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TRANSLATION OF THE FRENCH DOCUMENT de référence FISCAL YEAR ENDED DECEMBER 31, 2010 CONTENTS

LVMH group 1

History 1

Financial Highlights 2

Executive and supervisory bodies; statutory auditors 5

simplified organizational chart 6

business description 9

Management report of the board of directors 23

LVMH group 23

parent company: moet - SA 51

human resources 69

lvmh and the environment 87

Report of the chairman of board of directors 101

financial statements 115

consolidated financial statements 115

parent company financial statements: lvmh moet hennessy - louis vuitton sa 185

other information 211

corporate governance 211

general information regarding the parent company; stock market information 237

resolutions for the approval of the combined shareholders’ meeting of March 31, 2011 245

responsible company officer; financial information 261

TABLEs of CONCORDANCE 265

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 conflict in interpretation, reference should be made to the French version, which is the authentic text. LVMH group History

History

Although the history of the LVMH group began in 1987 with the merger of Moët Hennessy and Louis Vuitton, the roots of the Group actually stretch back much further, to eighteenth-century , when a man named Claude Moët decided to build on the work of Dom Pérignon, a contemporary of Louis XIV; and to nineteenth-century Paris, famous for its imperial celebrations, where Louis Vuitton, a craftsman trunk-maker, invented modern luggage. Today, the LVMH group is the world’s leading company, the result of successive alliances among companies that, from generation to generation, have successfully combined traditions of excellence and creative passion with a cosmopolitan flair and a spirit of conquest. These companies now form a powerful, global group in which the historic companies share their expertise with the newer brands, and continue to cultivate the art of growing while transcending time, without losing their soul or their image of distinction.

From the 16th century to the present:

16th century 1573 Wen Jun 1945 Céline 1593 Château d’Yquem 1947 Parfums Christian th 1729 18 century 1952 1743 Moët & Chandon 1957 1765 Hennessy 1960 DFS 1772 Domaine Chandon 1780 1963 Miami Cruiseline 19th century 1815 Ardbeg 1969 1828 1970 1832 Château Cheval Blanc 1976 1843 Krug 1846 1977 Newton 1849 Royal Van Lent 1980 1852 Le Bon Marché 1984 1854 Louis Vuitton 1858 Mercier Donna Karan 1860 TAG Heuer 1865 1985 Cloudy Bay 1870 1988 Parfums Kenzo 1893 Glenmorangie 1991 Fresh 1895 1996 Belvedere 1998 Numanthia Termes th 20 century 1908 1999 1916 1925 21st century 2001 De Beers Diamond 1936 Dom Pérignon Jewellers Fred 2003 Cheval des Andes 1942 Rossimoda 2005

Reference Document 2010 1 LVMH group Financial highlights

Financial highlights

Key consolidated data

(EUR millions and percentage) 2010 2009 2008

Revenue 20,320 17,053 17,193 Profit from recurring operations 4,321 3,352 3,628 Net profit 3,319 1,973 2,318 Net profit, Group share 3,032 1,755 2,026 Cash from operations before changes in working capital (1) 4,848 3,928 4,096 Operating investments 1,002 748 1,039 Net cash from (used in) operating activities and operating investments (free cash flow) 3,073 2,205 1,331 Total equity 18,204 14,785 13,793 (2) Net financial debt (3) 2,678 2,994 3,869 Net financial debt/Total equity ratio 15% 20% 28%

(1) Before tax and interest paid. (2) Restated to reflect the retrospective application as of January 1, 2007 of IAS 38 Intangible assets as amended. See Note 1.2 of notes to the consolidated financial statements. (3) Net financial debt does not take into consideration purchase commitments for minority interests included in Other non-current liabilities. See Note 17.1 of notes to the consolidated financial statements.

Data per share

(EUR) 2010 2009 2008

Earnings per share Basic Group share of earnings per share 6.36 3.71 4.28 Diluted Group share of earnings per share 6.32 3.70 4.26

Dividend per share Interim 0.70 0.35 0.35 Final 1.40 1.30 1.25 Gross amount paid for fiscal year (4) (5) 2.10 1.65 1.60 (4) Excludes the impact of tax regulations applicable to the beneficiary. (5) For fiscal year 2010, amount proposed at the Shareholders’ Meeting of March 31, 2011.

Information by business group

(EUR millions) 2010 2009 2008 Revenue by business group Wines and Spirits 3,261 2,740 3,126 Fashion and Leather Goods 7,581 6,302 6,010 Perfumes and Cosmetics 3,076 2,741 2,868 Watches and Jewelry 985 764 879 Selective Retailing 5,378 4,533 4,376 Other activities and eliminations 39 (27) (66) Total 20,320 17,053 17,193

Profit from recurring operations by business group Wines and Spirits 930 760 1,060 Fashion and Leather Goods 2,555 1,986 1,927 Perfumes and Cosmetics 332 291 290 Watches and Jewelry 128 63 118 Selective Retailing 536 388 388 Other activities and eliminations (160) (136) (155) Total 4,321 3,352 3,628

2 Reference Document 2010 LVMH group Financial highlights

Information by geographic region

2010 2009 2008

Revenue by geographic region of delivery (%) 13 14 14 Europe (excluding France) 21 21 24 United States 23 23 23 Japan 9 10 10 Asia (excluding Japan) 25 23 20 Other markets 9 9 9 Total 100 100 100

Revenue by invoicing currency (%) Euro 28 30 32 US dollar 27 27 28 Yen 9 10 10 Hong Kong dollar 6 5 4 Other currencies 30 28 26 Total 100 100 100

Number of stores France 364 353 331 Europe (excluding France) 646 620 596 United States 570 531 531 Japan 303 307 256 Asia (excluding Japan) 518 470 485 Other markets 144 142 115 Total 2,545 2,423 2,314

Reference Document 2010 3 4 Reference Document 2010 LVMH group Executive and Supervisory Bodies; Statutory Auditors

Executive and Supervisory Bodies; Statutory Auditors

Board of Directors Executive Committee Bernard Arnault Chairman and Chief Executive Officer Chairman and Chief Executive Officer Antoine Bernheim (1) Antonio Belloni Vice-Chairman Group Managing Director Pierre Godé (2) Pierre Godé Vice-Chairman Vice-Chairman Antonio Belloni (2) Nicolas Bazire Group Managing Director Development and Acquisitions Ed Brennan (2) Travel retail Nicolas Bazire (2) Yves Carcelle Fashion and Leather Goods (1) Chantal Gaemperle Nicholas Clive Worms (1) Human Resources, Synergies Charles de Croisset (1) (2) Jean-Jacques Guiony (1) (2) Finance Albert Frère Christophe Navarre Gilles Hennessy (2) Wines and Spirits Marie-Josée Kravis (1) (2) Patrick Ouart Advisor to the Chairman Lord Powell of Bayswater Philippe Pascal Felix G. Rohatyn Watches and Jewelry (1) Yves-Thibault de Silguy Daniel Piette Hubert Védrine (1) Investment Funds Advisory Board member Pierre-Yves Roussel Fashion Patrick Houël (2) Mark Weber Performance Audit Committee Donna Karan, LVMH Inc.

(1) Antoine Bernheim General secretary Chairman Marc-Antoine Jamet Nicholas Clive Worms (1) Gilles Hennessy

Nominations and Compensation Statutory auditors Committee ERNST & YOUNG et Autres Antoine Bernheim (1) represented by Olivier Breillot and Gilles Cohen Chairman DELOITTE & ASSOCIES Charles de Croisset (1) represented by Thierry Benoit Albert Frère

(1) Independent Director. Reference Document 2010 5 (2) Nomination / renewal proposed at the Shareholders’ Meeting of March 31, 2011. LVMH group Simplified organizational chart of the Group as of January 31, 2011

Simplified organizational chart of the Group as of January 31, 2011

LVMH SA

34%

66% 99.9% 100%

LVMH FASHION SOFIDIV SAS Moët Hennessy GROUP SA

100% 100% 100% 100%

Groupe Other holding LVMH BV LVMH Inc. Les Echos SA companies

100% 100%

Moët & Chandon 99% 100% 100% 100% Parfums 100% 100% Benefit 80% 100% Miami 100% Château 65% Hennessy Louis Vuitton Guerlain Chaumet Le Bon Marché Loewe Les Echos Mercier Christian Dior Fendi Cosmetics Cruiseline d’Yquem

100%

100% 100% Kenzo 100% 96% 90% 80% 61% 100% Château 50% Ruinart Belvedere Berluti Fred Franck & Fils Royal Van Lent Fresh DFS US Parfums Pucci Le Journal Cheval Blanc des Finances 100% 100%

100% 100% Parfums 100% 100% 100% 100% 100% 100% Krug Glenmorangie Céline Sephora Acqua Di Parma Donna Karan Sephora US Radio Classique Thomas Pink Givenchy

100% Wen Jun 100% Make Up 100% 99% 96% 100% Veuve Clicquot Kenzo La Samaritaine Zenith Marc Jacobs SID Editions Spirits For Ever

100%

100% 100% Numanthia 100% Connaissance 100% Cloudy Bay Givenchy TAG Heuer Termes des Arts

Newton 90% 100% 10 Cane 100% Vineyards Hublot

100% 50% De Beers Cape Mentelle Diamond Jewellers

61% Brands and Holding DFS Asia trade names companies

6 Reference Document 2010 LVMH group Simplified organizational chart of the Group as of January 31, 2011

LVMH SA Diageo

34%

66% 99.9% 100%

LVMH FASHION SOFIDIV SAS Moët Hennessy GROUP SA

100% 100% 100% 100%

Groupe Other holding LVMH BV LVMH Inc. Les Echos SA companies

100% 100%

Moët & Chandon 99% 100% 100% 100% Parfums 100% 100% Benefit 80% 100% Miami 100% Château 65% Hennessy Louis Vuitton Guerlain Chaumet Le Bon Marché Loewe Les Echos Mercier Christian Dior Fendi Cosmetics Cruiseline d’Yquem

100%

100% 100% Kenzo 100% 96% 90% 80% 61% Investir 100% Château 50% Ruinart Belvedere Berluti Fred Franck & Fils Royal Van Lent Fresh DFS US Parfums Pucci Le Journal Cheval Blanc des Finances 100% 100%

100% 100% Parfums 100% 100% 100% 100% 100% 100% Krug Glenmorangie Céline Sephora Acqua Di Parma Donna Karan Sephora US Radio Classique Thomas Pink Givenchy

100% Wen Jun 100% Make Up 100% 99% 96% 100% Veuve Clicquot Kenzo La Samaritaine Zenith Marc Jacobs SID Editions Spirits For Ever

100%

100% 100% Numanthia 100% Connaissance 100% Cloudy Bay Givenchy TAG Heuer Termes des Arts

Newton 90% 100% 10 Cane 100% Vineyards Hublot

The Group also holds a 20% investment in Hermès International (Paris, France). 100% 50% De Beers The objective of this chart is to present the direct and/or indirect control Cape Mentelle Diamond Jewellers structure of brands and trade names by the Group’s main holding companies. It does not provide a complete presentation of all Group shareholdings.

