Letter to shareholders

Letter to shareholders No 48 _ March 2010 L Oréal has shown its ability to renew itself and to bounce back Dear Shareholders, Confronted with one of the most sudden and severe economic crises the world has known for many years, L Oréal has succeeded in posting results quite close to those of 2008, while at the same time investing to prepare for its future growth. The proposal made to the Annual General Meeting to pay a dividend of 1.50 per share reflects our confidence in L Oréal s solidity, as well as our sincere concern to achieve the right balance, which as you know, is particularly important to us. This performance reflects the total commitment of Jean-Paul Agon and his teams, but also the energy and courage to take important decisions and transform the company. In weathering the storm, L Oréal has once more demonstrated its resilient nature and also its ability to renew itself. In the face of the crisis, the group has shown its capacity to modify its strategy and reinvent itself, as it does each time, to adapt to a changing environment. L Oréal is a strong, inventive company, full of resources, which is looking forward to its second century with more determination than ever. Sir Lindsay Owen-Jones Chairman International brands with annual sales of more than 50 million euros. Dear Shareholders, Despite the very difficult context, L Oréal weathered the crisis well and has strengthened its global leadership in the beauty sector. We have recreated the virtuous circle, the traditional driving force for growth at L Oréal. The results, even though they decreased very slightly, were of good quality and the group finished the year L Oréal has prepared itself well for a return to growth in 2010 with record cash flow and a very robust financial situation. We have also dedicated this year to preparing for the future with three major strategic changes: the broadening of our consumer base with the target of gaining a billion new consumers; a thorough transformation of the company to make it more flexible and more efficient; a determined increase of investments in R&D and advertising & promotion in order to accelerate growth and support our conquest of the new markets. We have emerged stronger from this year of crisis. L Oréal has prepared itself well to return to a new growth dynamic in its sales and results. We are concentrating all our efforts on making 2010 an excellent first year of our new century. Jean-Paul Agon Chief Executive Officer

2 - Highlights Solid, good quality 2009 results Sales -1.1% like-for-like +0.8% at constant exchange rates -0.4% reported figures Net profit (1) -3.2% EPS (2) -2.1% e17.5 bn e3.42 Dividend +4.2% $1.44 $1.50 (3) 2008 2009 e1 997 bn Gradual improvement in performance in 2009 2009 sales were slightly down, but the group gradually returned to growth from one quarter to the next. At 6 months, the like-for-like sales trend was -3.2%. The third and fourth quarters were positive (+0.8% and +1.5%). 2009 has been an exceptional vintage for innovation, and a year of very strong dynamism in Consumer Products, along with the conquest of a large number of new hair salons and rapid growth in new markets. Good quality operating profit Improvement in gross profit rate. L Oréal has continued its industrial transformation. Reduction in selling, general and administrative expenses. In 2009, L Oréal undertook and accelerated profound transformations of the company to streamline the business and make it more flexible, productive and efficient. Increase in Research & Development and advertising & promotion expenses. Despite the crisis, the Research & Development budget increased by +3.7% and the number of patents filed reached an all-time record of 674. Investments in advertising & promotion have increased as a percentage of sales to strengthen support for the brands and products, to re-ignite the dynamism of organic growth and to support our conquest of new markets. A solid balance sheet Record cash flow: improvement in operating cash flow which increased by +40.3% compared with 2008. A very robust balance sheet: shareholders equity represents 58% of total assets. A reduction in debt: net financial debt represents 14.4% of shareholders equity, a decrease compared with 2008 (31.3%). A dividend representing an increase of +4.2% The dividend proposed at the shareholders Annual General Meeting of April 27 th, 2010 amounts to 1.50 per share, an increase of +4.2%. Corresponding to this dividend increase is a new increase in the distribution rate which is near to 44% (3) this year, an expression of L Oréal s permanent concern to conduct a balanced and dynamic policy with regard to its shareholders. Rapid growth in New Markets Ukraine +30.3% The New Markets zone which groups together all the countries outside Western Europe and North America, now represents 33% of the group s cosmetics sales. L'Oréal made important market share gains in all divisions and recorded strong growth in a number of countries. South Korea +35.8% China +17.6% (1) Net profit excluding non-recurrent items after minority interests. (2) Diluted net earnings per share, based on net profit excluding non-recurrent items attributable to the group. (3) Subject to approval by the Annual General Meeting of April 27 th, 2010 Argentina +16.0% Chile +13.5% Brazil +15.0% India +31.5% Indonesia +21.5%

