L'Occitane International S A : FY2020 Annual Report

Headquarter Offices

49, Boulevard Prince Henri L-1724 Luxembourg

Chemin du Pré-Fleuri 5 CP 165

1228 Plan-les-Ouates Geneva Switzerland

Principal Place of Business in Hong Kong

20/F K11 ATELIER King's Road

728 King's Road

Quarry Bay, Hong Kong

Stock Code

973

Company Website

group.loccitane.com

Audit Committee

Charles Mark Broadley (Chairman)

Martial Lopez

Jackson Chik Sum Ng

Remuneration Committee

Pierre Milet (Chairman)

Charles Mark Broadley

Silvain Desjonquères

Nomination Committee

Jackson Chik Sum Ng (Chairman)

Valérie Bernis

André Hoffmann

Principal Bankers

HSBC France

Groupe Crédit Agricole Crédit Agricole CIB

Le Crédit Lyonnais (LCL)

Caisse Régionale du Crédit Agricole Mutuel Provence Côte d'Azur

BNP Paribas Groupe BPCE

Natixis

BRED

CEPAC

Palatine

Groupe Société Générale Société Générale Crédit du Nord

CIC

Auditor

PricewaterhouseCoopers

Principal Share Registrar and Transfer Office

49, Boulevard Prince Henri

L-1724 Luxembourg

Hong Kong Share Registrar

Computershare Hong Kong Investor Services Limited

Shops 1712-1716

17th Floor, Hopewell Centre

183 Queen's Road East

Wanchai

Hong Kong

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Despite the challenges towards the end of FY2020, our sales growth accelerated and operating profitability improved. In the past two years, we have emphasised the importance of targeted investments on major campaigns, products and markets. Indeed, this strategy has begun to pay off. Sales of L'OCCITANE en Provence grew 3.9%, but its operating profit grew 9.8%, gaining 0.8 points of operating margin to 14.0%. Along with the contribution of ELEMIS, the Group's operating margin gained 0.8 points to 11.4%, a commendable achievement.

Our encouraging results in FY2020 were also underpinned by a number of strategies and actions. One was our ongoing commitment to the major tenets of the Pulse strategy: empowering teams; executing fundamentals especially in a retail context; adopting an omni-channel, mobile and digital approach; engaging customers; and strengthening brand commitments. Another factor was the contribution from ELEMIS, our most recent acquisition, which has become a significant growth and profitability driver. The third factor was greater sales diversity, both in terms of product and brand mix.

For the latter, our product strategy was extremely important, as we successfully balanced our expanding face care ranges with our evergreen body and hand care ranges. The hero product, Immortelle Reset serum was a key contributor to this. In FY2020, we reached our target of selling 1 million units of this product. Meanwhile, COVID-19 prompted consumers to seek for body and hand care products, not only for hygiene but also for comfort and self- care. This surge in demand was reflected in the increased sales mix of those two segments. As we invest in a targeted manner on our hero face care ranges, we also aim to maintain customer loyalty with our iconic body and hand care ranges, and drive recruitment with new and exciting product offerings.

Another key contributor to the increased diversification of our revenue sources was our multi-brand strategy. ELEMIS, which accounted for 10% of overall sales in FY2020, delivered on its growth and profitability targets despite COVID-19's devastating impact on the maritime channel. We are building other sales channels for the brand, particularly in the online space with the opening of an online store on TMall Global with plans to extend its footprint beyond the U.S. and U.K. markets to China, Russia and selected markets in Asia.

LimeLife had a more difficult year, as a result of its rebranding exercise last year and teething pains typical of fast expansion. However, we remain convinced of the potential of its social-selling model, especially under the context of COVID-19. Meanwhile, our other brands showed divergent performances - Erborian remained profitable, but Melvita and L'OCCITANE au Brésil faced near-term challenges and recorded operating losses. Under their respective refined strategies, we are confident those two brands will continue to command a unique and meaningful space in our brand portfolio.

While the Pulse strategy will continue to anchor our plans and actions, the outbreak of COVID-19 highlighted the importance of adaptability. Amidst global lockdowns and social distancing, the creativity and solidarity our teams demonstrated were truly inspirational. We encouraged local initiatives to leverage on social or digital selling, such as empowering our beauty associates to maintain customer relationships digitally via video consultations and live streaming and ramping up the visibility of our brand ambassadors and KOLs on popular social media apps. During FY2020, our Web Sell-out channels grew by 41.8% at constant rates, partially compensating for sales lost in the final quarter of the year after much of our store footprint was temporarily closed because of COVID-19.

Needless to say, we are closely monitoring how COVID-19 could reshape consumer behaviour and the global retail landscape. It is realistic to see adaptations in the format and footprint of our store network. Yet, our experience over these months also showed us real-life social interactions cannot be completely replaced through virtual means. After all, we are social beings. We are convinced the progress with our online and omni-channel initiatives also rides on the existence of stores, and believe the key to our long- term success lies in the ability to build on the strong store network, online activities and omni-channelknow-how. Changes are happening in front of our eyes, which makes the coming months and years an exciting time to be at the forefront of premium beauty retail.

In the meantime, we are also focusing on other areas where we can make a lasting impact. We launched several sustainability initiatives during this financial year, in line with our longstanding commitments to reduce plastic use, support fair trade, respect biodiversity, care for eyesight and empower women. This includes entering into a new collaboration with Loop Industries that will enable us to reach our goal for 100% sustainable PET plastic packaging earlier than our original target of 2025. We also sought to make L'OCCITANE a more inclusive and fairer place to work with the launch of a new global parental leave policy that provides 20 weeks' fully paid leave to primary caregivers and a minimum of 12 weeks' fully paid leave to secondary caregivers.

At the same time, we have been contributing to the global fight against COVID-19. Over the past few months, we have been actively supporting healthcare workers and authorities around the world with donations of 1 million bottles of hand sanitiser and other hygiene products. We are also supporting the producers of our natural ingredients in Burkina Faso and Provence in meeting cashflow and labour availability challenges.

Looking ahead, although near-term turbulence is expected, we are already seeing some positive signs in markets such as China that could bode well for other markets as they begin to reopen. In the meantime, we will continue to implement our existing strategies, particularly in developing our multiple brands and omni-channels, while exploring new ones in areas such as social and digital engagement.

As the world changes, we must too. However, through this change, we will not lose sight of our authentic and human approach to beauty and our long-term mission to be a leader in the affordable premium beauty space. I thank you for your continued support.

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Definitions:

Comparable Stores means existing retail stores which have been opened before the start of the previous financial year, including Company owned e-commerce websites.

Non-comparable Stores & others means all stores that are not Comparable Stores, i.e. stores opened, closed and renovated during the previous or the current financial period under discussion, together with other sales from marketplaces, mail-orders,services, LimeLife and own e-commercewebsites of ELEMIS.

Comparable Store Sales means net sales from Comparable Stores during the financial period under discussion. Unless otherwise indicated, discussion of Comparable Store Sales excludes foreign currency translation effects.

Non-comparable Store Sales means net sales from Non-comparableStore Sales during the financial period under discussion. Non-comparableStore Sales also include sales from a limited number of promotional campaigns usually held at temporary common areas of shopping malls. Unless otherwise indicated, discussion of Non-comparableStore Sales excludes foreign currency translation effects.

Same Store Sales Growth represents a comparison between Comparable Store Sales for two financial periods. Unless otherwise indicated, discussion of Same Store Sales Growth excludes foreign currency translation effects.

Overall Growth means the total worldwide net sales growth for the financial period(s) presented excluding foreign currency translation effects.

REVENUE ANALYSIS

The Group's net sales reached €1,644.1 million in FY2020, representing growth of 15.2% at reported rates and 12.8% at constant exchange rates. ELEMIS became a subsidiary of the Group in March 2019 and its sales are consolidated from April 2019 onwards.

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Japan

Japan's net sales for FY2020 were €231.9 million, an increase of 4.4% as compared to FY2019. In local currency, the growth was -1.7%. Retail sentiment was sluggish in particular after the sales tax hike in the third quarter of FY2020 and further deteriorated after the hit of COVID-19 on retail traffic and operations in FY2020 Q4. E-commerce, however, remained strong.

Hong Kong

Hong Kong's net sales for FY2020 were €124.8 million, a decrease of 8.9% as compared to FY2019. At constant exchange rates, the decline was 12.6%. The social unrest seriously affected retail traffic and consumption since the second quarter of FY2020. In FY2020 Q4, the restrictive measures that were implemented as a result of COVID-19 further hampered local and tourist purchases. Travel retail business was also deeply affected by travel halts and a drastic drop in air traffic.

China

China's net sales for FY2020 were €197.2 million, an increase of 10.7% as compared to FY2019. At constant exchange rates, the growth was 10.5%, contributing 10.2% to Overall Growth. Sales momentum in China was strong in the first three quarters of FY2020, thanks to the various campaigns with celebrities and a strong focus on web channels. Business with T-mall, JD.com and WeChat mini programmes was particularly dynamic. However, sales declined sharply following the outbreak of COVID-19 in January 2020. Retail sales only started to pick up in March 2020 as the lockdown measures in some provinces were uplifted gradually. Web-based channels, however, rebounded quickly. FY2020 Q4 ended with an overall decline of 18.1%; yet strong growth was recorded in web partners, own E-commerce and marketplace.

Taiwan

Taiwan's net sales for FY2020 were €41.1 million, an increase of 7.6% at reported rates or 3.6% at constant exchange rates as compared to FY2019. Same Store Sales Growth was 2.9%. Taiwan was one of the most resilient markets, with sales growth throughout the year, thanks to the effective marketing campaigns on face and hand care items.

France

France's net sales for FY2020 were €104.1 million, an increase of 1.2% as compared to FY2019. Sales momentum started well in the first half of FY2020. E-commerce and retail were particularly dynamic. Yet strikes, social unrest and the subsequent COVID-19 outbreak seriously affected retail sentiment in the second half of FY2020. The growth in France was mainly contributed by E-commerce as well as wholesale of Erborian and L'Occitane en Provence.

United Kingdom

United Kingdom's net sales for FY2020 were €160.8 million, an increase of 165.1% as compared to FY2019. At constant exchange rates, the growth was 163.0%, contributing 54.2% to Overall Growth. The fantastic growth was mainly attributed to ELEMIS. Excluding ELEMIS, sales growth was 1.5%, thanks to the strong first half of FY2020. For ELEMIS in the UK, sales growth was double-digit, thanks to its E-commerce, TV channels and spa wholesale channels that held up strongly throughout the year.

