2007 annual report l

8/14/2019 2007 Annual Report L

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CONTENTS

02

04

07

COMMITMENT 10

12

14

LORAL FINANCIAL HIGHLIGHTS 19

MARKET TRENDS 27

BRANDS 32

INTERNATIONAL 36

40

42

44

RESOURCES 50

52

BUSINESSES 64

72

94

97


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WORLDS NUMBER 1 COSMETICS GROUP

25 INTERNATIONAL BRANDS

130 COUNTRIES

63,000 EMPLOYEES

17 BILLION EUROS OF SALES IN 2007

YUE-SAI


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The LOral adventure has been founded from the outset on a fundamentalconviction: cosmetics are an expression of a universal dream of well-being andinner harmony. They help everyone to fully express their personality, to be self-assured and open in their relations with others, and to fulfil their potential. They

can give vulnerable people the desire and the strength to rebuild their lives orresume their place in society. Beauty is useful and indeed essential.

The globalisation of cosmetics consumption is only just beginning. For LOral,this is an opportunity. And a responsibility. As the world leader in beauty, LOralhas a duty to satisfy all the desires and all the needs of consumers across theworld, by driving the scientific innovation which forges the excellence of itsproducts, and by cultivating the diversity of its brand portfolio and its distributionchannels to make beauty accessible to everyone.

LOrals goal is to be one of the exemplary global companies of the 21st century.The group focuses its efforts on fostering the personal and professionalfulfilment of its employees, on safeguarding the integrity and quality of theenvironment, on developing activities for the benefit of the community, and onstrengthening its corporate citizenship in the 130 countries in which it operates.Making a contribution to a more beautiful world is LOrals promise.

A WORLD OF BEAUTY


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02

VIGILANT AND DYNAMIC GOVERNANCE

The separation of the roles of Chairman and Chief Executive

-

-

modus

operandi

ACCELERATING GROWTH

-

LExpansion

CONTINUITY IN STRATEGY AND VALUES,

GROWTH ACCELERATES


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03

CONTINUITY OF VALUES

-

-

-

-

-

Sir Lindsay Owen-Jones

CHAIRMANS MESSAGE

The group ensures the continuitynot only of its business model,but also of the values it holds.


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04

PROFOUND TRANSFORMATION OF

THE COSMETICS MARKET

The profound transformationof the cosmetics marketis a historic opportunityfor LOral.

THE STRENGTH OF OUR BUSINESS MODEL

TO SEIZE ALL THE OPPORTUNITIES OF

A NEW COSMETICS WORLD

ACCELERATED GROWTH

FULL SPEED AHEAD

THE BODY

SHOP SANOFLORE

KIEHLS, LA ROCHE-POSAY GIORGIO ARMANI

LORAL PARIS


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05CHIEF EXECUTIVE OFFICERS MESSAGE

THE BODY SHOP

DIESELSANO-

FLORE

In 2007, our growth enginewas firing on all cylinders, andgenerating maximum power.

OPERATING PROFIT: STRONG IMPROVEMENT

IN A DIFFICULT CONTEXT


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06

CONFIDENCE FOR 2008

Jean-Paul Agon

We are confident thatwe can achieve another yearof sustained growth.

PROGRESS IN MANY AREAS

Code of Business Ethics


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0

BOARD OF DIRECTORS

COMPOSITION AT DECEMBER 31st, 2007. The statutory length of tenure of a LOral director is four years, and is renewable. Eachdirector holds a minimum of 1,000 LOral shares. (The full list of directors offices and directorships, in accordance with legal requirements,is included in the Notes to the Management Report of the Board of Directors.)

SIR LINDSAY OWEN-JONES(1)

Chairman of the Board of Directors

-

JEAN-PAUL AGON

LORAL PARIS

BIO-

THERM

Chief

Executive Officer

JEAN-PIERRE MEYERS (2) (6) (8)

Vice-

Chairman of the Board-

PETER BRABECK-LETMATHE(2) (5) (6)

-

-

LILIANE BETTENCOURT(2) (3)

FRANOISE BETTENCOURT MEYERS

WERNER BAUER

FRANCISCO CASTAER BASCO(2) (8)

-

CHARLES-HENRI FILIPPI(9)

-

30

-

XAVIER FONTANET(7)

-

BERNARD KASRIEL(2) (4) (5)

-

MARC LADREIT DE LACHARRIRE

-

-

-

ANNETTE ROUX-

LOUIS SCHWEITZER

-

-

Franck Riboud

TRIBUTE TO MR ANDR BETTENCOURT


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08

EXECUTIVE COMMITTEE

1 Jean-Paul Agon

Chief Executive Officer

2 Christian Mulliez

Executive Vice-President

Administration and Finance

3 Jean-Philippe Blanpain

Managing Director Operations

4 Marc Menesguen

President

Luxury Products Division

5 Patrick Rabain

President

Consumer Products Division

6 Jean-Jacques Lebel

President

Professional Products Division

2 3 6 7

8

5

4


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0EXECUTIVE COMMITTEE

7 Batrice Dautresme


Corporate Communications and External Affairs

8 Geoff Skingsley


Human Resources

9 Jochen Zaumseil

Managing Director Asia Zone

10 Laurent Attal

Managing Director North America Zone

11 Brigitte Liberman

Managing Director Active Cosmetics Division

12 Joseph Bitton

Managing Director Latin America Zone

13 Jean-Franois Grollier


Research and Development

9

1

10 11 13

12


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10

BUILDING

A RESPONSIBLE COMPANY

Social and environmentalresponsibilityp.14

Shareholderinformation

Corporategovernancep.12

COMMITMENT


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11

LOral has always sought to go beyond mere economic success. Strong ethical principles guideits growth. A broader conception of social responsibility drives its commitment. To be one of thecompanies that have the greatest respect for the planet and are the most caring towards communitiesneeds is LOrals constant goal, as it strives to build exemplary growth.

LOral employees, with children from the Alfred E. Smith Recreation Centre in New York, during the Volunteer Day organised by LOral USA.


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12

Vigilance and balance inspire LOrals governance. The Board of Directors constantly ensures that its organisationis adapted to changes in the group. The separation of roles between Chairman and Chief Executive Officer, decidedin 2006, is proving satisfactory. At the end of 2007, the Board decided to split the Management and RemunerationCommittee into two separate committees, one to select new Board members and corporate officers for appointmentby the Board, and the other to determine the remuneration of general management. This organisation ensures theharmonious development of the group.

A VIGILANT AND BALANCED BOARD OF DIRECTORS

A HARMONIOUS ALLOCATION OF ROLES

Following the separation of the roles of Chairman and Chief

RESPONSIBLE AND EXPERIENCED DIRECTORS

-

-

-

ACTIVELY INVOLVED COMMITTEES

The Strategy and Implementation Committee

-

-

-

(1) In accordance with the law, treasury stock carries no voting rights.

BREAKDOWN OF SHAREHOLDING STRUCTUREAT DECEMBER 31ST, 2007

BREAKDOWN OF VOTING RIGHTSAT DECEMBER 31ST, 2007(1)

37.4%

Public38.8%

Public

3.7%

Treasury stock28.9%

Nestl30.0%

Nestl

30.0%

Mrs Bettencourtand her family

31.2%



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13COMMITMENT // CORPORATE GOVERNANCE

SYSTEMATIC SELF-EVALUATION

-

modus operandi

-

-

-

ENSURING STRICT CONFIDENTIALITY

-

-

Appointments Committee

Remuneration Committee

Strategy and

Implementation

Committee

Management and

Remuneration

Committee

th

Appointments Committee

th

Remuneration Committee

th

Audit Committee

(1) Management Report of the Board of Directors, chapter on Remuneration of corporate

officers, pages 85 to 89 of volume 2 of this Reference Document.

The Management and Remuneration Committee

-

-

The Audit Committee

-

-

-


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14

LOrals goal is to ensure sustainable and responsible growth. We are convinced that sustainable success is basedon strong ethical principles, which provide a framework of values, shared by all employees, and guide our growth.It is also based on a genuine sense of responsibility towards the wider community.

ENSURING SUSTAINABLE ANDRESPONSIBLE GROWTH

-


-

>Appointment of a Director of Ethics, reportingdirectly to the Chief Executive Officer of the group.New edition of the Code of Business Ethics.

> Creation of the LOral Corporate Foundation.

> Extension of the Unesco-LOral For Womenin Science national fellowship programme to35 countries.

> Active participation of LOral in workinggroups on climate change, membership ofthe Global Business Leadership Platform onClimate Change of the United Nations GlobalCompact.

> Leadership of the CSR Europe DiversityLaboratory.

> Signing of the Responsible CommunicationCharterdrawn up by the French advertisersassociation (UDA).

> Internal communication on sustainabledevelopment: awareness raising days, moduleincluded in induction seminars, wide circulation

of abridged report.

> Strategic partnership with the Womens Forummeeting in Deauville and co-initiation of the SciTech Girl project to raise young womensawareness of scientific and technical professions.

2007HIGHLIGHTS

THE SIX KEY PRINCIPLES OF

OUR SUSTAINABLE DEVELOPMENT

APPROACH

> We are committed to ensuring growthwhich creates value for the largest possible number

of those who contribute to our success.

> We want to promote sustainable innovation byincorporating the principles of sustainabledevelopment into the heart of our Research andDevelopment activities.

> We want to offer our employees a safe, healthyand stimulating working environment, in whichpersonal talent and merit are recognised,diversity is valued, private life is respected andthe balance between professional life and personallife is taken into account.

> We build strong and lasting partnerships with ourcustomers and our suppliers, based on mutual trustand interest.