61% Brands and Holding DFS Asia trade names companies

Reference Document 2010 7 8 Reference Document 2010 LVMH Group

Business Description

Page

1. Wines and Spirits 10 1.1 Champagne and Wines 10 1.2 Cognac and spirits 12 1.3 Wines and Spirits distribution 14

2. Fashion and Leather Goods 15 2.1 The brands of the Fashion and Leather Goods business group 15 2.2 Design 16 2.3 Distribution 16 2.4 Supply sources and subcontracting 16

3. Perfumes and Cosmetics 16 3.1 The brands of the Perfumes and cosmetics business group 17 3.2 Research in Perfumes and cosmetics 18 3.3 Supply sources and subcontracting 19

4. Watches and Jewelry 19 4.1 The brands of the Watches and Jewelry business group 20 4.2 Supply sources and subcontracting 20

5. Selective Retailing 21 5.1 Travel retail 21 5.2 Selective retail 21

6. Other Activities 22

Reference Document 2010 9 LVMH group Business description

Business description

1. Wines and Spirits

The activities of LVMH in the Wines and Spirits sector are divided specializing exclusively in high-end vintages. The Montaudon between two branches: the Champagne and Wines branch and the brand, purchased at the end of 2008, was sold in December 2010. Cognac and Spirits branch. The Group’s strategy is focused on the The Chandon brand (created in 1960 in Argentina) includes the high-end segments of the global wine and spirits market. Moët Hennessy wines developed in California, Argentina, Brazil In 2010, revenue for the Wines and Spirits business group and Australia by Chandon Estates. amounted to 3,261 million euros, or 16% of the LVMH group’s total revenue. The Group also owns a number of prestigious wines from the New World: Cape Mentelle and Green Point in Australia, Cloudy Bay in New Zealand, and Newton in California. 1.1 Champagne and Wines Château d’Yquem, which joined LVMH in 1999, is the most In 2010, revenue for the Champagne and Wines activities was prestigious of the Sauternes. It owes its excellent international 1,664 million euros (82% of which was attributable to champagne), reputation to its 110 hectare vineyard located on a mosaic of representing 51% of the total revenue of the Group’s Wines and exceptional soils and to the extreme care taken in its preparation Spirits business group. throughout the year. 1.1.1 The Champagne and Wine brands In 2008, LVMH acquired the Spanish wine company Numanthia LVMH produces and sells a very broad range of high quality Termes, founded in 1998 and located at the heart of the Toro Champagne wines. In addition to Champagne, the Group develops region. and distributes a range of high-end still and sparkling wines from In 2009, LVMH proceeded with the acquisition of a 50% stake in well-known wine regions: France, Spain, California, Argentina, the prestigious winery Château Cheval Blanc, Premier Grand Cru Brazil, Australia and New Zealand. The wines developed by Moët classé “A” Saint-Emilion. Château Cheval Blanc owns a 37 hectare Hennessy are held within the Estates & Wines business unit. domain within the Saint-Emilion appellation. The strictest LVMH represents the leading portfolio of Champagne brands, respect for the purest traditions of winemaking characterizing the which hold complementary market positions. Dom Pérignon is Bordeaux grand crus, a terroir of superior quality, and an atypical a prestigious vintage produced by Moët & Chandon since 1936. blend of grape give its wines their exceptional balance Moët & Chandon (founded in 1743), the leading wine grower and unique personality. This acquisition was consolidated for the and exporter of Champagne, and Veuve Clicquot Ponsardin first time on a proportional basis with effect from August 2009. (founded in 1772), which ranks second in the industry, are two 1.1.2 Competitive position quality internationally-known brands. Mercier (founded in 1858) is a brand designed for the French market. Ruinart (the oldest In 2010, shipments of LVMH Champagne brands increased in of the Champagne Houses, founded in 1729) has a development volume by 20% while shipments from the Champagne region were strategy that is carefully targeted on a number of priority markets, up 9%. Thus, the market share of the LVMH brands was 17.5% which are currently mainly in Europe. Krug (founded in 1843 of the total shipments from the region, compared to 15.8% in and acquired by LVMH in January 1999) is a world famous brand, 2009 (source: CIVC).

The breakdown of Champagne shipments by region is as follows:

(in millions of bottles and percentage) 2010 2009 (1) 2008

Volumes Market Volumes Market Volumes Market share share share Region LVMH (%) Region LVMH (%) Region LVMH (%) France 185.0 12.6 6.8 180.8 11.1 6.1 181.2 10.1 5.6 Export 134.5 43.2 32.1 112.6 35.4 31.4 141.2 51.0 36.1 Total 319.5 55.8 17.5 293.3 46.5 15.8 322.4 61.1 18.9 (1) Shipments indicated for 2009 correspond to definitive statistics; figures provided in the 2009 reference document were compiled on the basis of provisional statistics. (Source: Comité Interprofessionnel des Vins de Champagne – CIVC).

10 Reference Document 2010 LVMH group Business description

The geographic breakdown of LVMH champagne sales in 2010 1.1.4 Grape supply sources and subcontracting is as follows (as a percentage of total sales expressed in number of The Group owns 1,679 hectares of champagne under production, bottles): which provide a little more than one-fourth of its annual needs. (in percentage) 2010 2009 2008 In addition, the Group companies purchase grapes and wines from wine growers and cooperatives on the basis of multi-year Germany 5 5 5 agreements; the largest supplier of grapes and wines represents less United Kingdom 11 12 10 than 15% of total supplies for the Group’s brands. Until 1996, a United States 18 17 17 theoretical price was published by the industry; to this were added Italy 5 6 8 specific premiums negotiated individually between wine growers Switzerland 2 2 2 and merchants. Following the signing of an initial four-year Japan 6 6 7 agreement in 1996, another industry agreement had been signed Other export 32 30 32 in the spring of 2000 covering the four harvests from 2000 to 2003, Total export 78 77 83 which had confirmed the aim of limiting upward or downward France 22 23 17 fluctuations in grape prices. A new industry agreement was then concluded in the spring of 2004 between the Champagne producers Total 100 100 100 and the region’s grape suppliers covering the five harvests from 2004 to 2009. This agreement was renewed in 2009 before its 1.1.3 The champagne production method expiry date, setting the framework for negotiations relating to The name Champagne covers a defined area classified A.O.C. harvests from 2009 to 2013. Each individual agreement must now (appellation d’origine contrôlée), which covers the 34,000 hectares include an indexation clause for grape prices. The recommended that can be legally used for production. Only three types of benchmark is the average sales price of a bottle of Champagne, grape varietals are authorized for the production of champagne: which ensures better value distribution for the market participants , pinot noir and pinot meunier. The preparation method and more control over grape price speculation. used for wines produced outside the Champagne region, but using For about ten years, wine growers and merchants have established the winemaking techniques used for champagne, is called the a qualitative reserve that will allow them to cope with variable “champenoise method.” harvests. The surplus inventories stockpiled this way can be sold in In addition to its effervescence, the primary characteristic of years with a poor harvest. These wines stockpiled in the qualitative champagne is that it is the result of blending wines from different reserve provide a certain security for future years with smaller years and/or different varieties and land plots. The best brands are harvests. distinguished by their masterful blend and constant quality which For the 2010 harvest, the Institut National des Appellations is achieved thanks to the talent of their wine experts. d’Origine (INAO, the French organization responsible for Weather conditions significantly influence the grape harvest from regulating controlled place names) set the maximum yield for one year to the next. The production of champagne also requires the Champagne appellation at 10,500 kg/ha. This maximum yield aging in cellars for two years or more for the “premium” vintages, represents the maximum harvest level that can be made into wine which are the vintages sold at more than 110% of the average sale and sold under the Champagne appellation. In 2006, the INAO price. To protect themselves against crop variations and manage redefined the legal framework for the abovementioned stockpiled fluctuations in demand, but also to ensure constant quality over the reserves. It is now possible to harvest grapes beyond the marketable years, the LVMH Champagne Houses have adjusted the quantities yield within the limits of a ceiling called “plafond limite de classement available for sale and keep reserve wines in stock. Since a lower (PLC)”, the highest permitted yield-per-hectare. This ceiling is harvest can impact sales for two or three years, or more, LVMH determined every year within the limits of the maximum total yield constantly maintains significant champagne inventories in its now set at 12,000 kg/ha for the 2010 harvest. Grapes harvested cellars. As of December 31, 2010 these inventories represented over and above the marketable yield are stockpiled in reserve, kept approximately 255 million bottles, the equivalent of 4.4 years of in vats and used to complement poorer harvests. The maximum sales; in addition, there are also 12 million equivalent bottles of level of this stockpiled reserve is set at 8,000 kg/ha. quality reserve held from sale.

Reference Document 2010 11 LVMH group Business description

Grape prices fell by 4% in 2009 as a result of the economic crisis develops the luxury vodka Belvedere, was founded in 1910 and and excess inventories being held by wine-merchants. The price purchased by Millennium in 2001, when it was privatized. There is paid for each kilogram of grapes in the 2010 harvest ranged no relationship between the Belvedere brand owned by LVMH and between 4.85 euros and 5.65 euros depending on the vineyard, a Belvédère, the French spirits group. In 1999, the company decided 2% increase compared to 2009. to develop flavored vodkas. In 2007, as a result of an agreement with Belvedere Winery, Moët Hennessy acquired the brand and Dry materials (bottles, corks, etc.) and all other elements Belvedere domain name in the United States, thus becoming the representing containers or packaging are purchased from non- owner of this luxury vodka brand worldwide. The distribution Group suppliers. rights for the Chopin brand were sold in 2010. The Champagne Houses used subcontractors primarily for bottle handling and storing operations; these operations represented Following a friendly take-over bid finalized at the end of approximately 15 million euros. December 2004, in January 2005, LVMH acquired 99% of the share capital of Glenmorangie plc, a British company listed in London, and the remaining capital in March 2005 as the result of 1.2 Cognac and spirits a delisting procedure. The Glenmorangie group holds the single In 2010, revenue for the Cognac and Spirits segment totaled malt whisky brands Glenmorangie and Ardbeg. The Glen 1,597 million euros, or 49% of the total revenue for the Wines Moray distillery, previously owned by Glenmorangie plc, was and Spirits business group. sold in 2008.

1.2.1 Cognac and spirits brands In the spring of 2005, LVMH launched a handcrafted luxury rum in the American market, under the 10 Cane brand, which reflects LVMH holds the most powerful brand in the cognac sector with the expertise of Moët Hennessy at every stage of production. Hennessy. The company was founded by Richard Hennessy in 1765. Historically, the leading markets for the brand were In May 2007, the Group acquired 55% of the share capital of Ireland and Great Britain, but Hennessy rapidly expanded its Wen Jun Spirits and Wen Jun Spirits Sales, which produce and presence in Asia, which represented nearly 30% of its shipments distribute baijiu (white liquor) in China. The distillery, which as early as 1925. The brand became the world cognac leader in prepares one of the most famous and prestigious baijius in the 1890. Hennessy created X.O (Extra Old) in 1870 and, since country, has been operating without interruption since the Ming then, has developed a line of high-end cognac that has made dynasty in the 16th century. its reputation. 1.2.2 Competitive position In 2002, LVMH acquired 40% of Millennium, a producer and distributor of high-end vodka under the brand names Belvedere In 2010, the volumes shipped from the Cognac region were up and Chopin; at year-end 2004, LVMH held 70%, and the remaining 19% from 2009, while the volumes of Hennessy shipped increased 30% of the capital was acquired in 2005. Millennium was founded by 18%. The market share of Hennessy was 42.5%, compared to in 1994 to bring to the American market a luxury vodka for 42.8% in 2009 (source: Bureau National Interprofessionnel du connoisseurs. In 1996, Belvedere and Chopin were introduced Cognac – BNIC). The company is the world leader in cognac, in this market. The Polmos Zyrardow distillery in Poland, which with particularly 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 number of bottles, excluding bulk, are as follows:

(million bottles and percentage) 2010 2009 (1) 2008

Volumes Market Volumes Market Volumes Market share share share Region LVMH (%) Region LVMH (%) Region LVMH (%) France 4.1 0.3 6.5 2.9 0.2 7.5 3.9 0.3 6.4 Europe (excluding France) 38.3 8.9 23.3 33.5 7.3 21.8 40.6 9.6 23.5 United States 46.4 27.4 59.0 43.0 27.1 63.0 47.6 27.0 56.7 Japan 1.4 0.7 52.8 1.8 1.2 63.2 1.7 1.0 56.1 Asia (excluding Japan) 50.0 21.8 43.5 37.0 14.6 39.5 40.2 19.1 47.5 Other markets 7.0 3.5 50.3 5.6 2.6 47.3 6.8 3.2 47.1 Total 147.2 62.6 42.5 123.8 53.0 42.8 140.8 60.2 42.7 (1) Figures provided for shipments in 2009 have been corrected to reflect definitive statistics and for this reason may no longer correspond to the volumes indicated in the 2009 reference document. (Source: Bureau National Interprofessionnel du Cognac – BNIC).

12 Reference Document 2010 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. (in percentage) 2010 2009 2008 Like the Champagne and Wine businesses, Hennessy obtains its United States 44 51 45 dry materials (bottles, corks and other packaging) from non-Group Japan 1 2 2 suppliers. The barrels and casks used to age the cognac are also Asia (excluding Japan) 35 27 32 obtained from non-Group suppliers. Europe (excluding France) 14 14 16 Hennessy makes only very limited use of subcontractors for its Other export 6 5 6 core business. Total export 100 100 100 France - - - 1.2.5 The vodka production method, supply sources Total 100 100 100 and subcontracting Vodka can be obtained from the distillation of various grains or 1.2.3 The cognac production method potatoes. is the result of the quadruple distillation of Polish rye. The distillery owned by Millennium that prepares The Cognac region is located around the Charente basin. The Belvedere performs three of these distillations itself in Zyrardow, vineyard, which currently extends over about 75,000 hectares, Poland. It uses water purified using a special process that yields a consists almost exclusively of the white ugni which yields vodka with a unique taste. a wine that produces the best eaux-de-vie. Millennium’s flavored vodkas are obtained by macerating fruits in This region is divided into six vineyards, each of which has its own a pure vodka prepared using the same process used for Belvedere, qualities: Grande Champagne, Petite Champagne, Borderies, Fins and distillation takes place in a Charente-type still. Bois, Bons Bois and Bois Ordinaires. Hennessy selects its eaux-de- vie from the first four vineyards, where the quality of the wines is Overall, Millennium’s top raw eaux-de-vie supplier represents less more suitable for the preparation of its cognacs. than 25% of the company’s supplies.