United States

United States' net sales for FY2020 were €295.8 million, an increase of 27.3% as compared to FY2019. At constant exchange rates, the growth was 22.3%. The growth was mainly contributed by ELEMIS. ELEMIS continued to grow rapidly, with main focus on E-commerce, TV channels and web partners. Development of new wholesale clients also drove the growth. However, the maritime business was affected by the de-stocking of a key client. Towards the end of the year, further adverse effects of the COVID-19 threat in the cruise business started to kick in. Excluding ELEMIS, sales in the US decreased by 5.5%, due mainly to trading with 12 stores fewer than in last year and the impact of COVID-19 on retail operations.

Brazil

Brazil's net sales for FY2020 were €57.6 million, flat as compared to FY2019. At constant exchange rates, the growth was 3.3%. The growth was mainly driven by the new stores opened in these two years. Both L'Occitane en Provence and L'Occitane au Brésil brands were impacted by the COVID-19 outbreak in FY2020 Q4.

Russia

Russia's net sales for FY2020 were €58.6 million, an increase of 14.4% as compared to FY2019. At constant exchange rates, the growth was 9.5%. Russia delivered healthy growth for the year, thanks to the dynamic growth of Erborian as well as L'Occitane en Provence. The growth in wholesale, distribution and web partners was particularly strong. Erborian continued its outstanding performance and ended the year with mid-double digit growth.

Other geographic areas

Other geographic areas' net sales for FY2020 were €372.2 million, an increase of 7.1% at constant exchange rates, contributing 13.5% to Overall Growth. All brands and channels posted healthy growth. L'Occitane en Provence contributed most to Overall Growth with encouraging results in South Korea, Australia, Malaysia and Germany.

PROFITABILITY ANALYSIS

Cost of sales and gross profit

Cost of sales increased by 26.2%, or €63.0 million, to €302.9 million in FY2020. The gross profit margin remained high at 81.6%, yet decreased by 1.6 points as compared to FY2019 due to the following factors:

• brand mix effect for 1.6 points, mainly from inclusion of ELEMIS, which runs a mostly wholesale business model, has a lower gross margin than the Group's;
• product mix for 0.2 points, as novelties and relaunches during the year have slightly lower gross margin;
• increase in production, freight and duties for 0.1 points; and
• obsolescence for 0.1 points.

The decrease in gross profit margin was partly offset by:

• favourable foreign exchange ("FX") impact for 0.3 points; and
• price increase for 0.1 points.

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€206.6 million in FY2020. As a percentage of net sales, marketing expenses decreased by 0.4 points to 12.6%. This improvement was attributable to:

The increase was partly offset by:

• favourable brand mix for 0.2 points;
• favourable foreign exchange impact for 0.1 points; and
• IFRS 16 impact for another 0.1 points.

Other gains and losses

Net other losses were €0.5 million in FY2020, being capital losses partly offset by tax credits on research expenditures. In FY2019, there were net other gains of €0.6 million.

Operating profit

Operating profit increased by 24.2%, or €36.5 million, to €187.3 million. The operating margin improved by 0.8 points of net sales to 11.4%. The improvement is explained by the factors below:

• brand mix, with contribution mainly from ELEMIS for 1.3 points;
• favourable channel mix for 0.7 points, as marketplace, web partner and own e-commerce channels, which have higher profitability, increased in sales mix;
• targeted marketing investments, including shifting investments from public relations, marketing events and advertising, to placing greater focus on online channels for 0.6 points;
• IFRS 16 for 0.5 points; and
• favourable FX for 0.4 points.

The improvement was partly offset by the following:

• lower leverage and efficiency on rental and retail personnel costs and others, partly from the impact of COVID-19 for 1.5 points;
• investments in LimeLife, R&D, human resources and information technology for 0.9 points; and
• one-offELEMIS acquisition costs for 0.3 points.

Finance costs, net

Net finance costs were €22.2 million in FY2020, which consisted of interest incomes on cash and cash equivalents of €2.6 million and the following expense items:

• IFRS 16 lease liabilities related interest and finance expenses of €14.0 million;

• interest expenses related to bank borrowing, overdrafts and current account with non-controlling interests and related parties of €8.8 million;
• financial assets impairment of €1.9 million; and
• unwinding of discount on other financial assets of €0.1 million.

The increase in interest expenses was mainly explained by the interests and costs related to loans and credit facilities drawn for acquisition of ELEMIS.

For FY2019, the net finance costs were €3.6 million, consisted of €3.7 million interest expenses on borrowings, netting off €0.5 million interest income on bank balances, as well as €0.4 million non-cash accrual. Note that the Company adopted IFRS 16 Lease accounting from FY2020 onward without restating last year's figures, therefore there were no comparative figures in FY2019 in this regard.

Foreign currency gains/losses

Net foreign currency losses amounted to €4.6 million in FY2020 (FY2019: net gains of €1.1 million) and were comprised €1.0 million realised gains and €5.6 million unrealised losses.

The realised gains were the net result of some gains from intercompany financing at group level, netting off losses at the subsidiary level generated from the intercompany trade and current accounts settlements during the year, mainly denominated in United States dollar.

The unrealised losses were the net result of year-end conversion of outstanding foreign currency based amounts into euro, mostly from bank balances, loans and revolving facilities, intercompany trade and financing balances, as well as the IFRS 16 related right-of-use and lease liabilities balances. The unrealised losses were largely related to Brazilian real, US dollar, Swiss franc, Russian ruble and Australian dollar, being partly netted off by unrealised gains in Japanese yen.

Income tax expense

The effective tax rate increased from 20.7% in FY2019 to 28.2% in FY2020, an increase of 7.5 points, due primarily to one-time effects for a total of 4.0 points.

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FOREIGN EXCHANGE RISK

MANAGEMENT

The Company enters into forward exchange contracts and currency options to hedge anticipated transactions, as well as receivables and payables not denominated in its presentation currency, the Euro, for periods consistent with its identified exposures. As at 31 March 2020, the Company had foreign exchange derivatives net liabilities of €0.2 million in the form of forward exchange contracts (in accordance with fair market valuation requirements under IFRS). The notional principal amounts of outstanding forward exchange derivatives as at 31 March 2020 were primarily sale of Chinese yuan for an equivalent amount of €27.6 million, Japanese yen for €16.6 million, Hong Kong dollar for €4.6 million, Brazilian real for €3.2 million, Russian ruble for €2.4 million, Great British pound for €2.3 million, Thai baht for €2.3 million and Mexican peso for €2.0 million.

DIVIDENDS

At the Board meeting held on 17 June 2019, the Board recommended a gross dividend distribution of €0.0297 per share for a total amount of €43.4 million or 36.7% of the net profit attributable to the equity owners of the Company. The amount of the final dividend was based on 1,461,052,171 shares in issue as at 17 June 2019 excluding 15,912,720 treasury shares. The shareholders of the Company (the "Shareholders") approved this dividend at a meeting held on 25 September 2019. The dividend was duly paid on 18 October 2019.

Despite the impact of COVID-19 on business operation, the Group remained solid in generating operating cashflow. In order to maintain a healthy cash position as well as to share the earnings with the Shareholders, the Board is pleased to recommend a final dividend of €0.02228 per share (the "Final Dividend"), approximately 75% of the dividend in FY2019. The total amount of the Final Dividend is €32.6 million.

The Final Dividend is based on 1,461,732,521 shares in issue as at 29 June 2020 excluding 15,232,370 treasury shares.

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However, starting in the last quarter of FY2020, the world was hit with an unprecedented crisis. The COVID-19 pandemic resulted in drastic restrictive measures globally, such as travel bans, lockdowns and shop closures. The Group's sales performance in February and March 2020 was seriously interrupted, with the retail, travel retail and B2B channels being the most affected. On the other hand, e-commerce, marketplace, web partners and TV channels all posted significant growth and compensated for some of the declines in brick and mortar channels. Within FY2020, the disruption was mostly in China, Hong Kong and Japan.

Under this transformed landscape, the Group was quick to adapt to new consumer demands and how it stayed connected to its customers. The five pillars under its 'Pulse' strategy remained highly relevant: empowering teams; executing fundamentals especially in a retail context; adopting an omni-channel, mobile and digital approach; engaging customers; and strengthening brand commitments. Despite the setback in the last quarter of the year, the Group recorded net sales growth of 15.2% at reported rates, and improved its operating margin by 0.8 points to 11.4%.

Product strategy balances hero skincare and iconic body care

L'OCCITANE en Provence delivered decent growth of 3.9% at reported rates during FY2020, thanks in part to its attractive online and offline product offerings, particularly during the festive season. A major contributor was its hero product strategy that focused on skincare - the highly popular Immortelle Reset serum was reinvigorated with the release of a 50ml version that offered a strong value proposition for repeat customers. In FY2020, the Group met its target of selling over 1 million units of the Immortelle Reset serum. The success of this hero product range is expected to continue with the recent release of its Immortelle Reset eye serum.

Meanwhile, the COVID-19 pandemic has shed new light on the importance of hygiene and self - care . Given L'OCCITANE en Provence's iconic status in premium body and hand care, the Group saw an increase in sales mix in those segments. The Group also acted swiftly and took the opportunity to complement its existing product portfolio by launching a hand purifying gel in key markets.

The Group will continue to pursue a product strategy that balances its hero skincare to boost its face care image, its evergreen body and hand care to maintain loyalty, as well as attractive seasonal offerings to drive recruitment and excitement.

Focus on multi-brand strategy further diversifies sales

The Group's namesake brand, L'OCCITANE en Provence accounted for around 79% of the Group's sales in FY2020, down from around 87% in FY2019. This diversification is expected to continue as each brand continues to build on their unique identities.

ELEMIS was the biggest growth driver in FY2020, and is the Group's second-largest brand accounting for 10% of its overall sales. Despite COVID-19 severely impacting its maritime channel, the brand maintained positive sales growth even during the final quarter of FY2020, thanks to the strong performances on its e-commerce and TV channels. This robust performance demonstrated the effectiveness of the Group's skincare-focused investments, a segment of the beauty market that has proved relatively resilient throughout COVID-19 lockdowns.