> We are aware of the impact of our activities onthe natural environment, including biodiversity, andare constantly striving to reduce it.

> Finally, we are determined to be a genuinelygood corporate citizen, making a positivecontribution in the countries and communities inwhich we operate and in particular by fosteringscience, support for the vulnerable, and education.


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CODE OF BUSINESS ETHICS

A new edition

The new Code of Business Ethics enables LOral employeesto anticipate and respond to the constantly changing expectations ofstakeholders.

Issues such as competition law, fight against corruption,responsible marketing, diversity and privacy are consideredfrom a decidedly practical and educational viewpoint.

To ensure it can be used by everyone, the Code of Business Ethicshas been translated into 43 languages.

COMMITMENT // SOCIAL AND ENVIRONMENTAL RESPONSIBILITY

We believe that our commitment to live up to these powerful values, andto demonstrate our high ethical standards in all that we do will ensure more thanever that LOral is seen as an organisation which inspires trust and respect.

2007: NEW EDITION OF THE CODE OF BUSINESS ETHICS

-

Code of Business Ethics -


-

-

EXTERNAL RECOGNITION

>

> Corporate Knights

>

Ethisphere Magazine-

>Carbon Leader

>-

On October 18th, 2007, LOral launched its new Code ofBusiness Ethics worldwide, with each employee receiving a copy.


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16

-

-

-

La Maison des Femmes

BIRTH OF THE LORAL FOUNDATION-

-

-

Women of the World

FOR WOMEN IN SCIENCE

National fellowships set up in 16 new countries

The For Women in Science programme, created in

partnership with Unesco, highlights the scientific excellence ofwomen, and encourages new talents. Each year,the LOral-Unesco awards are made to five eminent womenresearchers, with each scientist receiving $100,000. Up to now,47 major scientists have received this distinction, and becomerole models for the younger generation.

Fellowships to encourage scientific careers form another part ofthe For Women in Science programme.

Each year the international Unesco-LOral fellowships enable15 post-doctorate students to continue their research in the bestlaboratories in the world. To date, 105 young scientistswere awarded fellowships.

The national fellowship programmes, set up in 2001 by

LOral subsidiaries to enable women students to continuetheir scientific studies, have now been extended to 35 countriesand 340 doctorate students have benefited from the scheme.In 2007, sixteen new countries joined the programme,including France, Germany and Russia.

Discovering and promoting talent.Supporting the efforts of thosewho stand up to their fate. Reachingout a helping hand to those

made vulnerable by life. These areour Foundations ambitions.

Batrice Dautresme


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1

SAFETY, HEALTH AND ENVIRONMENT INDICATORS

COMMITMENT // SOCIAL AND ENVIRONMENTAL RESPONSIBILITY

37%Reuse

35%Recycling

2%Destruction

23%Energy recovery

from incineration

3%Landfill

>Waste reuse and recycling in 2007(group factories and distribution centres)

>Change in environmental indicators(group factories and distribution centres)

LOral has taken several green energy initiatives, for example at its plantat Burgos in Spain, where photovoltaic panels have been installed.

HAIRDRESSERS AGAINST AIDS

Programme launched in 12 new countries

Set in motion in South Africa, the preventative educationinitiative Hairdressers against AIDS was launched in 2007

in 12 new countries, including India, Germany, Argentina,Canada, Mexico and Russia.

It makes use of the network of LOral partner hairdressers toraise public awareness of the risks of the disease, and informcustomers of ways of protecting themselves.A specific AIDS training module is taught by more than3,000 instructors worldwide, through hairdressertraining academies, hair salons, and professional conferences.

To mark World AIDS Day on December 1st, 2007,2,500 hairdressers took part in events in France,550 salons in Germany relayed the programmes preventionmessages, and more than 400 Beijing hairdressers took part inThe Great AIDS Walkin China.

The Great AIDS Walk

>CO2

emissions in grams per finished products equivalent(group factories and distribution centres)

2005 2006 2007200420032002

19.5 18.1 17.120.0

22.522.4

>Number of accidents resulting in sick leaveper million hours worked for LOral personnel(group factories and distribution centres)

2006 20072005

2.53 2.55

3.10


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18

LOral has introduced a wide range of initiatives to supplement the financial and strategic information providedto shareholders and investors: shareholder meetings in regional capitals, participation in the 2007 Actionariashareholder fair in Paris, factory and laboratory visits, wider circulation of the Letter to Shareholders and theShareholder Digest, meetings of the rolling shareholder panel to prepare for the Annual General Meeting anddiscuss the Annual Report, and meetings with analysts and institutional investors from all over the world.

CLOSER TO THE SHAREHOLDER WITHMORE ACCESSIBLE INFORMATION

MEETING SHAREHOLDERS

LANCMEVICHY

Le Revenu

ON-LINE FINANCIAL INFORMATION

FULLER AND MORE ACCESSIBLE INFORMATION

By directly registering their shares, shareholderscan benefit from a number of advantages:the shareholder;routine transactions;

shares;or credited to the shareholders account;sent directly to the shareholder.

(1) Cliff: French Association of Investor Relations.

(2) FFCI: French Investment Club Federation.

nd, 2008.

More than 1,500 shareholders visited the LOral stand at Actionaria.

Calendar


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1

Sales(1)

(1) Based on published figures.

(2) Diluted net earnings per share based on net profit excluding non-recurrent items after minority interests.

(3) Dividend to be proposed to the Annual General Meeting of Shareholders on April 22 nd, 2008.

+8.1%

+13.0%

Net earningsper share(2)

+16.9%

Dividend(3)

+11.3%

Operating profit

LOral has always pursued a double objective:

to increase both its sales and its results.

DOUBLE

PERFORMANCEFOR SUSTAINED

GROWTH

LORAL FINANCIAL HIGHLIGHTS


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20

GROUP PERFORMANCE OVER FOUR YEARS

BREAKDOWN BY BRANCH IN 2007(3)

CONSOLIDATED SALES( millions)

PRE-TAX PROFITEXCLUDING NON-RECURRENT ITEMS(1)

( millions)

OPERATING PROFIT( millions)

NET PROFIT EXCLUDING NON-RECURRENTITEMS AFTER MINORITY INTERESTS(1)

( millions)

2007

2007

2007

2007

2006

2006

2006

2006

2005

2005

2005

2005

2004

2004(2)

2004

2004(2)

17,063

2,896

2,827

2,039

15,790

2,638

2,541

1,833

14,533

2,370

2,266

1,639

13,641

2,187

2,089

1,486

+8.1%

+11.3%

+9.8%

+11.2%

CONSOLIDATED SALES

millions Weight Growth based on %published sales of sales

2,701 95.5% +11.5% 17.0%

64 2.3% +9.3% 8.1%

62 2.2% +4.3% 16.9%

OPERATING PROFIT

millions GrowthLike-for-like Published figures

Cosmetics 15,908 +8.0% +6.0%

The Body Shop 787 +5.7% +80.9%

Dermatology(4) 368 +12.7% +6.9%

(1) Non-recurrent items include capital gains and losses on long-term asset disposals, depreciation of long-term assets and restructuring costs.

(2) For comparison purpose, 2004 pro forma profit and loss accounts are restated in order to reflect the deconsolidation of Sanofi-Synthlabo at January 1st, 2004:

- by replacing the share in net income of Sanofi-Synthlabo, 293.5 million, by the received dividends, 145.9 million,

- and by neutralizing the net of tax dilution capital gain relating to these shares, 2,854.5 million before any deduction and 471.1 million of taxes.

(3) The group business is composed of the cosmetics and the dermatology branches and of The Body Shop.

(4) Group share, i.e. 50%.


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2007 CONSOLIDATED SALES OF THE COSMETICS BRANCH

(1) The difference between the total cosmetics sales and the combined total of the four divisions, (60 million), consists mainly of mail order sales.

BY DIVISION

Like-for-like Growth basedmillions growth on published

figures

Professional Products 2,392 +7.5% +12.5%

Consumer Products 8,280 +7.9% +4.8%

Luxury Products 3,928 +8.4% +4.1%

Active Cosmetics 1,248 +10.8% +10.7%

Total cosmetics sales(1) 15,908 +8.0% +6.0%

15.0%

Professional Products

52.0%

ConsumerProducts

24.7%

LuxuryProducts

7.8%

Active Cosmetics

Divisions weight

BY GEOGRAPHIC ZONE


figures

Western Europe 7,250 +4.1% +3.7%

North America 4,004 +4.8% +1.3%

Rest of the World, of which: 4,654 +17.9% +14.5%

Asia 1,580 +14.3% +7.0%

Latin America 1,124 +14.6% +10.1%

Eastern Europe 1,142 +29.4% +34.4%

Other countries 808 +15.4% +12.5%

Total cosmetics sales 15,908 +8.0% +6.0%

45.6%

Western Europe

25.2%

North America

29.2%

Rest of the World

Geographic zones weight

BY BUSINESS SEGMENT


figures

Skincare 4,162 +10.8% +8.1%

Haircare 3,790 +5.7% +4.3%

Make-up 3,240 +8.0% +3.7%

Hair colourants 2,493 +5.2% +2.5%

Perfumes 1,715 +12.5% +9.1%

Other 509 +3.7% +26.5%

Total cosmetics sales 15,908 +8.0% +6.0%

26.2%

Skincare

23.8%

Haircare

15.7%

Hair colourants

20.4%

Make-up

10.8%

Perfumes

3.2%

Other

Business segments weight

LORAL FINANCIAL HIGHLIGHTS


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BY DIVISION 2006 2007

millions % of sales millions

rofessionalrofessional roductsroducts 4444 20.8%20.8% 55

uu roductsroducts 1,41,4 18.0%18.0% 1,51,5

LLuxuryuxury PProductsroducts 776776 20.6%20.6% 4444

AActivective CCosmeticsosmetics 221221 19.6%19.6% 5656

Cosmetics divisions total 1) 2,860 19.1% 3,180

on-allocatedon-allocated(2)(2) 44 2.9%2.9% 4747

Cosmetics branch total 2,423 16.1% 2,701

BY GEOGRAPHIC ZONE 2006 2007

millions % of sales millions

es ernes ern uu 1,51,5 21.8%21.8% 1,61,6

NNorthorth AAmericamerica 744744 18.8%18.8% 773773

RRest of theest of the WWorldorld 589589 14.5%14.5% 7474

Total for geographic zones 2,860 19.1% 3,180

on-allocatedon-allocated(2)(2) 44 2.9%2.9% 4747

osmetics branch total ,4 16.1 ,70

1 Includes the operating profit of the cosmetics miscellaneous activity which consists mainly of mail order sales.

2 Non-allocated items consist of the expenses of functional divisions and of fundamental research, and of stock option costs, which are not allocated to the cosmetics divisions.

