Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 1 of 61 PageID #: 577
`Case 1:17-cv—00868—JFB-SRF Document 28-4 Filed 12/08/17 Page 1 of 61 PageID #: 577
`
`
`
`
`
`EXHIBIT 4
`
`EXHIBIT 4
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 2 of 61 PageID #: 578
`
`2016
`AANNNNUUAALL
`RREEPPORT
`
`ANNUAL
`
`REPORT
`
`
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 3 of 61 PageID #: 579
`
`Explore
`THE FULL VERSION OF THE
`2016 ANNUAL REPORT ONLINE
`visit loreal.com
`via the LOréal Finance app
`or via the L’Oréal Finance app*
`
`exclusive
`
`more
`
`content
`online
`
`
`The digital version features exclusiveThe digital version features exclusive
`videos and content!
`
`* How to access the website from this printed version?
`1. Download the L’Oréal Finance app on your smartphone
`or tablet, available on the App Store or Google Play.
`2. In the L’Oréal Finance app, go to “Publications”/
`“Annual Reports” and click on “Scan this page”.
`3. Throughout this printed version, additional videos
`and topics available online are indicated by this symbol:
`4. Scan the page that you are reading to see extra content.
`
`Cover: L’Oréal dedicates the 2016 Annual Report cover page to the American make-up brand Urban Decay,
`“prestige beauty brand winner of the year” by WWD magazine. This image was chosen from the Vice Lipstick
`launch campaign, which is already a worldwide success.
`
`

`

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`
`Contents
`
`Prospects
`03 _ Prospects
`by Jean-Paul Agon,
`Chairman and
`Chief Executive Officer
`
`Performance
`16 _ Cosmetics Market
`19 _ L’Oréal in figures
`24 _ Worldwide advances
`
`Expertise
`44 _ Research and Innovation
`46 _ Operations
`48 _ Digital
`50 _ Human Relations
`52 _ Administration and Finance
`54 _ Corporate Social
`Responsibility
`
`Strategy
`06 _ Mission and Strategy
`08 _ The Board of Directors
`10 _ The Executive Committee
`12 _ Commitments
`14 _ Ethics
`
`Brands
`26 _ Consumer Products
`30 _ L’Oréal Luxe
`34 _ Professional Products
`38 _ Active Cosmetics
`42 _ The Body Shop
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 5 of 61 PageID #: 581
`
`A global
`
`34fl otilla of
`
`complementary
`brands
`
`cosmetics
`group
`worldwide(cid:2)(1)
`
`
`
`25.8
`
`4
`
`billion euros
`
`of sales
`
`89,300
`
`employees
`
`1st
`
`3 i
`
`47
`
`
`stered
`patents reg
`in 2016
`
`14count0ries
`
`4.54
`
`billion euros
`in operating profi t(2)
`
`Commitments
` for 2020
`“Sharing Beauty With All”(cid:2)
`
`2
`
`(1) Source: WWD, “Beauty’s Top 100”, April 2016. (2) At 31 December 2016.
`
`

`

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`
`P R O S P E C T S
`by Jean-Paul Agon, Chairman and Chief Executive Officer
`
`2016 was another
`good year for L’Oréal.
`We accelerated our
`growth, outperformed
`the market once again
`and increased our
`worldwide leadership
`of the beauty industry.
`
`
`2016 was another good year for L’Oréal. Three of our Divisions, L’Oréal Luxe,
`e
`Consumer Products and Active Cosmetics, made great progress and w
`
`gained market shares in each of our three strategic regions. 2016 was also a
`
`great vintage in terms of emblematic innovations and strategic acquisitions.
`,
`With IT Cosmetics, Atelier Cologne, Saint-Gervais Mont Blanc and CeraVe(1)
`r
`we made four very diverse acquisitions that perfectly complement ou
`
`global flotilla of brands and allow us to respond to new beauty desires. And,
`
`last but not least, we delivered a compelling set of results that once again
`l
`prove the robustness of L’Oréal’s economic model and its powerfu
`capacity to create value.
`•••
`
`(1) Acquisition announced on 6 January 2017 and finalised on 6 March 2017.
`
`P R O S P E C T S
`
`3
`
`