In addition to its strong top-line performance, ELEMIS' lean and efficient structure helped secure its impressive profitability despite the impact of COVID-19 in March, reaching an operating margin of 17.5%. Excluding the acquisition costs and depreciation of goodwill elements, the operating margin would be 22.9%. ELEMIS is also materialising synergies with L'OCCITANE en Provence's existing distribution in a disciplined manner, notably in Asia and Russia as first steps. In line with its successful digital- first strategy, ELEMIS opened its online store on TMall Global in FY2020 (with plans to launch domestically in China later in 2020) and plans to launch in several other markets in Asia in the near future.

LimeLife's performance was impeded by the rebranding exercise last year, teething pains related to its growth and expansion into new markets, as well as by COVID-19 towards the end of FY2020. Despite the short-term challenges, the Group remains convinced of the potential of LimeLife's social media-based business model, which is perhaps more relevant than ever under the current circumstances. The influence of a powerful and relatable role model was demonstrated by the successful launch of "Fierce by Aly", a make-up collection launched in collaboration with Olympic gold medal-winning gymnast Aly Raisman during the festive season that broadened the Group's appeal to younger consumers.

Meanwhile, the Group's emerging brands, Melvita, L'OCCITANE au Brésil and Erborian collectively delivered positive sales growth during FY2020, yet showed diverging results and recorded a material operating loss of €13.9 million. Melvita's top-line performance was hampered by macroeconomic challenges in each of its key markets in FY2020. However, under the refined strategy of its new management, Melvita regained some traction in France and

Japan, and will continue a disciplined expansion in Asia. Separately, L'OCCITANE au Brésil helped drive overall sales growth for the Group in Brazil, but its distribution, marketing and industrial investments meant that its operating loss widened in FY2020. Restructuring measures for L'OCCITANE au Brésil have already started in April 2020 to improve the efficiency of such investments, such as by closing unprofitable distribution points. On the other hand, Erborian benefited from its successful distribution strategy that had a strong country prioritisation - it built a solid wholesale business in Western Europe and retail footprint in Russia, achieving double-digit sales growth in FY2020 and maintaining its profitability.

Rethinking customer engagement and omni- channel experiences

One of the Group's missions is to provide a seamless omni-channel experience for customers to discover the Group's products and brands, making the path-to- purchase fun, memorable and convenient.

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Prior to the outbreak of COVID-19, the Group had become selective with physical store openings while continuing to create exciting retail experiences in key global shopping locations, such as Tokyo's Omotesando, London's Regent Street and New York's Fifth Avenue. It complemented its wide brick - and - mortar distribution with its own e-commerce website, third-party marketplaces, as well as social media and messaging apps. Online channels have become increasingly important, growing along with the shift in consumer behaviour. In FY2020, Web Sell-out channels grew by 41.8% at constant rates, equivalent to 19.0% of the total Sell-out sales.

As COVID-19 became a global threat, as much as 75% of the Group's store footprint had closed. The Group had to rethink how to stay connected with customers while still maintaining a human approach to beauty. Although e-commerce showed impressive growth in the final quarter of FY2020, it was not sufficient to compensate for the loss of sales from store closures. Staying true to its entrepreneurial drive, the Group has encouraged a myriad of local initiatives to drive social or digital selling. These include empowering the stores' beauty associates to maintain customer relationships digitally via video consultations and livestreaming, offering concierge personal shopping service, and maximising our exposure on popular social apps with the use of celebrities and KOLs. While some markets have begun to reopen, digital selling will continue to be a mainstay.

At the same time, as the Group gradually reopens its physical stores, it is putting in place stringent safety measures, focusing on a 100% contactless customer journey to maintain the highest possible levels of safety for its staff and customers, while continuing to provide fresh and memorable shopping experiences.

Actively supporting the global fight against COVID-19

Faced with this global crisis, the Group was compelled to meaningfully support the work of healthcare authorities and healthcare workers in the global fight against COVID-19. It reassigned some of its manufacturing facilities in Manosque to produce hand sanitiser, donating 300,000 bottles to health authorities in several European countries and 700,000 hand hygiene products to authorities in China, Japan, Brazil, Russia and the United States.

The Group also supported the producers of the natural ingredients used in its products, continuing its long-term contracts and pre-financing of 50-80% of costs before harvest, which is more valuable to its producers than ever.

In Burkina Faso, where pandemic-related government restrictions disrupted the end of the shea harvest, the Group also postponed some delivery dates to ensure the safety of the communities of women producers while maintaining their cash flow. In Provence, the Group's staff volunteered to assist with the orange blossom harvest after producers struggled to recruit workers because of COVID-19.

The Group has always strived to lead with conscience and adhere to its commitments, not only during times of crises. As a group that draws on the inspiration and resources from nature, it was imperative for the Group to contribute in social responsibility and environmental sustainability. More information on the Group's efforts is covered in its annual 'Environmental, Social and Governance' report.

OUTLOOK

Given the uncertain economic environment, the Group will implement several initiatives to achieve cost savings and increase its financial flexibility. This includes reducing the base compensation of Directors and Senior management and lowering the dividend; and controlling costs by renegotiating commercial rents, reducing staff costs through temporary unpaid leave or furlough and short-term working schemes, optimising or postponing its marketing and promotions, and reducing capital expenditures such as store openings and renovations.

The Group will continue to implement differentiated strategies for each of its brands, encouraging them to stay agile and autonomous, while still capitalising on synergies. It is equally important to continue making targeted investments to support major campaigns, products and markets, in line with the Pulse strategy to pursue sustainable growth and profitability.

While consumer sentiment will be impacted by COVID-19 for some time, the Group is confident about its resilience backed by the inherent strength of its brands, products and effective web-based activities, as well as its careful management and passion. As it navigates through the crisis, the Group will continue to prioritise its multi-brand strategy and omni-channel approach to improve its medium-to-long-term fundamentals, safeguard its future profitability and deliver value to its shareholders.

CORPORATE GOVERNANCE

PRACTICES

The Board reviews its corporate governance practices regularly in order to meet the rising expectations of its Shareholders, to comply with the increasingly stringent regulatory requirements and to fulfill its commitment to excellence in corporate governance. The Board is committed to maintaining a high standard of corporate governance practices and business ethics in the firm belief that they are essential for maintaining Shareholders' returns.

As set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"), "The Corporate Governance Code and Corporate Governance Report" (the "CG Code"), there are two levels of corporate governance practices, namely: code provisions that a listed company must

comply with or explain its non - compliance, and recommended best practices that a listed company is encouraged to comply with but need not disclose in the case of non-compliance.

On 17 June 2014, the Board adopted its own corporate governance manual which is based on the principles, provisions and practices set out in the CG Code; this is available on the Company's website group.loccitane.com. Please select "Governance" under "Investors".

DEVIATIONS FROM THE CODE

The Company has complied with all of the code provisions of the CG Code as set out in Appendix 14 to the Listing Rules throughout FY2020 save as disclosed below:

Code provision A.2.1 of the CG Code provides that the roles of chairman and chief executive should be separate and should not be performed by the same individual.

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Composition of the Board

The Board consists of ten Directors, comprising five executive Directors ("ED"), one non-executive Director ("NED") and four independent non-executive Directors ("INED"). All Directors have distinguished themselves in their field of expertise, and have exhibited high standards of personal and professional ethics and integrity. The biographical details of each Director are set out on pages 54 to 59 of this Annual Report.

Board Diversity Policy

1. Objective
   The Nomination Committee (the "Committee") was constituted as a committee of the board of directors (the "Board") of L'OCCITANE INTERNATIONAL S.A. (the "Company"). The Committee has the delegated authority of the Board in respect of the functions and powers set out in these terms of reference. Under its terms of reference, the Committee shall identify candidates who are qualified or suitable to become a member of the board of director and make recommendations to the Board on the selection of candidates nominated for directorships.
   This policy (the "Policy") sets out the approach to achieve diversity on the Board.
2. Vision and Policy Statement
   The Company recognizes the benefits of board diversity and supports the principle that diversity can strengthen the performance of the Board, promote effective decision-making and better corporate governance and monitoring.
   The Company believes that a diverse board will include and make good use of the difference in skills, experience and background, geographical and industry experience, ethnicity, gender, knowledge and length of service and other qualities of the members of the Board. These differences will be considered in determining the optimum composition of the Board and all Board appointments will be based on merit, having due regard to the overall effective function of the Board as a whole. The purpose of the Policy aims to achieve diversity on the Board including but not limited to genders, age, cultural and educational backgrounds, ethnicities, professional experience, skills, knowledge and lengths of service.

The Committee reviews and assesses the c o m p o s i t i o n o f t h e B o a r d a n d m a k e s recommendation to the Board on the appointment of new Directors. The Committee will also review the structure, size and diversity of the Board annually and make recommendations on any proposed changes to the Board to complement the Company's corporate strategy. In identifying suitable candidates for appointment to the Board, the Committee will take into consideration the Company's business models and specific needs. Selection of candidates will be based on a range of diversity criteria and perspectives. The Committee will consider the balance of skills, experience, independence and knowledge of the Board and the diversity representation of the Board, how the Board works together as a unit, and other factors relevant to its effectiveness.

1. Measurable Objectives
   The Committee will discuss and agree annually the relevant measurable objectives for achieving diversity on the Board and make recommendations to the Board for adoption. The ultimate decision will be based on merit against objective criteria and with due regard for the benefits of diversity on the Board.
2. Review and Monitor of this Policy
   The Committee will monitor the implementation of the Policy and report to the Board on the achievement of the measurable objectives for achieving diversity under this Policy.
   The Committee will review the Policy, as appropriate, and make recommendations on any required changes to the Board for consideration and approval.

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Responsibilities of the Board

The Board is responsible for:

• Reviewing and approving the strategic direction of the Group established by the EDs in conjunction with the management;
• Reviewing and approving objectives, strategies and business development plans;
• Monitoring the performance of the CEO and the senior management;
• Assuming responsibility for corporate governance; and
• Reviewing the effectiveness of the internal control system of the Group.

Responsibilities of the Senior Management

The senior management under the leadership of the CEO is responsible for:

• Formulating strategies and business development plans, submitting to the Board for approval, and implementing such strategies and business development plans thereafter;
• Submitting annual budgets to the Board on regular basis;
• Reviewing salary increment proposals and remuneration policy and submitting to the Board for approval; and
• Assisting the Board in conducting the review of the effectiveness of the internal control systems of the Group.

NON-EXECUTIVE DIRECTOR AND INDEPENDENT NON-EXECUTIVE DIRECTORS

The NED has his term of appointment coming to an end of three years after his appointment to the Board, subject to re-election at the end of his three-year term.