Charentaise distillation is unique because it takes place in two 1.2.6 The whisky production method stages, a first distillation (première chauffe) and a second distillation The legal definition of Scotch Whisky states that the spirit must be (seconde chauffe). The eaux-de-vie obtained are aged in oak barrels. produced at a distillery in Scotland from water and malted barley An eau-de-vie at full maturity is not necessarily a good cognac. to which other cereals may be added, fermented by yeast, distilled Cognac results from the gradual blending of eaux-de-vie selected and matured in Scotland in oak casks with a volume of less than on the basis of vintage, origin and age. 700 liters for a minimum of three years. Single Malt Scotch Whisky 1.2.4 Supply sources for wines and Cognac eaux-de-vie is the product of one single distillery. Blended Scotch Whisky is and subcontracting made by mixing malt and grain whiskies together. Hennessy owns 180 hectares. The Group’s vineyard has remained According to the rules for producing malt whisky, the malt is first virtually stable since 2000, after 60 hectares of vines were cleared ground, which produces a mixture of flour and husks called grist. in 1999 as part of the industry plan implemented in 1998. The This product is then mixed with hot water in large wooden tubes objective of the plan was to reduce the production area through called wash tuns in order to extract the sugars from the malted premiums offered for clearing and assistance given to wine growers barley. The resulting sugary liquid, known as worsts, is transferred to encourage them to produce wines other than those used in the to a fermentation vessel or wash back and yeast is added to allow preparation of cognac. fermentation to occur and alcohol to be created. This alcoholic liquid, known as wash, then undergoes a double distillation in Most of the wines and eaux-de-vie that Hennessy needs for its copper pot stills, known as wash and spirit stills. Every distillery’s production are purchased from a network of approximately 2,500 stills are unique in shape and size and have a huge impact on flavor. independent producers, a collaboration which enables the company Glenmorangie’s stills are the highest in Scotland at 5.14 meters to ensure that exceptional quality is preserved. Purchase prices and allow only the lightest vapors to ascend and condense. The for wine and eaux-de-vie are established between the company spirit still at Ardbeg has a unique spirit purifier. and each producer based on supply and demand. In 2010, the This newly made spirit is filled into American white oak ex-Bourbon price of wines from the harvest increased by 1% compared to the barrels and matured in a distillery warehouse for at least three 2009 harvest. years. Maturation is a very critical part of the production process With an optimal inventory of eaux-de-vie, the Group can manage providing the whiskies’ color and additional flavors. Glenmorangie the impact of price changes by adjusting its purchases from year and Ardbeg are normally matured for a minimum of 10 years in to year. very high quality casks.

Reference Document 2010 13 LVMH group Business description

1.2.7 The 10 Cane rum production method and alkalinity conditions of the local environment. Sichuan, where the Wen Jun distillery has been located since the 16th century The rum category is not highly regulated. With the exception (Ming dynasty) is considered as an ideal environment for the of “Agricultural Rums”, there is no Appellation Contrôlée. It is, production of “Nong” white liquors. Wen Jun is one of the oldest however, possible to distinguish two groups based on the method and most celebrated luxury spirit producers in China. of processing sugar cane: rums made from molasses, a by-product of the sugar refinement process, and rums prepared from a wine with a very diluted cane juice base. This is the case in the French 1.3 Wines and Spirits distribution Antilles, for example. LVMH’s Wines and Spirits are distributed to the world’s major The 10 Cane distillery on the island of Trinidad only uses the markets primarily through a network of international subsidiaries, juice from the first pressing, and everything else is rejected. After some of which are joint ventures with the spirits group Diageo plc. the gradual fermentation of the pure undiluted cane juice, the In 2010, 28% of champagne and cognac sales were made through distillery uses an ancestral and expressive distillation method. this channel. Double distillation in Charente stills highlights the qualities of the Diageo has a 34% stake in Moët Hennessy which is the holding cane wine and, ultimately, the rum. After distillation, maturation company of the LVMH group’s Wines and Spirits businesses. can begin in aged oak barrels from the French Limousin region that are lightly toasted. Beginning in 1987, LVMH and (prior to the creation For the installation of its production facility, the 10 Cane distillery of Diageo) signed agreements leading to the creation of 17 joint partnered with Angostura Trinidad Distillers, which has been ventures for the distribution of their top brands, including MHD in present on the island for several generations. However, 10 Cane France and Schieffelin & Somerset in the United States. This joint retains control in the most sensitive areas. network strengthens the positions of the two groups, improves distribution control, enhances customer service, and increases 1.2.8 Production method for Wen Jun spirits profitability by sharing distribution costs. The spirits produced in China by Wen Jun are white liquors of the At the end of 2004, LVMH and Diageo announced they were “Nong” (aromatic) style, the most popular in the country. They are separating their sales of the Moët Hennessy and Diageo product lines produced from spring water and various grains, primarily wheat, in the United States within the joint venture Schieffelin & Somerset; rice, sorghum, maize and glutinous rice. this agreement does not change the distribution of the products of the two groups to joint distributors in place on this market since The fermentation process is carried out in a pit dug into the ground, 2002. Following this agreement, LVMH announced early in 2005 measuring three meters on each side and in depth, whose walls are the creation of Moët Hennessy USA, which now markets all the covered with a special putty mixture containing particular enzymes LVMH brands of Wines and Spirits in the United States. and bacteria beneficial to flavor development. The grains are sealed into the pit with a fermenting agent for about 70 days prior to In 2010, LVMH and Diageo reorganized their product distribution distilling. The product obtained at the end of the distillation channels in Japan. Moët Hennessy refocused on the distribution process is then aged for a year in ceramic jars large enough to hold of its own brands of and spirits together with some 1,100 liters of the liquid. At the end of this aging process, the of Diageo’s ultra-premium spirits brands, while the distribution product is finally blended and bottled. The fermentation quality of of Diageo’s premium brands was transferred to a joint venture Chinese white spirits is closely linked to the temperature, moisture between Diageo and Kirin.

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2. Fashion and Leather Goods

The Fashion and Leather Goods business group includes in furs, the brand is also present in leather goods, accessories and Louis Vuitton, the world’s leading luxury brand, Donna Karan, ready-to-wear fashion. Fendi, Loewe, Céline, Kenzo, Marc Jacobs, Givenchy, Thomas Pink, Donna Karan was founded in New York in 1984. Its ready-to- Pucci, Berluti and Rossimoda. This exceptional group of brands, wear lines, the luxury Collection line, and DKNY, a more casual born in Europe and the United States, has 1,188 stores around the clothing line, meet the needs of a very modern and international world. While respecting the identity and creative positioning of lifestyle. each of its brands, LVMH supports their development by providing shared resources. Loewe, the Spanish company created in 1846 and acquired by LVMH in 1996, originally specialized in very high quality leather In 2010, the Fashion and Leather Goods business group posted work. Today it is present in leather goods and ready-to-wear. revenue of 7,581 million euros, representing 37% of the total The Loewe perfumes are included in the LVMH Perfumes and revenue of LVMH. Cosmetics business group. 2.1 The brands of the Fashion and Leather Goods Marc Jacobs, created in New York in 1984, is the brand name of business group Louis Vuitton’s eponymous creative director. It has been majority owned by LVMH since 1997 and is expanding rapidly in fashion In the luxury Fashion and Leather Goods sector, LVMH holds a for men and women. group of brands that are primarily French, but also include Spanish, Italian, British and American companies. Céline, founded in 1945 and owned by LVMH since 1996, is developing a ready-to-wear line, leather goods, shoes and Louis Vuitton Malletier (founded in 1854), the star brand of accessories. this business group, first focused its development around the art of traveling, creating trunks, rigid or flexible luggage items, Kenzo has generated rapid success in the world of fashion since it innovative, practical and elegant bags and accessories, before was formed in 1970, and joined the LVMH group in 1993. Today, expanding its territory and its expertise in other areas of expression. the company operates in the areas of ready-to-wear for men and For over 150 years, its product line has continuously expanded women, fashion accessories, leather goods and home furnishings. with new travel or city models and with new materials, shapes Its perfume business is part of the LVMH Perfumes and Cosmetics and colors. Famous for its originality and the high quality of its business group. creations, today Louis Vuitton is the world leader in luxury goods Givenchy, founded in 1952 by Hubert de Givenchy, a company and, since 1998, has offered its international customers a full range rooted in a tradition of excellence in , is also known of products: leather goods, ready-to-wear for men and women, for its collections of men and women’s ready-to-wear and its fashion shoes and accessories. Since 2002, the brand has also been present in accessories. The Givenchy perfumes are included in the LVMH the watch segment; Louis Vuitton launched its first line of jewelry Perfumes and Cosmetics business group. in 2004 and its first eyewear collection in 2005. Thomas Pink, a brand formed in 1984, is a recognized specialist The principal leather goods lines of Louis Vuitton are: in high-end shirts in England. Since joining the LVMH group in -- the Monogram line, a historical canvas created in 1896, also 1999, the brand has been accelerating its international growth. available in Monogram Vernis, Idylle, Monogram Multicolore and Emilio Pucci, an Italian brand founded in 1947, is a symbol of Monogram Denim; casual fashion in luxury ready-to-wear, a synonym of escape and -- the Damier line in three colors, ebony, blue azur and Damier refined leisure. Emilio Pucci joined LVMH in February 2000. Graphite for men, launched in 2008; -- the Cuir Epi line, offered in several colors; Berluti, an artisan bootmaker established in 1895 and held by LVMH since 1993, designs and markets very high quality men’s -- the Taiga line for men in four colors. shoes, both custom made and ready-to-wear and, since 2005, a Monogram Empreinte, an embossed line in soft and pliable leather, line of leather goods. was launched in 2010. Rossimoda, an Italian company founded in 1942, which joined the Fendi, founded in Rome in 1925, is one of the flagship brands of Group in 2003, specializes in the manufacturing and distribution Italian fashion. Particularly well-known for its skill and creativity of licensed luxury women’s footwear.

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2.2 Design Fendi and Loewe also have leather workshops in their country of origin and in Italy for Céline, which cover only a portion of Whether they belong to the world of haute couture or luxury their production needs. Generally, the subcontracting used fashion, the LVMH brands have founded their success first and by the business group is diversified in terms of the number of foremost on the quality, authenticity and originality of their subcontractors and is located primarily in the country of origin of designs that must be renewed with each season and each collection. the brand: France, Italy and Spain. Thus, a strategic priority is to strengthen the design teams, ensure the collaboration of the best designers, and adapt their talent to Overall, the use of subcontractors for Fashion and Leather Goods the spirit of each brand. operations represented about 43% of the cost of sales in 2010. LVMH believes that one of its essential assets is its ability to Louis Vuitton Malletier depends on outside suppliers for most of attract a large number of internationally recognized designers the leather and raw materials used in manufacturing its products. to its companies. Marc Jacobs has designed the Louis Vuitton Even though a significant percentage of the raw materials is ready-to-wear collections since 1998, supervises the creation of purchased from a fairly small number of suppliers, Louis Vuitton shoes and is successfully recreating the great classics of the brand believes that these supplies could be obtained from other sources, if in leather goods. Phoebe Philo was appointed as Céline’s new necessary. In 2004, recourse to a balanced portfolio of suppliers also creative director in 2008. The fashion designer Riccardo Tisci, limited dependence on specific suppliers. After a diversification who has been the creative director of Givenchy Femme’s haute program launched in 1998 to Norway and Spain, the portfolio couture, ready-to-wear and accessories lines since 2005, was given of suppliers was expanded to include Italy in 2000. In 2009, as responsibility for the brand’s ready-to-wear line for men in 2008 part of a continued effort to bolster this strategic supply source, as well. Stuart Vevers is Loewe’s creative director. Antonio Marras Louis Vuitton formed a joint venture with Tannerie Masure, which serves as creative director for all of the Kenzo collections. Donna has been providing the company with premium-quality leathers Karan continues to create the lines of the company that bears her for many years. This partnership will result in the creation of name. In 2008, Peter Dundas was named as Emilio Pucci’s creative Tanneries de la Comète, where hides will be tanned exclusively director. Olga Berluti, the heiress of the expertise built up by for Louis Vuitton using vegetal extracts. For Louis Vuitton, the her predecessors, is perpetuating the unique style and quality of leading supplier of hides and leathers represents about 38% of its Berluti shoes. total supplies of these products. Fendi is in a similar situation, except for some exotic leathers for 2.3 Distribution which suppliers are rare. Controlling the distribution of its products is a core strategic vector Finally, for the various Houses, the fabric suppliers are often Italian, for LVMH, particularly in luxury Fashion and Leather Goods. This but on a non-exclusive basis. control allows the Group to benefit from distribution margins, The designers and style departments of each House ensure that and guarantees strict control of the brand image, sales reception manufacturing does not generally depend on patents or exclusive and environment that the brands require. It also gives the Group expertise owned by third parties. closer contacts with its customers so that it can better anticipate their expectations. 3. Perfumes and Cosmetics In order to meet these objectives, LVMH created the first international network of exclusive boutiques under the banner of its Fashion and Leather Goods brands. This network included LVMH is present in the perfume and cosmetics sector with the 1,188 stores as of December 31, 2010. major French Houses Christian Dior, Guerlain, Givenchy and Kenzo. In addition to these world-renowned brands, this business 2.4 Supply sources and subcontracting group also includes Benefit Cosmetics and Fresh, two young, high- growth American cosmetics companies, the prestigious Italian In Fashion and Leather Goods, manufacturing capacities and the brand Acqua di Parma, Parfums Loewe, the Spanish brand with use of subcontracting vary significantly, depending on the brand. strong positions in its domestic market, and Make Up For Ever, a French company initially specializing in professional make-up The fifteen leather goods manufacturing shops of Louis Vuitton products. Two new perfumes were launched by Fendi and Pucci Malletier, eleven in France, three in Spain and one in the United at the end of 2007. States, provide most of the brand’s production. All development and production processes for Louis Vuitton’s entire footwear line The presence of a broad spectrum of brands within the business are handled at its site in Fiesso d’Artico, Italy. Louis Vuitton uses group generates synergies and represents a market force. The third parties only to supplement its manufacturing and achieve volume effect means that advertising space can be purchased at production flexibility. better prices and better locations can be negotiated in department