`

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`
`P R O S P E C T S
`by Jean-Paul Agon, Chairman and Chief Executive Officer
`
`2016 was also a year of great progress
`in the transformation of our group,
`with L’Oréal becoming even more digital,
`efficient, agile and sustainable.
`
`We increased our digital lead. Our
`
`e-commerce sales grew by +33%(1
`)
`
`and are now equivalent to the group’s
`
`4th largest country. More than 30% of
`
`our advertising is now digital, with
`t
`even more targeted and efficien
`
`communications. We have recruited
`
`1,600 experts and trained almost ten
`
`times that amount in-house. Across
`
`all Divisions, digital is amplifying the
`
`power of our brands and bringing
`them even closer to our consumers.
`
`We also continued our Industry 4.0
`
`
`transformation programme, which
`
`integrates all the new opportunities
`
`that digitalisation offers. There is a
`true industrial revolution taking place
`throughout our entire value chain.
`
`We also profoundly transformed
`ourselves to meet our sustainable
`development targets, set by our
`“Sharing Beauty With All” initiative.
`2016 was a pivotal year for our 2020
`objectives and a year of major achieve-
`ments, particularly in sustainable
`i nnovation and sustainable production.
`We achieved and even went beyond
`our goal of reducing CO2 emissions by
`60%, four years ahead of schedule(2).
`
`Inauguration of the Charles Zviak Centre,
`in Clichy (France).
`
`If we have been working hard
`to transform our company into
`a New L’Oréal it is because
`we believe that we are right now
`at the dawn of a Bright
`New World of Beauty.
`
`The world is changing around us at an amazing speed, the
`World of Beauty is also changing radically. As digital and
`social media become omnipresent in our lives, we are
`tering into the era of “social beauty”. An era where
`en
`beauty is becoming even more essential. The way you look
`will be more important than ever in expressing your per-
`sonality, crafting your image of yourself, and interacting
`positively with others.
`
`4
`
`P R O S P E C T S
`
`Visiting the L’Oréal factory in Karlsruhe (Germany).
`
`

`

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`
`This Bright New World of Beauty
`is a unique opportunity for L’Oréal,
`since we are uniquely positioned
`to drive and lead this new era.
`
`First, because our superiority in Research and
`Innovation gives us an edge in the quality, effica-
`cy, safety and sincerity of our products. These
`qualities are now, more than ever, required by
`consumers. Our capacity for innovation also
`includes services such as the Makeup Genius
`app, the My UV Patch or the connected brush
`by Kérastase.
`
`Furthermore, because we are able to track
`emerging trends and quickly offer products
`that meet these new aspirations, such as make-
`
`up, natural beauty, or personalisation desires.
`Moreover, because of our proximity and the
`quality of our interactions with consumers.
`Digital, in particular, offers opportunities for an
`ongoing dialogue and personal advice. With
`over one billion viewers on our brand websites
`and social media pages, L’Oréal is clearly the
`champion of connected beauty. We are also
`currently exploring all the direct-to-consumer
`channels, from e-commerce to boutiques
`opened by some of our brands.
`
`Finally, our unique
`characteristics appear to
`be perfectly fitted to
`this New World of Beauty.
`
`Our global flotilla of brands, each of which
` addresses specific consumer needs; Our pres-
`ence across all channels, categories, price
`points and regions of the world; Our agile and
`flexible organisation, strategically concentrat-
`ed but operationally decentralised; And, last
`but not least, our entrepreneurial culture and
`highly engaged teams.
`
`L’Oréal stand at the Vivatech fair in Paris (France).
`
`We, at L’Oréal, plan to make the most of this new golden age
`of beauty. More than any other company, since we are
`ty
`and will be the beauty company, offering the best of beau
`
`to all women and men living on this planet, thus fulfilling
`its mission: Beauty for All.
`
`(1) Sales achieved on the brands’ own websites and estimated sales achieved by the brands corresponding to sales through retailers’
`websites (non-audited data). Like-for-like growth. (2) In the plants and distribution centres. Period 2005-2016. In absolute value.
`
`P R O S P E C T S
`
`5
`
`

`

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`
`M I S S I O N A N D S T R A T E G Y
`
`OUR MISSION
`
`Beauty for All
`
`Offering all women and men worldwide
`he best of cosmetics innovation in terms of quality,
`t
`efficacy and safety to satisfy all
`their desires and all their beauty needs
`in their infinite diversity.
`
`OUR STR ATEGY
`
`Universalisation
`
`L’Oréal has chosen a unique strategy:
`Universalisation. It means globalisation that captures,
`understands and respects differences.
`Differences in desires, needs and traditions.
`To offer tailor-made beauty, and meet the aspirations
`of consumers in every part of the world.
`L’Oréal is driven by this vision of the world.
`
`6
`
`S T R A T E G Y
`
`

`

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`
`B R A N D S
`
`OUR BR ANDS
`
`A global flotilla
`
`L’Oréal’s flotilla of brands is organised by Division,
`which each develop a specific vision of beauty by consumption
`universe and distribution channel.
`
`CONSUMER PRODUCTS
`
`L’ORÉAL LUXE
`
`PROFESSIONAL PRODUCTS
`
`ACTIVE COSMETICS
`
`S T R A T E G Y
`
`7
`
`