The four INEDs are of high experience, with academic and professional qualifications in the field of accounting, finance or marketing. With their experience gained from various sectors, they provide strong support towards the effective discharge of the duties and responsibilities of the Board. They have his/her term of appointment coming to an end of three years after his/her appointment to the Board, subject to re-election at the end of his/her three-year term. Each INED gives an annual confirmation of his/her independence to the Company and the Company considers each of them to be independent. They all fulfill the criteria of independence under Rule 3.13 of the Listing Rules.

INDUCTION AND ONGOING

DEVELOPMENT

Newly appointed Directors receive an induction course to ensure their understanding of the Company's business and their awareness of a Director's responsibilities and obligations. Each member of the Board attended training on corporate governance, regulatory developments and other relevant topics during FY2020 and is frequently updated on developments in the statutory and regulatory regime and the business environment to assist in the discharge of their responsibilities.

COMMITTEES

As an integral part of good corporate governance, the Board has established audit, nomination and remuneration committees, each of which has adopted terms of reference.

To respect an amendment of the Listing Rules, terms of reference of the Audit Committee and Nomination Committee were amended and uploaded on the HKEX website and the Company's website on 8 February 2019.

During FY2020, each committee met and carried out its duties in accordance with its terms of reference. The authorities, functions, composition and duties of each committee are set out below:

Audit Committee

The Audit Committee has three members, Mr. Mark Broadley (Chairman), Mr. Jackson Ng and Mr. Martial Lopez. Mr. Martial Lopez is a NED, and the other two members are INEDs.

In compliance with Rule 3.21 of the Listing Rules, at least one member of the Audit Committee possesses appropriate professional qualifications in accounting or related financial management expertise in discharging the responsibilities of the Audit Committee.

All members have sufficient experience in reviewing audited financial statements as aided by the auditor of the Group whenever required.

The primary duties of the Audit Committee are to assist the Board in providing an independent view of the effectiveness of the Group's financial reporting process, internal control and risk management system, to oversee the audit process and to perform other duties and responsibilities as assigned by the Board.

The following is a summary of the work performed by the Audit Committee during FY2020:

1. Review of the report from the auditor on the audit of the final results of the Group for FY2019;
2. Review of the draft financial statements of the Group for FY2019;
3. Review of the draft results announcement and annual report of the Group for FY2019;
4. Review of the audit fees payable to the external auditor for FY2019;
5. Review of the external auditor's independence and transmission of a recommendation to the Board for the re-appointment of the external auditor at the forthcoming annual general meeting (the "AGM");
6. Review of the draft results announcement and interim report of the Group for the period ended 30 September 2019;
7. Review of the financial statements for the period ended 31 December 2019;
8. Review of the internal control system including the internal audit results analysis and the internal audit plan for 2019-2020, and report to the Board;

1. Review of the Listing Rules modification affecting the Group in order to monitor appropriate corporate governance and oversee the implementation of the Company's corporate governance manual. Under its terms of reference, the Audit Committee oversees the Company's corporate governance.

There have been four meetings of the Audit Committee during the Review Period: two of them were held prior to the publication of the financial reports (annual report and interim report) and two other meetings were specific to the internal control and corporate governance of the Company.

Nomination Committee

The terms of reference of the Nomination Committee were amended on 8 February 2019 to comply with the provisions set out in the CG Code and with the amended Listing Rules. The Nomination Committee has three members, who are Mr. Jackson Ng (Chairman), Mr. André Hoffmann and Mrs. Valérie Bernis. Mr. André Hoffmann is an ED, and the other two members are INEDs. The primary function of the Nomination Committee is to make recommendations to the Board on the appointment and removal of Directors, respecting the following Nomination Policy:

Objective

The Nomination Committee (the "Committee") was constituted as a committee of the board of directors (the "Board") of L'OCCITANE INTERNATIONAL S.A. (the "Company"). The Committee has the delegated authority of the Board in respect of the functions and powers set out in these terms of reference. Under its terms of reference, the Committee shall identify candidates who are qualified or suitable to become a member of the Board and make recommendations to the Board on the selection of candidates nominated for directorships.

Nomination Selection Criteria

1. The Committee is authorized by the Board to determine the nomination of directors, the procedure, process and criteria to be adopted for the purposes of selecting and recommending candidates for directorship, and shall make recommendations to the Board on the appointment or re-appointment of directors and succession planning for directors, in particular, the chairman and the chief executive officer.

1. When making recommendations regarding the appointment of any proposed candidate to the Board or re-appointment of any existing member(s) of the Board, the Committee shall consider a variety of factors including without limitation the following in assessing the suitability of the proposed candidate:
2. • the skills required on the Board at that particular time;
   • the relevant diversity considerations under its diversity policy ("Diversity Policy"), including but not limited to gender, age, cultural educational and professional background, skills, knowledge and experience;
   • the candidate's personal and professional integrity, professional accomplishment, competencies, experience, skills and reputation in the industry, relevance for the Board;
   • the nature of existing positions and relationships including Board positions that may impact the potential candidate's ability to exercise independent judgment or present any potential conflicts of interest;
   • the number of existing directorships held by the potential candidate, and in particular on the boards of listed companies, as well as other commitments that may demand the potential candidate's attention;
   • in case of independent non-executive director, compliance with the criteria of independence as prescribed under Rule 3.13 of the Listing Rules; and
   • any other relevant factors as may be determined by the Committee or the Board from time to time.
3. Non-executivedirector will receive a formal letter of appointment on his/her appointment to the Board.

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1. Following the interview, the Committee shall make its recommendations to the Board (and ultimately to the shareholders where required) having regard to the Committee's terms of reference. The Committee shall also give consideration to laws and regulations of all applicable jurisdictions and regulators in connection with the appointments to the Board. It is authorised by the Board to engage independent professional advisers and have access to such resources as it may consider appropriate.
2. The Board shall have the final decision on all matters relating to its recommendation of candidates to stand for election at any general meeting.
3. Any director appointed by the Board to fill a casual vacancy shall hold office until the first general meeting after his/her appointment and be subject to re- election at such meeting, and any director appointed by the Board as an addition to the existing Board shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election.
4. A shareholder of the Company can serve a notice to the Company within the lodgment period of its intention to propose a resolution to elect a certain person as a director. Details of the procedure has been set out in the "Procedure for Shareholders to Propose a Person for Election as a Director of the Company" published by the Company from time to time.
5. A new Director would undergo a Board induction (in line with approved induction process of the Board) as soon as possible and preferably before their first Board meeting.

Review and Monitor of this Policy

1. The Committee shall review the structure, size, composition (including skills, knowledge and experience) of the Board on a regular basis at least annually and diversity of the Board to ensure that it has a balance of expertise, skills and experience and diversity of perspective appropriate to the requirements for the business of the Company.
2. The Committee shall keep under review the leadership needs of the Company, both executive and non-executive, with a view to ensuring the continued ability of the Company to complete effectively in the marketplace.

1. The Committee shall keep up to date and fully informed about strategic issues and commercial changes affecting the Company and the market in which it operates.

Regarding the proposal of re-election of Mrs. Valérie Bernis and Mr. Pierre Milet as INEDs at the FY2019 AGM, one Nomination Committee meeting was held during FY2020.

Remuneration Committee

The terms of reference of the Remuneration Committee were amended on 29 March 2012 to comply with the provisions set out in the CG Code. The Remuneration Committee has three members, who are Mr. Pierre Milet (Chairman), Mr . Mark Broadley, and Mr . Silvain Desjonquères (since 23 October 2018). Mr. Silvain Desjonquères is an ED, and the other two members are INEDs.

The primary duties of the Remuneration Committee are to evaluate the performance of and make recommendations to the Board on the remuneration packages of the Directors and senior management and evaluate and make recommendations to the Board on employee benefit arrangements.

The following is a summary of the work performed by the Remuneration Committee during FY2020:

1. Review of the repartition and cost of the cash Long Term Incentive Plan 2019.
2. Review of the Directors' and senior management's compensation, with recommendation to the Board for approval.
3. Consideration of specific LTI plan for countries which have some difficulties to recruit.

There has been one meeting of the Remuneration Committee during the Review Period.

The following is a general description of the emolument policy and long term incentive schemes of the Group as well as the basis of determining the emoluments payable to the Directors:

1. The remuneration of the Directors is determined by the Board which receives recommendations from the Remuneration Committee. Under our current compensation arrangements, the EDs receive compensation in the form of salaries, bonus subject to performance and share-based payments. One of the EDs receives service fees. The NED and all the INEDs receive Directors' fees.
2. The remuneration the Directors have received (including fees, salaries, discretionary bonus, pension plan allowance, share based payments, housing and other allowances, service fees and other benefits in

kind) for FY2020 was approximately €3,389,000. The aggregate amount of fees, salaries, discretionary bonus, pension plan allowance, share-based payments, housing and other allowances, and other benefits in kind paid to the five highest paid individuals of the Group, including certain Directors, for FY2020 was approximately €4,171,000.

We have not paid any remuneration to the Directors or the five highest paid individuals as inducement to join or upon joining us as a compensation for loss of office in respect of FY2020. Further, none of the Directors has waived any remuneration during the same period.

DIRECTORS' RESPONSIBILITIES FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The Board acknowledges that it holds responsibility for:

• Overseeing the preparation of the financial statements of the Group with a view to ensuring such financial statements give a true and fair view of the state of affairs of the Group; and
• Selecting suitable accounting policies and applying the selected accounting policies consistently with the support of reasonable and prudent judgment and estimates.

The Board ensures the timely publication of the financial statements of the Group.

The management provides explanations and information to the Board to enable it to make an informed assessment of the financial and other information to be approved.

The Board endeavours to ensure a balanced, clear and understandable assessment of the Group's position and prospects to extend the Group's financial reporting including annual and interim reports, other price-sensitive announcements and other financial disclosures required under the Listing Rules, and reports to regulators as well as information required to be disclosed pursuant to statutory requirements and applicable accounting standards.

The statement of the auditor of the Company about its reporting responsibilities on the financial statements of the Group is set out in the Independent Auditor's Report on pages 78 to 84 of this Annual Report.

The Board is responsible for keeping proper accounting records, for safeguarding the assets of the Company and the Group and for taking reasonable steps for the prevention of fraud and other irregularities.

The Board is not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Company's ability to continue as a going concern.

