L'Oréal - 2018 Registration Document

Corporate Governance REMUNERATION OF THE EXECUTIVE OFFICERS

According to the IFRS applied for the preparation of the consolidated financial statements, the estimated fair value of one performance share (ACAs) under the plan of 17 April 2018, of which Mr Jean-Paul Agon is a beneficiary, is €176.17. This fair value was €166.90 on 20 April 2017. The estimated fair value according to the IFRS of the 30,000 performance shares (ACAs) granted in 2018 to Mr Jean-Paul Agon is therefore €5,285,100. These shares will only finally vest, in full or in part, if the performance conditions described below are reached. Performance conditions Final vesting of these shares is subject to achievement of performance conditions which will be recorded at the end of a 4-year vesting period as from the date of grant. Half of the number of shares that finally vests will depend on growth in like-for-like cosmetics sales as compared to those of a panel of competitors, such panel consisting in 2018 of Unilever, Procter & Gamble, Estée Lauder, Shiseido, Beiersdorf, Johnson & Johnson, Henkel, LVMH, Kao, Coty; the other half will depend on the growth in the L’Oréal Group’s consolidated operating profit. The calculation will be based on the arithmetical average for the three full financial years of the vesting period. The first full year taken into account for assessment of the performance conditions relating to this grant is 2019. In order for all the free shares granted to finally vest at the end of the vesting period pursuant to the criterion related to sales, L’Oréal has to outperform the average growth in sales of the panel of competitors. Below that level, the grant decreases. The Board defines a threshold, not made public for confidentiality reasons, below which no share will finally vest pursuant to this criterion. In order for all the free shares granted to finally vest at the end of the vesting period pursuant to the criterion related to operating profit, a level of growth defined by the Board, but not made public for confidentiality reasons, must be met or exceeded. Below that level, the grant decreases. If the operating profit does not increase in absolute value over the period, no share will finally vest pursuant to this criterion. The figures recorded each year to determine the levels of performance achieved are published in the Annual Financial Report. Main characteristics of the grant Under this plan, 931,000 performance shares (ACAs) were granted to 2,141 beneficiaries, representing 0.17% of the share capital.

The conditional award of performance shares to Mr Jean-Paul Agon in 2018 represented 3.22% of the total number of performance shares granted and 0.005% of the share capital at 31 March 2018. Moreover, Mr Jean-Paul Agon, as an executive officer, shall retain 50% of the shares which will finally vest for him at the end of the vesting period in registered form, until the termination of his duties as L’Oréal’s Chairman and Chief Executive Officer. Furthermore, as for previous grants, Mr Jean-Paul Agon has undertaken not to use any risk hedging instruments. It should be noted that no stock options to purchase or subscribe for shares, and no other long-term incentives, were granted to Mr Jean-Paul Agon in 2018. Additional social protection schemes 2.5.4.5. Mr Jean-Paul Agon will continue to be treated in the same way as a senior manager during the entire term of his corporate office which allows him to continue to benefit from the additional social protection schemes and, in particular, the employee benefit and healthcare schemes applicable to the Company’s employees. The amount of the employer’s contributions to the employee benefit and healthcare schemes amounted to €3,735 in 2018, and the amount of the employer’s contribution to the Defined Contribution Pension scheme amounted to €6,158. Under the Defined Contribution Pension Scheme (“RCD L’Oréal”, as described in chapter 3 of this Document), whose rights are strictly proportional to the contributions paid, and which benefits all employees of L’Oréal in France, the estimated amount of Mr Jean-Paul Agon’s annual retirement pension at 31 December 2018 would be €3,905 gross. As for all other senior executives of the Group, the capital resulting from the employer contributions of the RCD L’Oréal will be deducted from the amount of the Retirement Guarantee for the calculation of the life annuity potentially due under this plan so that these benefits do not add up (see section 2.5.2.4). As a reminder, the lifetime risk related to the plans resulting from Article 83.2 of the French Tax Code is borne by the insurer. As of 31 December 2018, the distribution of contributions was as follows: a contribution from the Company, subject to a 20% social contribution, of 0.5% for the portion of remuneration below a French social security ceiling and 3% for the portion of remuneration between one and six social security ceilings; and an employee contribution of 0.2% for the portion of remuneration below one French social security ceiling and 3% for the portion of remuneration between one and six French social security ceilings. The contributions paid by the Company and the related taxes are deductible from the corporate income tax.

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REGISTRATION DOCUMENT / L'ORÉAL 2018

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