This item also includes activities not forming part of the groups core businesses, such as insurance, reinsurance and banking.

3) Net gearing =urrent and non-current debt ash and cash equivalents

Shareholders equity after minority interests

2006 2007

(% of sales)(% of sales)

OOperating profit/perating profit/SSalesales == 16.1%16.1%

(% of shareholders equity)(% of shareholders equity)

NNet profit excluding non-recurrent items after minority interests/et profit excluding non-recurrent items after minority interests/OOpening shareholders equitypening shareholders equity == 12.5%12.5%

(% of shareholders equity)(% of shareholders equity)

NNet gearinget gearing(3)(3) == 22.8%22.8%

CCash flow/ash flow/IInves men snves men s == 3.2 x3.2 x

2007 FINANCIAL RATIOS

2007 OPERATING PROFIT OF THE COSMETICS BRANCH

% of sales% of sales

22.5%22.5%

19.3%19.3%

16.6%16.6%

20.0%20.0%

3.0%3.0%

17.017.0

16.6%16.6%

13.9%13.9%

17.4%17.4%

3.5 x3.5 x

% of sales% of sales

21.0%21.0%

19.1%19.1%

21.5%21.5%

20.5%20.5%

20.0%20.0%

3.0%3.0%

17.0%17.0%


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25

IFRS

(1) For comparison purpose, pro forma profit and loss accounts are restated in order to reflect the deconsolidation of anofi-Synthlabo at January 1st, 2004:

- by replacing the share in net income of anofi-Synthlabo, 293.5 million, by the received dividends, 149.5 million,

- and by neutralizing the net of tax dilution capital gain relating to these shares, 2,854.5 million before any deduction and 471.1 million of taxes.

2 Plus minority interests.

3 T e LOra s are as een iste in euros on t e Paris Bourse since January 4th, 1999, w ere it was iste in 1963.

The share capital is fixed at 123,595,122 at December 31st, 2007: the par value of one share is now 0.2.

(4) The dividend is fixed in euros since the AnnualGeneral Meeting of May 30th, 2000.

(5) Dividend proposed to the Annual eneral Meeting of April 22nd, 2008.

2002 2003 2004

14,28814,288 14,02914,029 14,53414,534

1,6981,698 1,8701,870 ,063,063

11.911.9 13.313.3 14.214.2

580580 629629 696696

,464,464 1,6611,661 1,6591,659

10.210.2 11.811.8 11.411.4

,456,456 1,6531,653 1,6561,656

433433 494494 5454

,130,130 ,136,136 11,53411,534

6,8436,843 6,8766,876 ,645,645

,216,216 ,303,303 1,9811,981

7,4347,434 ,136,136 10,56410,564

,646,646 1,9411,941 ,175,175

2.152.15 2.452.45 2.462.46

0.640.64 0.730.73 0.820.82

0.320.32 0.370.37

72.5572.55 65.0065.00 55.8555.85

675,990,516675,990,516 676,021,722676,021,722 673,547,541673,547,541

IFRS(millions)

2004 2004(1)pro forma

2005 2006

Results of operations

CConsolidated salesonsolidated sales 13,64113,641 13,64113,641 14,53314,533 15,79015,790

OOperating profitperating profit 2,0892,089 2,0892,089 2,2662,266 2,5412,541

As a percentage ofAs a percentage ofconsolidated salesconsolidated sales

15.315.3 15.315.3 15.615.6 16.116.1

PPre-tax profit excludingre-tax profit excludingnon-recurrent itemsnon-recurrent items

,334,334 ,187,187 ,370,370 ,638,638

NNet profit excluding non-recurrentet profit excluding non-recurrent

items after minority interestsitems after minority interests 1,4861,486 1,6391,639 1,8331,833

TTotal dividendotal dividend 5454 5454 659659 739739

Balance sheet

NNon-curren asse son-curren asse s 15,73415,734 15,73415,734 18,68618,686 19,15519,155

CCurrent assetsurrent assets 4,0754,075 4,0754,075 4,5374,537 4,8474,847

CCash and cash equivalentsash and cash equivalents 7676 7676 663663 781781

SShareholders equityhareholders equity(2)(2) 11,82511,825 11,82511,825 14,65714,657 14,62414,624

NNet current and non-current debtet current and non-current debt 1,5681,568 1,5681,568 ,217,217 3,3293,329

Cash flow 1,923 1,923 2,130 2,410

Per share data ()Diluted net profit excludingDiluted net profit excludingnon-recurrent items afternon-recurrent items afterminority interestsminority interests

.29.29 .60.60 .98.98

NNet dividendet dividend(3)(4)(3)(4) 0.820.82 0.820.82 1.001.00 1.181.18

SShare price at December 31hare price at December 31st(3)st(3) 55.8555.85 55.8555.85 62.8062.80 75.9075.90

Diluted weighted averageDiluted weighted averagenumber of share outstandingnumber of share outstanding

649,598,404649,598,404 649,598,404649,598,404 630,892,470630,892,470 615,723,220615,723,220

20072007

17,06317,063

2,8272,827

16.616.6

,896,896

,039,039

4343

16,97916,979

5,1345,134

1,0871,087

13,62213,622

,373,373

2,7202,720

3.363.36

1.381.38(5)(5)

7.987.98

606,012,471606,012,471

LORAL FINANCIAL HIGHLIGH S


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26

(1) Diluted net earnings per share based on net profit excluding non-recurrent items after minority interests.(2) Dividend proposed to the Annual General Meeting of April 22nd, 2008.(3) On the numbers of shares at December 31st, 2007, i.e. 617,975,610 shares.(4) Based on the dividend proposed to the Annual General Meeting of April 22nd, 2008.

Net earnings(1)

per share

3.36

Share price

97.98

Marketcapitalisation(3)

60.55 billion

Dividend(2)

per share

1.38

THE LORAL SHARE (at December 31st, 2007)

OVER 10 YEARS

Initial capital multiplied by 3.19 in 10 yearsTotal shareholder return: 11.26%

Purchase of 41 shares at 359.02(5) on December 31st, 1997:14,719.82 euros

Valuation at December 31st, 2007 including reinvestment ofdividends (479 shares at 97.98): 46,932.42 euros

OVER 20 YEARS

Initial capital multiplied by 35.3 in 20 yearsTotal shareholder return: 19.00%

Purchase of 38 shares at 389.51(5) on December 31st, 1987:14,801.38 euros

Valuation at December 31st, 2007 including reinvestment ofdividends (5,333 shares at 97.98): 522,527.34 euros

INVESTMENT IN LORAL SHARES

Change in LOralshare price in 2007

Change in CAC40index in 2007

70.00

75.00

80.00

85.00

90.00

95.00

100.00

75.90

81.30

83.17 82.45

88.12

89.23

87.00

84.3885.17

94.41

91.17

LOral

CAC 40 (reindexed on LOral)

01/01

01/15

01/29

02/12

02/26

03/12

03/26

04/09

04/23

05/07

05/21

06/04

06/18

07/02

07/16

07/30

08/13

08/27

09/10

09/24

10/08

10/22

11/05

11/19

12/03

12/17

12/31

93.58

97.1098.26

97.98

5,542 points

5,614 points

LORAL SHARE PRICE IN 2007 (in euro)

BREAKDOWN OF SHARE OWNERSHIP(as at December 31st, 2007)

DIVIDEND PER SHARE (in euro)

Dividend distribution rate in 2002: 36.0%

Dividend distribution rate in 2007: 41.1% (4)

2005 2006 2007200420032002

1.00

1.181.38(2)

0.820.73

0.64

21.7%

Internationalinstitutionalinvestors

10.0%

Frenchinstitutionalinvestors

5.1%

Individualshareholders

3.7%

Treasury stock0.6%Employees

28.9%

Nestl

30.0%


+16.9%

+29.09%

+1.31%


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2

TRENDS

COSMETICS MARKET

A NEW WORLD BECKONS


32/104

28

DYNAMICS OF THE FIVEMAIN BUSINESS SEGMENTS

SKINCARE, NUMBER 1CATEGORY IN THE MARKET

A MARKET WORTH ALMOST

110 BILLION EUROS

In 2007, the worldwide cosmetics mar-

ket totalled(1), represent-

ing some

GROWING

STRONGLY AND STEADILY

It is growing strongly and extremely

steadily in a very long term perspec-

tive, with an average annual growth

-

segments: skincare, haircare, make-up, fragrances and toi-

... AND THE MOST DYN

sun protection) have achie

highest growth rate of t

27%27%

HaircareHaircare

17%17%

Make-upMake-up

12%12%

FragrancesFragrances

32%32%

SSkincarekincare

12%12%

ToiletriesToiletries

> Weight of market by product category(2)(2) Excluding soap, toothpaste and razors. Source: LOral estimates.(2) Excluding soap, toothpaste and razors. Source: LOral estimates.