RISK MANAGEMENT AND INTERNAL CONTROL

The Board places great importance on internal controls and is responsible for establishing and maintaining adequate internal controls over the Group's financial reporting and assessing the overall effectiveness of those internal controls.

The Internal Audit Department provides an independent review of the adequacy and the effectiveness of the risk management and internal control systems. The audit plan is discussed and agreed every year with the Audit Committee. In addition to its agreed annual schedule of work, the Internal Audit Department conducts other special reviews as required. Internal Audit reports are sent to relevant Directors, external auditors and management of the audited entity. Moreover, summary reports of each audit are sent to all members of the Audit Committee.

The system of risk management and internal control is designed to provide reasonable assurance against human errors, material misstatements, losses, damages, or fraud, and to manage rather than eliminate risks of failure in operational systems and achievement of the Group's objectives. During FY2020, the internal control deviations were addressed effectively and action plans implemented to reduce the risks. The Audit Committee was satisfied that appropriate actions were undertaken and the overall risk management and internal control systems have functioned effectively as intended.

The Board has conducted a review of the effectiveness of the Group's risk management and internal control systems and considers that they are effective and adequate as a whole. The Board further considers that there were no issues relating to the material controls and risk management functions of the Group.

DIVIDEND POLICY

The Company has adopted a dividend policy (the "Dividend Policy"). According to the Dividend Policy, in considering the proposal and declaring dividends, the Board shall take into account the following factors of the Group:

• Financial results;
• Cash flow situation;
• Business conditions and strategies;
• Future operations and earnings;
• Capital requirements and expenditure plan;
• Interests of shareholders;
• Any restrictions on payment of dividend; and
• Any other factors that the board may consider relevant;

For the avoidance of any doubt and as outlined above, there can be no assurance that dividends will be paid in any particular amount for any given period.

In addition, any final dividend for a financial year will be subject to shareholders' approval.

INVESTOR RELATIONS AND

COMMUNICATIONS WITH

SHAREHOLDERS

The Company attaches great importance to communication with Shareholders. To this end, a number of means are used to promote greater understanding and dialogue with the investment community. The Company holds group meetings with analysts in connection with the Company's annual and interim results. In addition, designated senior executives maintain regular dialogue with institutional investors and analysts to keep them abreast of the Company's development, subject to compliance with the applicable laws and regulations, including the two results announcements. In addition, the Directors also made presentations and held group meetings with investors at investor forums in Hong Kong and overseas.

Further, the Company's website, group.loccitane.com, contains an investors section which offers timely access to the Company's press releases, other business information and information on the Company's corporate governance structure and practices. For efficient communication with

Shareholders and in the interest of environmental preservation, Shareholders are encouraged to refer to the Company's corporate communications on the Company's website.

No significant changes have been made to the Company's constitutional documents during the year under review.

SHAREHOLDERS' RIGHTS

Procedure for Shareholders to convene a General Meeting

Any one or more Shareholder(s) who together hold not less than 5 per cent of the paid-up capital that carries the right to vote at general meetings may convene a general meeting by depositing a written request signed by such Shareholders and addressed to the attention of the Company's Company Secretary at the registered office of the Company in Luxembourg or at the principal place of business of the Company in Hong Kong, the addresses of which are set below.

Such request must specify the objects of the meeting. If the Board does not within two calendar days from the date of deposit of the request proceed duly to convene the meeting to be held within a further 28 calendar days, the Shareholders signing the request (or any of them representing more than one-half of the total voting rights of all Shareholders signing the request) may convene the general meeting in the same manner, as nearly as possible, as that in which meetings may be convened by the Board. No general meeting convened by request of the Shareholders may be held later than three months after the date of deposit of the request.

Procedure for Shareholders to make enquiries to the Board

Shareholders may make enquiries to the Board in writing by sending such enquiries to the attention of the Company's Company Secretary at the registered office of the Company in Luxembourg or at the principal place of business of the Company in Hong Kong, the addresses of which are set out below. The Company Secretary will forward enquiries to the Chairman for consideration.

In addition, Shareholders in attendance at any general meeting of the Company may make enquiries at such meeting to the Chairman of the Board, the chairman of the various Board committees, or to other Directors in attendance at such meeting.

Procedure for Shareholders to put forward proposals at General Meetings

Upon a written request by (i) one or more Shareholder(s) representing not less than 2.5 per cent of the total voting rights of all Shareholders who at the date of such request have a right to vote at the meeting to which the request relates, or (ii) not less than 50 Shareholders holding shares in the Company on which there has been paid up an average sum, per Shareholder, of not less than HKD2,000, the Company shall, at the expense of the Shareholders making the request, (a) give to Shareholders entitled to receive notice of the next annual general meeting notice of any resolution which may be properly moved and is intended to be moved at that meeting, and (b) circulate to Shareholders entitled to receive notice of any general meeting a statement of not more than 1,000 words with respect to the matter referred to in the proposed resolution or the business to be dealt with in the meeting.

Such request must be signed by all the Shareholders making the request (or two or more copies between them containing the signatures of all the Shareholders making the request) and deposited at the registered office of the Company in Luxembourg or at the principal place of business of the Company in Hong Kong, the addresses of which are set below.

Such request must be deposited (i) not less than six weeks before the meeting in question in the case of a request proposing that a resolution be adopted at the meeting, and

1. not less than one week before the meeting in the case of any request that does not propose that a resolution be adopted at the meeting.

In addition, one or more Shareholder(s) who together hold at least 10 per cent of the Company's issued and outstanding shares may request that one or more additional items be put on the agenda of any general meeting. Such request must be sent to the registered office of the Company in Luxembourg by registered mail not less than five days before the meeting.

Except pursuant to the procedures described above, a Shareholder may not make a motion at a general meeting.

Procedure for election to the office of Director upon Shareholder proposal

A Shareholder who intends to propose a candidate for election to the office of Director shall provide the Company's Company Secretary at the registered office of the Company in Luxembourg or at the principal place of business of the Company in Hong Kong, the addresses of which are set below, with a written notice reflecting his intention to propose a person for election to the office of Director.

The notice shall be delivered by the Shareholder at the registered office of the Company in Luxembourg or at the principal place of business of the Company in Hong Kong, the addresses of which are set out below, during a period commencing no earlier than the day after the dispatch of the convening notice of the meeting scheduled for such election and ending not later than seven days prior to the date of such meeting. Such notice must be delivered by a Shareholder (not being the person proposed) who is entitled to attend and vote at the meeting. In addition, the candidate proposed for election shall deliver to the Company's Company Secretary at the registered office of the Company in Luxembourg or at the principal place of business of the Company in Hong Kong, the addresses of which are set below, a signed written notice reflecting his willingness to be elected as Director.

In accordance with Article 10.1 of the articles of association of the Company (the "Articles of Association"), the appointment of the Director will be made by way of a shareholders' general meeting of the Company and by ordinary resolution adopted at a simple majority of the votes cast.

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Reinold Geiger

Executive Director,

Chairman and

Chief Executive Officer

Mr. Reinold Geiger was appointed as an executive Director with effect from 22 December 2000 and is the Company's Chairman and Chief Executive Officer. Mr. Geiger is primarily responsible for the Group's overall strategic planning and the management of the Group's business. Mr. Geiger joined the Group in 1996 as Chairman and controlling shareholder. Mr. Geiger is a director and managing director ("administrateur délégué") of the Company, L'Occitane Groupe S.A. ("LOG") and LOG Investment S.A. ("LOGI"), president of L'Occitane Innovation LAB SAS, a member of the board of directors or managers of LimeLife Co-Invest Sarl, L'Occitane (Suisse) S.A., L'Occitane Australia Pty. Ltd., L'Occitane Japon K.K. and L'Occitane Russia. He is also the chairman of L'Occitane Inc. and L'Occitane LLC and the president of the Fondation d'entreprise L'Occitane. Since joining L'Occitane, Mr. Geiger has developed the Group from a largely domestic operation based in France to an international business. He has spent time travelling to the Group's worldwide locations in order to implement this growth strategy, where he has established the Group's subsidiaries and strong relationships with the local management. In June 2008, Mr. Geiger was awarded the accolade of "INSEAD entrepreneur of the year" for his international development strategy of the Group. Mr. Geiger began his career at the American Machine and Foundry Company in 1970. In 1972 he left to start his own business, and was involved in the distribution of machinery used in the processing of rubber and plastic, which he sold in 1978. Mr. Geiger then established and developed AMS Packaging SA, which specialised in packaging for the high end perfumes and cosmetics market. This company was floated on the Paris stock exchange in 1987 and Mr. Geiger left the company entirely in 1990. Between 1991 and 1995, he worked for a packaging company with operations primarily based in France and developed it into an international business. Mr. Geiger graduated from the Swiss Federal Institute of Technology in Zürich, Switzerland with a degree in engineering in 1969 and from INSEAD in Fontainebleu, France with a master's degree in business administration in 1976.

André Hoffmann

Executive Director and Vice-Chairman

Silvain Desjonquères

Executive Director and Group Managing Director

Mr. André Hoffmann was appointed as an executive Director with effect from 2 May 2001 and was further appointed as Vice-Chairman with effect from 19 April 2016 and is also a director of LOG and LOGI. Mr. Hoffmann is primarily responsible for the Group's strategic planning. He was previously in charge of the Group's business in Asia-Pacific between June 1995 and December 2017 as Managing Director, Asia Pacific. Mr. Hoffmann is the chairman of L'Occitane Trading (Shanghai) Limited, L'Occitane (Far East) Limited, L'Occitane (Korea) Limited and L'Occitane Taiwan Limited. He is also a director of L'Occitane Singapore Pte. Limited, L'Occitane Australia Pty. Limited, L'Occitane Japon K.K., L'Occitane (China) Limited and L'Occitane (Macau) Limited. He has over 30 years' experience in the retail and distribution of cosmetics, luxury products and fashion in Asia-Pacific. He is a director of Pacifique Agencies (Far East) Limited, which was a joint venture partner with the Company for the distribution of L'Occitane products in the Asia-Pacific region between 1995 and 2004. Between 1979 and 1986, Mr. Hoffmann worked in various sales management roles at the GA Pacific Group, a business specialising in the investment and management of retailing, wholesaling, trading, manufacturing and distribution operations and the hotel and tourism trade in Asia-Pacific. Mr. Hoffmann graduated from the University of California at Berkeley, USA in 1978 with a bachelor of arts degree in economics.

