www.lvmh.com Tel. +331441322-Fax: 33144132119 LVMH, 22avenueMontaigne-75008 Paris

LVMH 2007 TRANSLATION OFTHEFRENCH DOCUMENT DEREFERENCE FISCAL YEARENDED DECEMBER 31,2007

WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 CONTENTS

LVMH GROUP 1

HISTORY OF THE GROUP 1

FINANCIAL HIGHLIGHTS 2

SIMPLIFIED ORGANIZATIONAL CHART OF THE GROUP AS OF MARCH 31, 2008 4

BUSINESS DESCRIPTION 8

REPORT OF THE BOARD OF DIRECTORS ON GROUP MANAGEMENT 21

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON INTERNAL CONTROL PROCEDURES 65

CONSOLIDATED FINANCIAL STATEMENTS 75

LVMH MOËT HENNESSY ◆ LOUIS VUITTON SA 135

EXECUTIVE AND SUPERVISORY BODIES - STATUTORY AUDITORS 135

CORPORATE GOVERNANCE 151

GENERAL INFORMATION REGARDING THE PARENT COMPANY AND ITS CAPITAL; 167 STOCK MARKET INFORMATION

REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS’ MEETING 177

STOCK REPURCHASE PROGRAMS 191

PARENT COMPANY FINANCIAL STATEMENTS 195

RESOLUTIONS PRESENTED FOR THE APPROVAL OF THE COMBINED SHAREHOLDERS’ MEETING OF MAY 15, 2008 219

STATEMENT OF RESPONSIBLE COMPANY OFFICER; 229 FINANCIAL INFORMATION

TABLE S OF CONCORDANCE 233

The original French version of this document was submitted to the Autorité des Marchés Financiers on April 14 , 2008 pursuant to Articles 212-13 of its General Rules and Regulations. This document is a free translation into English of the original French “Document de Référence”, hereafter referred to as the “Reference Document”. It is not a binding document. In the event of a The original French version of this document may be used for the purposes of public capital and financial operations conflict in interpretation, reference should be made to the French version, which is the authentic text. if it is supplemented by a transaction note approved by the Autorité des Marchés Financiers. WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP History of the Group

HISTORY OF THE GROUP

Although the history of the LVMH Group began in 1987 with From the 16th century to the present: the merger of Moët Hennessy and Louis Vuitton, the roots of the Group actually stretch back much further—to eighteenth-century 16th century 1573 Wen Jun Champagne, when a man named Claude Moët decided to build 1593 Château d’Yquem on the work of Dom Pérignon, a contemporary of Louis XIV; and 18th century 1729 Ruinart to nineteenth-century Paris, famous for its imperial celebrations, 1743 Moët & Chandon where Louis Vuitton, a craftsman trunk-maker, invented modern 1765 Hennessy luggage. Today, the LVMH Group is the world’s leading luxury 1772 Veuve Clicquot goods company, the result of successive alliances among companies 1780 Chaumet that, from generation to generation, have successfully combined 19th century 1815 Ardbeg traditions of excellence and creative passion with a cosmopolitan 1828 Guerlain flair and a spirit of conquest. These companies now form a 1843 Krug powerful, global group in which the historic companies share 1846 Loewe 1852 Le Bon Marché their expertise with the newer brands, and continue to cultivate 1854 Louis Vuitton the art of growing while transcending time, without losing their 1858 Mercier soul or their image of distinction. 1860 TAG Heuer 1865 Zenith 1870 La Samaritaine 1893 Glenmorangie 1895 Berluti 1897 Glen Moray 20th century 1916 Acqua di Parma 1925 Fendi 1936 Dom Pérignon Fred 1942 Rossimoda 1945 Celine 1947 Parfums Christian Dior Emilio Pucci 1952 Givenchy 1957 Parfums Givenchy 1960 DFS 1963 Miami Cruiseline 1970 Kenzo 1973 Sephora Domaine Chandon 1976 Cape Mentelle 1977 Newton 1984 Thomas Pink Marc Jacobs Donna Karan 1985 Cloudy Bay 1987 Parfums Kenzo 1989 Make Up For Ever 1991 Fresh StefanoBi 1993 Chopin 1995 BeneFit Cosmetics 1996 Belvedere 1999 Terrazas de los Andes 21st century 2000 e.Luxury 2001 De Beers 2003 Cheval des Andes 2005 10 Cane

Reference Document 2007 1 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Financial highlights

FINANCIAL HIGHLIGHTS

Key consolidated data

(EUR millions and percentage) 2007 2006 2005

Revenue 16,481 15,306 13,910 Profit from recurring operations 3,555 3,172 2,743 Net profit 2,331 2,160 1,668 Group share of net profit 2,025 1,879 1,440 Cash from operations before changes in working capital 4,039 3,504 3,089 Operating investments 990 771 707 Total equity 12,528 11,594 10,484 Net financial debt/Total equity ratio 25% 29% 41%

Data per share

(EUR) 2007 2006 2005 Earnings per share Basic Group share of net profit 4.27 3.98 3.06 Diluted Group share of net profit 4.22 3.94 3.04

Dividend per share Interim 0.35 0.30 0.25 Final 1.25 1.10 0.90 Total gross amount (1) 1.60 1.40 1.15 (1) For fiscal year 2007, amount proposed at the Ordinary Shareholders’ Meeting of May 15, 2008.

Information by business group

(EUR millions) 2007 2006 2005 Revenue by business group Wines and Spirits 3,226 2,994 2,644 Fashion and Leather Goods 5,628 5,222 4,812 Perfumes and Cosmetics 2,731 2,519 2,285 Watches and Jewelry 833 737 585 Selective Retailing 4,179 3,891 3,648 Other activities and eliminations (116) (57) (64) Total 16,481 15,306 13,910

Profit from recurring operations by business group Wines and Spirits 1,058 962 869 Fashion and Leather Goods 1,829 1,633 1,467 Perfumes and Cosmetics 256 222 173 Watches and Jewelry 141 80 21 Selective Retailing 439 400 347 Other activities and eliminations (168) (125) (134) Total 3,555 3,172 2,743

2 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Financial highlights

Information by geographic region

2007 2006 2005

Revenue by geographic region of delivery (%) France 14 15 15 Europe (excluding France) 23 22 20 United States 25 26 27 Japan 11 13 14 Asia (excluding Japan) 19 17 17 Other markets 8 77 Total 100 100 100

Revenue by invoicing currency (%) Euro 31 30 30 US dollar 30 32 32 Yen 11 13 15 Hong Kong dollar 4 33 Other currencies 24 22 20 Total 100 100 100

Number of stores France 306 288 278 Europe (excluding France) 523 456 422 United States 463 394 365 Japan 253 278 262 Asia (excluding Japan) 409 363 329 Other markets 94 80 67 Total 2,048 1,859 1,723

Reference Document 2007 3 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Simplified organizational chart of the Group as of March 31, 2008

SIMPLIFIED ORGANIZATIONAL CHART OF THE GROUP AS OF MARCH 31, 2008

BLC>I7 9^V\Zd

34%

66% 99.9%

BLC><7I>?ED Ce†j>[dd[iio>ebZ_d]i =HEKFI7

100% 100%

Bd i8]VcYdc 100% 99% 100% 100% 100% EVg[jbh =ZccZhhn Adj^hKj^iidc

100% 100%

100% 100% EVg[jbh 100% 100% Gj^cVgi B^aaZc^jb 7Zgaji^ 8]VjbZi ;gVcX`;^ah @Zcod

99% 100% 100% EVg[jbh 100% @gj\

100% 55% LZc?jc 100% BV`ZJe 100% 100% KZjkZ8a^Xfjdi @Zcod HZe]dgV:jgdeZ He^g^ih ;dg:kZg

100% 100% EVg[jbh 100% 55% 8adjYn7Vn <^kZcX]n AVHVbVg^iV^cZ ;ZcY^

90% CZlidc EVg[jbh 100% K^cZnVgYh EjXX^

100% 8VeZBZciZaaZ

4 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Simplified organizational chart of the Group as of March 31, 2008

100%

IE

100% 100% 100% 100%

Ej^[h^ebZ_d] BLC>8L BLC>?D9 :?=HEKFI7 YecfWd_[i

100% 100% 7ZcZ;^i 80% 100% B^Vb^ 100% 8]}iZVj 65% OZc^i] AdZlZ AZhwX]dh 8dhbZi^Xh 8gj^hZa^cZ YÉNfjZb

99% 100% 80% 61% 100% AV7gdhhZ 99% IV\=ZjZg ;ZcY^ ;gZh] 9;HJH >ckZhi^g 9jedci

50% 100% 100% 100% 9Z7ZZgh HZe]dgVJH GVY^d8aVhh^fjZ I]dbVhE^c`

96% 100% 100% 100% EjXX^ 9dccV@VgVc Z#Ajmjgn H>9:Y^i^dch

61% 96% 8dccV^hhVcXZ 100% 9;H6h^V BVgX?VXdWh YZh6gih

100% 6XfjV9^EVgbV

The objective of this chart is to present the direct and/or indirect control structure of brands and trade names by the Group’s main holding companies. It does not provide a complete presentation of all Group shareholdings.

7jh^cZhh >ebZ_d] jc^ih YecfWd_[i

Reference Document 2007 5 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 6 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP

BUSINESS DESCRIPTION

Page

1. WINES AND SPIRITS 8 1.1 CHAMPAGNE AND WINES 8 1.2 COGNAC AND SPIRITS 10 1.3 WINES AND SPIRITS DISTRIBUTION 12

2. FASHION AND LEATHER GOODS 12 2.1 THE BRANDS OF THE FASHION AND LEATHER GOODS BUSINESS GROUP 13 2.2 DESIGN 13 2.3 DISTRIBUTION 14 2.4 SUPPLY SOURCES AND SUBCONTRACTING 14

3. PERFUMES AND COSMETICS 14 3.1 THE BRANDS OF THE PERFUMES AND COSMETICS BUSINESS GROUP 14 3.2 RESEARCH IN PERFUMES AND COSMETICS 15 3.3 SUPPLY SOURCES AND SUBCONTRACTING 16

4. WATCHES AND JEWELRY 17 4.1 THE BRANDS OF THE WATCHES AND JEWELRY BUSINESS GROUP 17 4.2 SUPPLY SOURCES AND SUBCONTRACTING 18

5. SELECTIVE RETAILING 18 5.1 TRAVEL RETAIL 18 5.2 SELECTIVE RETAIL 19

6. OTHER ACTIVITIES 19

Reference Document 2007 7 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description

BUSINESS DESCRIPTION

1. WINES AND SPIRITS exporter of Champagne, and Veuve Clicquot Ponsardin (founded in 1772), which ranks second in the industry, are two quality internationally-known brands. Mercier (founded in 1858) is a The activities of LVMH in the w ines and s pirits sector are divided brand designed for the French market. Ruinart (the oldest of the between two branches: the Champagne and Wines branch and the Champagne Houses, founded in 1729) has a development strategy Cognac and Spirits branch. The Group’s strategy is focused on the that is carefully targeted on a number of priority markets, which are high-end segments of the global wine and spirits market. currently mainly in Europe. Krug (founded in 1843 and acquired In 2007, revenue for the Wines and Spirits business group by LVMH in January 1999) is a world famous brand, specializing amounted to 3,226 million euros, or 19.5% of LVMH Group’s exclusively in high-end vintages. total revenue. The Chandon brand (created in 1960 in Argentina) includes the Moët Hennessy wines developed in California, Argentina, Brazil 1.1 Champagne and Wines and Australia by Chandon Estates. In 2007, revenue for the Champagne and Wines activities was The Group also owns a number of prestigious wines from the 1,802 million euros (86% for champagne), representing 56% New World: Cape Mentelle and Green Point in Australia, of the total revenue of the LVMH Wines and Spirits business group. Cloudy Bay in New Zealand, and Newton in California.

1.1.1 The champagne and wine brands Château d’Yquem, which joined LVMH in 1999, is the most prestigious of the Sauternes. It owes its excellent international LVMH produces and sells a very broad range of high quality reputation to its 110 hectare vineyard located on a mosaic of Champagne wines. In addition to Champagne, the Group develops exceptional soils and to the extreme care taken in its preparation and distributes a range of high-end still and sparkling wines from throughout the year. well-known wine regions: France, California, Argentina, Brazil, Australia and New Zealand. The wines developed by Moët 1.1.2 Competitive position Hennessy are held within the Estates & Wines entity. In 2007, shipments of LVMH Champagne brands rose in volume LVMH represents the leading portfolio of Champagne brands, by 1.7% while shipments from the Champagne region were up which hold complementary market positions. Dom Pérignon is 5.3%. Thus, the market share of the LVMH brands was 18.6% of a prestigious vintage produced by Moët & Chandon since 1936. the total shipments from the region, compared to 19.3% in 2006 Moët & Chandon (founded in 1743), the leading wine grower and (source: CIVC).

The leading geographic markets for champagne, for the region and for LVMH, are as follows (based on shipments in millions of bottles):

(million bottles and percentage) 2007 2006 2005

Volumes LVMH Volumes LVMH Volumes LVMH market market market Region LVMH share Region LVMHshare Region LVMH share (%) (%) (%) Germany 12.9 3.2 24.9 12.3 3.3 26.5 12.0 3.0 25.0 Great Britain 39.0 7.7 19.8 36.8 8.1 21.9 36.8 7.7 21.0 United States 21.7 12.4 57.3 23.2 13.5 58.4 20.7 12.1 58.3 Italy 10.3 4.3 42.0 9.3 4.6 49.3 8.8 4.5 50.8 France 187.8 10.8 5.8 181.0 10.6 5.9 178.1 10.2 5.7 (S ource: Comité Interprofessionnel des Vins de Champagne – CIVC)

8 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description

The geographic breakdown of LVMH champagne shipments is as 1.1.4 Grape supply sources and subcontracting follows (as a percentage of total shipments expressed in number The Group owns 1,671 hectares of champagne under production, of bottles): which provide a little more than one-fourth of its annual needs. (percentage) 2007 2006 2005 In addition, the Group companies purchase grapes and wines Germany 5 55from wine growers and cooperatives on the basis of multi-year agreements ; the largest supplier of grapes and wines represents less Great Britain 12 12 13 than 15% of total supplies for the Group’s brands. Until 1996, United States 20 20 21 a theoretical price was published by the industry; to this were Italy 7 88added specific premiums negotiated individually between the wine Switzerland 2 22growers and the merchants. After the first four-year agreement Japan 8 76signed in 1996, another industry agreement was signed between Other 29 28 26 the Companies and the wine growers of Champagne in the spring Total export 83 82 81 of 2000 covering the four harvests from 2000 through 2003, which France 17 18 19 confirmed the desire to limit upward or downward fluctuations in Total 100 100 100 grape prices. A new industry agreement was signed in the spring of 2004 by the Companies and the wine growers of Champagne 1.1.3 The champagne production method covering the five harvests from 2004 to 2008. This agreement sets new rules in order to ensure greater security for the payment to the The name Champagne covers a defined area classified A.O.C. wine growers and to achieve better control of price speculations. (Appellation d’origine contrôlée), which covers the 34,000 hectares that can be legally used for production. Only three types of For about ten years, the wine growers and the merchants have grape varietals are authorized for the production of champagne: established a qualitative reserve that will allow them to cope with chardonnay, pinot noir and pinot meunier. The preparation variable harvests. The surplus inventories “stockpiled” this way method used for wines produced outside the Champagne region, can be sold in years with a poor harvest. These wines “stockpiled” but using the winemaking techniques used for champagne, is in the qualitative reserve provide a certain security for future years called the “champenoise method.” with smaller harvests. In addition to its effervescence, the primary characteristic of For the 2007 harvest, the Institut National des Appellations champagne is that it is the result of blending wines from different d’Origine (INAO - French organization charged with regulating years and/or different varieties and harvests. The best brands are controlled place names) set the maximum yield for the Champagne distinguished by their masterful blend and constant quality which appellation at 12,400 kg/ha. This maximum yield represents the is achieved thanks to the talent of their wine experts. maximum harvest level that can be made into wine and sold under the Champagne appellation. In 2006, the INAO redefined the legal Weather conditions significantly influence the grape harvest from framework for the “stockpiled” reserves previously mentioned. It is one year to the next. The production of champagne also requires now possible to harvest grapes beyond the marketable yield within aging in cellars for two years or more for the “premium” vintages, the limits of a ceiling called “plafond limite de classement (PLC)”, which are the vintages sold at more than 110% of the average sale the highest permitted yield-per-hectare. This ceiling is determined price. To protect themselves against crop variations and manage every year within the limits of the maximum total yield now set at fluctuations in demand, but also to ensure constant quality over the 15,500 kg/ha. This additional harvest is stockpiled in reserve, kept years, the LVMH Champagne Houses have adjusted the quantities in vats and used to complement poorer harvests. The maximum available for sale and keep reserve wines in stock. Since a lower level of this stockpiled reserve is set at 8,000 kg/ha. harvest can impact sales for two or three years, or more, LVMH constantly maintains significant champagne inventories in its The 2007 harvest made it possible to reach the marketable ceiling cellars. Thanks to the last two harvests, the champagne brands of of 12,400 kg/ha and to supplement the stockpiled reserves within the LVMH Group today have inventory volumes in the quality the limits of the PLC set at 13,850 kg/ha for this harvest. The necessary to achieve measured growth in sales. As of December 31, release of 1,600 kg/ha in 2007 allowed us to maintain our inventory 2007 these inventories represented approximately 225 million ratios. The price paid for each kilogram of grapes in the 2007 bottles, the equivalent of three and a half years of sales; in addition, harvest ranged between 4.40 euros and 5.20 euros depending on there are also 5 million bottles of quality reserve held from sale. the vineyard, a 6% increase compared to 2006.

Reference Document 2007 9 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description

Dry materials (bottles, corks, etc.) and all other elements in 1910 and purchased by Millennium in 2001, when it was representing containers or packaging are purchased from privatized. In 1999, the company decided to develop flavored non-Group suppliers. vodkas. In 2007, as a result of an agreement with Belvedere The Champagne Houses used subcontractors primarily for bottle Winery, Moët Hennessy acquired the brand and Belvedere domain handling and storing operations; these operations represented name in the United States, becoming the owner of this luxury approximately 35 million euros. vodka brand worldwide. Following a friendly take-over bid finalized at the end of 1.2 Cognac and spirits December 2004, in January 2005, LVMH acquired 99% of the share capital of Glenmorangie plc, a British company listed in In 2007, revenue for the Cognac and Spirits segment totaled London, and the remaining capital in March 2005 as the result of 1,424 million euros, or 44% of the total revenue for the Wines a delisting procedure. The Glenmorangie group holds the single and Spirits business group. malt whisky brands Glenmorangie, Ardbeg and Glen Moray. 1.2.1 Cognac and spirits brands In the spring of 2005, LVMH launched a handcrafted luxury rum LVMH holds the most powerful brand in the cognac sector with in the American market, under the 10 Cane brand, which reflects Hennessy. The company was founded by Richard Hennessy in the expertise of Moët Hennessy at every stage of production. 1765. Historically, the leading markets for the brand were Ireland In May 2007, the Group acquired 55% of the share capital of and Great Britain, but Hennessy rapidly expanded its presence in Wen Jun Spirits and Wen Jun Spirits Sales, which produce and Asia, which represented nearly 30% of its shipments in 1925. The distribute baijiu (white liquor) in China. The distillery, which brand became the world cognac leader in 1890. Hennessy created prepares one of the most famous and prestigious baijius in the X.O (Extra Old) in 1870 and, since then, has developed a line of country, has been operating without interruption since the Ming high-end cognac that has made its reputation. dynasty in the 16th century. In 2002, LVMH acquired 40% of Millennium, a producer and 1.2.2 Competitive position distributor of high-end vodka under the brand names Belvedere and Chopin; at year-end 2004, LVMH held 70%, and the The volumes shipped from the Cognac region were up 7% from remaining 30% of the capital was acquired in 2005. Millennium 2006, while the volumes of LVMH brands shipped rose 11%. The was founded in 1994 to bring to the American market a luxury market share for the business group was 42%, up from 41% in 2006 vodka for connoisseurs. In 1996, Belvedere and Chopin were (source: Bureau National Interprofessionel du Cognac - BNIC). introduced in this market. The Polmos Zyrardow distillery in The Company is the world leader in cognac, with particularly Poland, which develops the luxury vodka Belvedere, was founded strong positions in the United States and Asia.

The leading geographic markets for cognac, both for the industry and for LVMH, on the basis of shipments in millions of bottles, excluding bulk, are as follows:

(million bottles and percentage) 2007 2006 2005

Volumes LVMH Volumes LVMH Volumes LVMH market market market Region LVMH share Region LVMHshare Region LVMH share (%) (%) (%) United States 55.6 32.9 59.2 51.5 27.9 54.2 52.2 28.4 55.6 Asia (excluding Japan) 36.4 16.3 44.7 31.1 15.8 50.9 25.9 12.4 47.8 Japan 2.7 1.6 60.0 2.9 1.7 59.7 3.4 2.0 59.8 Germany 5.2 1.1 21.8 5.4 1.2 22.5 5.3 1.2 22.2 France 4.7 0.3 5.4 4.5 0.3 5.6 5.1 0.3 5.1 (S ource: Bureau National Interprofessionnel du Cognac - BNIC)

10 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description

The geographic breakdown of LVMH cognac sales, as a percentage Hennessy continued to control its purchase commitments for the of total sales expressed in number of bottles, is as follows: year’s harvest, and diversify its partnerships to prepare its future growth in various qualities. (percentage) 2007 2006 2005 Like the Champagne and Wine businesses, Hennessy obtains its United States 53 52 55 dry materials (bottles, corks and other packaging) from non-Group Japan 3 33 suppliers. The barrels and casks used to age the cognac are also Asia (excluding Japan) 26 22 20 obtained from non-Group suppliers. Europe (excluding France) 14 12 12 Other 4 11 10 Hennessy makes only very limited use of subcontractors for its Total Export 100 100 100 core business. France - --1.2.5 The vodka production method, supply sources and Total 100 100 100 subcontracting

1.2.3 The cognac production method Vodka can be obtained from the distillation of various grains or potatoes. Belvedere vodka is the result of the quadruple distillation The Cognac region is located around the Charente basin. The of Polish rye. The distillery owned by Millennium that prepares vineyard, which currently extends over about 75,000 hectares, Belvedere performs three of these distillations itself in Zyrardow, consists almost exclusively of the white ugni varietal which yields Poland. It uses water purified using a special process that yields a a wine that produces the best brandies. vodka with a unique taste. This region is divided into six vineyards, each of which has its Chopin vodka is prepared in Poland by means of the quadruple own qualities: Grande Champagne, Petite Champagne, Borderies, distillation of potato juice, giving it a quality recognized by vodka Fins Bois, Bons Bois and Bois Ordinaires. Hennessy selects its connoisseurs; this process is conducted outside the Group. eaux-de-vie from the first four vineyards, where the quality of the wines is more suitable for the preparation of its cognacs. Millennium’s flavored vodkas are obtained by macerating fruits in a pure vodka prepared using the same process used for Belvedere, Charentaise distillation is unique because it takes place in two and distillation takes place in a Charente-type still. stages, a first distillation (première chauffe) and a second distillation (seconde chauffe). The eaux-de-vie obtained are aged in oak barrels. Overall, Millennium’s top raw brandy supplier represents less than An eau-de-vie at full maturity is not necessarily a good cognac. 20% of the company’s supplies. Cognac results from the gradual blending of eaux-de-vie selected on the basis of vintage, origin and age. 1.2.6 The whisky production method The legal definition of Scotch Whisky states that the spirit must be 1.2.4 Supply sources for wines and Cognac eaux-de-vie produced at a distillery in Scotland from water and malted barley and subcontracting to which other cereals may be added, fermented by yeast, distilled Hennessy owns 185 hectares. The Group’s vineyard has remained and matured in Scotland in oak casks with a volume of less than virtually stable since 2000, after 60 hectares of vines were cleared 700 liters for a minimum of three years. Single Malt Scotch Whisky in 1999 as part of the industry plan implemented in 1998. The is the product of one single distillery. Blended Scotch Whisky is objective of the plan was to reduce the production area through made by mixing malt and grain scotch whiskies together. premiums offered for clearing and assistance given to wine growers to encourage them to produce wines other than those used in the Depending on the rules for producing malt whisky, the malt is first preparation of cognac. ground, which produces a mixture of flour and husks called “grist”. This product is then mixed with hot water in large wooden tubes Most of the wines and eaux-de-vie that Hennessy needs for its called “wash tuns” in order to extract the sugars from the malted production are purchased from a network of approximately 2,500 barley. The resulting sugary liquid, known as worsts, is transferred independent producers, with whom the company ensures the to a fermentation vessel or wash back and yeast is added to allow preservation of exceptional quality. Purchase prices for wine and fermentation to occur and alcohol to be created. This alcoholic eaux-de-vie are established between the company and each producer liquid, known as wash, then undergoes a double distillation in based on supply and demand. In 2007, the price of wines from the c opper p ot s tills, known as wash and spirit stills. Every distillery’s harvest rose 7% for the Fins Bois, after a 2% increase in 2006. stills are unique in shape and size and have a huge impact on flavor. With an optimal inventory of eaux-de-vie, the Group can manage Glenmorangie’s stills are the highest in Scotland at 5.14 meters the impact of price changes by adjusting its purchases from year and allow only the lightest vapors to ascend and condense. to year. The spirit still at Ardbeg has a unique spirit purifier.

Reference Document 2007 11 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description

This new make spirit is filled into American white oak ex-Bourbon 1.3 Wines and spirits distribution barrels and matured in a distillery warehouse for at least three years. Maturation is a very critical part of the production process LVMH’s wines and spirits are distributed to the world’s major providing the whiskies’ color and additional flavors. Glenmorangie markets primarily through a network of international subsidiaries, and Ardbeg are normally matured for a minimum of 10 years in some of which are joint ventures with the spirits group Diageo. very high quality casks. In 2007, 23% of champagne sales and 21% of cognac sales were made through this channel. 1.2.7 The 10 Cane rum production method Diageo has a 34% stake in Moët Hennessy which is the holding The rum category is not highly regulated. With the exception company of LVMH group’s Wines and Spirits businesses. of “Agricultural Rums”, there is no Appellation Contrôlée. It is, Beginning in 1987, LVMH and Guinness (prior to the Diageo however, possible to distinguish two groups based on the method group creation) signed agreements leading to the creation of of processing sugar cane: rums made from molasses, a by-product 17joint ventures for the distribution of their top brands, including of the sugar refinement process, and rums prepared from a wine MHD in France and Schieffelin & Somerset in the United States. with a very diluted cane juice base. This is the case in the French This joint network strengthens the positions of the two groups, Antilles, for example. improves distribution control, enhances customer service, and The 10 Cane distillery on the island of Trinidad only uses the increases profitability by sharing distribution costs. juice from the first pressing, and everything else is rejected. After The Veuve Clicquot products are distributed through this the gradual fermentation of the pure undiluted cane juice, the joint distribution network with Moët and Hennessy in France, distillery uses an ancestral and expressive distillation method. Germany, Switzerland, Italy, the United Kingdom, Belgium, Double distillation in Charente stills highlights the qualities of the Asia, Latin America and the United States; through its own cane wine and, ultimately, the rum. After distillation, maturation subsidiaries in Japan; and through independent distributors in can begin in aged oak barrels from the French Limousin region the rest of the world. that are lightly toasted. At the end of 2004, LVMH and Diageo announced they were For the installation of its production shop, the 10 Cane distillery separating their sales of the Moët Hennessy and Diageo product partnered with Angostura Trinidad Distillers, which has been lines in the United States within the joint venture Schieffelin & present on the island for several generations. However, 10 Cane Somerset; this agreement does not change the distribution of the retains control in the most sensitive areas. products of the two groups to joint distributors in this market since 1.2.8 Production method for Wen Jun spirits 2002. Following this agreement, LVMH announced early in 2005 the creation of Moët Hennessy USA, which now markets all the The spirits produced in China by Wen Jun are white liquors of LVMH brands of wines and spirits in the United States. the “Nong” or “aromatic” style, the most popular in the country. They are produced from well water and various grains, primarily wheat, rice, sorghum, maize and glutinous rice. 2. FASHION AND LEATHER GOODS The fermentation process is carried out in a pit dug into the ground, measuring three meters on each side and in depth, whose walls are The Fashion and Leather Goods business group includes Louis covered with a special putty mixture containing particular enzymes Vuitton, the world’s leading luxury brand, Donna Karan, Fendi, and bacteria beneficial to flavor development. The grains are sealed Loewe, Celine, Kenzo, Marc Jacobs, Givenchy, Thomas Pink, into the pit with a fermenting agent for about 70 days prior to Pucci, Berluti, Rossimoda, StefanoBi, and the e-Luxury website. distilling. The product obtained at the end of the distillation This exceptional group of brands, born in Europe and the United process is then aged for a year in ceramic jars large enough to hold States, has 989 stores around the world. While respecting the 1,100 liters of the liquid. At the end of this aging process, the identity and creative positioning of each of its brands, LVMH product is finally blended and bottled. The fermentation quality of supports their development by providing shared resources. Chinese white spirits is closely linked to the temperature, moisture and alkalinity conditions of the local environment. Sichuan, where In 2007, the Fashion and Leather Goods business group posted the Wen Jun distillery has been located since the 16th century revenue of 5,628 million euros, representing 34% of the total (Ming dynasty) is considered as an ideal environment for the revenue of LVMH. production of “Nong” white spirits. Wen Jun is one of the oldest and most celebrated luxury spirit producers in China.

12 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description

2.1 The brands of the Fashion and Leather Goods women, fashion accessories, leather goods and home furnishings. business group Its perfume business is part of the LVMH Perfumes and Cosmetics business group. In the luxury fashion and leather goods sector, LVMH holds a group of brands that are primarily French, but also include Spanish, Givenchy, founded in 1952 by Hubert de Givenchy, a company Italian, British and American companies. rooted in a tradition of excellence in haute couture, is also known for its collections of men and women’s ready-to-wear and its fashion Louis Vuitton Malletier (founded in 1854), the star brand of accessories. The Givenchy perfumes are included in the LVMH this business group, first focused its development around the Perfumes and Cosmetics business group. art of traveling, creating trunks, rigid or flexible luggage items, innovative, practical and elegant bags and accessories, before Thomas Pink (formed in 1984) is a recognized specialist in high- expanding its territory and its expertise in other areas of expression. end shirts in England. Since joining the LVMH Group in 1999, For over 150 years, its product line has continuously expanded the brand has accelerated its international growth. with new travel or city models and with new materials, shapes Fendi, founded in Rome in 1925, is one of the flagship brands of and colors. Famous for its originality and the high quality of its Italian fashion. Particularly well-known for its skill and creativity creations, today Louis Vuitton is the world leader in luxury goods in furs, the brand is also present in leather goods, accessories and and, since 1998, has offered its international customers a full range ready-to-wear fashion. of products: leather goods, ready-to-wear for men and women, shoes and accessories. Since 2002, the brand has also been present in Emilio Pucci, an Italian brand founded in 1947, is a symbol of the watch segment; Louis Vuitton launched its first line of jewelry casual fashion in luxury ready-to-wear, a synonym of escape and in 2004 and its first eyewear collection in 2005. refined leisure. Emilio Pucci joined LVMH in February 2000. The principal leather goods lines of Louis Vuitton are: Donna Karan was founded in New York in 1984. Its ready-to-wear lines, the luxury Collection and DKNY, a more casual clothing - the Monogram line, a historical canvas created in 1896, also line, meet the needs of a very modern and international lifestyle. available in Monogram vernis, mini, satin, patent and matte; Rossimoda, an Italian company founded in 1942, which joined - the Cuir E pi line, offered in nine colors; the Group in 2003, specializes in the manufacturing and licensed - the Damier line in two colors, ebony and blue azur since 2006; distribution of luxury women’s footwear. - the Taïga line for men in four colors. 2.2 Design Loewe, the Spanish company created in 1846 and acquired by LVMH in 1996, originally specialized in high quality leather work. Whether they belong to the world of haute couture or luxury Today it is present in leather goods and ready-to-wear. The Loewe fashion, the LVMH brands have founded their success first and perfumes are included in the LVMH Perfumes and Cosmetics foremost on the quality, authenticity and originality of their business group. designs that must be renewed with each season and each collection. Thus, a strategic priority is to strengthen the design teams, ensure Celine, founded in 1945 and owned by LVMH since 1996, the collaboration of the best designers, and adapt their talent to is developing a ready-to-wear line, leather goods, shoes and the spirit of each brand. accessories. LVMH believes that one of its essential assets is its ability to Berluti, an artisan bootmaker established in 1895 and held by attract a large number of internationally recognized designers LVMH since 1993, designs and markets very high quality men’s to its companies. Marc Jacobs has designed the Louis Vuitton shoes, both custom made and ready-to-wear and, since 2005, a ready-to-wear collections since 1998, supervises the creation of line of leather goods. shoes and is successfully recreating the great classics of the brand StefanoBi, the Italian manufacturer of luxury shoes located in leather goods. Ivana Omazic joined Celine in 2005 as Artistic in Ferrara since 1991, was acquired by Louis Vuitton Malletier Director. Early in 2005, the young designer Riccardo Tisci was in 1996. named Artistic Director for haute couture, women’s ready-to- wear and accessories for Givenchy Women. Loewe’s new creative Marc Jacobs, created in New York in 1984, is the brand name of director is Stuart Vevers. Antonio Marras is the Artistic Director Louis Vuitton’s eponymous artistic director. It has been majority for the Kenzo Women collections. Donna Karan continues to create owned by LVMH since 1997 and is expanding rapidly in fashion the lines of the company that bears her name. In 2005, Matthew for men and women. Williamson was named Artistic Director for the ready-to-wear Kenzo has generated rapid international success since it was and accessory collections of Emilio Pucci. Olga Berluti, the heiress formed in 1970, and joined the LVMH Group in 1993. Today, of the expertise built up by her predecessors, is perpetuating the the company operates in the areas of ready-to-wear for men and unique style and quality of Berluti shoes.

Reference Document 2007 13 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description

2.3 Distribution The designers and style departments of each company ensure that manufacturing does not generally depend on patents or exclusive Controlling the distribution of its products is a core strategic expertise owned by third parties. vector for LVMH, particularly in luxury fashion and leather goods. This control allows the Group to maintain distribution margins, and guarantees strict control of the brand image, sales reception 3. PERFUMES AND COSMETICS and environment that the brands require. It also gives the Group closer contacts with its customers so that it can anticipate their LVMH is present in the perfume and cosmetics sector with the expectations. major French houses Christian Dior, Guerlain, Givenchy and In order to meet these objectives, LVMH created the first Kenzo. In addition to these world-renowned brands, this business international network of exclusive boutiques under the banner of its group also includes BeneFit Cosmetics and Fresh, two young, high- fashion and leather goods brands. This network included 989 stores growth American cosmetics companies, the prestigious Italian as of December 31, 2007, including 390 Louis Vuitton stores. brand Acqua di Parma, Parfums Loewe, the Spanish brand with strong positions in its domestic market, and Make Up For Ever, 2.4 Supply sources and subcontracting a French company specializing in professional make-up products. Two new perfumes were launched by Fendi and Pucci at the end In Fashion and Leather Goods, manufacturing capacities and of 2007. the use of subcontracting vary significantly, depending on the The presence of a broad spectrum of brands within the business brand. group generates synergies and represents a market force. The The fifteen leather goods manufacturing shops of Louis Vuitton volume effect means that advertising space can be purchased at Malletier, eleven in France, three in Spain and one in the United better prices and better locations can be negotiated in department States, provide most of the brand’s production. All development stores. In research and development, the group brands have pooled and production processes for Louis Vuitton’s entire footwear line their resources since 1997 with a joint center in Saint-Jean-de- are handled at its site in Fiesso d’Artico, Italy. Louis Vuitton uses Braye (France), at the industrial site of Parfums Christian Dior. third parties only to supplement its manufacturing and achieve The use of shared services by international subsidiaries increases the production flexibility. effectiveness of support functions for all brands and facilitates the Fendi and Loewe also have leather workshops in their country expansion of the newest brands. These economies of scale permit of origin and in Italy for Celine, which cover only a portion of larger investments in design and advertising, two key factors for their production needs. Generally, the subcontracting used success in the perfumes and cosmetics sector. by the business group is diversified in terms of the number of With the exception of the products and services of the Laflachère subcontractors and is located primarily in the country of origin of group, the LVMH perfumes and cosmetics brands are sold in the brand: France, Italy and Spain. selective retailing circuits (as opposed to general retailing and Overall, the use of subcontractors for Fashion and Leather Goods drugstores). operations represented about 35% of the cost of sales in 2007. In 2007, the Perfumes and Cosmetics business group posted Louis Vuitton Malletier depends on outside suppliers for most of revenue of 2,731 million euros, representing 16.5% of LVMH’s the leather and raw materials used in manufacturing its products. total revenue. Even though a significant percentage of the raw materials is purchased from a fairly small number of suppliers, Louis Vuitton 3.1 The brands of the Perfumes and Cosmetics business believes that these supplies could be obtained from other sources, if group necessary. In 2004, recourse to a balanced portfolio of suppliers also Parfums Christian Dior was born in 1947, the same year as the limited dependence on specific suppliers. After a diversification fashion house, with the introduction of the Miss Dior perfume. program launched in 1998 to Norway and Spain, the portfolio of While developing its lines of perfumes for men and women over suppliers was expanded to include Italy in 2000. For Louis Vuitton, the years, Parfums Christian Dior expanded its activity to the the leading supplier of hides and leathers represents about 20% of make-up sector in 1955, and to skincare products in 1973. Today, its total supplies of these products. Parfums Christian Dior allocates 1.7% of its revenue to research Fendi is in a similar situation, except for some exotic leathers for and is on the cutting edge in innovation. which suppliers are rare. The leading perfumes for women are: Miss Dior, Poison, J’Adore, Finally, for the various companies, the fabric suppliers are often Dior Addict, Pure Poison, Miss Dior Chérie, created in 2005 and Italian, but on a non-exclusive basis. Midnight Poison launched in 2007. Eau Sauvage, Fahrenheit, Dune

14 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description pour Homme, Higher, Dior Homme, launched in 2005, and Fahrenheit its exclusive boutiques in Paris and New York and in a number 32, created in 2007, are the best known fragrances for men. of selective retailing circuits, particularly in France, the United States, South Korea and the Middle East. Dior’s top cosmetics lines are: Capture, Diorsnow, Hydraction and L’Or de Vie, launched in France in 2007, for skincare products, Acqua di Parma, founded in 1916 in Parma, is a luxury perfume and Dior Addict, Diorskin, Backstage and Rouge Dior for make-up. brand and a symbol of Italian high fashion. The brand specializes in perfumes and skincare and has diversified its product line to Guerlain, founded in 1828 by Pierre François Pascal Guerlain, include home scents and linens. Now based in Milan, Acqua di has created more than 700 perfumes since its inception. The brand Parma relies on an exclusive retailing network, including a brand has an exceptional image in the perfume universe and many of store in Milan. its creations have enjoyed remarkable longevity. Today it is also known for its make-up and skincare lines. The Laflachère group, whose principal asset is the La Brosse et Dupont company, is the French leader in hygiene and beauty Jicky, l’Heure Bleue, Mitsouko, Shalimar, Samsara, Aqua Allegoria, product retailing. It was acquired by LVMH at the end of 1998. It L’Instant de Guerlain, Insolence created in 2006 and L’Instant Magic, has a strong presence in the retail circuits in France and Europe. launched in 2007, for women, Habit Rouge, Vetiver and L’Instant de Guerlain pour Homme, launched in 2004, for men, are the top brand ambassadors. 3.2 Research in Perfumes and Cosmetics Guerlain’s leading cosmetics lines are Issima and Orchidée Impériale More than in any other segment, research and innovation play for skincare products, and Terracota and Kisskiss for make-up. a major role in the development strategy of the Perfumes and Cosmetics business. The brands of the Perfumes and Cosmetics Parfums Givenchy, founded in 1957, rounds out its presence business group today benefit from the consolidation of their in the world of fragrances for men and women (Amarige, Organza, teams within a GIE (economic interest group), LVMH Research, Very Irresistible Givenchy, Ange ou Démon launched in 2006, the product of the gradual consolidation of the various research Givenchy pour Homme, Very Irresistible pour Homme and others) with entities of the brands in this business group. Almost 250 scientists, its activity in cosmetics through the Givenchy skincare products researchers, chemists, biologists, physicians and pharmacists now and the make-up line Givenchy Le Makeup launched in 2003. work at the laboratories in Saint-Jean-de-Braye on all developments Parfums Kenzo appeared in 1988, and recorded strong growth of skincare, make-up and perfume products for Christian Dior, after the success of FlowerbyKenzo, launched in 2000. The company Guerlain and Parfums Givenchy. The laboratories also provide began to diversify its activities in the “well-being” segment by product developments for Parfums Kenzo, Loewe, Acqua di launching the KenzoKi line the following year. The year 2006 Parma, Fendi, Pucci, and the American companies like Fresh and marked the launch of the women’s perfume KenzoAmour. BeneFit, and generally provide regulatory coordination for all the products of all the brands of the LVMH group involved in perfumes BeneFit Cosmetics (created in 1995 in San Francisco and acquired or cosmetics. by LVMH at the end of 1999) owes its rapid success to the high quality of its beauty and make-up products, which convey a true This combination of expertise and concentration of resources offers sense of pleasure and are enhanced by the playful aspect of the many advantages: it allows LVMH to conduct – together with product names and packaging. Aside from the sales of its seven French and foreign partners, particularly European universities exclusive boutiques in California, its three boutiques in Chicago – major applied research projects that benefit all the brands. A and its ten boutiques in Great Britain, the brand is currently larger pool of technical innovations that can fuel all the projects is distributed in over 1,200 points of sale in the United States, available to the marketing teams of the business group. Finally, the Europe, the Middle East and Asia. combination of services associated with the developments confirms the expertise of LVMH in areas such as product safety or ensures Fresh (created in 1991 and acquired by LVMH in September 2000) representation of its interests in various European, American and initially built its reputation on creating body care products inspired Asian regulatory organizations for the industry. by ancestral beauty recipes and entirely natural and high quality Overall, the research investments in Perfumes and Cosmetics fragrances, before expanding its concept to make-up and hair care represent approximately 1.4% of the revenue generated by the products. LVMH Perfumes and Cosmetics business group. Loewe introduced its first perfume in 1972. A major player in In 2007, the teams continued their work in key areas of expertise, Spain, the brand is also developing its international business, sensual appeal, pleasure, product safety, quality and performance primarily in Russia, the Middle East and Latin America. and their advances in biology, molecular biology and natural Make Up For Ever (created in 1989) joined LVMH in substances, particularly research in new plant substances. The November 1999. The brand specializes in professional make-up new ingredients developed and proposed by the teams reflected and its applications for consumers. Its products are distributed in a combination of attention to performance and a focus on ethics

Reference Document 2007 15 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description and sustainability. All these activities resulted in over 60 papers Dermo-System line, which is continuing its strong growth in the and scientific articles covering all these areas. In addition, LVMH men’s skincare segment. Research regularly protects its inventions: more than 18 major In the make-up segment, the priority research areas are the patents were filed in 2007 and an even larger number of patents are due to be filed in 2008. interaction between skin-light-matter, new effect pigments, intelligent materials, and new polymers. The upstream partnerships In skincare, one of the key subjects of ongoing research is anti- have developed new shade effects for different brands of the LVMH aging (prevention and correction), with special attention being group. Innovation frequently involves technology transfers, such as devoted to two areas. The first of these is cell and tissue longevity, the new polymers originally used in other industries, which have the topic of a symposium organized by LVMH Research in 2006. made possible the development of original formulations including Studies by participants revealed the presence in skin tissue of the Crème de Rouge (Parfums Christian Dior) and the foundation Diorskin reparative enzymes called sirtuins that regulate gene activity and Forever, which allows make-up to fit like a second skin. Materials cellular life spans. A specific ingredient developed to activate these used in the jewelry segment, like white sapphire and crystals, enzymes is now used in Capture Totale (Parfums Christian Dior). have been incorporated to improve the optical properties of the The second area is the protection of skin stem cells, the topic formulations (Parure from Guerlain). Highly pure compounds of a symposium organized by LVMH Research in 2007. Studies by participants permitted the identification of the presence of originating in the ceramics industry have been used for their self-renewing adult stem cells in the basal layer of the epidermis. peeling effect in Peel Abrasion from Dior. Collaboration between LVMH and the researcher Carlo Pincelli of Product innovation, which was particularly dynamic in 2007, the University of Modena (Italy) led to the launch of Capture R60/80 should not mask the major upstream research projects that will XP (Parfums Christian Dior). Convinced of the need to continue yield the commercial products of the future. These very ambitious investigations in this area, while avoiding research requiring the programs lead to the creation of ever more innovative products use of embryonic stem cells, Parfums Christian Dior and LVMH in areas where LVMH Research will continue to be ahead of its Research have joined forces to fund key research projects on stem competitors. In vectorization technologies to target biological cells and their applications for human regenerative therapy, by activities (after the liposomes used in the Capture line), in the contributing a percentage of sales generated by Dior’s Capture area of molecular biology in order to modify skin pigmentation R60/80 XP serums to the Stem Cell Institute for Regenerative kinetics (skin repair technology used in the Diorsnow lines), in Medecine of the Stanford University School of Medicine (USA). the area of Aquaporines and connective tissue in order to control In addition, LVMH Research is continuing its work in the area of the movements of water within skin tissues (technologies used hydration, a major expectation of consumers, while also pursuing in Hydraction from Dior and Super Aquaserum from Guerlain, the development of specific body care products and the whitening respectively), the future breakthrough technologies proposed creams and lotions appreciated by Asian customers but which may by LVMH Research will give the brands of the LVMH group also be used to improve skin tone, an effect desired by customers legitimate commercial successes in 2008 in skincare, make-up outside Asia as well. and perfumes. Several years of intensive research on orchids and longevity have Finally, 2007 also saw the filing of the building permit for contributed to the development of Orchidée Impériale, Guerlain’s LVMH Research’s new research center. This 16,500 m2 complex, leading anti-aging skincare line. In-depth studies in other areas originally proposed in 2005, will accommodate the Group’s have confirmed the effectiveness of several innovative compounds 250 researchers. Named Helios after the Greek sun god, the used in the Group’s newest products, including a patented amber facility will be the first research center to receive HQE® (Haute extract used in Success Future (Guerlain) and the combination of Qualité Environnementale) certification and will make use of two agents (hyalurosome and cyclocaps) in Radical No Surgetics (Parfums Givenchy). innovative technologies for light and energy management and reduced water consumption. Other basic work initiated several years ago has also identified fractions of the vine that are particularly effective in fighting free radicals. These studies isolated a particularly effective fraction 3.3 Supply sources and subcontracting from the vine shoots of the prestigious Château d’Yquem The five French production centers of Guerlain, Givenchy and vineyard, which are used in the L’Or de Vie by Parfums Christian Dior provide almost all the production for the four major French Dior. This development resulted in several new patents filed by brands, including Kenzo, both in fragrances, and in make- LVMH Research. up and beauty products. Make Up For Ever also has sufficient Lastly, revolutionary ingredients and formulations have manufacturing capacities in France to cover its own needs. Only the driven the success of Guerlain’s Super Aquaserum line in the newer American companies, Loewe perfumes and Acqua di Parma moisturizer segment as well as further additions to Dior’s subcontract most of the manufacturing of their products.

16 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description

In 2007, manufacturing subcontracting represented overall 4.1 The brands of the Watches and Jewelry business group about 8% of the cost of sales for this activity, plus approximately 10 million euros for logistical subcontracting. TAG Heuer (founded in 1860 in Saint-Imier in the Swiss Jura and acquired by LVMH in November 1999) is the undisputed Dry materials, such as bottles, stoppers and any other items that benchmark and world leader in luxury sport watches and form the containers or packaging, are acquired from suppliers chronographs. Partnered with the competitive sports world and outside the Group, as are the raw materials used in the finished its performance values, the brand is recognized for the quality and products. In certain cases, these materials are available only from precision and the leading-edge aesthetic of its watches. The most a limited number of French or foreign suppliers. coveted models for the “professional sport watch” line are: the The product formulas are developed primarily in the A quaracer, Link and Formula One series; and for traditional watches Saint-Jean-de-Braye laboratories, but the Group can also acquire and chronographs, they are the Carrera and Monaco models. In or develop formulas from specialized companies, particularly for 2002, TAG Heuer licensed and launched the TAG Heuer Sportvision perfume essences. line of sports eyewear, and signed a worldwide licensing agreement with ModeLabs Group for the creation and distribution of a range of mobile telephones in 2007. 4. WATCHES AND JEWELRY Zenith (founded in 1865 and established in Le Locle in the Swiss Jura region) joined LVMH in November 1999. Zenith belongs The most recent LVMH business group holds a portfolio of quality to the very select group of watch movement manufacturers. In watch brands with highly complementary market positions: TAG the watchmaking sector, the term “manufacture” designates a Heuer, the world’s leading maker of luxury sports watches and company that provides the entire design and manufacturing of chronographs; Zenith, an upscale watchmaker famous for its mechanical movements. The two master movements of Zenith, El Primero movement; Dior Watches, which offers collections the automatic chronograph El Primero and the automated extra-flat inspired by the designs of the fashion house; Chaumet, the movement Elite, absolute benchmarks for Swiss watchmaking, are prestigious historic jeweler in the Place Vendôme in Paris; Fred, provided on the watches sold under this brand: the Chronomaster, a designer of contemporary jewelry pieces; and De Beers, a joint Class and Port Royal lines. Zenith launched its Defy collection, its venture formed in July 2001, which affirms its positioning as a first sports line, in 2006. diamond jeweler (the activity of the De Beers brand, previously consolidated in Other Activities, has been consolidated within the Dior Watches, for which LVMH holds an exclusive license, Watches and Jewelry business group since 2006). The Omas brand belong to the category of fashion watches. They are manufactured of writing instruments was sold in October 2007. in Switzerland by Ateliers Horlogers. The collections of Dior Watches, particularly Christal, Chiffre Rouge and D de Dior, are The business group has already deployed internationally, designed in complete harmony with the creative force of the fashion strengthened the coordination and pooling of administrative house. The Christal line is currently enjoying strong growth. resources, expanded its sales and marketing teams, and begun to establish a network of after-sale multi-brand services worldwide Chaumet, a jeweler established in 1780, has maintained its to improve customer satisfaction. LVMH Watches and Jewelry prestigious expertise for over two centuries, imposing a style that has a territorial organization that covers all European markets, is deliberately modern and is reflected in all its designs, whether the American continent, northern Asia, Japan, and the Asia- luxury jewelry pieces, or jewelry or watch collections. The LVMH Pacific region. Group acquired Chaumet in November 1999. This business group has implemented industrial coordination Fred (founded in 1936) is present in high-end jewelry, jewelry through the use of shared resources, such as prototype design and watchmaking. In 1995, LVMH acquired a 71% interest in capacities, and by sharing the best methods for preparing investment the company, which it increased to 100% in 1996. Since joining plans, improving productivity and negotiating purchasing terms the Group, Fred has completely revamped its design, image and with suppliers. distribution. This revival can be seen in the bold contemporary style of its creations. In 2007, the Watches and Jewelry business group posted revenue of 833 million euros, which represented 5% of total De Beers is a joint venture between LVMH and the De Beers LVMH revenue. group that was created in July 2001. The goal of the company,

Reference Document 2007 17 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description headquartered in London, is to establish a global network of 5.1 Travel retail boutiques offering jewelry under the De Beers name. It approaches the diamond market from an original angle, both in its creative DFS jewelry design and its concept of points of sale. The jewelry is sold DFS joined LVMH in 1997 after LVMH acquired 61.25% of in boutiques in London, New York and Los Angeles, and in sixteen the company between December 1996 and February 1997. “shop in the shop” spaces in Japanese, Taiwanese, American, French and British department stores. In 2007, De Beers launched its first This American group is the pioneer and one of the world leaders collection of timepieces. in the sale of luxury products to international travelers. Its activity is closely linked to tourism cycles. 4.2 Supply sources and subcontracting Since it was formed in 1961 as a duty-free concession in the Kai Tak airport in Hong Kong, DFS has acquired an in-depth knowledge With its four Swiss workshops or manufactures, located in of the needs of traveling customers, built solid partnerships with Le Locle and in La Chaux de Fonds, the Group provides almost the Japanese and international tour operators, and has significantly entire assembly of the watches and chronographs sold under the expanded its business, particularly in the tourist destinations in TAG Heuer, Zenith, Christian Dior, Chaumet and Fred brands. the Asia-Pacific region. In its watchmaking shop, Zenith also designs and manufactures the mechanical movements El Primero and Elite that made this The strategy of the DFS group is now focused on the development brand famous. and promotion of its city-center Galleria stores, which account for most of its revenue today. In this business, subcontracting represented overall only 8% of the cost of sales in 2007. With an area of 1,000 to 18,000 square meters, the 13 Gallerias are located in the urban centers of major airline destinations in the Because of the very high quality requirements, the components Asia-Pacific, the United States and Japan. Each space combines assembled are obtained from a limited number of suppliers, in one site, close to the hotels where travelers are lodged, three primarily Swiss, with the exception of the leather for the watch different, but complementary commercial spaces: a general luxury bands. In 2007, TAG Heuer manufactured nearly one-fifth of the product offer (perfumes and cosmetics, fashion and accessories, cases needed for its production in its own industrial subsidiary etc.), a gallery of prestigious boutiques (Louis Vuitton, Hermès, Cortech, in Switzerland. Bulgari, Tiffany, Christian Dior, Chanel, Prada, Fendi, Celine, Even though the Group can, in certain cases, use third parties etc.), and a recreational and souvenir complex. to design its models, they are most often designed in its own studios. While focusing on the development of its Gallerias which are its main source of growth, DFS maintains its strategic interest in the airport concessions that can be obtained or renewed under 5. SELECTIVE RETAILING good financial terms. DFS is currently present in some twenty international airport sites in the Asia-Pacific, the United States and Japan. The Selective Retailing businesses are organized to promote an environment that is appropriate to the image and status of the Miami Cruiseline luxury brands. These companies are expanding in Europe, North Miami Cruiseline, acquired by LVMH in January 2000, is an America, Asia and the Middle East, and operate in two segments: American company founded in 1963, the world leader in the travel retail (the sale of luxury products to international travelers), sale of duty-free luxury items on board cruise ships. It provides the business of DFS and Miami Cruiseline, and the selective retail services to over 70 ships representing about ten cruise lines. It also concepts represented by Sephora and the Paris department store publishes tourist reviews, catalogs and advertising sheets available Le Bon Marché. on board. For reasons of safety and precaution, the Samaritaine department The acquisition of Miami Cruiseline boosted the travel retail store in Paris has been closed to the public since June 2005. activity’s organization of its geographic presence and enhanced In 2007, the Selective Retailing business group posted revenue of the diversity of its customer base, which was previously primarily 4,179 million euros, or 25% of the total revenue of LVMH. Asian, and is now supplemented by cruise customers, primarily

18 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Business description

Americans and Europeans. There are also excellent synergies La Samaritaine between the activities of DFS and those of Miami Cruiseline in Founded in 1870, the Samaritaine department store is, like Le Bon the areas of management and merchandising. Marché, one of the oldest in Paris. LVMH acquired 55% of the Miami Cruiseline focused its efforts on improving the quality of its Samaritaine department store in January 2001. product offer and adapting its product line to each cruise ship to For reasons of safety and precaution, the Samaritaine department boost the average expenditure per traveler. Particular emphasis is store closed to the public in June 2005. Based on the conclusions of being given to watches and jewelry, which offer good opportunities several studies and after consulting employee representatives, it was for growth in the years to come. decided that the store should remain closed during restructuring and renovation to bring the building into compliance. It is the intent of 5.2 Selective retail its management that, after such time, in addition to bringing the building into compliance, the commercial nature of the site will Sephora be continued through the creation of a major commercial complex The Sephora trade name, founded in 1970, has developed over of high architectural interest adapted to an urban environment and time a perfume and beauty format that combines direct access and to the needs of consumers in the 21st century. customer assistance. This concept led to a new generation of stores with a sober and luxurious architecture, designed in three spaces dedicated to perfumes, make-up and skincare respectively. Based 6. OTHER ACTIVITIES on the quality of this concept, Sephora has gained the confidence of selective perfume and cosmetics brands. The brand has also offered The Other Activities segment includes the media division products sold under its own brand name since 1995. managed by DI Group (formerly Desfossés International). In Since it was acquired by LVMH in July 1997, Sephora has recorded December 2007, DI Group acquired the Les Echos g roup from rapid growth in Europe by opening new stores and acquiring London-based Pearson plc. The Les Echos g roup includes Les Echos, companies that operated perfume retail chains, including Marie- France’s leading financial newspaper, lesechos.fr, the top business Jeannne Godard and the Italian companies Laguna, Boidi and and financial w eb site in France, the business magazine Enjeux-Les Kharys. Sephora has 534 stores in Europe today, located in Echos, as well as other specialized financial information services. 14 countries. At the end of 2004, given the level of profitability The financial daily La Tribune was sold to News Participations in Great Britain, the decision was made to close the store network in February 2008. Apart from Les Echos, DI Group holds several in this country. The Sephora concept also crossed the Atlantic in other financial and cultural media titles—Investir, Connaissance 1998 and the brand now has 177 stores in the United States, plus des Arts, Le Monde de la Musique, as well as the literary publisher an Internet site sephora.com, and eight stores in Canada. Present Arléa and the French radio station Radio Classique. in China since 2005, Sephora had 30 stores in this country as of December 31, 2007. The brand entered the Middle East in 2007, where it had seven stores by the end of the year.

Le Bon Marché Established in 1852, Le Bon Marché was a pioneer of modern marketing in the 19th century. The sole department store located on the left bank in Paris, it was acquired by LVMH in 1998. Le Bon Marché has a food store, La Grande Épicerie de Paris. Since 1995, it has also owned Franck et Fils, located on rue de Passy in the sixteenth district of Paris. In recent years, a fundamental overhaul that included the renovation and remodeling of its sales spaces, together with moving to a more upscale product offer, strengthened the identity of Le Bon Marché. Famous for its very demanding inventory and service policy, Le Bon Marché is now the most exclusive and creative department store in Paris.

Reference Document 2007 19 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 20 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP

REPORT OF THE BOARD OF DIRECTORS ON GROUP MANAGEMENT

Page

1. BUSINESS REVIEW 22 1.1 COMMENTS ON THE CONSOLIDATED INCOME STATEMENT 22 1.2 WINES AND SPIRITS 25 1.3 FASHION AND LEATHER GOODS 27 1.4 PERFUMES AND COSMETICS 29 1.5 WATCHES AND JEWELRY 31 1.6 SELECTIVE RETAILING 33 2. OPERATIONAL RISK FACTORS AND INSURANCE POLICY 34 2.1 OPERATIONAL RISK FACTORS 34 2.2 INDUSTRIAL AND ENVIRONMENTAL RISKS 35 2.3 RISK COVERAGE AND INSURANCE POLICIES 36 3. FINANCIAL POLICY 37 3.1 MARKET RISKS 38 3.2 CONSOLIDATED CASH FLOW 39 3.3 FINANCIAL STRUCTURE 40 4. OPERATING INVESTMENTS 41 4.1 COMMUNICATION AND PROMOTION EXPENSES 41 4.2 RESEARCH AND DEVELOPMENT COSTS 41 4.3 INVESTMENTS IN PRODUCTION FACILITIES AND RETAIL NETWORKS 41 5. EMPLOYEE INFORMATION 42 5.1 ANALYSIS AND DEVELOPMENT OF THE WORKFORCE 42 5.2 WORK TIME 46 5.3 COMPENSATION 48 5.4 EQUALITY AND DIVERSITY 48 5.5 TRAINING 50 5.6 HEALTH AND SAFETY 51 5.7 EMPLOYEE RELATIONS 51 5.8 RELATIONS WITH THIRD PARTIES 51 5.9 COMPLIANCE WITH INTERNATIONAL CONVENTIONS 53 6. EFFECTS OF OPERATIONS ON THE ENVIRONMENT 53 6.1 WATER, RAW MATERIAL AND ENERGY CONSUMPTION 53 6.2 SOIL USE CONDITIONS, EMISSIONS INTO THE AIR, WATER AND SOIL 56 6.3 MEASURES TAKEN TO LIMIT DAMAGE TO THE BIOLOGICAL EQUILIBRIUM, NATURAL HABITATS, ANIMAL AND PLANT SPECIES 59 6.4 ORGANIZATION OF ENVIRONMENTAL PROTECTION METHODS WITHIN THE GROUP 59 7. MAIN LOCATIONS AND PROPERTIES 62 7.1 PRODUCTION 62 7.2 RETAIL DISTRIBUTION 63 7.3 ADMINISTRATIVE SITES AND INVESTMENT PROPERTY 64 8. LITIGATION AND EXCEPTIONAL EVENTS 64 9. SUBSEQUENT EVENTS 64 10. RECENT DEVELOPMENTS AND PROSPECTS 64

Reference Document 2007 21 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

REPORT OF THE BOARD OF DIRECTORS ON GROUP MANAGEMENT

1. BUSINESS REVIEW

1.1 Comments on the consolidated income statement from 32% to 30% and 13% to 11%, respectively; the contribution of all other currencies advanced 3 points from 25% to 28%. Revenue by business group Revenue by geographic region of delivery

(EUR millions) 2007 2006 2005 (percentage) 2007 2006 2005 Wines and Spirits 3,226 2,994 2,644 France 14 15 15 Fashion and Leather Goods 5,628 5,222 4,812 Europe (excluding France) 23 22 20 Perfumes and Cosmetics 2,731 2,519 2,285 United States 25 26 27 Watches and Jewelry 833 737 585 Japan 11 13 14 Selective Retailing 4,179 3,891 3,648 Asia (excluding Japan) 19 17 17 Other activities and eliminations (116) (57) (64) Other markets 8 77 Total 16,481 15,306 13,910 Total 100 100 100 Profit from recurring operations by business group By geographic region of delivery, the year saw a drop in the relative contribution of the United States in Group revenue (EUR millions) 2007 2006 2005 from 26% to 25%, of France from 15% to 14% and of Japan Wines and Spirits 1,058 962 869 from 13% to 11%; Asia (excluding Japan) increased by 2 points Fashion and Leather Goods 1,829 1,633 1,467 from 17% to 19%, Europe (excluding France) and other markets Perfumes and Cosmetics 256 222 173 each advanced by 1 point, from 22% to 23% and from 7% Watches and Jewelry 141 80 21 to 8%, respectively. Selective Retailing 439 400 347 The decline in the contribution of the US dollar and the United Other activities and eliminations (168) (125) (134) States in Group revenue is mainly attributable to the adverse Total 3,555 3,172 2,743 impact of the appreciation of the euro against the US dollar. At constant exchange rates, US dollar-denominated revenue Consolidated revenue for the year ended December 31, 2007 was increased by 10% and revenue generated in the United States 16,481 million euros, up 8% from the previous year. It was affected increased by 12%. The reduced contribution of the yen and by the depreciation of the main invoicing currencies against the Japan in Group revenue is only partially explained by the poor euro, in particular the US dollar (–8%) and the yen (–9%). On a performance of the yen against the euro. At constant exchange constant currency basis, revenue for the year increased by 13%. rates, revenue invoiced in yen increased by 3%. There were no changes in the Group’s scope of consolidation in 2006 It is also worth noting the exceptionally robust performance of new and 2007 that would affect the comparability of performance. regions such as China, Russia and the Middle East, resulting in considerable increases in invoicing for the corresponding currencies . Revenue by invoicing currency By business group, the breakdown of Group revenue remained nearly stable: the contribution of Perfumes and Cosmetics (percentage) 2007 2006 2005 advanced by 1 point from 16% to 17%, while the contribution Euro 31 30 30 of all other business groups remaining unchanged, with Wines US Dollar 30 32 32 and Spirits at 20%, Fashion and Leather Goods at 34%, Watches Yen 11 13 15 and Jewelry at 5% and Selective Retailing at 25%. The growth in Hong Kong dollar 4 33the contribution of the Group’s Perfumes and Cosmetics brands Other currencies 24 22 20 is due in particular to the strong revenue performance achieved Total 100 100 100 with the Sephora retail network, which gave rise to additional consolidation eliminations . The breakdown of revenue by invoicing currency changed as Wines and Spirits posted revenue growth of 8% based on published follows: the contribution of the euro increased by 1 point to 31% while figures. With the adverse impact of exchange rate fluctuations both US dollar and yen-denominated revenue dropped by 2 points, decreasing revenue by 5 points, organic growth was 13%. Revenue

22 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management was buoyed by sales volume growth for the champagne and cognac The Group posted a gross margin of 10,695 million euros, up 9% segments, which posted increases of 4% and 10% respectively, compared to the previous year. The margin on revenue was 65%, and also by higher selling prices and continuing product mix 1 point higher than in 2006. This increase reflects better control improvements. Strong sales volume growth was achieved by the of the cost of products sold, higher selling prices, efforts to move champagne segment in Japan as well as in promising markets such brands upmarket resulting in product mix improvements, and the as Spain and Russia. This segment has also been highly successful efficiency of currency hedges. in moving its positioning upmarket, especially in Europe. Revenue Marketing and selling expenses totaled 5,752 million euros, up growth for the cognac segment was especially strong in Asia, 7% based on published figures, amounting to a 12% increase at particularly China and Vietnam, and in Russia. The US market constant exchange rates. Over and above robust communications maintained its robust levels of growth across all of the Group’s expenditures by the Group’s main brands, this increase is due to wines and spirits. the continued development of distribution networks, as much for Fashion and Leather Goods posted organic growth of 14%, and 8% retail activities (stores) as for wholesale business. Nevertheless, the based on published figures. Louis Vuitton turned in a remarkable level of these marketing and selling expenses remained stable as a performance for the year, again recording double-digit organic percentage of revenue, amounting to 35%. revenue growth. This brand has made spectacular headway in Asia, The geographical breakdown of retail networks is as follows: especially China, and continues to benefit from strong momentum in Europe and the United States. Fendi continued to perform well (Number) 2007 2006 2005 with a new sizable increase in revenue. The other brands of this business group also achieved strong results, with some experiencing France 306 288 278 very rapid growth, such as Marc Jacobs. Europe (excluding France) 523 456 422 United States 463 394 365 Perfumes and Cosmetics posted organic revenue growth of 12%, and 8% based on published figures. This performance was spurred Japan 253 278 262 by both innovation and the enrichment of existing lines. All three Asia (excluding Japan) 409 363 329 categories of products—perfume, make-up and skincare—benefited Other markets 94 80 67 from robust growth. All the brands in the portfolio contributed to Total 2,048 1,859 1,723 this performance, from flagship brands such as Parfums Christian Dior or Guerlain to alternative and niche brands such as BeneFit General and administrative expenses totaled 1,388 million euros, Cosmetics. The Perfumes and Cosmetics business group reaffirmed up 8% based on published figures, and up 11% on a constant its leadership position in Europe and its brands continued their currency basis. They represented 8% of revenue, a level identical steady advances in Russia, China and the Middle East, markets to that recorded in 2006. that confirmed their potential for further growth. The Group’s profit from recurring operations was 3,555 million Watches and Jewelry posted organic revenue growth of 19%, and euros, 12% higher than in 2006. Operating margin as a percentage 13% based on published figures. This performance was driven by of consolidated revenue amounted to nearly 22%, 1 point TAG Heuer, which reinforced its worldwide leadership position higher than its level a year earlier. As the level of general and in prestigious sports watches and chronographs. The excellent administrative expenses remained stable, this 1 point increase momentum achieved by this brand is sustained by constant reflects the improvement in the margin on revenue mentioned innovation and continued efforts to move the brand further above. It also results from the profitability gains posted by all upmarket, reflected by very strong advances in all its markets. The business groups, and in particular Watches and Jewelry whose Group’s other watch brands, Zenith and Dior Watches, turned in margin rose 6 points. strong results in their respective segments. Among the brands in Exchange rate fluctuations had a negative net impact on the the Group’s jewelry segment, Chaumet enjoyed sustained revenue Group’s profit from recurring operations of 255 million euros growth across all of its markets ; De Beers confirmed its potential as compared with the previous year. This total comprises the a diamond jeweler and is successfully expanding its retail network following three items: the impact of changes in currency parities in the United States, Asia and the Middle East. on export and import sales and purchases by Group companies, Selective Retailing also posted organic revenue growth of 12%, and the change in the net impact of the Group’s policy of hedging 7% based on published figures. This growth was driven by Sephora, its commercial exposure to various currencies, and the impact whose sales were very strong, not only on a same-store basis, but of exchange rate fluctuations on the consolidation of profit from also due to the expansion of its retail network in Europe, North recurring operations of subsidiaries outside the euro zone. On a America, China and the Middle East. Despite weaker performance constant currency basis excluding changes in the net impact of in tourist regions usually visited by Japanese travelers, DFS was currency hedges, the increase in the Group’s profit from recurring able to record revenue growth overall by benefiting from the strong operations would have been 20% compared to 2006. rise in business generated with customers from other parts of Asia, and especially Chinese tourists.

Reference Document 2007 23 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Profit from recurring operations for Wines and Spirits was The net result from recurring operations of Other Activities and 1,058 million euros, up 10% compared to the previous year. eliminations was a loss of 168 million euros, compared to a loss of This performance reflects sales volume growth, product mix 125 million euros in 2006. In addition to headquarters expenses, improvements and higher selling prices consistent with the Other Activities also includes the Media division. premium positioning of the Group’s products in addition to Other operating income and expenses amounted to a net expense supply constraints, notably affecting the champagne segment. of 126 million euros compared to a net expense of 120 million These price increases, together with tight cost control, offset the euros in 2006. In 2007, they comprised a net expense of 81 adverse impact of exchange rate fluctuations, expenses relating to million euros relating to the net loss on the sale of La Tribune the reinforcement of the distribution network and advertising and group, the logistics company Kami (Fashion and Leather Goods) promotional expenditure focused on strategic markets. Operating and Omas writing instruments; the remaining expense includes margin as a percentage of revenue for this business group increased 16 million euros for depreciation, amortization or accelerated by 0.7 points to 32.8%. depreciation of fixed assets, 25 million euros for commercial and Fashion and Leather Goods posted profit from recurring operations industrial reorganization costs and 4 million euros for various of 1,829 million euros, up 12% compared to 2006. Despite the non-recurring expenses and provisions. strongly unfavorable effect of exchange rate fluctuations, Louis The Group’s operating profit was 3,429 million euros, representing Vuitton once again performed remarkably well. Fendi continued a 12% increase over 2006. to show profitable growth. The other brands in a development or revitalization phase demonstrated their strong potential and The net financial expense was 252 million euros, compared to significantly enhanced their profitability. Operating margin a net financial expense of 53 million euros for 2006. as a percentage of revenue for this business group increased by The cost of net financial debt was 207 million euros as of 1.2 points to 32.5%. December 31, 2007, up from 173 million euros the previous year. Profit from recurring operations for Perfumes and Cosmetics was The interest expense on net debt included in this amount 256 million euros, an increase of 15% compared to 2006. Despite increased by 33 million euros to 211 million euros, reflecting two a higher level of advertising and promotional expenditure, and opposing trends: the decline in the amount of the net financial costs related to the new foray into the world of perfume by Fendi debt and the adverse impact of the rise in interest rates on the and Pucci, tight control over product costs and other operating financial expense related to the variable-rate portion of the debt. expenses once again improved profitability. Operating margin The balance corresponds to the change in the market value of as a percentage of revenue for this business group thus increased interest rate hedging instruments. by 0.6 points to 9.4%. With the exception of the new perfumes Other financial income and expenses amounted to a net expense of produced by Fendi and Pucci, all of the business group’s brands 45 million euros, compared to a net amount of other financial income contributed to this improvement. of 120 million euros for 2006. The financial cost of foreign exchange After having quadrupled in 2006, profit from recurring operations operations had a negative impact of 97 million euros for 2007; it for Watches and Jewelry increased by 76% in 2007 to 141 million had a negative impact of 45 million euros in 2006. Capital gains euros. This performance was driven by TAG Heuer and by the realized on the sale of various available for sale financial assets and improvement in the results of the other brands, notably Chaumet. dividends received from unconsolidated investments amounted to As mentioned above, operating margin as a percentage of revenue 73 million euros in 2007 compared to 185 million euros in 2006. for this business group soared 6 points to 16.9%. The Group’s effective tax rate was 27% as of December 31, 2007, Profit from recurring operations for Selective Retailing was down from 28% for 2006. This 1 point reduction is primarily 439 million euros, up 10% compared to 2006. Despite the attributable to the use or capitalization of tax loss carryforwards weakness of the yen, which had a significant impact on the and the effect of income tax rate reductions in several European buying power of Japanese tourists for a significant portion of 2007, countries (Italy, UK) on the deferred tax amounts recognized in DFS was able to increase its revenue on a constant currency basis the balance sheet. and its operating margin as a percentage of revenue remained Income from investments in associates was 7 million euros as of high. Sephora continued to improve its operating margin, despite December 31, 2007; it was 8 million euros in 2006. expenses resulting from its rapid expansion in Europe, the US, Profit attributable to minority interests was 306 million euros, China and the Middle East, thus confirming its highly profitable compared to 281 million euros for 2006. This mainly includes growth momentum. Le Bon Marché has firmly positioned itself minority interests in Moët Hennessy and DFS. as the most exclusive luxury and prestigious department store in Paris and continued to post strong profits. Operating margin as The Group’s share of net profit was 2,025 million euros, up 8% a percentage of revenue for the Selective Retailing business group compared to 2006 and up 41% compared to 2005. As was the case as a whole rose 0.2 to 10.5% points. in 2006, it represented 12% of revenue.

24 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

1.2 Wines and Spirits Principal developments

2007 2006 2005 Champagne and Wines In 2007, Moët & Chandon reinforced its global leadership. Revenue (EUR millions) 3,226 2,994 2,644 The brand recorded solid performances in its traditional markets Sales volume and spectacular growth in promising markets such as Russia, (millions of bottles) Central Europe, China and India. Its remarkable performance in Champagne 62.2 59.9 55.2 Japan should also be noted, the result of the work to build the Cognac 60.9 55.3 50.5 brand in this market that still offers great potential. Other spirits 28.8 26.6 27.9 Growth was achieved by the entire line of products, but was Still and sparkling wines 38.9 34.5 31.8 particularly tangible in the premium rosés, again demonstrating the Revenue by geographic region brand’s leadership role in this promising segment. The spectacular of delivery (%) launch of the Grand Vintage 2000, unanimously praised by the France 8 89 critics, allowed Moët & Chandon to create an event and accelerate Europe (excluding France) 29 28 27 its growth in the high-end segments of the market. United States 29 31 33 Japan 8 99The brand continued its very strong international media presence through the “Be Fabulous” promotional campaign. Asia (excluding Japan) 16 15 13 Other markets 10 99Dom Pérignon grew in its key markets, particularly in France Total 100 100 100 and Europe, and strengthened its position as a global leader in Profit from recurring operations luxury champagnes. 1,058 962 869 (EUR millions) Pursuing its strategy to create value, the brand accelerated its Operating margin (%) 32.8 32.1 32.9 development in the high-end segment with the international Operating investments 189 104 97 launch of Dom Pérignon Oenothèque 1993, which followed the (EUR millions) success of Dom Pérignon Rosé in 2006. New and innovative products – Marc Newson 2 or La Belle and the Jeroboam in Highlights partnership with Chaumet – enhanced the ultra-luxury offers. The Wines and Spirits business group recorded organic revenue The renovation of the brand’s packaging generated a synergy with growth of 13%, driven by the increase in volumes, improved these initiatives. Karl Lagerfeld continued his collaboration with product mix, and the implementation of a policy to raise prices. Dom Pérignon by designing a promotional campaign incarnated Based on published figures, revenue growth was 8% and profit by Claudia Schiffer. from recurring operations rose 10%. Ruinart recorded a new record year in 2007. This growth was Revenue for Champagne and Wines totaled 1,802 million euros, the result of the strategy to create value for the brand by giving with organic growth of 11% (7% based on published figures). priority to the premium products Ruinart Blanc de Blancs and Profit from recurring operations was 650 million euros, up 9%. Ruinart Rosé, and to the prestigious Dom Ruinart vintage. Its Champagne volumes rose 4%. three flagship countries in Europe played a key role in the growth and excellent results were recorded in Russia, Japan, and the United Revenue for Cognac and Spirits amounted to 1,424 million euros, States. Marked by exceptionally beautiful events, the year 2007 with organic growth of 16% (9% based on published figures) and saw, among others, the launch of the second Prestige Collection generated profit from recurring operations of 408 million euros, designed by Christian Biecher. an increase of 12%. Volumes for Hennessy cognac rose 10%. Mercier, a benchmark brand in France, confirmed its position. Moët Hennessy expanded its presence in China with the acquisition Basing its development on the values of friendship and of 55% of the share capital of Wen Jun Spirits, a producer of high- authenticity, the brand remained a major partner for the traditional end white alcohols. restaurant industry. As a result of an agreement with Belvedere Winery, Moët Veuve Clicquot Ponsardin confirmed the success of its strategy to Hennessy acquired the brand and Belvedere domain name in the create value. The recognized excellence of the wines, the creativity United States, becoming the owner of the luxury vodka brand of its innovations, and the support of major promotional plans worldwide. enhanced and intensified the dynamic image of the brand. The Moët Hennessy distribution network applied the planned price increases, thus strengthening its premium positioning.