`

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`
`G O V E R N A N C E
`
`The Board
`of Directors
`
`
`L’Oréal’s Governance
`is solid, perfectly in line with
`the challenges of tomorrow.
`
`
`-
`
`JEAN PAUL AGON
`Chairman and Chief Executive Officer
`
`This transparent and constructive dialogue culminates
`in a shared strategic vision, which gives the General
`Management the confidence that is necessary for its
`implementation.
`Proactive and committed directors
`
`Extremely determined and proactive, the directors are
`convinced that stringent governance creates value for the
`company, and they always keep the company’s long-term
`interests first in mind as they voice their opinions.
`The directors play a dynamic and assiduous role in the
`work of the Board and its four Committees, which actively
`contribute to preparing the Board’s deliberations. The Board
`closely monitors changes in best practices and, to ensure
`that constant progress is achieved, carries out a full review
`of its modus operandi and organisation every year.
`Ethics at the heart of L’Oréal’s
`governance and commitments
`
`The Board of Directors places great importance on
` respecting L’Oréal’s ethical principles – Integrity, Respect,
`Courage and Transparency – and more generally the
`Code of Ethics. In 2016, the Senior Vice-President and
`Chief Ethics Officer presented the ethics policy and the
`initiatives taken in this field, as well as their results. The
`Board considers these policies to be an integral part of
`L’Oréal’s growth model; it supports their implementation
`and regularly measures the advances made.
`
`Stable governance
`in the swiftly changing world
`of cosmetics
`
`The composition of the Board reflects L’Oréal’s share-
`holding structure and guarantees the interests of all its
`
`shareholders. Alongside the Chairman and Chief
`Executive Officer, there are five directors who represent
`L’Oréal’s major shareholders, seven independent directors
`and two directors representing the employees.
`The diversity and complementarity of the directors’
` industrial, financial and entrepreneurial expertise equip
`them to quickly and thoroughly comprehend the develop-
`ment challenges facing L’Oréal, the leader of a globalised
`and highly competitive cosmetics market in which the
`need to innovate and adapt is crucial. Most of the directors
`have experience managing international groups at the
`highest level. In 2016, the Board’s composition became
`even more diversified, with a higher proportion of women
`and greater internationalisation. The Board’s women di-
`rectors now represent 46% of the total, and 50% of the
`Committees are chaired by women independent directors.
`A role of reflection
`and strategic impetus
`
`The Board devotes the bulk of its work to strategic issues,
`to foster and accelerate the group’s transformation into a
`more universal, more digital and more sustainable L’Oréal.
`The Board is kept informed throughout the year about
`the group’s activities and results, its positions in relation
`to its competitors, market trends and the expectations
`of consumers all over the world. It examines acquisition
`projects, which were numerous in 2016, and regularly holds
`meetings with the group’s senior executives.
`
`8
`
`S T R A T E G Y
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 12 of 61 PageID #: 588
`
`JEAN - PAUL AGON
`Chairman and Chief Executive Officer
`since 18 March 2011
`(term of office renewed in 2014)
`
`PETER BRABECK- LETMATHE
`Vice-Chairman of the Board
`(term of office renewed in 2013)
`
`FRANÇOISE
`BETTENCOURT MEYERS
`(term of office renewed in 2013)
`
`JEAN - PIERRE MEYERS
`Vice-Chairman of the Board
`(term of office renewed in 2016)
`
`ANA SOFIA AMARAL
`(since 15 July 2014)
`
`CHARLES - HENRI FILIPPI
`(term of office renewed in 2015)
`
`SOPHIE BELLON
`(since 22 April 2015)
`
`X AVIER FONTANET
`(term of office renewed in 2014)
`
`BELÉN GARIJO
`(since 17 April 2014)
`
`BERNARD K ASRIEL
`(term of office renewed in 2016)
`
`BÉATRICE
`GUILLAUME- GRABISCH
`(since 20 April 2016)
`
`GEORGES LIAROK APIS
`(since 15 July 2014)
`
`JEAN -VICTOR MEYERS
`(term of office renewed in 2016)
`
`EILEEN NAUGHTON
`(since 20 April 2016)
`
`VIRGINIE MORGON
`(since 26 April 2013)
`
`S T R A T E G Y
`
`9
`
`

`

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`
`G O V E R N A N C E
`
`The Executive Committee,
`the group’s management body
`
`The Executive Committee members are in charge of the operational Divisions
`and functional Departments, as well as the geographic Zones. They implement
`the strategic guidelines and direct the activities of L’Oréal all over the world.
`In 2016, Nathalie Roos and Vianney Derville joined the Executive Committee
`as President Professional Products Division and Executive Vice-President Western
`Europe Zone respectively. Alexis Perakis-Valat was appointed President Consumer
`Products Division and Jochen Zaumseil Executive Vice-President Asia, Pacific Zone.
`
`14
`
`3
`
`15
`
`5
`
`9
`
`7
`
`4
`
`1
`
`10
`
`S T R A T E G Y
`
`