16 Reference Document 2010 LVMH group Business description stores. In research and development, the group brands have pooled Parfums Givenchy, founded in 1957, rounds out its presence their resources since 1997 with a joint center in Saint-Jean de in the world of fragrances for men and women (Amarige, Organza, Braye (France), at the industrial site of . Very Irresistible Givenchy, Ange ou Demon, and Play for her, launched The use of shared services by international subsidiaries increases the in 2010, Givenchy pour Homme, Very Irresistible pour Homme, Play, effectiveness of support functions for all brands and facilitates the launched in 2008) with its activity in cosmetics through the expansion of the newest brands. These economies of scale permit Givenchy skincare products and the make-up line Givenchy Le larger investments in design and advertising, two key factors for Makeup launched in 2003. success in the Perfumes and Cosmetics sector. Parfums Kenzo appeared in 1988, and recorded strong growth With the exception of the products and services of the La Brosse after the success of FlowerbyKenzo, launched in 2000. The company et Dupont group, which was sold in 2010, the LVMH Perfumes began to diversify its activities in the “well-being” segment by and Cosmetics brands are sold in selective retailing circuits (as launching the KenzoKi line the following year. The year 2006 opposed to general retailing and drugstores). marked the launch of the women’s perfume KenzoAmour, the men’s fragrance KenzoPower was launched in 2008, followed by In 2010, the Perfumes and Cosmetics business group posted KenzoHomme eau de toilette boisée in 2010. revenue of 3,076 million euros, representing 15% of LVMH’s total revenue. Benefit Cosmetics (created in 1976 in San Francisco and acquired 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 3.1 The brands of the Perfumes and cosmetics sense of pleasure and are enhanced by the playful aspect of the business group product names and packaging. Aside from the sales of its 30 Parfums Christian Dior was born in 1947, the same year as the exclusive boutiques across the world (California, Chicago, New fashion house, with the introduction of the Miss Dior perfume. York, United Kingdom, Hong Kong, Shanghai and Sydney), the While developing its lines of fragrances for men and women over brand is currently distributed in nearly 1,500 points of sale in the the years, Parfums Christian Dior expanded its activity to the United States, Europe and Asia. make-up sector in 1955, and to skincare products in 1973. Today, Fresh (created in 1991 and acquired by LVMH in September 2000) Parfums Christian Dior allocates 1.8% of its revenue to research initially built its reputation on creating body care products and is on the cutting edge in innovation. inspired by ancestral beauty recipes and entirely natural and high quality fragrances, before expanding its concept to make-up and The leading perfumes for women are: J’adore, Miss Dior, hair care products. and Dior Addict. In 2008, Parfums Christian Dior inaugurated the Escales collection. , Fahrenheit, pour Homme, Loewe introduced its first perfume in 1972. A major player in Dior Homme, Dior Homme Sport, launched in 2008, and Fahrenheit Spain, the brand is also developing its international business, Absolute, created in 2009, are the best known fragrances for men. primarily in Russia, the Middle East and Latin America. Dior’s top cosmetics lines are: Capture, Diorsnow, Hydralife and L’Or Make Up For Ever (created in 1984) joined LVMH in de Vie, launched in 2007, for skincare products, and Dior Addict, November 1999. The brand specializes in professional make-up Diorskin, Backstage, Rouge Dior and Diorshow for make-up. and its applications for consumers. Its products are distributed in its exclusive boutiques in Paris and New York and in a number Guerlain, founded in 1828 by Pierre François Pascal Guerlain, of selective retailing circuits, particularly in France, Europe, the has created more than 700 perfumes since its inception. The brand United States (markets developed in partnership with Sephora), has an exceptional image in the perfume universe and many of its in China, South Korea and the Middle East. creations have enjoyed remarkable longevity. Today it is also known for its make-up and skincare lines. Acqua di Parma, founded in 1916 in Parma, is a luxury perfume brand and a symbol of Italian high fashion. The brand specializes Jicky, l’Heure Bleue, Mitsouko, Shalimar, Samsara, Aqua Allegoria, in perfumes and skincare and has diversified its product line to L’Instant de Guerlain, Insolence and Idylle, created in 2009, for women, include home scents and linens. Now based in Milan, Acqua di Habit Rouge, Vetiver, L’Instant de Guerlain pour Homme, and Guerlain Parma relies on an exclusive retailing network, including a brand Homme, launched in 2008, for men, are the top brand ambassadors. store in Milan. Guerlain’s leading cosmetics lines are Success and Orchidée Impériale The La Brosse et Dupont group is the French leader in hygiene for skincare products, and Terracotta and KissKiss for make-up. A and beauty product retailing. It was acquired by LVMH at the end new skincare line, Abeille Royale, was launched in 2010. of 1998 and sold in September 2010.

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3.2 Research in Perfumes and cosmetics Worthy of mention are major advances in the fields of tissue repair, anti-wrinkle and firming technologies, anti-aging systems Innovation plays a major role in LVMH’s strategy for its Perfumes and innovations relating to galenical preparations, with new and Cosmetics business group. In recent years, the perfumes and transforming textures. The international orchid research platform, cosmetics sector has seen the advent of increasingly sophisticated Orchidarium, was the focus of considerable interest during the year, technologies used in creating new skincare and make-up products, resulting in the publication of a number of studies, including one to achieve ever more spectacular results. The establishment several doctoral thesis. Drawing upon biometric techniques, the analysis years ago of GIE LVMH Recherche, which brings together the of consumer eye movements using eye-tracking technology aids in various research entities of the Group’s brands, has generated the understanding of the perceived impact of make-up. Similarly, numerous synergies in the quest for, and development of, new the analysis of emotions through the decoding of facial expressions formulations. More than 270 scientists, researchers, chemists, combined with salivary hormone levels allows for the measurement biologists, physicians and pharmacists now work at the of the emotional impact of various cosmetic products. A new study laboratories in Saint-Jean de Braye near Orleans at the heart of has enabled the correlation of the tactile and visual dimensions of the competitiveness cluster known as Cosmetic Valley. Dedicated skin firmness using infrared thermography. teams, working in close collaboration with the marketing teams of The establishment of a collaborative photo library has provided the brands, research possible avenues for the further development of a system for the organization of LVMH’s existing collection of the skincare, make-up and perfume products of Parfums Christian scientific images. The full breadth of research activities conducted Dior, Guerlain, and Parfums Givenchy. The laboratories also by LVMH Recherche has resulted in numerous scientific papers support product developments for Parfums Kenzo, Make Up For covering all these areas, presented at various specialized scientific Ever, Acqua di Parma, Fendi, Pucci, Loewe, and the American conferences. The Japanese research facility, based in Tokyo, has companies like Fresh and Benefit, and generally provide regulatory forged new partnerships for strategic projects that will be decisive coordination for all products of all LVMH brands involved in for future developments concerning new make-up and skincare perfumes or cosmetics. formulations. Innovative research projects have also been pursued This optimization of resources and expertise allows LVMH at the Cosmetic Valley competitiveness cluster. In addition, Recherche to conduct research and development projects benefiting LVMH Recherche has continued to protect its inventions via all of the Group’s brands, in association with many French and patents, thus providing a genuine competitive advantage for the international partners, especially major universities. Lastly, owing Group’s brands. to its many contacts and its participation in various international In the skincare field, the Group’s main research topics currently regulatory organizations and bodies, LVMH Recherche brings to relate to anti-aging, in particular: bear the full measure of its expertise in areas such as product safety and the representation of the Group’s interests. Due to increasing -- the key role of proteasome stimulation in the elimination of regulatory constraints and new rules in certain major markets, toxins to render skin quality more youthful, with the launch of LVMH continually adapts its methodologies as necessary. In 2010, Capture One Essential by Parfums Christian Dior, a serum able, when the Group’s product safety evaluation laboratory brought new in used in conjunction with other skincare treatments, to boost their vitro methods on line, with the aim of detecting any potential effectiveness and extend their benefits over time; allergic reactions to new product ingredients. -- the presentation of new research findings on tissue repair using bee products, with the launch of Abeille Royale, a new anti-wrinkle LVMH Recherche is France’s second-largest research center in the serum from Guerlain; field of perfumes and cosmetics. In 2010, the center’s research and development teams continued their work in key areas of expertise: -- work on the ability of skin to stimulate its own defenses performance, sensual appeal, pleasure, quality, safety and customer against aging with the launch of Vax’in for Youth by Givenchy, satisfaction. Research platforms were also established to focus on demonstrating the potential of skin cells to resist aging when new active ingredients, the modeling of cell and tissue growth, subjected to repeated microstresses, which prompt cells to produce imaging techniques, and techniques aimed at detecting biological protective compounds and trigger repair mechanisms; activity. Their aim is to streamline processes. The development by -- understanding the interfaces that regulate both the characteristics LVMH Recherche of technical facilities for the study of biological of skin and the performance and sensual appeal of cosmetic activity is intended to facilitate the identification of tomorrow’s products, the theme of the 10th Scientific Symposium organized active ingredients, via multi-target or multi-ingredient screening. by LVMH Recherche in Paris in October 2010;