Reference Document 2007 25 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

The brand continued to grow in its key countries, like the United In Asia, 2007 was another year of strong growth. In China, States, Great Britain, Italy and Japan, and rapidly expanded its Hennessy continued to strengthen its leadership in value in presence in new markets in Asia, Australia and Latin America. the world of premium spirits. The brand generated exceptional growth in this country, primarily on the basis of its V.S.O.P In one of the highlights of 2007, Veuve Clicquot Ponsardin and X.O, in which it is the unchallenged leader. It is in a very celebrated the one hundred thirty years of its yellow label during an favorable position for the future in this highly strategic market. international event in New York, the occasion for the presentation In the very competitive Taiwan market, Hennessy enjoys a of the “Yellowboams”, a limited series of Yellow Card jeroboams similar strong position. Hennessy is the leader in the high- completely handmade and luxuriously adorned with gold leaf growth Vietnam market. A new advertising film enhanced and labels in rare leathers. The excitement generated by Veuve the sophisticated and luxurious image of Hennessy X.O in Clicquot Rosé continued in all markets. The new “couture” box for Asia. The Hennessy Artistry global communications platform La Grande Dame beautifully represents the elegant and luxurious was deployed for the second consecutive year in China, Hong character of the 1998 vintage in brut and rosé. Kong, Taiwan and Malaysia. Throughout 2007, Krug improved its positions and consolidated In Europe, Russia positioned itself as the third pillar of growth for its targeted investments in its strategic markets. In the United Hennessy (after the United States and China). Russian consumers States, Japan, Great Britain, France, and Italy, Krug recorded appreciate all of the products, from V.S to the rarest cognacs. double-digit growth carried by the enthusiasm of champagne In Ireland, Hennessy V.S maintained its exceptional market share. lovers for its inimitable taste. The release of the Krug 1996 vintage In the promising markets of Central and Eastern Europe, the brand was a particular success on the international stage. Wine Spectator grew rapidly. ranked it as exceptional, from 99 to 100 points, the highest ever awarded to a champagne. The development of a new communications strategy and the investments made in Belvedere vodka after the purchase of Estates & Wines, which holds the sparkling and still wines of the brand in the United States accelerated its growth. All key Moët Hennessy, recorded double-digit growth in results for the countries advanced steadily, permitting ambitious objectives. fourth consecutive year. This success confirmed the pertinence of In 2007, Chopin vodka benefited from the work performed on its growth model, based on a policy of excellence and innovation, its repositioning toward the high end, which was accompanied by and on the super premium positioning of its brands. Growth was new packaging and an innovative promotional program. particularly strong in the United States, the world’s leading wine market in value, and in Asia and Latin America. Two years after its launch, the luxury 10 Cane rum grew steadily in the United States and expanded distribution to Château d’Yquem, the peak of the hierarchy of Sauternes wines, several major countries. achieved a superb performance in 2007. The delivery of the 2004 vintage was perfectly executed and the 2007 crop suggests For Glenmorangie whisky, two years after joining the LVMH a very great wine. Two Château d’Yquem tastings were held in group, 2007 was a remarkable year, in which all the elements Los Angeles in November 2007 for the greatest English-speaking forming the identity of the brand, particularly its packaging, and Asian critics. were revised in order to capitalize on its extraordinary heritage. A new product range, Glenmorangie Extra Matured, which replaced Cognac and Spirits the Wood Finish range, was also launched and the preparation of Hennessy, the undisputed world leader in cognac, accelerated its Glenmorangie Original, the flagship 10-year old whisky, was growth in volume in 2007. refined in order to enhance the quality. The first results of these The United States confirmed its position as the primary developments were extremely promising. Ardbeg whisky, which contributing market for Hennessy, which continues to be leader is prepared on the island of Islay, was exceptionally well received there in the cognac category, both in volumes and in value. The in the industry in 2007 (it has been named World Whisky of the brand focused its growth on a strategy to create value. It intensified Year in the 2008 edition of Jim Murray’s famous Whisky Bible), its promotional operations in selective points of sale and with and developed limited edition products for its “aficionados”. innovative programs in high-end establishments. It continued to The history of Wen Jun, from the name of a legendary Chinese expand its consumer base through more advertising-promotional figure, dates back more than 2,000 years. The distillery, which resources. An advertising campaign – signage, press and television, prepares one of the most famous and prestigious white alcohols titled Flaunt Your Taste, gave Hennessy high visibility and an in the country, has been operating without interruption since enhanced image of sophistication. At the same time, Hennessy the Ming dynasty in the 16th century. Since its acquisition in Artistry, an exceptional international communications program, spring 2007 by Moët Hennessy, a blend with an entirely new both in concept and impact, was deployed for the second consecutive packaging has been developed and was introduced in December year with equal success. in Beijing.

26 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Outlook The business group’s distribution network expanded by 35 stores to total 989 stores at December 31, 2007. In 2008, the brands of the Wines and Spirits business group will focus on their value creation strategy and their policy of Principal developments innovation. Price increases and further improving product mix will be actively continued, accompanied by substantial investments in Louis Vuitton communications, both for the star brands and for the “rising stars”. Louis Vuitton generated another year of strong growth. Moët Hennessy will continue to reinforce its distribution network The year 2007 was characterized by very steady growth in Europe, in markets with significant growth potential. strong performances in North America, and exceptional vitality in Asia, particularly in China and South Korea. The brand significantly strengthened its positions in all geographic regions 1.3 Fashion and Leather Goods with local customers and reaped the full benefits of the boom in world tourism. Revenue rose substantially thanks to new travel 2007 2006 2005 customers from Asia, Russia and the Middle East. Revenue (EUR millions) 5,628 5,222 4,812 As of December 31, 2007, the Louis Vuitton global retail network Revenue by geographic region of delivery (%) consisted of 390 stores. The brand opened a net 22 stores during France 9 99the year, including three in new countries and completed several Europe (excluding France) 20 19 17 notable renovation projects. United States 20 21 22 The year 2007 was marked by a strong dynamic innovation and Japan 22 26 30 enhancement of the permanent leather lines. The Damier Azur line Asia (excluding Japan) 23 20 18 introduced at the end of 2006 was a success alongside Damier Ebène, Other markets 6 54which continued to grow through the introduction of new models. The Monogram Vernis line added two new colors, Pomme d’Amour Total 100 100 100 and Amarante, while the Ivory and Verona shades respectively Type of revenue as a percentage of total revenue appeared in the Epi and Suhali lines. Louis Vuitton also created (excluding Louis Vuitton) new models (Beverly, Neverfull, Riveting, etc.) for its traditional Retail 49 50 50 Monogram and Epi lines. The other segments of ready-to-wear, Wholesale 38 36 35 footwear, watches and accessories recorded significant growth. Licenses 8 78To highlight the relationship between Louis Vuitton and the art world, Marc Jacobs intensified his collaborations with major artists Other 5 77 like Richard Prince and Takashi Murakami. Total 100 100 100 Profit from recurring operations In order to meet strong growth in current and future sales, 1,829 1,633 1,467 (EUR millions) Louis Vuitton significantly increased production hours at its Operating margin (%) 32.5 31.3 30.5 14 leather workshops. As a result of the growth in footwear, the brand expanded the capacities of its site in Fiesso d’Artico in Italy, Number of stores which houses all the expertise, from development to production, Louis Vuitton 390 368 345 for all footwear categories. Fendi 160 135 116 Other brands 439 451 430 Reflecting its eternal values and its core business, Louis Vuitton placed 2007 under the sign of the voyage: products, windows, Operating investments 246 319 281 (EUR millions) models, events returned to the roots of the brand. One of the high points of this theme was the launch of the new institutional Highlights campaign represented by Mikhail Gorbatchev, Catherine Deneuve, Steffi Graf and André Agassi who posed for the lens In 2007, the Fashion and Leather Goods group recorded organic of Annie Leibovitz on behalf of environmental organizations. revenue growth of 14% and improved its profit from recurring The Louis Vuitton Museum also presented at Asnières a new scenic operations by 12%. design titled “Voyages and voyagers”. The Louis Vuitton Cultural Louis Vuitton achieved a remarkable performance with another Space at the Maison des Champs-Élysées in Paris hosted the exhibits year of double-digit organic revenue growth accompanied by an “The temptation of space” and “Moscopolis”, a presentation of the exceptional level of profitability. work of eleven contemporary Russian artists. Fendi continued to maintain its profitable growth trend and earned exceptional media coverage when it presented its spring- summer 2008 collection on the Great Wall of China.

Reference Document 2007 27 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Fendi Marc Jacobs continued its rapid growth, reaffirmed its success The activity of Fendi in 2007 continued the excellent trend of in the United States, and rapidly expanded its international the previous two years. Double-digit organic revenue growth development. New major stores were opened in 2007 in Europe, paralleled new improvement in profit from recurring operations. China and the Middle East. The ready-to-wear Marc by Marc Jacobs lines generated high demand, and shoes and leather goods, the Ready-to-wear and footwear recorded excellent growth. The result of a major creative effort, also recorded excellent growth. new leather goods lines B-Mix, Crossword and To You generated Finally, the line of accessories, a segment launched in 2004, has solid performances, like the Chef line launched earlier with become a market reference and the basis for solid and ongoing continued success. The development of Fendi sunglasses is equally growth. Thanks to these results, the brand will continue to expand progressing well. its world presence in 2008. As a breathtaking symbol of the creativity and the rebirth of At Celine, the leather products, a priority strategic vector, recorded the Roman brand, a fashion show of the 2008 spring-summer a solid performance, thanks in particular to the new best seller collection, designed by Karl Lagerfeld for the ready-to-wear and – the Bittersweet line launched in 2006. The brand enjoyed the Silvia Fendi for the leather goods, was organized at the Great Wall success of the new promotional campaign photographed by Bruce in China in October. This spectacular and completely original Weber. It accelerated its development in China, opening three event in the fashion world, received extensive coverage from the new boutiques, and signed a partnership agreement to expand its international press, giving Fendi exceptional visibility. presence in Southeast Asia. The brand continued to expand its retail network, opening 25 new Kenzo continued the very positive trend of revenue growth and stores in all its geographic regions. It inaugurated its presence in improved profitability. The year 2007 confirmed this new trend, four new countries – Spain, Turkey, Switzerland and Bahrain – and had a network of 160 stores as of December 31, 2007. thanks to the work made under the Artistic Direction of Antonio Marras. The plan for the global deployment of the new store Fendi also returned to the perfume segment with the launch of concept inspired by the historic boutique in Place des Victoires Palazzo, developed within the Perfumes and Cosmetics business in Paris accelerated with the reopening of the flagship store in Place group of LVMH. de la Madeleine. New stores were opened in Bahrain, Croatia and Argentina among other locations. New partnerships were signed Other brands in the home furnishings and decor sector. With a stronger management, a coherent strategy and an optimized organization, Donna Karan turned in a very dynamic performance In 2007, Givenchy recorded a strong improvement in its last year, marked by solid improvements. The brand capitalized on profitability, thanks to an impressive growth in all its product the strength of its designs and its stylistic orientation deliberately lines. The stylistic relook, initiated in 2005, enabled an increased based on the values that have made it a cult fashion brand in the visibility of the brand following extensive press coverage. Givenchy United States. continued its momentum in women’s ready-to-wear thanks to Riccardo Tisci’s collections, which progressively became involved Throughout the year, Donna Karan enjoyed remarkable coverage with the brand’s core expressions. The accessories are also growing from the international press, which drove demand for all its products. strongly, particularly driven by the Nightingale line and the launch The deployment of the Donna Karan Gold and Icons collections of the Postino line. The brand strengthened its position in China in the luxury Collection line generated significant growth. In its by expanding its store network there. exclusive boutiques, Donna Karan recorded double-digit revenue growth in dollars. The DKNY ready-to-wear products increased Thomas Pink, the British specialist in high-end shirts, turned their retail success, which should lead to a solid growth in orders in a particularly dynamic performance in 2007, reflected in the for the coming seasons. opening of 16 owned or franchised new stores, a renovated Internet site, and the design of several new lines for men, combining comfort Loewe achieved an excellent performance in 2007 in terms of and elegance and adapted to all occasions. revenue and profitability. The success of its emblematic Amazona line has now been enhanced by the success of the newest Napa Aire Pucci took advantage of its 60th anniversary to expand its visibility line, which has become a new best seller. The brand turned in a substantially. The events that were held in Florence, Tokyo and remarkable performance in Japan, where it continues to increase Miami generated significant media coverage. Revenue for the market share, and in China where it is progressively building its retail brand rose sharply. New stores were opened in Japan, Russia and network. The A rtistic D irection entrusted to Stuart Vevers and the the Middle East. A line of eyewear was launched in September and deployment of a new boutique concept designed by Peter Marino the perfume Vivara, developed within the LVMH Perfumes and form the foundation for ambitious objectives in the coming years. Cosmetics business group, was launched at year-end.

28 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Berluti intensified its year on year growth, while remaining 1.4 Perfumes and Cosmetics an exceptional brand for its customers. In 2007, revenue rose substantially in the 14 countries in which the brand is present. 2007 2006 2005 Nine stores, both owned and franchised, were opened during the Revenue (EUR millions) 2,731 2,519 2,285 year. The highly successful launch of the Fil d’Ariane and Démesures Revenue by product footwear lines and the initiation of a new communications campaign category (%) illustrating the footwear and leather goods designs from Berluti Perfumes 55 52 53 were the highlights of 2007. Cosmetics 26 28 28 Outlook Skincare products 19 20 19 Louis Vuitton again intends to strengthen its lead in 2008 and, Total 100 100 100 for this purpose, will deploy an ambitious program to develop Revenue by geographic region of delivery (%) new products while it continues to extend its global distribution network. The brand will open new stores in China, Asia, Europe, France 16 17 18 etc. It is also preparing for the inauguration of new Maisons Louis Europe (excluding France) 43 41 40 Vuitton in Hong Kong and London. United States 8 99 Japan 6 78 The year will be dynamic in terms of communication, with a new Asia (excluding Japan) 13 13 11 major fashion campaign and the continuation of the institutional campaign, which will call on new extraordinary personalities. Other markets 14 13 14 Total 100 100 100 Fendi also has ambitious objectives: the brand will enhance its Profit from recurring operations 256 222 173 leather goods offer by capitalizing on its icon products like the (EUR millions) Baguette line, which will celebrate its tenth anniversary in 2008, Operating margin (%) 9.4 8.8 7.6 and Selleria. Ready-to-wear and footwear will continue steady Operating investments 115 98 115 growth. Fendi will also further expand and optimize its distribution (EUR millions) network. Number of stores 55 48 43 The other brands of the Fashion and Leather Goods business group will intensify their growth in line with their strategic plans. Highlights With more effective organizations, very substantial operational The Perfume and Cosmetics business group recorded organic improvements, an increasing renewed creativity and rigorous work revenue growth of 12%. This unparalleled vitality was driven on all management parameters, they are in an excellent position to both by innovations and by the expansion of the flagship lines. reach their full potential and boost their contribution to the total All brands in the portfolio generated growth as did all product results of the business group. categories, perfumes, make-up and skincare. Profit from recurring operations rose 15%. The business group consolidated its European leadership. China, Russia, the Middle East, where our brands made solid advances, confirmed their high potential. Parfums Christian Dior successfully launched two new perfumes, Fahrenheit 32 for men during the first half of the year, and Midnight Poison for women in September, and developed the Capture skincare line. The brand celebrated its 60th anniversary spectacularly. Guerlain launched L’Instant Magic and the foundation Parure and opened a luxury boutique in Moscow. Fendi, with Palazzo, and Pucci, with Vivara, returned to the perfume world at the end of 2007.

Reference Document 2007 29 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Principal developments its remarkable and dynamic performance. The premium skincare line Orchidée Impériale was developed and continued its steady Parfums Christian Dior advance in all regions. In 2007, Parfums Christian Dior recorded solid revenue growth, surpassing the overall trend in its competitive market, which was After the magnificent renovation of its site at 68, Champs-Élysées accompanied by new and strong improvement in its profitability. and the remodeling of its Left Bank site on rue de Sèvres in Paris, The brand confirmed this dynamic performance in all geographic Guerlain deployed its new counter concept in Moscow by opening regions. Europe, its leading market, strengthened its potential up a high-end luxury boutique in the prestigious Tsum store. with the growth in Russia, a country where Dior is already Other brands positioned as a leader. Asia benefited from the dynamic Chinese Parfums Givenchy, which celebrated its 50th anniversary in 2007, market. In the United States, the brand successfully continued took a new step in its development by achieving better than market its selective distribution strategy, and gained market share with a revenue growth rates, while beating its initial objectives for the record growth rate. Its performance in the Middle East confirmed year for profit from recurring operations. the potential of this large market. The brand posted steady growth in its priority markets. It opened Dior continued its strategy for greater selectivity, both in its first location in China over the summer. distribution and in the product offer . Driven by a particularly high rate of innovation and the remarkable vitality of its top classics, the Its dynamic performance was driven by an ambitious innovation business group’s master brand recorded higher revenue in the three policy, illustrated in particular by the roll-out of the new Ange ou product categories. The perfume segment performed exceptionally Démon perfume for women, in countries where it was not present well, with a strong contribution from the launch of Midnight Poison in 2006, all markets in which this new product recorded solid and Fahrenheit 32 and the steady advances made by J’Adore, Dior results. The strong impact of the new marketing campaign for the Homme and Miss Dior Chérie. The dynamic performance of the line clearly helped to drive this growth. The make-up and skincare skincare products was particularly driven by the development of segments also contributed to the vitality of Parfums Givenchy, the Capture line, which confirmed its ambitious objectives in the with strong, double-digit growth in all regions. The launch of the anti-aging segment, and by the launch of an exceptional product new lipstick Rouge Interdit was one of the highlights of 2007. L’Or de Vie. In the make-up segment, the new Rouge Dior, the Parfums Kenzo recorded a good year, marked by steady growth. foundation Diorskin and the Backstage line recorded formidable This dynamic trend was driven by the solid performance of the performances. brand’s three foundation perfumes, FlowerbyKenzo, KenzoAmour and Supporting the various new products launched and the initiatives Eaux by Kenzo, and by the launch of TokyobyKenzo for men, which conducted over the year were special promotional efforts which won a younger customer segment. Parfums Kenzo continued to contributed to dynamic sales and enhanced the prestige of the expand in Europe, the Middle East and the United States, with a brand. The new star Eva Green embodies the perfume Midnight special emphasis on Russia, a market with a very strong growth Poison, while Sharon Stone, Charlize Theron and Monica Bellucci potential. increased the radiance of Dior and its products through new Two new identity-building promotional campaigns dedicated to marketing campaigns and special events. FlowerbyKenzo and KenzoAmour enhanced the poetic image that Guerlain distinguishes the brand and constitutes one of its strongest assets in the world of perfumes and cosmetics. Guerlain performed exceptionally well in 2007. Confirming the dynamic performance stimulated and accelerated in the last few BeneFit Cosmetics continued its rapid growth in all its markets years, the brand outpaced the market with remarkable revenue and maintained a very high level of profitability. Benefiting from growth and sharply improved its profitability. its original positioning, appreciated for its playful and unusual style, the brand strengthened its position among the make-up Guerlain reaped the benefits of a strategy based on high-end leaders in the United States and Great Britain, its most important innovation and the concentration of its investment efforts in its territories. It confirmed its success in all Asian and European priority European and Asian markets. The brand continued its countries where it continued to expand its presence, and enjoyed vigorous growth in all product categories. The women’s perfume a very promising entry in the Chinese market. Among its new L’Instant Magic, launched worldwide in September, was very well products, the make-up line Love Your Look and the brightening received. The House also continued to illustrate its commitment face primer That Gal were extremely successful. to high-end perfumes: new editions of its mythic perfumes and exclusive creations appeared throughout the year, a testimony to the Make Up For Ever again recorded an excellent performance in unique expertise of Guerlain, a creative perfume maker since 1828. all its markets. Backed by its recognized expertise in professional The make-up segment, driven by the star lines Terracotta and make-up, the brand is attracting a demanding customer base. It KissKiss and by the success of the new Parure foundation, continued generated very substantial revenue growth, driven not only by

30 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management the expansion of its retail network, but also by steady organic 1.5 Watches and Jewelry growth. In the United States it is definitely establishing a position as the benchmark in the professional make-up segment and is 2007 2006 2005 increasingly successful with the public. Its dynamic performance Revenue (EUR millions) 833 737 585 in France and China was also remarkable. The line of Aqua Eyes Revenue by geographic region waterproof eyeliners, launched in 2007, was extremely successful of delivery (%) with both the public and professional make-up artists. France 7 78 Acqua di Parma, Parfums Loewe and Fresh recorded a very Europe (excluding France) 24 25 23 good year in terms of revenue and profit. The launch of Colonia United States 25 25 24 Intensa strengthened one of the flagship lines of Acqua di Parma Japan 13 14 16 and highlighted its exclusive positioning. For Parfums Loewe, Asia (excluding Japan) 15 14 15 the year 2007 was marked by the successful launch of the new Other markets 16 15 14 fragrance for women Quizas Quizas Quizas. Fresh, whose natural products respond to a high-growth consumer trend, benefited from Total 100 100 100 Profit from recurring operations the work to renovate its packaging. 141 80 21 (EUR millions)

Outlook Operating margin (%) 16.9 10.9 3.6 Operating investments The Perfumes and Cosmetics business group, based on the 28 25 28 (EUR millions) continuous growth achieved in recent years, offers strong potential for gaining market share and improving its operating margin Number of stores 90 82 70 in 2008. Highlights Christian Dior has again set an objective for higher than market revenue growth. To achieve this objective, the brand intends to The Watches and Jewelry business group recorded organic revenue solidify and strengthen its strategic advances, by continuing to growth of 19% and a 76% increase in profit from recurring assert its status as a star brand and its positioning of perfume operations, even more remarkable since it nearly quadrupled craftsman and creator. This effort will again be based on a sustained in 2006. policy of innovation and refinement to serve its flagship products TAG Heuer developed its icon product lines, introduced the Grand lines in perfume, make-up and skin care. Dior will work to Carrera line of automatic watches and chronographs and announced consolidate its position as a European leader and accelerate its a diversification in the mobile telephone sector. advances in markets with strong growth potential. Zenith won the Public Grand Prize in the Geneva Watchmaking In 2008, Guerlain will celebrate 180 years of creation dedicated Grand Prix for its Defy Xtreme Open Stealth chronograph. to beauty. The company will vigorously continue its expansion with a plan for innovations designed to reinforce its strategic lines: Sharon Stone became the icon for Dior’s Christal collection. Shalimar, L’Instant, Terracotta, Parure, KissKiss, Orchidée Impériale. Chaumet successfully established its presence in Chinese Asia. These initiatives will be enhanced by two new major project launches in the perfume and make-up segments, where Guerlain De Beers introduced its first watch line. has a strong opportunity to consolidate its position. The Omas brand of writing instruments was sold in 2007. Parfums Givenchy is projecting a new year of solid growth Principal developments in 2008, with the launch of a new line of perfume for men, to be embodied by one of the most famous international personalities In 2007, for the fourth consecutive year, the dynamic performance in his field, along with a new version of the Very Irresistible line for of the LVMH watch and jewelry brands surpassed that of competing women and a strong innovation in the make-up category. companies. The organic revenue growth of 19% recorded by the business group was higher than that of the Swiss watch market Parfums Kenzo will celebrate 20 years in the perfume industry and higher than the published average increase of the principal in 2008. Its future initiatives include the creation of limited players in the jewelry segment. editions in its emblematic lines, the launch of a major perfume for men in the second half of the year, and the launch of a star While each brand focused its investments on the most profitable product in the KenzoKi skincare line. and growing markets, overall growth remained balanced among the principal geographic regions and between mature and emerging markets. Thus, in 2007, ambitious objectives were achieved in China, India, the Middle East and Russia, while market share was gained in Europe, the United States and Japan.

Reference Document 2007 31 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

In a context of unfavorable currency conditions, special attention Montres Dior was given to price increases and the global harmonization Montres Dior successfully continued its strategy of creating high- of prices, to targeting and to the effectiveness of advertising end luxury watches tied to the world of fashion. investments, and to productivity, both in the companies and in the With an elegance of design and the originality of the materials, distribution subsidiaries. This rigorous management, orchestrated the Christal line was exceptionally successful internationally. The by experienced and motivated teams, generated 76% growth in union of crystal, sapphire and diamonds resulted in the creation profit from recurring operations, even though it had already nearly of very exclusive pieces sought after globally. The advertising quadrupled in 2006. investments continued and now benefit from the radiant image TAG Heuer of Sharon Stone, ambassador of Christal. 2007 was another record year for TAG Heuer, which continued The Chiffre Rouge line continued its growth based on an exclusively its strategy of up market positioning and recorded strong, double- automatic offer for men. digit growth in all its markets. Chaumet The star brand, a dynamic leader in the prestige watch and sports Chaumet recorded very steady revenue growth in all its markets chronograph segment, expanded its icon lines Aquaracer, Link and substantially improved its profit from recurring operations. and Carrera with models for both men and women, and launched two new watch innovations: the calibre S, an electromechanical The brand successfully pursued the development initiated in movement now present on certain models in the Link and Aquaracer China (Hong Kong, followed by Shanghai in December 2007) and lines, and Grand Carrera, a new line of exclusively automatic Taiwan. It is in the process of regaining control of its distribution watches and chronographs. in South Korea. The TAG Heuer communications campaign is supported by a team In line with its strategy of targeted expansion, Chaumet also that is unique in the world, composed of ambassadors distinguished opened new boutiques in London, Singapore, Russia and the by their outstanding performance and extraordinary personalities. Middle East, but most of the growth in sales was generated by They include Tiger Woods, Maria Sharapova, Brad Pitt, Uma improved productivity in each store. Thurman, Kimi Räikkönnen, the new world Formula 1 racing In order to strongly anchor the Chaumet style, creativity was champion, Lewis Hamilton, a young F1 rising star, and Shah Rukh focused on the strategic product lines. The new collections Khan, the most famous Indian actor. consolidated the brand icons: Liens and Attrape-Moi in jewelry, The brand modernized the architectural concept of its boutiques Dandy and Class One in watches. and worked to expand its network. In 2007, new franchised stores De Beers were also opened in Hong Kong, China, Vietnam, Malaysia, The De Beers brand confirmed its potential as a diamond jeweler. Singapore, Bahrain and South Africa. In other markets, TAG It recorded very solid growth driven by the success of its collections Heuer expanded its presence in the major department stores and and its creations, a meld of original design and diamonds of with the leading multi-brand retailers. extraordinary quality in luxury jewelry and in the engagement Zenith ring segment. The Talisman line, which magnifies the diamond Manufacture Zenith consolidated its growth and established its in all states, has become an icon. De Beers opened boutiques in positioning in luxury watches. The brand achieved the greatest Japan, Seoul, Moscow, Hong Kong, Taipei, Houston, Washington, progress in Europe, China, the United States, Russia and the Middle Dubai and Jeddah. The year 2007 was also marked by the launch East and significantly improved its profit from recurring operations. of its first watch collection, a new promotional campaign and the creation of an Internet site for sales in the United States The year 2007 was dominated by the enhancement of the brand’s (www.debeers.com). emblematic lines, such as the Class and Chronomaster collections, and by the deployment of the new, sports-inspired Defy line, Fred which was highly successful and recognized with the Geneva Fred recorded strong growth in France. This momentum was driven Watchmaking Grand Prize. Zenith, which opened a new horizon by its updated offer with the Princess K and Miss Fred lines, by a new with this line, a sports watch imbued with a spirit of luxury, also advertising campaign, and by the modernization of its boutique expanded its high-end watches with in particular new launches of concept. The brand opened its first franchised stores in Beijing and complications and Tourbillons. in Dubai and, at year-end, relaunched its legendary Force 10 line.

32 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Outlook Le Bon Marché generated strong growth last year, driven by the dynamic performance of all its departments, and continued to Pursue steady organic growth, continue to gain market share, and renovate its retail spaces. consolidate the profitability that has increased significantly in the last four years are the objectives of the Watches and Jewelry Principal developments business group in 2008. The largest investments will be used to expand watch production capacities and to open stores in the center DFS of metropolitan areas and strategic locations. In a context of reduced spending by Japanese travelers penalized by the weakness of their national currency, DFS revenue growth was TAG Heuer will continue to integrate its watchmaking operations driven by the expansion of Asian tourism, with rapid growth in at La Chaux-de-Fonds and expand its network of boutiques. As it travelers from China. The dynamic vitality of these new customers, continues its positioning in the high end watchmaking segment, perfectly anticipated and placed at the center of the strategy of the brand will roll out its line of portable telephones in partnership the world leader in travel retail, represents a significant growth with the company Modelabs. driver. In order to continue to enhance its attractiveness in this Zenith will continue the modernization of its Factory in Le high-growth market segment, DFS initiated the expansion and Locle. Chaumet and De Beers will selectively expand their redesign of its stores in Hong Kong and Singapore. store networks. The launch of new creations will enhance the To implement its strategy of expansion into new territories, DFS emblematic lines in all watch and jewelry brands. Christian Dior also inaugurated its presence in Vietnam through a joint venture will introduce several new products in the Christal line. in 2007, and began operating concessions at the international airport in the Indian city of Mumbai in January 2008. 1.6 Selective Retailing While continuing the construction of the luxurious Galleria, scheduled to open on the site of the Four Seasons Hotel in Macao 2007 2006 2005 in 2008, DFS is also working on a project for another location at Revenue (EUR millions) 4,179 3,891 3,648 this high-potential destination, an opportunity that should become Revenue by geographic region a reality in 2009. of delivery (%) France 24 24 24 Miami Cruiseline Europe (excluding France) 10 98Revenue and profitability of Miami Cruiseline were up. The United States 39 40 40 company, which holds solid positions in the cruise market, opened Japan 3 33new retail spaces on ships. The increasingly high-end positioning of its boutiques and the efforts made to adapt its product offer to the Asia (excluding Japan) 20 20 21 customers of various cruise lines remain priorities and continued Other markets 4 44 to yield results. Total 100 100 100 Profit from recurring operations Sephora 439 400 347 (EUR millions) Confirming its dynamic and profitable growth, Sephora again Operating margin (%) 10.5 10.3 9.5 generated higher revenue in 2007 and continued to improve Operating investments 236 175 131 its operating margin. Present on three continents, Sephora had (EUR millions) an excellent year, both in Europe and in North America, and Number of stores continued to advance in new high-potential regions (China, Sephora 756 621 558 Central Europe and the Middle East). Sephora’s global network Other trade names 153 149 156 consisted of 756 stores at the end of 2007. Revenue for the online sites Sephora.com (USA), Sephora.fr (France) and Sephora.cn Highlights (China) continued to grow. The Selective Retailing business group posted organic revenue In Europe, Sephora recorded solid revenue growth on a same-store growth of 12% and improved its profit from recurring operations basis. It continued to expand in 2007, with 67 net new stores. by 10%. These stores were primarily opened in countries where the company has already developed strong positions and where there is still DFS expanded its geographic coverage to new territories: Vietnam, high potential for growth (France, Poland, Spain, Italy, Romania, a market opened in 2007, India and Macao, markets it will enter etc.). Sephora also inaugurated its presence in the new markets of in 2008. Slovakia, Croatia, Serbia and Turkey. Confirming the worldwide success of its concept, Sephora opened stores in the Middle East and continued its expansion with excellent results in all its strategic markets.

Reference Document 2007 33 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Its expansion in the Middle East was another highlight of 2007. Special events designed to promote the image of Le Bon Marché The first stores were opened in the United Arab Emirates, Qatar, continued at a steady pace. The Paris-Tokyo exhibit, organized in Bahrain, Saudi Arabia and Oman, and their sales performance the fall, was extremely successful. surpassed expectations. Europe and the Middle East together represent nine new countries that are all growth drivers. Outlook On the American continent, Sephora opened 43 stores in 2007, In 2008, DFS will continue to focus its efforts on implementing raising its network to 185 stores (177 in the United States and its up market positioning and winning Asian customers . Vietnam’s 8 in Canada). Sephora continued to improve its performance and contribution over a full year and the new store openings in Macao increase its market share in the United States, with double-digit and Mumbai allow DFS to set a new profitable growth objective. growth on a same-store basis for the seventh consecutive year. In 2008, Sephora will continue its international expansion at a Recently opened stores exceeded their objectives, reflecting steady pace, both in its key markets and in new territories, and efficient location targeting and, in general, Sephora’s ability to will continue to expand its product offer in profitable segments. optimize its growth model in the United States. The performance Sephora’s goal is to intensify its profitable growth and will build of the Canadian stores was also extremely dynamic. steadily on its policy of innovation and exclusivity in order to do so. The commercial success achieved in China was also on target. Le Bon Marché will continue the second renovation phase for Sephora is working to identify carefully the expectations of Chinese customers, to expand its offers in terms of brands, and the home sector until September 2008. The dynamic reopening to enhance the appeal of its stores, a total of 30 on December 31, of these new retail spaces will contribute to the projected 2007. These stores are primarily concentrated in Shanghai and growth. In addition, the very profitable jewelry and costume Beijing, but Sephora is gradually expanding its presence to other jewelry sectors will be expanded. La Grande Epicerie de Paris cities in the provinces. will expand its activities and its offer of rare products to define its unique character. In all the geographic regions in which it is present, Sephora stressed its strategy of differentiation through innovation, exclusivity and service, thus boosting its status as an expert in beauty. This policy 2. OPERATIONAL RISK FACTORS AND is reinforced by steady investments in training sales counselors. INSURANCE POLICY On all the continents where Sephora is present, an in-house school offers each counselor a training course structured on several levels, to give them the opportunity to acquire and perfect the expertise 2.1 Operational risk factors needed to become a “beauty coach”. Counterfeit and parallel retail networks The development of make-up and skincare products under the Sephora brand represents an additional growth driver, unique The Group’s brands, expertise and production methods can be because of its size within its competitive universe. The major counterfeited or copied. Products may be distributed in parallel work completed each year to renovate and modernize its stores retail networks without the Group’s consent. also contributes to the brand’s success, as does its effective customer Around the world, LVMH is known for its brands, unrivaled loyalty program: the Sephora loyalty card, which is offered expertise and production methods unique to its products. selectively, and the card-related services are being progressively expanded to all European countries and were introduced in the Brands are the cornerstone of the Group’s business strategy. As United States in 2007. a result, the legal protection of its trademarks and brands is an absolute necessity, especially for the Louis Vuitton brand. Thus, Le Bon Marché brands, product names and trademarks are always filed or registered Le Bon Marché recorded significant revenue growth in 2007, to guarantee legal protection both in France and in other countries. combined with improved profitability. All departments of the In general, the Group takes all measures at the international level store contributed to this growth. to ensure such legal protection is complete. Capitalizing on its unique character, and on the continued redesign The Group’s products, particularly leather goods, are subject to of its sales spaces, the flagship department store on the left bank counterfeiting, especially in Europe and South East Asia. stands out a little more each year as the benchmark for luxury and prestige in Paris. Continuing to build on its assets, the store Moreover, the Group’s perfumes and cosmetics may be found, initiated a major transformation of the home furnishings space, without LVMH’s control, in points of sale that are inappropriate to be completed over three years. A first stage of the store’s second for the image or nature of these products (known as parallel or floor renovation was completed in 2007. “gray market” trade).

34 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Counterfeiting and parallel distribution have an immediate adverse Worldwide operations effect on revenue and profit and may damage the brand image of The Group conducts business internationally and as a result is the relevant products over time. LVMH takes all possible measures subject to various types of risks and uncertainties. These include to protect itself against these risks. currency fluctuations which can affect transactions, customer In particular, an action plan has been specifically drawn up to purchasing power, and the value of operating assets located abroad, address the counterfeiting of Louis Vuitton products. This involves economic changes that are not necessarily simultaneous from one close cooperation with governmental authorities, customs officials country to another, and customs regulations or import restrictions and lawyers specializing in these matters in the countries concerned. imposed by some countries that may, under certain circumstances, LVMH also plays a key role in all of the trade bodies representing penalize the Group. Please see the “Financial policy” section below, the major names in the luxury goods industry, in order to promote for further information concerning the currency hedges used to cooperation and a consistent global message against counterfeiting, mitigate foreign exchange risks. all of which are essential in successfully combating the problem. It is important to note that LVMH’s activity is equally spread In addition, the Group takes various measures to fight the sale between three geographical and monetary regions: Asia, the euro of its products through parallel retail networks, in particular zone and the United States. This geographic balance helps to offset by developing product traceability, prohibiting direct sales to the risk of exposure to any one area. those networks, and taking specific initiatives aimed at better controlling retail channels. In 2007, the cost of these initiatives Finally, the LVMH Group operates to a very limited degree in was 16 million euros. countries which impose restrictions on repatriation of profits or access to foreign exchange. Competition Other risk factors LVMH faces intense competition from an increasing number of market participants and product offerings. Within this Customer risk environment, the positioning of LVMH products depends upon Because of the nature of its activities, the majority of the Group’s the image of its brands and the exemplary quality and innovative sales are not affected by customer risk. Sales are made directly to content of its products. Other factors influencing this positioning customers through our Selective Retailing network, the Fashion include product design and style, brand image and reputation. and Leather Goods stores and, to a lesser extent, the Perfumes and Competition in the markets in which LVMH operates is also being Cosmetics stores. Together, these sales accounted for approximately driven by the concentration of retail networks and the emergence of 66% of total revenue in 2007. new players. This is true for Wines and Spirits as well as Perfumes Furthermore, for revenue not included in this figure, the Group’s and Cosmetics which are currently facing pressure on margins, businesses are not dependent on a limited number of customers a plethora of rival product launches and encroachment by retail whose default would have a significant impact on Group activity chains. Competition is also intensifying in Fashion and Leather level or earnings. Goods, where the development and constant improvement of products constitute LVMH’s primary strengths. Country risk In general, the LVMH Group has little or no presence in politically Regulations instable regions. In France and the other countries in which the Group operates, The other risk factors, not directly related to business activities many of its products are subject to specific regulations. Regulations but to financing and investment transactions, are described in the apply to production and manufacturing conditions, as well as to “Financial policy” section below. sales, consumer safety, product labeling and composition.

Seasonality 2.2 Industrial and environmental risks Nearly all of the Group’s activities are subject to seasonal variations To identify, analyze and provide protection against industrial and in demand. Historically, a significant proportion of the Group’s environmental risks, the LVMH Group relies on a combination of sales—approximately 30% of the annual total—has been generated independent experts and qualified professionals from various Group during the peak holiday season in the fourth quarter of the year. companies, and in particular safety, quality and environmental Unexpected events in the final months of the year may adversely managers. The definition and monitoring of the Group’s risk affect the Group’s business volume and earnings. management policy are centralized by the Finance Department.

Reference Document 2007 35 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

2.2.1 Mitigating industrial risks Since 2004, the Group has made use of a risk-mapping tool enabling the systematic identification and documentation of The LVMH Group has consistently applied the highest safety its major operational risks based on a shared framework. Risk- standards as part of its policy on industrial risk prevention. Working mapping based on severity level and occurrence probability allows with its insurers, LVMH applies HPR (Highly Protected Risks) for identification and management of key risks. standards, the objective of which is to significantly reduce fire risk, and has established an incentive program for risk prevention This information and early warning tool is also used in decision- investments which is taken into account by insurance companies making since the identification not only of risks, but also of potential in their risk assessment process. weaknesses in security procedures and protective actions, enables managers to take preemptive action and implement corrective This approach is combined with an industrial and environmental measures to reduce the likelihood of their occurrence. risk monitoring program. In 2007, engineering consultants devoted about 250 audit days to the program. 2.3 Risk coverage and insurance policies In addition, prevention and protection schemes include contingency planning to ensure business continuity. LVMH has a dynamic global risk management policy based primarily on the following: 2.2.2 Preventing product-related risks; Incident - systematic identification and documentation of risks; management - procedures for risk prevention, occupational safety and protection In addition to industrial safety, LVMH companies also work to of persons and industrial assets; ensure greater product safety and traceability. The HACCP method - implementation of international incident management systems (Hazard Analysis Critical Control Point) is used by companies in and contingency plans; the Wines and Spirits and Perfumes and Cosmetics business groups. This approach aims notably to reinforce the Group’s anticipation - a comprehensive insurance program to reduce the financial and responsiveness in the event of a product recall. consequences of major events on the Group’s financial position; - worldwide coordination of ‘‘master” and centralized insurance A legal intelligence team has also been set up in order to better programs. manage the heightened risk of liability litigation, notably that to LVMH’s global approach is primarily based on transferring its risks which the Group’s brands are particularly exposed. to the insurance markets under reasonable financial terms, within 2.2.3 Risks incurred by all Group activities the limits of the conditions available in those markets both in terms of scope of coverage and limits. The extent of insurance coverage is The business of the Group’s companies is such that particular directly related to the constraints of the insurance market. attention is paid to exposures arising from the storage and transportation of raw materials and finished goods. Compared with LVMH’s financial capacity, the Group’s level of self-insurance does not seem significant. The deductibles payable by Due to the geographical locations of its operations, the Group’s Group companies in the event of a claim reflect an optimal balance businesses may be exposed to natural catastrophes. between coverage and the total cost of risk. Insurance costs paid 2.2.4 Loss experience by Group companies are less than 0.35% of consolidated revenue. In 2007, the Group’s businesses did not suffer the impact of any The financial ratings of the Group’s main insurance partners are significant disasters. All losses were fully covered by the Group’s reviewed on a regular basis. insurance policies. The main insurance programs coordinated by LVMH are designed to cover property damage and business interruption, transportation, 2.2.5 Verification of the proper application of risk third party liability and product recall. management policies LVMH conducts regular site visits and uses reporting procedures 2.3.1 Property and business interruption insurance to monitor the implementation and operation of risk management Most of the Group’s manufacturing operations are covered under a actions at Group entities. This enables the Group to review consolidated international insurance program for property damage and assess the pertinence of its risk management policy on an and associated operating losses. Other business operations are ongoing basis. covered under programs coordinated at corporate level.

36 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Property damage insurance limits are provided in line with the values - increase in cash, cash equivalents and current available for of assets insured. Business interruption insurance limits reflect gross sale financial assets; margin exposures of the Group companies for a period of indemnity - the Group’s financial flexibility, based on a significant reserve extending from 12 to 24 months based on actual risk exposures. of confirmed credit lines. The upper limit of this program is 1 billion euros, an amount Thanks to substantial cash flow from operations, net financial determined on the basis of the Group’s maximum possible loss. debt was again reduced from 3,400 million euros at December Coverage for “natural events” provided under the Group’s 31, 2006 to 3,094 million euros at year-end 2007. international damage insurance program is limited to 50 million Year-end equity before appropriation of profit increased by 8% euros per claim and 150 million euros per year. These limits are to 12,528 million euros thanks to the growth in 2007 net profit, in line with the Group companies’ risk exposures. despite the negative impact of translation adjustments resulting 2.3.2 Transportation insurance from the year-on-year depreciation of the US dollar in relation to the euro and the payment of dividends in the amount of All Group operating entities are covered by an “Inventory and 842 million euros. Transit” transportation insurance contract. The upper limit of this program (some 50 million euros) corresponds to the maximum • Maintaining a prudent foreign exchange and interest rate risk transportation liability. management policy designed primarily to hedge the risks generated directly and indirectly by the Group’s operations 2.3.3 Third-party liability and investments. The LVMH Group has implemented a third-party liability and With regard to foreign exchange risks, the Group continued worldwide product recall insurance program for all its subsidiaries to hedge the risks of exporting companies using call options or throughout the world. This program is designed to provide the ranges to limit the negative impact of currency depreciation while most comprehensive coverage for LVMH’s known risks, given the retaining most of the gains in the event of currency appreciation. insurance capacity and coverage available internationally. This strategy enabled the Group to obtain hedging rates for the US dollar and the yen, its two main invoicing currencies, higher Coverage levels are in line with those of companies with comparable than their respective average annual exchange rates. business operations. • The increasing use of borrowing in the French commercial Environment and accidental pollution-related risks are covered paper market, while preserving a high proportion of long term under this program. financing within the Group’s net financial debt. Specific insurance policies have been implemented for countries • Maintaining a balanced investment profile, as exemplified in where no state insurance schemes are available for work-related 2007 by the increase in the amount of cash, cash equivalents accidents, such as the United States. Coverage levels are in line with and current available for sale financial assets. Investments other the various legal requirements imposed by the different states. than money-market investments are mostly made with the aim of preserving capital, experiencing low volatility and a moderate 2.3.4 Coverage for special risks exposure to the general movement of the equity markets. The Insurance coverage for political risks, directors’ and officers’ Group holds directly and by means of derivatives a limited equity investment portfolio. Overall, the performance of non liability, fraud and malicious intent, natural catastrophe, acts of money-market investments was satisfactory in 2007. terrorism, data corruption or data loss, credit risk or environmental risks, is obtained through specific worldwide or local policies. • Controlling financial expenses. The cost of net financial debt increased in 2007, totaling 207 million euros, compared with 173 million euros in 2006. 3. FINANCIAL POLICY This increase is due to the rise in short term interest rates, particularly for loans denominated in euros, the Group’s primary During the year, the Group’s financial policy focused on: debt currency, whose one-month interest rate average rose by over 30% in 2007. The impact of this rise exceeded that of the • Improving the Group’s financial structure, as evidenced by the reduction in average net financial debt. The Group nevertheless key indicators listed below: managed to limit in 2007 the impact of interest rate increases in - continued growth in equity; euros, Swiss francs and US dollars thanks to the high proportion - decrease in net debt; of its fixed rate loans at the beginning of the fiscal year. - maintaining a high-level weighting of long term debt in net Financial income and expenses were favorably impacted by financial debt; proceeds from the sale of financial assets, various short-term

Reference Document 2007 37 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

investments or shares of mutual funds , as well as dividends This risk is managed using interest rate swaps and purchases of received, albeit for amounts less than in 2006. Moreover, the interest rate caps (protections against an increase in interest rate) recognition of the change in value of the ineffective portion of designed to limit the adverse impact of unfavorable interest rate foreign exchange hedges had a significantly bigger adverse impact fluctuations. on financial income and expenses than in the prior fiscal year. 3.1.3 Exposure to equity market risk • Pursuing a dynamic dividend payout policy to shareholders, to enable them to benefit from the company’s excellent The Group’s exposure to equity market risk relates mainly to its performances over the year: treasury shares which are held primarily for stock option plans and bonus share plans. The Group also now holds LVMH share-settled - an interim dividend for 2007 of 0.35 euro was paid in calls to cover these commitments to employees. LVMH treasury December 2007; shares, like call options, are considered as equity instruments - proposal of a total gross dividend of 1.60 euro per share for under IFRS, which have no impact on the consolidated income the period, up 14.3% compared to the prior year; as a result, statement. total dividend payments to shareholders by LVMH in respect of 2007 amounts to 784 million euros, before the impact of Shares other than LVMH treasury shares may be held by some of treasury shares held at this date. the funds in which the Group has invested, or even directly within non-current or current available for sale financial assets. 3.1 Market risks The Group has occasional and limited recourse to derivatives in order to manage its exposure to risk. In general, the purpose of 3.1.1 Exposure to foreign exchange risk derivatives is to serve as a hedge against fluctuations in share prices. A substantial portion of the Group’s sales is denominated in In particular, equity swaps in LVMH shares allow cash-settled currencies other than the euro, particularly the US dollar and LVMH share-based incentive plans to be hedged . Derivatives may the Japanese yen, while most of its manufacturing expenses are also be used to build a synthetic long position. euro-denominated. 3.1.4 Exposure to liquidity risk Exchange rate fluctuations between the euro and the main The Group’s local liquidity risks are generally not significant. currencies in which the Group’s sales are denominated can therefore Its overall exposure to liquidity risk can be assessed with regard significantly impact its revenue and earnings reported in euros, and to the amount of its net short term financial debt before hedging complicate comparisons of its year-on-year performance. (0.7 billion euros) and outstandings in respect of its commercial The Group actively manages its exposure to foreign exchange risk in paper program (1.1 billion euros). Should any of these borrowing order to reduce its sensitivity to unfavorable currency fluctuations facilities not be renewed, the Group has access to undrawn by implementing hedges such as forward sales and options. confirmed credit lines totaling 3.9 billion euros. Owning substantial assets denominated in currencies other Therefore, the Group’s liquidity is based on the large amount than euros (primarily the US dollar and Swiss franc) is also a of its investments and long term borrowings, the diversity of its source of foreign exchange risk with respect to the Group’s net investor base (bonds and commercial paper), and the quality of assets. This risk is managed via total or partial funding of these its banking relationships, whether evidenced or not by confirmed assets with borrowings denominated in the same currency as the credit lines. corresponding asset. 3.1.5 Organization of foreign exchange, interest rate and 3.1.2 Exposure to interest rate risk equity market risk management The Group’s exposure to interest rate risk may be assessed with The Group applies an exchange rate and interest rate management respect to the amount of its consolidated net debt, which totaled strategy designed primarily to reduce any negative impacts of approximately 3.1 billion euros as of December 31, 2007. At this foreign currency or interest rate fluctuations on its business and date, 47% of gross debt was subject to a fixed rate of interest and investments. 53% was subject to a floating interest rate. This management is primarily centralized at the parent company Since the Group’s debt is denominated in various different in Paris. currencies, the Group’s exposure to fluctuations in interest rates The Group has implemented a stringent policy, as well as strict underlying the main currency-denominated borrowings (euro, management guidelines to measure, manage and monitor these US dollar, Swiss franc and Japanese yen) varies accordingly. market risks.

38 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

These activities are organized based on a strict segregation of duties Group operating investments, net of disposals, resulted in net cash between risk measurement, hedging (front office), administration outflows of 952 million euros. The increase in their gross amount (back office) and financial control. reflects the Group’s dynamic growth policy and that of its star The backbone of this organization is an integrated information brands, such as Louis Vuitton, Sephora and Parfums Christian system which allows hedging transactions to be monitored in Dior, together with the acquisition of the Belvedere brand in the real time. United States. The Group’s hedging strategy is presented to the Audit Committee. Acquisitions of non-current available for sale financial assets Hedging decisions are made according to a clearly established exceeded disposals by 12 million euros. The net impact of the process that includes regular presentations to the Group’s Executive purchase and sale of consolidated investments resulted in an outflow Committee and detailed supporting documentation. of 329 million euros, primarily attributable to the acquisition of Les Echos group, the 6% stake in Fendi that was not yet owned Potential counterparties are selected based on a minimum rating by LVMH and 55% of Wen Jun Spirits in China. level and in accordance with the Group’s risk diversification strategy. Transactions relating to equity generated an 827 million euros outflow over the year. 3.2 Consolidated cash flow Disposals of LVMH treasury shares and related derivatives by the The consolidated cash flow statement, as presented in the Group’s Group, net of acquisitions, generated a cash inflow of 14 million consolidated financial statements, details the main cash flows for euros. As in 2006, LVMH call options were acquired to cover fiscal year 2007. commitments for purchase options granted to employees. In 2007 cash from operations before changes in working capital In 2007, LVMH SA paid 686 million euros in dividends, excluding rose 15% to 4,039 million euros from 3,504 million euros treasury shares, of which 520 million euros were distributed in in 2006. May in respect of the final dividend on 2006 profit and 166 million euros in December in respect of the interim dividend for 2007. Net cash from operations before changes in working capital Furthermore, the minority shareholders of consolidated subsidiaries (i.e. after interest and income tax) rose 15% to 2,932 million euros from 2,546 million euros recognized in 2006. received 156 million euros in dividends; these mainly consist of dividends paid to Diageo related to its 34% equity interest in Moët Interest paid in 2007 amounted to 191 million euros against Hennessy and minority interests in DFS. 174 million euros in 2006, increasing mainly due to the increase in euro interest rates, despite the reduction in the average financial Net cash provided by these operating, investment and equity- debt outstanding. related activities, including the dividend payment, amounted to 338 million euros. Income tax paid in 2007 amounted to 916 million euros against 784 million euros in 2006, given the increase in profit before tax. Borrowings and financial debt were amortized in 2007 for an amount of 1,700 million euros, and 278 million euros were Working capital requirements increased by 474 million euros. invested in current available for sale financial assets. Changes in inventories increased cash requirements by 565 million euros, due mainly to the replenishment of distilled alcohol Conversely, additional financial resources were realized by way of inventories for Cognac and Champagne wines and the increase bond issues and new borrowings, which provided a cash inflow of in business volumes. The year-on-year increase in trade accounts 2,006 million euros. In November 2007, the Group carried out receivable generated a cash requirement of 197 million euros, a six-year public bond issue in a nominal amount of 300 million mainly at Hennessy and Parfums Christian Dior, while the change Swiss francs. Furthermore, the Group increased its recourse in trade accounts payable provided extra cash of 222 million euros, to its French commercial paper program and LVMH K.K. notably at Hennessy, Louis Vuitton, the French perfume brands developed a commercial paper program in Japan as a replacement and Sephora. for the private placements issued under its Euro Medium Term Overall, net cash from operating activities posted a surplus of Notes program. 2,458 million euros. At the year-end 2007, cash and cash equivalents net of bank Net cash used in financial and operating investment activities overdrafts amounted to 1,087 million euros, substantially higher amounted to 1,293 million euros. than the amount of 765 million euros held at year-end 2006.

Reference Document 2007 39 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

3.3 Financial structure The Group share of equity before appropriation of profit increased to 11.6 billion euros from 10.6 billion euros at year-end 2006, The total of LVMH’s consolidated balance sheet, as presented thanks to the amount of net profit attributable to the Group in the Group’s consolidated financial statements, amounted to and despite the negative change in the cumulative translation 30.7 billion euros as of December 31, 2007, which represents a adjustment resulting from the depreciation of the US dollar in year-on-year increase of 6.8%. relation to the euro and the payment of dividends for an amount Non-current assets totaled 20.3 billion euros, compared with of 0.7 billion euros, an increase of 0.1 billion euros compared 19.6 billion euros at year-end 2006, representing 66% of total to 2006. assets compared to 68% one year earlier. Minority interests fell slightly to 0.9 billion euros, from 1.0 billion euros one year earlier. This decrease is due to the effect of the Tangible and intangible fixed assets increased slightly to depreciation of the US dollar on minority interests in DFS, which, 18.2 billion euros at year-end, against 17.9 billion euros at in addition to the dividends paid, exceeds the portion attributable year-end 2006. Brands and other intangible assets amounted to to minority interests in 2007 profit. 8.0 billion euros compared with 8.2 billion euros as of December 31, 2006. The adverse impact of exchange rate fluctuations on Total equity amounted to 12.5 billion euros and represented 41% brands and other intangible fixed assets recognized in US dollars, of the balance sheet total against 40% in the previous year. such as the Donna Karan brand and the DFS trade name, exceeded At end-2007, non-current liabilities amounted to 10.4 billion the positive impact of the purchase of the Belvedere brand in the euros, including 2.5 billion euros in long term borrowings. This United States. compares to 10.8 billion euros at year-end 2006, including an Goodwill increased to 4.8 billion euros, against 4.5 billion euros amount of long term borrowings of 3.2 billion euros. The decrease at year-end 2006. This change resulted mainly from the increase in long term borrowings was primarily due to the reclassification in goodwill related to share purchase commitments for minority of borrowings reaching maturity in 2008 under short term interests and the acquisition of Wen Jun Spirits in China, offset borrowings. Other non-current liabilities consist mainly of share by foreign currency effects on goodwill recognized in US dollars, purchase commitments, the most notable of which is the purchase such as that of Donna Karan and Miami Cruiseline. agreement with a 20% discount and a six-month notice period granted to Diageo in respect of its 34% stake in Moët Hennessy. Property, plant and equipment amounted to 5.4 billion euros, Non-current liabilities as a proportion of the total balance sheet up from 5.2 billion euros a year earlier. This increase is primarily fell to 34% from 38% in 2006. attributable to the operating investments of Louis Vuitton, Long term resources thus amounted to 23.0 billion euros, and Sephora, Parfums Christian Dior and DFS in their retail networks exceeded total non-current assets. and those of Hennessy and Moët & Chandon in their production equipment, which exceeded the depreciation charge for the year Current liabilities amounted to 7.8 billion euros as of December 31, and the effects of foreign currency fluctuations. 2007, compared to 6.4 billion euros at year-end 2006, due notably to the transfer to short term financial debt of a bond issued in Investments in associates, non-current available for sale financial 2001 for an initial period of seven years and the increase in trade assets, other non-current assets and deferred tax assets increased accounts payable resulting from the growth in business volumes from 1.7 billion euros at year-end 2006 to 2.0 billion euros at and distilled alcohol purchases. Their proportion of total liabilities year-end 2007. This increase is due mainly to the acquisition of and equity rose to 25%. the media group Les Echos, which is included under non-current available for sale financial assets as of December 31, 2007 and will Net financial debt, including the market value of interest be consolidated in 2008. rate derivatives, and net of cash, cash equivalents and current available for sale financial assets, amounted to 3.1 billion euros Inventories amounted to 4.8 billion euros compared with as of December 31, 2007 compared to 3.4 billion euros one year 4.4 billion euros at year-end 2006, due to the vigorous growth earlier, representing a gearing of 25% compared with 29% at in business volumes and the continued replenishment in distilled year-end 2006. alcohol inventories for Cognac and, to a lesser extent, wines for Champagne. Long term borrowings exceed 70% of the Group’s total net debt. As of December 31, 2007 confirmed credit lines amounted to Trade accounts receivable reached 1.6 billion euros, up from 4.1 billion euros, of which only 0.2 billion euros were drawn, 1.5 billion euros at year-end 2006, mirroring revenue growth. which means that the undrawn amount available was 3.9 billion Cash and cash equivalents, excluding current available for sale euros. The Group’s undrawn confirmed credit lines substantially financial assets, rose from 1.2 billion euros at year-end 2006 to exceeded the outstanding portion of its commercial paper program, 1.6 billion euros. which amounted to 1.1 billion euros as of December 31, 2007.

40 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

4. OPERATING INVESTMENTS 4.3 Investments in production facilities and retail networks The LVMH Group’s business strategy focuses on developing Apart from investments in communications, promotion and high growth-potential luxury brands and retail businesses. These research and development, operating investments are geared prestige brands and selective retail outlets require sustained towards improving and developing retail networks as well as investment in two areas: guaranteeing adequate production capabilities. - communications and promotion, to maintain and develop Total operating investments (acquisitions of property, plant and their image and their reputation, to increase market share and equipment and intangible assets) for the last three fiscal years profitability; were as follows, in absolute values and as a percentage of cash from - research and development, particularly for Perfumes and operations before changes in working capital: Cosmetics in order to offer customers the best and most innovative products. 2007 2006 2005 Investments in production facilities 4.1 Communication and promotion expenses and retail networks: - millions of euros 990 771 707 Over the last three fiscal years the Group’s total investments in - as a % of cash from communications, in absolute values and as a percentage of revenue, operations before change 24.5 22.0 22.9 were as follows: in working capital

2007 2006 2005 Following the model of Selective Retailing companies which Communication and directly operate their own points of sale , Louis Vuitton distributes promotion expenses: its products exclusively through its own stores. The products of - millions of euros 1,953 1,783 1,541 the Group’s other brands are marketed by agents, wholesalers, or distributors in the case of wholesale business, and by a network of - as a % of revenue 11.8 11.6 11.1 directly owned stores or franchises for retail sales. These expenses mainly correspond to advertising campaign costs, In 2007, operating investments mainly related to point of sale especially for the launch of new products, public relations and assets. Louis Vuitton increased the number of stores in its retail promotional events, and expenses incurred by marketing teams network to 390, with a net total of 22 openings, and renovated responsible for all of these activities. around 40 of its stores. Sephora also continued to expand its worldwide retail network, which reached 756 stores at the end of 4.2 Research and development costs 2007, compared to 621 the previous year. Parfums Christian Dior updated its retail fixtures and fittings to promote the brand’s new The Group’s research and development investments in the last image. DFS renovated its Galleria in Hong Kong and Singapore. three fiscal years were as follows: In Wines and Spirits, the most significant investments involved (EUR millions) 2007 2006 2005 purchases of vineyard land and producing vineyards, barrels, vats, and casks for storage and blending, as well as the construction of Research and development costs 46 43 38 cellars and other storage areas; all these investments are designed to preserve inventory and in anticipation of the long term development Most of these amounts cover scientific research and development of these brands. costs for skincare and make-up products in the Perfumes and Cosmetics business group.

Reference Document 2007 41 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

5. EMPLOYEE INFORMATION

A number of initiatives were pursued in 2007 with the aim of further The definitions of human resources indicators were also clarified so reinforcing the quality and reliability of the Group’s worldwide as to minimize the impact of recurring differences from one country reporting system. This work involved a formal assessment of the to the next. New information system controls were developed to consistency of the Group’s social and financial reporting. The scope enhance the reliability and consistency of information entered. A of financial reporting now covers all staff employed by Group total of 504 organizational entities, representing more than 99% of companies consolidated on a full or proportional basis, but does the Group’s workforce worldwide, participate in the social reporting not include equity-accounted associates. system and the monitoring of the indicators defined below.

5.1 Analysis and development of the workforce

5.1.1 Breakdown of the workforce LVMH Group’s total workforce as of December 31, 2007 amounted The main changes are due to organic growth and the opening to 71,885 employees. Of this total, 63,552 employees worked of new stores, essentially in Europe, Asia and the United States. under permanent contracts (CDI) and 8,333 worked under fixed- The workforce of Wines and Spirits, Fashion and Leather Goods term contracts (CDD). Part-time employees represented 14% of and Selective Retailing increased by an average of more than the total workforce, or 9,928 individuals. The portion of staff 10%. Among the changes in the scope of consolidation in 2007, outside France now stands at 74% of the workforce worldwide. we should note the acquisition of Wen Jun Spirits in China and the disposals of Omas and La Tribune. The Group’s average Full Time Equivalent (FTE) workforce in 2007 comprised 63,464 employees, a rise of 10.9% on 2006.

The tables below show the breakdown of the workforce, by business group, geographic region and professional category. Breakdown by business group

Total headcount as of December 31 (1) 2007 % 2006 % 2005 %

Wines and Spirits 6,313 9 5,521 9 5,134 8 Fashion and Leather Goods 20,803 29 17,951 28 18,071 31 Perfumes and Cosmetics 15,719 22 14,747 23 13,628 22 Watches and Jewelry 2,014 3 1,882 3 1,844 3 Selective Retailing 26,323 36 23,275 36 21,544 35 Other 713 1 877 1 867 1 Total 71,885 100 64,253 100 61,088 100

(2) Average headcount during the period Wines and Spirits 6,780 11 5,462 9 5,144 9 Fashion and Leather Goods 19,028 30 16,904 30 17,182 31 Perfumes and Cosmetics 14,275 23 13,453 24 12,771 23 Watches and Jewelry 1,994 3 1,836 3 1,767 3 Selective Retailing 20,494 32 18,612 32 17,540 32 Other 893 1 938 2 952 2 Total 63,464 100 57,205 100 55,356 100 (1) Total permanent and fixed-term headcount. (2) Average permanent and fixed-term headcount on full-time equivalent basis.

42 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Breakdown by geographic region

Total headcount as of December 31 (1) 2007 % 2006 % 2005 %

France 19,044 26 18,992 30 18,919 31 Europe (excluding France) 16,245 23 13,168 21 12,741 21 United States 16,136 23 14,217 22 13,103 21 Japan 4,929 7 4,596 7 4,621 8 Asia (excluding Japan) 13,084 18 11,073 17 10,059 16 Other 2,447 3 2,207 3 1,645 3 Total 71,885 100 64,253 100 61,088 100

Average headcount during the period (2) France 18,538 29 18,448 32 18,423 33 Europe (excluding France) 13,771 22 11,181 20 11,002 20 United States 12,203 19 11,024 19 10,533 19 Japan 5,008 8 4,563 8 4,591 8 Asia (excluding Japan) 11,775 19 9,990 17 9,150 17 Other 2,169 3 1,999 4 1,657 3 Total 63,464 100 57,205 100 55,356 100 (1) Total permanent and fixed-term headcount. (2) Average permanent and fixed-term headcount on full-time equivalent basis.

Breakdown by professional category

Total headcount as of December 31 (1) 2007 % 2006 % 2005 %

Managers 11,233 15 10,335 16 9,548 15 Technicians and team leaders 7,050 10 6,282 10 6,021 10 Office and sales personnel 43,667 61 39,106 61 36,513 60 Labor and production workers 9,935 14 8,530 13 9,006 15 Total 71,885 100 64,253 100 61,088 100

Average headcount (2) Managers 11,244 18 10,035 17 9,386 17 Technicians and team leaders 6,689 10 6,078 11 5,796 10 Office and sales personnel 35,927 57 32,634 57 31,164 57 Labor and production workers 9,604 15 8,458 15 9,010 16 Total 63,464 100 57,205 100 55,356 100 (1) Total permanent and fixed-term headcount. (2) Average permanent and fixed-term headcount on full-time equivalent basis.

Reference Document 2007 43 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Average age and breakdown by age The average age of staff employed under permanent contracts worldwide is 36 years and the median age is 34 years. The youngest age ranges are found among sales personnel, mainly in the Asia-Pacific region and the United States.

(%) Global France Europe (1) USA Japan Asia (2) Other workforce markets

Age: Less than 25 years 12.2 7.3 11.5 19.7 6.1 14.0 10.8 25 - 29 years 20.3 14.8 17.9 21.6 28.4 26.1 23.5 30 - 34 years 19.0 16.5 21.4 14.7 30.1 20.7 20.8 35 - 39 years 15.2 15.9 17.9 11.6 16.2 14.5 16.6 40 - 44 years 11.9 15.0 12.3 9.5 9.1 10.6 11.2 45 - 50 years 8.9 12.4 8.5 7.9 5.7 6.7 7.3 50 - 54 years 6.5 10.0 5.2 6.1 2.7 4.4 5.6 55 - 59 years 4.3 7.2 3.4 4.6 1.6 2.0 2.5 60 years and over 1.8 1.0 1.8 4.4 0.2 1.0 1.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Average age 36 39 36 36 34 34 35 (1) Excluding France. (2) Excluding Japan.

Average length of service and breakdown by length of service The average length of service within the Group is 11 years in France and about five to six years in the other geographic regions. This difference is mainly due to the predominance in these other regions of retail activities characterized by a high turnover rate. It is also the result of recent expansion by Group companies into emerging markets, where there is a greater fluidity of employment.

(%) Global France Europe (1) USA Japan Asia (2) Other workforce markets

Length of service: less than 5 years 56.9 34.1 59.4 74.6 54.4 67.5 64.7 5 - 9 years 21.5 26.0 24.5 14.7 29.9 16.6 21.4 10 - 14 years 8.0 10.9 7.7 4.8 7.6 8.0 6.0 15 - 19 years 6.1 11.2 4.5 2.9 5.4 4.6 3.3 20 - 24 years 3.2 6.9 1.6 1.6 1.9 1.9 2.6 25 - 30 years 2.2 5.2 1.2 0.9 0.6 1.0 1.1 30 years and over 2.2 5.7 1.3 0.5 0.2 0.5 1.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Average length of service 7 11 6 5 6 5 6 (1) Excluding France. (2) Excluding Japan.

44 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

5.1.2 Joiners, leavers and internal mobility Identifying and attracting talent are a key strategic objective of than 5,000 visitors perform searches on the website, browse LVMH’s recruitment policy. offers, and sign up for automatic job opening notifications, while In keeping with this policy, Group companies participated in 320 candidates submit their applications online in response to about a hundred events organized on the campuses of universities one or more offers. as well as engineering, business and design schools in 2007. Worldwide in 2007, nearly 16,000 individuals were hired These encounters with young people serve to raise the profile of under permanent contracts, including 2,077 in France. A total the Group and its companies and to convey the attractiveness of 4,447 people were recruited in France under fixed-term of the career opportunities offered across a wide range of contracts. The seasonal sales peaks, at the end of year holiday season professions. For the second year in a row, the 2007 Universum and the harvest season, are the two main reasons for using fixed- French Graduate Survey involving 10,300 students from term contracts. 84 leading French institutions ranked LVMH at the top of the list of companies preferred by young business school graduates. Departures from Group companies in 2007 (all causes combined) Similar initiatives were pursued in the United States (Columbia, affected a total of 14,334 employees working under permanent Harvard, Stanford, Wharton, Kellogg), Brazil (FGV), Japan contracts, of which almost half were employed within the Selective (Waseda, Keiko, Sophia, Hitotsubashi, Tokyo) and at other Retailing business group, which traditionally experiences a high major Asian universities (Tsinghua, CKGSB, BiMBA, Fudan). turnover rate. The leading causes for departure were resignations (77% of total departures) and individual layoffs (11% of Accessible on the Internet since June 2006, the “Join LVMH” total departures). pages of the Group w eb site allow visitors to browse job opportunities and submit their applications online. All Group The overall turnover rate increased by about 10% compared to companies worldwide publish their job offers on the site, but previous years and continues to show marked differences across also their available internships, VIEs (international volunteer geographic regions: the highest rates are recorded in North opportunities in companies) and apprenticeships. Each day, more America and Asia, where labor markets are more fluid.

Turnover by geographic region

(%) 2007 France Europe (4) USA Japan Asia (5) Other 2006 2005 markets

Total turnover (1) 22.4 11.3 20.2 38.2 15.7 27.3 16.1 20.2 20.2 o/w: voluntary turnover (2) 17.4 6.2 15.5 31.9 13.2 23.0 9.0 14.6 14.7 involuntary turnover (3) 4.4 3.9 4.3 5.8 2.3 4.1 7.0 4.9 4.9 (1) All reasons. (2) Resignations. (3) Redundancies/end of trial period. (4) Excluding France. (5) Excluding Japan.

Reference Document 2007 45 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Breakdown of movements of employees working under permanent contracts by business group and geographic region

Joiners Leavers (number) 2007 2006 2005 2007 2006 2005

Wines and Spirits 983 923 794 742 580 619 Fashion and Leather Goods 4,811 3,611 3,631 3,512 3,356 3,354 Perfumes and Cosmetics 3,064 2,254 2,649 2,635 2,070 2,102 Watches and Jewelry 440 318 309 295 302 242 Selective Retailing 9,420 6,502 6,217 7,071 5,395 4,483 Other 106 83 43 79 83 32 Total 18,824 13,691 13,643 14,334 11,786 10,832 France 2,714 1,983 1,721 2,051 1,707 1,788 Europe (excluding France) 3,573 2,546 2,728 2,675 2,348 2,171 United States 6,144 4,909 4,640 5,079 4,069 3,612 Japan 654 620 482 616 551 695 Asia (excluding Japan) 5,009 3,109 3,881 3,517 2,793 2,387 Other 730 524 191 396 318 179 Total 18,824 13,691 13,643 14,334 11,786 10,832

LVMH encourages mobility among its staff, from one geographic LVMH also fosters mobility between professional categories by region to another, or from one Group company to another. The encouraging its employees to acquire new skills, especially by wide range of companies making up the Group, their unique pursuing qualifying training or degree programs. More than 3,250 corporate identities as well as their expertise in a variety of business staff members were promoted in 2007, representing about 5% of segments, lend favor to these two forms of mobility. Today more the total workforce. than half of all managerial positions are filled by means of internal mobility and in 2007 nearly 700 of these movements were from one Group company to another.

5.2 Work time

5.2.1 Work time organization Worldwide, 17% of employees benefit from variable or adjusted working hours and 21% work as a team or alternate their working hours.

Global workforce affected by various forms of working hours’ adjustment: breakdown by geographic region

Employees affected (%) Global France Europe (1) USA Japan Asia (2) Other workforce markets

Variable/adjusted schedules 17 37 18 6 10 3 1 Part-time 17 12 21 34 0.5 9 14 Teamwork, alternating hours or night shifts 21 8 6 20 29 55 9 (1) Excluding France. (2) Excluding Japan.

46 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Global workforce in France affected by various forms of working hours’ adjustment: breakdown by professional category

Employees affected ( %) Workforce Managers Technicians Office Labor and France and team and sales production leaders personnel workers

Variable/adjusted schedules 37 38 56 54 3 Part-time 12 3 6 24 7 Teamwork, alternating hours or night shifts 8 1 6 3 21 Employees benefiting from time off in lieu 20 - 20 13 46

5.2.2 Overtime The cost of the volume of overtime is 33 million euros, or an average of 1.6% of the worldwide payroll. This cost varies between 1.4% and 2.3% of the payroll depending on the geographic region. Percentage of overtime by region

(% of payroll) Global France Europe (1) USA Japan Asia (2) Other workforce markets Overtime 1.6 1.4 2.0 1.6 2.3 1.5 1.0 (1) Excluding France. (2) Excluding Japan.

5.2.3 Absenteeism The worldwide absentee rate of the LVMH Group for employees 4.3% in 2005). This adverse development is attributable to the two working under permanent and fixed-term contracts is 4.7%. It main causes of absence—illness and maternity leave—primarily increased slightly compared with previous years (4.1% in 2006 and in the United States and Asia.

Absentee rate (1) by region and by reason

(%) Global France Europe (2) USA Japan Asia (3) Other workforce markets

Illness 2.3 3.4 3.7 1.4 0.3 1.1 1.4 Work/work-travel accidents 0.2 0.4 0.1 0.2 0.0 0.1 0.2 Maternity 1.4 1.6 2.5 0.8 1.1 0.8 1.0 Paid absences (family events) 0.4 0.3 0.3 0.4 0.2 0.8 0.1 Unpaid absences 0.3 0.2 0.2 0.3 0.2 0.5 0.4 Overall absentee rate 4.7 5.9 6.8 3.1 1.8 3 .3 3.1 (1) Number of days absent divided by the theoretical number of days worked. (2) Excluding France. (3) Excluding Japan.

Reference Document 2007 47 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

5.3 Compensation In 2001, the Group set up a worldwide share purchase option plan under which 25 options were allocated to all Group employees 5.3.1 Average salary with a strike price of 66 euros. Since May 2005 the beneficiaries of this plan have been able to exercise their options at any time The table below shows the gross average monthly compensation until May 2009. paid to Group employees in France under permanent contracts who were employed throughout the year: 5.4 Equality and diversity Employees concerned (%) 2007 2006 2005 (salary in euros) As a signatory of the United Nations Global Compact and, in Less than 1,500 12.7 20.5 24.6 France, of the Charte de la Diversité and the Charte d’Engagement 1,501 to 2,250 38.5 30.7 31.4 des Entreprises au Service de l’Egalité des Chances dans l’Education, LVMH places considerable emphasis on maintaining diversity, 2,251 to 3,000 17.9 19.2 18.5 which it sees as one of its key assets. All of its brands pursue growth Over 3,000 30.9 29.6 25.5 within a stimulating multi-cultural working environment, so as Total 100.0 100.0 100.0 to anticipate and then fully satisfy the needs of their international clientele. For this reason, Group companies recruit and develop the 5.3.2 Personnel costs best international talents so as to better grasp the various cultural sensitivities and leverage them as a decisive competitive advantage. Worldwide personnel costs break down as follows: This quest for mutual enrichment through the contact of cultures, (EUR millions) 2007 2006 2005 origins and knowledge is formalized in the Diversity policies implemented by Group companies. In 2007, this commitment Gross payroll - fixed term or 2,077.1 1,965.9 1,879.5 permanent notably gave rise to the collective efforts of seven Corporate Social Employers’ social security Responsibility workgroups involving human resources personnel 550.8 504.7 460.5 contributions of the participating companies. This focus on awareness raising, Temporary staffing costs 101.7 85.0 92.3 the sharing of best practices and the development of new means Total personnel costs 2,729.6 2,555.6 2,432.3 of action was specifically brought to the fore during the first Social Responsibility Convention organized by the Group in Outsourcing and temporary staffing costs remain stable, accounting December 2007. for 6.6% of the total payroll worldwide, including employer’s Lastly, for the second consecutive year, a worldwide survey was social security contributions. conducted on the basis of GRI 3 performance indicators relating to human rights and labor practices. 5.3.3 Incentive schemes, profit sharing and company savings plans 5.4.1 Equality of opportunity for men and women All companies in France with at least 50 employees have an The proportion of women within the Group workforce has incentive scheme, profit sharing or company savings plan. These remained broadly unchanged for several years and now amounts plans accounted for a total expense of 91.0 million euros in 2007, to 72%. This proportion is also reflected in new hires, 74% of a rise of 7% against 2006. whom were women in 2007. The significant percentage of female employees is explained in part by the nature and attractiveness of (EUR millions) 2007 2006 2005 LVMH’s business segments. Women are particularly prominent Profit sharing 50.5 46.5 43.6 in Perfumes and Cosmetics (81%), Selective Retailing (79%) and Incentive 35.2 33.7 27.0 Fashion and Leather Goods (74%). Conversely, the majority of staff Employer’s contribution in Wines and Spirits are men, representing 66% of the workforce 5.4 4.9 4.2 to company savings plans in this business group. Total 91.1 85.1 74.8

48 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Proportion of female employees in new joiners (1) and in the Group’s active workforce

% Women Joiners Group employees

2007 2006 2005 2007 2006 2005 Breakdown by business group Wines and Spirits 45 40 38 34 33 32 Fashion and Leather Goods 71 71 71 74 74 74 Perfumes and Cosmetics 83 86 84 81 81 80 Watches and Jewelry 57 56 58 56 56 55 Selective Retailing 77 81 80 79 79 77 Other 54 57 45 53 53 53

Breakdown of personnel by professional category Managers 59 60 57 57 57 56 Technicians and team leaders 67 70 70 69 70 69 Office and sales personnel 79 81 82 80 81 80 Labor and production workers 58 65 45 62 62 62

Breakdown by geographic region France 71 69 69 67 67 67 Europe (excluding France) 76 80 79 76 75 75 United States 72 76 73 73 73 70 Japan 79 82 79 77 77 76 Asia (excluding Japan) 76 78 80 75 77 76 Other 69 59 63 61 61 60

LVMH Group 74 76 75 72 72 71

(1) Under permanent contracts, including internal mobility and transfers from fixed-term to permanent contracts.

An increasing number of management positions are also being there is no discrimination against this category of employees in filled by women, who make up 57% of managers, as they did last terms of compensation, training or career advancement. year. This trend seems destined to continue, as women accounted Worldwide, 12.6% of the LVMH Group’s active workforce are for 59% of new hires to managerial positions in 2007. over the age of 50. In France, this population accounts for 18.2% Equality of opportunity also prevails in career advancement. of employees. Accordingly, 71% of staff promoted in 2007 were women. 5.4.3 Employment of disabled persons In addition, 28% of executive committee members are women and six Group companies are chaired by women: Veuve Clicquot The creation this year of “Mission Handicap LVMH” underscores Ponsardin, Fred, Montres Dior, Kenzo Parfums, e-Luxury and the Group’s commitment to the employment of disabled persons. Acqua di Parma. This association provides operational assistance to the human resources staff of Group companies to facilitate the recruitment and 5.4.2 Management of older staff retention of disabled employees and to develop sub-contracting to disabled-friendly or protected sectors. Some ten Group companies The fact that, at LVMH, several generations of artisans and participated in the “Semaine pour l’emploi des personnes luxury professionals work side-by-side contributes in an active handicapées” organized by ADAPT in Paris and in other actions and efficient manner to the transmission of Group know-how. throughout the rest of France. Group companies encourage this approach and lend their support to preserving this dynamic, notably through the implementation of Several initiatives are designed to assist employees who have had mentoring actions entrusted to older staff. Exemplary among Group work-related illnesses to return to employment: the ERIM (Espace companies in its support of older staff, Moët Hennessy Diageo has Reclassement Interne Mobilité) at Moët & Chandon and two established a Commission for Seniors whose role is to ensure that specially equipped industrial workshops at Parfums Christian Dior.