Mr. Silvain Desjonquères is the Group Managing Director, responsible for the overall management of the Company. Mr. Desjonquères joined the Group in April 2018. He has over 28 years of experience in Fast Moving Consumer Goods ("FMCG"), prêt-à-porter, retail and e-commerce sectors, and has held senior positions in marketing, consulting and as Chief Executive Officer in international companies. Before joining the Company, Mr. Desjonquères worked as an independent investor, administrator and advisor. Prior to that, he was the president and chief executive officer of Redcats USA (now FullBeauty Brands) from 2010 to 2014, leading a successful digital transformation and reviving growth. Between 2002 and 2009, Mr. Desjonquères worked at La Halle, Vivarte Group, where he joined as chief marketing officer, and moved on to become the chief merchandising officer and lastly the chief executive officer. He also worked at L'Oreal Group as Marketing Vice President, Latin America. Mr. Desjonquères holds a Master's degree in Business Administration and General Management from the ESSEC Business School Paris. Mr. Desjonquères has also been actively involved in a number of charitable or social organisations, including "Action Against Hunger, USA" and "Kinomé - forest & life".

Thomas Levilion

Executive Director and

Group Deputy General Manager,

Finance and Administration

Karl Guénard

Executive Director and

Company Secretary

Mr. Thomas Levilion was appointed as an executive Director with effect from 30 September 2008 and is the Group Deputy General Manager, Finance and Administration. He is primarily responsible for the Group's finance functions worldwide. Mr. Levilion joined the Group in March 2008 and is the managing director ("administrateur délégué") of the Company. Furthermore, he is a manager (a "gérant") of M&L Distribution S.à.r.l. as well as the President of Verveina SAS. Between 1988 and 2007, Mr. Levilion worked at Salomon S.A., which was a subsidiary of Adidas AG and was subsequently acquired by the Amer Sports Corporation, where he was the controller and the VP controller and subsequently the chief financial officer. During this time he gained experience in global supply chains, turn-arounds,re-engineering of organisations and mergers and acquisitions. He has a master's degree in business administration from the Ecole des Hautes Etudes Commerciales in Paris, France, where he majored in finance, and a postgraduate degree in scientific decision making methods from the University of Paris-Dauphine, France.

Mr. Karl Guénard was a non-executive Director of the Group from 30 June 2003. Mr. Guénard joined the Group in September 2013. Since 1 September 2013, he has been an executive Director and Company Secretary of the Group, he also has been further member of the board of directors or managers of LOG, LOGI, LOI Participations and LimeLife Co-Invest Sàrl. Between 2000 and 2013, Mr. Guénard worked at Edmond de Rothschild Group, where he was a senior vice president of the Banque Privée Edmond de Rothschild Europe and responsible for the financial and engineering department. Between 1998 and 2000, he was a manager of the financial engineering department at Banque de Gestion Privée Luxembourg (a subsidiary of Crédit Agricole Indosuez Luxembourg). Prior to this, between 1993 and 1998, Mr. Guénard was a funds and corporate auditor. Mr. Guénard is a chartered accountant. He holds a master's degree in economics and management sciences from the University of Strasbourg, France.

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PRINCIPAL ACTIVITIES

The Company is an international group that manufactures and retails beauty and well-being products that are rich in natural and organic ingredients. As a global leader in the premium beauty market, the Company has more than 3,000 retail outlets, including over 1,600 owned stores, and is present in 90 countries. Through its six brands - L'OCCITANE en Provence, Melvita, Erborian, L'OCCITANE au Brésil, LimeLife by Alcone and ELEMIS - the Company offers new and extraordinary beauty experiences, using high quality products that respect nature, the environment and the people who surround it.

An analysis of the Group's performance for FY2020 by operating segments is set out in note 5 to the consolidated financial statements.

BUSINESS REVIEW

A review of the business of the Group during the year and a discussion on the Group's future business development are provided in the Management Discussion & Analysis on pages 10 to 33 of this Annual Report. Description of possible risks and uncertainties that the Group may be facing can be found in the Chairman's Statement on pages 6 to 7 of this Annual Report. Also, the financial risk management objectives and policies of the Group can be found in Note 2.14 to the consolidated financial statements. Particulars of important events if any affecting the Group that have occurred since the end of the financial year ended 31 March 2020 are provided in Note 34 to the consolidated financial statements. An analysis of the Group's performance during the year using financial key performance indicators is provided in the Balance Sheet and cash-flow review on pages 25 to 27 of this Annual Report. In addition, discussions on the Group's environmental policies, relationships with its key stakeholders and compliance with relevant laws and regulations which have a significant impact on the Group are contained in the Chairman's Statement on page 6 and Corporate Governance Report on page 35 and in this Directors' Report on page 63 and in the ESG report available on the Group's corporate website in due course.

RESULTS AND DIVIDENDS

The results of the Group for FY2020 are set out in the Consolidated Statements of Income on page 85 of this Annual Report.

The Board recommends a final dividend of €0.02228 per Share. The payment shall be made in Euros, except that payment to Shareholders whose names appear on the register of members in Hong Kong shall be paid in Hong Kong dollars. The relevant exchange rate will be the opening buying telegraphic transfer rate of Hong Kong dollars to Euros as announced by the Hong Kong Association of Banks (www.hkab.org.hk) on the day of the approval of the dividend.

The final dividend will be subject to approval by the Shareholders at the forthcoming AGM to be held on 30 September 2020. The record date to determine which Shareholders will be eligible to attend and vote at the forthcoming AGM will be on 30 September 2020. The register of members of the Company will be closed from Friday, 25 September 2020 to Wednesday, 30 September 2020, both days inclusive, during which period no share transfers can be registered. All transfers accompanied by the relevant share certificate(s) must be lodged with the Company's Hong Kong Share Registrar, Computershare Hong Kong Investor Services Limited ("Computershare"), at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong not later than 4:30 p.m. on Thursday, 24 September 2020.

Subject to the Shareholders approving the recommended final dividend at the forthcoming AGM, such dividend will be payable on Friday, 23 October 2020 to Shareholders whose names appear on the register of members on Tuesday, 13 October 2020. To determine eligibility for the final dividend, the register of members will be closed from Thursday, 8 October 2020 to Tuesday, 13 October 2020, both days inclusive, during which period no share transfers can be registered. In order to be entitled to receive the final dividend, all transfers accompanied by the relevant share certificate(s) must be lodged with Computershare, not later than 4:30 p.m. on Wednesday, 7 October 2020.

The final dividend will be paid after retention of the appropriate withholding tax under Luxembourg Laws. In the circular containing the notice convening the AGM, Shareholders will be provided with detailed information about procedures for reclaiming all or part of the withholding tax in accordance with the provisions of the double tax treaty between Luxembourg and Hong Kong.

FIVE YEARS FINANCIAL SUMMARY

The five years financial summary of the Group is set out on page 192 of this Annual Report.

DISTRIBUTABLE RESERVES

As at 31 March 2020, the Company's reserves available for distribution to Shareholders in accordance with the Articles of Association as adopted on 15 April 2010 and last amended on 30 September 2014 amounted to approximately €704,501,388.

DONATIONS

Charitable and other donations made by the Group during FY2020 amounted to around €1,700,000, including the product costs of the hand sanitizers and hygiene products donated to health workers, organizations and hospitals during the COVID-19 pandemic.

PRE-EMPTIVE RIGHTS

There is no provision for pre-emptive rights under the Articles of Association or the laws of the Grand-Duchy of Luxembourg.

PURCHASE, SALE OR REDEMPTION OF SECURITIES

During FY2020, the Company transferred out of treasury a total of 680,350 Shares held in treasury pursuant to the employees' free share plan of the Company. The Company held 15,232,370 shares in treasury on 31 March 2020. Save as disclosed above, neither the Company nor its subsidiaries has purchased, redeemed or sold any of the Company's listed securities during FY2020.

On 4 October 2013, the Hong Kong Stock Exchange granted a conditional waiver (the "Waiver") to the Company in respect of Rule 10.06(5) of the Listing Rules to allow it, following any repurchase of Shares, to elect to hold its own Shares in treasury instead of automatically cancelling such Shares. As a consequence of such Waiver, the Hong Kong Stock Exchange has agreed certain consequential modifications to other Listing Rules applicable to the Company.

Shares held in treasury may subsequently be sold for cash, transferred pursuant to an employees' share scheme or cancelled.

Full details of the Waiver and the conditions attached thereto were set out in the announcement issued by the Company on 4 November 2013 and can be found on the Company's website at group.loccitane.com and on the Hong Kong Stock Exchange's website at www.hkexnews.hk.

SUBSIDIARIES

Details of the Company's principal subsidiaries as at 31 March 2020 are set out in note 35 to the consolidated financial statements.

DIRECTORS

The Directors of the Company during FY2020 and up to the date of this Annual Report were:

Executive Directors

Mr. Reinold Geiger

(Chairman and Chief Executive Officer) (appointed on 22 December 2000) Mr. André Hoffmann

(appointed on 2 May 2001 and further appointed as Vice-Chairman on 19 April 2016)

Mr. Silvain Desjonquères (appointed on 26 September 2018) Mr. Thomas Levilion

(appointed on 30 September 2008) Mr. Karl Guénard

(appointed on 30 June 2003 as Non-Executive Director and designated as Executive Director

on 1 September 2013)

Non-Executive Director

Mr. Martial Lopez

(appointed on 22 December 2000 and designated as Non-Executive Director on 30 September 2009)

Independent Non-executive Directors

Mrs. Valérie Bernis

(appointed on 28 November 2012) Mr. Charles Mark Broadley (appointed on 30 September 2008) Mr. Pierre Milet

(appointed on 29 January 2013) Mr. Jackson Chik Sum Ng (appointed on 25 January 2010)

In accordance with code provision A.4.2 as set out in Appendix 14 to the Listing Rules, every Director, including those appointed for a specific term, should be subject to retirement by rotation at least once every three years. In addition, all Directors appointed to fill a casual vacancy should be subject to election by Shareholders at the first general meeting after their appointment. In accordance with Article 10.1 of the Articles of Association, the Directors shall be elected by the Shareholders at a general meeting, which shall determine their number and term of office. The term of office of a Director shall be not more than three years, upon the expiry of which each shall be eligible for re- election.

BIOGRAPHICAL INFORMATION OF DIRECTORS

Brief biographical information of the Directors are set out in the "Directors and Senior Management" section on pages 54 to 59 of this Annual Report.

DIRECTORS' SERVICE CONTRACTS

None of the Directors has or is proposed to have a service contract with any member of the Group (other than contracts expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation)).