Creating the beauty of tomorrow - 3 Scientific innovation: a new era in hair colour with Inoa In its centenary year, L Oréal heralded a new era in salon hair colourants with Inoa, a breakthrough innovation from L Oréal Professionnel. To offer women a new level of comfort and optimal respect for hair fibre (1), while ensuring optimal colour quality, L Oréal researchers rethought their formulation approach and invented a new process: the Oil Delivery System. A new oil-rich base drives the active colour ingredients into the core of the hair fibre. This innovative formulation system uses an active alkaline ingredient instead of ammonia, offering unprecedented lightening performances at this level of concentration. Questioning established ways After a century marked by major improvements every 10 to 20 years, oxidation hair colourants offer a high level of satisfaction. However, there are still some inconveniencies: the smell of ammonia and sometimes slight discomfort while the dye is left on the hair before rinsing. Can these drawbacks be eliminated? Can hair be coloured in a different way? Breaking with their customary ways of thinking, L Oréal s researchers re-examined the science of emulsions. With comfortable application, good grey hair coverage and long-lasting colour, Inoa is a magical product both for me and my customers. Christophe, JM Joubert Salon An odour-free hair colourant The ODS enables the replacement of ammonia by another alkaline ingredient which is odour-free, without losing any of the colourant s habitual properties. Seven years of research were required to develop hundreds of formulas, file patents, evaluate harmlessness and efficacy, through thousands of head tests, with hundreds of hairdressers, and finally to industrialise the new process. Inoa from L Oréal Professionnel is the first hair colourant to benefit from this technological boost. (1) Respects the hair s natural essential amino acids and lipid balance. In 2010, for the first time in 25 years, the jury awards the Marie-Claire Beauty Excellence prize to a professional hair colourant. Inoa has already been chosen by 36,000 European hairdressing salons. 1 Infinite colour potential Inoa represents a huge qualitative leap for hairdressers and for women. For the first time, a permanent oxidation colourant with the ODS system, not only ammonia-free but odourless, can lighten by up to three levels and cover up to 100% of grey hair, while ensuring optimal scalp comfort. Presented during the L Oréal Professionnel Inspiration Paris Symposium in June 2009, I n o a w a s l a u n c h e d i n September.

4 - Around the world L Oréal steps up its presence in China L Oréal, number 2 in China, recorded another year of strong like-for-like growth at +17.6% in 2009. Amongst the year s star performers were L Oréal Paris, which ensured its prominence in the men s market where the group is number 1 and which made a high-profile entrance into the haircare segment, and Garnier, buoyed by the success of its skincare products. Not forgetting Kiehl s whose arrival in both Beijing and Shanghai is looking highly promising, and Matrix which has passed the 10,000 salons mark in China. L Oréal Paris targets the haircare market After hair colourants, make-up and skincare, L Oréal Paris also targeted the haircare market. Following an extensive preliminary study at its Pudong laboratory (1), in the summer, the brand launched a line of specially formulated and perfumed products, totally adapted to local haircare rituals. Initially available through 3,000 sales outlets, L Oréal Paris haircare products should soon achieve wider distribution and greater market penetration. (1) 45,000 volunteers were consulted to deepen understanding of Chinese hair and specific haircare expectations.

Around the world - 5 Men Expert by L Oréal Paris, already number 1 in department stores Garnier on a roll Three years after its launch in China, Men Expert can be proud to have made a significant contribution to the rapid development of the men s skincare market, in a country where 74% of urban dwellers regularly use a moisturiser (1). Already number 1 in its universe of department stores (2), Men Expert moved into modern distribution, capturing second place in 2009 (3) and thus reaching a far wider target group. The brand had the fastest growth rate in this segment, in the country which is now its largest market worldwide. (1) Source: Research International. Men aged between 15 and 50 in seven cities. (2) Source: CCSMR, Retail panel, 2009 value. (3) Source: Nielsen, Retail panel, 2009 market share-value. Luxury leadership confirmed in China The roll-out of Kiehl s, the rising prominence of Giorgio Armani beauty products, and the success of Lancôme, enabled the Luxury Products Division to confirm its number 1 position in this strategic market. Since September, accessible luxury brand Kiehl s has been ranked number 1 in its sales outlets, two department stores in Beijing and Shanghai. Garnier recorded sales growth of +61.2% like-for-like, driven by its skincare ranges. By doubling units sold, its Aqua Defense franchise became the leading moisturising brand amongst Chinese women (1). Its star product Aqua Defense essence, a moisturiser with a unique gel texture, is a big hit with young Chinese women, and is now the leading moisturising product. (1) Source: Nielsen, Retail panel, 2009 market share-value. Matrix passes the 10,000 salon mark in China The sales of the professional hairdressing brand Matrix grew very strongly in Asia, particularly in China where the growth rate was +30.6% like-for-like in 2009. Behind this success was the launch of products which are accessible to all hair salons, particularly in texture, one of the most important markets in Asia. The brand launched Opti-Straight, a lasting hair straightener which is simple to use and is sold to hairdressers in large formats for a lower cost per application. The success of Matrix was also linked to its enlarged presence, with initiatives which enabled it to pass the 10,000 salon mark: collaboration with distributors in new regions, partnerships with accessible salon chains, and dynamic hairdresser training.