`

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`
`Members of the Executive Committee of L’Oréal
`
`1 •
`JEAN-PAUL AGON
`Chairman and
`Chief Executive Officer
`2 LAURENT ATTAL
` •
`E
`xecutive Vice-President
`Research and Innovation
`
` • 3 VIANNEY DERVILLE
`Executive Vice-President
`Western Europe Zone
`4 NICOLAS HIERONIMUS
` •
`President
`Selective Divisions
`
`5 •
`BARBARA LAVERNOS
`Executive Vice-President
`Operations
`6 BRIGITTE LIBERMAN
` •
`President
`Active Cosmetics Division
`7 ISABEL MAREY-SEMPER
` •
`Executive Vice-President
`Communications and Public Affairs
`8 CHRISTIAN MULLIEZ
` •
`Executive Vice-President
`Chief Financial Officer
`9 • ALEXIS PERAKIS-VALAT
`President
`Consumer Products Division
`
`2
`
`13
`
`10
`
`11
`
` •
`
`10 •
`
` ALEXANDRE POPOFF
`Executive Vice-President
`Eastern Europe and
`Africa, Middle East Zones
` LUBOMIRA ROCHET
`Chief Digital Officer
`12 NATHALIE ROOS
` •
`President
`Professional Products Division
`13 FRÉDÉRIC ROZÉ
` •
`Executive Vice-President
`Americas Zone
`14 JÉRÔME TIXIER
` •
`Executive Vice-President
`Human Relations and Advisor
`to the Chairman
`15 JOCHEN ZAUMSEIL
` •
`Executive Vice-President
`Asia, Pacific Zone
`
`8
`
`6
`
`12
`
`11
`
`S T R A T E G Y
`
`11
`
`

`

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`
`C O M M I T M E N T S
`
`OUR COMMITMENTS
`
`“Sharing Beauty With All”
`
`INNOVATING SUSTAINABLY
`By 2020, 100% of L’Oréal products will have an improved
`environmental or social profile, for example thanks to
`the reduction of the environmental footprint of formulas,
`the respect of biodiversity or eco-design of packaging.
`
`PRODUCING SUSTAINABLY
`By 2020, L’Oréal will have reduced the environmental footprint
`of its plants and distribution centres by 60%(1),
`through the reduction of CO2 emissions(2), water consumption
`and waste generation(3).
`
`LIVING SUSTAINABLY
`L’Oréal aims to empower its consumers to make sustainable choices.
`To achieve this goal, the group is pursuing a number
`of initiatives such as assessing the footprint of each product
`and using the brands’ influence to raise consumer awareness.
`
`DEVELOPING SUSTAINABLY
`Sharing its growth with its stakeholders is a priority for L’Oréal, which fosters
`access to work for people from underprivileged communities,
`involves suppliers in its sustainable development commitments and ensures
`that its employees around the world benefit from the best social practices.
`
`12
`
`S T R A T E G Y
`
`(1) From a 2005 baseline. (2) In absolute terms. (3) Per unit per finished product.
`
`

`

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`
`OUR COMMITMENTS
`
`The L’Oréal Foundation
`
`The L’Oréal Foundation is committed to supporting
`and empowering women worldwide. It helps them to
`pursue careers in the fields of beauty and science,
`
`and “Beauty for a Better Life”.
`
`rough two specific programmes: “For Women in Science”th
`
`“FOR WOMEN IN SCIENCE”
`Celebrating women in science who have the power to change the world
`The “For Women in Science” programme was set up in 1998
`by L’Oréal in partnership with UNESCO with one aim in mind:
`to ensure that women achieve equal representation
`with men in all scientific disciplines, so that research benefits
`from women’s intelligence, creativity and drive.
`
`“BEAUTY FOR A BETTER LIFE”
`The Maison Rose in Bordeaux
`In February, the first-ever Maison Rose opened its doors in Bordeaux,
`thanks to support from the L’Oréal Foundation. Based on a concept
`invented with women cancer sufferers, the house provides
`them with a space that fosters a sense of well-being. A range of activities
`are available to help women feel better during
`and after treatment, including beauty advice and care from
`a specially trained socio-aesthetician.
`
`S T R A T E G Y
`
`13
`
`