18 Reference Document 2010 LVMH group Business description

-- continuing work and partnerships on skin stem cells, cell needs. Only the newer American companies, Loewe perfumes rejuvenation, and the development of new textures with the Capture and Acqua di Parma subcontract most of the manufacturing of and Prestige product lines from Parfums Christian Dior. their products. Novel approaches to hydration mechanisms, the correction of In 2010, manufacturing subcontracting represented overall uneven pigmentation, and light-capturing formulas have been about 6% of the cost of sales for this activity, plus approximately incorporated in new launches of moisturizing and whitening 10 million euros for logistical subcontracting. products by the Group’s different brands. These products, which Dry materials, such as bottles, stoppers and any other items that also improve the radiance and transparency of skin tone, are form the containers or packaging, are acquired from suppliers meeting with great success in Asia, where highly competitive outside the Group, as are the raw materials used in the finished cosmetics markets exhibit a distinct propensity for cutting-edge products. In certain cases, these materials are available only from developments and technology (DiorSnow and Prestige White by a limited number of French or foreign suppliers. Dior). The product formulas are developed primarily in the Saint-Jean In the make-up segment, researchers are focusing on the interactions de Braye laboratories, but the Group can also acquire or develop between skin, light and matter, new special effect pigments, formulas from specialized companies, particularly for perfume intelligent materials, and new formulations. Make-up has moved essences. confidently into a new era, bringing new skincare benefits and new sensual appeal. In nail polish, an unprecedented texture combined with a new type of applicator providing exceptional performance 4. Watches and Jewelry and longevity has generated considerable enthusiasm (Dior). In mascara, new approaches have found ways to further enhance eye definition, making the gaze more brilliant, lashes more attractive, The most recent LVMH business group holds a portfolio of quality thicker and longer, and giving an overall effect whose benefits watch and jewelry brands with highly complementary market compared to earlier products are immediately apparent (Le 2 de positions: TAG Heuer, the world’s leading maker of luxury Guerlain, Diorshow Extase by Dior, Phenomen’Eyes by Givenchy). sports watches and chronographs; Zenith, an upscale watchmaker A new, invisible skin-fusion foundation, using silk and linen famous for its El Primero movement; Montres Dior, which offers polymers, gives a polished and satiny finish that drapes the skin collections inspired by the designs of the fashion house; Chaumet, evenly while still appearing completely natural (Lingerie de Peau the prestigious historic jeweler in the Place Vendôme in Paris; by Guerlain). In powdered products, the incorporation of new Fred, a designer of contemporary jewelry pieces; and De Beers ingredients and the use of new manufacturing processes have Diamond Jewellers, a joint venture formed in July 2001, which resulted in high-performance products offering new powdered affirms its positioning as a diamond jeweler (the activity of the De effects closer to those obtained using skincare products. Beers brand, previously consolidated in Other Activities, has been consolidated within the Watches and Jewelry business group since In 2010 as in past years, a very large number of the Group’s 2006). Hublot, a young high-end brand, was acquired in 2008. products, in both skincare and make-up lines, received accolades and awards from leading international beauty publications. The business group has already deployed internationally, strengthened the coordination and pooling of administrative Innovation efforts have focused on greater cross-functional resources, expanded its sales and marketing teams, and progressively integration and cooperation in the management of projects began to establish a network of after-sale multi-brand services complemented by process optimization with a view to meeting worldwide to improve customer satisfaction. LVMH Watches high quality standards. Programs put in place pave the way for the and Jewelry has a territorial organization that covers all European products of the future, exploring new possibilities in the service markets, the American continent, northern Asia, Japan, and the of beauty. Asia-Pacific region. This business group has implemented industrial coordination 3.3 Supply sources and subcontracting through the use of shared resources, such as prototype design capacities, and by sharing the best methods for preparing The five French production centers of Guerlain, Givenchy and investment plans, improving productivity and negotiating Parfums Christian Dior provide almost all the production for the purchasing terms with suppliers. four major French brands, including Kenzo, both in fragrances, and in make‑up and beauty products. Make Up For Ever also has In 2010, the Watches and Jewelry business group posted revenue of sufficient manufacturing capacities in France to cover its own 985 million euros, which represented 5% of total LVMH revenue.

Reference Document 2010 19 LVMH group Business description

4.1 The brands of the Watches and Jewelry business group Chaumet, a jeweler established in 1780, has maintained its prestigious expertise for over two centuries, imposing a style that TAG Heuer (founded in 1860 in Saint-Imier in the Swiss Jura and is deliberately modern and is reflected in all its designs, whether acquired by LVMH in November 1999) is the undisputed benchmark high-end jewelry pieces, or jewelry or watch collections. The and world leader in luxury sport watches and chronographs. LVMH Group acquired Chaumet in November 1999. Partnered with the competitive sports world and its performance values, the brand is recognized for the quality and precision and Fred (founded in 1936) is present in high-end jewelry, jewelry the leading-edge aesthetic of its watches. The most coveted models and watchmaking. In 1995, LVMH acquired a 71% interest in for the “professional sport watch” line are: the Aquaracer, Link and the company, which it increased to 100% in 1996. Since joining Formula 1 series; and for traditional watches and chronographs, they the Group, Fred has completely revamped its design, image and are the Carrera and Monaco models. In 2002, TAG Heuer licensed and distribution. This revival can be seen in the bold contemporary launched its first eyewear line. Following the launch in 2007 of its style of its creations. Grand Carrera collection of automatic watches and chronographs, in 2008 the brand launched Meridiist, its first line of cellular handsets De Beers is a brand controlled jointly by LVMH and the De designed in partnership with ModeLabs. Beers group, created in July 2001 and managed by De Beers Diamond Jewellers Ltd. The company, headquartered in London, Hublot, founded in 1980, has always been an innovative brand, is progressively rolling out a global network of boutiques offering creating the first watch in the industry’s history fitted with a natural jewelry under the De Beers brand name. It approaches the diamond black rubber strap. Relying on a team of top-flight watchmakers, market from an original angle, both in its creative jewelry design the brand is widely renowned for its original concept combining and its concept of points of sale. In 2007, De Beers launched its noble materials with state-of-the-art technology and for its iconic first collection of timepieces. Big Bang model launched in 2005. Along with the many versions of this model, Hublot continues to develop its long-established Classic line. In 2008, Hublot launched a line of ladies’ watches and 4.2 Supply sources and subcontracting opened its first boutiques. King Power, a new line of timepieces, was launched in 2009. With its five Swiss workshops or manufactures, located in Le Locle, in La Chaux-de-Fonds and in Nyon, the Group provides almost Zenith (founded in 1865 and established in Le Locle in the Swiss the entire assembly of the watches and chronographs sold under Jura region) joined LVMH in November 1999. Zenith belongs the TAG Heuer, Hublot, Zenith, Christian Dior, Chaumet and to the very select group of watch movement Manufactures. In the Fred brands. In its watchmaking shop, Zenith also designs and watchmaking sector, the term manufacture designates a company manufactures the mechanical movements El Primero and Elite. In that provides the entire design and manufacturing of mechanical 2009, Hublot celebrated the opening of its new site in Nyon while movements. The two master movements of Zenith, the automatic TAG Heuer inaugurated a new workshop for the manufacture of chronograph El Primero and the automated extra-flat movement watch movements in La Chaux-de-Fonds. Elite, absolute benchmarks for Swiss watchmaking, are provided on the watches sold under this brand. In this business, subcontracting represented overall only 5% of the cost of sales in 2010. Montres Dior, managed since 2008 in the form of a joint venture between the Watches and Jewelry business group and Because of the very high quality requirements, the components the company Dior Couture, belongs to the category of fashion assembled are obtained from a limited number of suppliers, watches. They are manufactured in Switzerland by Ateliers primarily Swiss, with the exception of the leather for the watch Horlogers. The collections of Montres Dior, particularly Christal, bands. In 2010, the industrial subsidiary Cortech in Switzerland Chiffre Rouge and D de Dior, are designed in complete harmony manufactured a significant portion of the cases meeting the with the creative impetus of the fashion house. An important production needs of TAG Heuer and Zenith. event of 2008 was the launch of Christal watches with mechanical movements followed in 2009 by the jewelry version, the Mini D, Even though the Group can, in certain cases, use third parties to in the D de Dior collection. design its models, they are most often designed in its own studios.

20 Reference Document 2010 LVMH group Business description

5. Selective Retailing of duty-free luxury items on board cruise ships. It provides services to over 80 ships representing several cruise lines. It also publishes tourist reviews, catalogs and advertising sheets available on board. The Selective Retailing businesses are organized to promote an environment that is appropriate to the image and status of the The acquisition of Miami Cruiseline boosted the travel retail luxury brands. These companies are expanding in Europe, North activity’s organization of its geographic presence and enhanced America, Asia and the Middle East, and operate in two segments: the diversity of its customer base, which was previously primarily travel retail (the sale of luxury products to international travelers), Asian, and is now supplemented by cruise customers, primarily the business of DFS and Miami Cruiseline, and the selective retail Americans and Europeans. There are also excellent synergies concepts represented by Sephora and the Paris department store between the activities of DFS and those of Miami Cruiseline in Le Bon Marché. the areas of management and merchandising. In 2010, the Selective Retailing business group posted revenue of Miami Cruiseline focused its efforts on improving the quality of 5,378 million euros, or 27% of the total revenue of LVMH. its product offer and adapting its product line to each cruise ship to boost the average spending per traveler. 5.1 Travel retail 5.2 Selective retail DFS DFS joined the Group in 1997 after LVMH acquired 61.25% of Sephora the company between December 1996 and February 1997. Sephora, founded in 1969, has developed over time a perfume and This American group is the pioneer and one of the world leaders beauty format that combines direct access and customer assistance. in the sale of luxury products to international travelers. Its activity This concept led to a new generation of stores with a sober and is closely linked to tourism cycles. luxurious architecture, designed in three spaces dedicated to perfumes, make-up and skincare respectively. Based on the quality Since it was formed in 1960 as a duty-free concession in the Kai Tak of this concept, Sephora has gained the confidence of selective airport in Hong Kong, DFS has acquired an in-depth knowledge perfume and cosmetics brands. The brand has also offered products of the needs of traveling customers, built solid partnerships with sold under its own brand name since 1995. Japanese and international tour operators, and has significantly expanded its business, particularly in the tourist destinations in Since it was acquired by LVMH in July 1997, Sephora has recorded the Asia-Pacific region. rapid growth in Europe by opening new stores and acquiring companies that operated perfume retail chains, including Marie- The strategy of the DFS group is focused on the development and Jeanne Godard and the Italian companies Laguna, Boidi and promotion of its city-center Galleria stores, which account for more Carmen. Sephora has 673 stores today in Europe, located in than half of its revenue today. 15 countries. The Sephora concept also crossed the Atlantic in With an area of 1,000 to 18,000 square meters, the 14 Gallerias 1998 and the brand now has 251 stores in the United States, are located in the urban centers of major airline destinations in the plus an internet site sephora.com, and 25 stores in Canada. As Asia-Pacific, the United States and Japan. Each space combines of December 31, 2010, Sephora has nearly 100 stores in China, in one site, close to the hotels where travelers are lodged, two a market which it entered in 2005. Having entered the Middle different, but complementary commercial spaces: a general East in 2007, the brand had 20 stores in six countries at the end luxury product offer (including Perfumes and Cosmetics, Fashion of 2010. Also in 2009, Sephora opened its largest Asian store to and Accessories) and a gallery of prestigious boutiques (such as date in Singapore. In 2010, Sephora expanded into South America Louis Vuitton, Hermès, , Tiffany, Christian Dior, Chanel, with the acquisition of Sack’s, Brazil’s leading online retailer of Prada, Fendi, Céline…). selective perfumes and cosmetics. While focusing on the development of its Gallerias which are Le Bon Marché its main source of growth, DFS maintains its strategic interest in the airport concessions that can be obtained or renewed under Established in 1852, Le Bon Marché was a pioneer of modern good financial terms. DFS is currently present in some twenty marketing in the 19th century. The sole department store located international airport sites in the Asia-Pacific, the United States on the left bank in Paris, it was acquired by LVMH in 1998. and Japan. Le Bon Marché has a food store, La Grande Epicerie de Paris. Since 1995, it has also owned Franck et Fils, located on rue de Passy Miami Cruiseline in the sixteenth district of Paris. In recent years, a fundamental Miami Cruiseline, acquired by LVMH in January 2000, is an overhaul that included the renovation and remodeling of its sales American company founded in 1963, the world leader in the sale spaces, together with moving to a more upscale product offer,

Reference Document 2010 21 LVMH group Business description strengthened the identity of Le Bon Marché. Famous for its very by DI Group. In January 2011, following the acquisition of Le demanding inventory and service policy, Le Bon Marché is now the Journal des Finances by the media group Les Echos, this publication most exclusive and creative department store in Paris. was merged with Investir, another weekly published by Les Echos, to form a new title, Investir – Le Journal des Finances.

6. Other Activities Samaritaine The Samaritaine is a real estate complex located in the heart of The Other Activities segment includes the media division managed Paris, aside the Seine river. It comprised a department store in by the Les Echos group, the Samaritaine and, since the fourth addition to leased office and retail space until 2005 when the quarter of 2008, the Dutch luxury yacht maker Royal Van Lent. department store was closed for safety reasons. An architectural plan has been drawn up that would transform the building into a Les Echos group hotel, office, shopping mall and social housing complex, subject to administrative authorizations being obtained. In November 2010, In December 2007, LVMH acquired the Les Echos group from LVMH concluded an agreement with Fondation Cognacq-Jay to London-based Pearson plc. The Les Echos group includes Les acquire the 40.1% stake held by the latter in the Samaritaine. Echos, France’s leading financial newspaper, LesEchos.fr, the top business and financial website in France, the business magazine Royal Van Lent Enjeux-Les Echos, as well as other specialized business services. The French financial daily La Tribune was sold to News Participations Founded in 1849, Royal Van Lent designs and builds, according in February 2008. Apart from Les Echos, the Les Echos group to customers’ specifications, luxury yachts marketed under the holds several other financial and cultural media titles – Investir, Feadship brand, one of the most prestigious for yachts measuring Connaissance des Arts, as well as the literary publisher Arlea and the 50 meters or longer. In 2009, the company launched its 800th French radio station Radio Classique, which were previously owned yacht, the Trident.