6 - New products Opium 2009 by Yves Saint Laurent Doorway to the imagination Youth Code by L'Oréal Paris Gene science for everyone In January 2010, L Oréal Paris launched in Europe its first antiwrinkle rejuvenating skincare range (1), drawing on the result of 10 years of gene science research. Youth Code is dedicated to women over 35. Its new Pro-Gen technology has been designed to increase the expression of certain repair genes involved in cell renewal whose expression diminishes with age. It is designed to increase the skin s recuperative power, helping it to combat wrinkles and signs of fatigue. (1) Visible rejuvenating effect. In 1977, Yves Saint Laurent created the perfume Opium, with its provocative name, mysterious bottle and powerful fragrance. Today Opium is reinventing itself, drawing its strength, modernity and refinement from the sources of the myth, and expressing them through a new bottle and a new media campaign. Rénergie Lift Volumetry by Lancôme Inspired by growth factor research In 2010, Lancôme is moving cosmetic lifting into the third dimension by taking its inspiration from the latest discoveries in growth factor proteins, which are essential for cellular communication. Rénergie Lift Volumetry is an advanced lifting (1) skincare product, which refines and reshapes the face with a visibly volumetric action. The cream has an immediate supporting effect, refining the shape of the face and redrawing the profile: the cheekbones appear more rounded, and the features appear more smoothed out, as though lifted. (1) Cosmetic lifting. Lipikar Balm AP by La Roche-Posay A dermatological advance Capital Force by Kérastase The brand s first men s haircare line Because two men out of three have hair capital concerns (1), Kérastase has created Capital Force, a range of everyday haircare treatments for men. They use taurine system technology to tackle key factors of hair exhaustion, neutralising the male enzyme which causes the condition. This range with targeted action anti-dandruff, anti-greasy and with a thickening effect has been gradually rolled out in Europe since mid-february. Severe dryness of the skin, or atopy, is an increasingly prevalent condition, which affected under 10% of children in industrial countries in the 1960s, but today affects between 15% and 20%. For them, La Roche-Posay has created Lipikar AP, its first-ever 24-hour lipid-replenishing antiirritant anti-itch balm. Highly concentrated active ingredients in an original non-greasy, non-sticky, ultra-penetrating texture for rapid coverage, to restore lasting comfort for very dry skin and skin with atopic tendencies. (1) Source: Health and Beauty IPSOS Europe 5 Men 2005 2007.

L Oréal's commitments - 7 The eternal quest for beauty Every day, L Oréal is committed to helping to make the world a more beautiful place. Its Corporate Foundation, created in October 2007, is the second largest in France with a multiannual budget of 40 million euros. By supporting the book 100,000 Years of Beauty, it laid the cornerstone of a vast new programme of research in human sciences. The quest for beauty has been at the heart of humanity since its origins. Yet this subject has been left largely unexplored, or has not been granted the serious attention it deserves. A new kind of research The acknowledgement of this fact led the Foundation to initiate a vast reflection on human sciences, with a programme whose first tangible result is 100,000 Years of Beauty, a book applauded by the public as a reference in its field. Combining aestheticism with scientific rigour, this multi-disciplinary five-volume book is the culmination of the largest project ever carried out in human sciences on beauty and the role of appearance in societies. In its 1,300 pages it brings together the work of 300 contributors of 35 nationalities, who are artists or experts in 20 fields, including history, anthropology, philosophy and sociology. 100,000 Years of Beauty, the first scientific publication on the eternal, human quest for beauty The work of these researchers reveals that concern about appearance has been a constant feature in all civilisations. Each civilisation, from the most primitive to the most sophisticated, has asserted aesthetic choices and passed them on to us as a legacy. From prehistoric times onwards, human beings have sought to embellish themselves, using their appearance as a social language, a sign of belonging, a symbol of their beliefs or a way of perpetuating the species and distinguishing themselves from the animal kingdom. Rebuilding self-esteem Today, more than ever before, appearance plays a decisive role in our relations with other people. Care and respect for one s own appearance are not just linked to the desire to appeal to others. Sociologists, doctors and psychotherapists are exploring this avenue as a way for people to rebuild their self-esteem and sense of dignity which may have been affected by adverse life experiences. Millions of years ago, there was no such thing as industry, cars or agriculture. But cosmetics already existed! And in millions of years time when there are no more cars or planes, there will still, always, be L Oréal! Michel Serres Speaking during a radio programme. The French philosopher wrote the preface to 100,000 Years of Beauty. For more than 100,000 years, human beings have been changing how their bodies look, embellishing themselves, and using their appearance as a language in its own right. There is no record of any civilisation that has not asserted its aesthetic choices, or of a human society that has not sought to achieve beauty. Béatrice Dautresme, Chief Executive Officer of the L Oréal Corporate Foundation and Executive Vice-President Corporate Communications and External Affairs The L Oréal Corporate Foundation For the last two years, the Corporate Foundation has been leading initiatives based on the group s values and businesses. It is committed to three areas: Science Promoting scientific research and the role of women in science. Education Making knowledge accessible to as many people as possible. Solidarity Helping people made vulnerable by a change in their appearance to regain self-esteem and fit back into society.