> Worldwide cosmetics market 1993-2007 billions)billions)(1) Excluding soap, toothpaste and razors. Provisional estimates for 2007.(1) Excluding soap, toothpaste and razors. Provisional estimates for 2007.Source: LOral estimates, manufacturer selling prices.Source: LOral estimates, manufacturer selling prices.

00000019931993

58.2bn

5.0%5.0% +4.4%+4.4%3.0%3.0%

+5.3%+5.3%+5.4%+5.4%

+5.5%+5.5%+5.3%+5.3%

4.9%4.9%+4.3%+4.3%

+4.6%+4.6%+4.0%+4.0%

+3.4%+3.4%+3.8%+3.8%

4.9%4.9%

20072007

108.8bn

+5.0%

STRONG AND SUSTAINABLE GROWTH I

WORLDWIDE COSMETICS MARKET(1)

Average annual growth rate, excluding currency fluctuations:

+4.6%


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2

> Millions of men usinga facial skincare product in Europe

Source: LOral surveys in five European countries(France, Germany, United Kingdom, Italy, Spain).

200520032001

26.923.7

20.8

MARKET TRENDS

THE WORLDWIDE COSMETICS MARKET

A MARKET FOR

INNOVATION DRIVEN BY

MAJOR TECHNOLOGICAL

BREAKTHROUGHS

SENIORS

market is focused on innovation, as consumers are

Decades of research thus led to the discovery

and to the major discovery of the role played

OPPORTUNITY NUMBER 1

IN DEVELOPED COUNTRIES

With the ageing of the population

in the most developed countries,

seniors represent a major oppor-

tunity for developing the skincare

for increasingly active and techno-

logically advanced skincare prod-

ucts, and naturally turn to the high-

source of growth and an opportu-

MEN

SUSTAINABLE GROWTH

7 MILLION NEW EUROPEAN

CONSUMERS IN 4 YEARS

Men are gradually starting to consume

facial skincare products, even though

they still only represent a small share o

In 2005, 27 million men in Europe used

The cosmetics market in the developed

penetration rates in some markets, even

> Skincare creams: average annual spending andnumber of products purchased by age bracketper yearSource: TNS Worldpanel France.

Number ofproducts

purchased

3.0 4.1 4.4

30-39years:32.6

50-59years:70.8

40-49years:59.3

2.4

20-29years:26.1

Average annual spending()


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33%excluding Japan

21%

North America

13%

Japan

33%Western Europe

> Weight of cosmetics market by geographic zone(2)

> Cosmetics consumption per capita(1)()(1) Excluding soap, toothpaste and razors. 2007 provisional estimates.Source: LOral estimates of manufacturer selling prices.

WesternEurope

90.1

NorthAmerica

71.0

Rest ofthe World

6.4

Japan

107.6

> Weight and contribution of Rest of the World zonein cosmetics market growth(2)(2) Excluding soap, toothpaste and razors. 2007 provisional estimates.Source: LOral estimates.

DECISIVE

CONSUMPTION14 TIMES LOWER THAN

IN THE MOSTDEVELOPED MARKETS

Consumption of cosmetics products in the new

markets is still on average 14 times lower than

in the most developed markets (Japan, Western

NEW MARKETS BECOMETHE NUMBER ONE CONSUMPTIONZONE IN THE WORLD

THEY REPRESENT ONE THIRD OF THE MARKET

BUT THEY ARE THE GROWTH DRIVER

-

these countries will continue to generate a leverage effect,

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

10%

20%

30%

40%

50%

60%

70%

21.90%

33% Weight inworldwidemarket

23.90%

63% Contributiocosmeticsmarket gro

30


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31

> 52.3%: Contribution of BRIMC countries and

the Next 12 countries to worldwide cosmetics market growth(2)

BRIMC

BrazilRussiaIndiaMexicoChina

NEXT 12: 12 HIGH GROWTHPOTENTIAL COUNTRIES

ArgentinaColombiaCzech RepublicDubaiIndonesiaPhilippines

PolandSouth AfricaThailandTurkeyUkraine

Vietnam

(2) Excluding soap, toothpaste and razors. 2007 provisional estimates.

MARKET TRENDS

> Growth in world population by incomebracket (millions of people)Source: Calculated on data from the World BanksGlobal Economic Prospects 2007 report.(1) Middle-income: per capita income between4,000 and 17,000 U.S. dol lars P.P.P.

20302000

1,670

1,290 Middle-income(

High-income

CONTRIBUTION OF NEW MARKETS

INCREASING INCOMEACCELERATES ACCESS TO COSMETICS

POTENTIAL OF NEW MARKETS

In these new markets, the driving force for consumption is the strong

-

60 MILLION NEW CONSUMERS A YEAR

-

In 20 years, the world of cosmetics has under-

countries are now amongst the largest markets

-

-

stantial market potential and high growth rates,

the growth of the worldwide cosmetics market

MEETING ALL BEAUTY ASPIRATIONS

680

490

2.5

2.6


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32

COMPLEMENTARY BRANDS

All different and perfectly complementary in terms of cultural origin, positioning and price,the brands are rolled out by distribution channel with each division developing a specific vision of beauty:the artistic creativity of hairdressers, luxury in selective distribution, health and skincare in pharmacies, andaffordability in mass-market outlets. The brands are opening and developing all paths to beauty.

MULTICULTURAL BRANDS

LOral was the first global company to fully encompass geographic and cultural diversity inits conception of beauty. Italian luxury with GIORGIO ARMANI, French elegance with LORAL PARIS and LANCME,American style with RALPH LAUREN, American make-up with MAYBELLINE NEWYORK, natural inspiration withthe British brand THE BODY SHOP and artistic Japanese make-up with SHU UEMURA... The groups brand portfolio

meets the multi-faceted beauty aspirations of the whole world.

WITH STRONG POTENTIAL

Today, the 25 international brands, which represent 93% of sales, enable the group to actively prepare forthe future. Some, such as LORAL PARIS, LANCME, VICHY and LORAL PROFESSIONNEL, are already leadersin their respective channels. Others are rapidly emerging, and could become tomorrows leaders.Others again are beginning their conquest of world markets. All of them have tremendous growth potential.


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PROFESSIONAL PRODUCTS

THE BODY SHOPTHE BODY SHOP

CONSUMER PRODUCTS

25


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35

ACTIVECOSMETICS

LUXURYPRODUCTS


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36

EXPANDING IN

ALL THE WORLDS MARKETS

WesternEurope

EasternEuropep.40

NorthAmericap.42

LatinAmericap.44

Asia

Africa, Orient,Pacific

INTERNATIONAL


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3

Outstanding growth prospects are opening up in all markets. In Western Europe and North America,LOral is strengthening its position in markets where the groups brands have considerable growthpotential. In the rest of the world, as consumer spending potential increases for millions of peopleeach year, the group is ideally positioned to seize this historic opportunity.

LORAL PARIS event in Shanghai.


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38

> Innov, number one for oral cosmetics in Western EuropeIn 2003, LOral and Nestl created INNOV, an oral cosmetics brand

sold in pharmacies. Four years later,INNOV

is number one inthe European market and leads a new consumer trend.

SPAIN> Matrix on show in 5,000 salonsOne year after the brands launch in Spain,more than 5,000 hair salons have used MATRIXproducts:SoColor Beauty hair colourant and Biolage haircareranges are proving highly successful. The Americanbrands MATRIX and REDKEN are asserting their roleas growth relays for the Professional Products Division

in West European countries.

WESTERN EUROPE

GERMANY> Maybelline New York captivates BerlinLarger areas in sales outlets mean more advice and

shopping pleasure for consumers. The success of high definitionStretch&Define mascara and exclusive partnerships with the fashionworld, such as Berlin Fashion Week, are stimulating the growth oftheMAYBELLINE NEWYORK brand, and reinforcing its leadership ofthe German make-up market.

In an expanding market, Western Europe posted +4.1% like-for-like sales growth. Sales trends were very favourable inthe United Kingdom (+7.6%), Spain (+8.7%) and Scandinavia, particularly in Sweden (+9.7%). In France and Germanysales improved in the second half. The Professional Products Division performed particularly well in Germany and theUnited Kingdom. Consolidating its leadership, the Consumer Products Division won substantial market share in facialskincare, particularly in Germany, foundations and lipsticks. There was a sharp acceleration in the Luxury Products Divi-sions sales, with excellent performances in the United Kingdom, France and Italy. The Active Cosmetics Divisionrecorded solid growth.


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3

FRANCE> All-time record for LOral ParisJust six weeks after its launch in August 2007, the Derma Gensefacial skincare range was number one in the market.By winning new consumers, captivated by a new vision of facial skincare,LORAL PARIS is achieving all-time record market share levels,

strengthening its number one position in this segment.

7,250million euros ofconsolidated sales in 2007

45.6%of total groupconsolidated cosmetics sales

+4.1%like-for-like growth

UNITED KINGDOM> Fuel For Life by Diesel,an energising launchThe highly original launch of Fuel For Lifeby DIESEL took everyone by surprise:an offbeat teasing campaign on the Internet,true to the spirit of fashion and toits designer Renzo Rosso, backed up byan exceptional commercial initiative to givethe fragrances unrivalled visibility inretail outlets. Launched at the end ofAugust 2007, Fuel For Life reachedthe premier league of best selling mens

and womens fragrances by September.