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Page

1. Business Review 24 1.1 Comments on the consolidated income statement 24 1.2 Wines and Spirits 27 1.3 Fashion and Leather Goods 29 1.4 Perfumes and Cosmetics 32 1.5 Watches and Jewelry 34 1.6. Selective Retailing 36

2. Operational risk factors and insurance policy 38 2.1 Strategic and operational risks 38 2.2 Insurance policy 40 2.3 Financial risks 41

3. Financial policy 43 3.1 Consolidated cash flow 43 3.2 Financial structure 44

4. Operating investments 46 4.1 Communication and promotion expenses 46 4.2 Research and development costs 46 4.3 Investments in production facilities and retail networks 46

5. Main locations and properties 47 5.1 Production 47 5.2 Retail Distribution 48 5.3 Administrative sites and investment property 48

6. Stock option plans in force at subsidiaries 49

7. Litigation and exceptional events 49

8. Subsequent events 49

9. Recent developments and prospects 50

Reference Document 2010 23 Management Report of the Board of Directors LVMH group

LVMH Group

1. Business Review

1.1 Comments on the consolidated income statement Since January 1, 2009, the following changes were made in the Group’s scope of consolidation: in Perfumes and Cosmetics, Revenue by business group La Brosse et Dupont was deconsolidated in the fourth quarter of 2010; in Wines and Spirits, Château Cheval Blanc was consolidated (EUR millions) 2010 2009 2008 for the first time on a proportionate basis in August 2009. These changes in the scope of consolidation made a negative contribution Wines and Spirits 3,261 2,740 3,126 of 0.4 points to revenue growth for the year. Fashion and Leather Goods 7,581 6,302 6,010 Perfumes and Cosmetics 3,076 2,741 2,868 On a constant consolidation scope and currency basis, revenue Watches and Jewelry 985 764 879 increased by 13%. Selective Retailing 5,378 4,533 4,376 Revenue by invoicing currency Other activities and eliminations 39 (27) (66) Total 20,320 17,053 17,193 (percentage) 2010 2009 2008

Euro 28 30 32 Profit from recurring operations by business group US dollar 27 27 28 Japanese yen 9 10 10 (EUR millions) 2010 2009 2008 Hong Kong dollar 6 5 4 Wines and Spirits 930 760 1,060 Other currencies 30 28 26 Fashion and Leather Goods 2,555 1,986 1,927 Total 100 100 100 Perfumes and Cosmetics 332 291 290 The breakdown of revenue by invoicing currency changed as Watches and Jewelry 128 63 118 follows: the contribution of the euro fell by 2 points to 28%, yen- Selective Retailing 536 388 388 denominated revenue fell by 1 point to 9%, the contribution of Other activities and eliminations (160) (136) (155) the US dollar remained stable at 27%, while the contribution of Total 4,321 3,352 3,628 all other currencies rose by 3 points to 36%.

Revenue by geographic region of delivery Revenue and profit from recurring operations at constant structure and exchange rates (percentage) 2010 2009 2008

(EUR millions) Revenue Profit from France 13 14 14 recurring Europe (excluding France) 21 21 24 operations United States 23 23 23 Fiscal year 2009 17,053 3,352 Japan 9 10 10 Organic growth 2,294 598 Asia (excluding Japan) 25 23 20 Net impact of exchange rate Other markets 9 9 9 fluctuations on the financial statements 1,043 371 of consolidated entities denominated Total 100 100 100 in foreign currency (1) Net impact of changes in the scope By geographic region of delivery, the period saw a drop in the (70) n.s. of consolidation (1) relative contributions of France and Japan, the former from 14% Fiscal year 2010 20,320 4,321 to 13% and the latter from 10% to 9%. Europe (excluding France), (1) The principles under which the effects of exchange rate fluctuations and changes in the the United States, and other markets remained stable at 21%, 23%, scope of consolidation are determined are described on page 26. and 9%, respectively, while Asia (excluding Japan) advanced by 2 points to 25%. Consolidated revenue for the year ended December 31, 2010 was 20,320 million euros, up 19% from the previous year. It was By business group, the breakdown of Group revenue remained favorably impacted by the appreciation of the main invoicing nearly unchanged. The contributions of Wines and Spirits, Fashion currencies against the euro, in particular the US dollar, which and Leather Goods, and Selective Retailing remained stable at 16%, appreciated by 5%. 37% and 27%, respectively, while the contribution of Perfumes

24 Reference Document 2010 Management Report of the Board of Directors LVMH group and Cosmetics dropped by 1 point to 15%. The contribution of at constant exchange rates. This increase is mainly due to greater Watches and Jewelry rose by 1 point to 5%. communications expenditures by the Group’s main brands, but also to the development of retail networks. Nevertheless, the level Wines and Spirits saw an increase in revenue of 19% based on of marketing and selling expenses remained stable as a percentage published figures. On a constant consolidation scope and currency of revenue, amounting to 35%. Among these expenses, advertising basis, revenue increased by 13%, with the favorable impact of and promotion represented 11% of revenue, an increase of 21% at exchange rate fluctuations raising revenue by nearly 6 points. With constant exchange rates. distributors no longer destocking, the Group’s brands capacity to take advantage of the recovery in consumer spending has delivered The geographic location of stores is as follows: stronger sales, particularly in the Asian countries, where demand is very robust. More than ever, China has confirmed its status as the (number) 2010 2009 2008 second largest market for the Wines and Spirits business group. France 364 353 331 Fashion and Leather Goods posted organic revenue growth of Europe (excluding France) 646 620 596 13%, and 20% based on published figures. This business group’s United States 570 531 531 performance continues to be driven by the exceptional momentum Japan 303 307 256 achieved by Louis Vuitton, which again recorded double-digit Asia (excluding Japan) 518 470 485 revenue growth. Donna Karan, Marc Jacobs, Fendi and Givenchy Other markets 144 142 115 also confirmed their potential, with double-digit growth in Total 2,545 2,423 2,314 revenue in 2010. Revenue for the Perfumes and Cosmetics business group increased General and administrative expenses totaled 1,717 million euros, by 9% on a constant consolidation scope and currency basis, and by up 16% based on published figures, and up 12% on a constant 12% based on published figures. All of this business group’s brands currency basis. They represented 8% of revenue, thus decreasing turned in good results. This rebound illustrates the extent to which by 1 point compared to 2009. the value-based strategy resolutely pursued by the Group’s brands in The Group’s profit from recurring operations was 4,321 million the face of competitive pressures spawned by the current economic euros, up 29% compared to 2009. The operating margin as a crisis has been efficient. The Perfumes and Cosmetics business percentage of revenue increased by 2 points to nearly 21%. group saw considerable growth in revenue in Asia, especially in China, but also in Russia. In addition, this business group benefited Exchange rate fluctuations had a positive net impact on the from the strong recovery in the travel retail segment. Group’s profit from recurring operations of 371 million euros compared with the previous year. This total comprises the Revenue for the Watches and Jewelry business group increased following three items: the impact of changes in exchange rate by 21% on a constant consolidation scope and currency basis, parities on export and import sales and purchases by Group and by 29% based on published figures. Increases in inventory companies, the change in the net impact of the Group’s policy of by retailers certainly helped to drive substantially stronger sales hedging its commercial exposure to various currencies, and the of both watches and jewelry during the period, but the extent impact of exchange rate fluctuations on the consolidation of profit of this growth was especially attributable to the solid upturn in from recurring operations of subsidiaries outside the euro zone. consumer demand. For all of this business group’s brands, Asia is On a constant currency basis excluding changes in the net impact the most dynamic region. of currency hedges, the Group’s profit from recurring operations Based on published figures, revenue for the Selective Retailing increased by 18%. business group increased by 19%, and by 14% on a constant Profit from recurring operations for Wines and Spirits was consolidation scope and currency basis. The main drivers of this 930 million euros, up 22% compared to 2009. This performance is performance were Sephora, which saw considerable growth in sales primarily the result of sales volume growth. Tighter control of costs, across all the world’s regions, and DFS, which made excellent together with the positive impact of exchange rate fluctuations, advances, spurred especially by the continuing development of offset the rise in advertising and promotional expenditure focused Chinese tourism boosting business at its stores in Hong Kong on strategic markets. The operating margin as a percentage of and Macao. revenue for this business group increased by 1 point to 29%. The Group posted a gross margin of 13,136 million euros, up 21% Fashion and Leather Goods posted profit from recurring operations compared to the previous year. The gross margin as a percentage of 2,555 million euros, up 29% compared to 2009. Exchange of revenue was 65%, an increase of 1 point over the previous year, rate fluctuations had a positive impact on this business group’s particularly thanks to tighter control over the costs of products sold. profit in the amount of 246 million euros. Profit from recurring Marketing and selling expenses totaled 7,098 million euros, up operations for Louis Vuitton increased sharply, while Fendi and 17% based on published figures, amounting to a 12% increase Donna Karan confirmed their profitable growth momentum. The

Reference Document 2010 25 Management Report of the Board of Directors LVMH group operating margin as a percentage of revenue for this business group The cost of net financial debt was 151 million euros as of also increased by 2 points to 34%. December 31, 2010, down from 187 million euros the previous year. This decrease reflects the decline in the average net financial Profit from recurring operations for Perfumes and Cosmetics was debt outstanding during the year and the substantial proportion 332 million euros, up 14% compared to 2009. This growth was of variable-rate borrowings in a context of low rates. driven by Parfums Christian Dior, Guerlain, and Parfums Givenchy, which all posted significantly improved performance, thanks Other financial income and expenses amounted to a net income to the success of their market-leading product lines and strong of 763 million euros, compared to a net expense of 155 million innovative momentum. The operating margin as a percentage euros in 2009. The financial cost of foreign exchange operations of revenue for this business group remained stable at 11%. was 96 million euros in 2010 while it was 46 million euros in 2009. The management of current and non-current available for Profit from recurring operations for Watches and Jewelry increased sale financial assets and other financial instruments generated a twofold to 128 million euros. This business group significantly net gain of 865 million euros. This included, in the amount of improved its profitability and posted an operating margin as a 1,004 million euros, the gain, net of expenses, resulting from the percentage of revenue of 13%, representing an increase of more Hermès transactions on the settlement of equity linked swaps, than 5 points. corresponding to the difference between the market value of the Profit from recurring operations for Selective Retailing was securities acquired at the settlement date and their value based 536 million euros, up 38% compared to 2009. The operating on market prices as of December 31, 2009. As was the case in margin as a percentage of revenue for this business group as a whole 2009, the remaining amount was due both to changes in market increased by 1 point to 10%. performance and the recognition of impairment losses on current The net result from recurring operations of Other activities and and non-current available for sale financial assets. Other financial eliminations was a loss of 160 million euros, representing a decline expenses amounted to 20 million euros, compared to 26 million compared to 2009. In addition to headquarters expenses, this euros in 2009. heading includes the results of the Media division and those of The Group’s effective tax rate was 31% in 2010, compared to the yacht builder Royal Van Lent, acquired in 2008. 30% in 2009. Other operating income and expenses amounted to a net expense of Income from investments in associates was 7 million euros in 2010, 152 million euros, compared to a net expense of 191 million euros up from 3 million euros in 2009. in 2009. In 2010, this total included costs for the restructuring of Profit attributable to minority interests was 287 million euros as of industrial or commercial processes, in the amount of 32 million December 31, 2010, compared to 218 million euros the previous euros, together with costs related to disposals of the period, in the year. This total mainly includes profit attributable to minority amount of 36 million euros. The balance of other operating income interests in Moët Hennessy and DFS and reflects higher earnings and expenses consisted mainly of accelerated depreciation and by these entities. impairment of intangible assets, in the amount of 92 million euros. The Group’s share of net profit was 3,032 million euros; excluding The Group’s operating profit was 4,169 million euros, representing the impact of the Hermès transactions, the Group’s share of net a 32% increase over 2009. profit was 2,287 million euros, representing a 30% increase over The net financial income was 612 million euros, compared to a net 2009; it represented 11% of revenue in 2010, compared to 10% financial expense of 342 million euros in the prior year. in 2009.

Determination of constant structure and exchange rates impacts. The impact of exchange rate fluctuations is determined by translating the accounts for the fiscal year of entities having a functional currency other than the euro at the prior fiscal year’s exchange rates, without taking into account the impact of foreign currency hedges on profit from recurring operations, whether settled or not during the period.