8 - Shareholder information New L Oréal creates its Individual Shareholder Consultation Committee. A genuine consultation and exchange body between L Oréal and its shareholders, the Individual Shareholder Consultation Committee is committed to listening and understanding your expectations better. The committee is made up of four commissions dealing with the following themes: relations with our Shareholders, Shareholder events, communication tools, the beauty world and the cosmetics sector. 100.00 16 shareholder members, 3 permanent members The Individual Shareholder Consultation Committee meets, at L Oréal s initiative, between three and five times a year at the group s headquarters at Clichy, or at any other place. It is composed of sixteen shareholder members, selected for a non-renewable two-year term of office, and three permanent members. Shareholder panels have been making suggestions to help support our financial communications since 2002. Share price From December 31 st, 2006 to February 26 th, 2010 75.9 80.00 5,541.76 pts 60.00 00 40.00 20.00 81.10 L'Oréal 97.98 CAC 40 reindexed on L Oréal 78.72 Thierry PRÉVOT Committee Chairman Group General Manager, Financial Communications 69.10 Jean Régis CAROF Permanent Delegate Director of Individual Shareholder and Market Authority Relations 51.32 55.79 Nadia BELLON Committee Secretary Find out more at www.loreal-finance.com Discover the latest shareholder news (Consultation Committee, loyalty bonus, etc.) in the Shareholders Corner. 78.00 76.02 3,708.8 pts dec 06 feb 07 apr 07 jun 07 aug 07 oct 07 dec 07 feb 08 apr 08 jun 08 aug 08 oct 08 dec 08 feb 09 apr 09 jun 09 aug 09 oct 09 dec 09 feb 10 Registered in France as a Société Anonyme with registered capital of 119,794,482 euros - 632 012 100 RCS Paris NAF Code: 2042 Z ISIN Code: FR0000120321 - Registered office: 14, rue Royale, 75008 Paris, France Headquarters: 41, rue Martre, 92117 Clichy, France Tel. +33 1 40 14 80 50 For more information, please contact: L Oréal, Financial Communications Department, 41, rue Martre, 92117 Clichy, or consult the Shareholders Corner on the Internet site www.loreal-finance.com or the mobile website loreal-finance.mobi from your mobile phone. Identifying the Loyalty Bonus code on your bank statement The introduction of the 10% preferential dividend for registered shareholders has required the creation of a specific 2012 Loyalty Bonus code: FR0010833269. The Loyalty Bonus code indicates to holders of directly registered or managed registered shares whether their shares entitle them to the preferential dividend in 2012. The code FR0010833269 on your bank statement denotes shares registered before December 31 st, 2009. The share continues to be listed and traded under the code ISIN FR0000120321. Your key dates Annual General Meeting Tuesday, April 27 th, 2010 at the Carrousel du Louvre, 99, rue de Rivoli 75001 Paris, France. Shareholder Meetings in 2010 Nantes May 17 th Bordeaux November 16 th Lille Brussels September 14 th May 20 th Paris Actionaria Fair November 19 th & 20 th Toulouse Octobre 6 th Financial Calendar April 22 nd, 2010 1 st quarter sales April 29 th, 2010 Ex-date of the dividend (1) May 5 th, 2010 Payable date of the dividend (1) August 25 th, 2010 2010 half-year results Dijon November 9 th French solidarity tax on wealth (ISF) Strasbourg December 7 th Nice Marseille June 15 th December 14 th (1) Subject to approval by the Annual General Meeting of April 27 th, 2010. To estimate the 2009 French ISF declaration, the following L Oréal share value should be taken into account: either, the closing price on December 31 st, 2009: 78, or, the average of the last 30 days closing prices for 2009: 75.45. SEITOSEI Photographs: Peter Lindberg (p.1), Stéphane de Bourgies (p.1), Ben Hasset (p.3), Karen Hatch (p.3), Cyrille Coussat/Eyedea Illustration (p.4 and 5), Ira Block / National Geographic (p.7), Akg (p.7), Luisa Ricciriani / Leemage (p.7), Rue des Archives /RDA (p.7), Katya Legendre (p.7), D. Arraez (p.8), X.