Reference Document 2007 49 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Prevention programs have been established at several production the United States, France, the United Kingdom, Spain and Italy sites, notably at Louis Vuitton’s workshops. and are distributed uniformly across all hierarchical levels and Parfums Givenchy has developed local partnerships with among men and women. associations promoting the employment of disabled persons. Le A substantial portion of training also takes place on the job on Bon Marché has trained an entire team in the use of LSF (French a daily basis and is not factored into the indicators presented Sign Language) in order to integrate a young deaf employee under below. the best possible conditions. Hennessy has welcomed several interns from a vocational Global workforce 2007 2006 2005 rehabilitation center so as to introduce them to its professions. Training investment 54.7 52.1 44.6 (EUR millions) Disabled staff represent 0.9% of the Group’s global workforce. In Portion of total payroll (%) 2.7 2.8 2.3 2007, this rate was 1.8% for France, with a total of 2.8 million Number of days training 3.8 3.5 3.5 euros in services sub-contracted to ESATs (assisted employment per employee centers) or disabled-friendly companies, an increase of 16% Average cost of training 759 803 737 compared to the previous year. per employee (in euros) Employees trained during 70.0 70.6 72.3 5.5 Training the year ( %) Group companies offer a broad range of training programs to In 2007, training expenses incurred by the Group’s companies allow staff to develop their professional skills and their specific throughout the world rose 5% on 2006 to a total of 54.7 million business line expertise as artisans and creators as well as to share euros, or 2.7% of total payroll. a common vision. The Group offers a wide range of training In 2007, the average training expense per full-time equivalent programs worldwide–human resource management, sales employee was approximately 760 euros. A total of 275,700 techniques, marketing, project management, foreign languages, training days were provided. etc.–specifically adapted to the needs and professions of each company. Seminars are led by outside trainers, among the most A total of 70% of employees received at least one day of training respected in their professions worldwide, but also by Group during the year and the average number of days training came to managers considered as experts in their particular areas of expertise. 3.8 days per employee. The training investment is spread across These training programs are organized by the training center of the all professional categories and geographic regions in accordance specific business group or by regional training centers in Asia, Japan, with the table below.

Breakdown of training investment by geographic region and professional category

France Europe (1) USA Japan Asia (2) Other markets

Training investment (EUR millions) 23.9 11.7 8.1 3.4 6.5 1.1 Portion of total payroll (%) 3.7 2.7 1.5 2.3 2.8 2.1 Employees trained during the year ( %) 74.0 63.0 66.0 87.0 68.0 80.0 o/w: Executives and managers 70 67 74 81 68 81 Technicians and team leaders 68 64 33 85 52 82 Office and sales personnel 74 67 73 87 74 81 Labor and production workers 82 50 10 NA 33 77 (1) Excluding France. (2) Excluding Japan.

Moreover, LVMH organizes integration and awareness seminars for new hires focusing on the culture of the Group, its brands, its values as well as its key management principles. More than 19,500 employees attended seminars of this type in 2007.

50 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

5.6 Health and safety In 2007, employee representatives attended more than 1,650 meetings: In 2007, there were a total of 989 work accidents and work-related travel accidents resulting in leave of absence, down 19% compared Nature of the meetings Number to the prior year. They resulted in 24,405 lost working days. Works council 553 Lost time accidents by business group and geographic region break Employee representatives 513 down as follows: Health and Safety Committee 143 Other 443 Number of Frequency Severity Total 1,652 accidents rate (1) rate (2) Breakdown by business group As a result of these meetings, 99 company-wide agreements Wines and Spirits 224 21.13 0.73 were signed (such as annual negotiations on wages and work Fashion and Leather Goods 184 5.80 0.14 schedules, incentive and profit sharing agreements and company Perfumes and Cosmetics 178 7.46 0.17 savings plans). Specific agreements related to the employment of Watches and Jewelry 20 5.96 0.07 disabled persons, professional equality between women and men, Selective Retailing 374 10.16 0.21 anticipatory management of jobs and skills, and labor-management Other 9 6.00 0.08 dialogue have been signed at Group companies. Breakdown by geographic region 5.7.2 Social and cultural activities France 514 17.32 0.51 Europe (excluding France) 187 8.10 0.15 In 2007, in France, LVMH allocated a budget of over 12.4 million United States 65 2.88 0.05 euros, or 1.9% of total payroll expenses, to social and cultural Japan 5 0.69 0.01 activities in France via contributions to works councils. Asia (excluding Japan) 123 5.81 0.15 Total catering costs for all LVMH employees represent a budget Other 95 22.69 0.31 of 10.6 million euros. LVMH Group 2007 989 9.17 0.23 2006 1,175 12.79 0.27 5.8 Relations with third parties (1) The Frequency rate is equal to the number of accidents resulting in leave of absence, multiplied by 1,000,000 and divided by the total number of hours worked. 5.8.1 Relations with suppliers (2) The Severity rate is equal to the number of workdays lost, multiplied by 1,000 and divided by the total number of hours worked. A large proportion of the Group’s manufacturing facilities are located in France, Italy and Spain. Similarly, most of the Group’s LVMH invested over 13 million euros in Health and Safety in sub-contractors are located in Europe, thus facilitating the 2007. This includes expenses for occupational medical services, observance by these partners of social responsibility and sustainable small protective equipment as well as programs for improving development values. personal safety and health, such as compliance, the posting of LVMH intends to promote responsible partnerships with all of warnings, replacement of protective devices, fire prevention its suppliers and to ensure that they are applied effectively. For training, noise reduction. several years, the Group’s companies (Moët & Chandon, Louis The total amount of expenditure and investments promoting Vuitton, Fendi, Glenmorangie, Parfums Christian Dior, Sephora, health and safety in the workplace and improvements in working TAG Heuer, etc.) have developed supplier charters and codes of conditions amounted to 37 million euros in 2007, representing conduct. For example, Moët & Chandon establishes a specifications 1.4% of the Group’s gross payroll worldwide. document presented for signature to its subcontractors that Almost 15,500 Group company employees received safety training addresses respect for the environment and fundamental labor worldwide. law compliance, among other issues. Audits are also carried out on suppliers. In its supplier specifications documents, Sephora includes clauses dealing with the individual rights of employees, 5.7 Employee relations child labor prevention, equality of opportunity and treatment, working time policy, and the protection of the environment. Louis 5.7.1 Status of collective agreements Vuitton has put in place an ethical system of preliminary audits In France, Group companies have works councils, employee founded on compliance with local regulations as well as the SA representatives, as well as health and safety committees. The Group 8000 social accountability standard, which is based on international Committee was formed in 1985. workplace norms included in the ILO conventions: no child labor,

Reference Document 2007 51 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management no forced labor, providing a safe and healthy work environment, in creating jobs in their respective regions: Parfums Christian Dior freedom of association and the right to collective bargaining, no in Saint-Jean-de-Braye (near Orleans), Veuve Clicquot Ponsardin discrimination, disciplinary practices, compliance with working and Moët & Chandon in the Champagne region, and Hennessy hour and wage regulations. To ensure that they will be able to in the Cognac region have developed long-standing relationships perform preliminary audits independently, Louis Vuitton’s buyers with local authorities, covering cultural and educational aspects receive theoretical training covering the approach and criteria as as well as employment. Sephora, which has stores throughout well as practical training in the field in the company of an SA France (two-thirds of its workforce is employed outside the Paris 8000 auditor. In 2007, 48 audits were carried out. Donna Karan region), regularly carries out a range of measures encouraging the International has developed a Vendor Code of Conduct designed development of job opportunities at the local level. to ensure respect for fundamental principles of industrial relations and labor law and for the highest ethical standards. It has also 5.8.3 Relations with educational institutions and developed a Vendor Profile Questionnaire, a document signed by apprenticeship associations the subcontractor when the pre-approval request is submitted. The company has also introduced a Vendor Compliance Agreement, Throughout the world, Group companies have developed a number which calls for independent audits of suppliers to ensure that of partnerships with management schools and engineering schools, commitments have been observed. Similarly, TAG Heuer requires but also with fashion design schools and schools specializing in areas that all new foreign suppliers submit a written pledge indicating specific to our businesses. Key companies give presentations on the their compliance with the SA 8000 standard. The same is true for campuses of these schools several times a year. A number of the Parfums Christian Dior, Parfums Givenchy, and Guerlain, who classes taught feature lectures by the Group’s senior executives. have introduced specifications documents including compliance Many initiatives to promote the occupational integration of young with the SA 8000 standard among their provisions. people are undertaken to allow all employees to participate actively Over and above the supplier charters and codes of conduct in the Group’s commitment to society. specifically developed by several Group companies, a joint project A signatory of the Apprenticeship Charter, the Group has pursued was launched in 2007 at the behest of Executive Management, its objective to increase the number of apprentices. In 2007, nearly bringing together the Group’s key purchasing managers in 370 new work-study contracts were signed in all the Group’s order to formalize LVMH’s commitment to the fundamental ILO conventions. In addition to the sharing of best practices, companies in France, an increase of almost 50% compared to the this project has already taken a step forward by establishing a set previous year. Among the various events scheduled throughout the of requirements forming a shared frame of reference to be used year, “open door” days or orientation programs are often offered throughout the Group in all relationships with suppliers. to young apprentices by Group companies (notably Hennessy, Parfums Givenchy, Louis Vuitton, Le Bon Marché and TAG 5.8.2 Impact of the business on local communities in terms Heuer) so as to introduce them to their professions and products. of employment and regional development Mentors are also prized by companies such as Givenchy Couture LVMH follows a policy of maintaining and developing employment. and Le Bon Marché for their involvement in the transfer of know- Thanks to the strong and consistent growth achieved by our how. Similar initiatives are undertaken abroad, particularly in brands, many sales positions are created in all countries where we Brazil, where young people from disadvantaged backgrounds are are present, particularly as a result of the expansion of our brands’ recruited through the “Menor Aprendiz” program. retail networks. Contacts and partnerships with training institutions as well as In France, the Samaritaine department store, which had to local actions in secondary schools have been developed further, terminate its activities for safety reasons, has established a special particular with middle schools singled out for the “Ambition support program to assist employees in finding new positions Réussite” priority education program (Celine, La Grande Épicerie that caters to their individual needs. This outplacement plan was de Paris) and other companies are also spearheading the creation of formalized in a company agreement signed by the majority of curricula in the regions where they maintain operations. trade unions on February 6, 2006. In February and October 2007, several agreements were signed to enhance this plan with additional This year, in partnership with “Nos quartiers ont des talents”, assistance measures. By the end of 2007, new positions had been Guerlain, Parfums Givenchy and La Grande Épicerie de Paris, found for all but seven of the store’s employees. together with other Group companies, launched an operation to assist young graduates from disadvantaged backgrounds in finding Layoffs for non-disciplinary reasons account for 3% of total their first jobs. Experienced senior-level staff or senior executives at departures and there were no major mass layoff actions in 2007. these companies participating as sponsors in this program provide A number of the Group’s larger companies have been established individualized assistance to job seekers and help them crystallize for many years in specific regions of France and play a major role their career plans.

52 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Finally, in order to promote the integration of young people - a portion of the Group’s stores, representing 61% of the sales through education regardless of their background or origin, surface; LVMH funds ten scholarships offered by the association “Promotion - a portion of the Group’s sites, generally not related to production, des Talents”. namely those of Pucci, Make Up For Ever, Berluti, Donna Karan and Wen Jun Spirits. 5.9 Compliance with international conventions With respect to the financial reporting scope, in 2007 the environmental data reporting system covers: Taking each individual, his or her freedom and dignity, personal growth and health into consideration in each decision is the - 91% (in numerical terms) of the Group’s production facilities, foundation of a doctrine of responsibility to which all LVMH warehouses, and administrative sites; companies adhere. - 39% of the Group’s total sales surface. Accordingly, all LVMH companies have policies for equal Pursuant to Decree No. 2002-221 of February 20, 2002, known as opportunity and treatment irrespective of gender, race, religion the “NRE decree” (nouvelles régulations économiques), the following and political opinion, etc. as defined in the standards of the sections provide information concerning the nature and importance International Labor Organization. This culture and these practices of the elements that have a relevant and significant impact on also generate respect for freedom of association, respect for the operations. The indicators retained were selected by the Group’s individual, and the prohibition of child and forced labor. environmental department and validated by the statutory auditors. Since fiscal year 2002, the Group’s annual environmental data reporting has been verified each year by the Environment and 6. EFFECTS OF OPERATIONS ON Sustainable Development department of Ernst & Young, the THE ENVIRONMENT Group’s statutory auditors: the verified indicators are marked with the ;symbol. The reporting scope of environmental indicators in 2007 includes the following: 6.1 Water, raw material and energy consumption

- the production facilities and warehouses owned and/or operated 6.1.1 Water consumption by companies in which the Group controls more than 50% of the share capital or over which it exercises operational control; Water consumption is analyzed based on the following: - the French stores of Sephora, Celine, Guerlain and Louis Vuitton, - process requirements: use of water for cleaning purposes (tanks, Le Bon Marché and the main stores of DFS and Fendi; products, equipment, floors), air conditioning, employees, - the main administrative sites located in France. product manufacturing, etc; such water consumption generates waste water; In 2007, the reporting scope was extended to 415 sites (412 sites in 2006), 23 sites belonging to the above-mentioned scope being - agricultural requirements: water consumption for vine irrigation excluded. Changes in the reporting scope since 2006 comprise outside France, as irrigation is not practis ed in France. As such, the integration of the French stores of Guerlain, a Louis Vuitton water is taken directly from its natural environment for irrigation workshop, a new Moët-Hennessy administrative site, a new Celine purposes. Its consumption varies each year according to changes outlet and the disposal of Omas, certain Laflachère outlets and the in weather conditions. The measurement of water consumption KAMI logistics platform. for agricultural purposes is the result of less precise estimates than those used for process water consumption. The 2007 reporting scope does not include: - the environmental impacts of the administrative buildings (in m3) 2007 2006 % change and of stores owned directly or franchised by Perfumes and Process requirements ; 2,400,133 2,464,175 (3) Cosmetics, and Fashion and Leather Goods, except for brands Agricultural identified above; requirements 6,875,388 6,870,975 - (vine irrigation) ; - the impacts of the fleets of vehicles owned by the Group outside France used for employee travel; Water consumption used for the process requirements of the - energy consumption arising from the shipment of merchandise Group’s companies decreased 3% in absolute terms between 2006 exclusively by external transport companies; and 2007 and amounted to approximately 2.40 million cubic - the companies in which the Group controls less than 50% of meters. By way of comparison, for the manufacturing sector in the share capital or over which it does not exercise operational France, water consumption amounts to about 3.8 billion cubic control; meters (IFEN, 2005).

Reference Document 2007 53 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

At Hennessy, the refurbishment of the cooling system for the water from the distillation process, to be used both for the heating Bagnolet distillery with a new closed-circuit design resulted in of offices and the production of reverse osmosis purified water for water consumption savings of more than 35%, representing more the reduction of the alcoholic strength of distilled alcohol. than 50,000 cubic meters of water. Hennessy also recovers hot

Water consumption by business group

(Process requirements in m3) 2007 2006 % change

Wines and Spirits 1,418,267 1,428,090 (1) Perfumes and Cosmetics 369,952 348,996 6 Fashion and Leather Goods 172,206 231,986 (25) Watches and Jewelry 17,585 15,700 12 Selective Retailing 404,529 423,631 (5) Holding Company 17,594 15,772 12

Total ; 2,400,133 2,464,175 (3)

Water consumption for vineyard irrigation purposes is essential visual vine inspections, adaptation of supplies according to the for the preservation of vines in California, Argentina, Australia and requirements of each land plot (Domaine Chandon Australia); New Zealand due to the climate in these areas. This practice is closely - standardized drip method of irrigation: between 73% and 100% supervised by the local authorities that deliver authorizations. of wine-producing regions have now adopted this method; The Group has also taken measures to limit consumption: - weather forecasts for optimized irrigation (weather stations at - recovery of rain water by Domaine Chandon California, Domaine Domaine Chandon California); Chandon Australia, Bodegas Chandon Argentina; reuse of treated - periodical inspections of irrigation systems to avoid the risk of waste water by Domaine Chandon Carneros, California; recovery leakage; of water run-off by the creation of artificial lakes by Newton, - adoption of the “reduced loss irrigation” technique, which reduces California and Cape Mentelle; water consumption and actually improves the quality of the - drafting of agreements on measures and specifications with respect grapes, the size of the vine, yielding an enhanced concentration to water requirements: analyses of ground humidity, leaves, of aroma and color.

6.1.2 Energy consumption Energy consumption corresponds to the combined internal This consumption corresponds, in decreasing order of use to (combustion on a Group site, such as fuel oil for electricity Wines and Spirits (44%), Selective Retailing (25%), Perfumes generators, butane, propane and natural gas) and external and Cosmetics (15%), and Fashion and Leather Goods (13%). (combustion does not occur on site) energy sources. The remaining 3% is generated by Watches and Jewelry and the administrative activities of the holding structure. In 2007, the subsidiaries included in the reporting scope consumed 484,152 MWh provided by the following sources: 52% electricity, By way of comparison, for the manufacturing sector in 24% natural gas, 13% heavy fuel oil, 6% steam, 3% fuel and France, electricity and natural gas consumption amount to 2% butane-propane. This represents a decrease of 2% compared 125,000,000 MWh and 154,000,000 MWh, respectively to 2006. (French Ministry of Finance, 2006).

54 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Energy consumption by business group

(in MWh) 2007 2006 % change

Wines and Spirits 211,311 208,478 1 Perfumes and Cosmetics 74,357 80,819 (8) Fashion and Leather Goods 63,765 66,731 (4) Watches and Jewelry 11,143 7,771 43 (1) Selective Retailing 117,969 122,969 (4) Holding Company 5,607 5,937 (6) Total ; 484,152 492,705 (2) (1) Increase due to the increase in business volumes.

Consumption by energy source in 2007

(in MWh) Electricity Natural gas Heavy fuel oil Steam Fuel oil Butane Propane

Wines and Spirits 62,954 45,740 61,198 25,228 10,500 5,691 Perfumes and Cosmetics 36,478 36,498 72 1,157 152 - Fashion and Leather Goods 43,873 15,419 - 219 948 3,306 Watches and Jewelry 3,744 5,847 - - 1,552 - Selective Retailing 101,914 11,306 - 4,245 504 - Holding Company 4,654 312 - 602 39 - Total 253,617 115,122 61,270 31,451 13,695 8,997

6.1.3 Raw material consumption Given the variety of the Group’s operations and the resulting - Perfumes and Cosmetics: bottles, cases, etc. multiplicity of the raw materials used, the only significant, relevant - Fashion and Leather Goods: boutique bags, pochettes, cases, etc. criterion used by all of the Group’s brands retained for the analysis - Watches and Jewelry: cases and boxes, etc. of raw material consumption is the quantity, measured in metric tons, of primary and secondary packaging used for consumer goods - Selective Retailing: boutique bags, pochettes, cases, etc. placed on the market: The packaging used for transport is excluded from this analysis. - Wines and Spirits: bottles, boxes, caps, etc.

Packaging placed on the market

(in metric tons) 2007 2006 % change

Wines and Spirits 152,089 148,121 3 Perfumes and Cosmetics 21,261 19,042 12 Fashion and Leather Goods 5,136 2,298 123 Watches and Jewelry 512 493 4 (1) Selective Retailing 1,373 1,676 (18) Total ; 180,371 171,630 5 (1) Increase due to the change in reporting scope and increase in business volumes.

Reference Document 2007 55 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Breakdown of the total weight of packaging consumed, by type of material, in 2007

Glass Paper- Plastic Metal Other packaging (in metric tons) cardboard material Wines and Spirits 132,726 15,950 783 1,342 1,288 Perfumes and Cosmetics 10,951 4,365 4,715 656 574 Fashion and Leather Goods - 5,122 - - - Watches and Jewelry - 503 - 14 9 Selective Retailing 796 134 385 58 - Total 144,473 26,074 5,883 2,070 1,871

In order to promote eco-design strategies, new tools have been This method, used for several years by Wines and Spirits, was developed to measure the environmental impact of decisions taken, developed further this year. Veuve Clicquot and Moët & Chandon with respect to packaging and products as well as advertising use the integrated grape growing reference guide devised by the campaigns. Comité Interprofessionnel des Vins de Champagne. Accordingly, at Moët & Chandon, efforts to limit the use of herbicides and in Accordingly, at Guerlain efforts were focused on the packaging favor of cover planting are ongoing. Among the actions in 2007 for the skincare line Success, and on special sale items. This year, were: herbicide consumption was reduced by 8% compared to more than 60 metric tons of cardboard were saved through the 2006, the rollout of localized herbicide application equipment, optimization of cases and transport packaging. Parfums Givenchy experimentation with powder-form phytosanitary application has made perfume refills fashionable again. Its Eco Pampille equipment limiting pollution risks and enhancing dosage Recharge may be used to refill the elegant teardrop Ange ou management, etc. Veuve Clicquot continues its efforts to enlist Démon atomizers. the support of its grape suppliers in these endeavors: all its Developed in partnership with ADEME, Havas and suppliers are able to obtain any necessary technical assistance from PricewaterhouseCoopers, Ecopublicité is a tool designed to an agronomist, employed full-time to serve as a liaison between measure the environmental impact of advertising campaigns. them and the Champagne region’s agricultural extension office. All aspects are analyzed: the impact of producing the advertising In this manner, more than 80% of grape-growing areas have itself (film or photo shoots), the choice of media (written press, adopted the integrated approach. Veuve Clicquot also obtained television, radio, etc.), the duration of the campaign. Tested on an new equipment, which facilitates the optimal collection and advertising campaign for one of the Group’s companies, the use treatment of sanitary effluents. of this tool clearly helped to identify areas where improvements Integrated grape-growing practices have also been implemented by could be made, in each of the several media channels. the Moët Hennessy Estates & Wines in Australia, New Zealand and California: cover planting, use of alternatives to certain insecticides, 6.2 Soil use conditions, emissions into the air, water and soil verification of soil erosion, etc. Cape Mentelle has converted a portion of its vineyards to be farmed organically. 6.2.1 Soil use Soil pollution from old manufacturing facilities (cognac and 6.2.2 Greenhouse gas emissions champagne production; trunk production) is insignificant. The Given the nature of the Group’s operations, the only emissions more recent production facilities are generally located on former that have a significant impact on the environment are greenhouse farmland with no history of pollution. Finally, the Group’s gas emissions. manufacturing operations require very little soil use, except for Estimated greenhouse gas emissions in tons of CO (carbon dioxide) wine production. 2 equivalent correspond to the site energy consumption emissions, Integrated grape growing (viticulture raisonnée) is an advanced as defined in section 6.1.2. These include direct emissions method that combines cutting-edge technology with traditional (on-site combustion) and indirect emissions (from the generation methods, covering all stages of the wine producing process. of electricity and vapor used by the sites).

56 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Breakdown of emissions by business group in 2007

% change Direct CO Indirect CO CO emissions 2 2 2 in 2007 emissions emissions Wines and Spirits 51,217 8 30,852 20,365 Perfumes and Cosmetics 10,914 (4) 7,580 3,334 Fashion and Leather Goods 13,661 - 4,203 9,458 Watches and Jewelry 1,760 46 (1) 1,625 135 Selective Retailing 32,083 - 2,466 29,617 Holding Company 606 7 75 531 Total ; 110,241 4 46,801 63,440 (1) Change due to the increase in business volumes.

Hennessy continued to favor the transport of its goods by boat. The first Bilan Carbone® assessments were performed at Hennessy, Maritime transport produces 85 times less greenhouse gas Parfums Christian Dior, Veuve Clicquot and Louis Vuitton. These emissions than air transport: in metric tons.kilometer, 88% of procedures analyzed all greenhouse gas emissions generated Hennessy products were thus shipped by boat, 9% by road and by the activities of these Group companies and have helped to 2% by rail. identify priority courses of action, particularly to achieve lower energy consumption. This approach is now being pursued at all In Champagne, a single logistics platform for all of the Houses now of the Group’s major companies. Assessments are underway at provides transportation optimization, offering the most systematic Parfums Christian Dior (renewal), Guerlain, Kenzo Parfums and approach possible to the use of maritime transport services (now Glenmorangie. Moët & Chandon also carried out a Bilan Carbone® used for more than 80% of Champagne shipments). The preparation assessment in 2007, as did Louis Vuitton, which renewed its first of shipments to the United States has been optimized by enabling assessment carried out in 2004, with very encouraging results. vehicles for transshipment between the Champagne region and As an example, the significant efforts devoted to reductions in Antwerp to be loaded with 26 pallets instead of 22, thus an 18% packaging have generated 40% less emissions, corresponding to increase in capacity. more than 1,000 metric tons of annual CO2 equivalents.

6.2.3 Discharges to water The significant, relevant emissions retained are the discharges The parameter used is the chemical oxygen demand (COD) of substances causing eutrophization by Wines and Spirits and calculated after treatment of the discharges in the Group’s own Perfumes and Cosmetics operations. The Group’s other business plants or external plants with which the Group has partnership groups have a very limited impact on water quality. Eutrophization agreements. The following operations are considered as treatment: is the excessive build-up of algae and aquatic plants caused by city and county waste water collection and treatment, independent excess nutrients in the water (particularly phosphorus), which collection and treatment (aeration basin) and land application. reduces water oxygenation and adversely impacts the environment. In 2007, COD discharges dropped by 22%.

COD after treatment (metric tons/year) 2007 2006 % change

Wines and Spirits 1,996.5 2,696.7 (26) Perfumes and Cosmetics 102.0 8.8 1,059.0 (1) Total ; 2,098.5 2,705.5 (22)

(1) Increase due to change in reporting scope and business volumes .

Reference Document 2007 57 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

6.2.4 Waste Group companies continued their efforts with respect to the sorting In 2007, Moët & Chandon tried out a new approach to recovery and recovery of waste. On average, 94% of the waste was recovered and recycling making use of shoots thinned from vine trunks. in 2007 compared to 93% in 2006 and 86% in 2005. In parallel, Based on two recycling techniques, the composting of wood and waste production fell 4% in 2007. the recovery of energy, this project was developed in partnership with a service provider and may in future be extended throughout Recovered waste is waste for which the final use corresponds to the Champagne region. Moët & Chandon’s annual pruning one of the following channels: of vine trunks, amounting to between 200 and 400 metric tons - reuse, i.e. the waste is used for the same purpose for which the of wood, enables the production of between 400 and 900 MWh product was initially designed; of energy. - recycling, i.e. the direct reintroduction of waste into its original Sephora USA has implemented a very innovative test program, manufacturing cycle resulting in the total or partial replacement named GRN-PAK, in two of its largest stores. The idea is to of an unused raw material, controlled composting or land make a container available to customers for depositing empty treatment of organic waste to be used as fertilizer; packages. These materials are then handled through various - incineration for energy production, i.e. the recovery of the energy recycling channels. This system will be extended to other stores in the form of electricity or heat by burning the waste. following the test phase.

Waste produced in 2007

Hazardous or special Waste produced in Waste produced in Change in waste (in metric tons) waste in 2007 (1) 2007 2006 produced (%) Wines and Spirits 108 69,262 72,946 (5) Perfumes and Cosmetics 701 (2) 6,735 6,937 (3) Fashion and Leather Goods 67 5,129 4,686 9 Watches and Jewelry 24 223 184 21 Selective Retailing 14 3,143 3,653 (14) Holding Company 1 480 208 131 (3) Total ; 915 84,972 88,614 (4) (1) Waste to be sorted and treated separately from other ”common“ waste (boxes, plastic, wood, paper, etc.). (2) Some products that are removed from the manufacturing cycle are treated in the same way as hazardous waste to prevent counterfeiting attempts. (3) Increase related to the integration of a new administrative site.

Waste recovery in 2007

(in %) Re-used Material recovery Energy recovery Total recovery

Wines and Spirits 592198 Perfumes and Cosmetics 9 48 31 88 Fashion and Leather Goods 2 49 18 69 Watches and Jewelry 15 28 36 79 Selective Retailing -402767 Holding Company - 74 26 100 Total 583694

58 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

6.3 Measures taken to limit damage to the biological The Group’s environment management team was set up with the equilibrium, natural habitats, animal and plant species following objectives: Fashion and Leather Goods, and Watches and Jewelry implemented - implement the environmental policies of the Group companies, procedures to improve compliance with the convention on based on the LVMH Charter; international trade in endangered species (CITES). Through a - conduct environmental audits to assess Group companies’ system of import-export permits, this convention was set up to environmental performance; prevent certain species of endangered fauna and flora against over- - monitor regulatory and technical issues; exploitation in the course of international trade. - create management tools; Perfumes and Cosmetics’ laboratories request that their partners - help companies anticipate risks; provide information on the bio-diversity and bio-availability of - train employees and increase environmental awareness at all every new plant studied. Companies in this business group have management levels; undertaken not to use any protected, rare or endangered plants - define and consolidate the environmental indicators; in their operations. They favor plants that are commonly used or - work alongside the various key players (associations, rating grown specifically to meet their activity’s requirements. agencies, government authorities, etc.). Following the example of Parfums Christian Dior, which publicly The Group companies’ environment correspondents meet as announced its decision to refrain from testing the safety of its part of the LVMH Environment Commission coordinated by the cosmetic products on animals in 1989, all other companies in the Group’s environment management team once every three months Perfumes and Cosmetics business group have also discontinued and post their conclusions on the Group’s Environment Intranet this practice. Furthermore, for the last several years, LVMH has page, which is accessible to all employees. collaborated with teams of university researchers to establish Almost all of the companies in the business groups stepped up their programs for the development of new alternative methods, employee training and awareness programs this year. In 2007, these especially for allergy testing. The Group’s toxicologists have also programs resulted in 16,726 training hours (;) a 93% increase participated in the official validation processes for alternative compared to 2006 (8,680 hours). methods in several areas, including phototoxicity, eye irritation, and skin absorption. New executives at LVMH are briefed in the Group’s environmental policy, the available tools and its environmental safety network as part of their orientation seminar. 6.4 Organization of environmental protection methods within the Group A web-based training module that may be accessed by all staff via the environment page of the Group’s Intranet has been developed, 6.4.1 Organization particularly for the use of the new environmental representatives. It allows employees to increase their awareness at their own pace LVMH has had an environment management team since 1992. of the Group’s environmental policy and the best practices that In 2001 it established an “Environment Charter” signed by should be adopted. the Chairman of the Group, which requires that each company undertakes to set up an effective environment management system, At Moët & Chandon, an initiative promoting awareness of create think-tanks to assess the environmental impacts of the sustainable development issues was carried out throughout the Group’s products, manage risks and adopt the best environmental first half of the year, it mobilized 800 staff members for a total of practices. In 2003, Bernard Arnault joined the United Nations’ over 6,500 hours’ awareness training. Global Compact program. In 2007, he also endorsed Gordon Over and above these initiatives, the Group’s companies also Brown’s Millennium Development Goals. disseminate written information concerning the environment: The Group undertakes to adopt the following environmental - at the end of June, in honor of Sustainable Development Week, measures: Louis Vuitton sent an e-mail each day to all of its 13,000 employees worldwide to remind them of their eco-citizen - apply precaution to all issues impacting the environment; responsibilities across the full spectrum of environmental - undertake initiatives to promote greater environmental concerns: energy, water, leisure activities, waste, travel, etc.; responsibility; - in the United States, Sephora now provides environmental - favor the development and distribution of environmentally- awareness training to staff in all of its stores, with a special focus friendly technologies. on the recycling of waste and reductions in energy consumption;

Reference Document 2007 59 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

- as a complement to the information provided to new hires during and Sustainable Development department of Ernst & Young, orientation, Veuve Clicquot has developed new environmental the Group’s statutory auditors. awareness materials used at all of its production sites. These materials cover the company’s environmental policy and the 6.4.3 Measures to ensure compliance with applicable laws initiatives implemented; and regulations - in 2007, the Group’s Environmental Compliance Guidebook, Group companies are audited on a regular basis, either by third sent to all of the principal Group companies, devoted special parties, insurers or internal auditors, which enables them to keep attention to the materials used for fixtures and fittings in stores their compliance monitoring plan up-to-date. In 2007, 52 external and other sales outlets: furniture, floor coverings, window environment audits and 32 internal environment audits (;) decoration, etc.; were performed on-site, a 68% increase from 2006. These audits - the Attitude newsletter, whose second issue featured a discussion correspond to an inspection of one or more sites of the same of building and the environment, was sent to the Chairmen of all company based on all relevant environmental issues—waste, water, Group companies and to all Executive Committee members; energy, and environmental management—and are documented in a written report including recommendations. In the area of risk prevention, numerous actions were carried out in 2007. Several Group companies, including Hennessy, This figure does not include the numerous compliance controls Veuve Clicquot and Parfums Givenchy, published health, safety that may be performed on a specific environmental regulation and environment (HSE) information booklets intended for the topic, i.e., a waste sorting inspection, performed periodically contractors and service providers who work on their sites. HSE by the Group companies on their sites. Since 2003, a review of requirements are therefore communicated to all staff employed environmental regulatory compliance is also performed by the by these firms as soon as they arrive on site. insurance companies, which now includes an environmental inspection during their fire safety visits to Group company sites. See also Section 2.2, Industrial and Environmental Risks for risk A total of 30 visits were performed in 2007. prevention. The main environmental legal and regulatory measures introduced 6.4.2 Evaluation and certification programs by the Group during 2007 include the implementation of the European Union’s new REACH Regulation for all of the Group’s In accordance with the LVMH Environment Charter, every businesses as well as the establishment of financial contributions company is responsible for designing and implementing its own to authorized bodies for the funding of recovery systems for environment management system, and, in particular, for defining textile products placed on the French market and for unsolicited its own environment policy and objectives. Each company has advertising materials in France. access to an LVMH self-assessment guide and can, if it wishes, apply for ISO 14001 or EMAS certification for its system. Parfums Christian Dior’s Saint-Jean-de-Braye site continued the updating of its operating authorization application file. Hennessy’s ISO 14001 certification, first obtained in 1998, was renewed for the third time in 2007. Those of Veuve Clicquot and 6.4.4 Expenses incurred to anticipate the effects of Krug, originally acquired several years later, in 2004, have also operations on the environment been renewed. Amounts were recognized under the relevant environmental In addition, Mercier, Ruinart and Moët & Chandon also received expense headings in accordance with the recommendations of the ISO 14001 certification in 2007, as did the Belvedere vodka CNC (French National Accounting Council). Operating expenses plant in Poland and Louis Vuitton’s international logistics center and capital expenditure were recognized for each of the following at Cergy. headings: In 2004, a team of environmental auditors was established, - air and climate protection; consisting of staff members occupying technical (corporate services, - waste water management; quality, industrialization, maintenance, environmental), legal, or - waste management; financial functions. Today, the eleven members of this team are - protection and purification of the ground, underground water able to rapidly perform an environmental audit of a site, at the and surface water; request of a company. These Group auditors completed a three-day course in environmental audit techniques, followed by one day of - noise and vibration reduction; practical audit training in the field. Three companies employed - biodiversity and landscape protection; the services of this team to audit their sites in 2007. - radiation protection; Since the 2002 fiscal year, the Group’s annual environmental - research and development; data reporting has been audited each year by the Environment - other environmental protection measures.

60 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Environmental protection expenses in 2007 break down any product may be marketed taking into consideration their as follows: conditions of use. Furthermore, the European Commission’s Scientific Committee on Consumer Products (SCCP) evaluates the - operating expenses: 6.4 million euros; safety of substances used in cosmetic products on an ongoing basis. - capital expenditure: 5.1 million euros. LVMH is particularly vigilant in enforcing compliance with 6.4.5 Provisions and guarantees given for environmental regulations, and also monitors the opinions of scientific committees risks, and compensation paid during the year pursuant to and the recommendations of professional associations. Apart from a court decision their attention to these texts, the Group’s toxicologists, who No provision was established for environmental risks in fiscal assume responsibility for product safety, determine the necessary year 2007. guidelines for Group suppliers and the development teams. The Group’s experts participate regularly in the workgroups of 6.4.6 Objectives assigned by the Group to its national and European authorities and are very active in professional subsidiaries abroad organizations. The Group requests that each subsidiary, regardless of its In the area of environmental protection, developments in scientific geographic location, applies the Group’s environmental policy knowledge and/or regulations may sometimes lead the Group as set forth in the Charter, which stipulates that each subsidiary to replace certain ingredients. For example, the Group decided defines its own environmental objectives and communicates the that triclosan would no longer be used in its products due to annual indicators included in this section. its potential risk to the environment, although this ingredient 6.4.7 Consumer safety received a favorable assessment from European scientific authorities (Scientific Steering Committee and SCCP) in 2002 with respect Protecting human health by carefully selecting the ingredients used to the absence of any consumer safety risks. Substitutions have in manufacturing products, prior to any production processes, and therefore been made as product lines are revamped. by determining alternative production methods where required is With respect to its activities in the area of wines and spirits, LVMH a priority for the LVMH Group. promotes the responsible consumption of alcohol. The Group is Cosmetics manufactured or sold in Europe are regulated by Council a founding member of Enterprise et Prévention, an association Directive 76/768/EEC. Considered by experts as one of the most created some fifteen years ago, whose aim is to work together with stringent texts among those regulating cosmetics throughout the government authorities to encourage moderation. In addition, world, this directive governs all substances used by the cosmetics Moët-Hennessy has prepared a set of marketing guidelines to be industry and requires that a risk assessment be performed before respected by all of its Wines and Spirits brands.

Reference Document 2007 61 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

7. MAIN LOCATIONS AND PROPERTIES

7.1 Production

Wines and Spirits The vineyards in France and abroad owned by the Group are as follows:

(in hectares) 2007 2006

TOTAL Of which under TOTAL Of which under production production

France: Champagne name 1,788 1,671 1,770 1,678 Cognac name 220 185 246 189 Yquem 190 98 188 98 Other countries: California (United States) 464 320 466 336 Argentina 1,369 820 1,369 765 Australia, New Zealand 543 400 558 331 Brazil 232 62 232 63

In the table above, the number of hectares owned presented in the Kenzo owned logistics facilities in France which were sold at the “Total” column is determined exclusive of surfaces not used for end of 2007. viticulture. The difference between the total number of hectares Rossimoda owns its office premises and its production facility in owned and the number of hectares under production represents Stra and Vigonza in Italy. areas that are planted, but not yet productive, and areas that are not yet planted. The other facilities utilized by this business group are either leased or included within manufacturing subcontracting agreements. The Group also owns industrial and office buildings, wineries, cellars, warehouses, and visitor and customer centers for each of Perfumes and Cosmetics its main Champagne brands or production operations in France, California , Argentina, Australia, Brazil and New Zealand, as well Buildings located near Orleans in France housing the Research as distilleries and warehouses in Cognac, the United Kingdom and and Development operations of Perfumes and Cosmetics as well Poland. The total surface area is approximately 750,000 square as the manufacturing, distribution and office facilities of Parfums meters in France and 325,000 square meters abroad. Christian Dior are owned by Parfums Christian Dior and occupy a surface area of 122,000 square meters. Fashion and Leather Goods Guerlain owns its two manufacturing centers in Chartres Louis Vuitton owns fifteen leather goods production facilities and Orphin (France), for a total surface area of approximately located primarily in France, with other workshops near Barcelona 27,000 square meters. in Spain and San Dimas in California; the facility in Romania Parfums Givenchy owns its two plants in France, one in Beauvais is dedicated to component production. The company owns its and the other in Vervins , which also handles the production warehouses and logistics centers in France but leases warehouse of Kenzo product lines, corresponding to a total surface area space abroad. The total surface area of production facilities and of 19,000 square meters. The company also owns distribution warehouses owned is approximately 190,000 square meters. facilities in Hersham, England. Fendi owns its own manufacturing facility near Florence (Italy). La Brosse et Dupont owns production facilities, warehouses, and Celine also owns manufacturing and logistics facilities near office space in France and Poland, for a total surface area of about Florence (Italy). 50,000 square meters. Berluti’s shoe production factory in Ferrare (Italy) is owned by the Group.

62 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

Watches and Jewelry TAG Heuer leases all of its manufacturing facilities in La Chaux- The facilities operated by this business group’s remaining brands de-Fonds and the Jura region of Switzerland. – Chaumet, Fred, De Beers and Christian Dior Montres – are leased. Zenith owns the Manufacture, which houses its movement and watch manufacturing facilities in Le Locle, Switzerland. All of its European warehouses are leased.

7.2 Retail distribution Retail distribution of the Group’s products is most often carried In the Selective Retailing business group: out through exclusive boutiques. Most of the stores in the Group’s - Le Bon Marché and Franck et Fils own the buildings in Paris retail network are leased and only in exceptional cases does LVMH that house their department stores, corresponding to a total sales own the buildings that house its stores. area of about 70,000 square meters; Louis Vuitton owns certain buildings that house its stores in Tokyo, - DFS owns its stores in Waikiki (Hawaii), Tumon Bay (Guam) Kobe, Guam, Hawaii, Seoul, Taipei, Sydney, Caracas, Copenhagen, and Saipan; Stockholm, Rome, Genoa, Cannes and Saint-Tropez, for a total - The real estate complex previously used for the commercial surface area of approximately 10,000 square meters. operations of the Samaritaine department store in Paris, with Celine and Loewe also own the buildings housing some of their a sales area of about 80,000 square meters, is currently not stores in Paris and Spain. being used.

As of December 31, 2007, the Group’s store network breaks down as follows:

(in number of stores) 2007 2006 2005

France 306 288 278 Europe (excluding France) 523 456 422 United States 462 394 365 Japan 253 278 262 Asia (excluding Japan) 409 363 329 Other markets 95 80 67 Total 2,048 1,859 1,723

(in number of stores) 2007 2006 2005

Fashion and Leather Goods: Louis Vuitton 390 368 345 Other brands 599 586 546 989 954 891 Perfumes and Cosmetics 55 48 43 Watches and Jewelry 90 82 70 Selective Retailing: Sephora 756 621 558 Other 153 149 156 909 770 714 Other 5 55 Total 2,048 1,859 1,723

Reference Document 2007 63 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Board of Directors on Group management

7.3 Administrative sites and investment property 9. SUBSEQUENT EVENTS Most of the Group’s administrative buildings are leased, with the exception of the headquarters of certain brands, particularly those There were no significant subsequent events as of the date on which of Louis Vuitton, Parfums Christian Dior and Zenith. the financial statements were approved for publication. The Group holds a 40% stake in the company owning the building [Update after the date on which the Board of Directors approved housing its headquarters on avenue Montaigne in Paris. The Group the financial statements for publication: also owns three buildings in New York (total surface area of about The media group La Tribune was sold on February 11, 2008, 19,000 square meters) and a building in Osaka (about 5,000 square after the Minister for the Economy had granted his consent to this meters) that house the offices of subsidiaries. transaction on February 7, 2008. Lastly, the Group owns investment property, for the most part In February 2008, the Wines and Spirits business group acquired located in Paris and mainly in the vicinity of the Samaritaine 100% of the Spanish winery Bodega Numanthia Termes, which and Le Bon Marché department stores, for a total surface area of produces super-premium wines from the Toro Region in Spain]. approximately 50,000 square meters.

8. LITIGATION AND EXCEPTIONAL EVENTS 10. RECENT DEVELOPMENTS AND PROSPECTS

As part of its day-to-day management, the Group is party to various Following an excellent 2007, LVMH is well positioned for 2008. legal proceedings concerning trademark rights, the protection of The Group will continue its strategy of concentrating on internal intellectual property rights, the protection of Selective Retailing growth and the development of its leading brands. networks, licensing agreements, employee relations, tax audits, and LVMH has set itself an objective of a tangible growth in its results any other matters inherent to its business. The Group believes that for 2008. the provisions recorded in the balance sheet in respect of these risks, litigation proceedings and disputes that are in progress and any The geographical spread of its activities, the strength and the others of which it is aware at the year-end, are sufficient to avoid complementarity of its brands and the exceptional talent of its its consolidated financial net worth being materially impacted in teams will enable the Group to gain market share and to further the event of an unfavorable outcome. strengthen its lead in the global luxury goods market. In June 2007, the Group signed an agreement with the US company Belvedere Winery under which the Group acquired the Belvedere brand, thereby terminating the litigation claim concerning the use of that brand name in the United States. Following the decision delivered in March 2006 by the Conseil de la Concurrence (the French antitrust authority) regarding the luxury perfume sector in France, and the judgment rendered on June 26, 2007 by the Paris Court of Appeal, the Group companies concerned have taken their case to the Cour de Cassation, the highest court in France, which is expected to deliver its judgment in 2008.

64 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON INTERNAL CONTROL PROCEDURES

Page

1. PREPARATION AND ORGANIZATION OF THE TASKS OF THE BOARD OF DIRECTORS 66

2. IMPLEMENTATION OF INTERNAL CONTROL PROCEDURES 68

3. STATUTORY AUDITORS’ REPORT ON THE REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON INTERNAL CONTROL PROCEDURES 74

Reference Document 2007 65 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Chairman of the Board of Directors on internal control procedures

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON INTERNAL CONTROL PROCEDURES

This report, which has been drawn up in accordance with the option plans and bonus share plans, and the authorization of provisions of Article L. 225-37 of the French Commercial Code, is guarantees issued in favor of third parties as well as various related designed to give an account of the preparation and organization of party agreements. the tasks of the Board of Directors of LVMH Moët Hennessy-Louis The total amount of directors’ fees paid to members of the Board Vuitton, and the internal control procedures it has put in place. of Directors for the 2007 fiscal year was 1,125,000 euros.

1. PREPARATION AND ORGANIZATION OF THE 1.2 Executive Management TASKS OF THE BOARD OF DIRECTORS The Board of Directors decided not to assign the roles of Chairman and Chief Executive Officer to different persons. It made no change The Board of Directors has a Charter, which sets out the composition, in the powers vested in the Chief Executive Officer. tasks, functions and responsibilities of the Board of Directors. In agreement with the Chairman and Chief Executive Officer, the The Board of Directors has appointed two Committees amongst Board of Directors appointed a Group Managing Director, Mr. its members, the composition, role and tasks of which are set out Antonio Belloni, who is granted the same powers as the Chief in internal rules and regulations. Executive Officer. The Charter of the Board of Directors and the Committees’ internal rules and regulations are sent to any candidate for appointment as 1.3 Performance Audit Committee Director and to any permanent representative of an entity, before The main tasks of the Performance Audit Committee are to ensure they assume their duties. that the Company and the Group’s accounting policies comply with generally accepted accounting principles , to review the 1.1 Board of Directors individual company and consolidated financial statements before The Board of Directors is a strategic body of the Company which they are submitted to the Board of Directors, and to ensure the is primarily responsible for enhancing the Company’s value, effective implementation of the Group’s internal controls. ensuring that its underlying strategy is adopted and overseeing Its members and Chairman are appointed by the Board of its implementation, verifying the truth and fairness of information Directors. It currently consists of three directors, two of whom concerning it and protecting its assets. are independent: Messrs. Antoine Bernheim (Chairman), Nicholas The Board of Directors of LVMH Moët Hennessy-Louis Vuitton Clive-Worms and Gilles Hennessy. acts as guarantor of the rights of each of its shareholders and ensures The Performance Audit Committee met four times in 2007. One of that shareholders fulfill all their duties. these meetings was attended by all members, while the other three It consists of 18 members, six of whom are independent directors were attended by the Chairman and by one of the Committee’s who hold no interests in the Company. two other members as well as by the Statutory Auditors, Director of Operations, Chief Financial Officer, Chief Controller, Internal Directors have to hold personally a minimum of 500 shares. Audit Director, Accounting Director, Legal Director, and The Board of Directors met four times during the 2007 fiscal depending on the issues discussed, the Financing Director, the year at the written invitation of its Chairman sent to each of the Treasurer, the Tax Director and an Advisor to the Chairman. directors at least a week before the date of the meeting. The average In addition to reviewing the parent company and consolidated attendance level of directors at these meetings was 84%. financial statements, the Committee’s work included examining The Board of Directors approved the annual and half-yearly the results of Internal Audit’s missions, the Group’s currency financial statements and also reviewed the Group’s underlying hedging policy, as well as all legal matters, in particular any strategy, the budget, the implementation of share subscription ongoing litigation.

66 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Chairman of the Board of Directors on internal control procedures

1.4 Nominations and Compensation Committee on the recommendation of the Nominations and Compensation Committee. The main responsibilities of the Nominations and Compensation Committee are to issue: The Nominations and Compensation Committee can recommend that all or part of the directors’ fees be allocated based on the attendance - proposals on the allocation of directors’ fees paid by the Company, rate of the members at the meetings of the Board of Directors. as well as on compensation, benefits in kind and subscription or purchase options for the Chairman of the Board of Directors, the In respect of the 2007 fiscal year, LVMH paid a total of 1,125,000 Chief Executive Officer and the Group Managing Director(s) euros in directors’ fees to the members of its Board of Directors. of the Company; These fees are distributed among the directors and advisors in accordance with allocation rules defined by the Board of Directors - opinions on candidates for the positions of Director, Advisory that take into account the duties performed on the Board and in Board member, Group Executive Committee member or the Committees. member of Executive Management of the Company’s main subsidiaries, on compensation and benefits in kind allocated Other compensation to the Company’s Directors and Advisory Board members by Exceptional compensation may be paid to some Directors for the Company or its subsidiaries, and on the systems of fixed or special assignments and on the basis of the guidance or leadership variable, immediate or deferred compensation and incentives role they assume on various committees of the Board of Directors. for directors of the Group. The amount shall be determined by the Board of Directors and Its members and Chairman are appointed by the Board of Directors. reported to the company’s statutory auditors. It consists of three members, two of whom are independent: Messrs. Part of the compensation paid to members of the Executive Antoine Bernheim (Chairman), Albert Frère and Kilian Hennessy. Committee and key operations personnel is based on the generation The Committee met twice during the 2007 fiscal year, with all of cash, operating profit, and the return on capital employed for members in attendance. It issued proposals on compensation and the business groups and companies headed by the respective the allocation of share subscription options to the Chairman and executives, as well as on their individual performance. The variable Chief Executive Officer and to the Group Managing Director and portion generally represents between one-third and one-half of gave its opinion on compensation, share subscription options and their compensation. benefits in kind granted by the Company and its subsidiaries to Subject to certain conditions, notably the correct performance certain Directors. of their duties, members of the Executive Committee and where applicable Company officers, may benefit from a contractual 1.5 Advisory Board indemnity on leaving the company, in addition to the partial or total maintenance of their right to exercise any stock options that Advisory Board members are invited to meetings of the Board they received prior to their departure. of Directors and are consulted for decision-making purposes, although their absence cannot undermine the validity of the Board Upon their retirement, C ompany officers who serve on the Executive of Directors’ deliberations. Committee may receive a supplemental retirement benefit provided they have been members of the Executive Committee for a period They are appointed by the Shareholders’ Meeting on the proposal of at least six years and that they assert at the same time their of the Board of Directors and are chosen from shareholders on the entitlement to their basic retirement benefits under compulsory basis of their competencies. pension schemes. This supplemental payment corresponds to a The Advisory Board currently has one member. specific percentage of the beneficiary’s salary, to which a ceiling is applied on the basis of the reference salary determined by the 1.6 Compensation policy for company officers French social security scheme. Provisions recognized in 2007 for these supplemental retirement benefits are included in the Directors’ fees paid to the members of the Board of Directors amount shown for post-employment benefits under Note 30.3 of the consolidated financial statements. The Shareholders’ Meeting sets the total amount of directors’ fees to be paid to the members of the Board of Directors. This amount is divided among the members of the Board of Directors, and if applicable, the members of the Advisory Board

Reference Document 2007 67 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Chairman of the Board of Directors on internal control procedures

2. IMPLEMENTATION OF INTERNAL CONTROL As well as guaranteeing brand independence, this type of PROCEDURES organization also allows synergies to be brought into play between companies belonging to the same business line.

2.1 Definition The internal control policy applied across the Group is based on the following organizational principle: The Group uses an internal reference guide which is consistent - the parent company, LVMH SA, is responsible for its own with COSO principles (Committee of Sponsoring Organisation of internal control, while also acting as leader and coordinator for the Treadway Commission) and which the Autorité des Marchés all other internal control systems within the Group; Financiers (French market regulator - AMF) has taken as the basis - the President of a brand is responsible for the internal control for its Reference Framework. At the behest of the Board of Directors, of all the subsidiaries that contribute to development of the the Performance Audit Committee, Executive Management and brand worldwide; other senior managers of the parent companies and subsidiaries, - each subsidiary’s President is similarly responsible for its own internal control, in conformity with the reference guide, is designed operations. to provide reasonable assurance that the following objectives will be met: The internal control mechanism, which has been formalized since 2003 to comply with the LSF (French Financial Security Act), has - the control of activities and processes, the efficiency of operations adopted a similar structure; it is both: and the efficient utilization of resources; - decentralized at business group and brand level: the guidance and - the reliability of financial and accounting information; management of the internal control process is the responsibility of - compliance with applicable laws and regulations. the executive managements of the operational and legal entities; Moreover, in its reference guide, LVMH has defined two - unified around a shared methodology and a single reference further goals: guide, both of which are coordinated centrally by the LVMH SA holding company and rolled-out to all Group companies. - the safeguarding of assets and the value of capital; The first stage of formalization is a process of self-assessment. It is - the application of the instructions and orientations decided by part of an approach based on ongoing improvement that in the long the Executive Management of the Group and of the operational run will help appraise the adequacy and efficiency of the Group’s units, i.e. the companies/brands and their subsidiaries. internal control system. Self-assessment is based on the LVMH The internal control mechanism thus comprises a range of control internal control reference guide. This reference guide covers 12 key procedures and activities in addition to those directly connected processes (Sales, Retail Sales, Purchases, Licenses, Travel and to the financial and accounting system; because it aims to ensure Entertainment, Inventory, Production, Cash Management, Fixed the control and continuity of all existing and new activities, the Assets, Human Resources, Information Systems and Financial mechanism must enable the management of brand companies and Statements Closing) together with control activities accross the subsidiaries to focus fully on the strategy, development and growth five COSO components ; it is supported by SWITCH, an internal of the Group. control management and modeling tool that has also been adopted by other CAC 40 members. Limits of internal control The self-assessment approach tailored to the LVMH Group’s No matter how well designed and applied, the internal control configuration and culture consists of: mechanism cannot provide an absolute guarantee that the - defining the scope of the LSF project, encompassing the Group’s company’s objectives will be achieved. All internal control systems most significant companies; have their limits due notably to the uncertainties of the outside world, individual judgment or malfunctions resulting from human - sending detailed instructions from the Executive Management or other errors. of the Group to the Chairmen of the companies concerned; - a review of the general control environment, in order to allow each company’s Chairman to assess his or her entity’s general 2.2 Scope and formalization control environment; With luxury as the unifying concept, LVMH is comprised of five - a detailed review of key business processes in relation to the main business groups: Wines and Spirits, Fashion and Leather materiality of these processes and the expected level of risk Goods, Perfumes and Cosmetics, Watches and Jewelry and coverage; Selective Retailing. The business groups are themselves composed - the submission by the Management Committee of each selected of companies of varying sizes owning prestige brands, which in entity of a letter of representation signed by its Chairman turn are divided into subsidiaries operating worldwide. and its Chief Financial Officer, confirming their acceptance

68 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Chairman of the Board of Directors on internal control procedures

of responsibility for internal control in connection with All of these elements are centrally managed and coordinated, but the disclosure of information on areas of weaknesses and the they are also reviewed each year by the Group’s significant entities remediation needed. through the established self-assessment procedure in force.

The detailed review of key processes is carried out on the basis of a 2.3.1 The general control environment standard questionnaire listing the main risks and related controls, with each company adapting the document to its own business The internal control mechanism, which applies to all of LVMH’s environment. Specific processes were developed and evaluated to operations, aims primarily to create appropriate conditions for reflect the particular needs of certain activities (Distilled Alcohol a general internal control environment tailored to the Group’s and Vineyard Land for Wines and Spirits, Creation for Fashion specificities. It also aims to anticipate and control the risk of and Leather Goods). errors and fraud, without however guaranteeing their complete elimination. The letters of representation on internal control are passed on by The Group has always expressed its determination with regard to the subsidiaries to the parent companies which in turn forward these fundamentals, which are the management’s commitment them to the Group. to integrity and ethical behavior, the principle of honesty in In 2007, some one hundred entities (parent companies and relations with customers, suppliers, employees and other business subsidiaries) accounting for more than 80% of consolidated Group partners, clear organizational structures, responsibilities and revenue undertook self-appraisal. authorities defined and formalized according to the principle of the segregation of duties, regular monitoring of staff performance, and Furthermore, as a demonstration of their commitment to the a commitment to skills management and professional development. project, key Group entities have reinforced their internal control structures by explicitly identifying the hierarchy of responsibility Ethical and good governance principles have been widely for internal control within their organizations. disseminated. The Group recommends codes of conduct, supplier charters and formalized procedures for declaring and monitoring Lastly, in 2007, eight key processes (Treasury, Finance, Tax, conflicts of interest, the implementation of which it oversees at Consolidation, Financial Statements Closing, Cash Flows, company level. Information Systems and Financial Communication) were analyzed Skills management is a significant aspect of internal control. at the Group level and at that of the parent company, LVMH SA, LVMH pays special attention to adjusting job profiles and to determine the related risks. Upon completion of this analysis, corresponding responsibilities, formalizing annual performance action plans were established setting out procedures to correct reviews at individual and organizational level, and developing deficiencies when detected. skills through training programs custom-designed for each level Due diligence and assessments by Group managers of seniority as well as by encouraging internal mobility. Personnel reports are produced monthly by the Group’s Human Resources These internal control formalization procedures are carried out on Department, presenting changes in staff and related analyses as an internal basis, reinforced by independent external validation. well as vacancies and internal movements. A dedicated intranet This approach maximizes the involvement of operational managers, site is also available for the Group’s Human Resources. capitalizing on their knowledge and facilitating the maintenance of a permanent perspective on improving internal control over 2.3.2 Risk management time within the Group. The Group’s Statutory Auditors were kept The Group identifies and analyzes the main risks likely to affect informed on the progress of this initiative, as was the Performance achievement of its operational and financial objectives and its Audit Committee, by means of regular reports. goal of compliance with applicable laws and regulations. It takes measures to mitigate such risks and reduce their impact. A specific 2.3 Internal control components risk mapping tool is used for this purpose. Certain risks to which the Group is exposed are monitored In accordance with COSO guidelines, the Group’s internal control separately. These risks are detailed separately in the Report system includes five closely interrelated components: of the Board of Directors on Group management Paragraph 2 - a general control environment; Operational risk factors and insurance policy, and Paragraph 6 - a risk assessment system; Effects of operations on the environment. - appropriate controls; 2.3.3 Control activities, procedures and documentation - an IT and communications system that enables responsibilities Internal control practices and procedures are implemented by the to be exercised efficiently and effectively; companies’ internal control managers under the responsibility of - and a performance monitoring system. their management committees.

Reference Document 2007 69 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Chairman of the Board of Directors on internal control procedures

This year, on the occasion of the launch of a new Finance intranet, 2.3.5 Monitoring of the internal control systems the Group undertook a revision of all the procedures contributing There are several levels of monitoring, the two main ones being: to accounting and financial information and applicable to all the consolidated companies. It covered accounting and financial Ongoing monitoring of the processes: procedures available via the Group’s intranet, dealing mainly which is organized by the Operational Departments in order to with accounting policies and standards, consolidation, taxation, anticipate or detect incidents as soon as possible. This objective investments, financial reporting (including budgetary procedures now forms an integral part of IT projects (installation or upgrading and strategic plans), cash flow and financing (including cash of versions) in two notable cases: the implementation of embedded pooling, foreign exchange and interest rate hedging). The application controls and the editing of error or exception reports management reporting function also details the format, content for sensitive transactions and data. and frequency of financial reports. Periodic monitoring of the mechanism: At the same time, the internal control manual was revamped, entitled - by management or operational staff under the responsibility “The Essentials of Internal Control”, and made available on the of the internal control managers. The final deliverable of this intranet. The guide describes the bases of the general environment supervision is the letter of representation on internal control signed by the President and CFO of each significant entity; and the salient features of the main processes: Sales, Retail Sales, Purchases, Inventory, Production, Financial Statements Closing - by LVMH Internal Audit and the Statutory Auditors, who provide and Information Systems (general IT controls). management of the entities and the Executive Management of the Group with the results of their review work and their As well as this manual, the LVMH internal control reference recommendations. guide covering a number of business processes has also been made available. This reference guide details, for each risk arising from a 2.4 Internal control participants given process, the key control activities expected. In addition to the contribution of all Group employees to the As regards the controls that are essential to achieving the key success of the internal control system, the following participants process internal control objectives, the Group and its internal fulfill specific roles with respect to internal control: control managers at company level ensure their implementation, where necessary. The managers are asked to make a special effort At Group level to document the key activities in the form of a procedure in order Board of Directors to ensure consistent quality over time, regardless of who carries As part of its responsibilities described above, the Board of them out. Directors contributes to the general control environment through its underlying professional principles: the savoir-faire and The activities relating to the control and remediation of internal responsibility of its members, the clarity and transparence of its control weaknesses are reflected, documented and tracked by the decisions, and the efficiency and effectiveness of its controls. “Switch” computerized self-assessment system, which is installed in the most significant entities of the Group. Executive Committee The Executive Committee comprises executive, operational and 2.3.4 Information and communication systems functional directors and defines strategic objectives on the basis of the orientations decided by the Board of Directors, coordinates their The strategic plans in terms of information and communication implementation, ensures that the organization adapts to changes in systems are coordinated by the Group Finance Department, which the business environment, and oversees both the definition and the ensures the standardization of the SAP ERPs in operation as well accomplishment of the responsibilities and delegations of authority as business continuity. Aspects of internal control such as the of senior executives. segregation of duties and access rights are embedded at the time Performance Audit Committee of implementation of new information systems. As part of its responsibilities described above, the Performance The IT and telecommunications systems and their associated Audit Committee controls the existence and application of internal risks (physical, technical, internal and external security, etc.) are control procedures. It also examines the results of the work of also subject to special procedures: a Business Continuity Plan Internal Audit and approves annual and mid term internal auditing methodology kit has been distributed within the Group in order orientation in terms of geographic, business and risk coverage. to define for each significant entity the broad outlines of such a Legal Department plan as well as those of an IT Disaster Recovery Plan . A plan of The Group’s Legal Department is responsible for monitoring the each type is currently under development for the parent company proper application of laws and regulations in force in each of the LVMH SA. countries where LVMH has operations. It also fulfils a central legal

70 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Chairman of the Board of Directors on internal control procedures review function and provides advice on legal matters as required At subsidiary level by each of LVMH’s business groups. Management Committees Internal Audit The Management Committee within each subsidiary is responsible The Group’s multidisciplinary Internal Audit team, with some 20 for implementing the procedures necessary to ensure an efficient members whose supervision is centralized but operate out of two internal control mechanism for its scope of operations. The fact offices in Paris and Hong Kong, is active throughout the Group, that operational managers are personally accountable for internal applying a multi-year audit plan which is revised every year. controls in each company and in each of the key business processes Approximately 50 audit missions are performed on average is a linchpin of the internal control system. each year. 2.5 Internal controls related to financial and The multi-year audit plan allows the degree to which the internal accounting information control system has been understood and assimilated to be monitored and reinforced where necessary. The audit plan is prepared on the 2.5.1 Organization basis of an analysis of potential risks, either existing or emerging, by type of business (such as size, contribution to profits, geographical Internal controls of accounting and financial information are positioning and quality of local management) and inputs from organized based on the cooperation and control of the following operational and financial managers concerned. Internal Audit departments: Accounting and Consolidation, Management intervenes in all Group companies, both in operational or financial Control, Information Systems, Finance and Treasury, Tax and matters. A review of the self-assessment process and its results is Financial Communication. performed systematically for the significant entities involved. Accounting and Consolidation is responsible for updating and The plan can be modified in response to changes to the political distributing group-wide accounting standards and procedures. and economic environment or internal strategy. It oversees their application and establishes appropriate training programs. It is in charge of producing consolidated and individual Internal Audit reports on its work to management of the company financial statements on a quarterly, half-yearly and entity concerned and to Executive Management of the Group annual basis. It also coordinated the implementation of the IAS/ through a summary report and a detailed report explaining its IFRS project in 2004 and participates, along with the departments recommendations and setting out Management’s commitment concerned, in the deployment of a uniform worldwide reporting to apply them within a reasonable period of time. Internal Audit system (“SyRUS”). sends copies of the reports that it issues to the Statutory Auditors Management Control is responsible for coordinating the budget and meets with them periodically to discuss current internal process and its revisions during the year as well as for the five-year control issues. strategic plan. It produces the monthly operating report and all The main features of the annual and multi-year audit plan, together reviews required by Executive Management; it also tracks capital with the main conclusions of the year under review, are presented expenditures and cash flow, as well as producing statistics and to the Performance Audit Committee and to the business groups specific operational indicators. concerned. In 2007, Internal Audit carried out 50 assignments In conjunction with subsidiaries, Information Systems draws dealing with the key processes of audited companies, representing up a three-year plan for information systems, by business group 32% of the Group’s sales. Monitoring of the implementation of the and company. It disseminates the Group’s technical standards, recommendations has been enhanced by systematic on-site visits which are indispensable given the decentralized structure of the to companies with the most significant issues. Group’s equipment, applications, networks, etc., and identifies Moreover, since 2003, Internal Audit has coordinated the Group’s any potential synergies that may be achieved between businesses compliance with LSF (French Financial Security Act) internal and regions while respecting brand independence. It develops and control measures, and devoted a specific team to internal controls. maintains a telecommunications system shared by the Group. This team monitors and anticipates regulatory changes so that the Finally, it coordinates policy for system and data security and internal control system can be adapted as required. preparation of emergency contingency plans. It coordinates a network of entity-level internal controllers Finance and Treasury are responsible for applying the Group’s responsible for ensuring compliance with the Group’s internal financial policy, efficiently managing the balance sheet and financial control procedures and for preparing internal controls tailored to debt, improving financial structure and executing a prudent policy their businesses. These internal control managers are responsible for managing foreign exchange and interest rate risks, the primary for the various projects related to the internal control system and objective of which is to mitigate all related risks that are directly promote the dissemination and application of guidelines. or indirectly generated by Group companies.

Reference Document 2007 71 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Chairman of the Board of Directors on internal control procedures

Treasury focuses particularly on Group cash pooling, ensuring 2.5.2 Accounting and management policies optimal efficiency and preparing forecasts on the basis of quarterly Business units and subsidiaries adopt the accounting and updates prepared by the companies involved. It is also responsible management policies considered by the Group as appropriate for for applying a centralized foreign exchange and interest rate risk the individual company and consolidated financial statements. management strategy designed to limit the negative impact of A consistent set of accounting standards is applied throughout, foreign exchange and interest rate fluctuations on businesses and together with consistent formats and tools to submit data to be investments. To this end, a management policy and strict procedures consolidated. Accounting and management reporting is also have been established to measure, manage and consolidate these carried out through the same system, thus ensuring the consistency market risks. This organization relies on an integrated computerized of internal and published data. system allowing real-time controls on hedging transactions. The hedging mechanism is periodically presented to the Performance 2.5.3 Consolidation process Audit Committee. Hedging decisions are taken by means of a The consolidation process is laid out in a detailed set of instructions clearly established process that includes regular presentations to and has a specially adapted data submission system designed the Group’s Executive Committee and detailed documentation. to facilitate complete and accurate data processing, based on a Tax coordinates the preparation of tax returns and ensures consistent methodology and within suitable timeframes. The compliance with applicable tax laws and regulations, provides President and CFO of each company undertake to ensure the advice to the different business groups and companies and quality and completeness of financial information sent to the defines tax planning strategy based on the Group’s operational Group—including off-balance sheet items—in a signed letter of requirements. It organizes appropriate training courses in response representation which gives added weight to the quality of their to major changes in tax law and coordinates the deployment of a financial information. uniform reporting system for tax data (“SyRUS Tax”). There are sub-consolidations at business unit and business group Financial Communication is responsible for coordinating all level, which also act as primary control filters and help ensure information issued to the financial community to enable it to consistency. acquire a clear, transparent and precise understanding of the At Group level, the teams in charge of consolidation are specialized Group’s performance and prospects. It also provides Executive by type of business and are in permanent contact with the business Management with the perceptions of the financial community on groups and companies concerned, thereby enabling them to better the Group’s strategy and its positioning within its competitive understand and validate the reported financial data and anticipate environment. It defines the key messages to be communicated in the treatment of complex transactions. close collaboration with Executive Management and the business groups. It harmonizes and coordinates the distribution of corporate 2.5.4 Management reporting messages through various channels (publications such as the annual Each year, all of the Group’s consolidated entities produce a and half-yearly reports, financial presentations, meetings with five-year plan, a complete budget and annual forecasts. Detailed shareholders and analysts, the website, etc.). instructions are sent to the companies for each process. Each of these departments coordinates the financial aspects of These key steps represent opportunities to perform detailed the Group’s internal control in its own area of activity via the analyses of actual data compared with budget, and to foster ongoing financial departments of business groups, main companies and communication between companies and the Group—an essential their subsidiaries, which are in charge of similar functions in their feature of the financial internal control mechanism. respective entities. In this way, each of the central departments runs A team of controllers at Group level, specialized by business, is its control mechanism through its functional chain of command in permanent contact with the business groups and companies (controller, chief accountant, treasurer, etc.). concerned, thus ensuring better knowledge of performance and The financial departments of the main companies of the Group management decisions as well as appropriate control. and the Departments of the holding company described above The quarterly, half-yearly and annual financial statements are closed periodically organize joint finance committees. Run and out at special results presentation meetings, in the presence of the coordinated by the Central Departments, these committees deal Group’s financial representatives and the companies concerned, particularly with applicable standards and procedures, financial during which the Statutory Auditors present their conclusions performance and any corrective action needed, together with with regard to the quality of financial and accounting information internal controls applied to accounting and management data. and the internal control environment of the different companies A progress report on the LSF project is systematically provided of the Group, on the basis of the work that they performed during to these committees. their audit assignments.

72 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Chairman of the Board of Directors on internal control procedures

This report on internal control, the result of the contribution of the various internal control actors mentioned in the first part of this document, was forwarded in its draft form to the Performance Audit Committee for its opinion and to the Board of Directors for approval.

Conclusions Over and above its existing internal control mechanism, the LVMH Group reinforced continuing efforts to improve its internal control, an ongoing project since 2003, with the implementation of a self- assessment procedure. In 2007, each of the Group’s key entities completed a review of its internal control system, including the description and formalization of established controls as well as their appropriateness in relation to incurred risks.

Reference Document 2007 73 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Report of the Chairman of the Board of Directors on internal control procedures

3. STATUTORY AUDITORS’ REPORT ON THE REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON INTERNAL CONTROL PROCEDURES

To the Shareholders, As Statutory Auditors of LVMH Moët Hennessy - Louis Vuitton and in accordance with Article L. 225-235 of the French Commercial Code (Code de commerce), we hereby report to you on the report prepared by the Chairman of your Company in accordance with Article L. 225-37 of the French Commercial Code for the year ended December 31, 2007. In his Report, the Chairman reports, in particular, on the conditions for the preparation and organization of the Board of Directors’ work and the internal control procedures implemented by the Company. It is our responsibility to report to you our observations on the information set out in the Chairman’s report on the internal control procedures relating to the preparation and treatment of financial and accounting information. We have performed our work in accordance with the professional guidelines applicable in France. These guidelines require that we plan and perform procedures to assess the fairness of the information set out in the Chairman’s report on the internal control procedures relating to the preparation and treatment of the financial and accounting information. These procedures notably consisted of: - obtaining an understanding of the objectives and general organization of internal control, as well as the internal control procedures relating to the preparation and treatment of financial and accounting information, as set out in the Chairman’s Report; - obtaining an understanding of the work underlying the information set out in the report; - assessing whether major deficiencies related to internal control procedures and treatment of financial and accounting information have been appropriately reported in the Chairman’s Report, if any. On the basis of the procedures we have performed, we have nothing to report with regard to the information concerning the internal control procedures of the Company relating to the preparation and treatment of the financial and accounting information, as included in the Report of the Chairman of the Board of Directors, prepared in accordance with the Article L. 225-37 of the French Commercial Code.

