REGISTRATION DOCUMENT 2013 ANNUAL FINANCIAL REPORT Table of Contents

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REGISTRATION DOCUMENT 2013 ANNUAL FINANCIAL REPORT Table of Contents REGISTRATION DOCUMENT 2013 ANNUAL FINANCIAL REPORT Table of contents Page Page PRESENTATION OF THE GROUP / 5 5.7. Other information relating to the financial statements of L’Oréal parent company 189 1 1.1. Mission 6 5.8. Five-year financial summary 190 1.2. History 7 5.9. Investments (main changes including shareholding 1.3. Business activities and strategic orientations 7 threshold changes) 191 1.4. Internationalization and cosmetics market 10 5.10. Statutory auditors’ report on the financial statements 192 1.5. RESEARCH & INNOVATION: an objective of excellence 14 1.6. Operations 16 1.7. Investment policy 20 CORPORATE SOCIAL, / 195 1.8. Risk factors 20 ENVIRONMENTAL AND SOCIETAL 6 * RESPONSIBILITY CORPORATE GOVERNANCE* / 29 6.1. Highlight for 2013 197 6.2. Social information 198 2 2.1. Summary of the principles 30 6.3. Environmental Information 212 2.2 The Board’s composition and the way in which 6.4. Societal information 221 the Board’s work is prepared and organised 31 6.5. Table of concordance with the reporting 2.3. Remuneration of the Directors and the executive officers 62 standards with regard to social, environmental 2.4. Summary of trading by Directors and executive officers and societal matters 230 in L’Oréal shares in 2013 75 6.6. Report by the Statutory Auditors, designated as 2.5. Internal Control and Risk Management procedures independent third parties, on the consolidated social, (report of the Chairman of the Board of Directors environmental and societal information included on Internal Control) 75 in the Management Report 232 2.6. Statutory Auditors’ Report, prepared in accordance with Article L. 225-235 of the French Commercial Code on the report prepared by the Chairman of the Board of Directors 83 STOCK MARKET INFORMATION / 235 2.7. Statutory Auditors’ Special Report on regulated SHARE CAPITAL agreements and commitments with third parties 84 7 7.1. Information relating to the Company 236 7.2. Information concerning the share capital* 238 KEY FIGURES AND COMMENTS / 87 7.3. Shareholder structure* 240 7.4. Long-Term Incentive Plans* 245 ON THE 2013 FINANCIAL YEAR 3 7.5. The L’Oréal share / L’Oréal share market 252 3.1. The Group’s business activities in 2013* 88 7.6. Information policy 257 3.2. Financial highlights 94 3.3. Significant, recent events and prospects 102 ANNUAL GENERAL MEETING / 261 8 8.1. Draft resolutions and Report of the Board 2013 CONSOLIDATED / 105 of Directors to the Annual General Meeting to be held * on April 17th, 2014 (as of February 10th, 2014) 263 FINANCIAL STATEMENTS 4 8.2. Statutory Auditors’ Special Report on the cancellation 4.1. Compared consolidated income statements 106 of shares purchased by the company 276 4.2. Consolidated statement of comprehensive income 107 4.3. Compared consolidated balance sheets 108 4.4. Consolidated statements of changes in equity 109 APPENDIX / 277 4.5. Compared consolidated statements of cash flows 110 9.1. Statutory Auditors 278 4.6. Notes to the consolidated financial statements 111 9 9.2. Historical financial information included by reference 278 4.7. Consolidated companies at December 31st, 2013 159 9.3. Person responsible for the Registration Document 4.8. S tatutory auditors’ report on the consolidated financial and the Annual Financial Report 279 statements 163 9.4. Declaration by the person responsible for the Registration Document and the Annual Financial Report 279 PARENT COMPANY / 165 9.5. Registration Document table of concordance 280 * FINANCIAL STATEMENTS 9.6. Annual Financial Report table of concordance 282 5 9.7. Table of concordance with the AMF Tables 5.1. Compared income statements 166 on the remuneration of executive officers and Directors 282 5.2. Compared balance sheets 167 9.8. Table of concordance of the Management Report 283 5.3. Changes in shareholders’ equity 168 5.4. Statements of cash flows 169 5.5. Notes to the parent company financial statements 170 5.6. Table of subsidiaries and holdings at December 31st, 2013 186 Detailed chapter contents can be found at the beginning of each chapter. * This information forms an integral part of the Annual Financial Report as provided for in Article L. 451-1-2 of the French Monetary and Financial Code. REGISTRATION DOCUMENT 2013 ANNUAL FINANCIAL REPORT In application of Article 212-13 of the General Regulation of the Autorité des Marchés Financiers (AMF), this Registration Document was filed with the AMF on March 12th, 2014. This Registration Document may be used in connection with a financial transaction if it is accompanied by an information memorandum approved by the AMF. The document has been prepared by the issuer and its signatories incur liability in this regard. This is a free translation into English of the L’Oréal 2013 Registration Document issued in the French language and is provided solely for the convenience of English speaking readers. In case of