Letter to shareholders No 48 _ March 2010

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L’Oréal has shownits ability to renew itselfand to bounce backDear 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-Pau l Agon and h is teams, but also the energy and courage to take impor-tant decisions and transform the company. In weathering the storm, L’Oréal has once more demonstrated its resil-ient 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

L’Oréal has prepared itself well for a returnto growth in 2010

Dear Shareholders,

Despite the very difficult context, L’Oréal weathered the crisis well and has strengthened its global leadership in the beauty sector. W e h a v e r e c r e a t e d t h e “virtuous circle”, the tradi-tional 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

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 trans-formation 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 -

Rapid growth in New Markets

The New Markets zone which groups together all the countries outside Western Europe and North America, now repre-sents 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.

Chile+13.5%

Argentina+16.0%

Brazil+15.0% India

+31.5%

Indonesia+21.5%

China+17.6%

South Korea+35.8%

Ukraine+30.3%

Highlights

Solid, good quality 2009 results

Gradual improvementin 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 posi-tive (+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 ad- ministrative 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: share- holders’ 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 representingan increase of +4.2%

The dividend proposed at the sharehol-ders’ Annual General Meeting of April 27th, 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.

2 -

(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 27th, 2010

Sales

-1.1% like-for-like+0.8% at constant exchange rates-0.4% reported figures

e17.5 bn

EPS(2)

-2.1%

e3.42

2008 2009

Dividend +4.2%

$1.44$1.50 (3)

Net profit (1)

-3.2%

e1 997bn

- 3 - 3Creating the beauty of tomorrow

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, offer-

ing unprecedented lightening perfor-mances at this level of concentration.

Scientific innovation:a new era in hair colourwith Inoa

In its centenary year, L’Oréal heralded a new era in salon haircolourants with Inoa, a breakthrough innovationfrom L’Oréal Professionnel.

Questioning established ways

After a century marked by major impro-vements 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.

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 effi-cacy, 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 techno- logical boost. Inoa represents a huge qualita-

tive 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, Inoa was l aunched in September.

Infinitecolour potential

Inoa has already been chosen by 36,000 European hairdressing salons.

In 2010, for the first time in 25 years, the jury awards the Marie-Claire Beauty Excellence prize to a profes-sional hair colourant.

With comfortableapplication, good grey hair coverage and long-lasting colour, Inoa is a magical product both for me and

my customers.Christophe, JM Joubert Salon

(1) Respects the hair’s natural essential amino acids and lipid balance.

1

4 - 4 - Around the world

L’Oréal steps up its presence in ChinaL’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 marketAfter 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.

- 5

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 moisturi-sing 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.

Garnier on a roll

Around the world

Men Expert by L’Oréal Paris, already number 1 in department storesThree years after its launch in China, Men Expert can be proud to have made a signifi-cant 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 ChinaThe roll-out of Kiehl’s, the rising promi-nence 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.

Matrix passes the 10,000 salon mark in China

The sales of the professional hair- dressing 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.

Youth Code by L'Oréal ParisGene science for everyone

In January 2010, L’Oréal Paris launched in Europe its first anti-wrinkle 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.

6 - 6 - New products

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 hair-care 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.

(1) Source: Health and Beauty IPSOS Europe 5 Men 2005–2007.

Opium 2009by Yves Saint LaurentDoorway to the imagination

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 expres-sing them through a new bottle and a new media campaign.

Rénergie Lift Volumetry by LancômeInspired by growth factor research

In 2010, Lancôme is moving cosmetic lifting into the third dimension by taking its inspiration from the latest discove-ries 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-PosayA dermatological advance

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 anti-irritant anti-itch balm. Highly concentrated active ingredients in an original non-greasy, non-sticky, ultra-penetrat ing texture for rapid coverage, to restore lasting comfort for very dry skin and skin with atopic tendencies.

- 7L’Oréal's commitments

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 laidthe cornerstone of a vast new programme of researchin human sciences.

Rebuilding self-esteem

Today, more than ever before, appea-rance 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 psycho-therapists 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.

The L’Oréal Corporate FoundationFor the last two years, the Corporate Foundation has been leading initia-tives 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.

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 nationali-ties, who are artists or experts in 20 fields, including history, anthropology, philo-sophy and sociology.

100,000 Years of Beauty,the first scientific publicationon the eternal, human questfor 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 distin-guishing themselves from the animal kingdom.

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 SerresSpeaking 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 andExecutive Vice-President Corporate Communications and External Affairs

8 - Shareholder information

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L’Oréal creates its Individual Share-holder Consultation Committee.

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Share priceFrom December 31st, 2006 to February 26th, 2010

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.

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.

French solidarity taxon wealth (ISF)

To estimate the 2009 French ISF declaration, the following L’Oréal share value should be taken into account:

• either, the closing price on December 31st, 2009: €78,

• or, the average of the last 30 days’ closing prices for 2009: €75.45.

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.comor the mobile website loreal-finance.mobi from your mobile phone.

ToulouseOctobre 6th

LilleSeptember 14th

NantesMay 17th

NiceJune 15th

BordeauxNovember 16th

DijonNovember 9th

StrasbourgDecember 7th

BrusselsMay 20th

MarseilleDecember 14th

ParisActionaria Fair

November 19th & 20th

• Shareholder Meetings in 2010

Your key dates

•Annual General Meeting Tuesday, April 27th, 2010 at the Carrousel du Louvre, 99, rue de Rivoli – 75001 Paris, France.

• Financial Calendar April 22nd, 2010 1st quarter sales

April 29th, 2010 Ex-date of the dividend(1)

May 5th, 2010 Payable date of the dividend(1)

August 25th, 2010 2010 half-year results

(1) Subject to approval by the Annual General Meeting of April 27th, 2010.

16 shareholder members, 3 permanent members

The Individual Shareholder Consultation Committee meets, at L’Oréal’s initia-tive, 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.

Jean Régis CAROFPermanent Delegate

Director of Individual Shareholder and Market Authority Relations

Nadia BELLONCommittee Secretary

Thierry PRÉVOTCommittee Chairman

Group General Manager, Financial Communications

NewIdentifying 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 state-ment denotes shares registered before December 31st, 2009. The share continues to be listed and traded under the code ISIN FR0000120321.

Find out more at www.loreal-finance.comDiscover the latest shareholder news (Consultation Committee, loyalty bonus, etc.) in the Shareholders’ Corner.