`

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`
`E T H I C S
`
`Ethics at the heart
`of L’Oréal’s commitments
`
`L’Oréal was built on strong ethical principles that guide
`its development and contribute to building its reputation:
`Integrity, Respect, Courage and Transparency. These principles are namely the foundation
`of the group’s policies in terms of compliance, responsible innovation,
`environmental stewardship, social responsibility and philanthropy.
`
`Longstanding
`commitment to the
`United Nations
`
`L’Oréal has been a signatory since 2014 of
`the Women’s Empowerment Principles
`of UN Women, an initiative which aims to promote
`gender equality, and the empowerment of women
`in the workplace, market place, and the community.
`In 2016, Jean-Paul Agon, Chairman and CEO
`of L’Oréal, received the Women’s Empowerment
`Principles CEO Leadership Award. On 1 January 2016,
`the 17 Sustainable Development Goals for 2030
`– adopted by world leaders in September 2015
`at a historic United Nations summit meeting –
`came into force. As a responsible citizen,
`L’Oréal is already strongly committed to 14 out of
`the 17 goals.
`
`L’Oréal recognised by the
`Ethisphere Institute
`for the 7th time
`
`L’Oréal has been recognised as one of the World’s
`Most Ethical Companies 2016 by the Ethisphere
`Institute, a global leader in defining and advancing
`the standards of ethical business practices. Receiving
`this honour for the 7th time underscores L’Oréal’s
`commitment to leading ethical business standards.
`
`The global network of
`Ethics Correspondents
`
`L’Oréal has set up a global network of Ethics
`Correspondents to make sure each employee has a
`local point of contact whilst favouring the normal
`route for handling concerns by management.
`
`L’ORÉAL’S CODE
`OF ETHICS IS
`
`AV45AILABLE IN
`
` LANGUAGES
`
`THE ETHICS
`E-LEARNING AND
`ETHICS HELPLINE,
`L’ORÉAL ETHICS
`OPEN TALK, ARE
`AVAILABLE IN
`MORE THAN
`20 LANGUAGES
`
`V I D E O O N L I N E
`WATCH THE INTERVIEW WITH
`VALENTINA RANNO,
`ETHICS CORRESPONDENT
`FOR L’ORÉAL ITALY
`
`14
`
`S T R A T E G Y
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 18 of 61 PageID #: 594
`
`Chile
`
`Russia
`
`Greece
`
`United States
`
`Vietnam
`
`Morocco
`
`8th edition of
`Ethics Day
`
`Ethics Day has become a key date
`on the group’s calendar.
`The central event is a worldwide
`webchat with Chairman and CEO
`Jean-Paul Agon, who answers live
`hundreds of questions on ethics sent
`to him by L’Oréal employees.
`The General Manager of each
`country also organises
`a local session. In 2016 more than 60%
`of L’Oréal employees took part
`in Ethics Day, asking more than
`4,800 questions.
`Employees were also able to
`participate in a global crowdsourcing
`initiative, to gather collective
`intelligence on the theme of
`“How to better Work Together”.
`More than 1,100 suggestions
`were sent in, and over
`4,000 votes cast.
`
`Switzerl
`and
`
`Philippines
`
`Canada
`
`Turkey
`
`S T R A T E G Y
`
`15
`
`