Neuilly-sur-Seine and Paris-La Défense, March 10, 2008 The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG Audit Thierry Benoit Alain Pons Jeanne Boillet Olivier Breillot

74 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP

CONSOLIDATED FINANCIAL STATEMENTS

Page

CONSOLIDATED INCOME STATEMENT 76

CONSOLIDATED BALANCE SHEET 77

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 78

CONSOLIDATED CASH FLOW STATEMENT 80

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 81

CONSOLIDATED COMPANIES IN 2007 130

STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 134

Reference Document 2007 75 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

CONSOLIDATED INCOME STATEMENT

(EUR millions, except for earnings per share) Notes 2007 2006 2005

Revenue 22-23 16,481 15,306 13,910 Cost of sales (5,786) (5,481) (5,001)

Gross margin 10,695 9,825 8,909 Marketing and selling expenses (5,752) (5,364) (4,892) General and administrative expenses (1,388) (1,289) (1,274)

Profit from recurring operations 22-23 3,555 3,172 2,743

Other operating income and expenses 24 (126) (120) (221)

Operating profit 3,429 3,052 2,522 Cost of net financial debt (207) (173) (188) Other financial income and expenses (45) 120 45

Net financial income (expense) 25 (252) (53) (143)

Income taxes 26 (853) (847) (718) Income (loss) from investments in associates 7 7 87

Net profit 2,331 2,160 1,668 of which: minority interests 306 281 228 Group share 2,025 1,879 1,440

Basic Group share of net earnings per share (in euros) 27 4.27 3.98 3.06 Number of shares on which the calculation is based 474,327,943 471,901,820 470,206,389

Diluted Group share of net earnings per share (in euros) 27 4.22 3.94 3.04 Number of shares on which the calculation is based 479,891,713 477,471,955 474,047,257

76 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

CONSOLIDATED BALANCE SHEET

ASSETS Notes 2007 2006 2005

(EUR millions) Brands and other intangible assets - net 3 7,999 8,227 8,530 Goodwill - net 4 4,818 4,537 4,479 Property, plant and equipment - net 6 5,419 5,173 4,983 Investments in associates 7 129 126 128 Non-current available for sale financial assets 8 823 504 451 Other non-current assets 586 658 660 Deferred tax 26 492 395 306 Non-current assets 20,266 19,620 19,537

Inventories and work in progress 9 4,812 4,383 4,134 Trade accounts receivable 10 1,595 1,461 1,370 Income taxes 508 512 317 Other current assets 11 2,001 1,587 1,225 Cash and cash equivalents 13 1,559 1,222 1,470 Current assets 10,475 9,165 8,516

Total assets 30,741 28,785 28,053

LIABILITIES AND EQUITY Notes 2007 2006 2005

(EUR millions) Share capital 147 147 147 Share premium account 1,736 1,736 1,736 LVMH treasury shares (877) (1,019) (972) Revaluation reserves 976 917 658 Other reserves 8,191 7,062 6,158 Cumulative translation adjustment (608) (119) 292 Group share of net profit 2,025 1,879 1,440 Equity - Group share 14 11,590 10,603 9,459 Minority interests 16 938 991 1,025 Total equity 12,528 11,594 10,484

Long term borrowings 17 2,477 3,235 3,747 Provisions 18 976 983 949 Deferred tax 26 2,843 2,862 2,925 Other non-current liabilities 19 4,147 3,755 3,357 Non-current liabilities 10,443 10,835 10,978

Short term borrowings 17 3,138 2,100 2,642 Trade accounts payable 2,095 1,899 1,732 Income taxes 689 692 373 Provisions 18 296 255 305 Other current liabilities 20 1,552 1,410 1,539 Current liabilities 7,770 6,356 6,591

Total liabilities and equity 30,741 28,785 28,053

Reference Document 2007 77 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(EUR millions) Number Total equity of shares Share Share LVMH Revaluation Cumulative Net profit Group Minority Total capital premium treasury reserves translation and other share interests account shares and adjustment reserves related derivatives Notes 14.1 14.2 14.4 14.5 16 As of January 1, 2005 489,937,410 147 1,736 (1,006) 521 (200) 6,584 7,782 893 8,675

Translation adjustment 492 492 107 599 Income and expenses 137 137 (12) 125 recognized directly in equity Net profit 1,440 1,440 228 1,668 Total recognized - - - 137 492 1,440 2,069 323 2,392 income and expenses Stock option plan and 23 23 2 25 similar expenses (Acquisition)/disposal of LVMH treasury shares 34 (3) 31 - 31 and related derivatives Capital increase in subsidiaries -33 Interim and final (446) (446) (120) (566) dividends paid Changes in - (77) (77) consolidation scope Effects of purchase commitments for minority -11 interests

As of December 31, 2005 489,937,410 147 1,736 (972) 658 292 7,598 9,459 1,025 10,484

Translation adjustment (411) (411) (90) (501) Income and expenses recognized directly in equity 259 259 29 288 Net profit 1,879 1,879 281 2,160 Total recognized - - - 259 (411) 1,879 1,727 220 1,947 income and expenses Stock option plan and similar expenses 32 32 3 35 (Acquisition)/disposal of LVMH treasury shares and related derivatives (47) (2) (49) - (49) Capital increase in subsidiaries -66 Interim and final dividends paid (566) (566) (120) (686) Changes in consolidation scope - (6) (6) Effects of purchase commitments for minority - (137) (137) interests

As of December 31, 2006 489,937,410 147 1,736 (1,019) 917 (119) 8,941 10,603 991 11,594

78 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

(EUR millions) Number Total equity of shares Share Share LVMH Revaluation Cumulative Net profit Group Minority Total capital premium treasury reserves translation and other share interests account shares and adjustment reserves related derivatives Notes 14.1 14.2 14.4 14.5 16 As of December 31, 2006 489,937,410 147 1,736 (1,019) 917 (119) 8,941 10,603 991 11,594

Translation adjustment (489) (489) (86) (575) Income and expenses recognized directly in equity 59 59 19 78 Net profit 2,025 2,025 306 2,331 Total recognized - - - 59 (489) 2,025 1,595 239 1,834 income and expenses Stock option plan and similar expenses 40 40 4 44 (Acquisition)/disposal of LVMH treasury shares 142 (104) 38 - 38 and related derivatives Capital increase in -11 subsidiaries Interim and final dividends paid (686) (686) (156) (842) Changes in consolidation scope - (15) (15) Effects of purchase commitments for minority interests - (126) (126)

As of December 31, 2007 489,937,410 147 1,736 (877) 976 (608) 10,216 11,590 938 12,528

Reference Document 2007 79 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

CONSOLIDATED CASH FLOW STATEMENT

(EUR millions) Notes 2007 2006 2005 I. Operating activities Operating profit 3,429 3,052 2,522 Net increase in depreciation, amortization and provisions, excluding tax and financial items 638 474 639 Other unrealized gains and losses, excluding financial items (39) (31) (102) Dividends received 33 28 47 Other adjustments (22) (19) (17) Cash from operations before changes in working capital 4,039 3,504 3,089 Cost of net financial debt: interest paid (191) (174) (222) Income taxes paid (916) (784) (616) Net cash from operations before changes in working capital 2,932 2,546 2,251 Change in inventories and work in progress (565) (351) (281) Change in trade accounts receivable (197) (146) (67) Change in trade accounts payable 222 208 27 Change in other receivables and payables 66 31 64 Total change in working capital (474) (258) (257) Net cash from operating activities 2,458 2,288 1,994 II. Investing activities Purchase of tangible and intangible fixed assets (990) (771) (707) Proceeds from sale of tangible and intangible fixed assets 58 10 21 Guarantee deposits paid and other operating investments (20) 12 7 Operating investments (952) (749) (679) Purchase of non-current available for sale financial assets 8 (45) (87) (69) Proceeds from sale of non-current available for sale financial assets 8 33 172 469 Impact of purchase and sale of consolidated investments 2 (329) (48) (604) Other financial investments - -65 Financial investments (341) 37 (139) Net cash from (used in) investing activities (1,293) (712) (818) III. Transactions relating to equity Capital increases subscribed by minority interests 16 1 63 Acquisition and disposals of LVMH shares and related derivatives 14 (48) 32 Interim and final dividends paid by LVMH 14.3 (686) (566) (446) Interim and final dividends paid to minority interests in consolidated subsidiaries 16 (156) (120) (120) Net cash from (used in) transactions relating to equity (827) (728) (531) IV. Financing activities Proceeds from borrowings 2,006 785 1,192 Repayment of borrowings (1,700) (1,757) (1,559) Purchase and proceeds from sale of current available for sale financial assets 12 (278) (181) (40) Net cash from (used in) financing activities 28 (1,153) (407) V. Effect of exchange rate changes (44) (10) 41 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (I+II+III+IV+V) 322 (315) 279

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13 765 1,080 801 CASH AND CASH EQUIVALENTS AT END OF PERIOD 13 1,087 765 1,080 Transactions generating no change in cash: - acquisition of assets by means of finance leases 6 89

80 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Page

1. ACCOUNTING POLICIES 82 2. CHANGES IN THE SCOPE OF CONSOLIDATION 88 3. BRANDS, TRADE NAMES AND OTHER INTANGIBLE ASSETS 90 4. GOODWILL 93 5. IMPAIRMENT TESTING OF INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES 94 6. PROPERTY, PLANT AND EQUIPMENT 95 7. INVESTMENTS IN ASSOCIATES 96 8. NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS 97 9. INVENTORIES AND WORK IN PROGRESS 98 10. TRADE ACCOUNTS RECEIVABLE 98 11. OTHER CURRENT ASSETS 99 12. CURRENT AVAILABLE FOR SALE ASSETS 99 13. CASH AND CASH EQUIVALENTS 100 14. EQUITY 100 15. STOCK OPTION AND SIMILAR PLANS 104 16. MINORITY INTERESTS 107 17. BORROWINGS 107 18. PROVISIONS 110 19. OTHER NON-CURRENT LIABILITIES 111 20. OTHER CURRENT LIABILITIES 111 21. FINANCIAL INSTRUMENTS AND MARKET RISK MANAGEMENT 112 22. SEGMENT INFORMATION 117 23. REVENUE AND EXPENSES BY NATURE 119 24. OTHER OPERATING INCOME AND EXPENSES 120 25. NET FINANCIAL INCOME/EXPENSE 120 26. INCOME TAXES 121 27. EARNINGS PER SHARE 124 28. PROVISIONS FOR PENSIONS, MEDICAL COSTS AND SIMILAR COMMITMENTS 124 29. OFF BALANCE SHEET COMMITMENTS 127 30. RELATED PARTY TRANSACTIONS 128 31. SUBSEQUENT EVENTS 129

Reference Document 2007 81 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

1.1 General framework - IFRS 8 Segment reporting; - amendments to IAS 23 Borrowing costs. As required by Regulation (EC) No. 1606/2002 of July 19, 2002, the consolidated financial statements for the year ended The impacts of these texts on the consolidated financial statements December 31, 2007 were established in accordance with are in the process of being quantified. international accounting standards (IAS/IFRS) adopted by the European Union and applicable on February 5, 2008, the date on 1.3 First-time adoption of IFRS which these financial statements were approved for publication by the Board of Directors. These standards have been applied The first accounts prepared by the Group in accordance with IFRS consistently to the fiscal years presented. were the financial statements for the year ended December 31, 2005, with a transition date of January 1, 2004. IFRS 1 allowed for The Group has applied IAS 32 and IAS 39 with effect from exceptions to the retrospective application of IFRS at the transition January 1, 2004, including the amendments to IAS 39 pertaining date. The procedures implemented by the Group with respect to to the cash flow hedge accounting of forecast intragroup transactions these exceptions are listed below: and the fair value option. - business combinations: the exemption from retrospective application was not applied. The recognition of the merger of 1.2 Changes in the accounting framework in 2007 Moët Hennessy and Louis Vuitton in 1987 and all subsequent acquisitions were restated in accordance with IFRS 3; IAS 36 Standards, amendments and interpretations for which Impairment of Assets and IAS 38 Intangible Assets were applied application is mandatory in 2007 retrospectively as of this date; The standards, amendments and interpretations applicable to - measurement of property, plant and equipment and intangible LVMH have been implemented by the Group since January 1, assets: the option to measure these assets at fair value at the date 2007 and do not have a significant impact on the consolidated of transition was not applied; financial statements presented; they relate to: - employee benefits: actuarial gains and losses previously deferred - amendment to IAS 1 which requires additional disclosure under French GAAP at the date of transition were recognized; relating to capital; - foreign currency translation of the financial statements of foreign - IFRIC 8 Scope of IFRS 2, the standard dealing with share-based subsidiaries: translation reserves relating to the consolidation payments; of subsidiaries that prepare their accounts in foreign currency - IFRIC 9 Reassessment of embedded derivatives; were reset to zero as of January 1, 2004 and offset against “Other reserves”; - IFRIC 10 Interim financial reporting and impairment; - share-based payment: IFRS 2 Share-Based Payment was applied - IFRIC 11 Treasury shares and intragroup transactions. to all share subscription and share purchase option plans that Moreover, additional information required by IFRS 7 Financial were open at the date of transition, including those created before instruments, disclosures is also presented in the consolidated November 7, 2002, the date before which application is not financial statements. mandatory.

Standards, amendments and interpretations for which 1.4 Use of estimates application is optional in 2007 IFRIC 13 Customer loyalty programs has been applied by the For the purpose of preparing the consolidated financial statements, Group in 2007 consolidated financial statements; the impact is measurement of certain balance sheet and income statement not significant. items requires the use of hypotheses, estimates or other forms of judgment. This is particularly true of the valuation of intangible The following standards, amendments and interpretations, whose assets, purchase commitments for minority interests and of the mandatory application date is January 1, 2009, were not applied determination of the amount of provisions for contingencies and early in 2007: losses or for impairment of inventories and, if applicable, deferred tax assets. Such hypotheses, estimates or other forms of judgment which are undertaken on the basis of the information available, or

82 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements situations prevalent at the date of preparation of the accounts, may currency transactions are recognized in the balance sheet at their prove different from the subsequent actual events. market value at the balance sheet date and any change in the market value of such derivatives is recognized: 1.5 Methods of consolidation - within gross margin for the effective portion of hedges of receivables and payables recognized in the balance sheet at the The subsidiaries in which the Group holds a direct or indirect end of the period; de facto or de jure controlling interest are fully consolidated. - within equity (as a revaluation reserve) for the effective portion Jointly controlled companies are consolidated on a proportionate of hedges of future cash flows (this part is transferred to basis. gross margin at the time of recognition of the hedged assets For distribution subsidiaries operating in accordance with the and liabilities); contractual distribution arrangements with the Diageo Group, - within net financial income/expense for the ineffective portion only the portion of assets and liabilities and results of operations of hedges; changes in the value of discount and premium relating to LVMH Group activities is included in the consolidated associated with forward contracts, as well as the time value financial statements (see Note 1.23). component of options, are systematically considered as ineffective portions. Companies where the Group has significant influence but no controlling interest are accounted for using the equity method. When derivatives are designated as hedges of subsidiaries’ equity in foreign currency (net investment hedge), any change in market value of the derivatives is recognized within equity under 1.6 Foreign currency translation of the financial “Cumulative translation adjustment” for the effective portion and statements of foreign subsidiaries within net financial income/expense for the ineffective portion. The consolidated financial statements are stated in euros; the Market value changes of derivatives not designated as hedges are financial statements of subsidiaries stated in a different functional recorded within net financial income/expense. currency are translated into euros: - at the period-end exchange rates for balance sheet items; 1.8 Brands, trade names and other intangible assets - at the average rates for the period for income statement items. Only acquired brands and trade names that are well known and Translation adjustments arising from the application of these rates individually identifiable are recorded as assets at their values are recorded in equity under “Cumulative translation adjustment”. calculated on their dates of acquisition. Costs incurred in creating a new brand or developing an existing 1.7 Foreign currency transactions and hedging of brand are expensed. exchange rate risks Only brands, trade names and other intangible assets with finite Foreign currency transactions of consolidated companies are useful lives are amortized over their useful lives. The classification translated to their functional currencies at the exchange rates of a brand or trade name as an asset of definite or indefinite useful prevailing at the transaction dates. life is generally based on the following criteria: Accounts receivable, accounts payable and debts denominated in - the brand or trade name’s positioning in its market expressed foreign currencies are translated at the applicable exchange rates in terms of volume of activity, international presence and at the balance sheet date. Unrealized gains and losses resulting notoriety; from this translation are recognized: - its expected long term profitability; - within gross margin in the case of commercial transactions; - its degree of exposure to changes in the economic - within net financial income/expense in the case of financial environment; transactions. - any major event within its business segment liable to compromise Foreign exchange gains and losses arising from the translation of its future development; inter-company transactions or receivables and payables denominated - its age. in foreign currencies, or from their elimination, are recorded in the Amortizable lives of brands and trade names, depending on their income statement unless they relate to long term inter-company estimated longevity, range from 5 to 40 years. financing transactions which can be considered as transactions relating to equity. In the latter case, translation adjustments are recorded in equity under “Cumulative translation adjustment”. Derivatives which are designated as hedges of commercial foreign

Reference Document 2007 83 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

Amortization and any impairment expense of brands and trade This accounting policy has no effect on the presentation of minority names are recognized within “Other operating income and expenses”. interests within the income statement. Impairment tests are carried out for brands, trade names and The accounting treatment described above nevertheless elicits other intangible assets using the methodology described in the following observation: certain current interpretations of these Note 1.12. texts lead to the recognition of the entire amount of goodwill as Research expenditure is not capitalized. New product development a deduction from equity; under other interpretations, goodwill is expenditure is not capitalized unless the final decision to launch maintained under assets but in an amount frozen at the acquisition the product has been taken. date, with subsequent changes being taken directly to the income statement. Intangible assets other than brands and trade names are amortized over the following periods: 1.11 Property, plant and equipment - leasehold rights: based on market conditions, generally between 100% and 200% of the lease period; With the exception of vineyard land, the gross value of property, plant and equipment is stated at acquisition cost. Any borrowing - development expenditure: 3 years at most; costs incurred prior to use of assets are expensed. - software: 1 to 5 years. Vineyard land is recognized at the market value at the balance sheet 1.9 Goodwill date. This valuation is based on official published data for recent transactions in the same region, or on independent appraisals. Any When the Group takes de jure or de facto exclusive control of an difference compared to historical cost is recognized within equity in enterprise, its assets, liabilities and contingent liabilities are “Revaluation reserves”. If market value falls below acquisition cost estimated at their fair value and the difference between the cost the resulting impairment is charged to the income statement. of taking exclusive control and the Group’s share of the fair value of those assets, liabilities and contingent liabilities is recognized Vines for champagnes, cognacs and other wines produced by the as goodwill. Group, are considered as biological assets as defined in IAS 41 Agriculture. As their valuation at market value differs little from The cost of taking exclusive control is the price paid by the Group that recognized at historical cost, no revaluation is undertaken in the context of an acquisition, or an estimate of this price if the for these assets. transaction is carried out without any payment of cash. Investment property is measured at cost. Pending specific guidance from current standards, the difference between the cost and carrying amount of minority interests Assets acquired under finance leases are capitalized on the basis purchased after control is acquired is recognized as goodwill. of the lower of their market value and the present value of future lease payments. Goodwill is accounted for in the functional currency of the acquired entity. Property, plant and equipment is depreciated on a straight-line basis over its estimated useful life: Goodwill is not amortized but is subject to annual impairment testing using the methodology described in Note 1.12. Any - buildings including investment property: 20 to 50 years impairment expense recognized is included within “Other - machinery and equipment: 3 to 25 years operating income and expenses”. - store improvements: 3 to 10 years - producing vineyards: 18 to 25 years 1.10 Purchase commitments for minority interests The depreciable amount of property, plant and equipment The Group has granted put options to minority shareholders of comprises its acquisition cost less any estimated residual value. certain fully consolidated subsidiaries. Expenses for maintenance and repairs are charged to the income Pending guidance from IFRS on this subject, the Group recognizes statement as incurred. these commitments as follows at each period-end: - the contractual value of the commitment at this date appears in 1.12 Impairment testing of fixed assets “Other non-current liabilities”; Intangible and tangible fixed assets are subject to impairment - the corresponding minority interests are reclassified and included testing whenever there is any indication that an asset may be in the above amount; impaired, and in any event at least annually in the case of intangible - the difference between the amount of the commitment and the assets with indefinite useful lives (mainly brands, trade names and reclassified minority interests is recorded as goodwill. goodwill). When the carrying amount of such assets is greater than

84 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements the higher of their value in use or net selling price, the resulting Available for sale financial assets are measured at their listed value impairment loss is recognized within “Other operating income and at balance sheet date in the case of quoted investments, and at their expenses”, allocated in priority to any existing goodwill. net realizable value in the case of unquoted investments. Value in use is based on the present value of the cash flows expected Positive or negative changes in value are taken to equity to be generated by these assets. Net selling price is estimated by within “Revaluation reserves”. If an impairment loss is judged comparison with recent similar transactions or on the basis of to be definitive, a provision for impairment is recognized and valuations performed by independent experts. charged to net financial income/expense; the impairment is only Cash flows are forecast for each business segment defined as reversed through the income statement at the time of sale of the one or several brands or trade names under the responsibility of corresponding available for sale financial assets. a specific management team. Smaller scale cash generating units, e.g. a group of stores, may be distinguished within a particular business segment. 1.14 Inventories and work in progress Brands and goodwill are chiefly valued on the basis of the present Inventories other than wine produced by the Group are recorded at value of forecast cash flows, or of comparable transactions (i.e. the lower of cost (excluding interest expense) and net realizable value; using the revenue and net profit coefficients employed for recent cost comprises manufacturing cost (finished goods) or purchase transactions involving similar brands), or of stock market multiples price, plus incidental costs (raw materials, merchandise). observed for related businesses. Other complementary methods Wine produced by the Group, especially champagne, is measured may also be employed: the royalty method, involving equating a brand’s value with the present value of the royalties required to be at the applicable harvest market value, as if the harvested grapes paid for its use; the margin differential method, applicable when had been purchased from third parties. Until the date of the harvest, a measurable difference can be identified between the amount of the value of grapes is calculated pro rata temporis on the basis of the revenue generated by a branded product in comparison with an estimated yield and market value. unbranded product; and finally the equivalent brand reconstitution Inventories are valued using the weighted average cost or method involving, in particular, estimation of the amount of FIFO methods. advertising required to generate a similar brand. The forecast data required for the cash flow methods is based on Due to the length of the aging process required for champagne and budgets and business plans prepared by management of the related cognac, the holding period for these inventories generally exceeds business segments. Detailed forecasts cover a five-year period, one year. However, in accordance with industry practices, these a period which may be extended in the case of certain brands inventories are nevertheless classified as current assets. undergoing strategic repositioning. Moreover, a final value is also Provisions for impairment of inventories are chiefly recognized estimated, which corresponds to the capitalization in perpetuity for businesses other than Wines and Spirits. They are generally of cash flows most often arising from the last year of the plan. required because of product obsolescence (date of expiry, end of When several forecast scenarios are developed, the probability of occurrence of each scenario is assessed. Forecast cash flows are season or collection, etc.) or lack of sales prospects. discounted on the basis of the rate of return to be expected by an investor in the applicable business and include assessment of the 1.15 Trade accounts receivable risk factor associated with each business. Trade accounts receivable are recorded at their face value. A provision for impairment is recorded if their net realizable 1.13 Available for sale financial assets value, based on the probability of their collection, is less than Available for sale financial assets are classified as current or non- their carrying amount. current based on their nature and the estimated period for which they will be held. 1.16 Cash and cash equivalents Non-current available for sale financial assets mainly include participating investments (strategic and non-strategic). Cash and cash equivalents comprise cash on hand and demand deposits as well as highly liquid monetary investments subject to Current available for sale financial assets include temporary an insignificant risk of changes in value. investments in shares, shares of “SICAV”, “FCP” and other mutual funds, excluding investments made as part of the daily Monetary investments are measured at their market value and cash management, accounted for as cash and cash equivalents at the exchange rate prevailing at the balance sheet date, with any (see Note 1.16). changes in value recognized as part of net financial income/expense.

Reference Document 2007 85 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

1.17 Provisions for as described in Note 1.7 in the case of foreign exchange hedges, and as described in Note 1.18 in the case of interest rate hedges. A provision is recognized whenever an obligation exists towards a third party resulting in a probable disbursement for the Group, Market value is based on market data and on commonly used the amount of which may be reliably estimated. valuation models, and may be confirmed in the case of complex instruments by reference to values quoted by independent When execution of its obligation is expected to be deferred by more financial institutions. than one year, the provision amount is discounted, the effects of which are generally recognized in net financial income/expense. Derivatives with maturities in excess of twelve months are disclosed as non-current assets and liabilities. 1.18 Borrowings 1.20 Treasury shares and related derivatives Borrowings are measured at amortized cost, i.e. nominal value net of premium and issue expenses, which are charged progressively LVMH shares and options to purchase LVMH shares that are held to net financial income/expense using the effective interest by the Group are measured at their acquisition cost and recognized method. as a deduction from consolidated equity, irrespective of the purpose for which they are held. In the case of hedging against fluctuations in the capital amount of borrowings resulting from interest rate risk, both the hedged The cost of disposals of shares is determined by allocation category amount of borrowings and the related hedges are measured at (see Note 14.2) using the FIFO method with the exception of their market value at the balance sheet date, with any changes shares held under stock option plans for which the calculation is in those values recognized within net financial income/ performed for each plan using the weighted average cost method. expense for the period. Market value of hedged borrowings is Gains and losses on disposal, net of income taxes, are taken directly determined using similar methods as those described hereafter in to equity. Note 1.19 Derivatives. In the case of hedging of future interest payments, the related 1.21 Pensions, medical costs and other employee or borrowings remain measured at their amortized cost whilst any retired employee commitments changes in value of the effective hedge portions are taken to equity When payments are made by the Group in respect of retirement as part of revaluation reserves. benefits, pensions, medical costs and other commitments to third Changes in value of non-hedge derivatives, and of the ineffective party organizations which assume the payment of benefits or portions of hedges, are recognized within net financial medical expense reimbursements, these contributions are expensed income/ expense. in the period in which they fall due with no liability recorded on the balance sheet. Financial debt bearing embedded derivatives is measured at market value; changes in market value are recognized within net financial When retirement benefits, pensions, medical costs and other income/expense. commitments are undertaken by the Group, a provision is recorded in the balance sheet in the amount of the corresponding actuarial Net financial debt comprises short and long term borrowings, the commitment, and any changes in this commitment are expensed market value at the balance sheet date of interest rate derivatives, within profit from recurring operations over the period, including less the value of current available for sale, other financial assets and effects of discounting. cash and cash equivalents at that date. When this commitment is either partially or wholly funded by payments made by the Group to external financial organizations, 1.19 Derivatives these payments are deducted from the actuarial commitment The Group enters into derivative transactions as part of its strategy recorded in the balance sheet. for hedging foreign exchange and interest rate risks. The actuarial commitment is calculated based on individual country IAS 39 subordinates the use of hedge accounting to demonstration and company assessments. In particular, these assessments include and documentation of the effectiveness of hedging relationships assumptions regarding salary increases, inflation, life expectancy, when hedges are implemented and subsequently throughout staff turnover and the return on plan assets. their existence. A hedge is considered to be effective if the ratio of Cumulative actuarial gains or losses are amortized if, at the year- changes in the value of the derivative to changes in the value of the end, they exceed 10% of the higher of the total commitment or hedged underlying remains within a range of 80 to 125%. the market value of the funded plan assets. These gains or losses Derivatives are recognized in the balance sheet at their market are amortized in the period following their recognition over the value at the balance sheet date. Changes in their value are accounted average residual active life of the relevant employees.

86 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

1.22 Current and deferred tax Where this practice is applied, revenue and the corresponding trade receivables are reduced by the estimated amount of such returns, Deferred tax is recognized in respect of temporary differences and a corresponding entry is made to inventories. The estimated arising between the amounts of assets and liabilities for purposes rate of returns is based on statistics of historical returns. of consolidation and the amounts resulting from application of tax regulations. Businesses undertaken in partnership with Diageo Deferred tax is measured on the basis of the income tax rates enacted A significant proportion of revenue for the Group’s Wines and at the balance sheet date; the effect of changes in rates is recognized Spirits businesses are achieved within the framework of distribution during the periods in which changes are enacted. agreements with Diageo generally taking the form of shared entities which sell and deliver both groups’ brands to customers. Because Future tax savings from tax losses carried forward are recorded the distribution agreements provide specific rules for allocating as deferred tax assets on the balance sheet and impaired where appropriate; only amounts for which future use is deemed probable these entities’ net profit and assets and liabilities between LVMH are recognized. and Diageo, LVMH only recognizes the portion of their revenue and expenses attributable to its own brands. Deferred tax assets and liabilities are not discounted. Taxes payable in respect of the distribution of retained earnings of 1.24 Advertising and promotion expenses subsidiaries are provided for if distribution is deemed probable. Advertising and promotion expenses include the costs of producing advertising media, purchasing media space, manufacturing samples 1.23 Revenue recognition and publishing catalogs, and in general, the cost of all activities designed to promote the Group’s brands and products. Revenue Advertising and promotion expenses are recognized as expenses Revenue mainly comprises direct sales to customers and sales for the period in which they are incurred; the cost of media through distributors. Sales made in stores owned by third parties campaigns in particular is time-apportioned over the duration of are treated as retail transactions if the risks and rewards of ownership these campaigns and the cost of samples and catalogs is recognized of the inventories are retained by the Group. when they are made available to customers. Direct sales to customers are made through retail stores for Fashion and Leather Goods, certain Perfumes and Cosmetics, 1.25 Stock option and similar plans certain Watches and Jewelry brands and Selective Retailing. These sales are recognized at the time of purchase by retail customers. Share purchase and subscription option plans give rise to recognition Wholesale sales through distributors are made for Wines and of an expense based on the expected benefit granted to beneficiaries Spirits, and certain Perfumes and Cosmetics and Watches and calculated, using the Black & Scholes method, at the date of the Jewelry brands. The Group recognizes revenue when title transfers Board Meeting that granted the options. to third party customers, i.e. generally on shipment of products For bonus share plans, the expected benefit is calculated on the from Group facilities. basis of the closing share price on the day before the Board Meeting Revenue includes shipment and transportation costs re-billed to at which the decision to initiate the plan is made, and dividends customers only when these costs are included in products’ selling expected to accrue during the vesting period. prices as a lump sum. For cash-settled LVMH share-based incentive plans, the gain Revenue is presented net of all forms of discount. In particular, over the vesting period is estimated based on the type of plan as payments made in order to have products referenced or, in accordance described above. with agreements, to participate in advertising campaigns with the For all plans, the expense is apportioned on a straight-line basis distributors, are deducted from revenue and the corresponding over the vesting period, with a corresponding: trade accounts receivable. - impact on reserves for share purchase and subscription Provisions for product returns option plans; Perfumes and Cosmetics and, to a lesser extent, Fashion and - balance sheet impact for cash-settled plans. Leather Goods and Watches and Jewelry companies may accept After the vesting period has expired, only cash-settled plans have the return of unsold or outdated products from their customers an impact on the income statement, in the amount of the change and distributors. in the LVMH share price.

Reference Document 2007 87 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

1.26 Profit from recurring operations and other 1.27 Earnings per share operating income and expenses Earnings per share are calculated based on the weighted average The Group’s main business is the management and development number of shares outstanding during the period, excluding of its brands and trade names. Profit from recurring operations is treasury shares. derived from these activities, whether they are recurring or non- Diluted earnings per share are calculated based on the weighted recurring, core or incidental transactions. average number of shares before dilution and adding the weighted Other operating income and expenses comprises income statement average number of shares that would result from the exercise of items which, due to their nature, amount or frequency, may not be all existing subscription options during the period or any other considered as inherent to the Group’s recurring operations. This diluting instrument. It is assumed for the purposes of this caption reflects in particular the impact of changes in the scope of calculation that the funds received from the exercise of options, consolidation and the impairment of brands and goodwill, as well supplemented by the expense to be recognized for stock option and as any significant amount of gains or losses arising on the disposal similar plans (see Note 1.25), would be employed to re-purchase of fixed assets, restructuring costs, costs in respect of disputes, or LVMH shares at a price corresponding to their average trading any other non-recurring income or expense which may otherwise price over the period. distort the comparability of profit from recurring operations from one period to the next.

2. CHANGES IN THE SCOPE OF CONSOLIDATION

2.1 Fiscal year 2007 group of 107 million euros. Given the acquisition date, Les Echos will be consolidated as of fiscal year 2008; the shares acquired are Wines and Spirits recognized as of December 31, 2007 under non-current available for sale financial assets (see Note 8). In May 2007, the Group acquired for 25 million euros 55% of the share capital of Wen Jun Spirits and Wen Jun Spirits Sales, which At the same time, LVMH signed a memorandum of understanding produce and distribute baiju (white liquor) in China. Wen Jun for the disposal of the media group La Tribune; this disposal is group was fully consolidated as of the second half of the year. subject to the agreement of the French Competition Department (DGCCRF). Also in May 2007, the Group increased its investment in Newton Vineyards from 80% to 90%, for a total amount of The balance sheet of Les Echos group as of June 30, 2007, presented 5 million US dollars. on a pro forma basis before restatement of the accounts to LVMH Group standards, and before allocation of the purchase price, Fashion and Leather Goods is as follows: In May 2007, the Group increased its investment in Fendi from (EUR millions) 94% to 100%, for an amount of 66 million euros. Tangible and intangible fixed assets 9 Watches and Jewelry Current assets, net 38 Omas was divested in October 2007. Receivable vis-à-vis Pearson, assigned to LVMH 105 Cash and cash equivalents 19 Selective Retailing Current liabilities (63) In September 2007, the Group acquired a distribution license in Non-current liabilities (6) Vietnam for local duty free operators on a joint-venture basis; the Net assets 102 acquisition price, 52 million US dollars, represents the value of the distribution rights and inventories. 2.2 Fiscal year 2006 Other activities In 2006 changes in the scope of consolidation concerned the In December 2007, the media group Les Echos was acquired acquisition of minority interests, mainly in the United States from Pearson for 240 million euros, excluding the assumption (Fresh and Donna Karan), in addition to certain distribution by LVMH of Pearson’s financial debt with respect to Les Echos subsidiaries in Asia.

88 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

2.3 Fiscal year 2005 Fashion and Leather Goods Christian Lacroix was sold in January 2005. Wines and Spirits Following a friendly takeover bid finalized at the end of Other activities December 2004, in January 2005 LVMH acquired 99% of the The 49.9% stake in Bonhams Brooks PS&N Ltd, an associated share capital of Glenmorangie plc, a UK company listed in London, entity, was sold in July 2005. followed by the remaining 1% in February and March 2005 as the result of a delisting procedure. The cost of this acquisition was 459 million euros (316 million pounds sterling), including 8 million euros in acquisition costs. In accordance with the bid terms, 51 million pounds sterling of this total price were paid in the form of Loan Notes, bearing interest at GBP Libor less 0.80%. The Loan Notes are repayable at par value on demand of their holders, at the earliest on December 15, 2005 and at the latest on December 15, 2012, on the biannual interest payment dates of June 15 and December 15. Glenmorangie was fully consolidated with effect from January 1, 2005. The table below summarizes the purchase price allocation, on the basis of Glenmorangie’s balance sheet as of December 31, 2004:

(EUR millions) Value retained Carrying by LVMH amount Intangible assets 290 1 Property, plant and equipment 54 58 Inventories 130 123 Other current assets and liabilities, net (22) (10) Cash and cash equivalents 21 21 Borrowings (66) (66) Employee commitments (12) - Deferred tax and provisions (95) (7) Goodwill 159 - Total cost of acquisition 459 -

The Glenmorangie, Ardberg, and Glen Moray brands are recognized in intangible assets for a total of 289 million euros, of which 234 million euros represents the Glenmorangie brand. Goodwill is generated by the synergies to be created due to the integration of Glenmorangie in the Moët Hennessy distribution network. In April 2005 LVMH acquired for consideration of 120 million US dollars the 30% interest in Millennium that was owned by the latter’s minority shareholder, thus increasing its total holding to 100%. This investment represents an increase in the Group’s share of the distribution license in the United States for Belvedere vodka held by Millennium of 79 million euros. The Group’s investment in MountAdam was sold in July 2005.

Reference Document 2007 89 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

2.4 Impact of changes in the scope of consolidation on cash and cash equivalents

(EUR millions) 2007 2006 2005

Purchase of consolidated investments (352) (50) (623) Positive cash balance / (net overdraft) of companies acquired 16 - (6) Proceeds from sale of consolidated investments 9 234 (Positive cash balance) / net overdraft of companies sold (2) - (9) Impact of changes in the scope of consolidation on cash and cash equivalents (329) (48) (604)

In 2007, the impact of changes in the consolidation scope on the In 2006, the impact on the Group’s cash and cash equivalents of Group’s cash and cash equivalents breaks down as: changes in the scope of consolidation was mainly the result of the staggered payment for minority interests in Fendi in the amount - 240 million euros for the acquisition of Les Echos group; of 25 million euros, the acquisition of minority interests in Donna - 66 million euros for the acquisition of the 6% minority interests Karan for 8 million euros and 15% of Fresh for 4 million euros. in Fendi; In 2005, the overall impact on the Group’s cash and cash - 20 million euros for the amount paid during the year for the equivalents of changes in the scope of consolidation was a decrease acquisition in Vietnam of a local duty-free operator’s distribution of 604 million euros. This amount was chiefly attributable to license; the acquisition of Glenmorangie, accounting for 438 million - and finally 8 million euros for the acquisition of 55% of the euros, and to the acquisition of minority interests in Millennium, Wen Jun group. accounting for 92 million euros.

3. BRANDS, TRADE NAMES AND OTHER INTANGIBLE ASSETS

(EUR millions) 2007 2006 2005 Gross Accumulated Net Net Net amortization and impairment

Brands 6,202 (335) 5,867 5,768 5,846 Trade names 3,060 (1,241) 1,819 2,003 2,204 License rights 102 (56) 46 234 260 Leasehold rights 236 (135) 101 83 90 Software 293 (210) 83 71 59 Other 193 (110) 83 68 71 Total 10,086 (2,087) 7,999 8,227 8,530 Of which: assets held under finance leases 14 (14) - 11

90 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

3.1 Movements in the year Movements during the year ended December 31, 2007 in the net amounts of brands, trade names and other intangible assets were as follows:

Gross value Brands Trade names Other Total (EUR millions) intangible assets

As of December 31, 2006 6,111 3,383 929 10,423 Acquisitions 60 - 105 165 Disposals - - (20) (20) Changes in the scope of consolidation (33) - 16 (17) Translation adjustment (113) (323) (26) (462) Other, including reclassifications 177 - (180) (3) As of December 31, 2007 6,202 3,060 824 10,086

Accumulated amortization and impairment Brands Trade names Other Total (EUR millions) intangible assets

As of December 31, 2006 (343) (1,380) (473) (2,196) Amortization expense (7) - (77) (84) Impairment expense (10) - (1) (11) Disposals --1414 Changes in the scope of consolidation 15 - (1) 14 Translation adjustment 10 139 10 159 Other, including reclassifications - - 17 17 As of December 31, 2007 (335) (1,241) (511) (2,087)

Net carrying amount as of December 31, 2007 5,867 1,819 313 7,999

In June 2007, the Group acquired ownership of the Belvedere The translation adjustment mainly reflects the effects of changes brand in the United States for 83 million US dollars; until that in euro/US dollar exchange rates in the period on the valuation of date, the Group owned the brand in the rest of the world but intangible assets denominated in US dollars, especially the Donna held it under license in the United States. The rights attached Karan New York brand and the DFS trade name. to the license, amounting to 244 million US dollars, which were recognized under “Other intangible assets”, were reclassified The gross value of amortized brands is 150 million euros as of under “Brands”. December 31, 2007.

Reference Document 2007 91 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

3.2 Movements in prior years

Net carrying amount Brands Trade names Other Total (EUR millions) intangible assets

As of December 31, 2004 5,493 1,983 362 7,838 Acquisitions 3 - 66 69 Disposals - - (3) (3) Changes in the scope of consolidation 289 - 76 365 Amortization (6) (1) (66) (73) Impairment - (24) - (24) Translation adjustment 66 260 34 360 Other 1 (14) 11 (2) As of December 31, 2005 5,846 2,204 480 8,530

Acquisitions - - 76 76 Disposals - - (2) (2) Amortization (6) - (71) (77) Translation adjustment (72) (201) (29) (302) Other - -22 As of December 31, 2006 5,768 2,003 456 8,227

The effects of changes in the scope of consolidation in 2005 related to the acquisition of Glenmorangie in the amount of 290 million euros and the final recognition of the acquisition of the distribution license held by Millennium for a gross value of 62 million euros.

3.3 Brands and trade names The breakdown of brands and trade names by business group is as follows:

(EUR millions) 2007 2006 2005 Amortization Gross Net Net Net and impairment

Wines and Spirits 862 (8) 854 655 652 Fashion and Leather Goods 3,865 (302) 3,563 3,607 3,654 Perfumes and Cosmetics 613 (18) 595 599 606 Watches and Jewelry 842 (7) 835 859 887 Selective Retailing 3,060 (1,240) 1,820 2,003 2,204 Other activities 20 (1) 19 48 47 Brands and trade names 9,262 (1,576) 7,686 7,771 8,050

The brands and trade names recognized in the table above are those - Perfumes and Cosmetics: Parfums Christian Dior, Guerlain, that the Group has acquired. The principal acquired brands and Parfums Givenchy, Make Up for Ever, BeneFit Cosmetics, Fresh trade names as of December 31, 2007 are: and Acqua di Parma; - Wines and Spirits: Veuve Clicquot, Krug, Château d’Yquem, - Watches and Jewelry: TAG Heuer, Zenith, Fred and Chaumet; Belvedere, Glenmorangie and Newton Vineyards; - Selective Retailing: DFS Galleria, Sephora and Le Bon Marché; - Fashion and Leather Goods: Louis Vuitton, Fendi, Celine, Loewe, - Other Activities: Investir print media publications. Donna Karan New York, Givenchy, Kenzo, Berluti, Thomas These brands and trade names are recognized in the balance sheet Pink and Pucci; at their value determined as of the date of their acquisition by

92 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements the Group, which may be much less than their value in use or balance sheet. Les Echos, the press publication, will be recognized their net selling price as of the closing date for the consolidated as of fiscal year 2008. financial statements. This is notably the case for the brands Louis Brands and trade names developed by the Group, in addition to Louis Vuitton, Veuve Clicquot, and Parfums Christian Dior, or the trade Vuitton, Veuve Clicquot, Parfums Christian Dior, and Sephora, name Sephora, with the understanding that this list must not be represented 32% of total brands and trade names capitalized in considered as exhaustive. the balance sheet and 60% of the Group’s consolidated revenue Brands developed by the Group, notably Hennessy, in 2007. Moët & Chandon, Dom Pérignon, Mercier and Ruinart Please refer also to Note 5 for the impairment testing of champagnes, as well as the De Beers trade name developed as a brands, trade names and other intangible assets with indefinite joint-venture with the De Beers Group, are not capitalized in the useful lives.

4. GOODWILL

(EUR millions) 2007 2006 2005

Gross Impairment Net Net Net

Goodwill arising on consolidated investments 3,766 (1,024) 2,742 2,754 2,910 Goodwill arising on purchase commitments for minority interests 2,079 (3) 2,076 1,783 1,569 Total 5,845 (1,027) 4,818 4,537 4,479

Please refer also to Note 19 for goodwill arising on purchase commitments for minority interests. Changes in net goodwill during the fiscal years presented break down as follows:

(EUR millions) 2007 2006 2005 Gross Impairment Net Net Net

As of January 1 5,649 (1,112) 4,537 4,479 4,048 Changes in the scope of consolidation 63 6 69 11 158 Changes in purchase commitments for minority interests 256 16 272 220 127 Changes in impairment ---(15) (24) Translation adjustment (123) 63 (60) (158) 170 As of December 31 5,845 (1,027) 4,818 4,537 4,479

Changes in the scope of consolidation for 2007 include 39 million The translation adjustment mainly reflects the effects of changes euros for the increase in the Group’s investment in Fendi and in euro/US dollar exchange rates in the period on the valuation of 14 million euros for the impact of the consolidation of Wen Jun. goodwill denominated in US dollars, especially Miami Cruiseline The effects of consolidation scope changes in fiscal year 2005 and Donna Karan. mainly relate to the acquisition of Glenmorangie in the amount of 159 million euros.

Reference Document 2007 93 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

5. IMPAIRMENT TESTING OF INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES

Brands, trade names, and other intangible assets with indefinite As described in Note 1.12, these assets are generally valued on the useful lives as well as the goodwill arising on acquisition have been basis of the present value of forecast cash flows determined in the subject to annual impairment testing. No significant impairment context of multi-year business plans. The main assumptions retained expense has been recognized in respect of these items during the in 2007, similar to those used in 2006, for the determination of course of fiscal year 2007. these forecast cash flows are as follows:

Business group Period covered Pre-tax Growth rate for the by the plan discount rate period after the plan Wines and Spirits 5 years 10.5 to 15% 2% Fashion and Leather Goods 5 years* 13 to 19% 2% Perfumes and Cosmetics 5 years 13 to 17% 2% Watches and Jewelry 5 years* 16 to 17% 2% Selective Retailing 5 years 12 to 13% 2% Other 5 years 10 to 11% 2% * Five-year plans may be prolonged up to ten years for brands undergoing strategic repositioning.

Growth rates applied for the period not covered by the plans are for each business group would not give rise to any impairment based on market estimates for the business groups concerned. expense of related intangible assets, i.e. brands, trade names and goodwill. A one point change in the pre-tax discount rate or the growth rate for the period after the plan applied to the global cash flow forecast

94 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

6. PROPERTY, PLANT AND EQUIPMENT

(EUR millions) 2007 2006 2005 Gross Depreciation Net Net Net and impairment

Land 690 - 690 706 650 Vineyard land and producing vineyards 1,499 (73) 1,426 1,348 1,217 Buildings 1,623 (631) 992 989 1,052 Investment property 333 (47) 286 297 312 Machinery and equipment 3,725 (2,295) 1,430 1,369 1,357 Other tangible fixed assets (including assets in progress) 983 (388) 595 464 395 Total 8,853 (3,434) 5,419 5,173 4,983 o/w: assets held under finance leases 295 (134) 161 182 213 historical cost of vineyard land and producing vineyards 537 (73) 464 462 459

Movements in property, plant and equipment in the fiscal years presented break down as follows:

Gross value Vineyard land Land and Investment Machinery and Other tangible Total (EUR millions) and producing buildings property equipment fixed assets vineyards (including assets in progress)

As of December 31, 2006 1,417 2,304 343 3,555 850 8,469 Acquisitions 15 83 1 338 398 835 Change in the market value of vineyard land 81 - - - - 81 Disposals and retirements (8) (12) (2) (199) (44) (265) Changes in the scope of consolidation - - - 4 8 12 Translation adjustment (7) (75) (9) (125) (45) (261) Other, including reclassifications 1 13 - 152 (184) (18) As of December 31, 2007 1,499 2,313 333 3,725 983 8,853

Accumulated depreciation and impairment Vineyard land Land and Investment Machinery and Other tangible Total (EUR millions) and producing buildings property equipment fixed assets vineyards (including assets in progress)

As of December 31, 2006 (69) (609) (46) (2,186) (386) (3,296) Depreciation expense (5) (54) (4) (346) (61) (470) Impairment expense ------Disposals and retirements - 10 2 159 44 215 Changes in the scope of consolidation - 1 - 1 (4) (2) Translation adjustment 1 16 1 77 19 114 Other - 5 - - - 5 As of December 31, 2007 (73) (631) (47) (2,295) (388) (3,434)

Net carrying amount as of December 31, 2007 1,426 1,682 286 1,430 595 5,419

Reference Document 2007 95 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

Net carrying amount Vineyard land Land and Investment Machinery and Other tangible Total (EUR millions) and producing buildings property equipment fixed assets vineyards (including assets in progress)

As of December 31, 2004 1,162 1,617 288 1,071 403 4,541 Acquisitions 7 39 3 357 239 645 Disposals and retirements - (14) (3) (13) - (30) Depreciation expense (5) (55) (5) (303) (54) (422) Impairment expense - (2) - (22) - (24) Change in the market value of vineyard land 43 - - - - 43 Changes in the scope of consolidation (1) 27 - 24 1 51 Translation adjustment 10 65 10 49 27 161 Other, including transfers 1 25 19 194 (221) 18 As of December 31, 2005 1,217 1,702 312 1,357 395 4,983

Acquisitions 7 106 1 294 289 697 Disposals and retirements - (2) - (5) - (7) Depreciation expense (6) (57) (5) (329) (57) (454) Impairment expense - - - (8) (1) (9) Change in the market value of vineyard land 133 - - - - 133 Translation adjustment (7) (71) (11) (61) (12) (162) Other, including transfers 4 17 - 121 (150) (8) As of December 31, 2006 1,348 1,695 297 1,369 464 5,173

Property, plant and equipment acquisitions consisted mainly of investments by Louis Vuitton, Sephora and DFS in their retail networks.

7. INVESTMENTS IN ASSOCIATES

(EUR millions) 2007 2006 2005

Gross Impairment Net Net Net

Share of net assets of associates as of January 1 126 - 126 128 115 Share of net profit (loss) for the period 7-787 Dividends paid (4) - (4) (7) (3) Changes in the scope of consolidation ---(2) 10 Translation adjustment ---(1) (1) Share of net assets of associates as of December 31 129 - 129 126 128

In 2007, investments in associates consisted primarily of: - a 40% equity stake in Mongoual SA, a real estate company which owns a property held for rental in Paris (France), which is also the head office of LVMH Moët Hennessy-Louis Vuitton SA; - a 23.1% equity stake in Micromania, the leading distributor of video games and consoles in the French market. Total rents invoiced by Mongoual SA to the Group amounted to 15 million euros in 2007 (14 million euros in 2006 and 2005).

96 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

8. NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS

(EUR millions) 2007 2006 2005

Gross Impairment Net Net Net Total 853 (30) 823 504 451

Non-current available for sale financial assets changed as follows during the fiscal years presented:

(EUR millions) 2007 2006 2005 As of January 1 504 451 718 Acquisitions 374 85 107 Disposals at realized value (33) (162) (469) Impact of changes in market value (8) 132 229 Reclassification as investments in associates or current available for sale financial assets - - (144) Net impairment expense - 5- Changes in the scope of consolidation - -- Translation adjustment (14) (7) 10 As of December 31 823 504 451

The net gain/loss on disposal is analyzed in Note 25 Net financial under the heading “Impact of purchase and sale of consolidated income/expense. investments”. Acquisitions in fiscal year 2007 mainly comprise Les Echos The main disposals in 2006 concerned various investments held by group in the amount of 350 million euros; this acquisition will L Capital FCPR. In 2005, the main disposals concern the investment be consolidated in fiscal year 2008. in Bouygues SA; as of December 31, 2005, the remainder of the The change in cash flow relating to this acquisition, 240 million Group’s investment in Bouygues SA was classified under current euros, is classified in the consolidated cash flow statement available for sale financial assets.

Non-current available for sale financial assets held by the Group include the following:

(EUR millions) Percentage of Net Dividends Equity (3) (4) Net profit (3) interest value received

L Capital FCPR (France) (2) 45.8% 53 145 2 L Capital 2 FCPR (France) (2) 18.5% 62 151 (5) Tod’s Spa (Italy) (1) 3.5% 51 2 526 57 Xinyu Hengdeli Holdings Ltd (China) (1) 7.5% 71 156 21 Other investments (5) 236 26 Sub-total 473 28 Les Echos group 100.0% 350 (6) Total 823 28 (1) Market value of securities as of the close of trading on December 31, 2007. (2) Valuation at estimated net realized value. (3) Figures provided reflect company information prior to December 31, 2007, as year-end accounting data was not available at the date of preparation of the consolidated financial statements. (4) See Note 2.1 for Les Echos group. (5) Not applicable. (6) Not available. L Capital FCPR is an investment fund for which the bylaws and the management schemes do not allow LVMH to exercise exclusive control, joint control or significant influence on shareholdings held.

Reference Document 2007 97 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

9. INVENTORIES AND WORK IN PROGRESS

(EUR millions) 2007 2006 2005

Wines and distilled alcohol in the process of aging 2,683 2,406 2,161 Other raw materials and work in progress 460 421 385 3,143 2,827 2,546 Goods purchased for resale 476 456 481 Finished products 1,739 1,621 1,684 2,215 2,077 2,165 Gross amount 5,358 4,904 4,711 Impairment (546) (521) (577) Net amount 4,812 4,383 4,134

The net change in inventories for the periods presented breaks down as follows:

(EUR millions) 2007 2006 2005 Gross Impairment Net Net Net

As of January 1 4,904 (521) 4,383 4,134 3,598 Change in gross inventories 565 565 346 281 Fair value adjustment for the harvest of the period 35 35 23 19 Change in provision for impairment (48) (48) 21 (43) Changes in the scope of consolidation 23 2 25 - 125 Translation adjustment (169) 21 (148) (141) 154 As of December 31 5,358 (546) 4,812 4,383 4,134

The effects on cost of sales of marking to market harvests are as follows:

(EUR millions) 2007 2006 2005

Fair value adjustment for the harvest of the period 50 41 34 Adjustment for inventory consumed (15) (18) (15) Net effect on cost of sales of the period 35 23 19

10. TRADE ACCOUNTS RECEIVABLE

(EUR millions) 2007 2006 2005

Trade accounts receivable - nominal amount 1,780 1,650 1,577 Provision for impairment (53) (54) (66) Provision for product returns (132) (135) (141) Net amount 1,595 1,461 1,370

There is no difference between the market value of trade accounts receivable and their carrying amount.

98 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

The amount of the impairment expense in 2007 is 9 million euros relationships for the most part. Credit insurance is taken out (compared to 7 million euros in 2006 and 6 million euros in 2005). whenever the likelihood that receivables may not be recoverable is justified on reasonable grounds. Approximately 66% of the Group’s sales is generated through its own stores. The receivable auxiliary balance is comprised primarily Trade accounts receivable generally represent payment terms of less of work-in-progress inventories for wholesalers or agents, who are than two months. limited in number and with whom the Group maintains ongoing

11. OTHER CURRENT ASSETS

(EUR millions) 2007 2006 2005

Current available for sale financial assets 879 607 421 Derivatives 311 242 136 Tax accounts receivable, excluding income taxes 249 231 186 Advances and payments on account to vendors 109 100 86 Prepaid expenses 233 225 205 Other receivables, net 220 182 191 Total 2,001 1,587 1,225 Prepaid expenses include samples and advertising materials, particularly for Perfumes and Cosmetics, in the amount of 94 million euros as of December 31, 2007 (88 million euros as of December 31, 2006, 72 million euros as of December 31, 2005). There is no difference between the market value of other current assets and their carrying amount. Please also refer to Note 12 Current available for sale financial assets and Note 21 Financial instruments and market risk management.

12. CURRENT AVAILABLE FOR SALE ASSETS

(EUR millions) 2007 2006 2005

Unlisted securities, shares in non money market SICAV and FCP mutual funds 601 462 280 Listed securities 278 145 141 Total 879 607 421 Of which: historical cost of current available for sale financial assets 741 506 317

Current available for sale financial assets changed as follows during the fiscal years presented:

(EUR millions) 2007 2006 2005

As of January 1 607 421 201 Acquisitions 370 336 50 Disposals at net realized value (92) (156) (11) Changes in market value 58 42 49 Reclassification of non-current available for sale financial assets - - 126 Translation adjustment (64) (36) 6 As of December 31 879 607 421

As of December 31, 2005, short term investments included 3,060 thousand Bouygues shares for an amount of 126 million euros (see Note 8 Non-current available for sale financial assets). The results on disposal are analyzed in Note 25 Net financial income/expense.

Reference Document 2007 99 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

13. CASH AND CASH EQUIVALENTS

(EUR millions) 2007 2006 2005

Fixed term deposits (less than 3 months) 426 126 94 SICAV and FCP money market funds 48 49 34 Ordinary bank accounts 1,085 1,047 1,342 Cash and cash equivalents 1,559 1,222 1,470

As of December 31, 2007, cash and cash equivalents include 28 million euros, which guarantee borrowings of same amount (50 million euros as of December 31, 2006, 60 million euros as of December 31, 2005). The reconciliation between cash and cash equivalents as shown in the balance sheet and net cash and cash equivalents appearing in the cash flow statement is as follows:

(EUR millions) 2007 2006 2005

Cash and cash equivalents 1,559 1,222 1,470 Bank overdrafts (472) (457) (390) Net cash and cash equivalents 1,087 765 1,080

14. EQUITY

14.1 Share capital

As of December 31, 2007, issued and fully paid-up shares totaled rights are granted to registered shares held for at least three years 489,937,410 (489,937,410 shares as of December 31, 2006 (219,487,441 as of December 31, 2006, 219,721,757 as of and 2005), with a par value of 0.30 euro per share, including December 31, 2005). 225,670,036 shares with double voting rights. Double voting

14.2 Treasury shares and derivatives settled in LVMH shares The portfolio of treasury shares and derivatives settled in LVMH shares is allocated as follows:

(EUR millions) 2007 2006 2005

Number Value Value Value

Share purchase option plans 6,239,029 340 592 729 Bonus share plans 308,618 22 15 6 Other plans 8,745,377 418 301 232 Shares held for stock option and similar plans 15,293,024 780 908 967

Liquidity contract 130,000 11 17 5 LVMH treasury shares 15,423,024 791 925 972

LVMH share-based calls (1) 2,014,000 86 94 - LVMH treasury shares and derivatives settled in LVMH shares - 877 1,019 972 (1) Number of shares which could be purchased if all of the calls outstanding at the balance sheet date were exercised and the related premium paid on subscription.

100 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

Until fiscal year 2006, LVMH shares to be delivered under share “Other plans” comprise share subscription option plans and cash- purchase option plans were held by LVMH and allocated to these settled share-based compensation plans index-linked to the change plans as from the launch date of the plans. In the first half of 2006, in the LVMH share price. this method of hedging was replaced for certain existing plans by The market value of LVMH shares held under the liquidity contract the purchase of LVMH share purchase options (LVMH share- based as of December 31, 2007 is the same as their carrying amount, i.e. calls). The LVMH shares that were replaced by the LVMH share- 11 million euros. based calls were reallocated to cover plans other than share purchase option plans.

The portfolio movements in 2007 were as follows:

LVMH shares LVMH share-based calls

(EUR millions) Number of shares Value (EUR millions) Number of calls Value

As of December 31, 2006 17,618,089 925 As of December 31, 2006 1,838,500 94 Purchases 6,360,391 527 Calls purchased 1,829,000 76 Options exercised (3,931,161) (280) Calls exercised (1,653,500) (84) Proceeds from disposals (4,624,295) (384) As of December 31, 2007 2,014,000 86 Gross capital gain (loss) on sale - 3 As of December 31, 2007 15,423,024 791

14.3 Dividends paid by the parent company LVMH SA In accordance with French regulations, dividends are deducted amount available for distribution was 4,796 million euros; after from the profit for the year and reserves available for distribution taking into account the proposed dividend distribution in respect of the parent company, after deducting applicable withholding of the 2007 fiscal year, the amount available for distribution is tax and the value of treasury shares. As of December 31, 2007, the 4,184 million euros.

(EUR millions) 2007 2006 2005

Interim dividend for the current year (2007: 0.35 euro; 2006: 0.30 euro; 2005: 0.25 euro) 171 147 122 Impact of treasury shares (5) (5) (5) 166 142 117 Final dividend for the previous year (2006: 1.10 euro; 2005: 0.90 euro; 2004: 0.70 euro) 539 441 343 Impact of treasury shares (19) (17) (14) 520 424 329 Total disbursement for the period (gross) (1) 686 566 446 (1) Excludes the impact of tax regulations applicable to the beneficiary.

The final dividend for 2007, as proposed to the Shareholders’ Meeting of May 15, 2008 1.25 euro per share, representing a total disbursement of 612 million euros excluding the effects of treasury shares.

Reference Document 2007 101 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

14.4 Revaluation reserves Revaluation reserves record the unrealized gains and losses in respect of current and non-current available for sale financial assets, hedges of future foreign currency cash flows and vineyard land, primarily in Champagne. These reserves changed as follows during the fiscal years presented:

Equity - Group share

(EUR millions) Available for Hedges of Vineyard Total Group sale financial future foreign land share assets currency cash flows

As of December 31, 2004 21 103 397 521 Change in value 379 (114) 38 303 Transfer to profit for the year (129) (52) - (181) Tax impact (26) 54 (13) 15 Gains and losses recognized in equity 224 (112) 25 137 As of December 31, 2005 245 (9) 422 658

Change in value 284 155 105 544 Transfer to profit for the year (157) (55) - (212) Tax impact (2) (35) (36) (73) Gains and losses recognized in equity 125 65 69 259 As of December 31, 2006 370 56 491 917

Change in value 8 198 63 269 Transfer to profit for the year (29) (148) - (177) Tax impact 18 (30) (21) (33) Gains and losses recognized in equity (3) 20 42 59 As of December 31, 2007 367 76 533 976

Minority interests

(EUR millions) Hedges of Vineyard Total share future foreign land of minority currency cash interests flows

As of December 31, 2004 14 68 82 Change in value (19) 6 (13) Transfer to profit for the year (6) - (6) Tax impact 9 (2) 7 Gains and losses recognized in equity (16) 4 (12) As of December 31, 2005 (2) 72 70

Change in value 20 29 49 Transfer to profit for the year (6) - (6) Tax impact (4) (10) (14) Gains and losses recognized in equity 10 19 29 As of December 31, 2006 89199

Change in value 30 17 47 Transfer to profit for the year (20) - (20) Tax impact (3) (5) (8) Gains and losses recognized in equity 71219 As of December 31, 2007 15 103 118

102 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

Revaluation reserve related to hedges of future foreign currency cash flows is fully transferred to gross margin. Available for sale financial assets’ revaluation reserve is fully transferred to “Other financial income and expenses”, see Note 25 Net financial income/expense.

14.5 Cumulative translation adjustment The change in the translation adjustment recognized under equity as of December 31, 2007, net of hedging effects of net assets denominated in foreign currency, breaks down as follows by currency:

(EUR millions) 2007 Change 2006 2005

US dollar (545) (391) (154) 202 Japanese yen (29) (12) (17) 6 Hong Kong dollar (61) (50) (11) 21 Pound sterling (7) (36) 29 16 Other currencies (7) (24) 17 41 Hedges of foreign currency net assets (1) 41 24 17 6 Total (608) (489) (119) 292

(1) See Note 17.5 Analysis of gross borrowings by currency.

14.6 Strategy relating to the Group’s financial structure The Group firmly believes that the management of its financial - cash flow before financing activities; structure contributes fully, together with the development of the - proportion of long term debt in net financial debt, etc. companies it owns and the management of its brand portfolio, Where applicable, these indicators are adjusted to reflect the to its objective of driving value creation for its shareholders. Group’s off-balance sheet financial commitments. Furthermore, maintaining a strong credit rating and providing With respect to these indicators, the Group seeks to maintain adequate security to the Group’s bondholders and bank creditors levels allowing for considerable financial flexibility. are regarded as objectives in their own right. LVMH S A observes a steady dividend distribution policy, intended The Group manages its financial structure so as to ensure to ensure stable returns for shareholders, while making them considerable financial flexibility, allowing it both to seize partners in the growth of the Group. opportunities and enjoy significant access to markets offering The Group also promotes financial flexibility by maintaining favorable conditions. numerous and varied banking relationships, through the frequent recourse to several negotiable debt markets (both short and long To this end, the Group monitors a certain number of financial term), by holding a large amount of cash and cash equivalents, and ratios and aggregate measures of financial risk, including: through the existence of sizable amounts in undrawn confirmed - net financial debt to equity; credit lines. - net financial debt to EBITDA; In particular, the Group’s undrawn confirmed credit lines often - long term resources to fixed assets; largely exceed the outstanding portion of its commercial paper - net cash from operating activities; program.

Reference Document 2007 103 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

15. STOCK OPTION AND SIMILAR PLANS

Share subscription and purchase option plans For all plans, one option entitles the holder to purchase one LVMH share. The Shareholders’ Meeting of May 11, 2006 authorized the Board of Directors, for a period of thirty-eight months expiring Bonus share plans in July 2009, to grant share subscription or purchase options to Group company employees or directors, on one or more occasions, The Shareholders’ Meeting of May 12, 2005 authorized the Board in an amount not to exceed 3% of the company’s share capital. of Directors, for a period of thirty-eight months expiring in July 2008, to grant bonus shares to Group company employees or Each plan is valid for 10 years. The options may be exercised after directors, on one or more occasions, in an amount not to exceed 1% a three and a four-year period, for the plans issued since 2004, with of the company’s share capital on the date of this authorization. the exception of the share purchase option plan dated May 14, 2001 initially concerning 1,105,877 options, which is valid for The allocation of shares to their beneficiaries becomes definitive eight years and for which the options may be exercised after a after a two-year vesting period and the shares will need to be held period of four years. by the beneficiaries for an additional two years. In certain circumstances, in particular in the event of retirement, the period of three or four years before options may be exercised is not applicable.

15.1 Share subscription option plans

Number Exercise Vesting Number of Number of Number of Grant date of options price period options exercised options expired unexercised options granted (EUR) of rights in 2007 in 2007 as of Dec. 31, 2007

January 21, 2004 2,720,425 55.70 4 years - 51,550 2,637,625 " 27,050 58.90 " - 3,000 23,050 May 12, 2005 1,852,150 52.82 " - 21,125 1,828,575 " 72,250 55.83 " - 1,500 70,750 May 11, 2006 1,674,709 78.84 " - 12,650 1,662,059 " 114,650 82.41 " - 700 113,950 May 10, 2007 1,679,988 86.12 " - 604 1,679,384 - 91,129 8,015,393

2007 2006 2005

Number Weighted Number Weighted Number Weighted average exercise average exercise average exercise price (EUR) price (EUR) price (EUR)

Options outstanding as of January 1 6,426,534 61.39 4,637,175 54.57 2,747,475 55.73 Options granted during the period 1,679,988 86.12 1,789,359 79.07 1,924,400 52.93 Expired options (91,129) 58.76 - - (34,700) 55.59 Options exercised during the period ------Options outstanding as of December 31 8,015,393 66.60 6,426,534 61.39 4,637,175 54.57

Options granted relate to the share subscription option plan set up on May 10, 2007 with an average unit exercise price of 86.12 euros. The vesting period is four years.

104 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

15.2 Share purchase option plans

Number Exercise Vesting Number of Number of Number of of options price period of options options unexercised Grant date granted (1) (EUR) (2) (3) rights exercised expired options as of in 2007 (3) in 2007 (3) Dec. 31, 2007 (3)

May 29, 1997 233,040 37.50 3 years 469,875 61,960 - January 29, 1998 269,130 25.92 " 328,340 109,885 March 16, 1998 15,800 31.25 " 55,000 - January 20, 1999 320,059 32.10 " 660,270 94,935 203,790 September 16, 1999 44,000 54.65 " 30,000 30,000 150,000 January 19, 2000 376,110 80.10 " 29,000 162,050 1,603,850 January 23, 2001 2,649,075 65.12 " 339,585 107,250 1,847,315 March 6, 2001 40,000 63.53 " 5,000 30,000 May 14, 2001 1,105,877 66.00 4 years 48,600 481,094 May 14, 2001 552,500 61.77 3 years 552,500 September 12, 2001 50,000 52.48 " 50,000 January 22, 2002 3,256,700 43.30 " 317,105 59,300 1,916,212 January 22, 2002 27,400 45.70 " 5,750 May 15, 2002 8,560 54.83 " 5,560 January 22, 2003 3,155,225 37.00 " 1,549,077 23,300 1,264,273 January 22, 2003 58,500 38.73 " 6,250 6,000 32,800 3,838,102 544,795 8,253,029 (1) Number of options on the plan commencement date not restated for adjustments relating to the one-for-ten bonus share allocations of June 1999 and for the five-for-one stock split in July 2000. (2) Figures for periods prior to 1999 result from the translation into euros of data originally presented in French francs. (3) Restated following the operations referred to in (1) above.

2007 2006 2005 Number Weighted Number Weighted Number Weighted average exercise average exercise average exercise price (EUR) price (EUR) price (EUR)

Options outstanding as of January 1 12,635,926 51.36 14,927,777 49.48 17,148,615 48.66 Options granted during the period ------Expired options (544,795) 56.24 (48,893) 63.59 (956,498) 61.61 Options exercised during the period (3,838,102) 39.06 (2,242,958) 39.83 (1,264,340) 29.21 Options outstanding as of December 31 8,253,029 56.74 12,635,926 51.36 14,927,777 49.48

15.3 Bonus share plans

Grant Number Vesting Expired Shares Balance as Date of the Shareholders’ Meeting date of shares periods of allocations vested of Dec. 31, 2007 granted initially rights in 2007 in 2007

May 12, 2005 May 12, 2005 97,817 2 years 4,083 93,059 - May 12, 2005 May 11, 2006164,306 " 4,610 - 159,696 May 12, 2005 May 10, 2007 152,076 " 268 - 151,808 8,961 93,059 311,504

Reference Document 2007 105 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

A plan for allocation of bonus shares covering 152,076 shares was instituted on May 10, 2007. Shares are allocated definitively to their beneficiaries after a two-year vesting period, which is followed by a two-year lockup period during which beneficiaries may not sell their shares.

15.4 LVMH cash-settled share-based incentives

A plan equivalent to the award of 48,248 bonus shares was set up 12,000 bonus shares were set up on May 11, 2006 and August 1, on May 10, 2007. 2006, respectively. LVMH cash-settled share-based incentives similar to share purchase These plans vest over a period of four years. option plans were set up on January 21, 2004 and May 12, 2005; As of December 31, 2007, the recorded liability in relation to they related initially to 206,750 and 187,300 shares respectively. those plans amounts to 11 million euros. Moreover, two plans equivalent to the award of 39,300 and

15.5 Expense for the period The unit value of each option plan is determined on the basis of the Black & Scholes method, as described in Note 1.25. The assumptions and criteria retained for this calculation are as follows:

2007 Plans 2006 Plans 2005 Plans

LVMH share price on the grant date (EUR) 86.67 84.05 57.05 Average exercise price (EUR) 86.12 79.07 52.82 Volatility of LVMH shares 24.0% 24.5% 21.7% Dividend distribution rate 2.0% 1.4% 1.65% Risk-free investment rate 4.4% 4.1% 3.06% Vesting period 4 years 4 years 4 years The volatility of LVMH’s shares is determined on the basis of their implicit volatility. The unit values of share subscription options and bonus shares allocated in 2007 are 22.31 euros and 83.71 euros, respectively. The expense for the period resulting from these valuations is presented below; in 2005, 2006 and 2007 all plans which had not yet vested as of January 1, 2004, the date of transition to IFRS, are taken into account.

(EUR millions) 2007 2006 2005

Share subscription and purchase option plans, bonus share plans 43 34 25 LVMH cash-settled share-based incentive plans 3 15 Expense for the year 46 35 30

106 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

16. MINORITY INTERESTS

(EUR millions) 2007 2006 2005

As of January 1 991 1,025 893 Minority interests’ share of net profit 306 281 228 Dividends paid to minority interests (156) (120) (120) Changes in scope of consolidation: acquisition of minority interests in Millennium - - (76) acquisition of minority interests in Fendi (27) (2) - acquisition of minority interests in Donna Karan - (4) - consolidation of Wen Jun 9 -- other changes in scope of consolidation 3 - (1) Total changes in scope of consolidation (15) (6) (77) Capital increases subscribed by minority interests 1 63 Minority interests’ share in the following changes: revaluation reserves 19 29 (12) translation adjustment (86) (90) 107 stock option plan expenses 4 32 Effects of purchase commitments for minority interests (126) (137) 1 As of December 31 938 991 1,025

See also Note 14.4 concerning the analysis of minority interests’ share in revaluation reserves.

17. BORROWINGS

17.1 Net financial debt

(EUR millions) 2007 2006 2005

Long term borrowings 2,477 3,235 3,747 Short term borrowings 3,138 2,100 2,642 Gross amount of borrowings 5,615 5,335 6,389

Interest rate risk derivatives (51) (74) (151) Borrowings net of interest rate risk derivatives 5,564 5,261 6,238 Current available for sale financial assets (879) (607) (421) Other financial assets (32) (32) (29) Cash and cash equivalents (1,559) (1,222) (1,470) Net financial debt 3,094 3,400 4,318

Net financial debt does not take into consideration purchase commitments for minority interests included in “Other non-current liabilities” (see Note 19). The impact of interest rate derivatives is detailed in Note 21.

Reference Document 2007 107 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

17.2 Breakdown by nature

(EUR millions) 2007 2006 2005

Perpetual bonds - -32 Bonds and EMTNs 2,169 2,777 3,023 Finance and other long term leases 117 131 156 Bank borrowings 191 327 536 Long term borrowings 2,477 3,235 3,747

Bonds and EMTNs 791 219 1,195 Finance and other long term leases 18 22 22 Bank borrowings 117 170 146 Commercial paper 1,086 516 323 Other borrowings and credit facilities 583 624 468 Perpetual bonds - 12 - Bank overdrafts 472 457 390 Accrued interest 71 80 98 Short term borrowings 3,138 2,100 2,642

Total borrowings 5,615 5,335 6,389

Fair value of gross borrowings 5,603 5,351 6,455

The portion of financial debt recognized in accordance with the fair value option described in Note 1.18 is 290 million euros as of December 31, 2007 (292 million euros as of December 31, 2006, 308 million euros as of December 31, 2005); its nominal value is 535 million euros as of December 31, 2007 (1,297 million euros as of December 31, 2006 and 2005).

17.3 Bonds and EMTNs

(EUR millions) Maturity Initial effective 2007 2006 2005 interest rate (1) (%) CHF 300,000,000; 2007 2013 3.46 185 -- EUR 600,000,000; 2005 2012 3.43 598 598 598 EUR 600,000,000; 2004 2011 4.74 604 606 625 EUR 750,000,000; 2003 2010 5.05 742 746 773 EUR 500,000,000; 2001 2008 6.27 502 508 525 EUR 800,000,000; 1999 2006 - - - 808 Public bond issues 2,631 2,458 3,329 in euros 289 480 531 in foreign currencies 40 58 358 Private placements (EMTNs) 329 538 889

Total bonds and EMTNs 2,960 2,996 4,218 (1) Before impact of interest rate hedges set up at the time of, or subsequent to, each issuance.

108 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

17.4 Analysis of gross borrowings by payment date 17.8 Undrawn confirmed credit lines As of December 31, 2007, unused confirmed credit lines totaled (EUR millions) 2007 3.9 billion euros. Year 2008 3,138 2009 159 17.9 Guarantees and collateral 2010 815 2011 611 As of December 31, 2007, borrowings hedged by collateral were less than 100 million euros. 2012 620 Thereafter 272 Total 5,615

17.5 Analysis of gross borrowings by currency after hedging

(EUR millions) 2007 2006 2005 Euro 4,110 3,348 4,200 US dollar 217 431 384 Swiss franc 666 814 881 Yen 296 253 403 Other currencies 275 415 370 Total 5,564 5,261 6,238

In general, the purpose of foreign currency borrowings is to hedge net foreign currency-denominated assets acquired following the consolidation of companies located outside of the euro zone.

17.6 Analysis of gross borrowing by interest rate type after hedging

(EUR millions) 2007 2006 2005 Floating rate 2,963 1,756 604 Capped floating rate - 1,400 2,531 Fixed rate 2,601 2,105 3,103 Total 5,564 5,261 6,238

17.7 Covenants The Group has undertaken to comply with a certain financial covenant based on the ratio of net financial debt over cash flows for the year for certain long term credit lines. The current level of this ratio is very far from this contractual level, which means that the Group has a high degree of financial flexibility with regard to these commitments.

Reference Document 2007 109 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

18. PROVISIONS

(EUR millions) 2007 2006 2005

Provisions for pensions, medical costs and similar commitments 237 260 264 Provisions for contingencies and losses 712 685 631 Provisions for reorganization 27 38 54 Non-current (> 1 year) 976 983 949

Provisions for pensions, medical costs and similar commitments 5 4 5 Provisions for contingencies and losses 228 142 152 Provisions for reorganization 63 109 148 Current (< 1 year) 296 255 305

Total 1,272 1,238 1,254

In 2007, the changes in provisions were as follows:

(EUR millions) Dec. 31, Increases Amounts Amounts Changes Other items Dec. 31, 2006 used released in scope of (including 2007 consolidation translation adjustment) Provisions for pensions, medical costs and 264 34 (42) - (1) (13) 242 similar commitments Provisions for contingencies and losses 827 239 (65) (60) 3 (4) 940 Provisions for reorganization 147 12 (62) (2) - (5) 90 Total 1,238 285 (169) (62) 2 (22) 1,272 Of which: profit from recurring operations 138 (106) (23) net financial income (expense) - - - other 147 (63) (39)

Provisions for pensions, medical costs and similar commitments activities are carried out worldwide, within what is often an are examined in Note 28. imprecise regulatory framework that is different for each country, changes over time, and applies to areas ranging from product Provisions for contingencies and losses correspond to the estimate composition to the tax computation. of the impact on assets and liabilities of risks, disputes, or actual or probable litigation arising from the Group’s activities; such

110 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

19. OTHER NON-CURRENT LIABILITIES

(EUR millions) 2007 2006 2005

Purchase commitments for minority interests 3,862 3,490 3,151 Derivatives 20 17 15 Employee profit sharing (1) 109 100 63 Other liabilities 156 148 128 Total 4,147 3,755 3,357 (1) French companies only, pursuant to legal provisions.

As of December 31, 2005, 2006 and 2007 purchase commitments Purchase commitments for minority interests also include for minority interests mainly include the put option granted to commitments relating to minority shareholders in BeneFit (20%) Diageo plc for its 34% share in Moët Hennessy , with six-month’s and in Sephora in various countries. advance notice and for 80% of its market value at the exercise date The market value of the other non-current financial liabilities is of the commitment. identical to their carrying amount. With regard to this commitment valuation, the market value was determined by applying the share price multiples of comparable firms to Moët Hennessy’s operating results.

20. OTHER CURRENT LIABILITIES

(EUR millions) 2007 2006 2005

Derivatives 27 30 98 Employees and social institutions 514 488 485 Employee profit sharing 39 29 44 Taxes other than income taxes 234 239 212 Advances and payments on account 77 68 104 Deferred payment for tangible and financial non-current assets 271 168 192 Deferred income 49 47 46 Other 341 341 358 Total 1,552 1,410 1,539

The market value of the other current financial liabilities is identical to their carrying amount. Derivatives are analyzed in Note 21.

Reference Document 2007 111 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

21. FINANCIAL INSTRUMENTS AND MARKET RISK MANAGEMENT

Financial instruments are mainly used by the Group to hedge risks arising from Group activity and protect its assets.

21.1 Foreign exchange, interest rate and equity market Potential counterparties are selected based on a minimum rating risk management level and in accordance with the Group’s risk diversification strategy. The management of these risks and of transactions involving financial instruments is centralized to the greatest extent possible. The most complex instruments are those for which management 21.2 Presentation of financial instruments in the balance is the most centralized. sheet The Group has implemented a stringent policy, as well as rigorous The tables below present a breakdown of the financial assets and management guidelines to measure, manage and monitor these liabilities recognized in the balance sheet in accordance with market risks. the measurement categories defined under IAS 39 Financial Instruments: Recognition and Measurement. In addition to the These activities are organized based on a strict segregation of duties accounting policies applied by LVMH described in Notes 1.13, between risk measurement, hedging (front office), administration 1.16, 1.18 and 1.19, the following explanations apply specifically (back office) and financial control. to these tables: The backbone of this organization is an integrated information - fair value may be considered as nearly equivalent to market value, system which allows hedging transactions to be monitored very the latter being defined as the price that an informed third party closely. acting freely would be willing to pay or receive for the asset or The Group’s hedging strategy is presented to the Audit Committee. liability in question; Hedging decisions are made according to a clearly established - the category “Other and non-financial” includes prepaid process that includes regular presentations to the Group’s Executive expenses and deferred income as well as purchase commitments Committee and detailed supporting documentation. for minority interests (see Notes 1.10 and 1.19).

Fiscal year 2007

December 31, 2007 Notes Balance Fair Loans and Available Derivatives Change Debt at Other (EUR millions) sheet value receivables for sale in value amortized and non value assets through cost financial income

Non-current available for sale financial assets 8 823 823 823 Other non-current assets 586 586 562 24 Trade accounts receivable 10 1,595 1,595 1,595 Other current assets 11 2,001 2,001 578 879 311 233 Cash and cash equivalents 13 1,559 1,559 1,559 Assets 6,564 6,564 2,735 1,702 335 1,559 233 Long term borrowings 17 2,477 2,464 2,477 Other non-current liabilities 19 4,147 4,147 20 265 3,862 Short term borrowings 17 3,138 3,139 290 2,848 Trade accounts payable 2,095 2,095 2,095 Other current liabilities 20 1,552 1,552 27 1,476 49 Liabilities 13,409 13,397 47 290 9,161 3,911

112 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

Fiscal year 2006

December 31, 2006 Notes Balance Fair Loans and Available Derivatives Change Debt at Other (EUR millions) sheet value receivables for sale in value amortized and non value assets through cost financial income

Non-current available for sale financial assets 8 504 504 504 Other non-current assets 658 658 627 31 Trade accounts receivable 10 1,461 1,461 1,461 Other current assets 11 1,587 1,587 513 607 242 225 Cash and cash equivalents 13 1,222 1,222 1,222 Assets 5,432 5,432 2,601 1,111 273 1,222 225 Long term borrowings 17 3,235 3,251 280 2,955 Other non-current liabilities 19 3,755 3,755 17 248 3,490 Short term borrowings 17 2,100 2,100 12 2,088 Trade accounts payable 1,899 1,899 1,899 Other current liabilities 20 1,410 1,410 30 1,333 47 Liabilities 12,399 12,415 47 292 8,523 3,537

Fiscal year 2005

December 31, 2005 Notes Balance Fair Loans and Available Derivatives Change Debt at Other (EUR millions) sheet value receivables for sale in value amortized and non value assets through cost financial income

Non-current available for sale financial assets 8 451 451 451 Other non-current assets 660 660 550 110 Trade accounts receivable 10 1,370 1,370 1,370 Other current assets 11 1,225 1,225 463 421 136 205 Cash and cash equivalents 13 1,470 1,470 1,470 Assets 5,176 5,176 2,383 872 246 1,470 205 Long term borrowings 17 3,747 3,811 308 3,439 Other non-current liabilities 19 3,357 3,357 15 191 3,151 Short term borrowings 17 2,642 2,644 2,642 Trade accounts payable 1,732 1,732 1,732 Other current liabilities 20 1,539 1,539 98 1,395 46 Liabilities 13,017 13,083 113 308 9,399 3,197

Reference Document 2007 113 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

21.3 Summary of derivatives Derivatives are recorded in the balance sheet for the amounts and in the captions detailed as follows:

(EUR millions) Notes 2007 2006 2005

Interest rate risk Assets: non-current 18 29 94 current 73 89 119 Liabilities: non-current (20) (17) (13) current (20) (27) (49) 21.4 51 74 151 Foreign exchange risk Assets: non-current 6 216 current 238 153 17 Liabilities: non-current - - (2) current (7) (3) (49) 21.5 237 152 (18)

Total Assets: non-current 24 31 110 current 11 311 242 136 Liabilities: non-current 19 (20) (17) (15) current 20 (27) (30) (98) 288 226 133

21.4 Derivatives used to manage interest rate risk The Group manages its interest rate exposure on the basis of total net financial debt. The objective of its management policy is to protect net profit against a sharp rise in interest rates. As such, the Group uses interest rate swaps and options (caps and floors). Derivatives used to manage interest rate risk outstanding as of December 31, 2007 break down as follows:

(EUR millions) Maturity (1) Market value (2) 2008 2009 to Total Fair value Unallocated Total 2012 hedges amounts

Interest rate swaps in euros: - fixed rate payer - 1,000 1,000 15 10 25 - floating rate payer 1,535 1,553 3,088 23 (2) 21 Cross-currency swaps - 35 35 - 5 5 Total 38 13 51 (1) Nominal amounts. (2) Gain/(loss).

