding Faurecia) amounted to €12 million. It is estimated at €4 million for 2018.

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GROUPE PSA - 2017 REGISTRATION DOCUMENT