`

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`
`C O S M E T I C S M A R K E T
`
`The world of beauty
`in 2016
`
`The worldwide cosmetics market, estimated at a total of 205 billion euros, was stronger
`in 2016, with growth of +4.0%(1). In this supply-driven market, spurred by innovation,
`quality and perceived results, L’Oréal strengthened its leadership(2).
`
`+5.0%
`
`+2.9%
`
`+1.0%
`
`+4.2%
`
`+4.6%
`
`+4.6%
`
`+3.8%
`
`+3.6%
`
`+3.9%
`
`+4.0%
`
`Growth of the
`worldwide cosmetics
`market over ten years(cid:2)(1)
`
`2007
`
`2008
`
`2009
`
`2010
`
`2011
`
`2012
`
`2013
`
`2014
`
`2015
`
`2016
`
`Breakdown of the market
`by geographic Zone(cid:2)(1)
`36.9%
`Asia, Pacific
`24.8%
`North America
`19.3%
`Western Europe
`10.2%
`Latin America
`6.0%
`Eastern Europe
`2.9%
`Africa, Middle East
`
`Breakdown of the market
`by product category(cid:2)(1)
`36.3%
`Skincare
`22.9%
`Haircare
`18.2%
`Make-up
`12.0%
`Fragrances
`10.5%
`Hygiene products
`
`Acceleration
`of online sales
`
`+20.7%
`
`growth in worldwide
`online sales(cid:2)(1)
`
`
`
`11%
`
`share of selective
`cosmetics market e-commerce(cid:2)(1)
`
`Main worldwide players
`in sales
`(in billions of USD(cid:2)(3))
`
`L’ORÉAL
`28.02
`
`PROCTER
`& GAMBLE
`17.60(cid:3)(5)
`
`SHISEIDO
`7.11(cid:3)(4)
`
`ESTÉE
`LAUDER
`11.10
`
`UNILEVER
`20.47(cid:3)(4)
`
`(1) Source: L’Oréal 2016 estimates of the worldwide cosmetics market in net manufacturer prices. Excluding soaps, oral hygiene, razors and blades. Excluding currency effects.
`(2) Source: WWD, “Beauty’s Top 100”, April 2016. (3) Source: WWD, “Beauty’s Top 100”, April 2016. Based on 2015 sales. (4) WWD estimates of cosmetics sales. (5) WWD estimates
`of cosmetics sales. Before the disposal of 43 brands to Coty.
`
`16
`
`P E R F O R M A N C E
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 20 of 61 PageID #: 596
`
`Lipstick hits
`the headlines
`
`1)
`
`GROWTH
`
`A s13tar se.6gment
`+ %(
`1.5
`
`BILLION LIP
`MAKE-UP PRODUCTS SOLD
`PER YEAR(cid:2)(3)
`
`Powerful
`growth potential
`
`PENETRATION RATES
`STILL RELATIVELY
`MODEST IN SOME
`GEOGRAPHICAL AREAS
`
`BOOM IN
`MAKE-UP MARKET
`
`For the fourth consecutive year,
`the make-up category drove cosmetics
`market growth worldwide.
`The reasons behind this swift expansion
`across all regions and beauty
`sectors are analysed in detail below.
`
`Record growth(cid:2)(1)
`
`+8.4%
`
`In all geographic Zones,
`the make-up market is growing faster
`than the cosmetics market(1)
`
`X2
`
`North America
`
`X6
`
`Western Europe
`
`X2
`
`New Markets
`
`Make-up is
`the most dynamic category
`in all sectors(cid:2)(2)
`
`UNITED STATES
`
`BRAZIL
`
`68%
`50%
`
`FRANCE
`
`CHINA
`
`60%
`28%
`
`% of women who use
`at least one lip make-up product
`per year(cid:3)(4)
`
`(1) Source: L’Oréal 2016 estimates of the worldwide cosmetics market in net manufacturer prices. Excluding soaps, oral hygiene, razors and blades. Excluding currency effects.
`(2) Excluding dermocosmetics. Source: L’Oréal 2016 estimates of the worldwide cosmetics market in net manufacturer prices. Excluding soaps, oral hygiene, razors and blades.
`Excluding currency effects. (3) Source: Euromonitor, 2015 data. (4) Source: Women aged between 15 and 75 in the United States and Europe, between 15 and 80 in Japan,
`between 15 and 65 in Russia, Brazil and China, and between 15 and 55 in India, Beauty Track, 2012-2013.
`
`P E R F O R M A N C E
`
`17
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 21 of 61 PageID #: 597
`
`C O S M E T I C S M A R K E T
`
`New generations reinvent make-up
`
`The make-up boom is driven by the selfie generation, and the fast-growing use of social media, which focuses
`on appearance, self-expression and presentation. The new generations are reinventing uses, giving trends
`their own spin, and creating buzz for new looks.
`
`Who are the new make-up
`consumer generations?
`
`MILLENNIALS
`born between 1980 and 2000
`
`GENERATION Z
`born between 1995 and 2010
`
`1980
`
`1985
`
`1990
`
`1995
`
`2000
`
`2005
`
`2010
`
`New generations
`have a significant beauty
`spending budget(cid:3)(1)
`
`The new generations
`set and follow the trends
`
`FRANCE
`
`Per capita
`
`$35
`14-18 year-olds
`$28
`19-24 year-olds
`
`$42
`
`CHINA
`
`Per capita
`
`14-18 year-olds
`
`19-24 year-olds
`
`$77
`$71
`
`$85
`
`UNITED STATES
`
`Per capita
`
`$37
`14-18 year-olds
`$28
`19-24 year-olds
`
`$49
`
`L’ORÉAL
`IS IDEALLY
`PLACED TO SEIZE
`THE POTENTIAL
`OF THE MAKE-UP
`MARKET
`
`L’ORÉAL PARIS
`AND
`MAYBELLINE
`NEW YORK
`The two top
`worldwide make-up
`brands
`
`ESSIE
`A specialist nail care
`and varnish brand
`
`NYX
`PROFESSIONAL
`MAKEUP
`The highest growth
`in the market
`
`IT COSMETICS
`A newcomer
`to the portfolio:
`a skincare make-up
`brand developed
`with plastic surgeons
`
`LANCÔME,
`YVES SAINT LAURENT,
`GIORGIO ARMANI,
`URBAN DECAY
`AND SHU UEMURA
`Emblematic signatures
`with complementary
`positioning in
`the Luxury sector
`
`(1) Source: Ipsos, 2015 qualitative study, “Only include the beauty products you buy with your own money and not products bought for you by other people”.
`
`18
`
`P E R F O R M A N C E
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 22 of 61 PageID #: 598
`
`L ’ O R É A L I N F I G U R E S
`
`A robust and balanced
`business model
`
`The group achieved a significant growth in sales and robust profits in 2016.
`Operating margin and cash flows have set new records, confirming
`that L’Oréal’s business model is set to deliver robust performance and create
`significant value.
`
`Growth in sales in all Divisions
`and all geographic Zones
`
`Consolidated sales
`(in millions of euros)
`
`+4.7%(1)
`25,257 25,837
`
`21,638 22,124 22,532
`