114 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

21.5 Derivatives used to manage foreign exchange risk A significant part of both Group companies’ sales to customers and Future foreign currency-denominated cash flows are broken their own retail subsidiaries and certain purchases are denominated down as part of the budget preparation process and are hedged in currencies other than their functional currency; the majority of progressively over a period not exceeding one year unless a longer these foreign currency-denominated cash flows are inter-company period is justified by probable commitments. As such, and cash flows. Hedging instruments are used to reduce the risks arising according to market trends, identified foreign exchange risks are from foreign currency fluctuations against the various companies’ hedged progressively using forward contracts or options. own currencies and are allocated to either accounts receivable or The Group may also use appropriate financial instruments to hedge accounts payable for the fiscal year, or, under certain conditions, the net worth of foreign subsidiaries, in order to limit the impact of to transactions anticipated for future periods. foreign currency fluctuations against the euro on consolidated equity.

Derivatives used to manage foreign exchange risk outstanding as of December 31, 2007 break down as follows:

(EUR millions) Allocated to fiscal year (1) Market value (2)

2007 2008 Thereafter Total Future Fair value Net Not Total cash flow hedges asset allocated hedges hedges

Options purchased Put USD 408 1,646 61 2,115 146 7 21 174 Put JPY 55 525 39 619 25 1 2 28 463 2,171 100 2,734 171 8 - 23 202 Ranges Written JPY 28 39 52 119 2 2 28 39 52 119 2 - - - 2 Forward exchange contracts (3) USD 1,218 (214) (3) 1,001 26 2 28 JPY 63 56 119 2 2 3 7 GBP 69 40 109 2 1 3 Other 78 75 16 169 - 1,428 (43) 13 1,398 4 3 26 5 38 Foreign exchange swaps (3) CHF 460 460 4 4 USD (446) (34) (480) (11) (11) GBP 4 4 1 1 JPY (81) (81) 1 (1) - Other 84 84 1 1 21 (34) - (13) - - 1 (6) (5)

Total 177 11 27 22 237 (1) Nominal amounts. (2) Gain/(loss). (3) Sale/(purchase).

Reference Document 2007 115 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

The impacts of a positive or negative change in the value of the US dollar and the Japanese yen on the net profit for the year, equity (excluding net profit), and the market value of derivatives as of December 31, 2007 would be as follows:

(EUR millions) US dollar Japanese yen +10% -10% +10% -10%

Net profit (1) 49 (5) 15 (7) Equity, excluding net profit (1) 396 (295) (3) 30 Market value of derivatives (280) 317 (34) 77 (1) After tax effect. The changes above include the impact on fair value of derivatives of exchange rate fluctuations as well as currency translation adjustments resulting from consolidation of foreign-currency denominated subsidiaries. 21.6 Financial instruments used to manage equity risk The Group’s investment policy is designed to take advantage of a LVMH share price affect the income statement. The Group may long term investment horizon. Occasionally, the Group may invest also use derivatives to build a synthetic exposure to a particular in equity-based financial instruments with the aim of enhancing asset, without directly acquiring such an asset. the dynamic management of its investment portfolio. The nominal amount of forward contract derivatives used to The Group is exposed to risks of share price changes either directly, manage equity risk (forward purchases or sales, index futures, as a result of its holding of equity investments and current available equity swaps, etc.) outstanding as of December 31, 2007 was for sale financial assets, or indirectly, as a result of its holding of 121 million euros. As of that date, no option derivatives (put funds which are themselves partially invested in shares. options, call options, etc.) were held that should have been included in the Group’s consolidated financial statements under financial The Group generally uses financial instruments in this area to assets or liabilities. reduce the sensitivity of its position to changes in share price. This is the case, for example, for equity swaps in LVMH shares, The fair value of these instruments as of December 31, 2007 which are hedging LVMH share-based incentive plans . Such plans was negligible. are settled in cash rather than LVMH shares, and changes in the 21.7 Liquidity risk In addition to local liquidity risks, which are generally immaterial, The Group’s liquidity is based on the large amount of its investments the Group’s exposure to liquidity risk can be assessed through its and long term borrowings, the diversity of its investor base (bonds total net short term borrowings (0.7 billion euros) before interest and short term paper), and the quality of its banking relationships, rate risk derivatives, or through the outstanding amount of its whether evidenced or not by confirmed lines of credit. commercial paper program (1.1 billion euros). Should any of these instruments not be renewed, the Group has access to undrawn confirmed credit lines totaling 3.9 billion euros. The following table presents the contractual schedule of disbursements for financial liabilities recognized as of December 31, 2007, at nominal value and with interest, excluding discounting effects:

(EUR millions) 2008 2009 2010 2011 2012 Over Not Total 5 years determined

Bonds and EMTNs 965 133 818 641 627 187 3,371 Bank borrowings 129 110 62 3 20 2 326 Other borrowings and credit facilities 599 599 Finance and other long term leases 22 20 18 16 14 344 434 Commercial paper 1,086 1,086 Bank overdrafts 472 472 Gross financial debt 3,273 263 898 660 661 533 - 6,288 Derivatives 27 13 6 1 47 Other financial liabilities 1,476 37 29 28 31 140 1,741 Trade accounts payable 2,095 2,095 Other financial liabilities 3,598 50 35 29 31 140 - 3,883

Total financial liabilities 6,871 313 933 689 692 673 - 10,171

116 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

22. SEGMENT INFORMATION

22.1 Information by business group Fiscal year 2007

(EUR millions) Wines Fashion Perfumes Watches Selective Other and Eliminations 2007 and and Leather and and Retailing (6) holding (1) (4) (5) Spirits Goods Cosmetics Jewelry companies

Sales outside the Group 3,220 5,591 2,563 818 4,167 122 - 16,481 Sales between business groups 6 37 168 15 12 6 (244) - Total revenue 3,226 5,628 2,731 833 4,179 128 (244) 16,481 Profit from recurring operations 1,058 1,829 256 141 439 (154) (14) 3,555 Other operating income (4) (18) (17) (3) (24) (60) - (126) and expenses Operating investments (2) 199 241 116 28 243 173 - 1,000 Depreciation and amortization 71 210 103 21 125 24 - 554 Impairment - - - 1 - 10 - 11

Brands, trade names, licenses 3,187 4,887 927 979 2,525 45 - 12,550 and goodwill (3) Inventories 3,036 622 263 268 626 45 (48) 4,812 Other operating assets 2,429 1,739 709 266 1,745 1,622 4,869 13,379 Total assets 8,652 7,248 1,899 1,513 4,896 1,712 4,821 30,741 Equity ------12,528 12,528 Operating liabilities 1,064 977 833 155 1,053 458 13,673 18,213 Total liabilities and equity 1,064 977 833 155 1,053 458 26,201 30,741

Fiscal year 2006

(EUR millions) Wines Fashion Perfumes Watches Selective Other and Eliminations 2006 and and Leather and and Retailing (6) holding (1) (4) (5) Spirits Goods Cosmetics Jewelry companies

Sales outside the Group 2,989 5,190 2,379 724 3,879 145 - 15,306 Sales between business groups 5 32 140 13 12 6 (208) - Total revenue 2,994 5,222 2,519 737 3,891 151 (208) 15,306 Profit from recurring operations 962 1,633 222 80 400 (137) 12 3,172 Other operating income (12) (44) (30) (9) (27) 2 - (120) and expenses Operating investments (2) 107 308 99 25 186 50 - 775 Depreciation and amortization 61 208 98 21 117 16 - 521 Impairment - 5 - - 7 10 - 22

Brands, trade names, licenses 2,936 4,978 920 1,009 2,643 56 - 12,542 and goodwill (3) Inventories 2,730 603 244 235 558 50 (37) 4,383 Other operating assets 2,220 1,752 648 229 1,575 1,548 3,888 11,860 Total assets 7,886 7,333 1,812 1,473 4,776 1,654 3,851 28,785 Equity ------11,594 11,594 Operating liabilities 1,025 935 736 156 1,010 428 12,901 17,191 Total liabilities and equity 1,025 935 736 156 1,010 428 24,495 28,785

Reference Document 2007 117 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

Fiscal year 2005 Since De Beers LV was reclassified in 2006 from Other activities and holding companies to Watches and Jewelry, data for 2005 was restated to facilitate comparability with 2006 data.

(EUR millions) Wines Fashion Perfumes Watches Selective Other and Eliminations 2005 and and Leather and and Retailing (6) holding (1) (4) (5) Spirits Goods Cosmetics Jewelry companies

Sales outside the Group 2,639 4,781 2,161 575 3,637 117 - 13,910 Sales between business groups 5 31 124 10 11 6 (187) - Total revenue 2,644 4,812 2,285 585 3,648 123 (187) 13,910 Profit from recurring operations 869 1,467 173 21 347 (129) (5) 2,743 Other operating income (3) (25) (10) - (183) - - (221) and expenses Operating investments (2) 100 302 115 26 135 36 - 714 Depreciation and amortization 59 187 91 19 112 27 - 495 Impairment - - - - 72 11 - 83

Brands, trade names, licenses 2,830 5,033 938 1,041 2,861 86 - 12,789 and goodwill (3) Inventories 2,479 661 227 219 534 64 (50) 4,134 Other operating assets 1,899 1,672 669 220 1,542 1,647 3,481 11,130 Total assets 7,208 7,366 1,834 1,480 4,937 1,797 3,431 28,053 Equity ------10,484 10,484 Operating liabilities 932 960 666 145 1,043 592 13,231 17,569 Total liabilities and equity 932 960 666 145 1,043 592 23,715 28,053

(1) Eliminations correspond to sales between business groups; these generally consist of sales from business groups other than Selective Retailing to Selective Retailing. Selling prices between the different business groups correspond to the prices applied in the normal course of business for transactions involving wholesalers or distributors outside the Group. (2) Operating investments correspond to amounts capitalized during the fiscal year rather than payments made during the fiscal year with respect to these investments. (3) Brands, trade names, licenses, and goodwill correspond to the net carrying amounts shown under Notes 3 and 4. (4) Assets not allocated include investments in associates, available for sale financial assets, other financial assets, and income tax receivables. (5) Liabilities not allocated include borrowings and both current and deferred tax liabilities. (6) Of which revenue for the Samaritaine department store: 15, 14 and 51 million euros respectively, as of December 31, 2007, 2006 and 2005.

22.2 Information by geographic region Revenue by geographic region of delivery breaks down as follows:

(EUR millions) 2007 2006 2005 France 2,348 2,197 2,073 Europe (excluding France) 3,790 3,332 2,850 United States 4,124 4,009 3,686 Japan 1,856 1,985 2,013 Asia (excluding Japan) 3,044 2,651 2,301 Other 1,319 1,132 987 Revenue 16,481 15,306 13,910

118 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

Operating investments by geographic region break down as follows:

(EUR millions) 2007 2006 2005 France 399 295 317 Europe (excluding France) 231 119 126 United States 199 138 126 Japan 32 91 18 Asia (excluding Japan) 94 78 95 Other 45 54 32 Operating investments 1,000 775 714

Operating investments correspond to the amounts capitalized during the fiscal year rather than payments made during the fiscal year with respect to these investments.

23. REVENUE AND EXPENSES BY NATURE

23.1 Revenue Revenue consists of the following:

(EUR millions) 2007 2006 2005

Revenue generated by brands and trade names 16,155 14,974 13,718 Royalties and license revenue 107 105 101 Income from investment property 39 34 33 Other 180 193 58 Total 16,481 15,306 13,910

23.2 Expenses by nature Profit from recurring operations includes the following expenses:

(EUR millions) 2007 2006 2005 Advertising and promotion expenses 1,953 1,783 1,541 Commercial lease expenses 978 932 870 Personnel costs 2,716 2,569 2,399

Advertising and promotion expenses mainly consist of the cost of As of December 31, 2007, a total of 2,048 stores were operated by the media campaigns and point-of-sale advertising, and also include Group worldwide (1,859 in 2006 and 1,723 in 2005), particularly personnel costs dedicated to this function. by Fashion and Leather Goods and Selective Retailing. In certain countries, leases for stores are contingent on the payment of minimum amounts in addition to a variable amount, especially for stores with lease payments indexed to revenue. The total lease expense for the Group’s stores breaks down as follows:

(EUR millions) 2007 2006 2005 Fixed or minimum lease payments 402 356 266 Variable portion of indexed leases 176 173 185 Airport concession fees - fixed portion or minimum amount 204 209 248 Airport concession fees - variable portion 196 194 171 Commercial lease expenses for the period 978 932 870

Reference Document 2007 119 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

• Personnel costs consist of the following elements:

(EUR millions) 2007 2006 2005 Salaries and social charges 2,628 2,471 2,340 Pensions, medical costs and similar expenses 42 63 29 in respect of defined benefit plans Stock option plan and related expenses 46 35 30 Total 2,716 2,569 2,399

24. OTHER OPERATING INCOME AND EXPENSES

(EUR millions) 2007 2006 2005

Amortization of brands and trade names (6) (6) (7) Impairment of brands, trade names and goodwill (10) (15) (49) Impairment of tangible assets - (7) (34) Net gains (losses) on disposal of fixed assets (81) -- Restructuring costs (25) (63) (132) Other (4) (29) 1 Other operating income and expenses (126) (120) (221)

In 2007, other operating income and expenses mainly comprised In 2005, other operating income and expenses included an the net loss on the sale of La Tribune group, the logistics exceptional expense of 179 million euros following the closure of company Kami (Fashion and Leather Goods) and Omas writing the Samaritaine department store in Paris, which was required in instruments. order to carry out major renovation work to bring the premises into compliance with safety regulations and other standards. In 2006, restructuring costs, which were of a commercial or industrial nature, mainly relate to the Fashion and Leather Goods and the Perfumes and Cosmetics business groups.

25. NET FINANCIAL INCOME/EXPENSE

(EUR millions) 2007 2006 2005

Borrowing costs, excluding perpetual bonds (241) (201) (199) Interest and income from current available for sale financial assets 30 23 15 Fair value adjustment of borrowings and hedges, excluding perpetual bonds 2 71 Net cost of perpetual bonds 2 (2) (5) Cost of net financial debt (207) (173) (188)

Dividends received from non-current available for sale financial assets 29 21 44 Ineffective portion of foreign currency hedges (97) (45) (106) Net gain (loss) on the sale of available for sale financial assets 44 164 128 Other items - net (21) (20) (21) Other financial income and expenses (45) 120 45

Net financial income/(expense) (252) (53) (143)

120 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

Income from cash, cash equivalents and current available for sale financial assets includes the following items:

(EUR millions) 2007 2006 2005

Income from cash and cash equivalents 20 17 12 Interest from financial receivables 1063 Interest and income from current available for sale financial assets 30 23 15

The revaluation effects of financial debt and interest rate derivatives, excluding perpetual bonds, are attributable to the revaluation of the following items:

(EUR millions) 2007 2006 2005

Hedged financial debt, excluding perpetual bonds 16 77 30 Hedging instruments (15) (77) (29) Unallocated derivatives (1) (1) (3) Debt recognized in accordance with the fair value option 2 8 3 Effects of revaluation of financial debt and rate instruments, excluding perpetual bonds 2 7 1

The ineffective portion of exchange rate derivatives breaks down as follows:

(EUR millions) 2007 2006 2005

Financial cost of commercial foreign exchange hedges (97) (47) (89) Financial cost of foreign-currency denominated net asset hedges (1) (7) (11) Change in the fair value of unallocated derivatives 1 9 (6) Ineffective portion of foreign exchange derivatives (97) (45) (106)

The disposals of available for sale financial assets made in 2007 generated capital gains of 44 million euros, compared to 164 million euros in 2006. The latter were essentially attributable to the disposal of Bouygues shares and of various investments held by L Capital FCPR. In 2005, the net gain on the sale of available for sale financial assets included 99 million euros in respect of gains on the sale of Bouygues shares.

26. INCOME TAXES

26.1 Analysis of the income tax expense

(EUR millions) 2007 2006 2005 Current income taxes for the period (984) (986) (594) Current income taxes for prior periods 7 410 Current income taxes (977) (982) (584)

Change in deferred income taxes 77 135 (132) Effect of changes in tax rate on deferred income taxes 47 - (2) Deferred income taxes 124 135 (134)

Total tax expense (853) (847) (718)

Tax on items recognized in equity (33) (73) 15

Reference Document 2007 121 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

The effective tax rate is as follows:

(EUR millions) 2007 2006 2005 Profit before tax 3,177 2,999 2,379 Total income tax expense (853) (847) (718)

Effective tax rate 27% 28% 30%

26.2 Analysis of the difference between the theoretical and effective income tax rates The theoretical income tax rate, defined as the rate applicable in law to the Group’s French companies, may be reconciled as follows to the effective income tax rate disclosed in the consolidated financial statements:

(as % of income before tax) 2007 2006 2005

French statutory tax rate 34.4 34.4 34.9 - changes in tax rates (1.4) 0.1 0.1 - differences in tax rates for foreign companies (4.3) (3.4) (2.9) - tax losses and tax loss carry forwards (3.8) (5.3) (3.3) - difference between consolidated and taxable income, income taxable at reduced rates 1.6 2.0 0.6 - withholding taxes 0.4 0.4 0.8 Effective tax rate of the Group 26.8 28.2 30.2

Since 2000, French companies have been subject to additional income tax, at a rate of 4.8% for 2005 and 3.3% for 2006 and 2007, bringing the theoretical tax rate to 34.4% in 2007 and 2006, and 34.9% in 2005.

26.3 Sources of deferred taxes

In the income statement 2007 2006 2005 (EUR millions)

Valuation of brands 16 (45) (17) Fair value adjustment of vineyard land 2 -1 Other revaluation adjustments - (3) - Gains and losses on available for sale financial assets 10 (3) (86) Gains and losses on hedges of future foreign currency cash flows 8 (8) 8 Provisions for contingencies and losses (1) 28 22 (2) Intercompany margin included in inventories 6 25 15 Other consolidation adjustments (1) 64 106 (55) Losses carried forward (10) 42 2 Total 124 136 (134)

In equity 2007 2006 2005 (EUR millions)

Fair value adjustment of vineyard land (21) (36) (13) Gains and losses on available for sale financial assets 18 (2) (26) Gains and losses on hedges of future foreign currency cash flows (20) (35) 54 Total (23) (73) 15

122 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

In the balance sheet 2007 2006 2005 (EUR millions)

Valuation of brands (2,120) (2,209) (2,295) Fair value adjustment of vineyard land (443) (412) (350) Other revaluation adjustments (304) (303) (315) Gains and losses on available for sale financial assets (7) (36) (27) Gains and losses on hedges of future foreign currency cash flows (26) (21) 20 Provisions for contingencies and losses (1) 78 94 45 Intercompany margin included in inventories 201 196 162 Other consolidation adjustments (1) 156 87 (2) Losses carried forward 114 137 143 Total (2,351) (2,467) (2,619) (1) Mainly tax-driven provisions, accelerated tax depreciation and finance lease.

Net deferred taxes on the balance sheet include the following assets and liabilities:

(EUR millions) 2007 2006 2005

Deferred tax assets 492 395 306 Deferred tax liabilities (2,843) (2,862) (2,925) Net deferred tax asset (liability) (2,351) (2,467) (2,619)

26.4 Tax loss carry forwards As of December 31, 2007, unused tax loss carry forwards and tax credits, for which no deferred tax assets were recognized, had a potential impact on the future tax expense of 360 million euros (529 million euros in 2006, 763 million euros in 2005).

26.5 Tax consolidation • Tax consolidation agreements in France allow certain French • The application of other tax consolidation agreements in certain companies of the Group to combine their taxable profits to foreign countries, notably in the United States and Italy, calculate the overall tax expense for which only the parent generated current tax savings of 119 million euros in 2007 company is liable. (113 million euros in 2006, 74 million euros in 2005). This tax consolidation agreement generated a decrease in the current tax expense of 85 million euros in 2007 (46 million euros in 2006, 132 million euros in 2005).

Reference Document 2007 123 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

27. EARNINGS PER SHARE

2007 2006 2005

Group share of net profit (EUR millions) 2,025 1,879 1,440 Average number of shares in circulation during the period 489,937,410 489,937,410 489,937,410 Average number of treasury shares owned during the period (15,609,467) (18,035,590) (19,731,021) Average number of shares on which the calculation before dilution is based 474,327,943 471,901,820 470,206,389

Earnings per share (EUR) 4.27 3.98 3.06

Average number of shares on which the above calculation is based 474,327,943 471,901,820 470,206,389 Dilution effect of stock option plans 5,563,770 5,570,135 3,840,868 Other dilution effects - -- Average number of shares in circulation after dilution 479,891,713 477,471,955 474,047,257

Diluted earnings per share (EUR) 4.22 3.94 3.04

28. PROVISIONS FOR PENSIONS, MEDICAL COSTS AND SIMILAR COMMITMENTS

28.1 Expense for the year

(EUR millions) 2007 2006 2005

Current service cost 38 48 40 Impact of discounting 22 22 20 Expected return on plan assets (18) (14) (13) Amortization of actuarial gains and losses (2) 1- Past service cost 2 22 Changes in regime - 4 (20)

Total expense for the period for defined benefit plans 42 63 29

Effective return on/(cost of) plan assets 17 25 22

124 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

28.2 Net recognized commitment

(EUR millions) 2007 2006 2005

Benefits covered by plan assets 503 510 470 Benefits not covered by plan assets 111 131 137 Projected benefit obligation 614 641 607

Fair value of plan assets (403) (385) (343)

Actuarial differences not recognized in the balance sheet 27 10 8 Past service cost not yet recognized (8) (10) (12) Unrecognized items 19 - (4)

Net recognized commitment 230 256 260

Of which: Non-current provisions 237 260 264 Current provisions 5 45 Plan assets (12) (8) (9) Total 230 256 260

28.3 Breakdown of the change in commitment

(EUR millions) Projected benefit Fair value of Unrecognized Net recognized obligation plan assets items commitment As of December 31, 2006 641 (385) - 256 Net expense for the period 60 (18) - 42 Payments to beneficiaries (48) 32 - (16) Contributions to plan assets (40) - (40) Contributions of employees 2 (2) - - Translation adjustment (25) 15 (2) (12) Changes in scope and reclassifications 4 (5) 1 - Changes in regime (5) 5 - Actuarial differences: experience impacts (1) - 1 - Actuarial differences: change in assumptions (14) - 14 - As of December 31, 2007 614 (403) 19 230

The actuarial assumptions applied to estimate commitments as of December 31, 2007 in the main countries where such commitments have been undertaken, were as follows:

(%) 2007 2006 2005 United United United France Japan France Japan France Japan States States States

Discount rate 5 2.25 6 4.5 2 5.75 4 2 5.75 Expected return 4.75 4 7.75 4.5 4 8 4 4 8 on investments Future rate of increase 2 to 2 to 2 to 2 to 2 to 2 to 3.25 2.5 4.5 of salaries 4 4 4.5 4.5 4.5 4.5

Moreover, for all of the periods presented, the rate of increase of medical costs retained in the United States reduces from 9% to 5% over the first five years, and 5% thereafter.

Reference Document 2007 125 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

28.4 Analysis of benefits The breakdown of the projected benefit obligation by type of benefit plan is as follows:

(EUR millions) 2007 2006 2005

Retirement and other indemnities 90 85 85 Medical costs of retirees 36 49 53 Jubilee awards 11 11 12 Pensions 453 467 430 Early retirement indemnities 12 13 17 Other 12 16 10 Projected benefit obligation 614 641 607

Geographic breakdown of projected benefit obligation is as follows:

(EUR millions) 2007 2006 2005

France 275 278 261 Europe (excluding France) 177 190 169 United States 100 112 115 Japan 53 52 54 Asia (excluding Japan) 9 98 Projected benefit obligation 614 641 607

The main components of the Group’s net commitment for - in Europe (excluding France), the main commitments concern retirement and other benefit obligations as of December 31, 2007 schemes for the reimbursement of the medical expenses of retirees, are as follows: set up in the United Kingdom by certain Group companies, as well as the TFR (Trattamento di Fine Rapporto) in Italy, a legally - in France, these commitments mainly include jubilee awards and required end-of-service allowance, paid regardless of the reason retirement indemnities , the payment of which is determined by for the employee’s departure from the company; French law and collective bargaining agreements, respectively after a certain number of years of service or upon retirement; - in the United States, the commitment relates to defined benefit they also include the commitment to members of the Group’s plans or schemes for the reimbursement of medical expenses of Executive Committee, who are covered by an additional pension retirees set up by certain Group companies. plan after a certain number of years’ service, the amount of which is linked to their last year’s remuneration;

28.5 Analysis of related plan assets Market value of the underlying investments in plan assets is as follows:

(%) 2007 2006 2005

Shares 51 48 46 Bonds: - private issues 33 32 25 - public issues 11 15 22 Real estate, cash and other assets 5 57 Fair value of related plan assets 100 100 100

Plan assets do not include any real estate assets operated by the Group or any LVMH shares.

126 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

29. OFF BALANCE SHEET COMMITMENTS

29.1 Purchase commitments

(EUR millions) 2007 2006 2005 Grapes, wines and distilled alcohol 1,690 1,547 997 Other purchase commitments for raw materials 24 41 20 Industrial and commercial fixed assets 105 151 58 Investments in joint venture shares and non-current available for sale financial assets 55 84 59

Some Wines and Spirits companies have contractual purchase the contractual terms or known year-end prices and estimated arrangements with various local producers for the future supply production yields. Their increase in 2006 results from the signing of grapes, still wines and distilled alcohol. These commitments of long term supply contracts. are valued, depending on the nature of the purchases, based on

As of December 31, 2007, the maturity dates of these commitments break down as follows:

Less than One to More than Total (EUR millions) one year five years five years

Grapes, wines and distilled alcohol 584 634 472 1,690 Other purchase commitments for raw materials 17 7 - 24 Industrial and commercial fixed assets 72 33 - 105 Investments in joint venture shares and non-current available 46 3 6 55 for sale financial assets

29.2 Lease and similar commitments In addition to leasing its stores, the Group also finances some of its equipment through long term operating leases. Some fixed assets and equipment were also purchased or refinanced under finance leases.

Operating leases and concession fees The fixed or minimum portion of commitments in respect of operating lease or concession contracts over the irrevocable period of the contracts were as follows as of December 31, 2007:

(EUR millions) 2007 2006 2005

Less than one year 687 609 553 One to five years 1,831 1,359 1,508 More than five years 935 778 825 Commitments given for operating leases and concession fees 3,453 2,746 2,886

Less than one year 21 20 18 One to five years 42 46 44 More than five years 4 28 Commitments received for sub-leases 67 68 70

The increase in 2007 in commitments given is primarily attributable to airport concessions, notably the concession at Singapore airport’s new terminal, which was obtained during the fiscal year.

Reference Document 2007 127 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

Finance leases The amount of the Group’s irrevocable commitments under finance lease agreements as of December 31, 2007 breaks down as follows:

(EUR millions) 2007 2006 2005 Minimum Present Minimum Present Minimum Present future value of future value of future value of payments payments payments payments payments payments

Less than one year 22 21 27 27 32 29 One to five years 68 44 76 50 85 67 More than five years 344 70 395 76 464 81 Total future minimum payments 434 498 581

Of which: financial interest (299) (345) (404) Present value of minimum future payments 135 135 153 153 177 177

29.3 Contingent liabilities and outstanding litigation As part of its day-to-day management, the Group is party to The Group believes that the provisions recorded in the balance various legal proceedings concerning brand rights, the protection sheet in respect of these risks, litigation or disputes, known or of intellectual property rights, the set-up of selective retailing outstanding at year-end, are sufficient to avoid its consolidated networks, licensing agreements, employee relations, tax audits financial net worth being materially impacted in the event of an and other areas relating to its business. unfavorable outcome.

29.4 Collateral and other guarantees As of December 31, 2007, these commitments breaks down as Maturity dates of these commitments are as follows: follows:

Less than One to More than Total (EUR millions) 2007 2006 2005 (EUR millions) one year five years five years Securities and deposits 61 56 37 Securities and deposits 22 25 14 61 Other guarantees 28 56 54 Other guarantees 17 11 - 28 Guarantees given 89 112 91 Guarantees given 39 36 14 89 Guarantees received 32 63 35 Guarantees received 12 15 5 32

29.5 Other commitments The Group is not aware of any significant off balance sheet commitments other than those described above.

30. RELATED PARTY TRANSACTIONS

30.1 Relations of LVMH with Christian Dior and Relations of LVMH with Christian Dior Groupe Arnault LVMH, via its subsidiaries Parfums Christian Dior and Montres The parent company of LVMH is Christian Dior SA, a public Dior, coordinates its communications efforts with Christian company listed on the Eurolist by Euronext Paris, which is Dior SA and its subsidiaries. Christian Dior also provides creative controlled by Groupe Arnault SAS via its subsidiary Financière assistance to LVMH for the design of perfume bottles and watches, Agache SA. as well as its advertising and promotional campaigns.

128 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

LVMH distributes the products marketed by Christian Dior (27 million euros in 2006, 25 million euros in 2005); the total through its Selective Retailing businesses. Christian Dior purchases administrative expenses borne by the Wines and Spirits business the products manufactured by Parfums Christian Dior and Montres group amounted to 55 million euros in 2007 (48 million euros in Dior from LVMH, which it sells in its network of retail stores. 2006, 44 million euros in 2005). Finally, LVMH provides administrative assistance to the foreign subsidiaries of Christian Dior. 30.3 Executive bodies Transactions between LVMH and Christian Dior, which are The total compensation paid to the members of the Executive completed at market prices, may be summarized as follows: Committee and the Board of Directors, in respect of their functions within the Group, breaks down as follows: (EUR millions) 2007 2006 2005 LVMH purchases from Christian Dior (16) (13) (17) (EUR millions) 2007 2006 2005 Trade accounts payable as of Gross compensation, employers’ (9) (7) (11) 46 42 50 December 31 charges and benefits in kind Post-employment benefits 9 87 LVMH sales to Christian Dior 16 15 9 Trade accounts receivable as of Other long term benefits 13 62 3 12 December 31 End of contract indemnities - -- Stock option and similar plans 20 16 15 Relations of LVMH with Groupe Arnault and Total 88 72 74 Financière Agache Groupe Arnault SAS provides assistance to LVMH in the areas The net commitment recognized as of December 31, 2007 for of development, engineering, corporate and real estate law. In post-employment benefits is 5 million euros (9 million euros as addition, Groupe Arnault leases office premises to LVMH. of December 31, 2006 and 2005). LVMH leases office space to both of these companies and also provides them with various forms of administrative assistance. 31. SUBSEQUENT EVENTS Transactions between LVMH and Groupe Arnault and Financière Agache may be summarized as follows: There were no significant subsequent events as of the date on which the accounts were approved for publication. (EUR millions) 2007 2006 2005 Amounts billed by Groupe Arnault SAS (6) (5) (5) and Financière Agache to LVMH Trade accounts payable as of (1) (2) (2) December 31

Amounts billed by LVMH to Groupe 2 21 Arnault SAS and Financière Agache Trade accounts receivable as of - -- December 31

30.2 Relations with Diageo Moët Hennessy is the holding company for LVMH’s Wines and Spirits businesses, with the exception of Château d’Yquem and certain champagne vineyard . Since 1994, Diageo has held a 34% stake in Moët Hennessy. At this time an agreement has been concluded between Diageo and Moët Hennessy for the apportionment of holding company expenses between Moët Hennessy and the other holding companies of the LVMH Group. Under this agreement, Moët Hennessy assumed 24% of shared expenses in 2007 (24% in 2006, 23% in 2005). After taking into consideration the effects of the agreement, Moët Hennessy’s total administrative expenses amounted to 33 million euros in 2007

Reference Document 2007 129 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

CONSOLIDATED COMPANIES IN 2007

COMPANIES REGISTERED OFFICE PERCENTAGE OF COMPANIES REGISTERED OFFICE PERCENTAGE OF CONTROL INTEREST CONTROL INTEREST Moët Hennessy Asia Pacific Pte Ltd Singapore 100% 65% WINES AND SPIRITS Moët Hennessy Australia Ltd Rosebury, Australia 100% 65% Champagne Moët & Chandon SCS Epernay, France 100% 66% Millennium Import LLC Minneapolis, Minnesota, USA 100% 66% Moët Hennessy UK Ltd London, United Kingdom 100% 66% Millennium Brands Ltd Dublin, Ireland 100% 66% Moët Hennessy España SA Barcelona, Spain 100% 66% Polmos Zyrardow Zyrardow, Poland 99% 65% Moët Hennessy (Suisse) SA Geneva, Switzerland 100% 66% Moët Hennessy VR Ltd London, United Kingdom 100% 66% Champagne Des Moutiers SA Epernay, France 100% 66% The Glenmorangie Company Ltd Edinburgh, United Kingdom 100% 66% Schieffelin Partner Inc New York, USA 100% 66% Macdonald & Muir Ltd Edinburgh, United Kingdom 100% 66% Moët Hennessy de Mexico, SA de C.V. Mexico, Mexico 100% 66% Glenaird Ltd Edinburgh, United Kingdom 50% 33% Chamfipar SA Ay, France 100% 66% The Scotch Malt Whisky Society Ltd Edinburgh, United Kingdom 100% 66% Société Viticole de Reims SA Ay, France 100% 66% Wenjun Spirits Company Ltd Chengdu, China 55% 36% Cie Française du Champagne et du Luxe SA Ay, France 100% 66% Wenjun Spirits Sales Company Ltd Chengdu, China 55% 36% Moët Hennessy Belux SA Brussels, Belgium 100% 66% Champagne de Mansin SAS Gye sur Seine, France 100% 66% FASHION AND LEATHER GOODS Moët Hennessy Osterreich GmbH Vienna, Austria 90% 59% Louis Vuitton Malletier SA Paris, France 100% 100% Schieffelin & Somerset New York, USA 100% 66% Manufacture de souliers Louis Vuitton S.r.l. Fiesso d’Artico, Italy 100% 100% Moët Hennessy (Nederland) BV Baarn, Netherlands 100% 66% Louis Vuitton Saint Bartholomy SNC Saint Bartholomew, 100% 100% Moët Hennessy USA, Inc New York, USA 100% 66% French Antilles MHD Moët Hennessy Diageo SAS Courbevoie, France (3) 100% 66% Les Ateliers de Pondichery Private Ltd Pondichery, India 100% 100% Opera Vineyards SA Buenos Aires, Argentina (1) 50% 33% Société des Ateliers Louis Vuitton SNC Paris, France 100% 100% France Champagne SA Epernay, France 100% 66% Société Louis Vuitton Services SNC Paris, France 100% 100% Domaine Chandon, Inc Yountville (California), USA 100% 66% Société des Magasins Louis Vuitton France SNC Paris, France 100% 100% Cape Mentelle Vineyards Ltd Margaret River, Australia 100% 66% Belle Jardinière SA Paris, France 100% 100% Veuve Clicquot Properties, Pty Ltd Sydney, Australia 100% 66% Belle Jardinière Immo SAS Paris, France 100% 100% Moët Hennessy do Brasil - Vinhos E Destilados Ltda Sao Paulo, Brazil 100% 66% Sedivem SNC Paris, France 100% 100% Cloudy Bay Vineyards Ltd Blenheim, New Zealand 100% 66% Les Ateliers Horlogers Louis Vuitton SA La Chaux-de-Fonds, Switzerland 100% 100% Bodegas Chandon Argentina SA Buenos Aires, Argentina 100% 66% Louis Vuitton Monaco SA Monte Carlo, Monaco 100% 100% Domaine Chandon Australia Pty Ltd Coldstream Victoria, Australia 100% 66% ELV SARL Paris, France 100% 100% Newton Vineyards LLC St Helena (California), USA 90% 59% LVMH Fashion Group UK Ltd London, United Kingdom 100% 100% Veuve Clicquot Ponsardin SCS Reims, France 100% 66% Louis Vuitton Deutschland GmbH Düsseldorf, Germany 100% 100% Société Civile des Crus de Champagne SA Reims, France 100% 66% Louis Vuitton Ukraine LLC Kiev, Ukraine 100% 100% Veuve Clicquot U.K. Ltd London, United Kingdom 100% 66% LV Cup España S.L Valencia, Spain 100% 100% Clicquot, Inc New York, USA (*) 100% 66% Sociedad Catalana Talleres Artesanos Louis Vuitton SA Barcelona, Spain 100% 100% Veuve Clicquot Japan KK Tokyo, Japan 100% 66% Louis Vuitton BV Amsterdam, Netherlands 100% 100% Moët Hennessy Suomi OY Helsinki, Finland 100% 66% LVMH Fashion Group Belgium SA Brussels, Belgium 100% 100% Moët Hennessy Sverige AB Stockholm, Sweden 100% 66% Louis Vuitton Hellas SA Athens, Greece 100% 100% Moët Hennessy Norge AS Hoevik, Norway 100% 66% Louis Vuitton Cyprus Limited Nicosia, Cyprus 100% 100% Moët Hennessy Danmark A/S Copenhagen, Denmark 100% 66% Louis Vuitton Portugal Maleiro, Ltda. Lisbon, Portugal 100% 100% Moët Hennessy Deutschland GmbH Munich, Germany 100% 66% Louis Vuitton Ltd Tel Aviv, Israel 100% 100% Moët Hennessy Italia S.p.a. Milan, Italy 100% 66% Louis Vuitton Danmark A/S Copenhagen, Denmark 100% 100% Krug SA Reims, France 100% 66% Louis Vuitton Aktiebolag SA Stockholm, Sweden 100% 100% Champagne Ruinart SA Reims, France 100% 66% Louis Vuitton Suisse SA Geneva, Switzerland 100% 100% Ruinart UK Ltd London, United Kingdom 100% 66% Louis Vuitton Ceska s.r.o. Prague, Czech Republic 100% 100% Ruinart Japan KK Tokyo, Japan 100% 66% Louis Vuitton Osterreich G.m.b.H Vienna, Austria 100% 100% Ruinart España S.L. Madrid, Spain 100% 66% Louis Vuitton Cantacilik Ticaret Anonim Sirketi Istanbul, Turkey 99% 99% Château d’Yquem SA Sauternes, France 65% 65% LV US Manufacturing, Inc New York, USA 100% 100% Château d’Yquem SC Sauternes, France 64% 64% Somarest SARL Sibiu, Romania 100% 100% Jas Hennessy & Co SCS Cognac, France 99% 65% LVMH Fashion Group Hawaii Inc Honolulu (Hawaii), USA 100% 100% Diageo Moët Hennessy BV LLC Amsterdam, Netherlands (3) 100% 66% Atlantic Luggage Company Ltd Hamilton, Bermuda 100% 40% Hennessy Dublin Ltd Dublin, Ireland 100% 66% Louis Vuitton Guam, Inc Guam 100% 100% Edward Dillon & Co Ltd Dublin, Ireland (2) 40% 26% Louis Vuitton Saipan, Inc Saipan, Mariana Islands 100% 100% Hennessy Far East Ltd Hong Kong, China 100% 65% Louis Vuitton Norge Oslo, Norway 100% 100% Riche Monde Orient Ltd Hong Kong, China 100% 66% San Dimas Luggage Company New York, USA 100% 100% Moët Hennessy Diageo Hong Kong Ltd Hong Kong, China (3) 100% 66% Louis Vuitton Vietnam Company Ltd Hanoi, Vietnam 100% 100% Riche Monde (China) Ltd Shanghai, China (3) 100% 66% LVMH FG Brasil Ltda Sao Paulo, Brazil 100% 100% M.H. - U.D.G. (Far East) Ltd Hong Kong, China 100% 66% Louis Vuitton Panama Panama City, Panama 100% 100% Moët Hennessy Diageo Singapore Pte Ltd Singapore (3) 100% 66% Louis Vuitton Mexico S de RL de CV Mexico, Mexico 100% 100% Riche Monde Malaysia Inc Petaling Jaya, Malaysia (3) 50% 33% Blinfar SA Montevideo, Uruguay 100% 100% Riche Monde Taipei Ltd Taipei, Taiwan (3) 100% 66% Louis Vuitton Chile Ltda Santiago de Chile, Chile 100% 100% Diageo Moët Hennessy Thailand Ltd Bangkok, Thailand (3) 100% 66% Louis Vuitton (Aruba) N.V Oranjestad, Aruba 100% 100% Moët Hennessy Korea Ltd Seoul, South Korea 100% 65% LVMH Fashion Group Pacific Ltd Hong Kong, China 100% 100% Moët Hennessy Shanghai Ltd Shanghai, China 100% 66% LV Trading Hong Kong Limited Hong Kong, China 100% 100% Moët Hennessy India Pvt. Ltd New Delhi, India 100% 66% Louis Vuitton Hong Kong Ltd Hong Kong, China 100% 100% Moët Hennessy Taiwan Ltd Taipei, Taiwan 100% 65% Louis Vuitton (Philippines), Inc Makati, Philippines 100% 100% MHD Chine Co Ltd Shanghai, China 100% 66% LVMH Fashion (Singapore) Pte Ltd Singapore 100% 100% MHWH Limited Limassol, Cyprus 50% 33% PT Louis Vuitton Indonesia Jakarta, Indonesia 98% 98% Moët Hennessy Whitehall Russia SA Moscow, Russia 100% 33% Louis Vuitton (Malaysia) SDN BHD Kuala-Lumpur, Malaysia 100% 100% Moët Hennessy Diageo KK Tokyo, Japan (3) 100% 66% Louis Vuitton (Thailand) SA Bangkok, Thailand 100% 100%

130 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

COMPANIES REGISTERED OFFICE PERCENTAGE OF COMPANIES REGISTERED OFFICE PERCENTAGE OF CONTROL INTEREST CONTROL INTEREST Louis Vuitton Taiwan, Ltd Taipei, Taiwan 98% 98% Givenchy China Co Ltd Hong Kong, China 100% 100% Louis Vuitton Australia, PTY Ltd Sydney, Australia 100% 100% Givenchy Shanghai Commercial and Trading Co, Ltd Shanghai, China 100% 100% Louis Vuitton (China) Co Ltd Shanghai, China 100% 100% Gabrielle Studio, Inc New York, USA 100% 100% LV New Zealand Limited Auckland, New Zealand 100% 100% Donna Karan International Inc New York, USA (*) 100% 100% Louis Vuitton Kuweit CSP Safat, Kuwait (4) (4) The Donna Karan Company LLC New York, USA 100% 100% Louis Vuitton Trading India Private Ltd New Delhi, India 51% 51% Donna Karan Service Company BV Oldenzaal, Netherlands 100% 100% Louis Vuitton UAE LLC Dubai, United Arab Emirates 65% 65% Donna Karan Studio LLC New York, USA 100% 100% LV Saudi Arabia LLC Jeddah, Saudi Arabia (4) (4) The Donna Karan Company Store LLC New York, USA 100% 100% Louis Vuitton Korea Ltd Seoul, South Korea 100% 100% Donna Karan Company Store UK Holdings Ltd London, United Kingdom 100% 100% LVMH Fashion Group Trading Korea Ltd Seoul, South Korea 100% 100% Donna Karan Management Company UK Ltd London, United Kingdom 100% 100% Louis Vuitton Hungaria Sarl Budapest, Hungary 100% 100% Donna Karan Company Stores UK Retail Ltd London, United Kingdom 100% 100% Louis Vuitton Argentina SA Buenos Aires, Argentina 100% 100% Donna Karan Company Store (UK) Ltd London, United Kingdom 100% 100% Louis Vuitton Vostock LLC Moscow, Russia 100% 100% Donna Karan H. K. Ltd Hong Kong, China 100% 100% LV Colombia SA Santafe de Bogota, Columbia 100% 100% Donna Karan (Italy) S.r.l. Milan, Italy 100% 100% Louis Vuitton Maroc Sarl Casablanca, Morocco 100% 100% Donna Karan (Italy) Production Services S.r.l. Milan, Italy 100% 100% Louis Vuitton Venezuela SA Caracas, Venezuela 100% 100% Fendi International BV Amsterdam, Netherlands 100% 100% Louis Vuitton South Africa Ltd Johannesburg, South Africa 100% 100% Fendi International SA Paris, France 100% 100% Louis Vuitton Macau Company Ltd Macao, China 100% 100% Fun Fashion Emirates LLC Dubai, United Arab Emirates 60% 60% LVMH Fashion Group (Shanghai) Trading Co Ltd Shanghai, China 100% 100% Fendi SA Luxembourg, Luxembourg 100% 100% LVJ Group KK Tokyo, Japan 99% 99% Fun Fashion Bahrain WLL Manama, Bahrain 80% 80% LVMH Fashion Group Americas Inc New York, USA (*) 100% 100% Fendi S.r.l. Rome, Italy 100% 100% Louis Vuitton Canada, Inc Toronto, Canada 100% 100% Fendi Dis Ticaret Limited Sirketi Istanbul, Turkey 100% 100% Marc Jacobs International, LLC New York, USA (*) 96% 96% Fendi Adele S.r.l. Rome, Italy 100% 100% Marc Jacobs International (UK) Ltd London, United Kingdom 100% 100% Fendi Immobili Industriali S.r.l. Rome, Italy 100% 100% Marc Jacobs Trademark, LLC New York, USA (*) 33% 33% Fendi Italia S.r.l. Rome, Italy 100% 100% Marc Jacobs International Japan Co., Ltd Tokyo, Japan 100% 99% Fendi U.K. Ltd London, United Kingdom 100% 100% Loewe SA Madrid, Spain 100% 100% Fendi France SAS Paris, France 100% 100% Loewe Hermanos SA Madrid, Spain 100% 100% Fendi North America Inc New York, USA (*) 100% 100% Manufacturas Loewe SA. Madrid, Spain 100% 100% Fendi Australia Pty Ltd Sydney, Australia 100% 100% LVMH Fashion Group France SNC Paris, France 100% 100% Fendi Guam Inc Tumon, Guam 100% 100% Loewe Hermanos UK Ltd London, United Kingdom 100% 100% Fendi (Thailand) Company Ltd Bangkok, Thailand 100% 100% Loewe Saipan, Inc Saipan, Mariana Islands 100% 100% Fendi Asia Pacific Ltd Hong Kong, China 100% 100% Loewe Guam, Inc Guam 100% 100% Fendi Korea Ltd Seoul, South Korea 100% 100% Loewe Hong Kong Ltd Hong Kong, China 100% 100% Fendi Taiwan Ltd Taipei, Taiwan 100% 100% Loewe Commercial & Trading Co, LTD Shanghai, China 100% 100% Fendi Hong Kong Ltd Hong Kong, China 100% 100% Loewe Fashion Pte Ltd Singapore 100% 100% Fendi China Boutiques Ltd Hong Kong, China 100% 100% Loewe Fashion (M) SDN BHD Kuala Lumpur, Malaysia 100% 100% Fendi (Singapore) Pte Ltd Singapore 100% 100% Loewe Taiwan Ltd Taipei, Taiwan 100% 98% Fendi Fashion (Malaysia) Snd. Bhd. Kuala Lumpur, Malaysia 100% 100% Loewe Australia Pte Ltd Sydney, Australia 100% 100% Fendi Switzerland SA Geneva, Switzerland 100% 100% Loewe Korea Ltd Seoul, South Korea 100% 100% Fun Fashion FZCO LLC Dubai, United Arab Emirates 60% 60% Berluti SA Paris, France 100% 100% Fendi Marianas, Inc Tumon, Guam 100% 100% Société de Distribution Robert Estienne SNC Paris, France 100% 100% Fun Fashion Kuwait Co WLL Kuwait City, Kuwait 80% 80% Manifattura Ferrarese S.r.l. Ferrare, Italy 100% 100% Fun Fashion Germany GmbH & Co KG Stuttgart, Germany 51% 51% Rossimoda SpA Vigonza, Italy 97% 97% Fendi Macau Company Ltd Macao, China 100% 100% Rossimoda USA Ltd New York, USA 100% 97% Fendi Germany GmbH Stuttgart, Germany 100% 100% Rossimoda France SARL Paris, France 100% 97% Fun Fashion Napoli Srl Rome, Italy 51% 51% Brenta Suole S.r.l. Vigonza, Italy 65% 63% Fendi (Shanghai) Co Ltd Shanghai, China 100% 100% LVMH Fashion Group Services SAS Paris, France 100% 100% Fendi Jeddah Jeddah, Saudi Arabia (4) (4) Montaigne KK Tokyo, Japan 100% 99% Fendi Ryiadh Riyadh, Saudi Arabia (4) (4) Modulo Italia S.r.l. Milan, Italy 100% 100% Fun Fashion Spain SL Marbella, Spain 70% 70% Celine SA Paris, France 100% 100% Fun Fashion India Pte Ltd Mumbai, India 70% 70% Avenue M International SCA Paris, France 100% 100% Interservices & Trading SA Lugano, Switzerland 100% 100% Enilec Gestion SARL Paris, France 100% 100% Fendi Silk SA Lugano, Switzerland 51% 51% Celine Montaigne SA Paris, France 100% 100% Outshine Mexico S.r.l. Mexico City, Mexico 100% 100% Celine Monte Carlo SA Monte Carlo, Monaco 100% 100% Emilio Pucci S.r.l. Florence, Italy 100% 100% Celine Production S.r.l. Florence, Italy 100% 100% Emilio Pucci International BV Baarn, Netherlands 67% 67% Celine Suisse SA Geneva, Switzerland 100% 100% Emilio Pucci, Ltd New York, USA 100% 100% Celine UK Ltd London, United Kingdom 100% 100% Thomas Pink Holdings Ltd London, United Kingdom 100% 100% Celine Inc New York, USA (*) 100% 100% Thomas Pink Ltd London, United Kingdom 100% 100% Celine Hong Kong Ltd Hong Kong, China 99% 99% Thomas Pink BV Rotterdam, Netherlands 100% 100% Celine Commercial & Trading (Shanghai) Co Ltd Shanghai, China 100% 100% Thomas Pink Inc New York, USA (*) 100% 100% Celine (Singapour) Pte Ltd Singapore 100% 100% Thomas Pink Ireland Ltd Dublin, Ireland 100% 100% Celine Guam Inc Tumon, Guam 100% 100% Thomas Pink Belgium SA Brussels, Belgium 100% 100% Celine Korea Ltd Seoul, South Korea 100% 100% Thomas Pink France SAS Paris, France 100% 100% Céline Taiwan Ltd Taipei, Taiwan 100% 99% e-Luxury.com Inc San Francisco (California), USA 100% 100% CPC International Ltd Hong Kong, China 100% 100% Kami SA Montbazon, France 100% 100% PERFUMES AND COSMETICS Kenzo SA Paris, France 100% 100% Parfums Christian Dior SA Paris, France 100% 100% Kenzo Belgium SA Brussels, Belgium 100% 100% LVMH P&C Thailand Co Ltd Bangkok, Thailand 49% 49% Kenzo UK Ltd London, United Kingdom 100% 100% LVMH Parfums & Cosmétiques do Brasil Ltda Sao Paulo, Brazil 100% 100% Kenzo Homme UK Ltd London, United Kingdom 100% 100% France Argentina Cosmetics SA Buenos Aires, Argentina 100% 100% Kenzo Japan KK Tokyo, Japan 100% 100% LVMH P&C Shanghai Co Ltd Shanghai, China 100% 100% Givenchy SA Paris, France 100% 100% Parfums Christian Dior Finland Oy Helsinki, Finland 100% 100% Givenchy Corporation New York, USA 100% 100% LVMH P&C Inc New York, USA 100% 100% Givenchy Co Ltd Tokyo, Japan 100% 100% SNC du 33 avenue Hoche Paris, France 100% 100% Gentleman Givenchy Far East Ltd Hong Kong, China 100% 100% LVMH Fragrances & Cosmetics (Sinpagore) Pte Ltd Singapore 100% 100% Reference Document 2007 131 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

COMPANIES REGISTERED OFFICE PERCENTAGE OF COMPANIES REGISTERED OFFICE PERCENTAGE OF CONTROL INTEREST CONTROL INTEREST Parfums Christian Dior Orient Co Dubai, United Arab Emirates 60% 60% LBD Hong Kong Hong Kong, China 100% 100% Parfums Christian Dior Emirates Dubai, United Arab Emirates 51% 31% LBD Antilles SAS Ducos, Martinique, France 100% 100% Parfums Christian Dior (UK) Ltd London, United Kingdom 100% 100% BeneFit Cosmetics LLC San Francisco (California), USA 80% 80% Parfums Christian Dior BV Rotterdam, Netherlands 100% 100% BeneFit Cosmetics UK Ltd London, United Kingdom 100% 80% Iparkos BV Rotterdam, Netherlands 100% 100% BeneFit Cosmetics Korea Seoul, South Korea 100% 80% Parfums Christian Dior S.A.B. Brussels, Belgium 100% 100% BeneFit Cosmetics SAS Boulogne Billancourt, France 100% 80% Parfums Christian Dior (Ireland) Ltd Dublin, Ireland 100% 100% BeneFit Cosmetics Hong Kong Hong Kong, China 100% 80% Parfums Christian Dior Hellas SA Athens, Greece 100% 100% BeneFit Cosmetics Ireland Ltd Dublin, Ireland 100% 80% Parfums Christian Dior A.G. Zurich, Switzerland 100% 100% Fresh Inc Boston (Massachusetts), USA 80% 80% Christian Dior Perfumes LLC New York, USA 100% 100% LVMH Cosmetics Services KK Tokyo, Japan 100% 100% Parfums Christian Dior Canada Inc Montreal, Canada 100% 100% Parfums Luxe International SAS Boulogne Billancourt, France 100% 100% LVMH P&C de Mexico SA de CV Mexico, Mexico 100% 100% Parfums Christian Dior Japan K.K. Tokyo, Japan 100% 100% WATCHES AND JEWELRY Parfums Christian Dior (Singapore) Pte Ltd Singapore 100% 100% TAG Heuer International SA Luxembourg, Luxembourg 100% 100% Inalux SA Luxembourg, Luxembourg 100% 100% TAG Heuer SA La Chaux-de-Fonds, Switzerland 100% 100% LVMH P&C Asia Pacific Ltd Hong Kong, China 100% 100% LVMH Relojeria & Joyeria España SA Madrid, Spain 100% 100% Fa Hua Fragrance & Cosmetic Co Ltd Hong Kong, China 100% 100% LVMH Montres & Joaillerie France SA Paris, France 100% 100% LVMH P&C Shanghai Co, Ltd Shanghai, China 100% 100% LVMH Watch & Jewelry Italy Holding SpA Milan, Italy 100% 100% LVMH P&C Korea Ltd Seoul, South Korea 100% 100% LVMH Watch & Jewelry Central Europe GmbH Bad Homburg, Germany 100% 100% Parfums Christian Dior Hong Kong Ltd Hong Kong, China 100% 100% Timecrown Ltd Manchester, United Kingdom 100% 100% LVMH P&C Malaysia Sdn berhad Inc Kuala-Lumpur, Malaysia 100% 100% LVMH Watch & Jewelry UK Ltd Manchester, United Kingdom 100% 100% Fa Hua Hong Kong Co, Ltd Hong Kong, China 100% 100% Ebel Ltd Manchester, United Kingdom 100% 100% Pardior SA de CV Mexico, Mexico 100% 100% TAG Heuer Ltd Manchester, United Kingdom 100% 100% Parfums Christian Dior A/S Ltd Copenhagen, Denmark 100% 100% LVMH Watch & Jewelry USA (Inc) Springfield (New Jersey), USA 100% 100% LVMH Perfumes & Cosmetics Group Pty Ltd Sydney, Australia 100% 100% LVMH Watch & Jewelry Canada Ltd Toronto, Canada 100% 100% Parfums Christian Dior AS Ltd Hoevik, Norway 100% 100% LVMH Watch & Jewelry Far East Ltd Hong Kong, China 99% 99% Parfums Christian Dior AB Stockholm, Sweden 100% 100% LVMH Watch & Jewelry Singapore Pte Ltd Singapore 100% 100% Parfums Christian Dior (New Zealand) Ltd Auckland, New Zealand 100% 100% LVMH Watch & Jewelry Malaysia Sdn Bhd Kuala Lumpur, Malaysia 100% 100% Parfums Christian Dior GmbH Austria Vienna, Austria 100% 100% LVMH Watch & Jewelry Capital Pte Ltd Singapore 100% 100% Cosmetic of France Inc Miami (Florida), USA 100% 100% LVMH Watch & Jewelry Japan K.K. Tokyo, Japan 100% 100% GIE LVMH P&C Recherche Paris, France 100% 100% LVMH Watch & Jewelry Australia Pty Ltd Melbourne, Australia 100% 100% GIE Parfums et Cosmétiques Information Levallois Perret, France 100% 100% LVMH Watch & Jewelry Hong Kong Ltd Hong Kong, China 100% 100% Services - PCIS LVMH Watch & Jewelry Taiwan Ltd Taipei, Taiwan 100% 100% Perfumes Loewe SA Madrid, Spain 100% 100% Cortech SA Cornol, Switzerland 100% 100% Acqua Di Parma S.r.l. Milan, Italy 100% 100% LVMH Watch et Jewelry Carribean & Latin Coral Gables (Florida), USA 100% 100% Acqua Di Parma LLC New York, USA 100% 100% America Inc Guerlain SA Paris, France 100% 100% LVMH Watch & Jewelry India Pvt Ltd New Delhi, India 100% 100% LVMH Parfums & Kosmetik Deutschland GmbH Wiesbaden, Germany 100% 100% LVMH Watch & Jewelry China Shanghai, China 100% 100% Guerlain GesmbH Vienna, Austria 100% 100% Chaumet International SA Paris, France 100% 100% Cofra GesmbH Vienna, Austria 100% 100% Chaumet London Ltd London, United Kingdom 100% 100% Guerlain SA (Belgium) Fleurus, Belgium 100% 100% Chaumet Horlogerie SA Bienne, Switzerland 100% 100% Oy Guerlain AB Helsinki, Finland 100% 100% Chaumet Monte Carlo SAM Monte Carlo, Monaco 100% 100% Guerlain Ltd London, United Kingdom 100% 100% Chaumet Korea Chusik Hoesa Seoul, South Korea 51% 51% LVMH Perfumes e Cosmetica Lda Lisbon, Portugal 100% 100% Zenith International SA Le Locle, Switzerland 100% 100% Guerlain SA (Switzerland) Geneva, Switzerland 100% 100% Zenith Time Co Ltd Manchester, United Kingdom 100% 100% Guerlain Inc New York, USA 100% 100% LVMH Watch et Jewelry Italy SpA Milan, Italy 100% 100% Guerlain Canada Ltd Montreal, Canada 100% 100% Delano SA La Chaux-de-Fonds, Switzerland 100% 100% Guerlain De Mexico SA Mexico, Mexico 100% 100% Les Ateliers Horlogers LVMH SA La Chaux-de-Fonds, Switzerland 100% 100% Guerlain Asia Pacific Ltd (Hong Kong) Hong Kong, China 100% 100% Fred Paris SA Paris, France 100% 100% Guerlain KK Tokyo, Japan 100% 100% Joaillerie de Monaco SA Monte Carlo, Monaco 100% 100% Guerlain Oceania Australia Pty Ltd Melbourne, Australia 100% 100% Fred Inc Beverly Hills (California), USA (*) 100% 100% Make Up For Ever SA Paris, France 100% 100% Fred London Ltd London, United Kingdom 100% 100% Make Up For Ever UK Ltd London, United Kingdom 100% 100% Benedom SARL Paris, France 100% 100% Make Up For Ever LLC New York, USA (*) 100% 100% De Beers LV Ltd London, United Kingdom (1) 50% 50% Make Up For Ever Italy S.r.l. Milan, Italy 100% 100% Parfums Givenchy SA Levallois Perret, France 100% 100% SELECTIVE RETAILING Parfums Givenchy Ltd London, United Kingdom 100% 100% Sephora SA Boulogne Billancourt, France 100% 100% Parfums Givenchy GmbH Düsseldorf, Germany 100% 100% Sephora Luxembourg SARL Luxembourg, Luxembourg 100% 100% Parfums Givenchy LLC New York, USA (*) 100% 100% LVMH Iberia SL Madrid, Spain 100% 100% Parfums Givenchy Canada Ltd Toronto, Canada 100% 100% LVMH Italia SpA Milan, Italy 100% 100% Parfums Givenchy KK Tokyo, Japan 100% 100% Sephora Portugal Perfumaria Lda Lisbon, Portugal 100% 100% Parfums Givenchy WHD, Inc New York, USA (*) 100% 100% Sephora Poland Spzoo Warsaw, Poland 76% 76% Kenzo Parfums France SA Paris, France 100% 100% Sephora Deutschland GmbH Bad Homburg, Germany 100% 100% Kenzo Parfums NA LLC New York, USA (*) 100% 100% Clab S.r.l. Milan, Italy 100% 100% La Brosse et Dupont SAS Villepinte, France 100% 100% Sephora Marinopoulos SA Alimos, Greece 50% 50% La Brosse et Dupont Portugal SA S. Domingos de Rana, Portugal 100% 100% Beauty Shop Romania SA Bucharest, Romania 100% 50% Mitsie SAS Tarare, France 100% 100% Spring Time Cosmetics SA Athens, Greece 100% 50% LBD Iberica SA Barcelona, Spain 100% 100% Sephora S.R.O. Prague, Czech Republic 100% 100% LBD Ménage SAS Beauvais, France 100% 100% Sephora Monaco SAM Monaco 99% 99% LBD Belux SA Brussels, Belgium 100% 100% Sephora Patras Alimos, Greece 51% 25% SCI Masurel Tourcoing, France 100% 100% Sephora Cosmeticos España Madrid, Spain (1) 50% 50% SCI Sageda Orange, France 100% 100% S+ Boulogne Billancourt, France 100% 100% LBD Italia S.r.l. Stezzano, Italy 100% 100% Sephora Marinopoulos Cyprus Ltd Nicosia, Cyprus 100% 50% Etablissements Mancret Père & Fils SA Grenoble, France 100% 100% Sephora Slovensko S.R.O. Bratislava, Slovakia 100% 100% Inter-Vion Spolka Akeyjna SA Warsaw, Poland 51% 51% Sephora Unitim Kozmetik AS Istanbul, Turkey 60% 60% Europa Distribution SAS Saint Etienne, France 100% 100% Sephora Marinopoulos D.O.O. Zagreb, Croatia 100% 50% 132 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

COMPANIES REGISTERED OFFICE PERCENTAGE OF COMPANIES REGISTERED OFFICE PERCENTAGE OF CONTROL INTEREST CONTROL INTEREST Trion SA Alimos, Greece 100% 50% Tumon Entertainment LLC Tamuning, Guam 100% 100% Sephora Marinopoulos Cosmetics DOO Belgrade, Serbia 100% 50% Comete Guam Inc Tamuning, Guam 100% 100% Sephora Moyen Orient SA Fribourg, Switzerland 60% 60% Tumon Aquarium LLC Tamuning, Guam 97% 97% Sephora Middle East FZE Dubai, United Arab Emirates (4) (4) Comete Saipan Inc Saipan, Mariana Islands 100% 100% Sephora Emirates Dubai, United Arab Emirates (4) (4) Tumon Games LLC Tamuning, Guam 100% 100% Sephora Bahrain Manama, Bahrain (4) (4) Cruise Line Holdings Co Delaware, USA 100% 100% Sephora Qatar Doha, Qatar (4) (4) On Board Media, Inc Delaware, USA 100% 100% Sephora KSA Jeddah, Saudi Arabia (4) (4) Starboard Cruise Services, Inc Delaware, USA 100% 100% Sephora Oman Muscat, Oman (4) (4) Starboard Holdings Ltd Delaware, USA 100% 100% Sephora China Shanghai, China 81% 81% International Cruise Shops, Ltd Cayman Islands 100% 100% Sephora Holding Asia Shanghai, China 100% 100% Miami Airport Duty-Free Joint Venture Miami (Florida), USA 66% 66% Sephora (Beijing) Cosmetics Co. Ltd Beijing, China 81% 81% Fort Lauderdale Partnership Ft Lauderdale (Florida), USA 75% 75% Sephora USA, Inc San Francisco (California), USA (*) 100% 100% Vacation Media Ltd Kingston, Jamaica 100% 100% Sephora Beauty Canada, Inc San Francisco (California), USA 100% 100% STB S.r.l Florence, Italy 100% 100% Magasins de la Samaritaine SA Paris, France 55% 57% Parazull LLC Delaware, USA 100% 100% Le Bon Marché SA Paris, France 100% 100% SEGEP SNC Paris, France 99% 99% OTHER ACTIVITIES Franck & Fils SA Paris, France 100% 100% DI Group SA Paris, France 100% 100% DFS Holdings Ltd Hamilton, Bermuda 61% 61% DI Services SAS Paris, France 100% 100% DFS Australia Pty Ltd Sydney, Australia 100% 61% Imprimerie Desfossés SARL Paris, France 100% 100% Travel Retail Shops Pte Ltd Sydney, Australia (2) 45% 28% Atelier Desfossés Paris, France 100% 100% DFS European Logistics Ltd Hamilton, Bermuda 100% 61% Tribune Desfossés SAS Paris, France 100% 100% DFS Credit Systems Limited Hamilton, Bermuda 100% 61% Radio Classique SAS Paris, France 100% 100% DFS Group Ltd Delaware, USA 100% 61% Les Editions Classique Affaires SARL Paris, France 100% 100% DFS China Partners Ltd Hong Kong, China 100% 61% DI Régie SAS Paris, France 100% 100% DFS Macau Ltd Hong Kong, China 100% 61% SFPA SARL Paris, France 100% 100% DFS Hong Kong Ltd Hong Kong, China 100% 61% Investir Publications SAS Paris, France 100% 100% Hong Kong International Boutique Partners Hong Kong, China 50% 31% Investir Formation SARL Paris, France 100% 100% TRS Hong Kong Ltd Hong Kong, China (2) 45% 28% Compo Finance SARL Paris, France 100% 100% Preferred Products Limited Hong Kong, China 100% 61% SID Développement SAS Paris, France 100% 100% DFS Okinawa K.K. Okinawa, Japan 100% 61% SID Editions SAS Paris, France 100% 100% TRS Okinawa Okinawa, Japan (2) 45% 28% Ufipar SAS Boulogne Billancourt, France 100% 100% JAL/DFS Co., Ltd Chiba, Japan (2) 40% 24% L Capital Management SAS Paris, France 100% 100% DFS Korea Ltd Seoul, South Korea 100% 61% Sofidiv SAS Boulogne Billancourt, France 100% 100% DFS Seoul Ltd Seoul, South Korea 100% 61% GIE LVMH Services Boulogne Billancourt, France 100% 85% DFS Cotai Limitada Macao, China 100% 61% Moët Hennessy SNC Boulogne Billancourt, France 66% 66% DFS Sdn. Bhd. Kuala Lumpur, Malaysia 100% 61% LVMH Services Ltd London, United Kingdom 100% 100% Gateshire Marketing Sdn Bhd. Kuala Lumpur, Malaysia 100% 61% Moët Hennessy Investissements Boulogne Billancourt, France 100% 66% DFS Merchandising Ltd Dutch West Indies 100% 61% LVMH Fashion Group SA Paris, France 100% 100% DFS New Caledonia Sarl Noumea, New Caledonia 100% 61% Moët Hennessy International SAS Boulogne Billancourt, France 66% 66% DFS New Zealand Ltd Auckland, New Zealand 100% 61% Creare SA Luxembourg, Luxembourg 100% 86% TRS New Zealand Ltd Auckland, New Zealand (2) 45% 28% Creare Pte Ltd Singapore 100% 86% Commonwealth Investment Company, Inc Saipan, Mariana Islands 97% 59% Société Montaigne Jean Goujon SAS Paris, France 100% 100% DFS Saipan Ltd Saipan, Mariana Islands 100% 61% Delphine SAS Boulogne Billancourt, France 100% 100% Kinkaï Saipan L.P. Saipan, Mariana Islands 100% 61% LVMH Finance SA Boulogne Billancourt, France 100% 100% Saipan International Boutique Partners Saipan, Mariana Islands 50% 31% Primae SA Boulogne Billancourt, France 100% 100% DFS Palau Ltd Koror, Palau 100% 61% Eutrope SAS Boulogne Billancourt, France 100% 100% Difusi Information Technology & Development Shanghai, China 100% 61% Flavius Investissements SA Paris, France 100% 100% Co. Ltd LBD Holding SA Boulogne Billancourt, France 100% 100% DFS Information Technology (Shanghai) Shanghai, China 100% 61% LV Capital SA Paris, France 100% 100% Company Limited Micromania SAS Nice, France (2) 23% 23% Hainan DFS Retail Company Limited Hainan, China 100% 61% Moët Hennessy Inc New York, USA (*) 100% 66% DFS Galleria Taiwan Ltd Taipei, Taiwan 100% 61% One East 57th Street LLC New York, USA (*) 100% 100% DFS Taiwan Ltd Taipei, Taiwan 100% 61% LVMH Moët Hennessy Louis Vuitton Inc New York, USA (*) 100% 100% Tou You Duty Free Shop Co. Ltd Taipei, Taiwan 100% 61% 598 Madison Leasing Corp New York, USA (*) 100% 100% DFS Singapore (Pte) Ltd Singapore 100% 61% 1896 Corp New York, USA (*) 100% 100% DFS Trading Singapore (Pte) Ltd Singapore 100% 61% LVMH Participations BV Baarn, Netherlands 100% 100% DFS Venture Singapore (Pte) Ltd Singapore 100% 61% LVMH Moët Hennessy Louis Vuitton BV Baarn, Netherlands 100% 100% TRS Singapore Pte Ltd Singapore (2) 45% 28% Louis Vuitton Prada Holding BV Amsterdam, Netherlands 100% 100% Singapore International Boutique Partners Singapore 50% 31% Sofidiv UK Ltd London, United Kingdom 100% 100% DFS India Private Ltd Mumbai, India 100% 61% LVMH Moët Hennessy Louis Vuitton KK Tokyo, Japan 100% 100% DFS Vietnam (S) Pte Ltd Singapore 70% 43% Osaka Fudosan Company Ltd Tokyo, Japan 100% 100% New Asia Wave International (S) Pte Ltd Singapore 70% 43% LVMH Asia Pacific Ltd Hong Kong, China 100% 100% IPP Group (S) Pte Ltd Singapore 70% 43% LVMH Shanghai Management and Shanghai, China 100% 100% DFS Group L.P. Delaware, USA 61% 61% Consultancy Co, Ltd LAX Duty Free Joint Venture 2000 Los Angeles (California), USA 77% 47% Royal Hawaiian Insurance Company Ltd Hawaii, USA 100% 61% LVMH Moët Hennessy Louis Vuitton SA Paris, France Parent Company Hawaii International Boutique Partners Honolulu (Hawaii), USA 50% 31% JFK Terminal 4 Joint Venture 2001 New York, USA 80% 49% (*) The address given corresponds to the company’s administrative headquarters; DFS Guam L.P. Tamuring, Guam 61% 61% the corporate registered office is located in the state of Delaware. Guam International Boutique Partners Tamuring, Guam 50% 31% (1) Consolidated on a proportional basis. DFS Liquor Retailing Ltd Delaware, USA 61% 61% (2) Accounted for using the equity method. Twenty –Seven - Twenty Eight Corp. Delaware, USA 61% 61% (3) Joint venture companies with Diageo: only the Moët Hennessy activity is consolidated. (2) TRS Hawaii LLC Honolulu (Hawaii), USA 45% 28% (4) The Group’s percentages of control and interest are not disclosed , the results of these companies being consolidated on (2) TRS Saipan Saipan, Mariana Islands 45% 28% the basis of the Group’s contractual share in their business. TRS Guam Tumon, Guam (2) 45% 28%

Reference Document 2007 133 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH GROUP Consolidated financial statements

STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

To the Shareholders, In compliance with the assignment entrusted to us by your Annual General Meeting, we have audited the accompanying consolidated financial statements of LVMH Moët Hennessy-Louis Vuitton for the year ended December 31, 2007. The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit.

I. OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS We conducted our audit in accordance with the professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and results of the consolidated group in accordance with IFRS as adopted by the European Union.

II. JUSTIFICATION OF OUR ASSESSMENTS In accordance with the requirements of Article L. 823-9 of French Commercial Code (Code de Commerce) relating to the justification of our assessments, we bring to your attention the following matters: - we have verified that Note 1.10 to the consolidated financial statements provides appropriate disclosure on the accounting treatment of commitments to purchase minority interest securities as such treatment is not provided for by the IFRS framework as adopted by the European Union; - the brand and goodwill valuation has been tested under the method described in Note 1.12 to the consolidated financial statements. We have assessed the appropriateness of the methodology applied based on all estimates and reviewed the data and assumptions used by the Group to perform these valuations. These assessments were made in the context of the performance of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report.

III. SPECIFIC PROCEDURE In accordance with professional standards applicable in France, we have also verified the information given in the group management report. We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.

Neuilly-sur-Seine and Paris-La Défense, March 10, 2008 The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG Audit Thierry Benoit Alain Pons Jeanne Boillet Olivier Breillot

134 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH MOËT HENNESSY ◆ LOUIS VUITTON SA

EXECUTIVE AND SUPERVISORY BODIES - STATUTORY AUDITORS

Page

1. EXECUTIVE AND SUPERVISORY BODIES 137

2. CURRENT AND FORMER PRINCIPAL POSITIONS AND OFFICES OF MEMBERS OF THE BOARD OF DIRECTORS OVER THE PAST FIVE YEARS 138

3. STATUTORY AUDITORS 149

Reference Document 2007 135 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 136 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

1. EXECUTIVE AND SUPERVISORY BODIES

BOARD OF DIRECTORS EXECUTIVE COMMITTEE Bernard Arnault Bernard Arnault Chairman and Chief Executive Officer Chairman and Chief Executive Officer Antoine Bernheim 1 Antonio Belloni Vice-Chairman Group Managing Director Antonio Belloni Nicolas Bazire Group Managing Director Development and Acquisitions Antoine Arnault Ed Brennan Delphine Arnault-Gancia Travel retail Jean Arnault Yves Carcelle Fashion and Leather Goods Nicolas Bazire Chantal Gaemperle 1 Nicholas Clive Worms Human Resources 1 2 Charles de Croisset Pierre Godé Diego Della Valle 1 Advisor to the Chairman Albert Frère Jean-Jacques Guiony Finance Pierre Godé Patrick Houël Gilles Hennessy Advisor to the Chairman Patrick Houël Christophe Navarre Arnaud Lagardère 1 Wines and Spirits Lord Powell of Bayswater Philippe Pascal Watches and Jewelry Felix G. Rohatyn

1 Daniel Piette Hubert Védrine Investment funds ADVISORY BOARD MEMBER Bernard Rolley Kilian Hennessy 1 Operations Pierre-Yves Roussel PERFORMANCE AUDIT COMMITTEE Fashion 1 Antoine Bernheim Mark Weber Chairman Donna Karan, LVMH Inc Nicholas Clive Worms 1 Gilles Hennessy

NOMINATIONS AND COMPENSATION COMMITTEE GENERAL SECRETARY Antoine Bernheim 1 Marc-Antoine Jamet Chairman Albert Frère Kilian Hennessy 1

1 Independent Director. 2 Appointment presented for the approval of the Shareholders’ Meeting of May 15, 2008.

Reference Document 2007 137 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

2. CURRENT AND FORMER PRINCIPAL POSITIONS AND OFFICES OF MEMBERS OF THE BOARD OF DIRECTORS OVER THE PAST FIVE YEARS

2.1 Currently serving Directors

Mr. Bernard ARNAULT, Chairman and Chief Executive Officer Former positions and offices: Date of birth: March 5, 1949. Chairman and Chief Executive Officer of Montaigne Participations et Gestion SA, France. French. Date of first appointment: September 26, 1988. Director of Moët Hennessy Inc., United States. Legal Representative of Montaigne Participations et Gestion, Expiration of term: Annual Meeting convened to approve the Chairman of Gasa Développement SAS, France and Société financial statements for the 2009 fiscal year. Financière Saint-Nivard SAS, France. Mr. Bernard Arnault began his career as an engineer with Ferret- Savinel, where he became Senior Vice President for Construction Permanent Representative of Montaigne Participations et Gestion, in 1974, Chief Executive Officer in 1977 and finally Chairman Director of Financière Agache SA, France. and Chief Executive Officer in 1978. Mr. Antoine ARNAULT He remained with this company until 1984, when he became Chairman and Chief Executive Officer of Financière Agache SA Date of birth: June 4, 1977. and of Christian Dior SA. Shortly thereafter he spearheaded a reorganization of Financière Agache following a development French. strategy focusing on luxury brands. Christian Dior was to become Date of first appointment: May 11, 2006. the cornerstone of this new structure. Expiration of term: Annual Meeting convened to approve the In 1989, he became the leading shareholder of LVMH Moët financial statements for the 2008 fiscal year. Hennessy-Louis Vuitton, and thus created the world’s leading luxury products group. He assumed the position of Chairman and After graduating from HEC Montreal, in 2000 Mr. Antoine Chief Executive Officer in January 1989. Arnault created an internet company, Domainoo.com, which protects website domain names. Current positions and offices: Chairman and Chief Executive Officer of LVMH Moët Hennessy- In 2002, he sold his holding in Domainoo.com and joined Louis Louis Vuitton SA, France. Vuitton Malletier as marketing manager for the brand, where he took some significant initiatives, notably with respect to Chairman of the Board of Directors: advertising. - Christian Dior SA, France; In 2005, he was awarded an MBA from INSEAD. - Louis Vuitton pour la Création, Fondation d’Entreprise, France. In January 2006, he became Director of the provincial operations Chairman of Groupe Arnault SAS, France. of Louis Vuitton France. Director: In April 2007, he was named Director of Worldwide - Christian Dior Couture SA, France; Communications at Louis Vuitton. - Raspail Investissements SA, France; Current positions and offices: - Société Civile du Cheval Blanc, France; Director of LVMH Moët Hennessy-Louis Vuitton SA, France. - LVMH Moët Hennessy-Louis Vuitton (Japan) KK, Japan. Member of the Supervisory Board: Former positions and offices: - Lagardère SCA, France; Chairman of Domainoo.com. - Métropole Télévision “M6” SA, France. Chairman of the Board of Directors of Louis Vuitton Monaco.