discrepancy the French version prevails. This document was printed in France by an imprim’Vert-certifi ed printing company, on recyclable, chlorine-free, PEFC-certifi ed paper using PEFC/10-31-1316 pulp from forests managed according to sustainable environmental, economic and social principles. This label recognis es the most transparent Registration Documents according to the criteria of the Annual Transparency Ranking. INTERVIEW / A THRILLING STAGE IN BUILDING THE NEW L’ORÉAL 2 REGISTRATION DOCUMENT / L’ORÉAL 2013 MESSAGE FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER Jean-Paul AGON CHAIRMAN AND CEO OF L’ORÉAL Today more than ever, our brand portfolio What conclusions can you Is governance one of is the most varied, richest and most draw from 2013? powerful in the industry. It is this richness the factors in L’Oréal’s 2013 was another good year for L’Oréal. that enables us to meet the whole world’s success? beauty expectations so effectively. The group outperformed the market There is no doubt about it. The quality across all divisions and geographic Through globalisation, our brands have of governance is underpinned by zones, posting significant growth in both strengthened their positions across highly committed directors endowed results and profitability. 2013 was also all geographic zones. Moreover, the with complementary expertise. They another year of progress in adapting group’s growth is well-balanced: Western ensure that all decisions assist in the company to a changing world, and Europe remains very solid, North America the implementation of the strategic driving its efficiency, modernity and recorded another year of growth and orientations they have approved. performance, so as to continue to build market share gains in a less buoyant The Board draws on the quality of the dynamic, sustainable and profitable context, and the New Markets excluding contribution made by its specialised growth. Japan posted double-digit growth. committees, whose remits have been What were the reasons behind this good WE HAVE OUTPERFORMED performance? THE MARKET“ ACROSS ALL DIVISIONS Above all, thanks to our products and our AND GEOGRAPHIC ZONES. launches. It is essential in our business: ” cosmetics is a supply-driven market where leadership is built up primarily through the attractiveness and superiority of products. And in terms of results? expanded since their creation. In 2014, the This strong commitment to innovation is Board will propose to the Annual General 2013 was also a good year for progress at the heart of L’Oréal and enables us Meeting the appointment as new Board in results and in profitability, which to stay one step ahead. To rise to it, we Director of Mrs Belén Garijo, of Spanish reached a record level. These results once have once again increased our Research nationality, President and CEO of Merck again confirm the strength of L’Oréal’s and Innovation budgets, which have risen Serono, the pharmaceutical subsidiary of business model, which creates value faster than our sales. We are investing in the German group Merck. Out of a total and generates cash flow. They illustrate all areas: in Advanced Research and of fourteen directors, five women will have the group’s ability to continue to deliver in formulation; in France and in our five a seat on the Board, and there will be a sustainable and profitable growth. Their regional hubs, anchored in the planet’s substantial proportion of independent solidity, together with the company’s major cosmetics markets. directors. In governance matters, L’Oréal very favourable prospects, have led wants its behavior to be exemplary too. Another reason is the vitality of our brands. the Board of Directors to propose to the They play a key role in these successes. next Annual General Meeting a further The brands are always reinventing significant increase in dividend of +8.7% themselves, to stay perfectly attuned to to 2.50 euros. consumers who are constantly changing. REGISTRATION DOCUMENT / L’ORÉAL 2013 3 UNIVERSALISATION, Why did you decide THE“ STRATEGY WE HAVE to further develop CHOSEN, IS GLOBALISATION THAT the group’s organisation? To make the group more agile, more RESPECTS DIFFERENCES. efficient and better adapted to our ” universalisation strategy. We have thus grouped together the selective divisions You have made several You have continued – L’Oréal Luxe, Active Cosmetics, acquisitions. Can you the group’s Professional Products and The Body Shop – under the same leadership, so explain the reasoning transformation process. they can share their expertise and their behind them? Is a new L’Oréal now best practices more effectively. At the same time, we have organised the global On one hand there are acquisitions that emerging? market into eight major homogeneous complement our portfolio of brands with Yes definitely. Over the last few years, we strategic regions and localized the a global vocation, like the American have been adapting the group in all management of distant regions.
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