`Weight of
`digital in sales(cid:2)(2)
`1.7
`billion euros of sales
`in e-commerce
`6.5%
` sales
`of consolidated
`in e-commerce
`+32.7%
`of like-for-like growth
`in e-commerce
`
`(cid:3)
`
`2012
`
`2013
`
`2014
`
`2015
`
`2016
`
`(1) Like-for-like: based on a comparable structure and identical exchange rates. (2) Sales achieved on the brands’ own websites and estimated sales achieved by the brands on retailers’
`websites (non-audited data).
`
`P E R F O R M A N C E
`
`19
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 23 of 61 PageID #: 599
`
`L ’ O R É A L I N F I G U R E S
`
`Breakdown of 2016
`operational Divisions’ sales
`
`BY DIVISION
`
`48.1%
`Consumer Products
`30.8%
`L’Oréal Luxe
`
`13.6%
`Professional Products
`7.5%
`Active Cosmetics
`
`BY GEOGRAPHIC ZONE
`
`BY BUSINESS SEGMENT
`
`32.1%
`Western Europe
`
`28.5%
`North America
`
`39.333 4%
`New Markets:
`22.6% Asia, Pacific
`7.4% Latin America
`6.3% Eastern Europe
`3.1% Africa, Middle East
`
`28.5%
`Skincare
`26.4%
`Make-up
`19.2%
`Haircare
`
`12.1%
`Hair colourants
`9.5%
`Fragrances
`4.4%
`Other(cid:2)(1)
`
`Record operating margin, representing 17.6% of sales
`
`Operating
`profit
`(in millions of euros)
`
`Net profit
`excluding non-recurring items
`after non-controlling interests(2)
`(in millions of euros)
`
`Earnings
`per share(3)
`(in euros)
`
`+3.5%
`4,540
`
`4,388
`
`+4.5%
`3,647
`
`3,490
`
`+4.6%
`6.46
`
`6.18
`
`3,891
`
`3,760
`
`3,558
`
`3,125
`
`3,032
`
`2,861
`
`5.34
`
`4.99
`
`4.73
`
`2012
`
`2013
`
`2014
`
`2015
`
`2016
`
`2012
`
`2013
`
`2014
`
`2015
`
`2016
`
`2012
`
`2013
`
`2014
`
`2015
`
`2016
`
`20
`
`P E R F O R M A N C E
`
`(1) “Other” includes hygiene products and sales made by American professional distributors with brands outside of the group. (2) Net profit excluding
`non-recurring items after non-controlling interests does not include impairment of assets, restructuring costs, tax effects or non-controlling interests.
`(3) Diluted earnings per share, based on net profit from continuing operations, excluding non-recurring items, after non-controlling interests.
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 24 of 61 PageID #: 600
`
`A balanced operating profitability
`
`Profitability by Division
`(as % of Division sales)
`
`20.2%
`
`21.2%
`
`20.3%
`
`23.2%
`
`Profitability by
`geographic Zone
`(as % of Zone sales)
`
`22.9%
`
`19.6%
`
`19.7%
`
`Total operational
`Divisions’
`profitability
`
`20.7%(1)
`
`Consumer
`Products
`
`L’Oréal
`Luxe
`
`Professional
`Products
`
`Active
`Cosmetics
`
`Western
`Europe
`
`North
`America
`
`New
`Markets
`
`Solid balance sheet
`
`Capital
`expe
`diture
`
`4n
`
`%
`
`5.
`
`of sales
`
`Net cash
`surplus of
`
`48
`
`m
`
`illion eu
`
`os
`
`1r
`
`%
`
`sets
`
`8s
`
`Shareholders’
`equi
`ty
`
`68.
`
`
`
`of tota
`
`l a
`
`A dynamic shareholder return policy
`
`Dividend per share
`(in euros)
`
`€2.75
`€2.50
`
`€2.97
`€2.70
`
`€2.53
`€2.30
`
`€3.41
`€3.10
`
`€3.63 (2)
`€3.30 (3)
`
`+6.45%
`
`48.7%
`
`46.8%
`
`50.6%
`
`50.2%
`
`51.1%(cid:3)(4)
`
`2012
`2013
`2014
`2015
`Pay-out ratio (5) (as % of profit)
`
`2016
`
`2013
`2012
`2014
`2015
`2016
`€3.63 = Preferential dividend of +10% for shareholders
`who have held shares in registered form for two years(2).
`
`At 31 December 2016
`€173.40
`
`Share price
`
`€97.4 Bn
`
`Market capitalisation(6)
`
`(1) Before non-allocated: before central group expenses, fundamental research expenses, stock options and free grant of shares expenses
`and miscellaneous items. (2) For shareholders who continuously hold their shares in registered form for a minimum of two full calendar years,
`up to a maximum of 0.5% of the capital for the same shareholder. (3) Dividend proposed at the Annual General Meeting of 20 April 2017.
`(4) Based on the dividend proposed at the Annual General Meeting of 20 April 2017. (5) Pay-out ratio based on diluted net profit excluding
`non-recurring items, after non-controlling interests, per share. (6) On the number of shares at 31 December 2016, i.e. 561,855,741 shares.
`
`P E R F O R M A N C E
`
`21
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 25 of 61 PageID #: 601
`
`L ’ O R É A L I N F I G U R E S
`
`A dynamic
`acquisitions policy
`
`Ever since it was founded more than 100 years ago, the L’Oréal group has been building,
`through a succession of targeted acquisitions, a global flotilla of emblematic and
`complementary brands. Today it is the most powerful and diversified range of brands
`in the beauty industry, and drives the group’s performance in a long-term perspective.
`
`Find out how acquisitions enrich L’Oréal’s flotilla of brands,
`to drive future organic growth
`
`L’ORÉAL CONSOLIDATED SALES
`IN MILLIONS OF EUROS
`
`25
`
`20
`
`15
`
`51
`
`0
`
`1967
`
`(cid:1)
`
`1980
`
`1985
`
`1990
`
`1995
`
`2000
`
`(cid:1)
`2005
`
`(cid:1)(cid:1)
`
`(cid:1)
`2010
`
`2015
`
`(cid:1)
`
`Major acquisitions in 2016
`
`IT Cosmetics,
`a skincare make-up brand
`
`Atelier Cologne
`a niche perfume specialist
`
`IT Cosmetics is one of the fastest-growing
`American selective beauty brands.
`Created by Jamie Kern Lima and Paulo Lima,
`the brand was developed in conjunction
`with renowned plastic surgeons
`to provide skincare make-up products
`with a “problem-solution” approach.
`It is now part of the L’Oréal Luxe
`brand portfolio.
`
`The brand has a distinctive offering
`of concentrated and refreshing pure perfumes,
`or “colognes absolues”. Atelier Cologne
`has joined the prestigious brands
`of L’Oréal Luxe, such as Maison Margiela
`and the exclusive collections
`of Giorgio Armani and Yves Saint Laurent,
`in the high-growth alternative
`fragrances segment.
`
`22
`
`P E R F O R M A N C E
`
`