INTERNATIONAL // WESTERN EUROPE


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40

EASTERN EUROPE

The group achieved record growth of +29.4%, reflecting trends across all East European countries, particularly Russia(+37.7%) and Poland (+16.9%). LOral Ukraine became the third largest subsidiary in the zone, just two years after itscreation. Professional Products sales are accelerating everywhere, and are now number one in Russia, Poland and theCzech Republic. Consumer Products recorded strong and evenly matched growth, driven by facial skincare and make-up.The Luxury Products Division is growing twice as fast as the market, strengthening its leadership in the zone. In additionto the success ofVICHY, long established as the leader in pharmacies, LA ROCHE-POSAY is proving to be an importantgrowth relay for the Active Cosmetics Division.

POLAND> Vichy revolutionises pharmaciesVICHY, the number one pharmacy brand, consolidates its number two position infacial skincare across all retail channels. In 2007, ten Healthy skin check-up centresoffer skin diagnostic services across the country. By setting up high quality healthsections within pharmacies, the Active Cosmetics Division is playing a leading rolein modernising the channel, while improving the visibility of its brands.

UKRAINE> Instant Garnier effectCreated at the start of 2006,the Ukrainian subsidiarydelivers spectacular growth in 2007,spearheaded by the breakthrough ofGARNIER skincare. The Pure range,specially formulated to cleanseyoung skin, and the anti-wrinkleformulas of UltraLift both provean instant hit.

POLAND> Natural success for

The Body ShopIn its seven stores opened in 2007

in Warsaw and three othercities in Poland, THE BODY SHOP

is making its mark, particularly withits make-up and fragrance ranges.

The boom in the Polish marketfully justifies the brands goal of

opening around fifty storesin Poland over the next five years.


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41INTERNATIONAL // EASTERN EUROPE

RUSSIA> Lancme inspires dreams2007 was a year of conquest for LANCME in Russia:+70% growth and a luxury image reinforced bythe renovation of two of Russias most prestigiousdepartment stores, GUM and TSUM. The brand inspires

the dreams of Russian women, as reflected in the success ofthe most recent launches: Virtuse mascara andRnergie Morpholift R.A.R.E. anti-ageing skincare.

RUSSIA

> Affinitone by Maybelline New York:Made-to-measure beautyA nourishing formula to withstand the rigours of winter, anda palette of natural tones adapted to the complexions ofEast European women spell success for Affinitone foundation,which was launched in Russia at the end of 2007, and helpsthe MAYBELLINENEW YORK brand to grow by more than 30%.





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42

NORTH AMERICA

Sales grew by +4.8% in North America, as market growth slowed slightly. Market share gains were significant. TheProfessional Products Division strengthened its market leader position, particularly in hair colourants. The ConsumerProducts Division grew faster than the market in the make-up segment, due particularly to LORAL PARIS and in theskincare segment thanks to a number of strategic launches. Luxury Products Division sales grew slightly faster than themarket thanks to the success of its fragrances. The Active Cosmetics Division is strengthening its presence in drugstorein the north-eastern states and in California, while SKINCEUTICALS recorded a solid growth rate.

UNITED STATES

> Facial skincare breakthroughHaving gained second place in just three years in the United States haircaremarket with Fructis, GARNIER takes a new step forward with the launch ofits Nutritioniste skincare range. This product combines nutrition and dermatologyin a pack in the traditional green colour of the GARNIER brand. In 2007,LORAL PARIS also launches the Skin Genesis facial skincare range.Aimed at women in their thirties to early forties, Skin Genesis representsan opportunity for the brand to win new consumers. The success of the launchallows LORAL PARIS to take a commanding position in the anti-ageing skincaresegment. The launches of Nutritioniste by GARNIER and Skin Genesis byLORAL PARIS are helping the group to strengthen its number one position inthe consumer skincare market.

CANADA> The fascination ofShu UemuraThe opening in May 2007of the first counterin Vancouver marksthe launch ofSHUUEMURAin Canada.Canadian women findthe brands purifying oils,false eyelash collection andpalette of colours extremelyattractive. At the end of

December, the brandis already number threein make-up sales atthe Holt Renfrewdepartment storein Vancouver.

CANADA> Vichy, number one in facial skincarein Canadian pharmacies

VICHYs blockbuster Aqualia Thermal is launched in 2007in Canada, with special events in seven major cities.Just a few months after its launch, Aqualia Thermal reachesthe top 5 in facial skincare sales in pharmacies(1), bolsteringVICHYs position as number one in this category in Canada(2).

(1) Source: AC Nielsen, National $, Drugstores, Moisturisers,

3 periods: from September 29 th to November 24th, 2007.

(2) Source: AC Nielsen Canada, Total Face Care Market in Dollars, National Drug,

aggregate data at December 22nd, 2007.


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43INTERNATIONAL // NORTH AMERICA

UNITED STATES> Strategic acquisitions in Professional Products

With the acquisition of the luxury haircare brand PUREOLOGY, and the launch ofSHU UEMURA ART OF HAIR, the Professional ProductsDivision is stepping up its presence in the fast-growing sector of the most prestigious American hair salons.The acquisition of geographically complementary distributors Beauty Alliance and Malys West means the Division can controldistribution more effectively and build a closer relationship with American hairdressers by offering them the best service andtraining. These two strategic acquisitions form part of a highly efficient salon distribution business model, which combinesthe American distribution approach with LOrals expertise in partnerships with hairdressers.

UNITED STATES

> Three mens fragrances inthe top five 2007 launchesThe Luxury Products Divisionshows robust retail sales and gainsground in 2007, in part due to stronglaunches in designer fragrances.In 2007, the Division continued toconsolidate its leadership positionin the American mens category withthree out of the top five new launchesfor the yearAttitude by GIORGIOARMANI, Polo Explorer by RALPH LAURENand Fuel for Life by DIESEL.In womens fragrances, GIORGIO ARMANIcontinues to grow its presence with

the fall introduction of EmporioArmani Diamonds, which was the thirdlargest new launch of the year.





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44

LATIN AMERICA

In Latin America, like-for-like sales grew by +14.6%. Alongside Brazil and Mexico, already major markets for LOral,the group achieved spectacular growth in Colombia (+27.2%), Argentina (+36.6%), Venezuela (+46.8%) and Panama(+74.2%), where a subsidiary was created in 2007. The groups brands are capitalising on the spectacular developmentin this part of the world to gain market share. Meanwhile, the zone has rationalised its business model by grouping itsindustrial and logistical operations for the southern triangle in Brazil, and for the northern part in Mexico. The neworganisational structure enables LOral to make large economies of scale while significantly cutting its costs.

BRAZIL> Active Cosmetics

in the driving seatLA ROCHE-POSAY is strengtheningits position as the leading partner ofpharmacists and dermatologistsin Brazil, the brands second mostimportant country in the world.The partnership brings spectacularsuccesses in sun products forthe Anthelios range, and in anti-wrinkleskincare, with sales rising by more than50% since the launch of Redermic.With VICHY and LA ROCHE-POSAY,the Active Cosmetics Divisionis now number one in the Braziliandermocosmetics market.

ARGENTINA> Winning duo in hair salonsIn 2007, REDKEN andMATRIX are successfullylaunched in the Argentinean market,with two highly complementary strategies.The premium brand REDKEN is availablein more than 200 high-end salonsin the major cities. MATRIX, a moreaffordable brand, was sold in more than1,000 affordable salons by the end of2007. Together they are bolsteringthe Professional Products Divisions

number one position.

MEXICO> The Kiehls adventure begins

An affordable luxury positioning, a very friendly atmosphere andexcellent quality of service have ensured the success of the three KIEHLSboutiques opened in Mexico over the last year. The latest, created atthe Saks Fifth Avenue store in Mexico City, even succeeds in capturingthe number one position in the department stores cosmetics brand rankings.Four new KIEHLS boutiques are to be opened in 2008.


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45INTERNATIONAL // LATIN AMERICA

ARGENTINA> LOral,

number one partner ofthe World Congress of

DermatologyMore than 12,000 dermatologists from

all over the world took part inthe World Congress of Dermatology,

held in Buenos Aires in October 2007,of which LOral was the number onepartner. Many of the dermatologists

visited the LOral Village to find out

more about the groups brands.

BRAZIL

> Elsve Volume Controlby LOral Paris,specially designed forLatin American hairElsve Volume Control byLORAL PARIS is formulated tomeet the specificneeds of Brazilian womenwho wish to tamethe volume of their hair.Successfully launched inBrazil in April 2007,it rapidly becamethe leading franchise ofElsve, thanks to

its Crema para peinarconditioner.Also launched in Chile andMexico in 2007,Elsve Volume Controlwill continue its LatinAmerican roll-out in 2008.





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46

ASIA

LOrals growth accelerated quarter by quarter to reach +14.3% in like-for-like sales. In Asia excluding Japan, it reached+17.8%, with a growth rate of +1.8% in Japan. In the highly competitive North Asian markets (Japan and South Korea),the group achieved positive scores thanks to the success of Professional Products in both countries and the breakthroughofKIEHLS, SHU UEMURA and BIOTHERM in the luxury channel in South Korea. In China (+30%), growth was very rapid in alldivisions. The Luxury Products Division strengthened its number one position there, thanks in particular to the strongperformances ofYUE-SAI in skincare. Finally, conquests are continuing in the countries of South-East Asia, particularly inIndonesia (+21.2%), Thailand (+22%) and Vietnam, where LOral is creating a subsidiary to cover the four divisions.