DIRECTORS' INTERESTS IN

COMPETING BUSINESS

During the year, none of the Directors had any interests in a business which competes, either directly, or indirectly, with the business of the Company or the Group.

FY 20

20

Annual Report

FY 20

20

Annual Report

DIRECTORS' REPORT

ISSUED SHARES IN THE YEAR

Details of the Shares issued for the year ended 31 March 2020 are set out in note 18 to the consolidated financial statements.

SHARE OPTION PLANS

On 30 September 2010, a meeting of the Shareholders authorized the adoption of a share option plan (the "Share Option Plan 2010"), which expired and was terminated on 29 September 2013 and was replaced by another share option plan (the "Share Option Plan 2013") which was adopted on 25 September 2013. This Share Option Plan 2013 expired on 24 September 2016 and was replaced by another share option plan (the "Share Option Plan 2016") which was adopted on 28 September 2016.

The purpose of the Share Option Plan 2016 is to provide employees of the Group, all its Directors (including non- executive Directors) and Shareholders (together, the "Eligible Persons") with an opportunity to have a proprietary interest in the Company through being granted share options under the Share Option Plan 2016 rules (the "Options"), which will motivate the Eligible Persons to optimize their performance, effectiveness and efficiency for the benefit of the Group and attract and retain or otherwise maintain ongoing business relationships with those Eligible Persons whose contributions are or will be beneficial to the long-term growth of the Group. The maximum number of Shares in respect of which Options may be granted under the Share Option Plan 2016 shall not exceed 29,291,184 shares, being 2% of the Company's issued share capital (excluding shares held in treasury) as at 30 September 2016.

As at 31 March 2020, the total number of shares granted under the Share Option Plan 2016 was 18,000,100, leaving a balance of 11,291,084 Options representing 0.76% of the issued Shares as at date of this Annual Report. No share options were granted under the Share Option Plan 2016 during this year and the Share Option Plan 2016 expired on 27 September 2019.

Under the Share Option Plan 2016, the total number of Shares to be issued upon exercise of the Options granted to each participant in any 12-month period must not exceed 1% of the Shares in issue. The exercise price shall be at a price determined by the Board at its absolute discretion and shall be no less than the higher of:

1. the closing price of the Shares as stated in the daily quotation sheets issued by the Stock Exchange on the offer date;
2. the average closing price of the Shares as stated in the daily quotation sheets issued by the Stock Exchange for the five business days immediately preceding the offer date; and
3. the nominal value of a Share on the date of grant.

The Board considers that it is not appropriate to state the value of all Options that can be granted pursuant to the Share Option Plan 2016 as a number of variables which are crucial for the calculation of the Option value have not been determined. Such variables include but are not limited to the exercise price, vesting period, exercise period and the conditions that an Option is subject to. The Board believes that any calculation of the value of the Options based on a number of speculative assumptions would not be meaningful and would be misleading to the Shareholders.

FY 20

20

Annual Report

FREE SHARE PLAN

On 30 September 2010, a meeting of the Shareholders authorized the adoption of a free share plan (the "Free Share Plan 2010"), which expired and was terminated on 29 September 2013 and replaced by another free share plan (the "Free Share Plan 2013") which was adopted on 25 September 2013. This Free Share Plan 2013 expired on 24 September 2016 and was replaced by another free share plan (the "Free Share Plan 2016") which was adopted on 28 September 2016. In view of the balance of free shares available under the free share Plan 2016, the Shareholders approved the adoption of a free share plan (the "Free Share Plan 2018") at the annual general meeting of the Company on 26 September 2018. Upon the approval of the Free Share Plan 2018, no further free shares would be granted under the Free Share Plan 2016. The purpose of the Free Share Plan 2018 is to provide employees of the Group (the "Employees") with an opportunity to have a proprietary interest in the Company through being granted free shares under the rules of the Free Share Plan 2018 (the "Free Shares"), which will motivate the relevant Employees to optimize their performance, effectiveness and efficiency for the benefit of the Group and attract and retain or otherwise maintain ongoing business relationships with those Employees whose contributions are or will be beneficial to the long- term growth of the Group. The maximum number of Free Shares that may be granted under the Free Share Plan 2018 shall not exceed 7,303,412 shares, being 0.5% of the Company's issued share capital (excluding shares held in treasury) as at 26 September 2018.

On 4 December 2013, the Company granted 887,500 Free Shares pursuant to the Free Share Plan 2013 to certain eligible Employees (as defined in the rules of the Free Share Plan 2013). The Free Shares were vested on 4 December 2017.

On 24 February 2015, the Company granted 840,900 Free Shares pursuant to the Free Share Plan 2013 to certain eligible Employees (as defined in the rules of the Free Share Plan 2013). The Free Shares were vested on 24 February 2019.

On 23 March 2016, the Company granted 921,400 Free Shares pursuant to the Free Share Plan 2013 to certain eligible Employees (as defined in the rules of the Free Share Plan 2013). The Free Shares were vested on 24 March 2020.

On 29 March 2018, the Company granted 5,559,500 Free Shares pursuant to the Free Share Plan 2016 to certain eligible Employees (as defined in the rules of the Free Share Plan 2016). The Free Shares will vest on 29 March 2022.

None of the Free Shares had been granted under the Free Share Plan 2018 as at 31 March 2020.

TREASURY SHARES

On 4 October 2013, the Hong Kong Stock Exchange granted a conditional waiver (the "Waiver") to the Company in respect of Rule 10.06(5) of the Listing Rules to allow it, following any repurchase of shares, to elect to hold its own shares in treasury instead of automatically cancelling such shares. As a consequence of the Waiver, the Hong Kong Stock Exchange has agreed certain consequential modifications to other Listing Rules applicable to the Company.

Shares held in treasury may subsequently be sold for cash, transferred pursuant to an employees' share scheme or cancelled.

Full details of the Waiver and the conditions attached thereto are set out in the announcement issued by the Company on 4 November 2013 and can be found on the Company's website at group.loccitane.com and on the H o n g K o n g S t o c k E x c h a n g e ' s w e b s i t e a t www.hkexnews.hk.

The Company confirmed that during the year ended 31 March 2020, the Company was in compliance with the conditions of the Waiver.

The Company holds as at 31 March 2020, 15,232,370 ordinary shares as treasury shares, and the total number of ordinary shares in issue (excluding shares held as treasury shares) is 1,461,732,521.

DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBT SECURITIES

Other than as disclosed in the paragraphs headed

"DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS IN SHARES AND UNDERLYING SHARES" and "SHARE OPTION PLANS" in this Annual Report, at no time during the year was the Company or any of its subsidiaries a party to any arrangement to enable the Directors or chief executive of the Company (including their spouses or children under 18 years of age) to have any right to subscribe for securities of the Company or any of its associated corporations as defined in the SFO or to acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS' INTERESTS IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS OF SIGNIFICANCE

At the end of the year or at any time during FY2020, there was no transaction, arrangement or contract of significance in relation to the Company's business, to which the Company or any of its subsidiaries was a party, and in which a Director had, whether directly or indirectly, a material interest.

MANAGEMENT CONTRACTS

N o c o n t r a c t c o n c e r n i n g t h e m a n a g e m e n t a n d administration of the whole or any substantial part of the business of the Company was entered into or existed during the year ended 31 March 2020 and up to the date of this Annual Report.

PERMITTED INDEMNITY PROVISION

The Articles of Association provide that all Directors and officers of the Company shall be indemnified and secured harmless out of the assets and profits of the Company from and against all actions, costs, charges, losses, damages and expenses which they shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty. Directors' and officers' liability insurance is arranged to cover the Directors and officers of the Company and its subsidiaries against any potential costs and liabilities arising from claims brought against them.

EQUITY-LINKED AGREEMENTS

Save as disclosed in the Directors' Report regarding the grant of Share Options and Free Shares during the year ended 31 March 2020, the Company has not entered into any other equity-linked agreement.

CONNECTED TRANSACTIONS

The Company has entered into certain contracts with its connected persons (as defined under Chapter 14A of the Listing Rules). These transactions were monitored and managed by the Company in accordance with the Listing Rules.

During the year, the Group had the following non-exempted continuing connected transactions with Patisseries Paris Saint-Sulpice P2S2 ("P2S2"):

(1) Sublease agreement

On 26 July 2017, the Group (as sub-lessor) entered into a sub-lease agreement with P2S2 for an initial period of 3 years from 1 August 2017 to 20 July 2020. Rentals for the property subleasing were determined after arm's length negotiations between the parties with reference to the prevailing market rent for comparable premises. The Group recharged rentals of €1,673,000 for the year ended 31 March 2020.

(2) Paris supply and distribution agreement

On 8 December 2017, the Group (as purchaser) entered into a supply and distribution agreement with P2S2 for the Champs-Elysées shop in Paris, France for an initial period from 7 December 2017 to 20 July 2020. P2S2 shall supply Pierre Hermé products to the Champs-Elysées shop of the Group. The parties also agreed to reimburse each other for certain expenses relating to the operation of the shop. For the year ended 31 March 2020, P2S2 invoiced the Group €1,954,000 for supply of Pierre Hermé products, €1,599,000 for services related to sales of products. The Group also invoiced P2S2 €522,000 for reimbursement of fees and charges.

1. London supply and distribution agreement

On 8 December 2017, the Group (as purchaser) entered into a supply and distribution agreement with P2S2 for the Regent Street shop in London, UK for an initial period from 15 December 2017 to 14 December 2020. For the year ended 31 March 2020, P2S2 issued credit note of €8,000 to the Group for the net return of Pierre Hermé products. The agreement was terminated during FY2020.

P2S2 is a wholly-owned subsidiary of Pierre Hermé, which is indirectly owned as to 40% by LOG, the controlling shareholder of the Company. Mr. Reinold Geiger, the Chairman of the Company, being the ultimate shareholder of LOG, is then considered to have material interest in the above mentioned continuing connected transactions by virtue of his deemed interests in P2S2.

The pricing and the terms of the above transactions have been determined in accordance with pricing policies and guidelines as set out in the respective announcements. Proper internal control procedures are in place to identify, approve and record all these transactions. The Independent Non-executive Directors have reviewed all the above continuing connected transactions and confirmed that the transactions have been entered into:

1. in the ordinary and usual course of business of the Group;
2. either on normal commercial terms or, on terms no less favourable to the Group than terms available to or from independent third parties; and
3. in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole.