`

`Case 1:17-cv-00868-JFB-SRF Document 28-4 Filed 12/08/17 Page 26 of 61 PageID #: 602
`
`“Sharing Beauty With All”
`2016 indicators
`
`2016 is the third year of implementation of the social
`responsibility and sustainability programme
`“Sharing Beauty With All”, which aims to make L’Oréal
`an exemplary company in sustainable innovation,
`production and consumption, and in sharing growth
`with all its stakeholders.
`
`-67%
`
`CO EMISSIONS(2)
`2
`
`-48%
`
`WATER
`CONSUMPTION(3)
`
`-35%
`
`WASTE
`GENERATION(4)
`
`82%
`
`OF NEW PRODUCT
`ANALYSED HAVE
`AN IMPROVED SOCI
`OR ENVIRONMENTA
`PROFILE(1)
`
`S A
`
`L
`L
`
`90%
`
`OF THE BRANDS
`HAVE EVALUATED
`THEIR ENVIRONMENTAL
`OR SOCIAL IMPACT(5)
`
`46%
`
`OF THE BRANDS
`HAVE CONDUCTED
`A CONSUMER
`AWARENESS INITIATIVE(5)
`
`More than
`67,500
`
`PEOPLE FROM SOCIALLY
`AND FINANCIALLY
`UNDERPRIVILEGED
`COMMUNITIES WERE PROVIDED
`WITH ACCESS TO WORK
`
`83%
`
`OF THE GROUP’S STRATEGIC
`SUPPLIERS HAVE BEEN
`EVALUATED AND SELECTED
`BAS