CHINA> LOral Paris, number one in its retail universe

Driven by the success of its ranges in the skincare segment,the largest market in China, LORAL PARIS achieved growth of more than47% in 2007, making it the number one beauty brand in its retail universe.Among its major successes, the Men Expert range, launched one year ago,is proving a winner with Chinese men.

HONG KONG> Armani magicThe immediate success of the premiumskincare range Crema Nera, and its rise tonumber one position in the selectivefluid/cream foundation market, enablethe GIORGIO ARMANI brand to achieve+38% growth in 2007. The opening oftwo new sales outlets takes the totalnumber to six.

SOUTH KOREA> Customers appreciateKiehls quality of serviceSouth Koreans are very keen on the KIEHLSbrand. They appreciate the simple,

natural products, quality of service andproximity to the consumer, which createa spirit of community. Present in five stores,KIEHLS achieves spectacular growth in 2007,particularly in skincare with its flagship rangesDermatologist Solutions and Ultra Facial.


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4INTERNATIONAL // ASIA

MALAYSIA

> Garniersnew horizonsBuilding on its successin Thailand, whereGARNIER is now number twoin the skincare segment,the brand moved intoHong Kong andseveral countries inSouth-East Asia, includingIndonesia and Malaysia.GARNIER is makinga significant breakthroughthere, driven bythe success of Light

facial skincare,ideally suited tolocal expectations.

JAPAN> Luxury is synonymous with

KrastaseKRASTASE establishes itself in Japan

as the top luxury brand in the exclusivehaircare sector. Its rinse-free haircareproducts, which highlight the skills of

the hairdresser, are proving highlysuccessful with very demanding

customers. These successes have madeJapan the second largest market for

the brand after France, andare contributing, with the success of

LORAL PROFESSIONNEL, to the Divisionsvery significant market shareincreases in Japan.





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48

AFRICA, ORIENT, PACIFIC

Like-for-like sales in the Africa-Orient-Pacific zone grew by +15.4%. The zones growth was driven by India (+34.4%)and boosted by resounding successes in South Africa (+19.9%) and Dubai (+26.4%). Meanwhile, growth is increasingagain in Australia (+11.3%). All the brands are making progress in North Africa and the Middle East, thanks to GARNIERsskincare initiatives and the success of the luxury brands, especially in Dubai.

AUSTRALIA> Elvive by LOral Paris makes a remarkable debutWell established in the make-up, skincare and hair colourant segments, LORAL PARIS in 2007 launched its Elvive haircare rangein Australia, a market with 20 million consumers. This launch propelled LORAL PARIS into second place in the Australian market.

INDIA> Garnier,modernity for everyoneWith the success ofits Light Matte skincare range,GARNIER is assertingits identity as a modern andhigh performance brand,which remains affordable.With its dual lightening andmatte effect, ideal forthe humid Indian climate,Light Matte helped GARNIER toshoot up the Indian skincare

rankings from fifth to secondin one year.


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4INTERNATIONAL // AFRICA, ORIENT, PACIFIC

NEW ZEALAND> Creativity galvanises growthMore than 1,300 young hairdressersfrom New Zealand took part in the newTalent Spotting competition organisedby LORAL PROFESSIONNEL, and intended todevelop their professional and artisticskills. This initiative helped the brand togrow much faster than the market.This success, and those achieved bythe other brands including MATRIX,is consolidating the Professional Products

Divisions position as the unchallengedleader in this market.

DUBAI

> Viktor & Rolf,luxury rolls-out its brandsLaunched in highlyselective retail channels,theVIKTOR & ROLF brandhas very rapidly succeeded inmaking Flowerbomb one ofthe top five womens fragrancesin Dubai. The introduction ofVIKTOR & ROLF, which perfectlyembodies the modern luxuryconcept, is continuing inthe luxury brand portfolioroll-out in this region.

808million euros ofconsolidated sales in 2007




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AT THE HEART OF THE GROUP,

INVENTING THE FUTURE

Operations

HumanResources

Administrationand Finance

Research andDevelopmentp.52

RESOURCES

50


55/104


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52

The world of beauty is changing. As people live longer and the melting pot effect continues,new kinds of beauty expectations are emerging. At the same time, the paths of beauty arediversifying. Men and women are turning increasingly to institutes, pharmacies, hair salons,perfumeries, supermarkets, dermatologists and even surgeons. LOral Research is taking allthese factors on board so as to anticipate beauty trends, seize growth relays and invent theproducts of tomorrow, without making any concessions on quality, safety and performance.

Jean-Franois GrollierExecutive Vice-PresidentResearch and Development

INVENTING BEAUTYINSPIRED BY DIVERSITY

> Creation of two new worldwide developmentunits: Natural and organic cosmetics;Instrumental cosmetics.

> Validation by ECVAM (European Centre forthe Validation of Alternative Methods) ofthe human epidermis model Episkin asa method of predicting the irritant potential of

chemical substances, enabling the completereplacement of animal testing for skin irritation.

> Publication of the first volume of the SkinAging Atlas (Volume 1: Caucasian types).The result of 12 years of studies over the world,this research enables the evaluation ofanti-ageing product performance andthe development of ageing modelling tools.

> LOrals innovative force was recognised

when it won the Decision Makers Prize(Prix des Dcideurs) at the firstInnovation Management Trophy Awards.

2007HIGHLIGHTS


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53

COSMETICS ANDDERMATOLOGICALRESEARCH CENTRESWORLDWIDE

RECONSTRUCTED SKIN

Moving towards widespread use

For 25 years, LOral has been able to reconstructskin from human cells, in the laboratory, but also ona large scale, in a production unit in Lyon (France).

The Episkin epidermis model, which isan invaluable research tool in biology, has justbeen validated by the European Commission bodyECVAM (European Centre for the Validation ofAlternative Methods) as a tool for evaluatingthe irritant potential of substances and products onthe skin. This is a decisive step forward for

alternative methods, and has been welcomed byconsumers, regulatory bodies, and the chemicalindustries.

LOral does not intend to stop there; other modelsof the skin and the cornea are currently beingvalidated to replace other safety evaluation tests.

Using an instrumental method patented by LOral,researchers measured the skin colour of

some 3,500 women in the four corners of the earth.

They have thus created a chart of 63 different tones.

THE FUTURE OF BEAUTY

-

The beauty of the future will reflect the worlds diversity.

-

> 10 in FranceChevilly-Larue, Clichy (2 centres),Tours, Aulnay, Lyon,Sophia Antipolis, Monaco, Nice,Gigors-et-Lozeron

> 3 in the United StatesClark, Chicago, Princeton

> 3 in AsiaKawasaki, Tokyo (Japan)Pudong (China)

RESOURCES // RESEARCH AND DEVELOPMENT


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54

-

-

-

Towards energy cosmetics. -

INNOV

-

-

At the heart of living matter.-

-

in vitro

> Number of patents(cosmetics anddermatological research)

> Research anddevelopment budget( millions, including 50% ofGalderma research investments)

The universal classification of hair shape contains eight categories.

For more than 10 years,the hair biologyteams have beenworking on stem cells:they have identified tworing-shaped reservoirsalong the hair follicle(shown in reddish brown).

2007 20072006 20062005 2005

560576

533

569

496529

1

5

2

6

3

7

4

8


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55

HAIR SHAPE

A universal classification

LOral researchers, in conjunction with population geneticists, have just published the results of a study of1,500 people in 18 countries, which set out to define hair types on the basis of shape criteria.

Simple, based on physical measurements which are easily applicable to hair, this objective classificationreflects diversity. It is compatible with the history of migrations and the melting pot process.

The method requires the measurement of three parameters: diameter of curvature, curl index and number of waves.

It leads to a classification with eight categories, from the straightest hair to the curliest. From now on,the performances of a straightener, a relaxer or a permanent wave will be defined on the basis of these eight classes,thus opening up new perspectives for the development of hair styling and texture products.

HIGH TECH AND NATURALNESS: THE SYNERGY

SANOFLORETHE BODY SHOP

INNOVATION

576patentsregisteredin 2007

560million eurosof research expenses in 2007(including 50% of Galderma research expenses)

3,095cosmetics and dermatologicalresearch employees(including 50% of Galdermaresearch employees)

Centifolia rose extract is obtained from petalsusing environment-friendly distillation processes.

FOR SUSTAINABLE INNOVATION

-

-

-

-

RESOURCES // RESEARCH AND DEVELOPMENT


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56

DIESEL fragrance packaging, Gauchy factory (France).

The newly created Operations Division has now brought the production and commerciallogistics teams together under a single authority. We have redeployed the whole supply chaininto four geographic poles (Europe, Asia, Latin America, North America), each with considerableautonomy, to increase responsiveness and accelerate mutualizing projects. We are continuingour efforts to simplify production facilities and ensure recurrent reductions in purchasing costs.This takes us forward in the ongoing process of streamlining our production and logisticsstructures, to improve returns on investment and maintain the cost cutting spiral in a contextof less favourable raw material prices.

Jean-Philippe Blanpain

Managing Director Operations

STREAMLINING OPERATIONS TO DRIVEPERFORMANCE

Millions of units

millions

Cosmetics investments (production and

Comparable product

Cosmetics Cosmetics

> The Production and Technology Divisionhas been superseded by the Operations Division,which has a wider brief covering the wholesupply chain.

> LOral has joined the Carbon Disclosure ProjectSupply Chain Leadership Council to gaina clearer vision of the environmental footprint ofits supply chain.

> LOral received the Responsible Purchasingprize at the Procurecon Awards Meeting inBrussels for its many joint initiatives with suppliersin the field of social responsibility, and forthe social audit programme implemented overthe last two years.