138 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

Mrs Delphine ARNAULT-GANCIA Former positions and offices: Date of birth: April 4, 1975. Chairman and Chief Executive Officer of Omnium Lyonnais d’Études SAS, France. French. Chairman of Heliantis SAS, France. Date of first appointment: September 10, 2003. Managing Director and Director of Montaigne Participations et Expiration of term: Annual Meeting convened to approve the Gestion SA, France. financial statements for the 2009 fiscal year. Director: Mrs. Delphine Arnault- Gancia began her career with the international management consulting firm McKinsey & Co, where - Groupe George V SA, France; she worked as a consultant for two years. - Paris Provence Bâtiment SA, France; In 2000, she moved to designer John Galliano’s company, where she - Octis, Luxembourg. helped in development, thereby acquiring concrete experience of Legal Representative of Montaigne Participations et Gestion, the fashion industry. In 2001, she joined the Executive Committee Chairman of Société Financière Saint-Nivard SAS, France, and of Christian Dior where she currently serves as Deputy Managing Gasa Développement SAS, France. Director . She also is a member of Loewe’s Board of Directors, where she is Senior Vice President for Product Strategy. Mr. Antoine BERNHEIM, Vice-Chairman

Current positions and offices: Date of birth: September 4, 1924. Director: French. - LVMH Moët Hennessy-Louis Vuitton SA, France; Date of first appointment: September 22, 1988. - Loewe SA, Spain; Expiration of term: Annual Meeting convened to approve the - Emilio Pucci Srl, Italy. financial statements for the 2008 fiscal year. Mr. Antoine Bernheim was Managing Partner of Lazard Frères & Mr. Jean ARNAULT Cie from 1967 to 2000 and Partner of Lazard LLC from 2000 to Date of birth: October 23, 1919. 2005. He served as Chairman and Chief Executive Officer of La French. France SA from 1974 to 1997 and of Euromarché from 1981 to 1991. Chairman of Generali SpA between 1995 and 1999, he was Date of first appointment: September 22, 1988. reappointed to this post in 2002.

Expiration of term: Annual Meeting convened to approve the Current positions and offices: financial statements for the 2009 fiscal year. Chairman of Assicurazioni Generali SpA, Italy. Mr. Jean Arnault was Chairman of Ferret-Savinel until 1976. Chairman and then Managing Director of Groupe Arnault SAS Chief Executive Officer of Société Française Générale Immobilière since 1978, Chief Executive Officer of Montaigne Participations SA, France. et Gestion from 1976 to 2004, he also served as Chairman of the Vice-Chairman and Director: Supervisory Board of LVMH Moët Hennessy-Louis Vuitton from - Bolloré SA, France; 1988 to 1989. - LVMH Fashion Group SA, France; Current positions and offices: - LVMH Finance SA, France; Director: - LVMH Moët Hennessy-Louis Vuitton SA, France; - Belle Jardinière SA, France; - Alleanza Assicurazioni, Italy; - Christian Dior Couture SA, France; Vice-Chairman of the Supervisory Board of Intesa Sanpaolo, - Financière Agache SA, France; Italy. - LVMH Moët Hennessy-Louis Vuitton SA, France; Director: - Parfums Christian Dior SA, France. - Christian Dior SA, France; Managing Director of Groupe Arnault SAS, France. - Christian Dior Couture SA, France; Member of the Supervisory Committee of Montaigne Finance SAS, - Ciments Français SA, France; France. - Generali France SA, France;

Reference Document 2007 139 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

- AMB Generali Holding AG, Germany; Former positions and offices: - BSI: Banca della Svizzera Italiana, Switzerland; Chairman of the Board of Directors: - Generali España Holding SA, Spain; - Worms & Co. Ltd, United Kingdom; - Generali Holding Vienna AG, Austria; - Worms & Co Inc., United States. - Graafschap Holland, Netherlands; Chairman of the Supervisory Board of Worms & Cie, France. - LVMH Inc., United States. Chairman of Maison Worms SAS, France. Member of the Supervisory Board: Managing Partner of Maison Worms & Cie, France. - Eurazeo SA, France; Director: - Mediobanca, Italy. - Groupe Danone SA, France; Vice-Chairman and Member of the Supervisory Committee of - TF1 SA, France; Financière Jean Goujon SAS, France. - Unibail Holding SA, France; Former positions and offices: - Arjo Wiggins Appleton Plc, United Kingdom; Partner at Lazard LLC, United States. - Christie’s International Plc, United Kingdom; - Haussmann Holdings SA, Luxembourg. Managing Partner at Partena, France. Member of the Supervisory Board: Vice-Chairman and Director of Bolloré Investissement SA, France. - Permal SCA, France; Director: - Demachy Worms & Cie. - Financière Agache SA, France; Permanent Representative: - Rue Impériale, France; - Permal Group SA, Director of Ifabanque, France; - Banca Intesa SpA, Italy; - Worms 1848 SAS, Member of the Supervisory Board of - Mediobanca, Italy. Worms & Cie SA, France. Chairman of Permal Group SCA, France. Mr. Nicholas CLIVE WORMS Mr. Albert FRÈRE Date of birth: November 14, 1942. Date of birth: February 4, 1926. French. Belgian. Date of first appointment: September 22, 1988. Date of first appointment: May 29, 1997. Expiration of term: Annual Meeting convened to approve the Expiration of term: Annual Meeting convened to approve the financial statements for the 2009 fiscal year. financial statements for the 2008 fiscal year. Mr. Nicholas Clive Worms was General Partner and later Having begun his career within the family metal products business, Managing Partner of Maison Worms et Cie between 1970 and Mr. Albert Frère turned his focus to industrial acquisitions and 1996, Managing Partner and subsequently Chairman of the gained control, with his partners, of virtually all the steel industry Supervisory Board of Worms & Cie between 1991 and 2004. He around Charleroi. In 1981, he founded Pargesa Holding SA jointly also served as Chairman and Chief Executive Officer and then with several partners. The following year, this company acquired Managing Partner of Pechelbronn between 1976 and 1991. He is interests in Groupe Bruxelles Lambert. In 1987 he was appointed currently Chairman of Worms 1848 SAS. Chairman of its Board of Directors, a position he still holds today. He has also served as Chairman of the Board of Directors of Frère- Current positions and offices: Bourgeois SA since 1970. Chairman of the Board of Directors of Permal UK Ltd, Current positions and offices: United Kingdom. Chairman of the Board of Directors: Chairman de Worms 1848 SAS, France. - Société Civile du Cheval Blanc, France; Director: - Erbé SA, Belgium; - Financière de Services Maritimes SA, France; - Financière de la Sambre SA, Belgium; - LVMH Moët Hennessy-Louis Vuitton SA, France. - Fingen SA, Belgium;

140 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

- Frère-Bourgeois SA, Belgium; Current positions and offices: - Stichting Administratie Kantoor Frère-Bourgeois, Netherlands. Chairman and Chief Executive Officer: Chairman of the Board of Directors and Managing Director of - Financière Agache SA, France; Groupe Bruxelles Lambert SA, Belgium. - Raspail Investissements SA, France. Honorary Chairman of Banque Nationale de Belgique. Managing Director of Groupe Arnault SAS, France. Chairman of the Supervisory Board of Métropole Télévision Chairman of Financière Jean Goujon SAS, France. “M6” SA, France. Director: Vice-Chairman, Managing Director and Member of the Management Committee of Pargesa Holding SA, Switzerland. - Christian Dior SA, France; - Christian Dior Couture SA France; Vice-Chairman of the Board of Directors and Director of Suez SA, France. - LVMH Moët Hennessy-Louis Vuitton SA, France; - Société Civile du Cheval Blanc, France; Director: - SA du Château d’Yquem, France; - LVMH Moët Hennessy-Louis Vuitton SA, France; - LVMH Moët Hennessy-Louis Vuitton Inc., United States; - Raspail Investissements SA, France; - Sofidiv UK Limited, United Kingdom. - Gruppo Banca Leonardo, Italy. Manager of PMG SARL, France. Permanent Representative: - Belholding Belgium SA, Member of the Executive Committee Legal Representative of Financière Agache, Manager of Sevrilux of Groupe Arnault SAS, France; SNC, France. - Frère-Bourgeois SA, Manager of GBL Vervaltung SARL, Member of the Executive Committee of Sofidiv SAS, France. Luxembourg. Member of the Supervisory Committee of Semyrhamis SAS, France. Member of the International Committee of Assicurazioni Generali SpA, Italy. Former positions and offices:

Former positions and offices: Chairman and Chief Executive Officer of Financière Truffaut, France. Chairman of the Board of Directors of Petrofina, Belgium. Director and Managing Director of Le Bon Marché, Maison Director: Aristide Boucicaut, France. - Agesca Nederland NV, Netherlands; Director: - Coparex International SA, Belgium; - Le Bon Marché International, France; - Frère-Bourgeois Holding BV, Netherlands; - Montaigne Participations et Gestion, France; - Parjointco NV, Netherlands. Member of the International Advisory Board of Power Corporation - Christian Dior Inc., United States; of Canada, Canada. - Fendi SA, Luxembourg; - Louis Vuitton Japan KK, Japan; Mr. Pierre GODÉ, Advisor to the Chairman - LVMH Services Limited, United Kingdom. Date of birth: December 4, 1944. Permanent Representative: French. - Financière Agache, Director of Parfums Christian Dior, France; Date of first appointment: January 13, 1989. - LVMH Moët Hennessy-Louis Vuitton, Director of DI Group, France. Expiration of term: Annual Meeting convened to approve the Member of the Executive Board and Chief Executive Officer of financial statements for the 2008 fiscal year. LVMH Fashion Group, France. Mr. Pierre Godé began his career as a lawyer admitted to the Lille Member of the College of Directors of GIE LVMH Services, France. bar (avocat au barreau de Lille) and has taught at the Lille and Nice university law faculties. Member of the Supervisory Board of Métropole 1850, France. He has served as Advisor to the Chairman of Groupe Arnault Legal Representative of Financière Agache, Chairman of Aristide since 1986. Boucicaut, France.

Reference Document 2007 141 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

Member of the Supervisory Committee: Former positions and offices: - Montaigne Finance SAS, France; Chairman of the Board of Directors of LVMH Iberia SL, Spain. - Sèvres Investissements, France; Chairman and Chief Executive Officer of LVMH Finance SA, - Sifanor SAS, France. France. Manager: Chairman of the Board of Directors: - Lamourelle Paris, France; - Creare, Luxembourg; - Redeg SARL, France. - Delano SA, Switzerland. Vice-Chairman of the Supervisory Board of LVMH Fashion Mr. Patrick HOUËL, Advisor to the Chairman Group, France. Date of birth: July 25, 1942. Member of the Management Board of Moët Hennessy SNC, France. French. Director: Date of first appointment: May 13, 2004. - DI Group SA, France; Expiration of term: Annual Meeting convened to approve the - Krug, Vins fins de champagne SA, France; financial statements for the 2009 fiscal year. - LBD Holding SA, France; Mr. Patrick Houël worked at Crédit Lyonnais for seven years before - Le Jardin d’Acclimatation SA, France; being named as Chief Financial Officer of Jas Hennessy & Co in - Moët Hennessy International SA, France; 1978. In 1983, he became Deputy Chief Financial Officer of Moët - Parfrance SICAV, France; Hennessy Group and took over the post of Chief Financial Officer - Parfums Givenchy SA, France; of Moët Hennessy in 1985. In 1987, when Moët Hennessy merged - RG Monétaire International SICAV, France; with Louis Vuitton, he became Chief Financial Officer of the - DFS Holdings Limited, Bermuda; LVMH Group. He currently serves as Advisor to the Chairman. - DFS Guam L.P., Guam; Current positions and offices: - DFS Group Limited, Bermuda; Director: - DFS Group L.P., United States; - Le Bon Marché Maison Aristide Boucicaut SA, France; - LVMH Moët Hennessy-Louis Vuitton (Japan) KK, Japan; - LVMH Fashion Group SA, France; - LVMH Moët Hennessy-Louis Vuitton Inc., United States; - LVMH Services Ltd, United Kingdom; - LVMH Moët Hennessy-Louis Vuitton SA, France; - Moët Hennessy USA Inc., United States; - Marco Polo SA, France; - Sofidiv Inc., United States; - Objectif Small Caps Euro SICAV, France; - Tag Heuer International SA, Luxembourg; - SA du Château d’Yquem, France; - The Glenmorangie Company Ltd, United Kingdom; - Slivarente SICAV, France; - 1896 Corp, United States; - Wine & Co SA, France; - 598 Madison Leasing Corp, United States. - Sociedad Textil Lonia, Spain. Permanent Representative: Member of the Supervisory Board of Nyse-Euronext Inc., - LVMH Fashion Group, Director of Sephora SA, France; United States. - LVMH Finance, Director of LV Capital SA, France; Permanent Representative: - LVMH Moët Hennessy-Louis Vuitton, Director of Kenzo SA, France, and Louis Vuitton Malletier SA, France; - LVMH, Director of Guerlain SA and Parfums Christian Dior SA, France; - Ufipar, Director of D2I SA, France. - Ufipar, Director of Grands Magasins de la Samaritaine Maison Manager and Liquidator of SCI du 30 de l’avenue Hoche, France. Ernest Cognacq SA, France, and Member of the Supervisory Board of Berluti SA, France. Chairman: Permanent Representative of Société Montaigne Jean Goujon, - Delphine SAS, France; Director of Mongoual SA, France. - Eutrope SAS, France;

142 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

- Société Montaigne Jean Goujon SAS, France; Chairman: - Sofidiv SAS, France; - Association des Amis de Paris Jean Bouin C.A.S.G., France; - Ufipar SAS, France. - Association Lagardère Paris-Racing, France; Member of the Supervisory Board of SFMI Micromania SAS, - Association Lagardère Paris-Racing Ressources, France; France. - Fondation Jean-Luc Lagardère, France; Member of the College of Directors of LVMH Services, GIE, - Lagardère SAS, France; France. - Lagardère Active Broadband SAS, France; - Lagardère Capital et Management SAS, France. Advisory Board member of seloger.com, France. Permanent Representative of Lagardère Active Publicité, Director of Lagardère Active Radio International SA, France. Mr. Arnaud LAGARDÈRE Date of birth: March 18, 1961. Former positions and offices: Chairman and Chief Executive Officer of Lagardère Thématiques French. SA, France. Date of first appointment: May 15, 2003. Chairman of the Board of Directors of Lagardère Active North Expiration of term: Annual Meeting convened to approve the America Inc., United States. financial statements for the 2008 fiscal year. Chairman of the Supervisory Board of Hachette Filipacchi Medias Mr. Arnaud Lagardère served as Chairman of Grolier Inc from 1994 SAS, France. to 1998 and of Grolier Interactive Europe from 1994 to 2000. He Vice-Chairman of the Supervisory Board of Arjil & Compagnie has served as Chairman and Chief Executive Officer of Hachette SA, SCA, France. Chairman of EADS NV and EADS Participations BV and General Chairman: Partner and Manager of Lagardère SCA since 2003. - Association du Club des Entreprises Paris 2012, France; Current positions and offices: - Lagardère Active SAS, France; General Partner and Manager of Lagardère SCA, France. - Lagardère Images SAS, France. Chairman and Chief Executive Officer: Deputy Chairman of Lagardère Active Broadcast SA, Monaco. - Arjil Commanditée – ARCO SA, France; Director: - Hachette SA France. - Canalsatellite SA, France; Chairman of the Board of Directors: - Éditions P. Amaury SA, France; - European Aeronautic Defence and Space Company-EADS NV, - Fimalac SA, France; Netherlands; - France Télécom SA, France; - EADS Participations BV, Netherlands. - Hachette Filipacchi Médias SA, France; Chairman of the Supervisory Board: - Lagardère-Société SAS, France; - Société d’Agences et de Diffusion SA, France; - Lagardère Active SAS, France; - Lagardère Management Inc., United States. - Lagardère Sports SAS, France. Member of the Supervisory Board of Lagardère Sports SAS, Member of the Supervisory Board: France. - Le Monde SA, France; Director of Lagardère-Sociétés SAS, France. - Virgin Stores SA, France; Representative of Hachette SA to the Management Board of Sédi - Daimler AG, Germany. TV-Téva SNC, France. Director: Manager: - Hachette Livre SA, France; - Lagardère Active Publicité SNC, France; - Lagardère Services SA, France; - Lagardère Élevage SNC, France; - Lagardère Ressources SAS, France; - Nouvelles Messageries de la Presse Parisienne NMPP SARL, - LVMH Moët Hennessy-Louis Vuitton SA, France. France. Chairman and Director of Sogeade Gérance SAS, France. Co-Manager of I.S.-9 SARL, France.

Reference Document 2007 143 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

Lord POWELL of BAYSWATER - Jardine & Lloyd Thompson Group Plc, Bermuda; Date of birth: July 6, 1941. - Jardine Matheson Holdings Ltd, Bermuda; - Jardine Strategic Holdings Ltd, Bermuda; British. - National Westminster Bank Plc, United Kingdom; Date of first appointment: May 29, 1997. - Nelfi SA, Luxembourg; Expiration of term: Annual Meeting convened to approve the - Said Holdings Ltd, Bermuda. financial statements for the 2008 fiscal year. Lord Powell was Private Secretary and Advisor on Foreign Affairs Mr. Felix G. ROHATYN and Defense to Prime Ministers Margaret Thatcher and John Date of birth: May 29, 1928. Major from 1983 to 1991. He was Chairman of Sagitta Asset Management from 2001 to 2005. In 2006 he became Chairman American. of the Board of Directors of Capital Generation Partners. Date of first appointment: May 14, 2001. Current positions and offices: Expiration of term: Annual Meeting convened to approve the Chairman of the Board of Directors: financial statements for the 2009 fiscal year. - Capital Generation Partners, United Kingdom; Mr. Felix G. Rohatyn was United States Ambassador to France - LVMH Services Limited, United Kingdom; from 1997 to 2000. He previously was Managing Partner of Lazard - Magna Holdings, Bermuda. Frères & Co LLC. He also served on the Board of the New York Stock Exchange from 1968 to 1972. Director: - Financière Agache SA, France; Current positions and offices: - LVMH Moët Hennessy-Louis Vuitton SA, France; Chairman of LVMH Moët Hennessy-Louis Vuitton Inc., United - Caterpillar Inc., United States; States. - Mandarin Oriental International Ltd, Bermuda; Advisor to the Chairman and Chief Executive Officer Richard - Matheson & Co Ltd, United Kingdom; S. Fuld, Jr and Chairman of the Board of Directors of the Advisory Committees of International Lehman Brothers. - Northern Trust Global Services, United Kingdom; - Schindler Holding, Switzerland; Honorary Vice-Chairman of the Board of Directors of Carnegie Hall, United States. - Singapore Millennium Foundation Limited, Singapore; - Textron Corporation, United States; Member of the Supervisory Board: - Yell Group Ltd, United Kingdom. - Lagardère SCA, France; - Publicis Groupe SA, France. Former positions and offices: Director: Chairman of the Board of Directors of Sagitta Asset Management, United Kingdom. - LVMH Moët Hennessy-Louis Vuitton SA, France; Chairman of the Advisory Committee of Phillips, de Pury & - Center for Strategic and International Studies (CSIS), United Luxembourg, United Kingdom. States; - Advisor to the Council on Foreign Relations, United States. Director: - Montaigne Participations et Gestion SA, France; Former positions and offices: - Arjo Wiggins Appleton Plc, United Kingdom; Director: - British Mediterranean Airways, United Kingdom; - Rothschilds Continuation Holdings AG, France; - Dairy Farm International Holdings Ltd, Bermuda; - Suez, France; - Falgos Investments Ltd, United Kingdom; - Comcast Corporation, United States; - Hongkong Land Holdings Ltd, Bermuda; - Fiat SpA, Italy. - J. Rothschild Name Co Ltd, United Kingdom; United States Ambassador to France. - Jardine International Motor Holdings Ltd, Bermuda; Managing Partner of Lazard Frères LLC.

144 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

Mr. Hubert VÉDRINE Director: Date of birth: July 31, 1947. - Agache Développement SA, France; French. - DI Group SA, France; - Europatweb SA, France; Date of first appointment: May 13, 2004. - Financière Agache Private Equity SA, France; Expiration of term: Annual Meeting convened to approve the - Ipsos SA, France; financial statements for the 2009 fiscal year. - Les Echos SA, France; Mr. Hubert Védrine has held a number of French government - Louis Vuitton pour la Création, Fondation d’Entreprise, and administrative posts, notably as Foreign Relations Consultant France; at the Secretariat General of the Presidency from 1981 to 1986, Spokesperson for the Presidency from 1988 to 1991, Secretary - LVMH Fashion Group SA, France; General for the Presidency from 1991 to 1995 and Minister for - LVMH Moët Hennessy-Louis Vuitton SA, France; Foreign Affairs from 1997 to 2002. In early 2003, he founded - Tajan SA, France. a geopolitical management consulting firm, “Hubert Védrine Permanent Representative of Groupe Arnault SAS, Director of Conseil”. Financière Agache SA, France. Current positions and offices: Member of the Supervisory Committee: Managing Partner of Hubert Védrine (HV) Conseil SARL, - Carrefour SA, France; France. - Montaigne Finance SAS, France; Director of LVMH Moët Hennessy-Louis Vuitton SA, France. - Semyrhamis SAS, France. Former positions and offices: Former positions and offices: Minister for Foreign Affairs. Chairman of the Supervisory Board of LVMH Fashion Group SA, France. 2.2 Candidates for the office of Director Managing Director and Director of Montaigne Participations et Gestion SA, France. 2.2.1 Appointments to be renewed Mr. Nicolas BAZIRE, Senior Vice President for Development Director: and Acquisitions - Amec, France; Date of birth: July 13, 1957. - Marignan Investissements, France. Chairman: French. - Invry SAS, France; Date of first appointment: May 12, 1999. - La Tour du Pin SAS, France; Mr. Nicolas Bazire has worked as an Auditor and Conseiller - Société Financière Saint-Nivard SAS, France. Référendaire at the Cour des comptes (French government audit Permanent Representative: office). In 1993, he became Chief of Staff of Prime Minister Édouard Balladur. He subsequently was Managing Partner at - Eurofinweb NV, Director of Europatweb France SA, France; Rothschild & Cie Banque between 1995 and 1999, when he was - Sifanor, Director of Agache Développement, France. appointed as Chairman of its Board of Limited Partners (Conseil des Permanent Representative of Montaigne Participations et Gestion Commanditaires). Since 1999, he has served as Managing Director SA, Member of the Supervisory Committee of Paul Doumer of Groupe Arnault SAS. Automobiles SAS, France, Chairman of Gasa Développement SAS, Current positions and offices: France, and Société Financière Saint-Nivard SAS, France. Managing Director of Groupe Arnault SAS, France. Member of the Supervisory Committee: Member of the Supervisory Board of Rothschild et Cie Banque - Lyparis SAS, France; SCS, France. - Sifanor SAS, France.

Reference Document 2007 145 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

Mr. Antonio BELLONI, Group Managing Director Mr. Diego DELLA VALLE Date of birth: June 22, 1954. Date of birth: December 30, 1953. Italian. Italian. Date of first appointment: May 15, 2002. Date of first appointment: May 15, 2002. Mr. Antonio Belloni joined LVMH Group in June 2001, following Mr. Diego Della Valle joined the family’s shoe business in 1975. 22 years with Procter & Gamble, the last three of which as head He played a fundamental role in the definition of the company’s of the company’s European division. Previously he had served as development strategy and the creation of the brands that have Chairman and Chief Executive Officer for the global consumer shaped its image. He developed an innovative marketing plan, products group’s Italian operations. He began his career at Procter which has since served as a model to other companies around the & Gamble in Italy in 1978 and subsequently held a number of world in the luxury goods industry. Since October 2000, he has positions in Switzerland, Greece, Belgium and the United States. been Chairman and Managing Director of Tod’s SpA, which today is a world leader in the luxury accessories sector. Current positions and offices: Group Managing Director and Director of LVMH Moët Hennessy- Current positions and offices: Louis Vuitton SA, France. Chairman of the Board of Directors and Managing Director of Chairman of the Board of Directors of LVMH (Shanghai) Tod’s SpA, Italy. Management & Consultancy Co. Ltd, China. Chairman of the Board of Directors of Fondazione Della Valle Director: Onlus, Italy. - Louis Vuitton pour la Création, Fondation d’Entreprise, Honorary Chairman of ACF Fiorentina SpA, Italy. France; Vice-Chairman and Director of Marcolin SpA, Italy. - Givenchy SA, France; General Partner and Director of Diego Della Valle & C. SAPA, - Le Bon Marché, Maison Aristide Boucicaut SA, France; Italy. - De Beers Diamond Jewellers Limited, United Kingdom; Director: - De Beers Diamond Jewellers Trademark Ltd, United Kingdom; - Le Monde Europe SA, France; - DFS Group Limited, Bermuda; - DFS Holdings Limited, Bermuda; - LVMH Moët Hennessy-Louis Vuitton SA, France; - DFS Guam LP, Guam; - Assicurazioni Generali SpA, Italy; - Donna Karan International Inc., United States; - Compagnia Immobiliare Azionaria, Italy; - Emilio Pucci Srl, Italy; - DI.VI. Finanziaria SAPA, Italy; - Emilio Pucci International BV, Netherlands; - Ferrari SpA, Italy; - Fendi SA, Luxembourg; - RCS Mediagroup SpA, Italy. - Fendi Adele Srl, Italy; Sole Director of DDV partecipazioni SRL, Italy. - Fresh Inc., United States; Former positions and offices: - Thomas Pink Holdings Limited, United Kingdom. Chairman of the Board of Directors of Italiantouch Srl, Italy. Manager of Benefit Cosmetics LLC, United States. Director: Former positions and offices: - Acqua Di Parma, Italy; Managing Director of LVMH Moët Hennessy-Louis Vuitton Inc., - Banca Commerciale Italiana, Italy; United States. - Banca Nazionale del Lavoro SpA, Italy; Director: - Cassa di Risparmio di Fermo, Italy; - Chamarac Properties Inc., United States; - D.A.DV Family Holding SARL, Luxembourg; - DFS Group LP, United States; - Gimar Srl, Italy; - Fendi Srl, Italy; - Iri Spa, Italy; - Fendi Immobili Industriali Srl, Italy; - Maserati Spa, Italy; - Fendi Italia Srl, Italy. - Tod’s UK Ltd, United Kingdom.

146 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

Mr. Gilles HENNESSY Former positions and offices: Date of birth: May 14, 1949. Managing Director and Director of Jas Hennessy & Co, France. French. Director of Moët Hennessy International SA, France. Date of first appointment: June 6, 1990. Manager: Mr. Gilles Hennessy joined Jas Hennessy & Co in 1971 as head of - EURL Richemont, France; marketing and sales and participated in Hennessy’s expansion into - Moët Hennessy Deutschland GmbH, Germany. the Japanese market in 1977, followed by the cognac producer’s Member of the Management Board of Moët Hennessy SNC, introduction into China, South Korea and Vietnam. He has served France. as Vice Chairman of Moët Hennessy since September 1, 2002. 2.2.2 New appointment Current positions and offices: Mr. Charles de CROISSET Chairman of the Board of Directors: Date of birth: September 28, 1943. - Jas Hennessy & Co Ltd, Ireland; French. - Moët Hennessy Danmark A/S, Denmark. Director: Mr. Charles de Croisset entered the Inspection des Finances in 1968. After a career in the administration, he joined Crédit - France Champagne SA, France; Commercial de France (CCF) in 1980 as Corporate Secretary before - LVMH Moët Hennessy-Louis Vuitton SA, France; being appointed Deputy Chief Executive and then Chief Executive. - MHD Moët Hennessy Diageo SAS, France; In 1993, he was named Chairman and Chief Executive Officer - Moët Hennessy Investissements SA, France; of CCF, then as an Executive Director of HSBC Holdings Plc in - Millennium Import LLC, United States; 2000. In March 2004, he joined Goldman Sachs Europe as its Vice Chairman and was named as International Advisor to - Millennium Brands Limited, Ireland; Goldman Sachs International in 2006. - Innovacion en Marcas de Prestigio SA de CV, Mexico; - Moët Hennessy Belux SA, Belgium; Current positions and offices: - Moët Hennessy UK Ltd, United Kingdom; Director: - Moët Hennessy de Mexico SA, Mexico; - Bouygues SA, France; - Moët Hennessy Asia Pacific Pte, Singapore; - Renault SA, France; - Moët Hennessy Shanghai Limited, China; - Thalès SA, France; - Moët Hennessy USA Inc., United States; - Thalès Holdings Plc, United Kingdom. - The Glenmorangie Company Ltd, United Kingdom. Member of the Supervisory Board of Euler Hermès SA, France. Member of the Supervisory Board of Schieffelin & Somerset, Member of the Advisory Board of Galeries Lafayette SA, France. United States. Chairman of Fondation du Patrimoine, France. Permanent Representative of Jas Hennessy & Co, Member of the Board of Limited Partners of Moët & Chandon SCS, France. Former positions and offices: Chairman and Chief Executive Officer of CCF, France. Member of the Board of Limited Partners: - Jas Hennessy & Co SCS, France; Executive Director of HSBC Holdings Plc, United Kingdom. - Veuve Clicquot Ponsardin SCS, France. Director: Member of the Executive Committee of Moët Hennessy Do Brasil, - HSBC Bank Plc, United Kingdom; Brazil. - HSBC Guyerzeller Bank AG, Germany; - HSBC Private Holding SA, Switzerland; - HSBC / CCF Asset Management Group, France.

Reference Document 2007 147 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

2.3 Advisory Board member Mr. Kilian HENNESSY Date of birth: February 19, 1907 French. Date of first appointment: September 16, 1971. Expiration of term: Annual Meeting convened to approve the financial statements for the 2009 fiscal year. Mr. Kilian Hennessy began his career in a Parisian bank. He then joined Jas Hennessy & Co as Manager. He became Chairman of the Board of this company in 1969 and served in this capacity until 1975. He also served as Chairman and Chief Executive Officer of Moët Hennessy from 1972 to 1976.

Current positions and offices: Honorary Chairman of the Board of Partners of Jas Hennessy & Co SCS, France. Advisory Board member of LVMH Moët Hennessy-Louis Vuitton SA, France. Director of Parfums Christian Dior SA, France.

148 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Executive and supervisory bodies - statutory auditors

3. STATUTORY AUDITORS

Statutory Auditors

Start date Current term of first term Date appointed End of term

• ERNST & YOUNG Audit Tour Ernst & Young, Faubourg de l’Arche Annual Meeting convened to June 6, 1998 May 13, 2004 approve the financial statements 92037 Paris La Défense for the 2009 fiscal year Represented by Jeanne BOILLET and Olivier BREILLOT

• DELOITTE & ASSOCIÉS Annual Meeting convened to 185, avenue Charles de Gaulle May 13, 2004 May 13, 2004 approve the financial statements 92524 Neuilly sur Seine Cedex for the 2009 fiscal year Represented by Thierry BENOIT and Alain PONS

Alternate Statutory Auditors

• Mr. Denis GRISON Annual Meeting convened to 61, rue Henri Regnault June 6, 1986 May 13, 2004 approve the financial statements 92075 Paris La Défense for the 2009 fiscal year

• Mr. Dominique THOUVENIN Annual Meeting convened to Tour Ernst & Young, Faubourg de l’Arche June 9, 1986 May 13, 2004 approve the financial statements 92037 Paris La Défense for the 2009 fiscal year

Fees paid in 2007

(in thousands of euros, excluding VAT) ERNST & YOUNG Audit DELOITTE & ASSOCIÉS

2007 2006 2007 2006

Amount % Amount % Amount % Amount %

Audit Statutory audit, certification, audit of the individual company and consolidated financial statements: - LVMH Moët Hennessy-Louis Vuitton SA 1,633 15 1,652 15 921 14 1,150 17 - Fully-consolidated subsidiaries 7,854 71 7,753 71 5,179 78 4,936 74 Other services relating directly to the statutory audit assignment: - LVMH Moët Hennessy-Louis Vuitton SA - - - - 38--- - Fully-consolidated subsidiaries 344 3 418 4 176 3 178 3 9,831 89 9,823 90 6,314 95 6,264 94 Other services provided by the firms to fully-consolidated subsidiaries - Legal, tax, employee-related 1,220 11 1,017 9 316 5 245 4 - Other 17 - 62 1 30 - 122 2 1,237 11 1,079 10 346 5 367 6

Total 11,068 100 10,902 100 6,660 100 6,631 100

Reference Document 2007 149 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 150 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH MOËT HENNESSY ◆ LOUIS VUITTON SA

CORPORATE GOVERNANCE

Page

1. GENERAL ORGANIZATION 152

2. CHARTER OF THE BOARD OF DIRECTORS 153

3. INTERNAL RULES OF THE PERFORMANCE AUDIT COMMITTEE 155

4. INTERNAL RULES OF THE NOMINATIONS AND COMPENSATION COMMITTEE 156

5. BYLAWS 157

Reference Document 2007 151 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

CORPORATE GOVERNANCE

1. GENERAL ORGANIZATION

The objectives of the Board of Directors, the strategic body of annual and half-yearly financial statements and also reviewed the LVMH, are to ensure the sustainable development of the value of the Group’s underlying strategy, the budget, the implementation of company, to adopt the major strategies that guide its management, share subscription option plans and bonus share plans, and the to verify the fair and accurate presentation of information about authorization of guarantees issued in favor of third parties as well the company, and to protect its corporate assets. as various related party agreements. As part of its mission, the Board of Directors supports the priority LVMH paid a total of 1,125,000 euros in Directors’ fees to the objective of LVMH management, which is, as it always has been, members of its Board of Directors. These fees were distributed to ensure the continuous growth of the Group and a steady increase among the Directors and A dvisors in accordance with allocation in value for its shareholders. rules defined by the Board of Directors that take into account the duties performed on the Board and in the Committees. The Board of Directors has adopted a Charter that spells out the membership, mandates, operations and responsibilities of the Board of Directors. Executive Management The Board of Directors has two Committees, the membership, role The Chairman of the Board of Directors also serves as Chief and mandates of which are defined by internal procedural rules. Executive Officer of the company. The Chief Executive Officer’s powers are not limited in any way. The Board of Directors’ Charter and the rules of the Committees are provided to every candidate for the position of Director, and to In agreement with the Chairman and Chief Executive Officer, the the permanent representative of any legal entity, before he assumes Board of Directors has appointed a Managing Director who has his duties. the same powers as the Chief Executive Officer. Pursuant to the provisions of the Board of Directors’ Charter, Directors must bring to the attention of their Chairman any Performance Audit Committee instance, even potential, of a conflict of interests between their The main tasks of the Performance Audit Committee are to ensure duties and responsibilities to the company and their private that the Company and the Group’s accounting policies comply interests and/or other duties and responsibilities. They must also with generally accepted accounting principles , to review the provide him with details of any conviction in relation to fraudulent individual company and consolidated financial statements before offenses, any official public incrimination and/or sanctions, any they are submitted to the Board of Directors, and to ensure the disqualifications from acting as a member of an administrative, effective implementation of the Group’s internal controls. management or supervisory body imposed by a court as well as of any bankruptcy, receivership or liquidation proceedings to which It is currently made up of three Directors, two of whom are independent. Its members and Chairman are appointed by the they have been a party. No information was communicated to the Board of Directors. Chairman with respect to this obligation. The Performance Audit Committee met four times in 2007. One The company complies with all legal and regulatory provisions of the meetings was attended by all members, while the other three relating to corporate governance currently in force in France. were attended by the Chairman and by one of the Committee’s two other members, as well as by the Statutory Auditors, Director Board of Directors of Operations, Chief Financial Officer, Chief Controller, Internal Audit Director, Accounting Director, Legal Director, and The Board of Directors has 18 members, six of whom are depending on the issues discussed, the Financing Director, the appointed from among independent persons with no interests in Treasurer, the Tax Director and an Advisor to the Chairman. the Company. In addition to reviewing the parent company and consolidated Members of the Board of Directors must personally own at least financial statements, the Committee’s work included examining 500 LVMH shares. the results of Internal Audit’s missions, the Group’s currency The Board of Directors met four times in 2007, with an average hedging policy, as well as all legal matters, in particular any attendance rate of 84%. The Board of Directors approved the ongo ing litigation.

152 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

Nominations and Compensation Committee 2. CHARTER OF THE BOARD OF DIRECTORS The responsibilities of the Nominations and Compensation Committee are to issue: The Board of Directors is the policy-making body of LVMH. - recommendations on the distribution of Directors’ fees paid Expert and responsible members, clear and fair decisions, and by the company, as well as compensation, benefits in kind and effective and secure controls are the ethical principles that govern share subscription and purchase options granted to the Chairman the Board. of the Board of Directors, the Chief Executive Officer and the The priority objectives of the LVMH Board of Directors are to Managing Director(s) of the company; increase the value of the company, determine the broad management - opinions on candidates for the positions of Director, Advisor to strategies, verify the fair and accurate presentation of information the Board or membership on the Executive Committee of the about the company, and protect its assets. Group or the general management of its principal subsidiaries, on The duty of the LVMH Board of Directors is to protect the rights the compensation and benefits in kind granted to the Directors of each and every shareholder and ensure that they fulfill all their and Advisors of the company by the company or its subsidiaries, duties. and on fixed or variable, immediate or deferred compensation and incentive plans for senior executives of the Group. Each of these factors contributes to the transparency legitimately The Committee has three members, two of whom are independent. required of a company by law, the trust demanded by the public, Its members and its Chairman are appointed by the Board of and the performance demanded by the market. Directors. Thus, because it guarantees the permanent and overall growth of The Committee met twice during the 2007 fiscal year, with all a unique combination of businesses and brands, combining the members in attendance. It issued proposals on compensation and tradition and innovation which have created the company’s sound the allocation of share subscription options to the Chief Executive position, its reputation and vitality, the Board of Directors can Officer and Group Managing Director and gave its opinion on make a commitment to supervising the present while laying the compensation, share subscription options and benefits in kind foundations for the future. given by the Company or its subsidiaries to certain Directors. 2.1 Structure of the Board of Directors Advisory Board The Board of Directors shall have a maximum of 18 members, The Shareholders’ Meeting may, on the recommendation of the four of whom are appointed from among prominent independent Board of Directors, appoint a maximum of nine Advisors. persons with no interests in the company. The Advisors are drawn from the shareholders based on individual The number of Directors or permanent representatives of legal merit, and form an Advisory Board. entities from outside companies, in which the Chairman of the LVMH Board of Directors or any LVMH Director serving as They are appointed for a three-year term that ends immediately LVMH Chief Executive Officer or Managing Director holds an after the Ordinary Shareholders’ Meeting convened to approve office, shall be limited to four. the financial statements for the previous fiscal year, which is held during the year in which an Advisor’s term expires. 2.2 Mission of the Board of Directors Advisors are invited to attend Board of Directors’ meetings and participate in the deliberations in an advisory capacity; their The mission of the Board of Directors is to: absence does not affect the validity of these proceedings. - ensure that the company’s interests and assets are protected; - select the company’s management structure; Compensation Policy - appoint the Chairman of the Board of Directors, Chief Executive Officer and Managing Directors; Part of the compensation paid to members of the Executive Committee and key operations personnel is based on the generation - control the company’s management; of cash, operating profit, and the return on capital employed for - approve the company’s annual and interim financial statements; the business groups and companies headed by the respective - verify the quality of the information about the company provided executives, as well as on their individual performance. The variable to shareholders; portion generally represents between one-third and one-half of - disseminate the collective values that guide the company and their compensation. its employees and that govern relationships with consumers and with partners and suppliers, by adopting a charter of ethics;

Reference Document 2007 153 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

- promote a policy of economic development consistent with a The Directors agree to: social and citizenship policy based on concepts that include - warn the Chairman of the Board of Directors of any instance, respect for human beings and the preservation of the environment even potential, of a conflict of interest between their duties and in which it operates. responsibilities to the company and their private interests and/or other duties and responsibilities; 2.3 Operations of the Board of Directors - abstain from voting on any issue that concerns them directly The Board of Directors shall hold at least four meetings a year. or indirectly; - inform the Chairman of the Board of Directors of any operation Any individual who accepts the position of Director or permanent or agreement entered into with any LVMH Group company to representative of a legal entity appointed as Director of the which they are a party; company shall agree to attend Board of Directors’ and Shareholders’ Meetings regularly. - provide details to the Chairman of the Board of Directors of any conviction in relation to fraudulent offenses, any official On the recommendation of the Board’s Nominations and public incrimination and/or sanctions, any disqualifications Compensation Committee, repeated unjustified absenteeism from acting as a member of an administrative, management or by a Director may cause the Board of Directors to reconsider his supervisory body imposed by a court as well as of any bankruptcy, appointment. receivership or liquidation proceedings to which they have been So that members can fully perform their duties, the Chairman of a party. the Board of Directors, the Directors holding the positions of Chief The Chairman of the Board of Directors shall apprise the Audit Executive Officer or Managing Director, and the other Directors must and Performance Committee upon receiving any information of report to the Board of Directors any and all significant information this type. they need to perform their duties as members of the Board. Decisions by the Board of Directors shall be made by simple 2.5 Compensation majority vote and are adopted as a board. The Shareholders’ Meeting shall set the total amount of Directors’ If they deem necessary, the independent Directors may meet fees to be paid to the members of the Board of Directors. without the other members of the Board of Directors. This amount shall be distributed among all members of the Board For special or important issues, the Board of Directors may appoint of Directors and the advisors, if any, on the recommendation of several Directors to form one or more committees. the members of the Directors’ Nominations and Compensation Committee. Each member of the Board of Directors shall act in the interests and on behalf of all shareholders. The Directors’ Nominations and Compensation Committee can recommend that all or part of the Directors’ fees be allocated based 2.4 Responsibilities on the attendance rate of the members at the meetings of the Board of Directors. The members of the Board of Directors shall be required to Exceptional compensation may be paid to some Directors for familiarize themselves with the general and specific obligations special assignments and on the basis of the leadership role they of their office, and with all applicable laws and regulations. assume on the various committees of the Board of Directors. The The members of the Board of Directors shall be required to respect amount shall be determined by the Board of Directors and reported the confidentiality of any information of which they may become to the company’s Statutory Auditors. aware in the course of their duties concerning the company or the Group, until such information is made public by the company. 2.6 Scope of application The members of the Board of Directors agree not to trade in the This Charter shall apply to all members of the Board of Directors company’s shares, either directly or indirectly, for their own and the Advisory Board. It must be given to each candidate for account or on behalf of any third parties, based on information the position of Director and to each permanent representative of disclosed to them in the course of their duties that is not known a legal entity before they take office. to the public.

154 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

3. INTERNAL RULES OF THE PERFORMANCE The Committee may also make recommendations to the AUDIT COMMITTEE management on general priorities and guidelines for Internal Audit.

3.1 Structure of the Committee 3.3 Operating procedures of the Committee The Performance Audit Committee (hereinafter “the Committee”) A Director’s agreement to serve on the Committee shall imply shall be made up of at least three Directors, the majority of whom that he will devote the necessary time and attention to his duties shall be independent Directors. Its members shall be appointed on the Committee. by the Board of Directors. The Committee shall meet at least twice a year, without the The Board of Directors shall appoint a Chairman of the Committee Chairman of the Board of Directors or any Directors serving as from among its members. Chief Executive Officer or Managing Director, before the Board of Directors’ meetings in which the agenda includes a review of Neither the Chairman of the Board of Directors nor any Director the annual and interim parent company and consolidated financial performing the duties of Chief Executive Officer or Managing statements. Director of LVMH may be a member of the Committee. If necessary, the Committee may be required to hold special A Director may not be appointed as a member of the Committee meetings, when an event occurs that may have a significant effect if the Chairman of the Board of Directors or a Director serving as Chief Executive Officer or Managing Director of LVMH is already on the parent company or consolidated financial statements. a member of a corresponding committee in the company in which Any document submitted to the Committee in connection with the first Director serves as a company officer. its responsibilities shall be considered confidential as long as it has not been made public by the company. 3.2 Role of the Committee The proceedings of the Committee are confidential and shall not The missions of the Committee are to: be discussed outside the Board of Directors. - verify the relevance and permanence of the accounting policies Decisions of the Committee shall be made by simple majority vote and principles adopted by the company and the transparent and shall be deemed to have been reached as a board. application of such policies and principles; The proceedings of each Committee meeting shall be recorded in - verify the existence, pertinence, and application of internal minutes of the meeting. procedures in this area; - review the parent company and consolidated financial statements, including off-balance sheet items, before they are submitted to 3.4 Prerogatives of the Committee the Board of Directors; The Committee shall report on its work to the Board of Directors. - analyze changes in consolidation, debt, and foreign exchange or It shall submit to the Board its findings, recommendations and interest rate hedging; suggestions. - review the findings and recommendations of the external The Committee may request any and all accounting, legal or financial auditors; documents it deems necessary to carry out its responsibilities. - be aware of major agreements entered into by any Group companies and any agreements involving one or more Group At its request, and without the Chairman of the Board, the companies with one or more third-party companies in which a Chief Executive Officer or any Managing Director of LVMH Director of the LVMH Group company is also a senior executive being present, the Committee may interview the executives and or principal shareholder; managers in the company responsible for preparing the financial - assess any instances of conflict of interest that may affect a Director statements and for conducting the internal audit, as well as the and recommend suitable measures to prevent or correct them; Statutory Auditors. - verify the quality of the information provided to shareholders. The Chairman of the Board of Directors or the Directors serving as 3.5 Compensation of Committee members Chief Executive Officer and Managing Director may consult the The Committee members and its Chairman may receive a special Committee to seek an opinion on the appointment or renewal of Director’s fee, the amount of which shall be determined by the the Statutory Auditors and other external auditors. Board of Directors and charged to the total financial package The Committee shall issue an opinion on the Statutory Auditors’ fees. allocated by the Shareholders’ Meeting.

Reference Document 2007 155 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

4. INTERNAL RULES OF THE NOMINATIONS AND The Committee shall prepare a statement summarizing the COMPENSATION COMMITTEE Directors’ fees actually paid to each Director. The Committee shall prepare a draft report every year for the 4.1 Structure of the Committee Shareholders’ Meeting, which it shall submit to the Board of Directors, on the compensation of company officers and any stock The Board’s Nominations and Compensation Committee (hereinafter options granted or exercised by said officers in the previous year. “the Committee”) shall be made up of at least three Directors and/ The report shall also list the ten employees of the company that or A dvisors. The majority of its members shall be independent. received and exercised the most options. Its members shall be appointed by the Board of Directors. Changes in compensation are based on performance and changes The Board of Directors shall appoint a Chairman of the Committee in the intrinsic value of the company. from among its members. Neither the Chairman of the Board of Directors, nor any Director 4.3 Operating procedures of the Committee serving as Chief Executive Officer or Managing Director of LVMH, A Director’s agreement to serve on the Committee implies that or who are compensated by any LVMH subsidiary, may be a he will devote the necessary time and energy to his duties on the member of the Committee. Committee. A Director may not be appointed as a member of the Committee, The Committee shall meet whenever necessary, either at the if the Chairman of the Board of Directors or a Director serving as initiative of the Chairman of the Board of Directors, or the Chief Executive Officer or Managing Director of LVMH is already Director serving as Chief Executive Officer, or of two Committee a member of a corresponding committee in the company in which members. the first Director serves as a company officer. The proceedings of the Committee are confidential and shall not 4.2 Role of the Committee be discussed outside the Board of Directors. Decisions by the Committee shall be made by simple majority vote After conferring with the Chairman of the Board of Directors and shall be deemed to have been reached as a board. and undertaking its own review, the Committee is responsible for issuing opinions on applications for the positions of Director and Advisor, making certain that the company’s Board of Directors 4.4 Prerogatives of the Committee includes prominent independent persons outside the company. The Committee shall report on its work to the Board of Directors. The Committee’s opinion may also be sought by the Chairman It shall submit to the Board its findings, recommendations and of the Board of Directors or by any Directors serving as Chief suggestions. Executive Officer or Managing Director, on potential members Members of the Committee may request any and all available of the group’s Executive Committee or candidates for senior information that they deem necessary for the purposes of carrying management positions at the Group’s major subsidiaries. out their responsibilities. After review, the Committee shall make recommendations on the Any unfavorable opinion issued by the Committee on any proposal distribution of Directors’ fees paid by the company, and on the must be substantiated. compensation, benefits in kind and share purchase and subscription options granted to the company’s Chairman of the Board of Directors, Chief Executive Officer and Managing Director(s). 4.5 Compensation of Committee members The Committee shall issue an opinion on the compensation and The members and Chairman of the Committee may receive a benefits in kind granted to the company’s Directors and advisors special Director’s fee, the amount of which shall be determined by the G roup or its subsidiaries, and on the fixed or variable, by the Board of Directors and charged to the total financial package immediate or deferred compensation and incentive plans for the allocated by the Shareholders’ Meeting. Group’s senior executives. The Committee shall draft and propose to the Board of Directors a biographical note on each Director for publication in the Annual Report.

156 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

5. BYLAWS Article 4 - Registered office The registered office of the company is at: Paris (8e) – 22, avenue Article 1 - Legal form Montaigne. The company, which was formed on April 19, 1962 by way of It may be transferred to any other place within the same district transformation of a “Société à responsabilité limitée” into a “Société (“département”) or any adjacent district pursuant to a decision of anonyme”, is governed by the provisions of the French Commercial the Board of Directors subject to the approval of said decision by Code as well as by the present Bylaws. the next Ordinary Shareholders’ Meeting, and to any other place pursuant to a resolution of the Extraordinary Shareholders’ Meeting. Article 2 - Corporate purpose Article 5 - Duration 1. Any taking of interests, through a direct or indirect equity investment, a contribution, merger, spin-off, or joint venture The company, which came into existence on January 1, 1923, shall with any company or group existing or to be formed, operating end on December 31, 2021, except in the event of early dissolution any commercial, industrial, agricultural, personal property, real or extension as provided by these Bylaws. estate or financial operations, and among others: - trade in champagne and other wines, cognac and other spirits Article 6 - Capital and, more generally, any food or beverage product; 1. The share capital of the company is one hundred and forty six - trade in all pharmaceutical products, perfumes and cosmetics million nine hundred and eighty one thousand two hundred and and, more generally, products related to hygiene, beauty twenty three (146,981,223) euros, divided into four hundred and skincare; and eighty nine million nine hundred and thirty seven thousand - the manufacture, sale and promotion of travel articles, luggage, four hundred and ten (489,937,410) fully paid-up shares of a bags, leather goods, clothing articles, accessories, as well as nominal value of 0.30 euro each. any high quality and branded articles or products; 287,232 shares of FRF 50 were issued further to the contribution - the operation of vineyards, horticultural and arboricultural in kind, valued at FRF 34,676,410, completed upon the merger estates, as well as the development of any related with Champagne Mercier. biotechnological process; 772,877 shares of FRF 50 were issued further to the contribution - the operation of any real estate; by the shareholders of Jas Hennessy & Co. of 772,877 shares of - the development of any trademark, signature, model, said company, valued at FRF 407,306,179. design and, more generally, any industrial, literary or artistic property right. 2,989,110 shares of FRF 50 were issued further to the contribution in kind, valued at FRF 1,670,164,511, completed 2. More generally, to undertake directly any commercial, industrial, upon the merger with Louis Vuitton. agricultural, viticultural operations, or any operation relating to personal or real property, movable or immovable property or 1,343,150 shares were issued further to the contribution made financial, management or service operation in any of the fields by BM Holding, of 1,961,048 shares of Le Bon Marché, Maison of activities described in paragraph 1 above. Aristide Boucicaut, valued at FRF 1,700,000,000. 2. The share capital may be increased by a resolution of the Article 3 - Corporate name Extraordinary Shareholders’ Meeting. However, when the The name of the company is: increase of the capital is completed by way of capitalization of reserves, profits or issue premium, the Shareholders’ Meeting LVMH MOËT HENNESSY - LOUIS VUITTON shall vote subject to the quorum and majority conditions of the All deeds and documents originating from the company Ordinary Shareholders’ Meetings. and addressed to third parties, in particular letters, invoices, 3. The share capital may, by resolution of the Extraordinary advertisements and publications of all kinds, must indicate this Shareholders’ Meeting, be amortized by means of equal repayment name immediately preceded or followed by the words “Société for each share by use of profits or reserves other than the legal Anonyme” or the initials “S A ” which should appear legibly and reserve, without such amortization causing the reduction of the disclosure of the amount of the share capital, together with the capital. the name of the Register of Commerce and Companies with 4. The share capital may also be reduced by resolution of the which the company is registered and the number under which Extraordinary Shareholders’ Meeting either by reducing the it is registered. nominal value or the number of the shares.

Reference Document 2007 157 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

Article 7 - Payment for the shares Article 9 - Form and transfer of the shares The amounts to be paid for the shares to be subscribed in cash Fully paid up shares are either in the registered or in the bearer form, pursuant to an increase of the capital are payable as provided by as the shareholder may decide, subject however to the statutory the Extraordinary Shareholders’ Meeting. provisions relating to the shares held by certain persons. Upon subscription the initial payment is of at least one fourth of The shares are registered in the accounts as provided by law. the nominal value of the shares. The issue premium, if any, must be paid in full on subscription. However, certificates, or any other document, representing the shares may be issued when and as provided by law. The balance of the nominal value of the shares shall be paid, as provided by the Board of Directors, in one or several stages, not The ownership of the shares in the registered form is evidenced by later than five years from the date at which the increase in capital their registration in registered accounts. was completed. When the owner of the shares is not a French resident within Calls for funds shall be notified to the shareholders eight days the meaning applied Article 102 of the French Civil Code, any before the time fixed for each payment, either by registered letter intermediary may be registered on behalf of such owner. Such with acknowledgement of receipt or by a notice inserted in a legal registration may be made in the form of a joint account or several gazette published where the registered office is located. individual accounts, each corresponding to one owner. The sums payable for the unpaid part of the shares are subject to At the time such account is opened through either the issuing a daily interest charge at a rate of 5% per annum, without need of company or the financial intermediary authorized as account Court action, as from the date at which they fell due. holder, the registered intermediary shall be required to declare his capacity as intermediary holding shares on behalf of another party. When the shares are not fully paid up, upon issuance, they must be in the registered form and so remain until they are fully paid up. The shares registered in accounts are freely transferable by transfer from one account to another. Article 8 - Rights and obligations attached to the shares Prior approval of the transferee is required only for partly paid up shares. The rights and obligations attached to a share follow the share to any transferee to whom it may be transferred and the transfer All costs resulting from the transfer shall be borne by the transferee. includes all the payable and unpaid dividends and dividends Shares with payments in arrears may not be transferred. payable, as well as, as the case may be, the corresponding share in reserves and provisions. Article 10 - Securities The ownership of a share shall imply ipso facto the acceptance of the present Bylaws and of the decisions of the Shareholders’ The company may issue any security authorized by law. Meetings . Certificates, or any other document, representing securities may In addition to the right to vote which is attached by law to the be issued as and when provided by law. shares, each of them carries a right to a share of corporate assets, of profits, and of any liquidation surplus, proportional to the number Article 11 - Board of Directors and nominal value of the existing shares. As the case may be, and subject to any statutory provision, all 1. Subject to the exceptions provided by law, the Board of tax exemptions or charges as well as all taxation which may be Directors is composed of three to eighteen members, who may borne by the company shall be taken into account prior to any be individuals or legal entities appointed by the Ordinary reimbursement either within the course of the life of the company Shareholders’ Meeting. or upon its liquidation so that, according to their nominal value, A legal entity must, at the time of its appointment, designate an all the existing shares of the same class shall receive the same net individual, who will be its permanent representative on the Board amount irrespective of their origin or their date of issuance. of Directors. The term of office of a permanent representative is the The shareholders shall be responsible for any negative equity of the same as the legal entity that he represents. When the legal entity company up to the nominal value of the shares they hold. dismisses its permanent representative, it must at the same time provide for its replacement. The same applies in case of death or Each time it shall be necessary to hold a certain number of shares resignation of the permanent representative. in order to exercise a right, it will be the responsibility of the shareholder(s) having less than the required number to take the 2. Each member of the Board of Directors must during its term of necessary actions to form a group with a sufficient number of shares. office own at least five hundred (500) shares of the company.

158 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

If, at the time of its appointment, a member of the Board of Directors case, he shall not lose the benefit of his employment contract. The does not own the required number of shares or if, during its term of number of Directors bound to the company by an employment office, it ceases to be the owner thereof, it shall dispose of a period contract may not exceed one-third of the Directors in office. of three months to purchase such number of shares, in default of which it shall be automatically deemed to have resigned. Article 12 - Organization and operation of the Board of 3. Nobody being more than seventy years old shall be appointed Directors Director if, as a result of his appointment, the number of Directors The Board of Directors shall elect a Chairman, who must be an who are more than seventy years old would exceed one-third of the individual, from among its members. It shall determine his term members of the Board. The number of members of the Board of of office, which cannot exceed that of his office as Director and Directors who are more than seventy years old may not exceed one- may dismiss him at any time. third, rounded to the next higher number if this total is not a whole number, of the Directors in office. Whenever this limit is exceeded, The Board shall also determine the compensation to be paid to the term in office of the oldest appointed member shall be deemed the Chairman. to have expired at the close of the Ordinary Shareholders’ Meeting The Chairman of the Board of Directors cannot be more than convened to approve the financial statements of the fiscal year seventy-five years old. Should the Chairman reach this age limit during which the limit was exceeded. during his term of office, his appointment shall be deemed to 4. Directors are appointed for a term of three years. The duties of a have expired at the close of the Ordinary Shareholders’ Meeting Director shall terminate at the close of the Ordinary Shareholders’ convened to approve the financial statements of the fiscal year Meeting convened to approve the accounts of the preceding fiscal during which the limit was reached. Subject to this provision, the year and held in the year during which the term of office of said Chairman of the Board may always be re-elected. Director comes to an end. The Board may always elect one or several Vice Chairman(men). However, in order to allow a renewal of the terms which is as It shall determine their term of office which cannot exceed that of egalitarian as possible and in any case complete for each period of their respective office as Director. three years, the Board of Directors will have the option to determine The officers of the meeting are the Chairman, the Vice the order of retirement of the Directors by the impartial selection in Chairman(men) and the Secretary. a Board Meeting of one-third of the Directors each year. Once the rotation has been established, renewals will take place according The Secretary may be chosen from outside the Directors or the to seniority. shareholders. The Board determines its term of office. The Secretary may always be re-elected. The Directors may always be re-elected; they may be revoked at any time by decision of the Shareholders’ Meeting. Article 13 - Meetings of the Board of Directors In the event of the death or resignation of one or several Directors, the Board of Directors may make provisional appointments 1. The Board, convened by its Chairman, meets as often as required between two Shareholders’ Meetings. by the interests of the company. Appointments made by the Board of Directors pursuant to the Notice is served in the form of a letter sent to each Director, at least above paragraph are submitted to the ratification of the next eight days prior to the meeting; it shall mention the agenda of the Ordinary Shareholders’ Meeting. Should the Meeting of the meeting as set by the person(s) convening the meeting. shareholders fail to ratify these provisional appointments, this However, the Board may meet without notice upon verbal notice shall not affect the validity of prior resolutions and acts of the and the agenda may be set at the opening of the meeting: Board of Directors. - all Directors in office are present or represented; or When the number of members of the Board of Directors falls - when it is convened by the Chairman during a Shareholders’ below the statutory minimum, the remaining Directors must Meeting. immediately convene an Ordinary Shareholders’ Meeting in order Moreover a meeting of the Board of Directors may also be convened to supplement the membership of the Board of Directors. by any group of Directors, representing at least one-third of The Director appointed to replace another Director shall remain in the members of the Board, if the Board has not met for more office for the remaining term of office of its predecessor only. than two months. In such case, they shall indicate the agenda of the meeting. 5. A salaried employee of the company may be appointed as a Director provided that his employment contract antedates his The meetings of the Board are held at the registered office or at appointment and corresponds to a position actually held. In such any place, in France or abroad.

Reference Document 2007 159 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

2. Any Director may give to another Director, by letter, cable, Article 15 - Powers of the Chairman of the Board of telex, or fax, a proxy to another Director to be represented at a Directors meeting of the Board. However, each Director may only dispose of one proxy during the meeting. 1. The Chairman of the Board of Directors chairs the meetings of the Board, and organizes and directs its work, for which he reports The Board may validly act only if at least one-half of its members to the Shareholders’ Meeting. He ensures the proper operation of are present. the corporate bodies and verifies, in particular, that the Directors Directors who participate in Board meetings by means of video- are capable of fulfilling their assignments. conferencing or other telecommunication methods under the 2. In case of temporary disability or death of the Chairman, the conditions defined by the internal rules and regulations of the Board may temporarily delegate a Director to perform the duties Board of Directors shall be deemed to be present for the purposes of the Chairman. of calculating the quorum and majority. However, actual presence or representation shall be necessary for any Board resolutions In case of temporary disability this delegation is granted for a relating to the preparation of the annual financial statements limited duration; it is renewable. In case of death it is granted and consolidated financial statements, and to the drafting of the until the election of the new Chairman. management report and the report on the Group’s management. Decisions are made by a majority of votes of the members present Article 16 - General Management or represented, each Director being entitled to one vote for himself 1. Choice between the two methods of General Management and one for the Director he represents. In the event of a tie vote, the Chairman’s vote is the deciding vote. The company’s General Management is performed, under his responsibility, either by the Chairman of the Board of Directors, 3. An attendance register shall be kept and signed by all the or by another individual appointed by the Board of Directors Directors attending each meeting of the Board of Directors. and bearing the title of Chief Executive Officer, depending upon 4. To be valid, copies or abstracts of the minutes of the meetings the decision of the Board of Directors choosing between the two of the Board of Directors shall be certified by the Chairman of the methods of exercising the General Management function. It shall Board of Directors, the Chief Executive Officer, the Secretary, the inform the shareholders thereof in accordance with the regulatory Director temporarily delegated to perform the duties of Chairman conditions. or by a representative duly authorized to that effect. When the company’s General Management is assumed by the Chairman of the Board of Directors, the following provisions Article 14 - Powers of the Board of Directors relating to the Chief Executive Officer shall apply to him. The Board of Directors sets guidelines for the company’s activities 2. Chief Executive Officer and shall ensure their implementation. Subject to the powers The Chief Executive Officer may or may not be chosen from expressly granted to the Shareholders’ Meetings and within the among the Directors. The Board sets his term of office as well limits of the corporate purpose, it addresses any issue relating to as his compensation. The age limit for eligibility to perform the the company’s proper operation and settles the affairs concerning duties of Chief Executive Officer is seventy-five years. Should the it through its resolutions. Chief Executive Officer reach this age limit during his term of In its relations with third parties, the company is bound even office, his appointment shall be deemed to have expired at the by acts of the Board of Directors falling outside the scope of the close of the Ordinary Shareholders’ Meeting convened to approve corporate purpose, unless it demonstrates that the third party knew the financial statements of the fiscal year during which the limit that the act exceeded such purpose or that it could not have ignored was reached. it given the circumstances, it being specified that mere publication The Chief Executive Officer may be dismissed at any time by the of the Bylaws is not sufficient proof thereof. Board of Directors. If the dismissal is decided without just cause, The Board of Directors performs such monitoring and verifications it may give rise to damages, unless the Chief Executive Officer as it deems appropriate. Each Director receives all necessary assumes the duties of Chairman of the Board of Directors. information for completing his assignment and may request any The Chief Executive Officer is vested with the most extensive documents he deems useful. powers to act under any circumstances on behalf of the company. He exercises such powers within the limits of the corporate purpose, and subject to the powers expressly granted by law to the Shareholders’ Meeting and to the Board of Directors.

160 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

He shall represent the company in its relations with third parties. Article 18 - Agreements subject to authorization The company is bound even by acts of the Chief Executive Officer falling outside the scope of the corporate purpose, unless it Any sureties, endorsements and guarantees granted by the demonstrates that the third party knew that the act exceeded such company must be authorized by the Board of Directors as purpose or could not have ignored it given the circumstances, it provided by law. being specified that mere publication of the Bylaws is not sufficient Any agreement to be entered into between the company and to establish such proof. one of its Directors or its Chief Executive Officer or one of its The provisions of the Bylaws or decisions of the Board of Directors Managing Directors, whether directly or indirectly or through an limiting the powers of the Chief Executive Officer are not binding intermediary, must be submitted to the prior authorization of the on third parties. Board of Directors under the conditions provided by law.

3. Managing Directors Such prior authorization is also required for agreements between the company and another enterprise, should one of the Directors Upon the proposal of the Chief Executive Officer, the Board of Directors may appoint one or more individuals responsible for or the Chief Executive Officer or one of the Managing Directors of assisting the Chief Executive Officer, with the title of Managing the company be the or an owner, partner with unlimited liability, Director, for whom it shall set the compensation. company manager, Director, chief executive officer, member of the Executive Board or Supervisory Board, or in a general sense The number of Managing Directors may not exceed five. top-ranking executive of this other enterprise. Managing Directors may be dismissed at any time by the Board The same shall hold for any agreement entered into with a of Directors, upon the proposal of the Chief Executive Officer. shareholder holding a proportion of voting rights greater than If the dismissal is decided without just cause, it may give rise to 10% or with any company which controls a company holding damages. more than 10% of the company’s share capital. When the Chief Executive Officer ceases to exercise his duties or is The above provisions shall not apply to agreements relating prevented from doing so, the Managing Directors remain in office to current operations entered into under normal terms. Such with the same powers until the appointment of the new Chief agreements are nevertheless made known to the Chairman of Executive Officer, unless resolved otherwise by the Board. the Board of Directors by the interested party unless they are In agreement with the Chief Executive Officer, the Board of of no significance to any party, given their subject matter or Directors sets the scope and duration of the powers granted to their financial implications. A list of such agreements and their Managing Directors. With regard to third parties, they shall have respective subjects is sent by the Chairman to the members of the the same powers as the Chief Executive Officer. Board of Directors and to the Statutory Auditors. The age limit for eligibility to perform the duties of Managing Director is sixty-five years. Should a Managing Director reach Article 19 - Prohibited agreements this age limit during his term of office, his appointment shall be deemed to have expired at the close of the Ordinary Shareholders’ Directors, other than legal entities, are forbidden to contract loans Meeting convened to approve the financial statements of the fiscal from the company in any form whatsoever, to secure an overdraft year during which the limit was reached. from it, on current account or otherwise, or to have the company guarantee or secure their undertakings toward third parties. Article 17 - Delegation of powers The same prohibition applies to the Chief Executive Officer, the Managing Directors and to permanent representatives of legal The Board of Directors may grant one or more Directors, or third entities which are Directors. It also applies to spouses, ascendants parties, whether shareholders or not, with the ability to replace and descendants of the persons referred to in this article as well as it, any authority, assignments and special offices for one or more to all persons acting as intermediaries. specific purposes. It may resolve to create committees responsible for studying Article 20 - Remuneration of the Directors such issues as it or the Chief Executive Officer submit thereto for examination. Such committees shall perform their duties at 1. The Ordinary Shareholders’ Meeting may allow to the Directors the discretion of the Board, which sets their composition and in remuneration for their services a fixed sum as attendance fees, responsibilities, as well as the compensation of their members, if any. the amount of which is to be included in the operating expenses of the company. The Chief Executive Officer and the Managing Directors may, at their discretion, consent to partial delegations of authority to The Board shall divide the amount of these attendance fees among third parties. its members as it deems fit.

Reference Document 2007 161 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

2. The Board may also authorize the reimbursement of the travel Article 23 - Shareholders’ Meetings fares and expenses and of the expenses incurred by the Directors in the interest of the company. 1. Shareholders’ Meetings shall be convened and held as provided by law. The agenda of the Meeting shall be mentioned on the 3. The Board may allow special payments to Directors for projects convening notice and letters; it is set by the corporate body assigned or delegated to them pursuant to the provisions of Article convening the Meeting. 17 of these Bylaws. These payments, to be included in the operating expenses of the company, shall be subject to the provisions of When the Shareholders’ Meeting has not been able to transact Article 18 of these Bylaws. business validly due to a lack of quorum, a second Meeting or, as the case may be, a prorogated second Meeting, is convened in 4. Apart from the amounts provided for under the three paragraphs the same way at least six days prior to the Meeting. Notice and above as well as from the salaries of the Directors being employees convening letters relating to such second Meeting reproduce the of the company, and from the compensation, whether fixed or date and agenda of the first Meeting. proportional, to be paid to the Chairman, or the Director temporarily delegated in the duties of Chairman, the Chief Executive Officer The Meetings are held at the registered office or at any other place and, as applicable, the Managing Directors, no other consideration, mentioned in the convening notice. whether permanent or not, may be paid to the Directors. The right to attend and vote at Shareholders’ Meetings is subject to the registration of the shareholder in the company’s share register. Article 21 - Advisory Board A shareholder is entitled to attend and vote at any Meeting The Shareholders’ Meeting may, upon proposal of the Board provided that the shares held are registered in the name of the of Directors, appoint Advisors the number of whom shall not shareholder or intermediary authorized to act on his or her behalf exceed nine. as of the fourth business day preceding the Meeting at midnight, Paris time, either in the accounts of registered shares maintained In case of death or resignation of one or more Advisors, the Board by the company or in the accounts of bearer shares maintained by of Directors may make provisional appointments subject to their the officially authorized financial intermediary. The recording or ratification by the next Ordinary Shareholders’ Meeting. registration of bearer shares is certified by a statement delivered by The Advisors, who are chosen among the shareholders on the the financial intermediary authorized as account holder. strength of their skills, shall constitute an Advisory Board. A shareholder can always be represented in a valid manner The Advisors are appointed for a term of three years ending at the at a Shareholders’ Meeting by his or her spouse or by another close of the Ordinary Shareholders’ Meeting convened to approve shareholder. the accounts of the preceding fiscal year and held in the year during Shareholders may vote by mail at any Meeting in accordance with which their term of office comes to an end. applicable laws and regulations. To be taken into account, the The Advisors are convened to the meetings of the Board of Directors voting form must have been received by the company at least three and take part to the deliberations with a consultative vote. Their days prior to the date of the Meeting. absence cannot however affect the validity of such deliberations. Shareholders may address their proxy form and/or their voting The Board of Directors may allocate fees to the Advisors the amount form for any Meeting, in accordance with applicable laws and of which will be set off from the attendance fees allocated by the regulations, either by mail or, if decided by the Board of Directors, Shareholders’ Meeting to the members of the Board of Directors. by electronic transmission. Pursuant to the provisions of Article 1316-4, paragraph 2 of the French Civil Code, in the event of the Article 22 - Statutory Auditors use of an electronically submitted form, the shareholder’s signature shall make use of a reliable identification process that ensures the The company shall be audited, as provided by law, by one or more link with the document to which it is attached. Statutory Auditors legally entitled to be elected as such. When the A shareholder having voted either by mail or by electronic conditions provided by law are met, the company must appoint at transmission, having sent a proxy or having requested an admittance least two Statutory Auditors. card or certificate stating the ownership of shares may not select Each Statutory Auditor is appointed by the Ordinary Shareholders’ another means of taking part in the Meeting. Meeting. In accordance with the conditions set by applicable legal and One or more supplementary deputy Statutory Auditors, who may regulatory provisions, and pursuant to a decision of the Board of be called to replace the regular Statutory Auditors in the event of Directors, Shareholders’ Meetings may also be held by means of death, disability, resignation or refusal to perform their duties, are video conference or through the use of any telecommunications appointed by the Ordinary Shareholders’ Meeting. media allowing the identification of shareholders.

162 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

Any intermediary who meets the requirements set forth in Votes shall be expressed either by raised hands or by standing up paragraphs seven and eight of Article L. 228-1 of the French or by a roll-call as decided by the officers of the Meeting. Commercial Code may, pursuant to a general securities management However a secret ballot may be decided: agreement, transmit to a Shareholders’ Meeting the vote or proxy of a shareholder, as defined in paragraph seven of that same article. - either by the Board of Directors; Before transmitting any proxies or votes to a Shareholders’ Meeting, - or by the shareholders representing at least one-fourth of the the intermediary shall be required, at the request of the issuing capital if their request was made in writing and addressed to corporation or its proxy, to provide a list of the non-resident owners the Board of Directors or the corporate body having convened of the shares to which such voting rights are attached. Such list the Meeting, two days at least prior to the Meeting. shall be supplied as provided by applicable regulations. 3. The Ordinary Shareholders’ Meeting makes decisions which do not amend the Bylaws. A vote or proxy issued by an intermediary who either is not declared as such, or does not disclose the identity of the shareholders, may It is convened at least once a year, within six months from the end not be counted. of each fiscal year to vote on the accounts of that fiscal year. When a Works Council exists within the company, two of its In order to pass valid resolutions, the Ordinary Shareholders’ members, appointed by the Council, may attend Shareholders’ Meeting, convened upon first notice, must consist of shareholders, Meetings. At their request, their opinions must be heard on present or represented, holding at least one-fifth of total voting the occasion of any vote requiring the unanimous approval of shares. The deliberations of an Ordinary Shareholders’ Meeting, shareholders. convened upon second notice, shall be valid regardless of the A Shareholders’ Meeting is chaired by the Chairman of the Board number of shareholders present or represented. of Directors or, in his absence, by the oldest Vice Chairman of the The resolutions of the Ordinary Shareholders’ Meeting are Board of Directors or, in the absence of the latter, by a Member of approved by a majority of the votes of the shareholders present the Board of Directors appointed by the Board for that purpose. If no or represented. chairman has been appointed, the Meeting elects its Chairman. 4. Only the Extraordinary Shareholders’ Meeting may amend the The two Members of the Meeting present, having the greatest Bylaws. However, in no event can it increase the duties of the number of votes, and accepting that role, are appointed as shareholders except in the case of transactions resulting from a Scrutineers. The Officers of the Meeting appoint a Secretary, who duly completed regrouping of shares. may but need not be a shareholder. As to the Extraordinary Shareholders’ Meeting, the quorum An attendance sheet is drawn up, in accordance with the law. necessary, upon first convening notice, is one-fourth of the voting 2. The voting right attached to a share is proportional to the share shares, and one-fifth upon second convening notice or in the case of the capital it represents. When having the same nominal value, of prorogation of the second meeting. each share, either in capital or redeemed (“de jouissance”), gives right to one vote. The resolutions of the Extraordinary Shareholders’ Meeting shall be carried out at a two third majority of the votes of the shareholders However a voting right equal to twice the voting right attached present or represented. to other shares, with respect to the portion of the share capital that they represent, is granted: 5. The copies or abstracts of the minutes of the Meetings shall be validly certified by the Chairman of the Board of Directors, the - to all fully paid up registered shares for which evidence of registration under the name of the same shareholder during at Chief Executive Officer, or the Secretary of the Meeting. least three years will be brought; Ordinary and Extraordinary Shareholders’ Meetings shall exercise - to registered shares allocated to a shareholder in case of increase their respective powers as provided by law. of the capital by capitalization of reserves, or of profits carried 6. During constitutive Extraordinary Shareholders’ Meetings, forward or of issue premiums due to existing shares for which which are those called to approve contributions in kind or benefits it was entitled to benefit from this right. in kind, the contributor or the beneficiary cannot vote either for This double voting right shall automatically come to an end in himself or as a proxy. the case of registered shares being converted into bearer shares and/or conveyed in property. However any transfer by right of 7. When there are several classes of shares, the rights attached to the inheritance, by way of liquidation of community property between shares of one class cannot be modified without a proper vote of an spouses or deed of gift inter vivos to the benefit of a spouse or an Extraordinary Shareholders’ Meeting open to all shareholders and heir shall not interrupt the three-year period nor cause the double without a proper vote of a Special Shareholders’ Meeting exclusively voting right to end. comprising owners of the shares of the class concerned.

Reference Document 2007 163 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance

As to the Special Shareholders’ Meeting, the quorum necessary, Article 26 - Fiscal year upon first convening notice, is one-third of the voting shares, and one-fifth upon second convening notice or in the case of prorogation Each fiscal year has a duration of one year beginning on January 1 of the second Meeting. and ending on December 31. The resolutions of the Special Shareholders’ Meeting shall be carried by a two-thirds majority vote of the shareholders present Article 27 - Annual accounts or represented. The Board of Directors shall keep regular accounts of the corporate operations and shall draw up the annual accounts in conformity Article 24 - Information on shareholdings with the law and the commercial practice. Any individual or legal entity who becomes the owner of a fraction of capital of at least one per cent shall notify the total number of Article 28 - Appropriation of results and allocation of shares it holds to the company. Such notice should be given within profits fifteen days from the date at which this percentage is reached. From the profit for a fiscal year, minus prior losses, if any, an The same obligation applies whenever the portion of capital held amount equal to at least 5% must be deducted and allocated to increases by at least one per cent. However, it shall cease to be the formation of a “legal reserve” fund. This deduction is no longer applicable when the portion of capital held is equal to or greater required when the amount of the legal reserve has reached one- than 60% of the share capital. tenth of the share capital of the company. In case of non-compliance with the above obligation and upon the Distributable earnings consist of the net profit of the fiscal year, request of one or several shareholders holding at least 5% of the minus prior losses and the deduction described in the previous capital and recorded in the minutes of the Shareholders’ Meeting, paragraph, plus profits carried forward. the shares in excess of the percentage to be declared shall be deprived From these earnings, and subject to the decisions of the Shareholders’ of their right to vote at any Meeting held until the expiration Meeting, an initial deduction is made of the amount required to of a period of three months as from the date at which proper distribute to shareholders a preliminary dividend, equal to five notification pursuant to the above paragraph is eventually made. percent (5%) of the amount paid up on the shares that has not been repaid to shareholders by the company. Article 25 - Identification of the holders of securities Dividends do not accumulate from one fiscal year to the next. The company may, at any time, in accordance with the applicable From the remaining amount, the Shareholders’ Meeting may laws and regulations, request the central depositary of financial deduct the amounts it deems appropriate to allocate to all optional, instruments to give it the name, nationality and address of natural ordinary or special reserve funds, or retain, in the proportions it persons or legal entities holding securities conferring an immediate shall determine. or deferred right to vote at its own Shareholders’ Meetings, as well as the number of securities held by such natural persons or The balance, if any, shall be divided among shareholders as a legal entities and the restrictions, if any, which may exist upon super-dividend. the securities. A fee will be charged to the company for this In addition, the Shareholders’ Meeting may decide to distribute information, the maximum amount of which shall be determined sums taken from the reserves, either to provide or supplement in accordance with the provisions of a decree of the Minister of a dividend, or as an exceptional distribution. In this case, the Economy. resolution shall expressly indicate the reserve items against which In light of the list sent by the aforementioned body, the company these amounts are charged. However, dividends shall be paid first shall be entitled to request information concerning the owners from the distributable earnings for the fiscal year. of the shares listed above, either through the intervention of that When a balance sheet, drawn up during, or at the end of the body, or directly, to the persons appearing on that list and who fiscal year, and certified by the Statutory Auditor, shows that might be, in the company’s opinion, registered on behalf of third the company, since the close of the preceding fiscal year, after parties. having made the necessary depreciations and provisions and after When they act as intermediaries, such persons shall be required to deduction of the prior losses, if any, as well as of the amounts which disclose the identity of the owners of such shares. The information are to be allocated to the reserves provided by law or by the Bylaws, shall be provided directly to the authorized financial intermediary and taking into account profits carried forward, if any, has available holding the account, who shall, in turn, be responsible for earnings, the Board of Directors may resolve the distribution of communicating it to the issuing company or the aforementioned interim dividends prior to the approval of the accounts of the fiscal body, as applicable. year, and may determine the amount thereof and the date of such

164 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Corporate governance distribution. The amount of such interim dividends cannot exceed net assets have not been replenished to an amount at least equal the amount of the profits as defined in this paragraph. to one half of the share capital. Any dividend distributed in violation of the foregoing rules is a In the absence of Shareholders’ Meeting or in the case where the fictitious dividend. Meeting has not been able to act in a valid manner, any interested If the result for the year is a loss, after the approval of the annual party may institute legal proceedings to dissolve the company. financial statements by the Ordinary Shareholders’ Meeting, such loss is either set off against retained earnings or added to the losses Article 32 - Effect of dissolution carried forward. If the balance is negative, it is carried forward again to be charged against the profits of subsequent fiscal years The company is deemed to be in liquidation as soon as it is dissolved until it is extinguished. for any reason whatsoever. It continues to exist as a legal entity for the needs of this liquidation until the completion thereof. Article 29 - Payment of dividends During the period of the liquidation, the Shareholders’ Meeting shall retain the same powers as it did exercise during the life of The dividend payment terms are defined by the Shareholders’ the company. Meeting or, if the Meeting fails to do so, by the Board of Directors. The shares shall remain transferable until the completion of the However, dividends must be paid within a maximum period of liquidation proceedings. nine months after the fiscal year-end, unless such period is extended by Court order. The dissolution of the company is only valid vis-à-vis third parties as from the date at which it has been published at the Register of No repayment of the dividend may be demanded from shareholders, Commerce and Companies. unless the following two conditions are met: - the distribution was made in violation of legal requirements; Article 33 - Appointment of liquidators - Powers - the company has established that the beneficiaries were aware of the irregularity of the distribution at the time it was made, Upon the expiration of the term of existence of the company or in or could not ignore it given the circumstances. the case of its premature dissolution, the Shareholders’ Meeting Any recovery of dividends meeting the above conditions must be shall decide the methods of liquidation and appoint one or carried out within the time period provided by law. several liquidators whose powers it will determine, and who will exercise their duties according to the law. The appointment of the Dividends not claimed within five years after the date at which liquidator(s) terminates the office of the Directors, as well as that they became payable shall be void. of the Advisors, if any.