The impact of changes in the scope of consolidation is determined by deducting: • for the period’s acquisitions, revenue generated during the period by the acquired entities, as of their initial consolidation; • for the prior period’s acquisitions, current period revenue generated over the months of the prior period during which the acquired entities were not yet consolidated. and by adding: • for the period’s disposals, prior period revenue generated over the months of the current period during which the entities were no longer consolidated; • for the prior period’s disposals, prior period revenue generated by the entities sold.

Profit from recurring operations is restated in accordance with the same principles.

26 Reference Document 2010 Management Report of the Board of Directors LVMH group

1.2 Wines and Spirits (Vintage 2002, Rosé Vintage 2000, Œnothèque Vintage 1996 and Œnothèque Rosé Vintage 1990, the first of its kind), which were 2010 2009 2008 all received enthusiastically by the trade press. Another unique moment during the year was the tribute to Andy Warhol, the Revenue (EUR millions) 3,261 2,740 3,126 master of Pop Art, through a limited edition produced with the Sales volume (millions of bottles) assistance of Central Saint Martin’s College of Art and illustrated Champagne 55.2 48.4 57.6 with an international advertising campaign. Cognac 59.8 54.6 57.7 Other spirits 12.4 12.3 25.1 Ruinart, whose strategy is geared primarily to the development Still and sparkling wines 39.9 36.2 36.9 of premium cuvées, recorded solid revenue growth in France and abroad. Several new product launches marked by exciting events Revenue by geographic region of delivery (%) illustrated the innovative values of the brand, like the Extraits box France 9 9 8 designed by India Mahdavi and the Fil d’Or, created by Patricia Urquiola. In the second half of the year, Ruinart launched the Europe (excluding France) 24 25 31 “Integrale” case holding its six vintages in France. True to its United States 26 24 26 longstanding ties with the world of art, the brand continued to Japan 6 6 6 be present at major contemporary art exhibits and maintained its Asia (excluding Japan) 23 22 19 partnership with the magazine Connaissance des Arts. Other markets 12 12 12 Total 100 100 100 Mercier, a brand which has geared its strategy primarily to the Profit from recurring operations French market where it is highly appreciated, continued to expand 930 760 1,060 (EUR millions) its presence in its traditional restaurant segment through its Operating margin (%) 28.5 27.7 33.9 original program “Les Lieux de Toujours”.

Operating investments 94 103 158 (EUR millions) Taking full advantage of the improved economic environment, Veuve Clicquot grew substantially in all its markets. The sharp Champagne and Wines recovery seen in the major traditional countries went hand in hand with the appearance of solid prospects in emerging markets such Moët & Chandon consolidated its position as the world leader in as Brazil and Russia. champagne. The brand fully benefited from the recovery in demand The performance of Veuve Clicquot is based on the constancy of in most of the major consumer countries and recorded remarkable its value strategy, the quality of its wines recognized by excellent growth in the emerging markets. ratings, and its tradition of daring and innovation, which was The creation of Moët Ice Impérial, the first champagne developed particularly illustrated in 2010 by the success of the Fridge, a to be drunk over ice during the summer, was another illustration designer case that suggests both “vintage” and the avant-garde. of the tradition of innovation and the pioneering spirit of Veuve Clicquot also relied on an international event platform that Moët & Chandon. This new product offers a brand new experience was set up and on a publicity campaign in the new media (internet and a radically new way to drink champagne. The introduction sites and social networks, expanded relations with bloggers). of the 2002 Vintage, the first since 1930 to have aged for seven years, achieving exceptional levels of maturity and harmony, was The end of the year was marked by the happy discovery, reported the year-end high point and illustrates the wine-making expertise by the international press, of the oldest bottles of Veuve Clicquot of the brand. champagne known to date. The intact bottles, found on a wreck off the Aland Islands in the Baltic Sea, date from the mid-19th century Moët & Chandon expanded its presence and its visibility and still have admirable organoleptic qualities. at international film festivals. The House also organized an extraordinary event at its vineyard during the harvest to celebrate Capitalizing on its fundamentals, Krug implemented a tasting its heritage and its expertise, an event attended by its international program paying homage to the Grande Cuvée, its emblematic ambassador Scarlett Johansson. champagne which embodies the values of generosity, excellence and non-conformity. This initiative was highly successful worldwide. Dom Pérignon, an iconic brand, showing strong growth, The Krug champagnes again earned the top international ratings. performed exceptionally well in the United States, Europe and The brand focused on giving an opportunity to discover or rediscover Asia as retail inventories returned to normal levels. The brand its universe and the excellence of its champagnes to representatives organized dynamic events, including VIP dinners to highlight a from the general and trade press and to preferred consumers during history that dates back to 1668 at the Abbaye d’Hautvillers. The trips to Reims and during an amazing gastronomical evening in year 2010 was an exceptional year with the launch of four vintages Paris prepared by six famous chefs from around the world.

Reference Document 2010 27 Management Report of the Board of Directors LVMH group

The excellence of the wines developed throughout the world of conquering the emerging countries of Asia, Africa, Central by Estates & Wines has regularly been recognized by many Europe and Central America. A brand that is international but international critics. These wines recorded strong growth in 2010 has deep roots in national cultures, it knows how to celebrate in all their markets, with a special mention for the Asia-Pacific historic moments. In 2010, for example, it launched two limited and Latin American regions. editions in Mexico and Nigeria to celebrate the anniversary of the independence of those two countries. The Chandon sparkling wines achieved remarkable growth in their domestic markets, and consolidated their leadership position in Supported by the investments made by Hennessy in all its markets, the super premium category. After its successful launch in Japan the dynamic performance of the brand is driven year after year by and in Asia, the brand continued its internationalization strategy. its desire to create the exceptional and to create value for its offer. The still wine brands of Cloudy Bay (New Zealand) and Terrazas In 2010, the brand reinvented its classics with “collector” series de los Andes (Argentina) recorded excellent results in all markets, offering high added value like X.O Odyssey and V.S.O.P Helios. It as did Newton (California), Numanthia (Spain), Cheval des Andes also enhanced its prestige line with the launch of Paradis Impérial, (Argentina) and Cape Mentelle (Australia) in more selective markets. a cognac with incomparable finesse set in a crystal and gold carafe created by the young designer Stéphanie Ballini. This creation Château d’Yquem offered the first sale of a classic vintage, the evokes Hennessy’s historical relations with the imperial courts. 2009, which was enthusiastically received by international experts and buyers, particularly in the Asian market. Out of a desire to In 2010 the single malt whiskies Glenmorangie and Ardbeg place its brand within its era, Château d’Yquem created its own were again the recipients of the most prestigious awards in the blog called “mYquem” and joined its fans in the social networks. International Wine & Spirit Competition (IWSC). The efforts made by these two brands since joining LVMH now mean that they can Cognac and Spirits begin a decisive stage in their growth under optimum conditions. Hennessy completed a year of growth in all regions and for all its Glenmorangie whisky recorded a very good year in the United qualities of cognac. The brand again reached its historical highs States, continental Europe and Asia. This very encouraging growth and confirmed its position as a global leader in terms of both was backed by a new advertising campaign highlighting the volume and value. considerable work involved in producing a single malt without In the United States, in a competitive environment of lower prices, equal. The brand plumbed its rich heritage to create Glenmorangie Hennessy returned to a positive trend without compromising its Finealta, the new opus of its Private Edition collection, which value strategy and strengthened its positions due to ambitious reinterprets a whisky that was introduced for the first time in innovations. Hennessy Black, launched in 2009, confirmed its 1903. Glenmorangie, whose spirit of innovation and leadership success as it was deployed throughout the US. The Hennessy has been recognized by six “Best in Class” gold medals, increased Artistry concert program, one of the most effective vectors for the capacities of its distillery and launched construction of a new promoting the brand, also expanded throughout the country with bottling site with leading-edge technologies. The brand thus the participation of prestigious artists. developed the solid basis and high-performance tools to ensure its future growth. Hennessy reinforced its historic leadership in Europe. It grew in its traditional markets, like Ireland, Germany, Russia and the United Ardbeg continued to maintain its position as the most desirable Kingdom, and developed on new markets in Eastern and Northern Islay whisky. It recorded strong growth in the United States and Europe. The dynamic repositioning of Hennessy Fine de Cognac, a continental Europe. The introduction of Ardbeg Corryvreckan was brand exclusively marketed in Europe, is a good indicator of both greeted enthusiastically and the product won the title “Best Single the recovery and of Hennessy’s intention to invest in this continent. Malt” in the 2010 Whisky Bible. For the third consecutive year, Asia was the primary growth driver for Belvedere vodka completed an extraordinarily eventful year. The Hennessy. In China, the top contributor to profit, the brand recorded contribution of a new global advertising campaign, an offensive double-digit growth in all its products. It won new positions as a strategy based on the social networks, the launch of two new result of an ambitious distribution policy and the expansion of its products – Pink Grapefruit, now the leader in macerated vodkas, prestige product line illustrated particularly by the success of Paradis and Intense Unfiltered 80 – were just some of the highlights of Horus, a special limited edition packaged by the designer Ferruccio 2010. Tied to the nightclub sector, the brand is supported by a Laviani. Hennessy continued to expand in the other Asian countries, very dynamic strategy of events during the “Fashion Weeks” and maintaining a strong position in Taiwan and growing in promising the principal music festivals in the United States. Revenue grew markets such as Vietnam, Malaysia and Cambodia. significantly to reach an historic high in 2010, demonstrating both In addition to its principal markets which ensure a very balanced its success in the United States and in the rest of the world as well: distribution of revenue, Hennessy continued to deploy its strategy Europe is now recording the most rapid growth.

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In line with its strategy for growth, the Wenjun brand is now 1.3 Fashion and Leather Goods well established in southern China and began its first shipments to Macao in October 2010 for distribution to wine merchants and 2010 2009 2008 restaurants. A new promotional campaign was launched at the end Revenue (EUR millions) 7,581 6,302 6,010 of the year to boost its visibility just before the peak sales season Revenue by geographic region during the Chinese New Year. The Master Selection limited edition of delivery (%) offered on the Wenjun visitor’s site was created for collectors. France 8 8 8 Outlook Europe (excluding France) 21 21 21 United States 18 18 19 Strengthened by the rebound in 2010 caused by the relative Japan 16 18 20 improvement in the global economy, the Wines and Spirits business group intends to continue solid growth in the volume Asia (excluding Japan) 30 28 25 and value of its sales during the coming months and to consolidate Other markets 7 7 7 its market share. Total 100 100 100 Type of revenue as In an increasingly competitive environment, the LVMH brands a percentage of total revenue will continue to capitalize on their powerful fundamentals: (excluding Louis Vuitton) excellence, authenticity, an image of luxury and exceptional Retail 52 50 47 creativity. While they will continue to pay careful attention to Wholesale 41 42 44 controlling production costs, their growth strategies will be based Licenses 7 8 8 on their strong ability to innovate and on substantial media and Other - - 1 marketing investments. Total 100 100 100 The Champagne sector will aggressively pursue its growth targets Profit from recurring operations 2,555 1,986 1,927 in the major consumer countries with increasingly strong goals in (EUR millions) promising markets such as Japan and Latin America, which are Operating margin (%) 33.7 31.5 32.1 longer term growth drivers. Hennessy’s focus will primarily be on its two key geographic regions: Asia, which is dominated by China Number of stores 1,188 1,164 1,090 Operating investments but includes other growth areas; and the United States where the 370 262 311 brand continues its conquest of new consumers. (EUR millions)

Louis Vuitton Louis Vuitton achieved another year of double-digit revenue growth and again gained market share. This performance was, as usual, accompanied by exceptional profitability in a context of continued investments in the retail network, in the expansion of production capacities, and in communications. The uninterrupted growth of Louis Vuitton, due to the global success of its products, continued to be supported by strong and dynamic innovation. In the leather goods segment, 2010 saw significant development of the Damier line in its three colors of ebony, azure and graphite, the contribution of new designs in the Monogram and Vernis collections, and the introduction of the first models of Monogram Empreinte, a new line in embossed soft leather with high potential. The brand expanded the creation of models in high-end leather and the activity related to the personalization of certain products. Louis Vuitton also recorded solid successes in its other businesses (including ready-to-wear, footwear, textiles, accessories). While it continued development of its watches, the brand marked its entrance into the world of high-end jewelry by participating for the first time in the prestigious Biennale des Antiquaires in Paris. Invited to exhibit during this major event in the international