2007 HIGHLIGHTS


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5RESOURCES // OPERATIONS

SUPPLIERS AND

DIVERSITY CONVENTION

In November 2007, LOral held a convention withmore than 100 of the groups suppliers.A dozen associations were thus able to makepresentations about the challenges of diversity andillustrate good practices.This is in line with the strategy of encouragingsupplier involvement in LOrals sustainabledevelopment policy: some 600 social auditswere carried out in 2007 on suppliers premises.

COMMITMENT

A NEW INTEGRATED AND CENTRALISED SUPPLY CHAIN

same authority: production, purchasing/procurement, and

-

enables greater efficiency and better customer service quality,

-

ing the supply chain to suit the specifics of each geographic

RECURRENT PURCHASING COST REDUCTIONS

-

-

-

five criteria: quality, innovation, competitivity, logistics and

Consumer Products: 23 factories

LuxuryProducts: 6 factories

Professional Products: 3 factories

Active Cosmetics: 2 factories

Dermatology: 2 factories

Raw materials: 4 factories

FOUR AUTONOMOUS GEOGRAPHIC POLESINDUSTRIAL FACTORIES IN THE WORLD

LOral China distribution centre, Suzhou (China).

SIMPLIFYING PRODUCTION FACILITIES

industrial site in Chile so as to concentrate production for

productivity gains have been added to the process, driven by

-

THE ENVIRONMENT AND SAFETY

-

-

2-

ronmental commitment is leading to practical steps such as

-

> Latin America3 factories

> Asia - Africa -Middle-East - Pacific8 factories

> Europe21 factories(including 13 in France)

> North America8 factories


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SECURING THE TALENTS OF TOMORROW

Our mission at Human Resources is to contribute to LOrals sustainable growth by providingon-going support to the men and women of the company. Identifying and recruiting the talentsof tomorrow, developing their skills, promoting their careers and securing their loyalty all lieat the heart of our forward-looking Human Resources strategy. To achieve this, we are constantlyseeking to attract the best candidates and communicate to them the enthusiasm and passionfor our business and brands. At the same time, we stimulate creativity by sharing our know-howand promoting the personal development of each individual, thus strengthening our expertisein beauty products and our capacity for generating leaders. Our working environment,remuneration policies, opportunities for advancement and sensitivity to employees needs allcontribute to a sense of belonging, and create the optimum conditions for focusing everybodysenergy on our business. We also provide support to our Divisions by staying abreast of this

perpetually changing environment, continually devising fresh solutions to meet thechallenges and opportunities in rapidly changing world markets.

Geoff SkingsleyExecutive Vice-PresidentHuman Resources

> 28,200 employees from 14 countriesparticipated in an internal opinion survey.

> Hewitt, the Human Resources consultancy,named LOral as one of the best performingcompanies for spotting and developing leadersin its Top companies for Leaders survey.

> In 2007, LOral once again came top asthe favourite company of European students inthe internationally renowned Trendence survey.

> Creation of LOral Innovation Laba new business game for recruiting Researchcandidates.

> Over 1,800 managers participated in Diversityseminars in Europe in 2007.

2007HIGHLIGHTS


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5

SUSTAINING GROWTH

-

enced and trained individuals in all its different business sec-

to constantly prepare managers for their future responsibili-

-

-

-

SHARING PASSION AND AMBITION

-

richness, is a core requisite of our recruitment policy and for

-

or virtual recruitment events designed to give target audi-

-

RESOURCES // HUMAN RESOURCES

BUSINESSGA

MES

For its 15th edition, the LOralBrandstorm marketing gameattracted more than 4,400 studentsfrom 35 countries who worked oncreating a new range of hairstylingproducts.

LOral Ingenius Contestawards engineering studentswho have demonstratedtheir inventive talent byputting an ambitious industrialchallenge into practice.

The latest game, LOralInnovation Lab is aimed atattracting and recruitingcandidates of a scientificbackground for our Research andDevelopment Division.

For the 7th edition of the LOrale-Strat Challenge businessgame, more than 44,000 studentsin 128 countries took on the role ofGeneral Manager of a virtualcosmetics company.

RECRUITMENT WEEKENDS IN NEW YORK

American students spend a weekend in New Yorkliving the LOral experience.

The students from American universities are picked from amongseveral hundreds of candidates and get the chance of talking toLOral managers about their careers, the industry andthe different lines of business.

Over the weekend, the students experience both real-life

business situations (getting to know the groups brands andproducts, its creativity) and take part in recreational workshopswhich are a fun and engaging way of experiencing the fullimpact of LOrals passion and energy.R

ECR

UITMENT


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CAPITALISING ON ENERGY

-

Pulse, a single

-

REWARDING COMMITMENT AND PERFORMANCE

--

remuneration is also a means of developing employee loyalty

-

-

STIMULATING CREATIVITY

-

and a number of programmes have also been specifically

teams and managers have the opportunity of meeting creative

The Must Have programmes

Metiers Essentials in India

-

-

360 Launch Excellence in Brazil

-

-

-

> Change in workforce

2005 2006 2007

15,082 16,19716,975

52,403

60,851(1)63,358(1)

Global workforce Global number of executives(2)

(1) Including The Body Shop since 2006 and American distributors since 2007.

(2) Global number of executives in the cosmetics branch.

19.3%France

24.9%Western Europe

excluding France

4.4%Eastern Europe

15.1%Asia

7.7%Latin America

23.8%North America

4.6%Other regions

> Breakdown of employees by geographic zone (1)

at December 31st, 2007


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56%Women

35%Women

44%Men

65%Men

> Breakdown of female and male executives in 2007(2) > Breakdown of female and malemanagement committee members in 2007(2)

RESOURCES // HUMAN RESOURCES

PROMOTING TALENTS AND

DIVERSITY TRAINING FOR MANAGERS

> Scholarships and mentoring

Dr Ismail, Associate Dean Business School, UitM

I never thought that LOral would be our partner LOral

is like family now.

> Diversity and Performance Chair, ESSEC (France)

Pierre Tapie, Executive Director, ESSEC Business School

The Diversity and Performance Chair is the culmination of

a shared belief: that diversity drives performance. LOral was

intimately involved in defining the content.

> Diversity Seminars for Managers

programme is designed to help them identify and overcome

Mike Elmont, co-founder of Focus Consultancy

In the past two years we have designed and piloted a Diver-

sity and Equity training programme for LOral and are cur-

rently rolling it out Europe-wide for 8,000 LOral managers.

You cannot invest that amount of time and allocate the rel-

evant resources without a serious commitment to diversity.

ACTIONS FOR DIVERSITY

PROMOTING EQUAL RECRUITMENT OPPORTUNITIES

numerous forums devoted to minorities, the disabled or sen-

-

SHARING BEST PRACTICES

-

-

Ann Vandenhende, CSR Europe Senior Director and Cathe-

rine Rubbens, CSR Europe Director

LOral has taken up a strong leadership role in managing this

laboratory. Through the active engagement of key European

stakeholders, it also pushes forward the equality and non-

discrimination agenda in Europe.


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The Administration and Finance Division of LOral continued to apply a balanced financialpolicy in 2007. The policy was supported by initiatives to improve the productivity of bothorganisational structures and systems made available to the operational teams. Throughoutthe group, the administration, management and finance teams played an active part in theoperational performance of the businesses. Their contribution was particularly focused ontightening up internal control, monitoring cash flows and ensuring rigorous control ofperformance, which was reported in detail to all shareholders. Overall, the group continuedin 2007 its policy of substantially and continuously increasing dividend, backed up by a share

buyback programme for significant amounts, while strengthening the balance sheet.

Christian Mulliez

Executive Vice-PresidentAdministration and Finance

> Updating of the Fundamentals of InternalControlguide to help employees identifyoperational risks even more clearly.

> Implementation of the Enterprise ResourcePlanning (ERP) and the new reporting toolcontinued.

> Creation of an Indirect Purchasing departmentin most subsidiaries.

> Pooling of subsidiaries support servicescontinued.

> Disposal of 1.8% stake in Sanofi-Aventis capital.

> Several strategic acquisitions: PUREOLOGY,an American premium professional haircare brand;the American distributors Beauty Alliance andMalys West; preparation for the acquisition ofCanan, a Turkish haircare product company, andthe signing of a scientific collaboration agreement

with Light Bioscience, the leading medicalresearch company in LED photomodulation.

2007HIGHLIGHTS

ENSURING FINANCIAL STABILITY ANDMAKING OUR ORGANISATIONALSTRUCTURES MORE EFFICIENT


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INFORMATION SYSTEMS TO DRIVE PERFORMANCE

-

-

INTERNAL AUDIT, A TOOL FOR CONTROL

-

PURCHASING OPTIMISATION

-

The merging of teams in single sites continued,as in Greece where a new headquarters was opened.

GREATER CONTROL OF OPERATIONAL RISKS

To help all employees carry out their everyday duties, the group has updatedthe Fundamentals of Internal Controlguide.

This overview of internal control, first edited in 2005, is a simple and effectivemanagement and training tool, which supplements the groups standards and charters.It forms part of an ongoing internal control effort, and is an essential tool toeffectively manage operational risks.

The guide is a reference document based on practical experience.

It brings together all the measures designed to provide a guidance framework foroperational activities.