Article 30 - Premature dissolution Article 34 - Liquidation - Termination An Extraordinary Shareholders’ Meeting may at any time declare the premature dissolution of the company. After payment of the liabilities, the remaining assets shall be used first for the payment to the shareholders of the amount paid for their shares and not amortized. Article 31 - Loss of one-half of the share capital of the Company The balance, if any, shall be divided among all the shares. If, as a consequence of losses showed by the company’s accounts, The shareholders are convened at the end of the liquidation in the net assets (“capitaux propres”) of the company are reduced order to decide on the final accounts, to discharge the liquidators to below one-half of the share capital of the company, the Board from liability for their acts of management and the performance of Directors must, within four months from the approval of the of their office, and to formally acknowledge the termination of accounts showing such loss, convene an Extraordinary Shareholders’ the liquidation process. Meeting in order to decide whether the company ought to be The termination of the liquidation process shall be published as dissolved before its statutory term. provided by law. If the dissolution is not resolved, the share capital must, at the latest by the end of the second fiscal year following the fiscal year Article 35 - Litigation during which the losses were established and subject to the legal provisions concerning the minimum share capital of “Sociétés Any dispute between the company and any of its shareholders anonymes”, be reduced by an amount at least equal to the losses arising directly and/or indirectly from the present Bylaws shall which could not be charged to reserves, if during that period the be settled by the Commercial Court of Paris.

Reference Document 2007 165 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 166 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH MOËT HENNESSY ◆ LOUIS VUITTON SA

GENERAL INFORMATION REGARDING THE PARENT COMPANY AND ITS CAPITAL; STOCK MARKET INFORMATION

Page

1. GENERAL INFORMATION REGARDING THE PARENT COMPANY 168 1.1 ROLE OF THE PARENT COMPANY WITHIN THE GROUP 168 1.2 CORPORATE NAME – REGISTERED OFFICE 168 1.3 LEGAL FORM 168 1.4 JURISDICTION 168 1.5 DATE OF INCORPORATION – TERM 168 1.6 CORPORATE PURPOSE (ARTICLE 2 OF THE BYLAWS) 168 1.7 REGISTER OF COMMERCE AND COMPANIES 168 1.8 LOCATION WHERE DOCUMENTS CONCERNING THE COMPANY MAY BE CONSULTED 168 1.9 FISCAL YEAR 168 1.10 DISTRIBUTION OF PROFITS (ARTICLE 28 OF THE BYLAWS) 169 1.11 SHAREHOLDERS’ MEETINGS (ARTICLE 23 OF THE BYLAWS) 169 1.12 DECLARATION OF THRESHOLDS (ARTICLE 24 OF THE BYLAWS) 170

2. GENERAL INFORMATION REGARDING THE CAPITAL 170 2.1 CHANGES IN THE SHARE CAPITAL UNDER THE BYLAWS 170 2.2 SHARE CAPITAL – CLASSES OF SHARES 170 2.3 AUTHORIZED SHARE CAPITAL 170 2.4 AUTHORIZATION TO REPURCHASE SHARES OF THE COMPANY’S STOCK 171 2.5 SHAREHOLDER IDENTIFICATION 172 2.6 NON-CAPITAL SECURITIES 172 2.7 SECURITIES GIVING ACCESS TO THE COMPANY’S CAPITAL 172 2.8 THREE-YEAR SUMMARY OF CHANGES IN THE PARENT COMPANY’S SHARE CAPITAL 172

3. ANALYSIS OF SHARE CAPITAL AND VOTING RIGHTS 172 3.1 SHARE OWNERSHIP 172 3.2 CHANGES IN SHARE OWNERSHIP DURING THE LAST THREE FISCAL YEARS 173 3.3 PLEDGES OF PURE REGISTERED SHARES BY MAIN SHAREHOLDERS 173 3.4 NATURAL PERSONS OR LEGAL ENTITIES THAT MAY EXERCISE CONTROL OVER THE COMPANY 173

4 MARKET FOR FINANCIAL INSTRUMENTS ISSUED BY LVMH 174 4.1 MARKET FOR LVMH SHARES 174 4.2 STOCK REPURCHASE PROGRAM 175 4.3 LVMH BONDS MARKET 175 4.4 DIVIDEND 175 4.5 PERFORMANCE PER SHARE 175

Reference Document 2007 167 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY General information regarding the parent company and its capital; stock market information

GENERAL INFORMATION REGARDING THE PARENT COMPANY AND ITS CAPITAL; STOCK MARKET INFORMATION

1. GENERAL INFORMATION REGARDING 1.6 Corporate purpose (Article 2 of the Bylaws) THE PARENT COMPANY Any taking of interests, through a direct or indirect equity investment, a contribution, merger, spin-off, or joint venture 1.1 Role of the parent company within the Group with any company or group existing or to be formed, having any commercial, industrial, agricultural, personal property, real estate LVMH manages and coordinates the operational activities of all or financial operations, and among others: its subsidiaries, and offers them various management assistance services, particularly in legal, financial, tax and insurance matters. - trade in champagne and other wines, cognac and other spirits and, more generally, any food or beverage product; The company centralizes the cash resources and financing - trade in all pharmaceutical products, perfumes and cosmetics requirements of its French subsidiaries, as well as those of certain and, more generally, products related to hygiene, beauty and European subsidiaries. skincare; LVMH also centralizes foreign currency hedges for these - the manufacture, sale and promotion of travel articles, luggage, subsidiaries, covering them symmetrically on the market. bags, leather goods, clothing articles, accessories, as well as any high quality and branded articles or products; All these services are invoiced to the subsidiaries in question, based on the real cost price or normal market conditions, based on the - the operation of vineyards, horticultural and arboricultural type of service. estates, as well as the development of any related biotechnological process; For fiscal year 2007, LVMH billed its subsidiaries 98 million - the operation of any real estate; euros for management assistance; the intra-Group financial income and expenses resulting from the cash operations described above - the development of any trademark, signature, model, design totaled 187.5 million euros and 126 million euros respectively and, more generally, any industrial, literary or artistic property for the same period. right. More generally, to undertake directly any commercial, industrial, Since Group brands belong to the various operating subsidiaries, agricultural, viticultural operations, or any operation relating to LVMH does not collect any royalties in connection with personal or real property, movable or immovable property or these brands. financial, management or service operation in any of the fields of activities described in paragraph 1 above. 1.2 Corporate name – registered office Corporate name: LVMH Moët Hennessy-Louis Vuitton. 1.7 Register of Commerce and Companies Registered office: 22, avenue Montaigne – 75008 Paris, France. The company is registered in the Paris Register of Commerce and Companies under number 775 670 417. APE code (company 1.3 Legal form activity code): 7010Z.

Société anonyme (limited liability corporation). 1.8 Location where documents concerning the company may be consulted 1.4 Jurisdiction The Bylaws, financial statements and reports, and the minutes of The company is governed by French law. Shareholders’ Meetings may be consulted at the registered office at the address indicated above. 1.5 Date of incorporation – Term 1.9 Fiscal year LVMH was incorporated on January 1, 1923 for a term of 99 years, which expires on December 31, 2021, unless the company From January 1 until December 31. is dissolved early or extended by a resolution of the Extraordinary Shareholders’ Meeting.

168 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY General information regarding the parent company and its capital; stock market information

1.10 Distribution of profits (Article 28 of the Bylaws) - the company has established that the beneficiaries were aware of the irregularity of the distribution at the time it was made, The net profit of each fiscal year, minus general expenses and other or could not ignore it under the circumstances. expenses incurred by the company, including all amortization, Any recovery of dividends meeting the above conditions must be depreciation and provisions, represents the net profit or loss of carried out within the time period provided by law. the fiscal year. Dividends not claimed within five years after the date at which From the profit for a fiscal year, minus prior losses, if any, an they became payable shall be void. amount equal to at least 5% must be deducted and allocated to the formation of a “legal reserve” fund. This deduction is no longer required when the amount of the legal reserve has reached one- 1.11 Shareholders’ Meetings (Article 23 of the Bylaws) tenth of the capital of the company. • Notice of Meetings Distributable earnings consist of the net profit of the fiscal year, Shareholders’ Meetings are convened and held under the conditions minus prior losses and the deduction described in the previous provided by the laws and decrees in effect. Meetings are held at paragraph, plus profits carried forward. the registered office or at any other location specified in the notice From these earnings, and subject to the decisions of the Shareholders’ of meeting. Meeting, an initial deduction is made of the amount required to distribute to shareholders a preliminary dividend, equal to five • Conditions for admission percent (5%) of the amount paid up on the shares that has not The right to take part in Shareholders’ Meetings is subject to the been repaid to shareholders by the company. registration of the shareholder in the company’s share registers. Dividends do not accumulate from one fiscal year to the next. A shareholder is entitled to attend and vote at any Meeting provided that the shares held are registered in the name of the From the remaining amount, the Shareholders’ Meeting may shareholder or intermediary authorized to act on his or her behalf deduct the amounts it deems appropriate to allocate to all optional, as of the fourth business day preceding the Meeting at midnight, ordinary or special reserve funds, or retain, in the proportions it Paris time, either in the accounts of registered shares maintained shall determine. by the company or in the accounts of bearer shares maintained by The balance, if any, shall be divided among shareholders as a the officially authorized financial intermediary. The recording or super-dividend. registration of bearer shares is certified by a statement (“attestation de participation”) delivered by the financial intermediary In addition, the Shareholders’ Meeting may decide to distribute authorized as account holder. amounts taken from the reserves, either to provide or supplement a dividend, or as an exceptional distribution. In this case, the A shareholder having voted by mail or by electronic transmission, resolution shall expressly indicate the reserve items against which sent a proxy or requested an admittance card or certificate stating these amounts are charged. However, dividends shall be paid first the ownership of shares may not select another means of taking from the distributable earnings for the fiscal year. part in the Meeting. Any dividend distributed in violation of the foregoing rules is a • Conditions for exercising voting rights; double voting fictitious dividend. rights If the result for the year is a loss, after the approval of the annual The voting right attached to the shares is proportional to the financial statements by the Ordinary Shareholders’ Meeting, such share of capital it represents. Each share with the same nominal loss is either set off against retained earnings or added to the losses value, either in capital or redeemed (“de jouissance”) gives right to carried forward. If the balance is negative, it is carried forward one vote. again to be charged against the profits of subsequent fiscal years However, a voting right equal to twice the voting right attached until it is extinguished. to other shares with respect to the portion of the share capital that The dividend payment terms are defined by the Shareholders’ they represent, is granted to: Meeting or, if the Meeting fails to do so, by the Board of Directors. - all fully paid-up shares for which there is evidence of registration However, dividends must be paid within a maximum period of under the name of the same shareholder. The Extraordinary nine months after the fiscal year-end, unless such period is extended Shareholders’ Meeting of June 6, 1986 increased the minimum registration period to three years (previously two); by Court order. - the registered shares allocated to a shareholder, in the event of a No repayment of the dividend may be demanded from shareholders, capital increase by capitalization of reserves, or of profits carried unless the following two conditions are met: forward or of issue premiums due to existing shares in respect of - the distribution was made in violation of legal requirements; which it was entitled to benefit from this right.

Reference Document 2007 169 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY General information regarding the parent company and its capital; stock market information

This double voting right shall automatically come to an end in 2. GENERAL INFORMATION REGARDING the event of registered shares being converted into bearer shares THE CAPITAL and/or conveyed in property. However, any transfer resulting from inheritance, liquidation of community property between spouses or an inter vivos gift to a spouse or a relative entitled to inherit shall 2.1 Changes in the share capital under the Bylaws not interrupt the three year period. This right may be eliminated The share capital of the company may be increased by a resolution by a decision of an Extraordinary Shareholders’ Meeting, after the of the Extraordinary Shareholders’ Meeting. However, when ratification by the Special Shareholders’ Meeting of the holders a capital increase is completed by capitalizing reserves, profits of this right. or share premiums, the Shareholders’ Meeting approving such increase shall vote under the quorum and majority conditions for 1.12 Declaration of thresholds (Article 24 of the Bylaws) Ordinary Shareholders’ Meetings. Independently of legal obligations, the Bylaws stipulate that any Pursuant to a resolution of the Extraordinary Shareholders’ Meeting, individual or legal entity that becomes the owner of a fraction of the share capital may be amortized by equal repayment for each capital greater than or equal to one percent shall notify the total share, by use of profits or reserves, other than the legal reserve, number of shares held to the company. Such notice should be without such amortization resulting in a reduction of capital. given within fifteen days from the date at which the fraction is The share capital may also be reduced by a resolution of the reached. Extraordinary Shareholders’ Meeting, either by reducing the This obligation applies each time the portion of capital owned nominal value of the shares, or by reducing the number of shares. increases by at least one percent. However, the Combined Shareholders’ Meeting of May 15, 2002 eliminated this obligation 2.2 Share capital – classes of shares when the shareholder in question reaches the threshold of 60% of the capital. The shares issued by the company are all of the same class. In case of non-compliance with this provision, and at the request, As of December 31, 2007, the company’s share capital was as recorded in the minutes of the Shareholders’ Meeting, of one 146,981,223 euros, consisting of 489,937,410 fully paid-up shares or more shareholders holding at least 5% of the capital of the with a par value of 0.30 euro each. company, the shares exceeding the percentage to be declared shall Of these 489,937,410 shares and as of this same date, be deprived of their voting rights at any Shareholders’ Meeting 225,670,036 shares conferred double voting rights. that may be held until the expiration of a period of three months from the date at which proper notification is made. 2.3 Authorized share capital As of December 31, 2007, the company had 601,166,185 shares of authorized share capital with a par value of 0.30 euro each.

• Authorizations to increase the company’s share capital The Combined Shareholders’ Meeting of May 10, 2007 authorized the company’s Board of Directors to: - increase the company’s share capital, notably by issuing any type of securities giving immediate or future access to the company’s share capital or giving access to debt securities, with the understanding that these issues may be carried out with or without preemptive subscription rights. These authorizations, granted for a period of twenty-six months, has not been used; - increase the company’s share capital as consideration either for shares contributed to a public exchange offer or, in an amount not to exceed 10% of the company’s share capital, for contributions in kind consisting of company shares or securities giving access to the company’s share capital. This authorization, granted for a period of twenty-six months, has not been used;

170 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY General information regarding the parent company and its capital; stock market information

- increase the company’s share capital through an issue reserved 2.4 Authorization to repurchase shares of for certain categories of investors, particularly credit institutions the company’s stock or companies governed by the French Insurance Code or its foreign equivalent. The Combined Shareholders’ Meeting of May 10, 2007 authorized This authorization has not been used. The Shareholders’ Meeting the Board of Directors to repurchase shares of the company’s stock. of May 15, 2008 will be invited to renew this authorization for This authorization was given for a period of eighteen months and a period of eighteen months. was described in the Reference Document which was filed with the AMF on April 11, 2007. These delegations include the power of the Board of Directors to increase the number of securities to be issued under the terms of This authorization included the following limitations: the issue in the event of surplus demand. - the number of shares to be bought back under this authorization - increase the company’s share capital through an issue reserved may not exceed 10% of the total number of shares representing for Group employees enrolled in a company savings plan, in an the company’s share capital as of January 1, 2007, thus amount not to exceed 3% of the company’s share capital. 48,993,741 shares; This authorization has not been used. The Board of Directors - the purchase price per share may not exceed 130 euros, will present a resolution to the Combined Shareholders’ Meeting thus a maximum total theoretical investment of about of May 15, 2008 renewing this authorization for a period of 6.4 billion euros. twenty-six months. In the event of a capital increase through the incorporation of The overall ceiling for the above-mentioned capital increases is reserves and the granting of bonus shares as well as in cases of either 30 million euros. a stock split or a reverse stock split, the price indicated above will be adjusted by a multiplying coefficient equal to the ratio of the • Authorization to grant options to purchase or subscribe number of shares making up the company’s share capital before to shares and after the operation. The Combined Shareholders’ Meeting of May 11, 2006 authorized The shares held by the company as of December 31, 2007, a the Board of Directors to grant options to purchase or subscribe total of 15,423,024 shares representing 3% of the share capital, to shares in an amount not to exceed 3% of the company’s share are classified as follows in the individual company accounts of capital, a portion equivalent to 14,698,122 shares as of December LVMH SA: 31, 2007. As of this date, there were a total of 11,228,775 options - 1,176,407 shares are recognized as short term investments, remaining to be granted under this authorization. including 130,000 held under a liquidity contract for • Authorization to grant bonus shares 11 million euros, 308,618 held under bonus share allocation plans not yet vested to beneficiaries for 22 million euros, and The Combined Shareholders’ Meeting of May 12, 2005 authorized 737,789 shares allocated to future plans for 40 million euros; the Board of Directors to grant bonus shares in an amount not to in addition 6,239,029 shares, for a value of 332 million euros, exceed 1% of the company’s share capital, a portion equivalent to are allocated to share purchase option plans, representing a total 4,899,374 shares as of December 31, 2007. As of this date, there asset of 405 millions euros; were a total of 4,485,175 shares remaining to be granted under this authorization. - 8,007,588 shares are recognized under long term investments, representing a total amount of 379 million euros, with the The total amount of these allocations is deducted from the main objective of covering commitments for existing share aforementioned total maximum amount of 30 million euros. subscription option plans. The Board of Directors will present a resolution to the Combined Lastly, as of December 31, 2007, the company held Shareholders’ Meeting of May 15, 2008 renewing this authorization 2,014,000 American call options, to cover commitments for the for a period of thirty eight months. share purchase option plans taking effect in January 1998, January 1999, and January 2002 representing a total premium amount of • Authorization to reduce the company’s share capital 86 million euros. The Combined Shareholders’ Meeting of May 10, 2007 authorized (See also the Report of the Board of Directors to the Shareholders’ the Board of Directors to reduce the company’s share capital by Meeting, “Treasury share transactions”). no more than 10% of its total amount through the retirement of shares bought back under share repurchase programs. The Board of Directors will present a resolution to the Shareholders’ Meeting of May 15, 2008 renewing this authorization for a period of eighteen months.

Reference Document 2007 171 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY General information regarding the parent company and its capital; stock market information

The Board of Directors will present a resolution to the Shareholders’ 2.5 Shareholder identification Meeting of May 15, 2008 renewing this authorization for a period of eighteen months, under the following conditions: Article 25 of the Bylaws authorizes the company to set up a shareholder identification procedure. - the number of shares to be bought back under this authorization may not exceed 10% of the total number of shares representing the company’s share capital, i.e. 48,993,741 shares as of 2.6 Non-capital securities January 1, 2008; The company has not issued any non-capital securities. - the price per share may not exceed 130 euros; - such shares may be acquired, in particular, to provide market 2.7 Securities giving access to the company’s capital liquidity services (purchases/sales) under a liquidity contract, to cover stock option plans, employee stock ownership plans No securities giving access to the company’s capital, other than or any other form of share allocation or share-based payment, share subscription options described in Section 3.4.2 of the to cover securities giving access to the Company’s shares, to Report of the Board of Directors to the Shareholders’ Meeting, be retired, or to be held so as to be exchanged or presented are outstanding as of December 31, 2007. as consideration at a later date for external growth operations.

2.8 Three-year summary of changes in the parent company’s share capital

(EUR thousands) Change in capital Capital after transaction

Number of Accumulated Type of transaction shares Par value Premiums Amount number of shares As of December 31, 2004 - - - - 146,981 489,937,410 Fiscal year 2005 - - - - 146,981 489,937,410 Fiscal year 2006 - - - - 146,981 489,937,410 Fiscal year 2007 - - - - 146,981 489,937,410 As of December 31, 2007 - - - - 146,981 489,937,410

3. ANALYSIS OF SHARE CAPITAL AND VOTING RIGHTS

3.1 Share ownership As of December 31, 2007, the company’s share capital comprised 489,937,410 shares. Of this total, taking into account shares held as treasury shares, voting rights were attached to 475,514,386 shares, including 225,670,036 with double voting rights. The breakdown of shares by type was as follows: - 235,002,908 pure registered shares; - 8,114,641 administered registered shares; - 246,819,861 bearer shares.

Number of Number of % of % of Shareholders shares voting rights (1) capital voting rights Groupe Arnault (2) 232,333,190 454,143,600 47.42 63.46 Other shareholders 257,604,220 261,463,846 52.58 36.54 Total as of December 31, 2007 489,937,410 715,607,446 100.00 100.00 (1) Theoretical total number of voting rights. As of December 31, 2007, the total number of voting rights net of shares without voting rights was 700,184,422. As of December 31, 2007, there were 15,423,024 treasury shares without voting rights. (2) Controlled by the family of Mr. Bernard Arnault, Groupe Arnault SAS is the holding company with ultimate control over LVMH.

172 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY General information regarding the parent company and its capital; stock market information

On the basis of registered shareholders and information as of of 8,007,588 being recognized as long term investments, the main December 2007 provided by a Euroclear survey of depositaries objective of which is to cover commitments for existing share with a minimum of 100,000 shares in the company and limited subscription option plans. In accordance with legal requirements, to shareholders owning at least 150 shares, the c ompany has about these shares are stripped of their voting rights. 40,110 shareholders. Resident and non-resident shareholders As of December 31, 2007, the employees of the company respectively represent 72% and 28% of the company’s share capital and of affiliated enterprises, as defined under Article L. 225-180 (see 2007 Annual Report, “Ownership structure”). of the Commercial Code, held 76,059 LVMH shares in employee To the best of the company’s knowledge: savings plans (equivalent to less than 0.1% of the company’s - one shareholder held at least 5% of the company’s share capital share capital). and voting rights as of December 31, 2007; During the 2007 fiscal year, Crédit Suisse and certain Crédit Suisse - no other shareholder held 5% or more of the company’s share capital subsidiaries, Caisse des D épôts and Nati xis informed the company or voting rights, either directly, indirectly, or acting in concert; on several occasions that they had exceeded or fallen below statutory - no shareholders’ agreement or any other agreement constituting shareholding thresholds in the range between 1% and 3% of the an action in concert existed involving at least 0.5% of the company’s share capital. According to the latest notices received company’s share capital or voting rights. in 2007 , Crédit Suisse and certain Crédit Suisse subsidiaries owned As of December 31, 2007, members of the Executive Committee 1.09% of the share capital and 0.75% of the theoretical voting and of the Board of Directors directly and personally held less than rights; Caisse des Dépôts held 1.44% of the share capital and 0.1% of the company’s share capital and voting rights. 0.99% of the theoretical voting rights and Natixis held 1.86% of the share capital and 1.27% of the theoretical voting rights. As of December 31, 2007, the company held 15,423,024 shares as treasury shares. 1,176,407 shares were recognized as short During the fiscal year ended December 31, 2007 and as of April term investments, 6,239,029 shares were allocated to cover 14, 2008, no public tender or exchange offer nor price guarantee commitments for share purchase option plans, with the balance was made by a third party involving the company’s shares.

3.2 Changes in share ownership during the last three fiscal years

As of December 31, 2007 As of December 31, 2006 As of December 31, 2005 % of % of % of Number % of Number % of Number % of Shareholders voting voting voting of shares capital of shares capital of shares capital rights (1) rights (1) rights (1) Groupe Arnault 232,333,190 47.42 63.46 232,933,190 47.54 63.33 232,819,190 47.52 63.29 Including: - Financière Jean Goujon 207,821,325 42.42 58. 08 207,821,325 42.42 58.59 207,821,325 42.42 58.57 - Financière Agache and 24,511,865 5.00 5. 38 25,111,865 5.12 4.74 24,997,865 5.10 4.72 related entities Treasury shares 15,423,024 3.15 2.16 17,618,089 3.60 2.48 19,293,947 3.94 2.72 Public registered 4,863,535 0.99 1.22 4,779,791 0.98 1.12 6,285,930 1.28 1.36 Public bearer 237,317,661 48.44 33.16 234,606,340 47.88 33.07 231,538,343 47.26 32.63 Total 489,937,410 100.00 100.00 489,937,410 100.00 100.00 489,937,410 100.00 100.00 (1) Theoretical voting rights.

3.3 Pledges of pure registered shares by main 3.4 Natural persons or legal entities that may exercise shareholders control over the company On March 26, 1997, Financière Jean Goujon pledged shares as As of December 31, 2007, Financière Jean Goujon held 207,821,325 collateral. The condition for the taking up of this collateral was shares in the company representing 42.42% of the share capital the reimbursement of the amounts guaranteed. This pledge was and 58.08% of the theoretical voting rights. The sole activity of withdrawn . Financière Jean Goujon is to hold LVMH shares.

Reference Document 2007 173 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY General information regarding the parent company and its capital; stock market information

As of December 31, 2007, Financière Jean Goujon was a wholly With respect to the various control holdings of the LVMH owned subsidiary of Christian Dior, the parent company of Group: Christian Dior Couture. - in December 2002, Financière Agache contributed its controlling As of the same date, Christian Dior, a company listed on Euronext interest in Christian Dior SA to its wholly owned subsidiary Paris by Nyse Euronext, was controlled through direct and indirect Semyrhamis; holdings totaling 69.35% of its share capital, by Financière Agache, - in December 2004, Montaigne Participations et Gestion merged itself controlled, through Montaigne Finance, a wholly owned with Groupe Arnault SAS. subsidiary of Groupe Arnault SAS, by the Arnault family.

4 MARKET FOR FINANCIAL INSTRUMENTS ISSUED BY LVMH

4.1 Market for LVMH shares

The company’s shares are listed on Euronext Paris (ISIN code 438,554,464 LVMH shares were traded in 2007 for a total FR0000121014) and they are eligible for the deferred settlement amount of 36 billion euros. This corresponds to an average daily service of Euronext Paris. LVMH shares are used as underlying volume of 1,719,821 shares. assets for negotiable options on Euronext.liffe. Since September 23, 2005, LVMH Moët Hennessy-Louis LVMH is included in the principal French and European indices Vuitton has entrusted a provider of financial services with the used by fund managers: CAC 40, DJ EuroStoxx 50, MSCI Europe, implementation of a liquidity contract in conformity with the FTSE Eurotop 100 and Euronext 100. Ethical Chart of AFEI (“Charte de déontologie de l’AFEI”) approved by the Autorité des Marchés Financiers in its decision of March LVMH’s market capitalization was 40.5 billion euros at year- 22, 2005, as published in Bulletin des annonces légales obligatoires end 2007, making it the eleventh largest on the Paris stock dated April 1, 2005. exchange.

Trading volumes and amounts on Euronext Paris and price trend over the last eighteen months

Opening price Closing price Number of Value of first day last day Highest * Lowest * shares traded shares traded (EUR) (EUR) (EUR) (EUR) (EUR billions) 2006 SEPTEMBER 80.30 81.25 81.65 76.95 26,849,683 2.1 OCTOBER 81.75 81.65 83.90 79.80 22,942,975 1.9 NOVEMBER 81.30 78.30 84.90 77.75 38,006,065 3.1 DECEMBER 78.50 79.95 80.70 75.75 36,898,470 2.9 2007 JANUARY 80.35 80.90 81.95 77.10 36,232,460 2.9 FEBRUARY 82.00 83.73 89.20 80.30 40,375,013 3.4 MARCH 83.25 83.05 84.86 80.12 38,786,977 3.2 APRIL 82.95 85.97 88.00 82.36 30,714,652 2.6 MAY 86.30 87.72 88.47 83.72 37,193,694 3.2 JUNE 87.40 85.54 87.53 82.32 36,780,907 3.1 JULY 85.25 82.76 85.64 79.02 36,279,177 3.0 AUGUST 81.10 81.99 84.40 77.06 42,901,690 3.5 SEPTEMBER 82.29 84.07 84.15 78.00 29,767,919 2.4 OCTOBER 83.76 88.88 89.36 83.30 34,738,329 3.0 NOVEMBER 89.18 82.94 89.20 77.63 45,523,655 3.7 DECEMBER 83.04 82.68 85.90 80.25 29,259,991 2.4 2008 JANUARY 82.98 68.53 83.93 61.95 68,024,571 4.9 FEBRUARY 69.16 68.23 73.32 66.50 43,952,594 3.1 (*) Prices recorded during market trading hours.

174 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY General information regarding the parent company and its capital; stock market information

4.2 Stock repurchase program Dividend distribution in respect of fiscal years 2003 to 2007 LVMH has implemented a stock repurchase program that allows it to buy back up to 10% of its share capital. This program, which Year Gross dividend per share (1) Dividend distribution replaced the program approved by the Shareholders’ Meeting of (EUR) (EUR millions) May 11, 2006, was approved by the Shareholders’ Meeting of 2007 (2) 1.60 784 May 10, 2007. Within this framework, between January 1 and 2006 1.40 686 December 31, 2007, stock market purchases of its own shares by 2005 1.15 563 LVMH SA net of disposals (excluding calls and options exercised) 2004 0.95 465 amounted to 82,596 shares, or 0.02% of its share capital. LVMH also exercised 1,653,500 calls on its own shares and acquired 2003 0.85 416 (1) Exclude the impact of tax regulations applicable to the beneficiary and net of the 1,829,000 calls. amount of the “avoir fiscal” tax credit in 2003. (2) Proposed to the Shareholders’ Meeting of May 15, 2008. 4.3 LVMH bonds market The company has a steady dividend distribution policy, designed to Among the bonds issued by LVMH Moët Hennessy-Louis Vuitton ensure a stable return to shareholders, while making them partners SA outstanding on December 31, 2007, the bonds mentioned in the growth of the Group. below are listed for trading. Pursuant to current laws in France, dividends and interim Bonds listed in Paris and in Luxembourg dividends uncollected within five years become void and are paid to the French state. Currency Amount Year of Year of Interest outstanding issue maturity rate (in currency) 4.5 Performance per share EUR 750,000,000 2003 2010 5% EUR 500,000,000 2001 2008 6.125% (EUR) 2007 2006 2005 Diluted Group share of net profit 4.22 3.94 3.04 Bonds listed in Luxembourg Gross dividend 1.60 1.40 1.15 Change compared to previous year 14.3% 21.7% 21.1% Currency Amount Year of Year of Interest outstanding issue maturity rate Highest share price 89.36 85.50 76.85 (in currency) Lowest share price 77.06 69.60 52.95 EUR 600,000,000 2005 2012 3.375% Share price on December 31 82.68 79.95 75.05 EUR 600,000,000 2004 2011 4.625% Change compared to previous year 3.4% 6.5% 33.2% CZK 770,000,000 2004 2009 variable

Bonds listed in Zurich

Currency Amount Year of Year of Interest outstanding issue maturity rate (in currency)

CHF 300,000,000 2007 2013 3.375%

4.4 Dividend A gross dividend of 1.60 euro per share is being proposed for fiscal year 2007 in respect of the 489,937,410 shares representing share capital, up 14.3% compared to the dividend paid for fiscal year 2006. The total LVMH Moët Hennessy-Louis Vuitton SA distribution will amount to 784 million euros for fiscal year 2007, before the effect of treasury shares. The distribution for fiscal year 2006 was 686 million euros.

Reference Document 2007 175 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 176 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH MOËT HENNESSY ◆ LOUIS VUITTON SA

REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS’ MEETING

Page

1. COMMENTS ON THE LVMH PARENT COMPANY FINANCIAL STATEMENTS 178 1.1 COMMENTS ON THE BALANCE SHEET 178 1.2 TREASURY SHARE TRANSACTIONS 179 1.3 PARENT COMPANY RESULTS AND OUTLOOK FOR THE FUTURE 179

2. APPROPRIATION OF EARNINGS FOR THE YEAR 180

3. SHAREHOLDERS – SHARE CAPITAL – SHARE OPTION PLANS 181 3.1 MAIN SHAREHOLDERS 181 3.2 SHARES HELD BY MEMBERS OF THE MANAGEMENT AND SUPERVISORY BODIES 181 3.3 EMPLOYEE SHARE OWNERSHIP 181 3.4 SHARE SUBSCRIPTION AND PURCHASE OPTION PLANS INSTITUTED BY LVMH 181 3.5 ALLOCATION OF BONUS SHARES TO GROUP EMPLOYEES 184 3.6 ACTIVITY DURING THE FISCAL YEAR 185 3.7 OPTION PLANS INSTITUTED BY SUBSIDIARIES 185

4. FINANCIAL AUTHORIZATIONS 186 4.1 AUTHORIZATION TO ENGAGE IN STOCK MARKET TRANSACTIONS 186 4.2 AUTHORIZATION TO REDUCE THE SHARE CAPITAL 186 4.3 AUTHORIZATION TO INCREASE THE SHARE CAPITAL 186 4.4 EMPLOYEE SHARE OWNERSHIP 186

5. AUTHORIZATIONS GRANTED TO THE BOARD OF DIRECTORS IN RESPECT OF CAPITAL INCREASES 186

6. ADMINISTRATIVE MATTERS 187 6.1 COMPOSITION OF THE BOARD OF DIRECTORS 187 6.2 LIST OF POSITIONS AND OFFICES HELD BY THE DIRECTORS 187 6.3 COMPENSATION, BENEFITS IN KIND AND COMMITMENTS GIVEN TO COMPANY OFFICERS 187

7. SUMMARY OF TRANSACTIONS IN LVMH SECURITIES DURING THE YEAR BY DIRECTORS AND RELATED PERSONS 188

8. INFORMATION THAT COULD HAVE A BEARING ON A TAKEOVER BID OR EXCHANGE OFFER 188

9. INFORMATION CONCERNING THE EMPLOYMENT-RELATED AND ENVIRONMENTAL CONSEQUENCES OF THE COMPANY’S OPERATIONS 189

10. SUBSEQUENT EVENTS 189

Reference Document 2007 177 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS’ MEETING

1. COMMENTS ON THE LVMH PARENT COMPANY FINANCIAL STATEMENTS

The balance sheet, income statement and notes to the financial the same accounting policies and methods as those used in the statements of LVMH for the year ended December 31, 2007 have previous year. been prepared in accordance with French legal requirements and

1.1 Comments on the balance sheet

1.1.1 Change in the equity investment portfolio 1.1.3 Hedging transactions The gross value of the equity investment portfolio was 11.3 billion Financial instruments are regularly used by LVMH for its own euros, an increase of 1.2 billion euros compared to year-end 2006. account to hedge against the foreign exchange or interest rate This change corresponds to the amount of LVMH’s subscription risks to which its financial assets or liabilities, including dividends to the capital increase of its French subsidiary Sofidiv S.A.S., receivable from subsidiaries and foreign equity investments, are with its interest remaining unchanged at 100% following this exposed. Each hedging instrument used is allocated to the balances operation. or transactions hedged.

1.1.2 Financial structure Given its role within the Group, LVMH may exceptionally use financial instruments that are qualified as foreign currency In addition to its portfolio management activities, LVMH has a hedging instruments in the consolidated financial statements cash pooling arrangement in euros and foreign currencies with but not matched in the parent company financial statements, or its French subsidiaries and certain European subsidiaries. It also that are allocated to underlying amounts maintained at historical centralizes their financing requirements and manages interest rate exchange rates. risk on borrowings. The changes in financial structure from one year to the next chiefly reflect changes in the balances relating to Lastly, with respect to the company’s centralization of foreign these arrangements. In particular, in the balance sheet the amounts exchange hedging transactions, the hedging contracts underwritten of receivables from controlled entities and miscellaneous loans and by LVMH on behalf of its French subsidiaries and certain European borrowings vary depending on the financing needs of subsidiaries subsidiaries are symmetrically covered in the market in terms of and on any cash surplus they have generated. hedge types, currencies, amounts and hedging periods. As a result, the company has no net foreign exchange exposure. LVMH also provides foreign currency hedges to its French subsidiaries and certain European subsidiaries and takes out Counterparties for hedging contracts are selected on the basis similar cover in the financial markets. This centralized approach to of their international credit rating as well as for reasons of hedging affects the foreign currency gains and losses recognized in diversification. the income statement, although these effects offset each other. 1.1.4 Share capital In 2007, LVMH issued 300 million Swiss francs worth of 3.375% Share capital remained unchanged at 146.9 million euros. bonds (the total issue equivalent to 183 million euros), redeemable at par in full in 2013. Excess cash flows, after all management and investment activities and after dividend payments, enabled the company to amortize 350 million euros worth of long term borrowings at their maturity, comprising 200 million euros in bonds issued in 2004 and 150 million euros in respect of a bank loan approved in 2001. Finally, the amount of commercial paper outstanding increased by 550 million euros during the year.

178 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

1.2 Treasury share transactions The company performed the following treasury share transactions during the year:

Short term investments Long term investments

Share purchase Other plans Liquidity contract Total option plans (EUR millions) Number EUR Number EUR Number EUR Number EUR Number EUR As of January 1 10,797,426 532.0 261,267 15.3 217,000 17.0 11,275,693 564.3 6,342,396 300.4 Purchases 1,653,500 137.3 169,596 14.8 4,537,295 375.0 6,360,391 527.2 - - Sales - - - - (4,624,295) (381.3) (4,624,295) (381.3) - - Transfers (2,373,795) (115.9) 708,603 37.7 - - (1,665,192) (78.2) 1,665,192 78.2 Options exercised (3,838,102) (221.9) - - - - (3,838,102) (221.9) - - Shares granted - - (93,059) (5.6) - (93,059) (5.6) - - As of December 31 6,239,029 331.5 1,046,407 62.4 130,000 10.7 7,415,436 404.6 8,007,588 378.7

Share purchases were completed under the stock repurchase As of December 31, 2007, LVMH treasury shares represented program authorized by the Combined Shareholders’ Meeting of a total of 3.15% of share capital. May 10, 2007. Costs incurred in the above transactions totaled 0.25 million euros. Reflecting the impact of the liquidity line, the average share purchase and sales price was 83 euros.

1.3 Parent company results and outlook for the future Operating income consists chiefly of dividends received from Net exceptional income chiefly consists of the gain of 449 million subsidiaries and other investments. euros recorded as a result of the retirement of perpetual bonds issued in 1990, with net changes in the impairment of equity For the most part, financial income is attributable to cash pooling investments accounting for the remainder. and centralized foreign exchange hedging transactions conducted with the Group’s subsidiaries, as described above and in the notes Finally, with regard to the preparation of the company’s income to the financial statements. tax return, no expenses were considered as non-deductible within the meaning of Articles 39-4, 39-5, 54 quater and 223 quinquies Income tax includes the portion calculated on the basis of a group of the French General Tax Code. tax consolidation regime with certain subsidiaries, in the amount of 13 million euros.

Reference Document 2007 179 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

2. APPROPRIATION OF EARNINGS FOR THE YEAR

The proposed appropriation of the amount available for distribution for the fiscal year is as follows:

(EUR) Net profit for the year ended December 31, 2007 783,412,326.27 Allocation to the legal reserve - Retained earnings before appropriation 2,759,550,929.12 Total amount available for distribution (1) 3,542,963,255.39

Proposed appropriation: - reserve for long term capital gains Nil - statutory dividend of 5% or EUR 0.015 per share 7,349,061.15 - additional dividend of EUR 1.585 per share 776,550,794.85 - retained earnings after appropriation 2,759,063,399.39 3,542,963,255.39

(1) For information, as of December 31, 2007, the company owned 15,423 thousand of its own shares, representing a non-distributable amount of 783 million euros.

Should this appropriation be approved, the total gross dividend Finally, should the Company hold, at the time of payment of would be 1.60 euro per share. As an interim dividend of this balance, any treasury shares under prior authorizations, the 0.35 euro per share was paid on December 3, 2007, the balance of corresponding amount of unpaid dividends will be allocated to the dividends due per share is equal to 1.25 euro . It will be paid retained earnings. out on May 23, 2008. As required by law, the Shareholders’ Meeting observes that the With respect to this dividend distribution, individuals whose gross dividends per share paid out in respect of the past three fiscal tax residence is in France will be entitled to the 40% deduction years were as follows: provided under Article 158 of the French Tax Code.

Fiscal year Nature Number of shares Payment Gross dividend (1) representing share capital date (EUR)

2006 Interim 489,937,410 December 1, 2006 0.30 Final " May 15, 2007 1.10 Total 1.40 2005 Interim 489,937,410 December 2, 2005 0.25 Final " May 18, 2006 0.90 Total 1.15 2004 Interim 489,937,410 December 2, 2004 0.25 Final " May 18, 2005 0.70 Total 0.95 (1) Excludes the impact of tax regulation applicable to the beneficiary.

180 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

3. SHAREHOLDERS – SHARE CAPITAL – SHARE OPTION PLANS

3.1 Main shareholders 3.4 Share subscription and purchase option plans instituted by LVMH As of December 31, 2007, Groupe Arnault SAS controlled 47.42% of the company’s capital, compared with 47.54% as of December The beneficiaries of the option plans are selected in accordance 31, 2006, and held 63.46% of the voting rights, compared with with the following criteria: performance, development potential 63.33% as of December 31, 2006. and contribution in a key position. Twelve share purchase plans and four share subscription plans were 3.2 Shares held by members of the management and in force as of December 31, 2007. The exercise price of options is equal to the reference price calculated in accordance with applicable supervisory bodies laws for the plan launched in 2007, and to 95% of this same As of December 31, 2007, the members of the Board of Directors reference price for all earlier plans. Each plan has a term of ten and Executive Committee held directly, in a personal capacity years. Share purchase options may be exercised after the end of a and in the form of registered shares, less than 0.1% of the share period of three years from the plan’s commencement date, while share subscription options may be exercised after the end of a capital. period of four years. Moreover, in its deliberation of May 14, 2001, the Board of 3.3 Employee share ownership Directors instituted an extraordinary eight-year share purchase As of December 31, 2007, the employees of the company and its option plan named OPAL, intended for a large majority of the affiliates, within the meaning of Article L. 225-180 of the French Group’s employees. The exercise period for these purchase options Commercial Code, held 76,059 LVMH shares (i.e. less than 0.1% began on May 14, 2005. of the share capital) in connection with corporate savings plans. For all plans, one option gives the right to one share.

3.4.1 Share purchase option plans

• Under the authorization granted by the Meeting held on June 8, 1995

Plan commencement date Number of Number of options granted (1) Exercise Number Number of beneficiaries price of options options (2) not Total of which of which (EUR) exercised in exercised as of company the first ten 2007 (2) 12/ 31/ 2007 officers employees

May 29, 1997 (3) 319 233,040 97,500 46,000 37.50 469,875 - January 29, 1998 346 269,130 97,500 65,500 25.92 328,340 109,885 March 16, 1998 4 15,800 - 15,800 31.25 55,000 - January 20, 1999 364 320,059 97,000 99,000 32.10 660,270 203,790 September 16, 1999 9 44,000 5,000 39,000 54.65 30,000 150,000 January 19, 2000 552 376,110 122,500 81,000 80.10 29,000 1,603,850 (1) Number of options as of the plan’s commencement date, without any restatement for the adjustments related to the June 1999 grant of bonus shares or the July 2000 five-for-one stock split. (2) Adjusted for the transactions referred to under (1). (3) Plan expired on May 28, 2007.

Reference Document 2007 181 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

• Under the authorization granted by the Meeting held on May 17, 2000

Plan commencement date Number of Number of options granted Exercise Number Number of beneficiaries price of options options not Total of which of which (EUR) exercised exercised as of company the first ten in 2007 12/ 31/ 2007 officers employees

January 23, 2001 786 2,649,075 987,500 445,000 65.12 339,585 1,847,315 March 6, 2001 1 40,000 - 40,000 63.53 5,000 30,000 May 14, 2001 44,669 1,105,877 (1) - - 66.00 48,600 481,094 May 14, 2001 4 552,500 450,000 102,500 61.77 - 552,500 September 12, 2001 1 50,000 - 50,000 52.48 - 50,000 January 22, 2002 993 3,284,100 1,215,000 505,000 43.30 (2) 317,105 1,921,962 May 15, 2002 2 8,560 - 8,560 54.83 - 5,560 January 22, 2003 979 3,213,725 1,220,000 495,000 37.00 (3) 1,555,327 1,297,073 (1) 25 options were granted to each beneficiary. (2) The exercise price is 45.70 euros for Italian residents and 43.86 euros for American residents. (3) The exercise price for Italian residents is 38.73 euros.

3.4.2 Share subscription option plans

• Under the authorization granted by the Meeting held on May 15, 2003

Plan commencement datey Number of Number of options granted Exercise Number Number of beneficiaries price of options options not Total of which of which (EUR) exercised in exercised as of company the first ten 2007 12/ 31/2007 officers employees January 21, 2004 906 2,747,475 972,500 457,500 55.70 (1) - 2,660,675 May 12, 2005 495 1,924,400 862,500 342,375 52.82 (1) - 1,899,325 (1) The exercise prices for Italian residents applicable to the plans commencing on January 21, 2004 and May 12, 2005 are 58.90 euros and 55.83 euros, respectively.

• Under the authorization granted by the Meeting held on May 11, 2006

Plan commencement date Number of Number of options granted Exercise Number Number of beneficiaries price of options options not Total of which of which (EUR) exercised in exercised as of company the first ten 2007 12/ 31/ 2007 officers employees May 11, 2006 520 1,789,359 852,500 339,875 78.84 (1) - 1,776,009 May 10, 2007 524 1,679,988 805,875 311,544 86.12 - 1,679,384 (1) The exercise price for Italian residents is 82.41 euros.

182 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

3.4.3 Options granted to and exercised by the Group’s officers and the Group’s first ten employees

• Options granted during the year to company officers

Beneficiaries Company granting the options Date of Number Exercise Maturity date the plan of options price (EUR) of the plan Bernard Arnault LVMH Moët Hennessy-Louis Vuitton SA May 10, 2007 427,500 86.12 May 9, 2017 Antoine Arnault " May 10, 2007 9,500 86.12 May 9, 2017 Delphine Arnault-Gancia " May 10, 2007 9,500 86.12 May 9, 2017 Nicolas Bazire " May 10, 2007 142,500 86.12 May 9, 2017 Antonio Belloni " May 10, 2007 142,500 86.12 May 9, 2017 Pierre Godé " May 10, 2007 15,000 86.12 May 9, 2017 Gilles Hennessy " May 10, 2007 19,000 86.12 May 9, 2017 Patrick Houël " May 10, 2007 40,375 86.12 May 9, 2017

In application of the decision of the Board of Directors’ meeting on May 10, 2007, upon exercising their options, the Chairman and Chief Executive Officer and the Group Managing Director are required to retain, until the conclusion of their term in office, a number of shares determined on the basis of the exercise date for the options and corresponding to a multiple of their total gross compensation.

• Options exercised during the fiscal year by company officers

Beneficiaries Date of Number Exercise price the plan of options (EUR)

Bernard Arnault May 29, 1997 385,000 37.50 " January 29, 1998 272,180 25.92 " January 20, 1999 385,000 32.10 " January 22, 2003 600,000 37.00 Nicolas Bazire September 16, 1999 25,000 54.65 " January 23, 2001 115,000 65.12 " January 22, 2003 200,000 37.00 Pierre Godé January 20, 1999 110,000 32.10 " January 22, 2002 52,500 43.30 " January 22, 2003 150,000 37.00 Gilles Hennessy January 29, 1998 8,250 25.92 Patrick Houël January 22, 2002 36,000 43.30 " January 22, 2003 45,500 37.00

• Options granted during the fiscal year to the ten employees of the Group, other than company officers, holding the largest number of options

Company granting the options Date of Number Exercise price the plan of options (EUR) LVMH Moët Hennessy-Louis Vuitton SA May 10, 2007 311,544 86.12

Reference Document 2007 183 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

• Options exercised during the fiscal year by the ten employees of the Group, other than company officers, having exercised the largest number of options

Company granting the options Date of Number Exercise price the plan of options (EUR) LVMH Moët Hennessy-Louis Vuitton SA May 29, 1997 11 ,000 37.50 " January 29, 1998 2,750 25.92 " March 16, 1998 55,000 31.25 " January 20, 1999 84,700 32.10 " September 16, 1999 5,000 54.65 " January 23, 2001 25,000 65.12 " March 6, 2001 5,000 63.53 " January 22, 2002 89,000 43.30 " January 22, 2003 101,450 37.00

3.5 Allocation of bonus shares to Group employees Beneficiaries of bonus shares are selected among the employees of the Group’s French subsidiaries on the basis of their level of responsibility and their individual performance. The allocation of bonus shares to their beneficiaries shall only be definitive after a vesting period of two years. In addition, the shares shall be subject to a compulsory two-year holding period as from the end of the vesting period.

Under the authorization granted by the Meeting held on May 12, 2005

Plan commencement date Number of Number of bonus shares granted Shares Balance as of beneficiaries vested 12/ 31/ 2007 Number Of which Of which of shares company first ten granted initially officers employees May 12, 2005 333 97,817 - 23,325 93,059 - May 11, 2006 347 164,306 - 30,575 - 159,696 May 10, 2007 348 152,076 - 34,805 - 151,808

• Shares vested to company officers during the year: Company officers do not receive bonus shares.

• Shares vested during the year to the Group’s ten employees who are not C ompany officers having received the largest number of shares:

Company granting the options Plan commencement date Number of shares LVMH Moët Hennessy-Louis Vuitton SA May 12, 2005 23,325

184 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

3.6 Activity during the fiscal year

Share purchase option plans

(Number of options) 2007 2006 2005 Options outstanding as of January 1 12,635,926 14,927,777 17,148,615 Options granted - -- Options exercised (3,838,102) (2,242,958) (1,264,340) Expired options (544,795) (48,893) (956,498) Options outstanding as of December 31 8,253,029 12,635,926 14,927,777

Share subscription option plans

(Number of options) 2007 2006 2005 Options outstanding as of January 1 6,426,534 4,637,175 2,747,475 Options granted 1,679,988 1,789,359 1,924,400 Options exercised - -- Expired options (91,129) - (34,700) Options outstanding as of December 31 8,015,393 6,426,534 4,637,175

Allocation of bonus shares

(Number of shares) 2007 2006 2005 Non-vested shares as of January 1 261,448 97,817 - Non-vested shares 152,076 164,306 97,817 Vested shares (93,059) -- Expired bonus shares allocated (8,961 ) (675) - Non-vested shares as of December 31 311,504 261,448 97,817

3.7 Option plans instituted by subsidiaries A stock option plan was instituted by LVMH Participations BV on July 24, 2007. As of the date of preparation of this Reference Document, no option has been exercised and this plan was cancelled.

Reference Document 2007 185 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

4. FINANCIAL AUTHORIZATIONS

4.1 Authorization to engage in stock market transactions The Board proposes that this authorization be renewed for a period of eighteen months. The Combined Shareholders’ Meeting of May 10, 2007 authorized the Board of Directors to initiate a share buyback program and set at 10% of the share capital the maximum number of shares that 4.4 Employee share ownership may be acquired and at 130 euros per share the maximum unit 4.4.1 The Combined Shareholders’ Meeting of May 12, 2005 purchase price. authorized the Board of Directors to grant existing or newly issued The Board proposes to this Meeting that this authorization be bonus shares to certain Group employees and directors. renewed for a term of eighteen months, it being understood that The Board proposes that this authorization, which cancels and such shares may be acquired, in particular, to provide market replaces the previous authorization granted by the Combined liquidity services (purchases/sales) under a liquidity contract, to Shareholders’ Meeting of May 12, 2005, be renewed for a period of cover stock option plans, employee stock ownership plans or any thirty-eight months. This new authorization will allow the Board other form of share allocation or share-based payment, to cover of Directors to grant bonus shares, on one or more occasions, in an securities giving access to the Company’s shares, to be retired, or amount not to exceed 1% of the Company’s share capital. to be held so as to be exchanged or presented as consideration at a later date for external growth operations. The Board of Directors shall be entitled to set the vesting period either at two years, with a requirement to hold the shares for two The total number of shares that may be acquired by the company more years, or at four years, without any requirement to hold the will be limited to 10% of the share capital. The maximum purchase shares once fully vested. price per share will be 130 euros. The Board of Directors will inform the Shareholders’ Meeting each year of any operations carried out under this authorization. 4.2 Authorization to reduce the share capital 4.4.2 Pursuant to Article L. 225-129-6 of the French Commercial Pursuant to Article L. 225-209 of the French Commercial Code, Code, we also propose that your Board of Directors be delegated the Combined Shareholders’ Meeting of May 10, 2007 authorized the authority to increase the share capital in favor of employees the Board of Directors, should it consider that such an action serves of the Group who are members of a company savings plan and to the shareholders’ interests, to reduce the company’s share capital exclude, to that end, the shareholders’ pre-emption right in favor through cancellation of shares acquired in connection with the of this category of individuals. share buy-back programs. The share issuance price shall be determined in accordance The Board proposes that this authorization be renewed for a period with the provisions of Article L. 443-5, paragraph 3 of the French of eighteen months. Labor Code. This authority is delegated for a term of twenty-six months and 4.3 Authorization to increase the share capital will enable the Board of Directors to increase the share capital, on The Combined Shareholders’ Meeting of May 10, 2007 delegated one or more occasions, within the limit of 3% of the share capital. to the Board of Directors the authority to increase the share capital It cancels and replaces that granted by the Combined Shareholders’ through issuance of any investment securities giving access, Meeting of May 10, 2007. whether immediately or over time, to the share capital or giving a right to a receivable, in favor of credit institutions or companies governed by the French Insurance Code or the foreign equivalent 5. AUTHORIZATIONS GRANTED TO THE BOARD thereof in connection with complex financial transactions aimed OF DIRECTORS IN RESPECT OF CAPITAL at optimizing the Company’s balance sheet structure. Should this INCREASES delegation be used, the issue price of shares will need to be at least equal to the weighted average of the share price for the last three Detailed information pertaining to the authorizations granted to the trading days preceding the determination of this issue price less, Board of Directors to increase the share capital and the use made of these where applicable, a discount not to exceed 5%. authorizations is provided in the “General information concerning In the event of any excess subscriptions in connection with a capital the capital” section of the Reference Document, under paragraph 2.3. increase, the number of shares to be issued may be increased by the Board of Directors in accordance with applicable laws.

186 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

6. ADMINISTRATIVE MATTERS

6.1 Composition of the Board of Directors 6.2 List of positions and offices held by the D irectors It is recommended that you: The list of all positions and offices held by each Director during the last five years is provided in the “Executive and Supervisory bodies - renew the terms of office as directors of Messrs. Nicolas Bazire, – Statutory Auditors” section of the Reference Document. Antonio Belloni, Diego Della Valle and Gilles Hennessy, whose current terms of office expire at the end of this Meeting; - appoint Mr. Charles de Croisset as Director.

6.3 Compensation, benefits in kind and commitments given to company officers (1)

Members of the Board of Directors Fixed compensation Variable compensation Directors’ fees

(EUR) 2007 2006 2007 2006 2007 2006

Bernard Arnault (3) 1,702,011 1,739,221 2,300,000 2,200,000 119,060 119,056 Antoine Arnault (3) 150,000 86,931 20,000 - 45,000 30,000 Delphine Arnault-Gancia (3) 90,000 - 20,000 - 58,158 65,333 Jean Arnault - - - - 45,000 49,709 Nicolas Bazire (2) (3) 1,235,000 1,235,000 2,150,000 1,950,000 55,000 55,000 Antonio Belloni (2) (3) 3,089,870 2,951,436 2,086,590 1,925,795 87,245 79,623 Antoine Bernheim - - - - 500,030 309,528 Nicholas Clive-Worms - - - - 67,500 67,500 Diego Della Valle - - - - 45,000 45,000 Albert Frère - - - - 67,500 67,500 Jacques Friedmann - - - - 55,000 55,000 Pierre Godé (3) 710,878 159,261 - - 131,463 133,312 Gilles Hennessy (2) (3) 500,000 453,100 321,653 281,710 67,500 67,500 Patrick Houël (2) (3) 632,075 609,892 374,387 356,559 78,453 78,453 Arnaud Lagardère - - - - 45,000 45,000 Lord Powell of Bayswater 299,401 300,719 - - 45,000 45,000 Felix G. Rohatyn 218,882 238,892 - - 45,000 45,000 Hubert Védrine - - - - 45,000 45,000

(1) Gross compensation and benefits in kind paid or borne by the company and the companies controlled by it as well as any compensation and benefits paid or borne by Financière Jean Goujon and Christian Dior, referred to under Article L. 225-102-1 of the French Commercial Code. (2) Benefit in kind: company car. (3) The details of the capital securities awarded to members of the Board of Directors during the fiscal year are provided in §3.4.3.

Subject to certain conditions, notably the correct performance of at least six years and that they assert at the same time their of their duties, members of the Executive Committee and where entitlement to their basic retirement benefits under compulsory applicable Company officers, may benefit from a contractual pension schemes. This supplemental payment corresponds to a indemnity on leaving the company, in addition to the partial or specific percentage of the beneficiary’s salary, to which a ceiling total maintenance of their right to exercise any stock options that is applied on the basis of the reference salary determined by the they received prior to their departure. French social security scheme. Provisions recognized in 2007 Upon their retirement, C ompany officers who serve on the Executive for these supplemental retirement benefits are included in the Committee may receive a supplemental retirement benefit provided amount shown for post-employment benefits under Note 30.3 of they have been members of the Executive Committee for a period the consolidated financial statements.

Reference Document 2007 187 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

7. SUMMARY OF TRANSACTIONS IN LVMH SECURITIES DURING THE YEAR BY DIRECTORS AND RELATED PERSONS (1)

Person Type of transaction Number of shares Average price (EUR) Bernard Arnault Purchase (2 ) 1,642,180 34.13 Company (-ies) related to the family of B. Arnault Sale 600,000 87.58 Antoine Arnault Sale 107,000 85.97 " Purchase 2,000 80.78 Delphine Arnault-Gancia Sale 162,000 85.92 " Purchase 9,800 81.44 Nicolas Bazire Sale 215,000 85.02 " Purchase (2 ) 340,000 46.15 " Sale of calls 275,000 " Purchase of puts 275,000 Person(s) connected with Nicolas Bazire Sale 125,000 86.35 Pierre Godé Sale 110,000 84.27 " Purchase (2 ) 312,500 36.33 Gilles Hennessy Purchase (2 ) 8,250 25.92 Patrick Houël Sale 25 84.10 " Purchase (2 ) 81,525 39.79 (1) As defined in Article R. 621-43-1 of the Code Monétaire et Financier. (2 ) Options exercised to purchase or subscribe to shares.

8. INFORMATION THAT COULD HAVE A BEARING ON A TAKEOVER BID OR EXCHANGE OFFER

Pursuant to the provisions of Article L. 225-100-3 of the French - increase the share capital, with or without shareholders’ pre- Commercial Code, the capital structure and other information emption rights, in a total nominal amount not to exceed 30 million that could have a bearing on a takeover bid or exchange offer is euros, or 20% of the Company’s current share capital; and presented below: - grant share subscription options, within the limit of 3% of • Capital structure of the company: the company is controlled by the share capital; Groupe Arnault SAS, which controlled 47.42% of the capital - grant free shares, to be issued, within the limit of 1% of the and 63.46% of the voting rights as of December 31, 2007. share capital. • Share issuance and buybacks: under various resolutions, the The law provides for the suspension during the period of a takeover Shareholders’ Meeting has delegated to the Board of Directors bid or exchange offer of any delegation whose application would full powers to: be likely to cause the operation to fail.

188 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

9. INFORMATION CONCERNING THE EMPLOYMENT-RELATED AND ENVIRONMENTAL CONSEQUENCES OF THE COMPANY’S OPERATIONS

The information concerning the employment-related and environmental consequences of the operations of the company and its subsidiaries is provided in the Report of the Board of Directors on Group management.

10. SUBSEQUENT EVENTS

There were no significant subsequent events as of the date on which the accounts were approved for publication.

Reference Document 2007 189 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 190 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH MOËT HENNESSY ◆ LOUIS VUITTON SA

STOCK REPURCHASE PROGRAMS

Page

1. SPECIAL REPORT ON THE STOCK REPURCHASE PROGRAMS 192

2. DESCRIPTION OF THE MAIN CHARACTERISTICS OF THE STOCK REPURCHASE PROGRAM PRESENTED TO THE COMBINED SHAREHOLDERS’ MEETING OF MAY 15, 2008 FOR APPROVAL UNDER THE TENTH RESOLUTION 193

3. SUMMARY TABLE DISCLOSING THE TRANSACTIONS PERFORMED BY THE ISSUER INVOLVING ITS OWN SHARES FROM MARCH 1, 2007 TO DECEMBER 31, 2007 194

Reference Document 2007 191 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Stock repurchase programs

STOCK REPURCHASE PROGRAMS

1. SPECIAL REPORT ON THE STOCK REPURCHASE PROGRAMS

This report is presented in application of the provisions of Article L. 225-209 of the Commercial Code, in order to provide information to the Shareholders’ Meeting concerning any transactions by the Company involving its own shares performed between March 1, 2007 and December 31, 2007 as part of the stock repurchase programs authorized by the Combined Shareholders’ Meetings of May 11, 2006 and May 10, 2007, respectively. Under the liquidity contract concluded by the Company with Oddo & Cie Entreprise d’Investissement and Oddo Corporate Finance on September 23, 2005, the Company acquired 3,801,795 LVMH shares at the average price per share of 83.10 euros and sold 3,769,595 LVMH shares at the average price per share of 83.62 euros. LVMH also directly acquired 169,596 of its own shares to cover plans. In addition, the Company exercised 1,375,500 options to purchase its own shares. The table below provides an overview of the transactions carried out, at value date between March 1, 2007 and May 10, 2007, and between May 11, 2007 and December 31, 2007, grouped by purpose:

(Number of shares) Liquidity Coverage of Coverage of securities Exchange or payment Shares Total contract plans giving access to in connection with retired Company shares acquisitions Balance as of February 28, 2007 97,800 17,001,492 - - - 17,099,292 Purchases 959,877 100,000 - - - 1,059,877 Average price (in euros) 83.40 87.95 83.83 Sales (957,618) - - - - (957,618) Average price (in euros) 84.36 84.36 Exercise of stock option plans - (391,582) - - - (391,582) Average price (in euros) 41.43 41.43 Exercise of call options - 434,000 - - - 434,000 Average price (in euros) 37.00 37.00 Bonus share awards ------Reallocations for other purposes ------Balance as of May 10, 2007 100,059 17,143,910 - - - 17,243,969 Purchases 2,841,918 69,596 - - - 2,911,514 Average price (in euros) 83.00 86.98 83.10 Sales (2,811,977) - - - - (2,811,977) Average price (in euros) 83.37 83.37 Exercise of stock option plans - (2,768,923) - - - (2,768,923) Average price (in euros) 37.37 37.37 Exercise of call options - 941,500 - - - 941,500 Average price (in euros) 30.52 30.52 Bonus share awards (93,059) (93,059) Reallocations for other purposes ------Balance as of December 31, 2007 130,000 15,293,024 - - - 15,423,024

192 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Stock repurchase programs

During this period, the Company bought call options on 1,429,000 shares, thus 0.3% of its share capital, of which 1,089,000 from March 1, 2007 to May 10, 2007, and 340,000 from May 11, 2007 to December 31, 2007. As of December 31, 2007, taking into account the 1,375,500 options exercised during this period, call options on 2,014,000 shares were held by the Company, in order to cover stock option plans. The Company did not retire any shares during the twenty-four months preceding December 31, 2007.

2. DESCRIPTION OF THE MAIN CHARACTERISTICS OF THE STOCK REPURCHASE PROGRAM PRESENTED TO THE COMBINED SHAREHOLDERS’ MEETING OF MAY 15, 2008 FOR APPROVAL UNDER THE T ENTH RESOLUTION

• Securities concerned: shares issued by LVMH Moët Hennessy-Louis Vuitton SA. • Maximum portion of the capital that may be purchased by the Company: 10%. • Maximum number of its own shares that may be acquired by the Company: 48,993,741, but taking into account the 15,423,024 shares held as treasury shares and the 2,014,000 call options held as of December 31, 2007, only 31,556,717 treasury shares are available to be acquired. • Maximum price per share: 130 euros. • Objectives: - buy and sell securities under the liquidity contract implemented by the Company; - buy shares to cover stock option plans, the granting of bonus shares or any other allocation of shares or share-based payment schemes, benefiting employees or company officers of LVMH or an affiliated enterprise as defined under Article L. 225-180 of the Commercial Code; - retire the shares acquired; - buy shares to cover securities giving access to the Company’s shares, notably by way of conversion, tendering of a coupon, reimbursement or exchange; - buy shares to be held and later presented for consideration as an exchange or payment in connection with external growth operations. • Term of the program: 18 months as from the Combined Shareholders’ Meeting of May 15, 2008.

Reference Document 2007 193 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Report of the Board of Directors to the Shareholders’ Meeting

3. SUMMARY TABLE DISCLOSING THE TRANSACTIONS PERFORMED BY THE ISSUER INVOLVING ITS OWN SHARES FROM MARCH 1, 2007 TO DECEMBER 31, 2007

The table below, prepared in accordance with the provisions of AMF Instruction No. 2005-06 of February 22, 2005 in application of Article 241-2 of the AMF’s General Rules and Regulations, provides a summary overview of the transactions performed by the Company involving its own shares from March 1, 2007 to December 31, 2007. Number of shares held in the portfolio as of February 28, 2007: 17,099,292

As of December 31, 2007: Percentage of own share capital held directly or indirectly: 3.15% Number of shares retired in the last 24 months: nil Number of shares held in the portfolio: 15,423,024 Book value of the portfolio: 745,117,000 euros Market value of the portfolio: 1,275,175,624 euros

Cumulative gross transactions Open positions as of December 31, 2007

Purchases Sales / Open buy positions Open sell positions Transfers Purchased Forward Sold call Forward call options purchases options sales

Number of shares 5,346,891 7,023,159 2,014,000 - - - of which: - liquidity contract 3,801,795 3,769,595 - purchases to cover plans 169,596 - exercise of stock option plans 3,160,505 - bonus share awards 93,059 - exercise of call options 1,375,500 Average maximum maturity 35 months - - - Average trading price* (in euros) 83.10 83.62 Average exercise price (in euros) 32.57 37.87 42.06 - - - Amounts (in euros) 315,940,062 434,905,627 * Excluding bonus share awards.

194 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH MOËT HENNESSY ◆ LOUIS VUITTON SA

PARENT COMPANY FINANCIAL STATEMENTS

Page

BALANCE SHEET 196

INCOME STATEMENT 198

CASH FLOW STATEMENT 199

COMPANY RESULTS OVER THE LAST FIVE FISCAL YEARS 200

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS 201

INVESTMENT PORTFOLIO AS OF DECEMBER 31, 2007 214

SUBSIDIARIES AND INVESTMENTS AS OF DECEMBER 31, 2007 214

STATUTORY AUDITORS’ REPORT ON THE PARENT COMPANY FINANCIAL STATEMENTS 215

STATUTORY AUDITORS’ SPECIAL REPORT ON RELATED PARTY AGREEMENTS AND COMMITMENTS 216

Reference Document 2007 195 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

BALANCE SHEET

ASSETS

(EUR millions) Notes 2007 2006 2005 Gross Depreciation, Net Net Net amortization and impairment

NON-CURRENT ASSETS Intangible assets Start-up costs ----- Other intangible assets ----- Property, plant and equipment 9 Vineyards and other land 28.0 - 28.0 27.8 25.6 Buildings ----- Technical fittings and machinery ----- Other property, plant and equipment 8.8 (0.9) 7.9 7.9 7.9 Advances and downpayments ----- Non-current financial assets Investments 10 11,283.2 (1,702.2) 9,581.0 8,463.4 7,952.6 Receivables from controlled entities 11 3,909.5 - 3,909.5 4,109.8 4,046.2 Other investment securities 56.1 (41.6) 14.6 25.6 36.3 Loans ---0.6 0.6 Treasury shares 13 378.7 - 378.7 300.4 204.4 Other non-current financial assets 0.4 - 0.4 0.4 0.4 15,664.8 (1,744.7) 13,920.1 12,936.0 12,274.0 CURRENT ASSETS Advances and downpayments ----- Trade accounts receivable ----- Other receivables 12 615.2 (90.5) 524.7 534.1 842.2 Treasury shares 13 404.6 (0.1) 404.5 563.7 710.9 Short term investments ---- 400.1 Cash and cash equivalents 189.3 - 189.3 70.3 107.1

PREPAYMENTS AND ACCRUED INCOME Prepaid expenses 14 3.6 - 3.6 1.0 0.3 1,212.7 (90.6) 1,122.1 1,169.2 2,060.6 Deferred charges ----- Bond redemption premiums 2.9 - 2.9 3.7 5.8 Cumulative translation adjustments 15 0.1 - 0.1 0.3 0.1

TOTAL ASSETS 16,880.4 (1,835.3) 15,045.1 14,109.3 14,340.5

196 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

LIABILITIES AND EQUITY

(EUR millions) Notes 2007 2006 2005 Before Before Before appropriation appropriation appropriation

EQUITY Share capital (fully paid up) 16 147.0 147.0 147.0 Share premium account 16 1,736.3 1,736.3 1,736.3 Revaluation adjustments 17 41.5 41.5 41.6 Legal reserve 14.7 14.7 14.7 Regulated reserves 18 331.3 331.3 331.3 Other reserves 195.0 195.0 195.0 Retained earnings 2,759.6 2,394.1 1,493.6 Interim dividends (166.1) (141.7) (122.5) Profit for the year 783.4 1,027.5 1,447.5 Regulated provisions 0.1 0.1 0.1 5,842.8 5,745.8 5,284.6

PROVISIONS 19 Provisions for contingencies 378.2 308.9 309.6 Provisions for losses 44.7 30.3 19.8 422.9 339.2 329.4

L IABILITIES 20 Perpetual bonds 88.6 546.1 551.7 Convertible bonds - -- Other bonds 3,000.7 3,016.3 3,993.3 Bank loans and borrowings 372.7 597.6 541.4 Miscellaneous loans and borrowings 5,016.5 3,526.3 3,271.1 Trade accounts payable (1) 122.8 21.6 22.6 Tax and social security liabilities 24.6 89.7 32.5 Other liabilities (1) 121.8 217.4 313.1

ACCRUALS AND DEFERRED INCOME Prepaid income 31.7 9.3 0.8 8,779.4 8,024.3 8,726.5 Cumulative translation adjustments - --

TOTAL LIABILITIES AND EQUITY 15,045.1 14,109.3 14,340.5

( 1) After reclassification, in 2007, of accrued invoices from “Other liabilities” to “Trade accounts payable”, in the amount of 102 million euros.

Reference Document 2007 197 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

INCOME STATEMENT

(EUR millions) Notes 2007 2006 2005

Income from investments 737.9 945.9 664.2 Services provided, other revenues 179.2 177.1 153.5 Income from investments and other revenues 3 917.1 1,123.0 817.7 Reversal of depreciation, amortization and provisions 19 16.5 4.0 1.5 Other operating income - 0.1 0.6

Total operating income 933.7 1,127.1 819.8

Purchases and external charges 189.3 184.1 160.6 Taxes, duties and similar levies 3.5 3.2 3.9 Wages, salaries and social security expenses 44.5 39.8 47.5 Depreciation and amortization 0.2 0.1 0.1 Provisions 19 49.8 27.5 13.6 Other expenses 2.0 1.2 1.2

Total operating expenses 289.4 256.0 226.8

Provisions released and expense transfers 19 86.6 - 26.1 Interest and similar income 4 206.8 178.3 146.1 Foreign exchange gains 5 1,154.5 795.8 1,279.2 Net gains on sales of short term investments 5.7 8.1 4.6

Total financial income 1,453.6 982.2 1,455.9

Provisions 19 88.9 106.4 17.9 Interest and similar expenses 6 386.7 272.0 294.2 Foreign exchange losses 5 1,146.1 797.5 1,264.3 Net losses on sales of short term investments 3.1 5.5 9.5

Total financial expenses 1,624.9 1,181.3 1,586.0

PROFIT FROM RECURRING OPERATIONS BEFORE TAX 473.0 672.0 462.9

Exceptional income from operations 7 454.0 -- Exceptional capital gains 7 - 2.8 0.1 Provisions released and expense transfers 19 37.8 507.4 852.7

Total exceptional income 491.9 510.2 852.8

Exceptional expenses from operations 7 - -- Exceptional capital losses 7 0.1 0.1 - Depreciation, amortization and provisions 19 173.4 54.8 1.6

Tot al exceptional expenses 173.5 54.9 1.6

E XCEPTIONAL INCOME (LOSS) 318.4 455.3 851.2 Income tax (income)/expense 8 8.0 99.8 (133.4)

NET PROFIT 783.4 1,027.5 1,447.5

198 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

CASH FLOW STATEMENT

(EUR millions) 2007 2006 2005

OPERATING ACTIVITIES Net profit 783.4 1,027.0 1,447.5 Depreciation and amortization of fixed assets 93.7 (493.7) (841.7) Change in other provisions 83.8 104.0 4.5 Gains on sale of fixed assets and treasury shares (3.0) (5.0) 3.0

CASH FROM OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 957.9 632.3 613.3 Inter-company current accounts 1,140.4 (8.3) (67.4) Current assets and liabilities (29.2) 184.3 12.8

NET CASH FROM OPERATING ACTIVITIES 2,069.1 808.3 558.7

INVESTING ACTIVITIES Purchase of tangible and intangible fixed assets - (2.0) - Purchase of equity investments - -- Proceeds from sale of equity investments and similar transactions - -- Subscription to capital increases carried out by subsidiaries (1,200.0) (6.0) -

NET CASH FROM (USED IN) INVESTING ACTIVITIES (1,200.0) (8.0) 0.0

FINANCING ACTIVITIES Capital increase - -- Change in treasury shares 83.4 53.0 33.0 Dividends and interim dividends paid during the year (686.4) (566.0) (449.0) Proceeds from financial debt 690.2 359.0 816.6 Repayments in respect of financial debt (837.3) (1,083.0) (888.0) Changes in listed securities - -- NET CASH USED IN FINANCING ACTIVITIES (750.1) (1,237.0) (487.4) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 119.0 (436.7) 71.3 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 70.3 507.2 436.0 CASH AND CASH EQUIVALENTS AT END OF YEAR 189.3 70.3 507.2

Reference Document 2007 199 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

COMPANY RESULTS OVER THE LAST FIVE FISCAL YEARS

(EUR millions, except earnings per share, expressed in euros) 2003 2004 2005 2006 2007

1. Share capital at year-end • Share capital 147.0 147.0 147.0 147.0 147.0 • Number of ordinary shares outstanding 489,937,410 489,937,410 489,937,410 489,37,410 489,937,410 • Maximum number of future shares to be created: - through conversion of bonds ------through exercise of equity warrants ------through exercise of share subscription options - 2,747,475 4,637,175 6,426,534 8,015,393

2. Operations and profit for the year • Income from investments and other revenues 1,349.5 960.8 817.7 1,123.0 917.1 • Profit before taxes, depreciation, 961.0 641.1 467.1 804.7 962.7 amortization and movements in provisions • Income tax (income)/expense (1) - - - - - • Profit after taxes, depreciation, 768.4 1,011.1 1,447.5 1,027.5 783.4 amortization and movements in provisions (2) • Profit distributed as dividends (3) 416.4 465.4 563.4 685.9 783.9

3. Earnings per share • EPS after taxes but before depreciation, 2.57 1.87 1.23 1.44 1.95 amortization and movements in provisions • EPS after taxes, depreciation, 1.57 2.06 2.95 2.10 1.60 amortization and movements in provisions (2) • Net dividend distributed per share (3)(4) 0.85 0.95 1.15 1.40 1.60

4. Employees • Average number of employees 36 33 27 24 25 • Total payroll 34.5 28.5 35.9 31.0 44.5 • Amounts paid in respect of social security 10.2 8.6 10.7 9.0 10.7

(1) Excludes the impact of the tax consolidation agreement. (2) Includes the impact of the tax consolidation agreement. (3) Amount of the distribution resulting from the resolution of the Shareholders’ Meeting, before the effects of LVMH treasury shares at the date of distribution. For fiscal year 2007, amount proposed to the Ordinary Shareholders’ Meeting of May 15, 2008. (4) Excludes the impact of tax regulations applicable to the beneficiary, and net of the amount of the “avoir fiscal” French tax credit in 2003.