Pursuant to rule 14A.56 of the Listing Rules, the Board of Directors engaged the Company's auditor to perform certain procedures in respect of the continuing connected transactions set out above in accordance with Hong Kong Standard on Assurance Engagements 3000 "Assurance Engagements Other than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 "Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public Accountants. The auditor has, based on the procedures performed, issued an unqualified letter containing his findings and conclusions in respect of the continuing connected transactions to the Board of Directors. Save as disclosed above, none of the transactions disclosed as related party transactions in Note 32 to the consolidated financial statements is a connected transaction or a continuing connected transaction which is subject to the reporting and disclosure requirements under the Listing Rules. The Company has complied with the disclosure requirements governing connected transactions under the Listing Rules.

BANK LOANS AND OTHER

BORROWINGS

Details of the Group's bank loans and other borrowings as at 31 March 2020 are set out in note 19 to the consolidated financial statements.

MAJOR CUSTOMERS AND SUPPLIERS

The nature of the Group's activities is that the percentage of sales or purchases attributable to the Group's five largest customers or suppliers is significantly less than 30% of the total and the Directors do not consider any one customer or supplier to be influential to the Group.

RETIREMENT BENEFIT SCHEMES

Details of the retirement benefit schemes of the Group are set out in note 20 to the consolidated financial statements.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as the code of conduct for dealing in the securities of the Company by the Directors. Having made specific enquiry to all Directors, they have confirmed that they had complied with the required standard of the Model Code throughout the Review Period.

CORPORATE GOVERNANCE REPORT

The Corporate Governance Report is set out on pages 36 to 51 of this Annual Report.

CONTINGENT LIABILITIES

Details of contingent liabilities are set out in notes 30.2 to the consolidated financial statements.

POST BALANCE SHEET EVENTS

Details of significant events occurring after the balance sheet date are set out in note 34 to the consolidated financial statements.

SUFFICIENCY OF PUBLIC FLOAT

Based on the information that is publicly available to the Company and within the knowledge of the Directors at the date of this Annual Report, there was a sufficient prescribed public float of more than 25% of the issued share capital of the Company under the Listing Rules during the Review Period.

AUDITOR

T h e f i n a n c i a l s t a t e m e n t s w e r e a u d i t e d b y PricewaterhouseCoopers who will retire as auditor of the Company at the conclusion of the forthcoming AGM and being eligible, offer themselves for re-appointment. A r e s o l u t i o n f o r t h e r e - a p p o i n t m e n t o f PricewaterhouseCoopers as auditor of the Company will be proposed at the forthcoming AGM.

HUMAN RESOURCES

As at 31 March 2020, the Group had 9,347 employees (31 March 2019: 8,601 employees).

The Group ensures that all levels of employees are paid competitively and are rewarded in accordance with the Group's salary, incentive and bonus schemes. Options and Free Shares may also be offered to eligible employees. Training schemes are available where appropriate.

By order of the Board

Reinold Geiger

Chairman

29 June 2020

Key audit matter

Revenue recognition

For the year ended 31 March 2020, the Group has revenue of €1,644 million.

As described in the note 2.22, sales of goods to the customers are recognised when control of the product has transferred.

The revenue is recognized as follows:

1. Sales of goods - retail (Sell-out channel): comprises the sales of the products directly to the final customers mainly through a worldwide network of stores and Group's website. Sell-out accounted for approximately 69.2% of the total revenue. The revenue is recognized when the Group sells a product to the customer at the store.
   We focused on this area due to the risks arising from the large volume of transactions generated from the sale of different products to a significant number of customers that take place in many different locations. This area required significant audit attention to test the occurrence and accuracy of this kind of transactions.
2. Sales of goods - wholesalers and distributors (Sell-in channel): comprises the sales of the products to an intermediate (mainly distributors, wholesalers, TV show channels and travel retailers). This channel also comprises sales of products to corporate customers and the sales of the Group's products to an intermediate who will provide them as free amenities to its final customers. The revenue is recognized when control of the products is transferred, being when the products are delivered to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler's acceptance of the products.
   We focused on this area due to the risk of revenue being recognised inappropriately close to the year-end.

How our audit addressed the Key audit matter

W e a s s e s s e d a n d t e s t e d t h e e f f e c t i v e n e s s o f management's controls in respect of the Group's sales transactions. In addition, we tested the general IT control environment and related automated control of the Group's systems.

We assessed the compliance of the Group's revenue recognition policies with IFRS and tested the application of those policies.

We tested the different revenue streams as follows:

For retail sales, our procedures included:

1. Reconciliation between the revenue recorded in the point-of-sale system and the general ledger;
2. Reconciliation between the revenue recorded and cash collection;
3. Test the number and the fair value of award credits recognized in deferred revenue.

For wholesalers and distributors sales, our procedures included:

1. Testing of the relevant supporting documents (sales order, bill of lading, invoice and/or payments) for a sample of revenue transactions covering different clients;
2. Confirmation of a sample of client's outstanding invoices at the balance sheet date;
3. Testing to assess whether revenue was recognised in the correct reporting period. We tested recognition of revenue based on the transfer of control to the intermediaries and the accounting period in which products were delivered by reconciling a sample of revenue items to contract and shipping documents;
4. Reviewing management's estimate related to the loyalty program's redemption rate.

(Continued)

Key audit matters (continued)

Key audit matter

Revenue recognition (continued)

Customer loyalty programs are used by the Group to provide customers with incentives to buy their products. Each time a customer buys goods, or performs another qualifying act, the Group grants the customer award credits. The Group accounts for award credits as a separately identifiable component of the sales transactions, as deferred revenue. The Group then recognizes revenue in respect of the award credits in the periods which awards credits are redeemed.

We focused on this area due to the risk arising from the volume of award credits generated in different locations and from the management estimates about the total number of award credits expected to be redeemed.

Assessment of impairment on non-current assets and goodwill

As at 31 March 2020, the Group had goodwill of €761.9 million, intangible assets of €341.6 million (including trademarks for €275.6 million), right-of-use assets of €429.5 million and leasehold improvements for €54.7 million in property, plant and equipment as at 31 March 2020.

As mentioned in the note 2.8.a) and note 2.4., due to the recent business combinations with Elemis and LimeLife, the Group has modified its internal reporting in order to assess performance and allocate resources from a brand perspective. As a consequence, management decided to allocate goodwill and trademarks to cash generating units (CGU) corresponding to operating segments, except for the historical goodwill arising from the acquisition of L'Occitane distributors in certain countries.

Management performed an annual review of the CGU to which goodwill and other non-current assets are allocated to assess that their carrying value does not exceed its recoverable amount. The recoverable amount is determined based on expected future cash flow projections.

How our audit addressed the Key audit matter

1. We assessed the accuracy of the allocation of goodwill and trademarks to their respective CGU;
2. We assessed the compliance of the impairment testing methodology adopted by the Group with prevailing accounting standards;
3. We assessed the Group's process and controls by which the projections were drawn up and compared the underlying inputs to the latest plan approved by
   Management;
4. We tested the accuracy of assets included in the carrying amount of the CGU to which the goodwill and trademarks have been allocated;
5. We reviewed the consistency of cash flow projections with management's assumptions and the economics environment in which the Group operates. We have notably evaluated the impact of COVID-19 considered by the management in the assumptions for the next fiscal year and the reasonableness of the estimate;

(Continued)

Key audit matters (continued)

Key audit matter

Assessment of impairment on non-current assets and goodwill (continued)

We considered the valuation of those specific assets to be a key audit matter as they required significant audit attention due to the their size but also because the Group's assessment of the recoverable amounts is usually based on the future performance of the business (e.g. forecasted sales based on stores' location, COVID-19 impact on future cash-flows, expectations of market developments) and the discount rates applied to the future cash flow forecast which involves significant management assumptions, judgments and estimates as detailed in the note 4 to the consolidated financial statements.

How our audit addressed the Key audit matter

1. We assessed the reasonability of the growth rates used for projected cash flows with available external analyses and/or the historical growth rates in net sales;
2. We assessed, with the assistance of our valuation experts:
3. • the consistency of the long-term growth rates and;
   • the reasonableness of post-tax discount rates applied to projected cash flows.
4. We compared the projected cash flows of previous business plans with the actual results to assess the reasonableness of the assumptions;
5. We assessed management's sensitivity analysis with respect to variations of key assumptions adopted, to evaluate the extent to which reasonably possible changes, both individually and in aggregate, would impact outcomes of the impairment assessment;
6. We assessed the appropriateness of information disclosed in the consolidated financial statements.

(Continued)

Key audit matters (continued)

Key audit matter

Initial application of IFRS 16 Leases

As described in note 2.1. to the consolidated financial statements, the Group adopted IFRS 16 retrospectively from 1 April 2019 but has not restated comparatives for the prior year reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and adjustments arising from the new leasing rules have therefore been recognised in the opening balance sheet on 1 April 2019.

As at 1 April 2019, the initial application of this standard led to the recognition of:

• Right-of-use assets with a carrying amount of €485.1 million within "Other non-current assets";
• Lease liabilities totalling €466.5 million, including €106.8 million in current lease liabilities.

As at 31 March 2020, as described in the note 8 to the consolidated financial statements, the right-of-use assets mainly relate to stores leases.

We consider the initial application of IFRS 16 Leases as a key audit matter, given the significant importance of the amounts involved, the volume of existing contracts and the degree to which their value is determined based on management's judgment and estimates, in particular concerning the assumptions used for lease terms and discount rates.

How our audit addressed the Key audit matter

With the support of our local audit teams and our specialists:

1. We assessed the appropriateness of the methods used by the Group to identify and record contracts containing a lease and to determine the main assumptions, in particular those related to the lease terms and discount rates applicable to lease liabilities;
2. We tested the effectiveness of the key controls that we considered most relevant regarding the information systems and processes put in place by the Group;
3. We assessed the accuracy and completeness of the lease data included in the calculation by comparing the scope of the leases with the operating leases identified under the old standard, by assessing the residual lease expenses and by agreeing a sample of leases to the underlying contracts;
4. We assessed the appropriateness/compliance of the approach to transition with specific focus on the practical expedients chosen;

(e) W e a s s e s s e d t h e a p p r o p r i a t e n e s s o f t h e assumptions used by Management to determine the residual lease duration;

1. We assessed the appropriateness and completeness of the disclosure required by IFRS 16 as included in the notes to the consolidated financial statements, including information on the initial application.