COM

MITMENT

POOLING CONTINUES

-

SECURITY OF FINANCING AND

OPTIMISATION OF FINANCIAL FLOWS

-

MANAGEMENT/CONSOLIDATION

LEGAL

RESOURCES // ADMINISTRATION AND FINANCE


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EXCELLING IN ALL

OUR DISTRIBUTION CHANNELS

ConsumerProductsp.72

LuxuryProducts

ActiveCosmetics

The Body Shopp.94

ProfessionalProducts

BUSINESSES


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6565

To tap into every desire for beauty, each Division maximises the potential of all its brands: todaysleaders and those of tomorrow. In this way, a closer and stronger relationship is established eachday, between our brands and growing numbers of increasingly diverse consumers. In 2007, allDivisions increased their market share, matching each other in contributing to the dynamism ofthe groups growth.

GIORGIO ARMANI event for the Emporio Armani Diamonds launch at GUM department store in Moscow.

Galderma

p.97


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PRODUCTS

PROFESSIONAL

BUSINESSES


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68

The Divisions key focus is to be the partner of the greatest number of hair salons around theworld. Firstly, through differentiated brands, enabling salons of all kinds to express theirpersonality. The acquisition of the American brand PUREOLOGY in 2007, for example, isstrengthening our presence in the new and fast-growing luxury segment. The Division alsooffers increasingly relevant innovations which improve the quality of hair colour, styling andhaircare services. Finally, educational initiatives, tailored to suit each salons stage ofdevelopment and aspirations, support and inspire salons, reflecting the specific preferencesof each region of the world.

Jean-Jacques Lebel

President Professional Products

STIMULATING CREATIVITYIN ALL HAIR SALONS

Shu Uemura Art of Hair, France.

> Acquisition of two of its key distributorsin the United States, Beauty Alliance andMalys West, to build a closer relationship withAmerican hairdressers in the fields of servicesand education, and to accelerate the Divisionsgrowth.

> Acquisition of the PUREOLOGY brand

in the United States to complete the Divisionsbrand portfolio in the luxury haircare segment.This brand offers haircare products forcolour-treated hair.

> Launch ofSHU UEMURA ART OF HAIR inan ultra-selective distribution channel.

> Success of the Divisions initiativesin the segment aimed at senior women withColor Suprme hair colourants andAge Densiforce haircare from LORAL PROFESSIONNEL,together with the Age-Recharge haircare range

from KRASTASE.

> Extension of the global reach of the MATRIX brand,now present in 50 countries and 260,000 salons.

2007HIGHLIGHTS


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2008 OUTLOOK

Growth is set to continue in 2008, with a particular focus onthe highly dynamic luxury hairdressing market, as the Divisiongoes on building a comprehensive offering to meet the needsof the most exclusive salons. It will continue to develop itsluxury brands with highly diverse cultural backgrounds: theFrench brand KRASTASE, the Japanese brand SHU UEMURA ART OFHAIR and the American brand PUREOLOGY. 2008 marks the Divi-sions entry into the new and highly dynamic market of profes-sional skincare, with the newly created brand KERASKIN ESTHETICS.The Division is now able to offer a full spectrum of beauty careproducts in the worlds most prestigious salons. The Division

will also strive to reinforce its positions in the booming mensand senior womens segments. Finally, the geographical roll-out will continue across all regions of the world, particularly inthe most affordable salons where MATRIX should make morebreakthroughs.

2007 REVIEW

Growth accelerated in all regions of the world, as the Divisiongrew three times faster than the market. In Western Europe, allcountries and all brands contributed to the growth rate of +4%.In North America (+6.2%), the Division is benefiting from theacquisition of two distributors, by forging a strategic alliancewith the hairdressers who are our customers, and from the dyna-mism of our brands, particularly REDKEN and KRASTASE. Therecently acquired PUREOLOGY brand is also growing strongly.Growth in the rest of the world was +16.4%, with advances of+9.3% in Japan, +40.7% in Russia and +29.4% in China.

PUREOLOGY

A new strategic brandfor the Division

in a fast-growing sector

PUREOLOGY has an excellent reputationwith the top American hair colourspecialists for its highly original

formulas: sulphate-free shampoos,plant ingredients and aromatic perfumes.

Acquired in 2007, the brand is provingextremely successful in the United States.

It is unlocking excellentgrowth opportunities all over the world.

CONSOLIDATED SALES BY GEOGRAPHIC ZONE CONSOLIDATED SALES BY BUSINESS SEGMENT

2006 2007 % of 2007 sales

Growth2007/2006

millions Like-for-like Publishedfigures

Western Europe 980.3 1,017.8 42.6% +4.0% +3.8%

North America 635.5 802.0 33.5% +6.2% +26.2%

Rest of the World 510.0 572.1 23.9% +16.4% +12.2%

TOTAL 2,125.9 2,391.9 100% +7.5% +12.5%

2006 2007 % of 2007 sales

Growth007/2006

millions Like-for-like Publishedfigures

Hair colourants 842.8 887.6 37.1% +6.5% +5.3%

Styling and textures 349.5 360.3 15.1% +1.1% +3.1%

Shampoos andhaircare

933.6 1,144.0 47.8% +10.4% +22.5%

TOTAL 2,125.9 2,391.9 100% +7.5% +12.5%

BUSINESSES // PROFESSIONAL PRODUCTS


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Krastase

With Noctogenist,KRASTASE is growing rapidly and

reinforcing its positionas the luxury haircare

world leader.

The Professional Products Division develops services and offers

products to meet the expectations of all hairdressing profes-

sionals, in hair colourants, textures and haircare. It has the most

comprehensive brand portfolio in the industry thanks to its cul-

tural variety and its ability to cater for all kinds of hair salons,

from the most affordable to the most exclusive.

brand is continuing to win market share in zones with strong

-

tech styling range, has made a very promising start.

KRASTASEKRASTASE continued to improve its top-end positioning,

-

-

professional use only, and the creation of the new haircare cat-

HAIR BE 12

Serious games foster a new educational approach

The Division has developed a new tool for both trainees and experienced hairdressers,that uses online video game techniques to simulate the activity of a hair salon.This new educational system helps hairdressers improve the quality of the servicesprovided to their customers, builds team spirit and increases salon sales.Hair Be 12 is also aimed at all our hairdressers who wish to train or perfect their skillsusing the Internet. The initiative has been unanimously welcomed by hairdressing schoolsand hairdressers in salons across the world.

PART

NERSHIP

LORAL PROFESSIONNELLORAL PROFESSIONNEL brand sharply accelerated its

growth, advancing more than twice as fast as the worldwide

-


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Shu Uemura Art of HairWith the new SHU UEMURAART OF HAIR brand,the Division continues tobuild a complete offering forhigh-end salons.

LOral Professionnel,Germany.

Matrix,India.

Redken,shampoo range.

International hairdressing show,Germany.

SHU UEMURA ART OF HAIR

SHU UEMURA ART OF HAIR, in the second half of

focuses on hair beauty rituals inspired by the Japanese tea

products formulated with rare and natural ingredients redis-

growth prospects are promising.

MATRIX

MATRIX produced a satisfactory

performance in this region, despite a less substantial contribu-

tion from new products and substantial efforts to restrict distri-

-

REDKEN

REDKEN is build-

ing up its presence and recruiting thousands of salons with the

REDKEN

-

MIZANI

treatments to obtain an outstanding quality of hair.

LOral Professionnel, Age DensiforceLORAL PROFESSIONNEL is continuing its

breakthrough in the seniors segment thanks tothe success of its two major initiatives:

the Age Densiforce anti-ageing haircarerange and the global roll-out ofColor Suprme hair colourant.

BUSINESSES // PROFESSIONAL PRODUCTS


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CONSUMER

BUSINESSES

PRODUCTS


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INNOVATING FOR ALL CONSUMERS

LOral Paris, Bosnia and Herzegovina.

> In facial skincare, the Division brokethe one billion euro barrier with a +19% increase,boosted by the successful launch of Skin Genesisby LORAL PARIS. Men Expert facial skincaremeanwhile advanced by +45%.

> An outstanding year in make-up,both for LORAL PARIS and MAYBELLINE NEW YORK,

thanks in particular to very strong growth forthe foundations Accord Parfait Mineral fromLORAL PARIS and Superstay byMAYBELLINENEWYORK.

> 12 countries accounted for 70% of the Divisionsgrowth, in the following order: Russia, UnitedStates, China, Ukraine, Spain, United Kingdom,India, Mexico, Poland, Australia, Brazil and Italy.

> Productivity efforts are continuing inorganisational structures and in purchasing.Gross profit is improving, while selling, general

and administrative expenses are advancing atonly half the rate of sales growth, enabling a verysignificant increase in profit.

2007HIGHLIGHTS

The most important challenge for the Division is the global roll-out of our major brands, LORALPARIS, GARNIER and MAYBELLINE NEW YORK, to make sure that we take full advantage of dynamicconsumer spending in the growth relay countries and the thrust of modern retailing channels.Our second challenge is to continue our geographic conquests, by investing in the BRIMCcountries (Brazil, Russia, India, Mexico and China) while supporting a good level of growth inWestern Europe and North America and increasing worldwide profitability through businesseswhich have reached critical mass. The third challenge is moving into categories with a stronggrowth potential and high added value, such as skincare and make-up, where our performanceis able to excell both in terms of sales and contribution to profit, without failing to developpositions in our original business of haircare. Our fourth challenge is making product innovation

a permanent process: as well as rapidly renewing the catalogue, the key to our dynamic growth,it is important to build major franchises in a long-term perspective, spurred on by technologicalinnovations, and establish them on a permanent basis in each of the main regions of the world.

Patrick RabainPresidentConsumer Products


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SKIN GENESIS

Natural source of youth

With Skin Genesis, multi-layer cell strengtheningskincare, LORAL PARIS is innovating by combining,without added preservatives, two key activeingredients: Pro-Xylane, a molecule developed

using green chemistry

2007 annual report l

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