200 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

1. BUSINESS ACTIVITY

LVMH Moët Hennessy-Louis Vuitton S.A. (“LVMH”, LVMH also centralizes foreign exchange hedges underwritten by “the Company”) manages and coordinates the operational activities its French subsidiaries and certain European subsidiaries. These of all of its subsidiaries, and provides them with assistance, foreign currency hedges are symmetrically covered in the market particularly for legal, financial, tax and insurance matters. in terms of hedge type, currency, amount and maturity. In addition to managing its portfolio of investments in its capacity Changes in financial structure from one year to the next, and foreign of holding company, LVMH has cash pooling arrangements in exchange gains and losses recorded in the income statement, mainly euros and foreign currencies with its French subsidiaries and result from these transactions. certain European subsidiaries. It also centralizes their financing requirements and manages the interest rate risk on borrowings.

2. ACCOUNTING POLICIES AND METHODS

2.1 General on the basis of valuations performed by independent experts or by comparison with recent similar transactions. The balance sheet and income statement of LVMH Moët Hennessy-Louis Vuitton have been prepared in accordance with Changes in the value of provisions for impairment of the equity French legal provisions, particularly Regulation 99-03 of the investment portfolio are classified under exceptional income/ Comité de la Réglementation Comptable regulations and accounting expense to enhance comparability of the income statement. principles generally accepted in France. Portfolio investments held as of December 31, 1976 were revalued However, in view of the fact that the Company’s direct operations in 1978 (revaluation pursuant to the French law of 1976). exclusively comprise financial and real estate transactions and in order to enhance the presentation of its income statement, 2.4 Accounts receivable dividends received from subsidiaries and equity investments, in addition to the C ompany’s share in income of partnerships Accounts receivable are recorded at their face value. Impairment subject to statutory clauses providing for the allocation of income for doubtful accounts is recorded if their net realizable value, to partners, are recorded in operating income. based on the probability of their collection, is lower than their carrying amount. 2.2 Property, plant and equipment 2.5 Short term investments Property, plant and equipment are stated at acquisition cost (purchase price and incidental costs, excluding acquisition expenses) Short term investments, including money market investments on or at contribution value, with the exception of property, plant which interest is rolled up, are stated at the lower of acquisition cost and equipment acquired prior to December 31, 1976 which was (excluding transaction costs) or market value; when their market revalued in 1978 (revaluation pursuant to the French law of 1976). value at the balance sheet date is lower than their acquisition cost, an impairment expense is recorded in financial income/expense for the amount of the difference. 2.3 Non-current financial assets The market value of listed investments is calculated based on Non-current financial assets, excluding receivables, loans and average listed share prices during the last month of the year and deposits, are stated at acquisition cost (excluding incidental costs) translated, where applicable, at year-end exchange rates. The or at contribution value. market value of non-listed securities is calculated based on their When net realizable value as of the year-end is lower than the estimated realizable value. carrying amount, a provision is recorded in the amount of the This calculation is performed on a line-by-line basis, without difference. The net realizable value is measured with reference to offsetting any unrecognized capital gains and losses. the value in use and the net selling price. Value in use is based on the entities’ forecast future cash flows; the net selling price is In the event of partial investment sales, any gains or losses are calculated with reference to ratios or share prices of similar entities, calculated based on the FIFO method.

Reference Document 2007 201 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

2.6 Treasury shares and derivatives settled in of the exercise price of the plan covered the holders of options will LVMH shares exercise their rights, at this date a provision for impairment in the value of the premiums recorded may be recognized. 2.6.1 Treasury shares Treasury shares are recorded at acquisition cost. 2.7 Dividends from subsidiaries and other investments Treasury shares acquired under French market regulations Amounts distributed by subsidiaries and other investments, in governing share repurchase programs or under the terms of the addition to the share in income from partnerships subject to liquidity contract are recorded as short term investments with the statutory clauses providing for the allocation of income to partners, exception of shares held on a long term basis, or for the purpose of are recognized as of the date that they accrue to the shareholders future cancellation or exchange, which are recorded as non-current or partners. financial assets. Treasury shares held for share purchase option plans are allocated to these plans. 2.8 Foreign currency transactions If the market value of LVMH shares, calculated in accordance with Foreign currency transactions are recorded at the rates of exchange the method described in Note 2.5, falls below their acquisition prevailing on the dates of transactions. cost, impairment is recorded in the amount of the difference. Foreign currency receivables and payables are revalued at year-end With regard to LVMH shares allocated to share purchase option exchange rates and any resulting unrealized gains and losses are plans, impairment as described above is calculated for each plan recorded in the cumulative translation adjustment. Provisions are if the corresponding plans are deemed to be exercisable (share recorded for unrealized foreign exchange losses at the year-end, market value exceeds the option exercise price) and on the basis except for losses offset by potential gains in the same currency. of the average cost price of plans when options are deemed non- exercisable (share market value falls below the option exercise price). Year-end foreign exchange gains and losses on foreign currency cash and cash equivalents are recorded in the income statement. Furthermore, if the value of treasury shares allocated to share purchase option plans, net of the corresponding impairment, 2.9 Hedging instruments exceeds the expected exercise price of any plan, a provision for contingencies and losses is recorded in the amount of Foreign exchange options and forward contracts entered into on the difference. the company’s own behalf are revalued at the year-end exchange rates. The resulting unrealized gains or losses are: The cost of disposals is determined by allocation category using the FIFO method, with the exception of shares held in stock - offset against unrealized foreign exchange gains or losses on the option plans for which the calculation is performed for each plan assets or liabilities hedged by these instruments; individually using the weighted average cost method. - deferred if instruments have been allocated to transactions of Shares held under bonus share plans give rise to a provision for the subsequent accounting period; contingencies in the amount of their carrying amount when they - recorded as foreign exchange gains or losses if they have not been are allocated to these plans. allocated as hedges. Within the framework of centralized management of subsidiaries’ 2.6.2 Derivatives settled in LVMH shares foreign exchange risks (see Note 1 Business activity), foreign Under the terms of share purchase option plans, as an alternative exchange options and forward contracts outstanding at the year-end to holding shares allocated to these plans, LVMH may acquire are not revalued at the year-end exchange rates; as contracts entered derivatives settled in shares; these derivatives consist of LVMH into with subsidiaries are symmetrically covered in the market, share purchase options (“calls”), acquired when the plan was set up any foreign currency gains or losses resulting from revaluation of or after that date. The premiums paid in respect of these options all such items would have a nil impact. are recognized as assets in “Other receivables”. These premiums The impact of interest rate hedges (swaps, future rate agreements, give rise where applicable to the recognition of a provision for caps, etc.) is calculated on a pro rata basis over the term of contracts, contingencies and losses or a provision for impairment, according and recorded as interest expense for the year. to the same rules as those defined above for LVMH shares allocated to the share option plans, with the value of LVMH shares held in 2.10 Bond issue premiums the portfolio being replaced for these purposes by the amount of the premium paid supplemented by the exercise price of the calls; Bond issue premiums are amortized over the life of bonds. however, when it is decided at the balance sheet date that in light Issue costs are expensed upon issuance.

202 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

3. FINANCIAL INCOME FROM INVESTMENTS AND OTHER REVENUES

(EUR millions) 2007 2006 2005

Financial income from subsidiaries and other investments: - Dividends received from French companies 472.4 671.9 411.6 - Share of income from French partnerships 265.5 274.0 252.6 737.9 945.9 664.2 Real estate revenues 6.3 6.0 5.6 Services provided 172.9 171.0 147.9 917.1 1,123.0 817.7

Real estate revenues are attributable to Champagne vineyards owned by LVMH which are leased to Group companies. Services provided comprise support services provided to the subsidiaries (See Note 1 Business activity) and recharged expenses incurred by LVMH on behalf of the latter.

4. INTEREST AND SIMILAR INCOME

Interest and similar income breaks down as follows:

(EUR millions) 2007 2006 2005

Income from loans and advances to affiliates 187.5 145.8 113.4 Income from short term investments and other financial income 19.3 32.5 32.7 206.8 178.3 146.1

5. FOREIGN EXCHANGE GAINS AND LOSSES

Foreign exchange gains and losses break down as follows:

(EUR millions) Losses Gains

Gains and losses on transactions performed on behalf of subsidiaries (1) 1,137.8 1,137.8 Gains and losses on own transactions 8.3 16.7 1,146.1 1,154.5 (1) See Note 1 Business activity.

Reference Document 2007 203 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

6. INTEREST AND SIMILAR EXPENSE

Interest and similar expenses break down as follows:

(EUR millions) 2007 2006 2005

Interest on perpetual bonds 2.9 16.7 71.1 Interest on other bonds 124.4 124.4 116.1 Interest on bank loans 5.8 10.2 8.4 Interest on commercial paper 40.1 16.1 17.8 Interest on current accounts and advances to affiliates 126.3 86.1 59.7 Other interest and financial charges 87.1 18.5 21.2 386.7 272.0 294.2

7. EXCEPTIONAL INCOME (LOSS)

In February 2007, LVMH acquired for a nominal amount, under terms of a purchase option, the perpetual bonds issued in 1990, which were cancelled immediately after their acquisition. The exceptional income for fiscal year 2007 includes a gain of 449 million euros, corresponding to the non amortized amount of the perpetual bonds at that date. The balance is chiefly attributable to the net change in impairment on equity portfolio investments.

8. INCOME TAXES

8.1 Tax consolidation agreement 8.2 Breakdown of the tax expense LVMH is the parent company of a tax group comprising certain of Corporate income tax breaks down as follows: its French subsidiaries (Article 223-A et seq. of the French General Tax Code). In the majority of cases, the tax consolidation agreement (EUR millions) Profit Tax (expense) Net does not alter the tax expense or the right to the benefit from the before tax income profit Profit from recurring tax losses carried forward of the subsidiaries concerned; their tax 473.0 (71.8) 401.2 operations position with respect to LVMH, insofar as they remain part of the Exceptional income (loss) 318.4 (1.6) 316.8 consolidated tax group, remains identical to that which would Impact of losses carried - 73.4 73.4 have been reported had the subsidiaries been taxed individually. forward Any additional tax savings or tax expense, i.e. any difference 791.4 - 791.4 between the tax recorded by each consolidated company and the Tax in respect of prior - 5.2 5.2 tax resulting from the calculation of taxable income for the tax years group, is recorded by LVMH. Tax consolidation - (13.2) (13.2) As of December 31, 2007, the amount of tax losses that may 791.4 (8.0) 783.4 be reclaimed by the subsidiaries included in the LVMH tax consolidation agreement totaled 626 million euros. 8.3 Deferred tax Deferred taxes arising from timing differences amount to a net debit balance of 11 million euros as of December 31, 2007, including 3 million euros relating to timing differences that are expected to reverse in 2008.

204 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

9. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT

(EUR millions) 2007 Net amount of fixed assets as of December 31, 2006 35.8 Additions 0.3 Disposals and retirements (0.1) Net change in depreciation/amortization (0.1) Net amount of fixed assets as of December 31, 2007 35.9

10. INVESTMENTS

(EUR millions) 2007 2006 2005 Gross amount 11,283.2 10,083.2 10,077.2 Provision for impairment (1,702.2) (1,619.8) (2,124.6) Net amount of investments 9,581.0 8,463.4 7,952.6

The investment portfolio is presented in the “Subsidiaries and Investments” and “Investment Portfolio” table. The change in provisions for impairment is analyzed in Note 19.

11. RECEIVABLES FROM CONTROLLED ENTITIES

Receivables from controlled entities consist of current account relate to one-year cash pooling arrangements renewable by tacit advances or loans to LVMH’s direct or indirect subsidiaries. agreement. Advances are recorded under non-current assets, insofar as they

12. OTHER RECEIVABLES

Other receivables break down as follows:

(EUR millions) 2007 2006 2005 Gross Impairment Net Net Net Related company receivables 318.5 - 318.5 342.7 542.3 o/w: tax consolidation current accounts 26.6 - 26.6 24.9 268.9 share of profit receivable in flow-through subsidiaries 265.5 - 265.5 274.0 176.3 premiums paid on foreign exchange options 8.8 - 8.8 19.6 71.6 accrued income from related companies ---- 1.0 Receivables from the State 69.1 - 69.1 96.9 134.7 Other receivables 227.6 (90.5) 137.1 94.5 165.2 o/w: premiums paid for foreign exchange options 99.4 - 99.4 80.8 144.4 premiums paid for LVMH share purchase options 86.1 (86.1) - -- 615.2 (90.5) 524.7 534.1 842.2

All these receivables mature within one year, with the exception of a portion of the premiums paid for LVMH share purchase options (See Note 13.2 Derivatives settled in LVMH shares).

Reference Document 2007 205 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

13. TREASURY SHARES AND RELATED DERIVATIVES

13.1 Treasury shares The value of the treasury shares held is allocated as follows as of December 31, 2007:

(EUR millions) 2007 2006 Gross Provision for Net Net impairment

Long term investments 378.7 - 378.7 300.4 Share purchase option plans 331.5 (0.1) 331.4 531.4 Bonus share option plans 22.3 - 22.3 15.3 Future plans 40.1- 40.1 - Liquidity contact 10.7 - 10.7 17.0 Short term investments 404.6 (0.1) 404.5 563.7

Portfolio movements over the period were as follows:

(EUR millions) Short term investments Share purchase option plans Other plans Liquidity contract Total Number Value Number Value Number Value Number Value As of January 1 10,797,426 532.0 261,267 15.3 217,000 17.0 11,275,693 564.3 Purchases 1,653,500 137.3 169,596 14.8 4,537,295 375.0 6,360,391 527.2 Sales - - - - (4,624,295) (381.3) (4,624,295) (381.3) Transfers (2,373,795) (115.9) 708,603 37.7 - - (1,665,192) (78.2) Options exercised (3,838,102) (221.9) - - - - (3,838,102) (221.9) Share allocations - - (93,059) (5.6) - - (93,059) (5.6) As of December 31 6,239,029 331.5 1,046,407 62.4 130,000 10.7 7,415,436 404.6

The gain recognized on disposals amounted to 2.6 million euros.

(EUR millions) Long term investments

Number Value

As of January 1 6,342,396 300.4 Purchases -- Transfers 1,665,192 78.2 As of December 31 8,007,588 378.7

Until fiscal year 2006, LVMH shares to be delivered under share option plans or bonus share option plans, with these reallocations purchase option plans were held by LVMH and allocated to these accounting for most of the “transfers” presented in the table plans as soon as they were implemented. Since fiscal year 2006, above. this method of coverage was replaced for certain existing plans by the purchase of LVMH share purchase options (“calls”); shares for As of December 31, 2007, the stock market value of shares held which the calls were substituted were reallocated to the coverage under the liquidity contract is not different from their accounting of plans other than the purchase option plans: share subscription value of 11 million euros.

206 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

13.2 Derivatives settled in LVMH shares During the fiscal year, the only derivatives used were LVMH calls; Calls in force as of December 31, 2007 may be exercised at any the movements were as follows: time in accordance with the following schedule:

(EUR millions) Number Value Expiration date of calls Gross value (EUR millions) As of December 31, 2006 1,838,500 93.5 At the latest in 2008 4.1 Purchased 1,829,000 76.3 2009 5.7 Exercised (1,653,500)83.7 2012 76.3 As of December 31, 2007 2,014,000 86.1 Total 86.1

14. PREPAID EXPENSES 15. CUMULATIVE TRANSLATION ADJUSTMENT

Prepaid expenses consist primarily of interest and similar Foreign currency gains and losses relate to the revaluation as of charges. December 31, 2007 of receivables and payable denominated in foreign currencies.

16. SHARE CAPITAL AND SHARE PREMIUM ACCOUNT

16.1 Share capital As of December 31, 2007, the company’s share capital can be broken down as follows: The company’s share capital comprises 489,937,410 fully paid-up shares, each with a par value of 0.30 euro. Number % All the shares comprising the company’s share capital have the Shares with double voting rights 225,670,036 46.06 same voting and dividend rights, except for registered shares held Shares with single voting rights 248,844,350 50.79 for at least three years which have double voting rights. Treasury 474,514,386 96.85 shares do not have voting or dividend rights. Treasury shares 15,423,024 3.15 Total number of shares 489,937,410 100.00

16.2 Change in equity The change in equity during the period may be analyzed as follows:

(EUR millions) Share capital and Reserves and Other Retained Interim Net Total share premium regulated reserves earnings dividend profit equity account provisions As of December 31, 2006 1,883.3 387.6 195.0 2,394.1 (141.7) 1,027.5 5,745.8 before appropriation Appropriation of net profit for 2006 1,027.5 (1,027.5) - Dividends for 2006 (685.9) 141.7 (544.3) of which treasury shares 23.9 23.9 As of December 31, 2006 1,883.3 387.6 195.0 2,759.6 - - 5,225.5 after appropriation Interim dividend for 2007 (171.5) (171.5) of which treasury shares 5.4 5.4 Net profit for 2007 783.4 783.4 As of December 31, 2007 1,883.3 387.6 195.0 2,759.6 (166.0) 783.4 5,842.8 before appropriation The appropriation of net profit for 2006 resulted from the resolutions of the Combined Shareholders’ Meeting of May 10, 2007.

Reference Document 2007 207 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

17. REVALUATION ADJUSTMENTS

Revaluation adjustments are the result of revaluations carried out in 1978 pursuant to the French law of 1976. The adjustments concern the following non-amortizable fixed assets:

(EUR millions) 2007 2006 2005

Vineyards and other land 17.9 17.9 18.0 Investments (Parfums Christian Dior) 23.6 23.6 23.6 Total 41.5 41.5 41.6

18. RESERVES

18.1 Regulated reserves 18.2 Other reserves Regulated reserves comprise the special reserve for long term Following changes in the law relating to long term capital gains capital gains and restricted reserves, in the amount of 2.2 million introduced by the amended French Finance Act for 2004 (Article euros, which were created as a result of the reduction of capital 39) and by decision of the Shareholders’ Meeting of May 12, 2005, performed at the same time as the conversion of the company’s an amount of 200 million euros was transferred, in 2005, from the share capital into euros. The special reserve for long term capital special reserve for long term capital gains to an ordinary reserve gains may only be distributed after tax has been levied. account, less a 2.5% tax deduction of 5 million euros. The amount of these reserves of 195 million euros may be distributed without tax being deducted.

19. CHANGE IN IMPAIRMENT AND PROVISIONS

The change in asset impairment and provisions breaks down as follows:

(EUR millions) December 31, Provisions Used Released December 31, 2006 2007 Provisions for impairment of assets: - investments 1,619.8 114.4 (32.0) 1,702.2 - LVMH shares 0.6 (0.5) 0.1 - other assets 128.5 87.4 (83.8) 132.1

Provisions for contingencies and losses: - for general contingencies 269.7 52.0 (1.7) 320.0 - for losses in respect of share option and similar plans 37.0 23.7 (5.8) (7.6) 47.3 - for other losses 32.5 34.6 (2.7) (8.8) 55.6 Total 2,088.1 312.1 (94.0) (48.9) 2,257. 3 o/w: operating profit (loss) 49.8 (8.4) (8.2) financial income (expense) 88.9 (83.7) (2.9) exceptional income (expense) 173.4 (1.9) (37.8) 312.1 (94.0) (48.9)

208 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

Provisions for general contingencies and losses correspond to an Provisions for losses in respect of share option plans include the cost estimate of the impact on assets and liabilities of risks, disputes, of implementing bonus share plans and in respect of share purchase or actual or probable litigation arising from the Group’s activities; option plans, the amount of the difference between the cost base of such activities are carried out worldwide, within what is often an the plan and the exercise price of options by the beneficiaries. imprecise regulatory framework that is different for each country, (See Note 2.6 Accounting policies). changes over time, and applies to areas ranging from product composition to the tax computation.

20. BREAKDOWN OF OTHER LIABILITIES

The breakdown of borrowings and other liabilities by type and maturity, prior to the appropriation of earnings, and the related accrued expenses, are shown in the table below:

Borrowings Total Amount Of Of (EUR millions) which which less than from 1 to more than accrued related 1 year 5 years 5 years expenses companies Perpetual bonds 88.6 - - 88.6 - - Other bonds 3,000.7 832.1 1,985.1 183.5 26.0 - Bank loans and borrowings 372.7 311.7 61.0 - 0.2 - Miscellaneous loans and borrowings 5,016.5 5,016.5 - - 14.7 3,966.2 Financial debt 8,478.4 6,160.3 2,046.1 272.1 40.9 3,966.2 Trade payable 122.8 122.8 - - 117.8 101.9 Tax and social liabilities 24.6 24.6 - - 22.0 - Other debt (including premiums received on foreign 121.8 121.8 - - 6.7 101.6 exchange options: 106.4 million euros) Total 8,747.6 6,429.5 2,046.1 272.1 187.3 4,169.7

20.1 Perpetual bonds In December 1990 and February 1992, LVMH issued, outside The subordinated perpetual bonds issued in 1992 were France, two series of subordinated perpetual bonds for amounts of simultaneously reclassified pursuant to the pari passu clause 762 million euros and 229 million euros respectively. contained in their issue memorandum. The conditions of issue were as follows: Agreements have been entered into in respect of these issues with third-party companies who have promised to hold or - repayable at par value only in the event of LVMH’s liquidation repurchase the perpetual bonds from the bondholders after a or voluntary dissolution, except for that resulting from a merger or spin-off; fifteen-year period, and have all or substantially all agreed to relinquish any rights to interest on these perpetual bonds after - principal payments subordinated to full payment of all that time, in exchange for the payment by LVMH (at the date of other creditors; issue of the perpetual bonds) of final amounts of 170 million euros - possibility of deferring interest payments if specific financial and 57 million euros respectively. ratios are not achieved. According to these arrangements: In 1996, due to an amendment to the 1990 subordinated perpetual bonds which eliminated the second and third of the - the perpetual bonds were recorded in the balance sheet on issue aforementioned conditions, they were reclassified under financial at their par value net of these payments, i.e. 592 million euros debt as perpetual bonds. and 172 million euros; - amounts paid in respect of the par value of the issue are recorded partly in interest and partly in amortization of the principal.

Reference Document 2007 209 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

The 1990 perpetual bonds no longer bear interest as of December to third-party companies is now subject to taxation. This tax 20, 2005, the date of the fifteenth anniversary after these securities becomes due for the period during which these securities give rise were issued. The 1992 perpetual bonds were issued at a face value to the payment of an effective interest amount not exceeding the of 9.70% per year. par value of the issue multiplied by the legal interest rate, in other words, fiscal year 2006 for the 1990 perpetual bonds and fiscal year The initial tax regime of these issues was modified by the 2006 2007 for the 1992 perpetual bonds. The corresponding expense Finance Act, which incorporated into the General Tax Code a amounted to 13 million euros in 2007 (63 million euros in 2006). measure under which, at the end of the period of fifteen years after issue, part of the revenue generated by the investment of payments See also Note 7 Exceptional income/ (loss).

20.2 Other bonds Other bonds consist of public issues and private placements. Private placements have been made since May 2000 as part of an EMTN (Euro Medium Term Notes) issue program of 10 billion euros, and total 3 billion euros as of December 31, 2007.

(EUR millions) Nominal Floating-rate Maturity Nominal as of Accrued Total interest rate swap December 31, interest 2007 after swap Public issues: CHF 300,000,000, 2007 3.375% - 2013 183.5 0.7 184.1 EUR 600,000,000, 2005 (1) 3.375% - 2012 600.0 10.6 610.6 EUR 600,000,000, 2004 (2) 4.625% total 2011 600.0 5.3 605.3 EUR 750,000,000, 2003 (3) 5.00% total 2010 750.0 7.4 757.4 EUR 500,000,000, 2001 (4) 6.125% total 2008 500.0 0.4 500.4 Private placements: CZK 300,000,000, 2006 3.575% total 2009 10.6 0.2 10.8 CZK 770,000,000, 2004 variable - 2009 24.5 0.1 24.6 EUR 306,130,153, 2003 variable - 2008 306.1 1.2 307.3 Total 2,974.7 26.0 3,000.7 (1) Issued at 99.828% of the par value. (2) Issued at 99.427% of the par value. (3) Issued at 99.986% of the par value. (4) Issued at 99.363% of the par value.

Unless otherwise indicated, bonds are redeemable at par upon maturity. The interest rate swaps presented in the table above were entered into on the issue date of the bonds. Subsequent interest rate hedging transactions may also have been performed. In 2007, bonds were reimbursed for an amount of 200 million euros.

20.3 Loans and borrowings Miscellaneous borrowings comprise commercial paper and, for the amount shown in the table above under “related companies”, current account advances or amounts payable by subsidiaries or other Group companies, made in respect of the cash pooling arrangement described in Note 11.

210 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

20.4 Debt analysis by foreign currency As of December 31, 2007 the breakdown by currency of the 21), taking into account any hedging arrangements contracted at company’s total borrowings of 8,478 million euros (see Note the time of recognition of debts or subsequently, is as follows:

Currency Equivalent stated ( EUR millions) After taking into account On issue hedging instruments

Euro 4,252 3,809 Swiss franc 184 662 Pound sterling 34 34 Other currency 41 7 Financial debt outside LVMH Group 4,512 4,512 Related companies 3,966 Total financial debt 8,478 In general, foreign currency borrowings are contracted in order to hedge net assets denominated in foreign currencies which mainly comprise the acquisition of subsidiaries outside the euro zone.

21. MARKET RISK EXPOSURE

In the course of its business activities for its own account, LVMH are not matched in the parent company financial statements, or regularly uses financial instruments. This practice meets the allocated to underlyings maintained at historical exchange rates. foreign currency and interest rate hedging needs for financial Finally, with respect to the centralization of foreign exchange assets and liabilities, including dividends receivable from foreign hedges, LVMH covers symmetrically on the market the transactions investments; each instrument used is allocated to the financial entered into with its French subsidiaries, in terms of the type of balances or hedged transactions. contract, currency, amount and maturity; therefore there is no Given the role of LVMH within the Group, it may exceptionally foreign exchange exposure as a result of this centralization. use financial instruments that are qualified as foreign currency Counter parties for hedging contracts are selected on the basis of hedging instruments in the consolidated financial statements but their international rating as well as for reasons of diversification.

21.1 Interest rate instruments Interest rate instruments are generally allocated to borrowings The types of instruments outstanding as of December 31, 2007 falling due either at the same time as, or after, the instruments. and the underlying amounts broken down by expiration period are as follows:

(EUR millions) Nominal amounts presented off balance sheet Fair value (1) Expiring within Expiring between Expiring in more 1 year 1 and 5 years than 5 years Fixed-rate payer swaps - 1,000.0 - 23.7 Floating-rate payer swaps 1,500.0 1,546.0 - 24.6 (1) Gain/(loss).

Reference Document 2007 211 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

21.2 Foreign exchange hedging instruments The nominal values of hedges outstanding as of December 31, 2007 for all currencies, revalued at the year-end exchange rates, are as follows:

(EUR millions) Nominal amounts Fair value (1)

With third parties With subsidiaries

Hedging transactions on behalf of subsidiaries: - Forward purchases/sales 401.9 401.9 10.3 - Foreign currency options 2,886.7 2,886.7 202.9 Own account hedging transactions: - Options purchased (34) - 1.6 - Forward contracts 971.4 - 27.9 - Foreign exchange swaps 12.1 - (5)

(1) Gain/(loss).

22. OTHER INFORMATION

22.1 Compensation of executive bodies 22.3 Share purchase commitments The total gross compensation paid to company officers and members Share purchase commitments amount to 3,761 million euros of the company’s Executive Committee for 2007 amounted to and represent the contractual commitments entered into by the 22.2 million euros, including 1.1 million euros in directors’ fees. Group to purchase minority interests in consolidated companies, shareholdings or additional shareholdings in unconsolidated Due to the nature of the company’s business, as described under companies, or for additional payments in connection with Note 1 Business activity, a significant portion of this compensation transactions already entered into. This amount includes the impact is reinvoiced to Group companies in connection with management of the memorandum of understanding entered into on January 20, support services. 1994 between LVMH and Diageo, according to which LVMH agreed to repurchase Diageo’s 34% interest in Moët Hennessy, 22.2 Commitments given in respect of supplementary with six months’ notice, for an amount equal to 80% of the pension and retirement benefits investment value as of the commitment date. These commitments result in the recognition of provisions, or are hedged by life insurance capitalization contracts. 22.4 Other commitments given Most of these commitments relate to members of the Executive Committee who, after a certain length of service in their office, (EUR millions) December 31, benefit from an additional pension plan, the amount of which is 2007 linked to their last year’s remuneration. Guarantees and comfort letters granted to 1,541.5 subsidiaries or other Group companies Commitments are estimated on the basis of the following actuarial Potential commitment with respect to 84.7 hypotheses: LVMH-share based calls Discount rate 5.00% Long term rate of return on investments 4.75% As of December 31, 2007, the net commitment that has not been recognized amounts to 20 million euros.

212 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

22.5 Other commitments in favo r of LVMH 22.6 Identity of the consolidating parent company The financial statements of LVMH Moët Hennessy-Louis Vuitton (EUR millions) December 31, SA are fully consolidated by Christian Dior SA, 30, avenue 2007 Montaigne, 75008 Paris, France. Undrawn confirmed long term lines of credit 2,281.5 Undrawn confirmed short term lines of credit 1,452.3 3,733.8

Reference Document 2007 213 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

INVESTMENT PORTFOLIO AS OF DECEMBER 31, 2007

Equity investments % of direct Carrying (EUR millions) ownership amount 35,931,661 shares in Moët Hennessy SNC with a par value of EUR 7 each 58.67 1,019.0 23,742,919 shares in LVMH Fashion Group SA with a par value of EUR 1.50 each 99.94 822.0 68,959 shares in Parfums Christian Dior SA with a par value of EUR 38 each 99.98 76.5 411,826,000 shares in Sofidiv SAS with a par value of EUR 15 each 100.00 7,166.8 1,961,048 shares in Le Bon Marché SA with a par value of EUR 15 each 99.99 259.2 31,482,978 shares in Moët Hennessy International SA with a par value of EUR 13.82 each 58.67 74.4 23,000 shares in LVMH KK (Japan) with a par value of JPY 50,000 each 100.00 7.6 7,000 shares in the GIE LVMH Services with a par value of EUR 457.35 each 20.00 8.9 37,000 shares in Creare SA (Luxembourg) with a par value of EUR 15.24 each 32.17 0.6 9,660 shares in Loewe SA (Spain) with a par value of EUR 30 each 5.44 6.7 3,500,000 LVMH Services Ltd (UK) with a par value of GBP 1 each 100.00 2.6 2,333,060 shares in LVMH Finance SA with a par value of EUR 15 each 99.99 136.7 Other investments 23.0 TOTAL 9,581.0

See also Note 13.1 Treasury shares.

SUBSIDIARIES AND INVESTMENTS AS OF DECEMBER 31, 2007

Company Head Currency Share Equity Percentage Carrying amount of Loans Deposits Revenue Net profit Dividends office capital other share capital shares held (3 ) and and excluding (loss) received in (1 ) than share held advances sureties taxes (1 ) from the 2007 (3 ) capital provided granted previous (all amounts in millions) (1 ) (2 ) Gross Net (3 ) (3 ) year (1 )

1. Subsidiaries (>50%)

Moët Hennessy SNC Boulogne EUR 428.7 2,297.6 58.67 1,019.0 1,019.0 - - 618.3 452.2 - Moët Hennessy Inter. SAS Boulogne EUR 151.6 165.3 58.67 74.4 74.4 - - 53.6 53.7 6.9 LVMH Fashion Group SA Paris EUR 35.6 1,498.1 99.94 822.0 822.0 - - 939.7 899.7 403.6 Parfums Christian Dior SA Paris EUR 2.6 278.5 99.98 76.5 76.5 0.8 - 933.0 121.7 50.0 Sofidiv SAS Boulogne EUR 6,177.4 989.3 100 7,866.4 7,166.8 - - 24.1 31.8 - LVMH Finance SA Boulogne EUR 35.0 106.1 99.99 1,130.5 136.7 - - 0.1 (108.6) - Le Bon Marché SA Paris EUR 29.4 93.7 99.99 259.2 259.2 - - 245.4 20.1 11.9 LVMH KK Tokyo JPY 1,150.0 566.3 100 7.6 7.6 - 310.4 1,060.5 37.5 - LVMH Services Ltd London GBP 7.4 (5.5) 100 11.5 2.6 - - 0.9 (0.7) -

2. Other shareholdings (>10% and <50%)

GIE LVMH Services Boulogne EUR 44.3 1.1 20.00 8.9 8.9 - - 2.2 1.1 -

3. Other investments (<10%)

Loewe SA Madrid EUR 5.3 13.4 5.44 6.7 6.7 18.0 - 107.2 4.6 -

4. Other 11---- -

Total 11,283.2 9,581.0 18.8 310.4 472.4 (1 ) In local currency for foreign subsidiaries. (2 ) Prior to the appropriation of earnings for the year. (3 ) In EUR millions.

214 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

STATUTORY AUDITORS’ REPORT ON THE PARENT COMPANY FINANCIAL STATEMENTS

To the Shareholders, In accordance with our appointment as Statutory Auditors by your Annual General Meeting, we hereby report to you for the year ended December 31, 2007 on: • the audit of the accompanying financial statements of LVMH Moët Hennessy-Louis Vuitton; • the justification of our assessments; • the specific procedures and disclosures required by law. These financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements, based on our audit.

I. OPINION ON THE FINANCIAL STATEMENTS We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements give a true and fair view of the financial position and the assets and liabilities of the Company as of December 31, 2007 and of the results of its operations for the year then ended, in accordance with French accounting regulations.

II. JUSTIFICATION OF ASSESSMENTS In accordance with Article L. 823-9 of the French Commercial Code (Code de commerce) governing the justification of our assessments, we hereby report on Note 2.3 of section “2. Accounting policies and methods” to the financial statements which sets out the accounting principles and methods applicable to non-current financial assets. In the context of our assessment of the accounting principles used by your Company, we have verified the appropriateness of the above-mentioned accounting methods and that of the disclosures in the notes to the financial statements and have ascertained that they were properly applied. The assessments on these matters were performed in the context of our audit approach for the financial statements taken as a whole and therefore contributed to the expression of the unqualified opinion in the first part of this report.

III. SPECIFIC PROCEDURES AND DISCLOSURES We have also performed the other procedures required by law in accordance with professional standards applicable in France. We have no matters to report as to: - the fair presentation and consistency with the financial statements of the information given in the Board of Directors’ report and in the documents addressed to shareholders with respect to the financial position and the financial statements; - the fair presentation of the information given in the Board of Directors’ report on the compensation and benefits paid to relevant Company Officers as well as commitments granted in their favor when they assumed, changed or terminated duties or subsequent thereto. Furthermore, we report that, as indicated in the Board of Directors’ report, this information relates to compensation and benefits paid or incurred by your Company and the companies which it controls, as well as the compensation and benefits paid or incurred by Financière Jean Goujon and Christian Dior. Pursuant to the law, we have verified that the Board of Directors’ report contains the appropriate disclosures as to the identity of and percentage interests and votes held by shareholders.

Neuilly-sur-Seine and Paris-La Défense, March 10, 2008 The Statutory Auditors DELOITTE & ASSOCIÉS ERNST & YOUNG Audit Thierry Benoit Alain Pons Jeanne Boillet Olivier Breillot

Reference Document 2007 215 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

STATUTORY AUDITORS’ SPECIAL REPORT ON RELATED PARTY AGREEMENTS AND COMMITMENTS

To the Shareholders, In our capacity as Statutory Auditors of your Company, we hereby present our special report on related party agreements and commitments. Pursuant to Article L. 225-40 of the French Commercial Code (Code de commerce), the following agreements and commitments, previously authorized by the Board of Directors of your Company, have been brought to our attention. The terms of our engagement do not require us to identify such other agreements or commitments, if any, but to communicate to you, based on information provided to us, the principal terms and conditions of those agreements and commitments brought to our attention, without expressing an opinion on their usefulness and appropriateness. It is your responsibility, pursuant to Article R. 225-31 of the French Commercial Code, to assess the significance attached to these agreements and commitments and to their related approval. We conducted our procedures in accordance with professional standards applicable in France; those standards require that we agree the information provided to us with relevant source documents.

1. AGREEMENT ENTERED INTO WITH GROUPE ARNAULT SAS

Directors involved: Messrs. Bernard Arnault, Jean Arnault, Nicolas Bazire, Albert Frère and Pierre Godé. Nature, subject matter, terms and conditions: Service agreement entered into with Groupe Arnault SAS. On January 17, 2007, the Board of Directors authorized the signature of an amendment to the service agreement entered into on July 31, 1998 between your Company and Montaigne Participations & Gestion. As a matter of record, pursuant to the merger of Montaigne Participations & Gestion into Groupe Arnault SAS on December 22, 2004, the performance of this agreement has been assumed by Groupe Arnault SAS. The amendment modifies the fees provided for in the contract, fixed at 4,600,000 euros per year (exclusive of VAT) as from January 1, 2007.

2. OTHER AGREEMENTS AND COMMITMENTS

In addition, pursuant to the French Commercial Code , we have been advised that the following related party agreements and commitments conducted and authorized in previous years have had continuing effect during the year 2007:

Nature, subject matter, terms and conditions: LVMH Group holding company cost sharing. The LVMH Group holding company cost-sharing agreement with Diageo Plc (formerly Guinness Plc) dated January 20, 1994, based on the annual revenue of each of the two business groups “Wines and Spirits” and “Other activities”, has had continuing effect during the year 2007. The portion borne by the “Wines and Spirits” business group during the year totaled 49.9 million euros of which 28 million euros for Moët Hennessy SNC .

(continued overleaf)

216 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Parent company financial statements

Nature, subject matter, terms and conditions: Financing via subscription to bond issues. The agreement covering the subscription by an unlimited partnership, of which your Company and Christian Dior are partners, to two bond issues, respectively issued by your Company for an amount of 306 million euros and Christian Dior, has had continuing effect during the year 2007. The amount of interest paid by your Company totaled 13,500,340 euros in 2007.

Nature, subject matter, terms and conditions: Service agreement. This service agreement entered into with Christian Dior for the provision of legal services, particularly for corporate law issues and management of the Christian Dior’s Securities Department for an annual fixed fee of 45,750 euros ( exclusive of VAT) , has had continuing effect during the year 2007.

Nature, subject matter, terms and conditions: Funding of the supplemental pension scheme. Funding via an insurance company of the supplemental pension scheme set up in 1999 for the benefit of the Executive Committee members, some of whom are also Directors, has had continuing effect during the year 2007. The resulting expense for your Company during 2007 is included in the amount appearing in Note 30.3 of the notes to the consolidated financial statements.

Nature, subject matter, terms and conditions: Leasing of works of art. Group Arnault SAS’s agreement to lease a set of works of art has had continuing effect during the year 2007. Your Company incurred expenses totaling 611,631 euros under this agreement in 2007.

Nature, subject matter, terms and conditions: Bank borrowing guarantee. Your Company and LVMH Moët Hennessy-Louis Vuitton Inc. are joint borrowing parties to a 650 million US dollar loan agreement. Your Company has agreed to guarantee the portion borrowed by LVMH Moët Hennessy-Louis Vuitton Inc. from a banking syndicate represented by Citibank International plc up to a maximum of 110% of the nominal amount. No commission has been received by your Company in respect of this guarantee in 2007.

Neuilly-sur-Seine and Paris-La Défense, March 10, 2008 The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG Audit Thierry Benoit Alain Pons Jeanne Boillet Olivier Breillot

Reference Document 2007 217 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 218 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH MOËT HENNESSY ◆ LOUIS VUITTON SA

RESOLUTIONS FOR THE APPROVAL OF THE COMBINED SHAREHOLDERS’ MEETING OF MAY 15, 2008

Page

1. ORDINARY RESOLUTIONS 220

2. EXTRAORDINARY RESOLUTIONS 222

STATUTORY AUDITORS’ REPORT ON THE PROPOSED DECREASE IN SHARE CAPITAL BY THE CANCELLATION OF SHARES PURCHASED 225

STATUTORY AUDITORS’ REPORT ON THE GRANTING OF EXISTING OR FUTURE SHARES FOR NO CONSIDERATION TO EMPLOYEES AND COMPANY OFFICERS 226

STATUTORY AUDITORS’ REPORT ON THE ISSUE OF SHARES AND INVESTMENT SECURITIES WITH CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS 227

STATUTORY AUDITORS’ REPORT ON THE INCREASE IN SHARE CAPITAL WITH CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS RESERVED FOR EMPLOYEE MEMBERS OF A COMPANY SAVINGS SCHEME 228

Reference Document 2007 219 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Resolutions for the approval of the combined Shareholders’ Meeting

RESOLUTIONS FOR THE APPROVAL OF THE COMBINED SHAREHOLDERS’ MEETING OF MAY 15, 2008

1. ORDINARY RESOLUTIONS

First resolution: Approval of the consolidated Fourth resolution: Allocation of net profit – financial statements Determination of dividend The Shareholders’ Meeting, after examining the report presented The Shareholders’ Meeting, on the recommendation of the Board by the Board of Directors and the reports of the Statutory Auditors, of Directors, decides to allocate and appropriate the distributable hereby approves the consolidated financial statements for the fiscal profit for the fiscal year ended December 31, 2007 as follows: year ended December 31, 2007, including the balance sheet, income statement and notes, as presented to the Meeting, as well (EUR) Net profit for the year ended as the transactions reflected in these statements and summarized 783,412,326.27 December 31, 2007 in these reports. Allocation to the legal reserve - Retained earnings before appropriation 2,759,550,929.12

Second resolution: Approval of the financial statements (1) of the parent company Amount available for distribution 3,542,963,255.39 Proposed appropriation: The Shareholders’ Meeting, after examining the report presented - reserve for long term capital gains Nil by the Board of Directors, the report presented by the Chairman - statutory dividend of 5% or EUR 0.015 7,349,061.15 of the Board and the reports of the Statutory Auditors, hereby per share approves the financial statements of the parent company for the - additional dividend of EUR 1.585 776,550,794.85 fiscal year ended December 31, 2007, including the balance sheet, per share income statement and notes, as presented to the Meeting, as well - retained earnings 2,759,063,399.39 as the transactions reflected in these statements and summarized 3,542,963,255.39 in these reports. (1) For information, as of December 31, 2007, the company held 15,423 thousand of its Consequently, it discharges the members of the Board of Directors own shares, corresponding to a non-distributable amount of 783 millions euros. for the performance of their duties for said year. The total gross dividend amounts to 1.60 euro per share. Taking into account the interim dividend of 0.35 euro per share paid Third resolution: Approval of related party agreements on December 3, 2007, the balance of 1.25 euro will be paid out described in Article L. 225-38 of the French Commercial on May 23, 2008. Code With respect to this dividend distribution, individuals whose The Shareholders’ Meeting, after examining the special report of tax residence is in France will be entitled to the 40% deduction the Statutory Auditors on the related party agreements described in provided under Article 158 of the French Tax Code. Article L. 225-38 of the French Commercial Code, hereby declares that it approves said agreements. Finally, should the Company hold, at the time of payment of this balance, any treasury shares under prior authorizations, the corresponding amount of unpaid dividends will be allocated to retained earnings.

220 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Resolutions for the approval of the combined Shareholders’ Meeting

As required by law, the Shareholders’ Meeting observes that the Eighth resolution: Renewal of the term of office gross dividends per share paid out in respect of the past three fiscal of Director of Mr. Gilles Hennessy years were as follows: The Shareholders’ Meeting, noting that the term of office of Fiscal year Number Payment date Gross Amount Mr. Gilles Hennessy expires on this date, hereby re-appoints him of shares dividend of the tax to the office of Director for a three-year term that shall expire at representing (1) credit share capital (EUR) (EUR) the end of the Ordinary Shareholders’ Meeting convened in 2011 to approve the financial statements for the previous fiscal year. 2006 Interim 489,937,410 December 1, 2006 0.30 0.12 Final " May 15, 2007 1.10 0.44 Ninth resolution: Appointment of Mr. Charles de Croisset as Director Total 1.40 0.56 2005 The Shareholders’ Meeting decides to appoint Mr. Charles de Interim 489,937,410 December 2, 2005 0.25 0.125 Croisset as Director for a three-year term that shall expire at the end of the Ordinary Shareholders’ Meeting convened in 2011 to Final “ May 18, 2006 0.90 0.36 approve the financial statements for the previous fiscal year. Total 1.15 0.485

2004 Tenth resolution: Share repurchase Interim 489,937,410 December 2, 2004 0.25 NA Final " May 18, 2005 0.70 0.35 The Shareholders’ Meeting, having examined the Report of the Total 0.95 0.35 Board of Directors, authorizes the latter to acquire company shares, pursuant to the provisions of Articles L. 225-209 et seq. of (1) Excludes the impact of tax regulations applicable to the beneficiary. the French Commercial Code. It thus authorizes the implementation of a share repurchase program. Fifth resolution: Renewal of the term of office of Director In particular, the shares may be acquired in order (i) to provide of Mr. Nicolas Bazire market liquidity services (purchases/sales) under a liquidity The Shareholders’ Meeting, noting that the term of office of contract set up by the Company; (ii) to cover stock option plans, Mr. Nicolas Bazire expires on this date, hereby re-appoints him to the awarding of bonus shares or any other form of share allocation the office of Director for a three-year term that shall expire at the or share-based payment, in favor of employees or officers either end of the Ordinary Shareholders’ Meeting convened in 2011 to of the Company or of an affiliated undertaking as defined under approve the financial statements for the previous fiscal year. Article L. 225-180 of the French Commercial Code; (iii) to cover securities giving access to the Company’s shares, notably by way of conversion, tendering of a coupon, reimbursement or exchange; Sixth resolution: Renewal of the term of office or (iv) to be retired or (v) held so as to be exchanged or presented as of Director of Mr. Antonio Belloni consideration at a later date for external growth operations. The Shareholders’ Meeting, noting that the term of office of The purchase price per share may not exceed 130 euros. In the event Mr. Antonio Belloni expires on this date, hereby re-appoints him of a capital increase through the capitalization of reserves and the to the office of Director for a three-year term that shall expire at granting of bonus shares as well as in cases of either a stock split the end of the Ordinary Shareholders’ Meeting convened in 2011 or a reverse stock split, the purchase price indicated above will to approve the financial statements for the previous fiscal year. be adjusted by a multiplying coefficient equal to the ratio of the number of shares making up the Company’s share capital before Seventh resolution: Renewal of the term of office and after the operation. of Director of Mr. Diego Della Valle The maximum number of shares that may be purchased shall not The Shareholders’ Meeting, noting that the term of office of exceed 10% of the share capital, with the understanding that this Mr. Diego Della Valle expires on this date, hereby re-appoints him limit shall apply to the amount of the share capital that shall to the office of Director for a three-year term that shall expire at be adjusted, where applicable, in order to take into account any the end of the Ordinary Shareholders’ Meeting convened in 2011 transactions having an impact on the share capital subsequent to to approve the financial statements for the previous fiscal year. the date of this Meeting. As of December 31, 2007, this limit

Reference Document 2007 221 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Resolutions for the approval of the combined Shareholders’ Meeting corresponds to 48,993,741 shares. The maximum total amount 1. authorizes the Board of Directors, at its sole discretion, to award dedicated to these purchases may not exceed 6.4 billion euros. bonus shares, whether already in existence or to be issued, in one The shares may be acquired by any appropriate method on the or several operations, to employees and officers of the Company market or over the counter, including the use of derivatives, as or of any of its affiliates as defined under Article L. 225-197-2 well as through block purchases or as part of an exchange. Pursuant of the French Commercial Code; to the provisions of Articles L. 225-209 and seq. of the French 2. grants this authorization for a period of thirty-eight months as Commercial Code, the shares thus acquired may be resold by the of the date of this Meeting; Company by any means, including block sales. 3. decides that the total number of bonus shares shall not exceed All powers are granted to the Board of Directors to implement 1% of the share capital as of the date of this Meeting, it being this authorization. The Board may delegate such powers in order indicated that such amount shall be applied against the nominal to place any and all buy and sell orders, enter into any and all amount of any capital increase resulting or likely to result agreements, sign any document, file all declarations, carry out all over time from issuances decided under the 13th, 14th or 15th formalities and generally take any and all other actions required resolutions presented for the approval of this Shareholders’ in the implementation of this authorization. Meeting or under the 15th, 16th and 17th resolutions approved This authorization, which replaces the authorization granted by by the Combined Shareholders’ Meetings of May 10, 2007; the Combined Shareholders’ Meeting of May 10, 2007, is hereby 4. decides that the allocation of shares to their beneficiaries shall granted for a term of eighteen months as of this date. become definitive either (i) after a minimum vesting period of two years, the beneficiaries being required in this case to hold the shares for a minimum of two more years once fully vested, 2. EXTRAORDINARY RESOLUTIONS or (ii) after a minimum vesting period of four years, without any requirement to hold the shares once fully vested. It is to Eleventh resolution: Authorization to reduce the share be understood that the Board of Directors shall be entitled to capital choose between these two options, at its own discretion, making use of them either alternately or concurrently, and, within the The Shareholders’ Meeting, having examined the report prepared legal framework defined by Article L. 225-197-1 of the French by the Board of Directors and the special report prepared by Commercial Code, to determine the vesting and required the Statutory Auditors, holding periods; 1. authorizes the Board of Directors to reduce the share capital of 5. authorizes the Board of Directors to make, where applicable the company, on one or more occasions, by cancelling the shares during the vesting period, any adjustments to the number of shares acquired pursuant to the provisions of Article L. 225-209 of in connection with any transactions involving the Company’s the French Commercial Code; share capital, in order to protect the rights of beneficiaries; 2. sets the maximum amount of the capital reduction that may be 6. takes note that if the allocation involves an issue of new shares, performed under this authorization over a twenty-four month this authorization entails the waiver by shareholders, in favor period to 10% of company’s current capital; of the beneficiaries of bonus shares, of their preemptive right to 3. grants all powers to the Board of Directors to perform and record subscribe to the new shares to be issued; the capital reduction transactions, carry out all required acts and formalities, amend the Bylaws accordingly and generally 7. grants all powers to the Board with the right to delegate the take any and all other actions required in the implementation same, within the limits set forth by law, in order to implement of this authorization; this authorization, including: 4. grants this authorization for a period of eighteen months as - the approval of the list of award beneficiaries, of the date of this Meeting; - the determination of the award terms and conditions and, 5. decides that this authorization shall replace that granted by where applicable, the award criteria, the Combined Shareholders’ Meeting of May 10, 2007. - the determination of the dates from which the shares shall carry dividend rights, Twelfth resolution: Authorization to award bonus shares - where applicable, the acknowledgment of the completion of to Group employees and officers capital increases, the resulting modification of the Bylaws, The Shareholders’ Meeting, having examined the report presented and generally the performance of any and all actions required by the Board of Directors and the special report of the Statutory in the implementation of this authorization; Auditors, pursuant to Articles L. 225-197-1 et seq. of the French 8. decides that this authorization shall replace that granted by Commercial Code, the Combined Shareholders’ Meeting of May 12, 2005.

222 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Resolutions for the approval of the combined Shareholders’ Meeting

Thirteenth resolution: Increase in the share capital 5. takes note that in the event of the exercise of this delegation reserved for several categories of investors – Grant of of authority, the decision to issue investment securities giving authority access to the Company’s share capital shall entail, in favor of the holders of the issued securities, the express waiver by shareholders The Shareholders’ Meeting, having examined the report prepared of their preemptive right to subscribe to capital securities to by the Board of Directors and the special report prepared by which the investment securities so issued shall give access; the Statutory Auditors and acting in accordance with the 6. decides that the amount of the consideration, accruing and/or provisions of the French Commercial Code and in particular to accrue at a later date to the company, for each of the shares Articles L. 225-129-2, L. 225-138 and L. 228-92, issued or to be issued under this delegation of authority, taking 1. grants the Board of Directors the right to issue, on one or more into account, in the event of the issue of stand-alone warrants, occasions, in such proportions and at such times as it shall see the issue price of such warrants, shall be at least equal to the fit, on the French market and/or international market, through weighted average of the share price for the last three trading public offerings of investment securities, whether in euro or in days preceding the determination of this issue price less, where any other currency or accounting unit created by way of reference applicable, a discount not to exceed 5%; to one or more currencies, ordinary shares and/or any other 7. takes note that this delegation of authority grants the same investment securities, including any subscription or acquisition powers to the Board of Directors, including the option to warrants issued on a stand-alone basis, giving access to the capital, delegate such powers to the Chief Executive Officer, or subject whether immediately or over time, at any time or at a fixed date, to the latter’s approval, to a Managing Director, in order to or giving a right to a debt security, whether by subscription implement this delegation of authority, in accordance with the in cash or by way of receivables’ set-off, conversion, exchange, repayment, tendering of a coupon or in any other manner. Such terms set forth by law, and in particular to, debt securities may be issued with or without a guarantee, in - in the event of amalgamation of profits, reserves or premiums such forms, at such rates and under such terms as the Board of into the capital: Directors shall see fit, it being understood that the issuance of • determine the amount and nature of the reserves to be preference shares is excluded from the scope of this authority; amalgamated into the capital, determine the number of new 2. grants this delegation of authority for a period of eighteen shares to be issued and/or the amount in which the existing months as of the date of this Meeting; nominal value of the shares comprising the share capital shall 3. decides to remove the preemptive right of shareholders with be increased, set the date, even with retroactive effect, starting respect to any shares or other investment securities that may be from which the new shares shall have dividend rights or the issued under this resolution to credit institutions or companies date starting from which the increase in the par value shall governed by the French Insurance Code or its foreign equivalent, be effective; in connection with complex financial transactions aimed at • decide that fractional rights may not be traded, that the optimizing the company’s balance sheet structure; corresponding shares shall be sold and that the proceeds of 4. decides that in the event of the exercise of this delegation of the sale shall be allotted to the holders of the rights; authority by the Board of Directors: - in the event of issuance of shares and/or other investment securities giving access to the capital or giving a right to a a) the maximum nominal amount of capital increases that may debt security: be effected, directly or indirectly, on the basis of the issuance of the shares or investment securities addressed under item 1. • determine the list of beneficiaries and the number of securities above shall be equal to thirty (30) million euros, with the to be attributed to each of them; understanding that against such amount there shall be applied • decide upon the amount to be issued, the issue price, as well the nominal amount of any capital increase resulting or likely as the amount of the premium that may, where applicable, to result over time from issuances decided under the 12th, 14th be charged upon issuance; th or 15 resolutions submitted for the approval of shareholders at • determine the dates and terms of the issuance, the nature, th th th this Meeting and under the 15 , 16 or 17 resolutions approved form and features of the securities to be issued, which may be by the Combined Shareholders’ Meeting of May 10, 2007; subordinated or unsubordinated, perpetual or redeemable, b) to the above ceiling, there shall be added, where applicable, bear interest at a fixed and/or variable rate, or produce capi- the nominal amount of the shares to be issued, if any, in the talized interest and may be repaid with or without a premium event of further financial transactions, in order to protect, in or be amortized; accordance with provisions of law, the rights of holders of • determine the mode of payment of the shares and/or securities investment securities giving access to the share capital; issued or to be issued;

Reference Document 2007 223 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Resolutions for the approval of the combined Shareholders’ Meeting

• determine, where applicable, the terms of exercise of the Fifteenth resolution: Capital increase reserved for rights attaching to the securities issued or to be issued and, Group employees – Grant of authority in particular, determine the date, even with retroactive effect, as of which the new shares shall have dividend rights, as well The Shareholders’ Meeting, having examined the report prepared as any and all other terms and conditions of completion of by the Board of Directors and the special report prepared by the issuance; the Statutory Auditors and acting in accordance with the provisions of Articles L. 225-129-2 and L. 225-129-6 of the French • determine the terms under which the company may, where applicable, have the right to acquire or exchange on the stock Commercial Code, market, at any time or during specific periods, the securities 1. delegates to the Board of Directors the authority to carry out, on issued or to be issued, whether or not these securities are to one or more occasions, under the conditions set forth in Article be retired, in accordance with applicable laws; L. 443-5 of the Labor Code, any capital increase in cash reserved • provide for the option to suspend, where applicable, the for the employees of the company and of affiliated enterprises exercise of the rights attaching to such securities for a period who have enrolled in a company savings plan; not to exceed three months; 2. grants this delegation for a period of twenty-six months as of • at its sole discretion, apply the expenses of the share capital the date of this Meeting; increases against the amount of the corresponding premiums 3. decides that the total number of shares that may be subscribed by and deduct from that amount any sums necessary in order to employees under this delegation may not be greater than 3% of increase the statutory reserve to one-tenth of the new capital the share capital as of the date of issue, with the understanding following each increase; that the amount of this capital increase shall be applied against • make all adjustments required in accordance with applicable the nominal amount of any capital increase resulting or likely laws and regulations and determine the terms ensuring, to result over time from issuances decided under the 12th, 13th where applicable, the protection of the rights of holders of or 14th resolutions submitted for the approval of shareholders at investment securities giving future access to the Company’s this Meeting and under the 15th, 16th or 17th resolutions approved share capital; by the Combined Shareholders’ Meeting of May 10, 2007; • record the completion of each capital increase and amend the 4. decides that the subscription price of shares shall be determined Bylaws accordingly; in accordance with the provisions of Article L. 443-5, paragraph 3 of the Labor Code; • execute any agreement, take any action and complete any and all formalities required for the issuance and financial service 5. grants all powers to the Board of Directors in order to implement of any securities issued under this delegation of authority and this delegation and in particular to: for the exercise of any rights attaching thereto. - determine the length of service requirements that must be met 8. decides that this authorization shall replace that granted by the in order to participate in the operation, within any limits set Combined Shareholders’ Meeting of May 10, 2007. forth by law, and, where applicable, the maximum number of shares that may be subscribed by each employee, Fourteenth resolution: Increase in the amount - determine the number of new shares to be issued and the date of an issue where demand for securities is in excess from which such shares shall carry dividend rights, of the original amount offered – delegation of authority - determine, within any limits set forth by law, the issue price of The Shareholders’ Meeting, having examined the report the new shares and the time periods within which employees may exercise their rights, presented by the Board of Directors and the special report prepared by the Statutory Auditors, hereby decides that in the - determine the time periods and terms and conditions within event of an issue approved under the delegation granted to the and under which payments are to be made on the new shares, Board of Directors by virtue of the 13th resolution presented - record the completion of each capital increase and amend the above, the number of shares to be issued may, if demand Bylaws accordingly, for securities is in excess of the original amount offered, be - proceed with any and all operations and formalities deemed increased under the conditions and within the limits provided necessary to carry out the capital increase or increases; under Article L. 225-135-1 of the French Commercial Code 6. decides to remove the preemptive right of shareholders and its implementing decree, in accordance with the ceilings to subscribe to share in favor of the above-mentioned category indicated in the abovementioned resolution. of employees; 7. decides that this delegation of authority shall replace that granted by the Combined Shareholders’ Meeting of May 10, 2007.

224 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Statutory Auditors’ Report on the proposed decrease in share capital by the cancellation of shares purchased

STATUTORY AUDITORS’ REPORT ON THE PROPOSED DECREASE IN SHARE CAPITAL BY THE CANCELLATION OF SHARES PURCHASED

To the Shareholders, As Statutory Auditors of LVMH Moët Hennessy-Louis Vuitton and pursuant to Article L. 225-209, paragraph 7 of the French Commercial Code (Code de commerce) on the decrease in share capital by the cancellation of a company’s own shares, we hereby report on our assessment of the terms and conditions of the proposed decrease in share capital. We performed the procedures that we deemed necessary in accordance with the professional guidelines of the French Institute of Statutory Auditors (Compagnie nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures consisted in reviewing the fairness of the terms and conditions of the proposed decrease in share capital. This transaction is part of the purchase by your Company of its own shares, within a limit of 10% of its share capital, in accordance with Article L. 225-209 of the French Commercial Code. Furthermore, this purchase authorization is proposed for approval at your Shareholders’ Meeting and would be effective for a period of eighteen months. Your Board of Directors requests the delegation of all powers, for a period of eighteen months, to cancel all shares purchased following the granting of authority by your Company for the purchase of its own shares, within the limit of 10% of its share capital, and during a period of 24 months. We have no comment to make as to the terms and conditions of the proposed share capital decrease, it being indicated that prior approval, by your Shareholders’ Meeting, for the purchase by your Company of its own shares, is required.

Neuilly-sur-Seine and Paris-La Défense, March 10, 2008 The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG Audit Thierry Benoit Alain Pons Jeanne Boillet Olivier Breillot

Reference Document 2007 225 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Statutory Auditors’ report on the granting of existing or future shares for no consideration to employees and company officers

STATUTORY AUDITORS’ REPORT ON THE GRANTING OF EXISTING OR FUTURE SHARES FOR NO CONSIDERATION TO EMPLOYEES AND COMPANY OFFICERS

To the Shareholders, As Statutory Auditors of your Company and in accordance with Article L. 225-197-1 of the French Commercial Code (Code de commerce), we have prepared this report on the proposed attribution of existing or future shares for no consideration to the employees and C ompany Officers of LVMH Moët Hennessy-Louis Vuitton and its affiliated companies within the meaning of Article L. 225-197-2 of the French Commercial Code. Shareholders are requested to authorize the Board of Directors to grant existing or future shares for no consideration. It is the responsibility of the Board of Directors to prepare a report on the transaction which it wishes to perform. It is our responsibility, where necessary, to give you our comments on the information which is communicated to you on the proposed transaction. We performed the procedures that we deemed necessary in accordance with the professional guidelines of the French Institute of Statutory Auditors (Compagnie nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures involved verifying that the proposed terms and conditions presented in the Board of Directors’ report conform to the provisions provided for by law. We have no comment to make on the information given in the Board of Directors’ report relating to the proposed transaction.

Neuilly-sur-Seine and Paris-La Défense, March 10, 2008 The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG Audit Thierry Benoit Alain Pons Jeanne Boillet Olivier Breillot

226 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Statutory Auditors’ report on the issue of shares and investment securities with cancellation of preferential subscription rights

STATUTORY AUDITORS’ REPORT ON THE ISSUE OF SHARES AND INVESTMENT SECURITIES WITH CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS

To the Shareholders, As Statutory Auditors of your Company and pursuant to Articles L. 225-138 and L. 228-92 of the French Commercial Code (Code de commerce), we hereby report to you on the proposed delegation of authority to the Board of Directors to decide on the issue of shares and investment securities giving access to the capital (hereafter “capital securities”), including subscription or purchase warrants issued independently, transactions which you are being asked to approve. This issue, reserved for credit institutions or companies governed by the French Insurance Code (Code des assurances) or the equivalent of such code in any other foreign country, in connection with complex financial transactions aimed at optimizing the company’s balance sheet structure, may result in a maximum capital increase of 30 million euros, it being indicated that against such amount will be applied the nominal amount of any capital increase resulting or likely to result from the issues decided under the 12th or 15th resolutions subject to your approval at this Shareholders’ Meeting and the 15th, 16th or 17th r esolutions approved by the Combined Shareholders’ Meeting of May 10, 2007. This ceiling includes the additional securities which could be issued under the conditions and within the limits set forth in Article L. 225-135-1 of the French Commercial Code, should you adopt the 14th resolution. Based on its report, the Board of Directors proposes that you delegate to them, for a period of 18 months, the authority to decide on one or more issues and proposes that you cancel your preferential subscription rights. When necessary, the Board of Directors will set the final terms and conditions of this transaction. Pursuant to Articles R. 225-113 and R. 225-114 of the French Commercial Code, the Board of Directors will issue a report in which it will express its opinion on the fair presentation of the quantified information extracted from the accounts, on the proposed cancellation of preferential subscription rights and on certain other information concerning these transactions, contained in this report. We performed the procedures that we deemed necessary in accordance with the professional guidelines of the French Institute of Statutory Auditors (Compagnie nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures consisted in verifying the content of the Board of Directors’ report on this transaction and the conditions governing the issue price of capital securities to be issued. Subject to later examination of the conditions under which the proposed issues will be decided, we have no matters to report on the determination of the issue price of capital securities to be issued as presented in the Board of Directors’ report. As the issue price of capital securities to be issued has not yet been set, we do not express an opinion on the final conditions under which the issues will be performed and, as such, on the proposed cancellation of preferential subscription rights. In accordance with Article R. 225-116 of the French Commercial Code, we will issue an additional report, if necessary, when your Board of Directors performs any issues.

Neuilly-sur-Seine and Paris-La Défense, March 10, 2008 The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG Audit Thierry Benoit Alain Pons Jeanne Boillet Olivier Breillot

Reference Document 2007 227 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Statutory Auditors’ Report on the increase in share capital with cancellation of preferential subscription rights reserved for employee members of a company savings scheme

STATUTORY AUDITORS’ REPORT ON THE INCREASE IN SHARE CAPITAL WITH CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS RESERVED FOR EMPLOYEE MEMBERS OF A COMPANY SAVINGS SCHEME

To the Shareholders, As Statutory Auditors of your Company and pursuant to Articles L. 225-135 et seq. of the French Commercial Code (Code de commerce), we hereby report on the proposed delegation of authority to the Board of Directors to decide on a share capital increase via the issue of ordinary shares with cancellation of preferential subscription rights reserved for employees of LVMH Moët Hennessy-Louis Vuitton and all affiliated companies which are members of a company savings scheme, a transaction submitted to you for approval. This share capital increase is submitted to you for approval pursuant to the provisions of Articles L. 225-129-6 of the French Commercial Code and L. 443-5 of the French Labor Code (Code du travail). The total number of shares which may be issued pursuant to this r esolution shall not exceed 3% of the share capital at the date of issuance, it being indicated that the amount of this share capital increase will be applied against the joint maximum ceiling of 30 million euros under the 12th, 13th or 14th resolutions subject to your approval at this Shareholders’ Meeting and the 15th, 16th or 17th resolutions approved by the Combined Shareholders’ Meeting of May 10, 2007. Based on its report, your Board of Directors proposes that you delegate to them, for a period of 26 months, the authority to decide on one or more issues and proposes that you cancel your preferential subscription rights. When necessary, the Board of Directors will set the final terms and conditions of this transaction. Pursuant to Articles R. 225-113 and R. 225-114 of the French Commercial Code, the Board of Directors will issue a report in which it will express its opinion on the fair presentation of the quantified information extracted from the accounts, on the proposed cancellation of preferential subscription rights and on certain other information concerning these transactions, contained in this report. We performed the procedures that we deemed necessary in accordance with the professional guidelines of the French Institute of Statutory Auditors (Compagnie nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures consisted in verifying the content of the Board of Directors’ report on this transaction and the conditions governing the issue price of shares to be issued. Subject to later examination of the conditions under which the proposed capital increases will be decided, we have no matters to report on the determination of the issue price of shares to be issued as presented in the Board of Directors’ report. As the issue price of shares to be issued has not yet been set, we do not express an opinion on the final conditions under which the issues will be performed and, as such, on the proposed cancellation of preferential subscription rights. In accordance with Article R. 225-116 of the French Commercial Code, we will issue an additional report, if necessary, when your Board of Directors performs any share capital increases.

Neuilly-sur-Seine and Paris-La Défense, March 10, 2008 The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG Audit Thierry Benoit Alain Pons Jeanne Boillet Olivier Breillot

228 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 STATEMENT OF RESPONSIBLE COMPANY OFFICER ; FINANCIAL INFORMATION

Page

1. STATEMENT OF RESPONSIBLE COMPANY OFFICER 230

2. INFORMATION INCORPORATED BY REFERENCE IN THE REFERENCE DOCUMENT 231

3. DOCUMENTS ON DISPLAY 231

Reference Document 2007 229 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Statement of responsible company officer; financial information

STATEMENT OF RESPONSIBLE COMPANY OFFICER ; FINANCIAL INFORMATION

1. STATEMENT OF THE COMPANY OFFICER RESPONSIBLE FOR THE REFERENCE DOCUMENT AND THE ANNUAL FINANCIAL REPORT

We declare, having taken all reasonable care to ensure that such is the case, that the information contained in this Reference Document is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. We declare that, to the best of our knowledge, the financial statements have been prepared in accordance with applicable accounting standards and provide a true and fair view of the assets, liabilities, financial position and profit or loss of the parent company and of all consolidated companies, and that the management report presented on pages 22 and 178 gives a true and fair picture of the business performance, profit or loss and financial position of the parent company and of all consolidated companies as well as a description of the main risks and uncertainties faced by all of these entities. We have obtained a letter from the Statutory Auditors certifying that they have verified, in accordance with professional standards and doctrine applicable in France, the financial and accounting information provided in this Reference Document and that they have read the document as a whole.

Paris, April 14 , 2008

Under delegation from the Chief Executive Officer Jean-Jacques GUIONY Chief Financial Officer, Member of the Executive Committee

230 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 LVMH PARENT COMPANY Statement of responsible company officer ; financial information

2. INFORMATION INCORPORATED BY REFERENCE IN THE REFERENCE DOCUMENT

In application of Article 28 of Commission Regulation (EC) No. 809/2004, the following information is incorporated by reference in this Reference Document: - the 2006 consolidated financial statements, prepared in accordance with IFRS, accompanied by the report of the statutory auditors on these statements, included on pages 74-126 and 127, respectively, of the 2006 Reference Document, filed with the AMF on April 11, 2007 under the number D07-0347; - the 2005 consolidated financial statements, prepared in accordance with IFRS, accompanied by the report of the statutory auditors on these statements, included on pages 72-120 and 121, respectively, of the 2005 Reference Document, filed with the AMF on April 19, 2006 under the number D06-0297; - the developments in the Group’s financial situation and in the results of its operations between the 2006 and 2005 fiscal years, presented on pages 22-61 of the 2006 Reference Document, filed with the AMF on April 11, 2007 under the number D07-0347; - the developments in the Group’s financial situation and in the results of its operations between the 2005 and 2004 fiscal years, presented on pages 21-59 of the 2005 Reference Document, filed with the AMF on April 19, 2006 under the number D06-0297; - the 2006 parent company financial statements, prepared in accordance with French GAAP, accompanied by the report of the statutory auditors on these statements, included on pages 188-206 and 207, respectively, of the 2006 Reference Document, filed with the AMF on April 11, 2007 under the number D07-0347; - the 2005 parent company financial statements, prepared in accordance with French GAAP, accompanied by the report of the statutory auditors on these statements, included on pages 182-200 and 201, respectively, of the 2005 Reference Document, filed with the AMF on April 19, 2006 under the number D06-0297; - the special report of the statutory auditors on related party transactions of the 2006 fiscal year, included on pages 208-209 of the 2006 Reference Document, filed with the AMF on April 11, 2007 under the number D07-0347; - the special report of the statutory auditors on related party transactions of the 2005 fiscal year, included on pages 202-204 of the 2005 Reference Document, filed with the AMF on April 19, 2006 under the number D06-0297.

3. DOCUMENTS ON DISPLAY

The Bylaws of LVMH Moët Hennessy-Louis Vuitton S.A. are incorporated within this Reference Document. Other legal documents pertaining to the Company may be consulted at its headquarters under the conditions provided by law. The Company’s press releases relating to revenue and earnings, as well as the annual and interim reports and the consolidated and parent company financial statements may be consulted on the Company’s website at the following address: www.lvmh.com. The Reference Document filed by LVMH with the Autorité des Marchés Financiers (AMF) may be consulted on the AMF website (www.amf-france.org).

Reference Document 2007 231 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 232 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 TABLES OF CONCORDANCE

Page

1. TABLE OF CONCORDANCE WITH HEADINGS PRESENTED IN ANNEX 1 OF COMMISSION REGULATION (EC) 809/2004 234

2. TABLE OF CONCORDANCE WITH THE ANNUAL FINANCIAL REPORT 236

Reference Document 2007 233 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 1. TABLE OF CONCORDANCE WITH HEADINGS PRESENTED IN ANNEX 1 OF COMMISSION REGULATION (EC) 809/2004

Headings Page Headings Page

1 - Persons responsible 230 10.4 Information regarding any restrictions on the use of capital resources that have 2 - Statutory Auditors 149 materially affected, or could materially affect, the issuer’s operations n.a. 3 - Selected financial information 10.5 Anticipated sources of financing 109 3.1 Historical information 2-3; 200 11 - Research and development, patents and licenses 15-16; 41 3.2 Interim information n.a. 12 - Trend information 64 4 - Risk factors 34-37; 38-39 13 - Profit forecasts or estimates n.a. 5 - Information about the Company 14 - Administrative, management, 5.1 History and development of the Company 1; 8-19; 168 and supervisory bodies and 5.2 Investments 41; 117-118; 127 senior management 14.1 Administrative, management, 8-19 6 - Business overview and supervisory bodies and senior management 137-148 7 - Organizational structure 14.2 Administrative, management, 7.1 Brief description 4-5 and supervisory bodies and senior management conflicts of interest 152 7.2 List of significant subsidiaries 131-133 15 - Remuneration and benefits 187; 129 8 - Property, plant and equipment 62-64 16 - Board practices 9 - Operating and financial review 22-34; 37-40 16.1 Date of expiration of the current term of office 138-148 10 - Capital resources 16.2 Members of the administrative, 10.1 Capital resources of the issuer 170; 172 management or supervisory bodies’ service contracts 187 10.2 Sources and amounts of cash flows 39 16.3 Information about the Audit Committee and Remuneration Committee 152-153; 155-156 10.3 Borrowing requirements 37-40; 107-109; and funding structure 175; 210 16.4 Corporate government 152

n.a.: not applicable.

234 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 Headings Page Headings Page

17 - Employees 20.4 Auditing of historical annual financial information 134; 215; 230-231 17.1 Number of employees 42-53 20.5 Age of latest financial 181-185 17.2 Shareholdings and stock options information December 31, 2007 17.3 Arrangements for involving the employees in the capital 20.6 Interim and other of the issuer 181 financial information n.a.

18 - Major shareholders 20.7 Dividend policy 175 18.1 Shareholders having an interest in the capital of voting rights 20.8 Legal and arbitration of over 5% 172-174 proceedings 64 18.2 Existence of different voting rights 172 20.9 Significant change in the issuer’s financial 18.3 Control of the issuer 173-174 or trading position n.a. 18.4 Arrangements known to the issuer, the operation of which may at a 21 - Additional information subsequent date result in a change in control of the issuer n.a. 21.1 Share capital 170-173

128-129 19 - Related party transactions 21.2 Memorandum and Articles of Association 157-165 20 - Financial information concerning the issuer’s 22 - Material contracts n.a. assets and liabilities, financial position and profits and losses 23 - Third party information 20.1 Historical financial information 76-129; 231 and statement by experts and declarations of interest n.a. 20.2 Pro forma financial information n.a. 20.3 Individual company financial 24 - Documents on display 231 statements of LVMH Moët Hennessy-Louis Vuitton S.A. 19 6-214; 231 25 - Information on holdings 96

Reference Document 2007 235 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 2. TABLE OF CONCORDANCE WITH THE ANNUAL FINANCIAL REPORT (1)

Information Page

1 - Parent company financial statements 196-214

2 - Consolidated financial statements 76-133

3 - Statutory Auditors’ report on the parent company financial statements 215

4 - Statutory Auditors’ report on the consolidated financial statements 134

5 - Management report 5.1 Analysis of the change in revenue, results and financial position, principal risks and contingencies, financial risk management policy 22-64; 178-179 5.2 Summary table of valid delegations of authority granted by the Shareholders’ Meeting to the Board of Directors regarding capital increases 186 5.3 Factors liable to have an impact in the event of a public takeover offer 188 5.4 Purchases of treasury shares 192-194 5.5 Statement by the Company Officer responsible for the management report 230

6 - Statutory Auditors’ fees 149

7 - Report of the Chairman of the Board of Directors on internal control procedures 66-73

8 - Statutory Auditors’ on the Report of the Chairman of the Board of Directors on internal control procedures 74

(1 ) In application of Articles L. 451-1-2 of the French Code monétaire et financier and 222-3 of the General Rules and Regulation of the AMF.

236 Reference Document 2007 WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 CONTENTS

LVMH GROUP 1

HISTORY OF THE GROUP 1

FINANCIAL HIGHLIGHTS 2

SIMPLIFIED ORGANIZATIONAL CHART OF THE GROUP AS OF MARCH 31, 2008 4

BUSINESS DESCRIPTION 8

REPORT OF THE BOARD OF DIRECTORS ON GROUP MANAGEMENT 21

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON INTERNAL CONTROL PROCEDURES 65

CONSOLIDATED FINANCIAL STATEMENTS 75

LVMH MOËT HENNESSY ◆ LOUIS VUITTON SA 135

EXECUTIVE AND SUPERVISORY BODIES - STATUTORY AUDITORS 135

CORPORATE GOVERNANCE 151

GENERAL INFORMATION REGARDING THE PARENT COMPANY AND ITS CAPITAL; 167 STOCK MARKET INFORMATION

REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS’ MEETING 177

STOCK REPURCHASE PROGRAMS 191

PARENT COMPANY FINANCIAL STATEMENTS 195

RESOLUTIONS PRESENTED FOR THE APPROVAL OF THE COMBINED SHAREHOLDERS’ MEETING OF MAY 15, 2008 219

STATEMENT OF RESPONSIBLE COMPANY OFFICER; 229 FINANCIAL INFORMATION

TABLE S OF CONCORDANCE 233

The original French version of this document was submitted to the Autorité des Marchés Financiers on April 14 , 2008 pursuant to Articles 212-13 of its General Rules and Regulations. This document is a free translation into English of the original French “Document de Référence”, hereafter referred to as the “Reference Document”. It is not a binding document. In the event of a The original French version of this document may be used for the purposes of public capital and financial operations conflict in interpretation, reference should be made to the French version, which is the authentic text. if it is supplemented by a transaction note approved by the Autorité des Marchés Financiers. WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56 www.lvmh.com Tel. +331441322-Fax: 33144132119 LVMH, 22avenueMontaigne-75008 Paris

LVMH 2007 TRANSLATION OFTHEFRENCH DOCUMENT DEREFERENCE FISCAL YEARENDED DECEMBER 31,2007

WorldReginfo - 61a092e4-dd9c-4ef4-ad1b-f7cce310ea56