Reference Document 2010 29 Management Report of the Board of Directors LVMH group art market, Louis Vuitton showed 80 outstanding jewelry pieces, In leather goods, Fendi continued to develop its historic lines. including the second opus in the L’âme du Voyage collection The star Peekaboo line remained a benchmark, combining designed by Lorenz Bäumer. elegance quality and timelessness. 2010 saw the launch of some new lines. The retail segment proved to be just as rich in developments in 2010. As part of the qualitative expansion of the store network, As part of the qualitative expansion of its retail network, the new store openings and remarkable renovations punctuated the Palazzo Fendi in Rome and the Plaza 66 store in Shanghai were year on all continents. One of the high points was the opening expanded. New stores were opened in such places as Las Vegas, of the Maison Louis Vuitton in New Bond Street in London: Atlanta and Beverly Hills in the United States, in Singapore and designed like the apartment of an art collector, housing a number in Hangzhou, China. of exceptional works, this remarkable project is one of the brand’s Fendi intensified its artistic communication along its priority most sophisticated in this area. Two new stores in Shanghai, along vectors, under the guidance of its creator, Karl Lagerfeld. It with the brand’s participation in the World Expo, and its entrance highlighted the creativity of the Roman brand and its artisanship, into two new countries, Lebanon and Santo Domingo, were all the prime focus of its activity. All year long, innovations focusing notable events and testimony to Louis Vuitton’s leadership and on selected artists gave birth to original works praised in the uniqueness within the high quality universe. different design shows in Europe and the United States. Louis Vuitton intensified and expanded its communications strategy. The brand confirmed its media presence with strong Other brands campaigns that reflected its many facets, including its new jewelry Donna Karan continued to establish the components of its growth . In the second half of the year, the campaign illustrating model. After safely weathering the difficult economic conditions of the core values of Louis Vuitton on the travel theme benefited from 2009, the New York brand once again recorded revenue growth in the participation of Ali Hewson and Bono, the founders of the Edun 2010, in the United States and abroad, and continued to improve ethical clothing brand, which is developing fair trade with Africa. its profitability. It was driven by the success of its fashion shows and In Paris, the “Africa Rising” exhibit, a tribute to the vitality of by the work that had been conducted for several years to upscale contemporary art in Africa, was an integral part of the launch of its image and intensify the spirit of its designs with collections this campaign. In its various Maisons around the world, a number that reflect the energy of New York City and that are built on the of initiatives helped to illustrate Louis Vuitton’s historic ties to values of sophistication and functionality. the art world and honored the wealth of expertise of its artisans. The end of the year was marked by a major exhibit devoted to The Donna Karan Collection line, whose new positioning is giving th Louis Vuitton at the Carnavalet Museum, which specializes in excellent results, celebrated its 25 anniversary in 2010. After the history of Paris. “Icons” and “Cashmere,” growth continued with a “Casual” collection, synonymous with luxury and modernity. This new In order to meet the very high demand for its products, Louis line expanded the customer base and established its position in a Vuitton committed significant resources to increasing its artisanal high-growth segment. A new store devoted to the Collection line production capacities. The year 2010 saw the completion of the opened in Las Vegas in December. Fiesso d’Artico site in Italy for footwear, and the inauguration of the first workshops of Tanneries de la Comète, the future center Donna Karan continued to consolidate and expand the international for development and excellence for leather treated with vegetable presence of its very New York line DKNY, which also recorded extracts. Louis Vuitton is also preparing to open a new leather very strong performances, particularly in Asia. workshop in Marsaz in the Drôme. Marc Jacobs continued to grow. The American brand is still Fendi driven by the exceptional audience for its fashion shows, both for its emblematic Collection and for the second line Marc by Fendi achieved an excellent performance in 2010 as illustrated Marc Jacobs. In 2010, the designer received his ninth award by the significant growth in all product categories (leather from the Council of Fashion Designers of America (CFDA). The goods, footwear, ready-to-wear, furs and accessories) and the brand achieved very strong performance in all its markets, and solid improvement in profitability to a new high. This dynamic was particularly successful with its Collection accessories and its momentum was visible in all geographic regions, highlighting Marc by Marc Jacobs lines of accessories and jewelry. A new men’s Fendi’s desirability, the appeal of its designs, the growing efficiency fragrance was launched in 2010. Marc Jacobs expanded its retail of its network of boutiques and the quality of the customer service network with the opening of two flagship stores in Hong Kong offered by its teams: the in-depth work initiated in recent years to and Tokyo. create value for the brand and consolidate the general organization of the company continued to reap benefits.

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The solid performance in 2010 of Spanish brand Loewe confirmed Pucci, an iconic brand, unique because of its original inspiration, that is now expanding rapidly. It recorded very encouraging results continued to capitalize on its historic assets and benefited from the by applying its strategic choices: focusing on leather, its core progressive introduction of the style orientations of Peter Dundas. business, reaffirming its identity codes, and rolling out a new A new showroom was opened in Milan. The year 2010 was also store concept designed by architect Peter Marino. The emblematic marked by the publication of an outstanding work on Pucci by Amazona and Napa leather goods lines, made from leather of Taschen, an art book publisher. exceptional quality, grew significantly. The leather ready-to-wear Leather Icons collection exceeded its objectives. Berluti recorded a good year, driven by the success of its footwear collections and the new higher end lines of leather goods. Several Céline benefited from the creative renaissance that began with new products marked the year: the Démesures Incision, the Indio2 the arrival of Phoebe Philo as Artistic Director. The extremely moccasin, and the “tryptic” models of the Pierre line. The encouraging media success that heralded the beginning of this inauguration of the Shanghai Peninsula store, a new advertising collaboration is now generating substantial commercial results. campaign and the launch of a new website were the other high This momentum is reflected in all product categories: ready-to- points of the year. wear, leather goods and footwear. In 2010, Phoebe Philo was named designer of the year at the British Fashion Awards. Outlook In 2011, Louis Vuitton will maintain its innovative momentum Kenzo continued its repositioning and reorganization. In 2010, and continue to focus on its values of perfection and sophistication. the brand focused primarily on streamlining its retail network. The brand will expand its personalization services, continue qualitative development of its global store network and strengthen Givenchy confirmed the success of its creations since the arrival production capacities. The new Marsaz workshop in the Drôme of Riccardo Tisci and had an excellent year. The solid results for will open in the spring of 2011. Pursuing its ambitions in high- Women’s ready-to-wear were amplified by the development of the end jewelry, Louis Vuitton will open a dedicated boutique and “capsule” collections which pick up the strong themes of the fashion workshop of jewelry artisans in the Place Vendôme in Paris. The shows, an initiative launched in 2009 and expanded in 2010. The launch of a new digital platform is also planned in the first half. Haute Couture activity completed a transition to a “Salon de Couture” concept, which is closer, in terms of its exclusivity, to Fendi will continue to rely on developing its iconic products and the roots of the brand and the origins of this prestigious business. highlighting its know-how, one that is synonymous with both artisanal tradition and stylistic innovation. Its retail network will Thomas Pink recorded solid revenue growth in its key markets, be expanded in regions offering high potential. the United Kingdom and the United States. The British brand introduced successful innovations with the Imperial, Informal and Extending the significant rebound in their activities in 2010, Comfort Stretch shirt lines. It focused on developing exemplary the other brands will intensify their momentum and continue to customer service expressed particularly in the “Pink on Demand” implement the different components of their growth model. The offer which resulted in the brand being awarded the grand prize quality of the creative teams in place will increase the commercial at the Retail Systems Awards in London. Thomas Pink selectively impact of the collections. And the attention given to the excellence expanded its retail network, establishing a presence for the first at all levels is also an absolute priority for all our brands. time in Australia. Its online sales have grown rapidly.

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1.4 Perfumes and Cosmetics are composed with the most noble and precious ingredients in the world of perfume. 2010 2009 2008 In the make-up segment, where innovation plays a major role, Revenue (EUR millions) 3,076 2,741 2,868 Dior distinguished itself in the first half of 2010 with the success

Revenue by product category (%) of its mascara Diorshow Extase and the extension of its Diorskin Nude foundation line. The second half of the year saw the highly Perfumes 48 53 54 successful launch of the new Rouge Dior, available in 32 shades Cosmetics 34 28 28 directly inspired by the world of haute couture, and the introduction Skincare products 18 19 18 of a collection of nail polishes designed in the same spirit and also Total 100 100 100 offering an exceptional palette of colors. Revenue by geographic region of delivery (%) The skincare lines performed extremely well, driven in particular France 14 17 16 by the solid growth in the emblematic anti-aging Capture line and Europe (excluding France) 39 39 42 the highly successful new-generation Capture One Essential serum launched in 2010. United States 8 8 8 Japan 6 7 6 All these developments enhanced the legitimacy, modernity and Asia (excluding Japan) 18 16 14 expertise of the brand. Other markets 15 13 14 Guerlain Total 100 100 100

Profit from recurring operations After its resilient response to the effects of the economic crisis on 332 291 290 (EUR millions) the perfumes and cosmetics market the previous year, Guerlain, Operating margin (%) 10.8 10.6 10.1 one of the world’s oldest perfume houses, created in 1828, returned to strong, dynamic growth and established a new record for both Operating investments 103 99 144 (EUR millions) revenue and profit. The brand achieved an exceptional performance Number of stores 75 65 62 in France and recorded strong growth in China. The growth in perfumes was particularly driven by the confirmed Parfums Christian Dior success of the new fragrance Idylle and by the exceptional strength of the legendary Shalimar. The year 2010 also highlighted the Parfums Christian Dior achieved a remarkable performance, sustained performance of the Orchidée Impériale skincare line, which with double-digit growth in revenue and profit from recurring generated double-digit growth, and the promising beginning of operations. The year was marked by a rebound in the major the innovative Abeille Royale derived from the royal jelly. The traditional markets and continued growth in Asia. make-up business benefited from the strengthening of the powder Intensifying its strategy to create value, the brand maintained Terracotta, and from the introduction of a new foundation Lingerie and highlighted a very selective approach in its creations, in the de Peau, which was very favorably received. development of its know-how in line with the values of high Continuing to affirm its status as a leading name in the world of fashion and in the design and organization of its points of sale. beauty, Guerlain expanded its network of boutiques in France The exceptionally steady and dynamic performance of the flagship (renovation of the Paris boutique in Passy and a point of sale opened product lines and the implementation of a high-quality strategy of in Printemps Haussmann) and abroad (re-opening of the “imperial” innovation generated growth in all segments: perfumes, make-up boutique in Tokyo and the inauguration of two exclusive spaces and skincare. The activity of the brand was supported by significant in Dubai). advertising investments in its priority markets. Other brands In the perfume segment, Dior focused on the development of its strategic products. The continued global success of Miss Dior Parfums Givenchy recorded an excellent year with strong growth Chérie, a new format for J’adore, the deployment of Eau Sauvage, the in revenue and marked growth in operating profitability. This production of new films for Hypnotic Poison and Dior Homme were strength was confirmed in almost all geographic regions and some of the high points of 2010. The year was also punctuated by distribution circuits. The most dynamic lines were the perfumes the creation of a new opus in the Escales series and by the launch of Ange ou Démon and Play (the women’s version of which, Play for the Collection Couturier Parfumeur, a true tribute to Monsieur Dior: Her, was successfully launched in 2010), Le Soin Noir and Vax’in, this collection signed by François Demachy, the perfumer-designer an innovative anti-aging serum launched during the year. Among for the Brand, offers ten fragrances assembled by hand, all of which, other innovations, Parfums Givenchy introduced Mister Lash from the Oriental to the Cologne, from women’s fragrances to men’s, Booster, a revitalizing serum for eyelashes.

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The business of Parfums Kenzo benefited from the solid accelerated its international growth. Acqua di Parma recorded performance of the FlowerbyKenzo line, which reacted positively excellent performances generated by the continued success of its to its new advertising campaign and the launch of a woody variant perfume lines, emblematic of Italian style, and a few very selective in the Kenzo Homme line. innovations.

Fendi returned to the perfume market in the second half of 2010 Outlook with Fan di Fendi, a new line with a highly identifying design, Continuing the momentum developed in 2010, the year 2011 rolled out by the LVMH Fragrance Brands sales network in around promises to be rich in developments for the brands of the Perfumes ten countries. The first results for this perfume were excellent and and Cosmetics business group. it will be extended to the rest of the world in 2011. Parfums Christian Dior has strong growth prospects for Miss Parfums Emilio Pucci continued to expand its international Dior Chérie, which will benefit from the association with its presence and launched a new fragrance, Miss Pucci. new ambassador Natalie Portman. Particular efforts will also be dedicated to the Dior Addict lipstick line and to the re-introduction The performance of Benefit in 2010 continued to generate rapid of the Capture Totale skincare line based on the cell-regenerating growth. The brand expanded in the United States, its country of power of the One Essential serum and with the addition of a new origin, and continued to develop in Asia and Europe. A young and exclusive active cosmetics ingredient. J’adore will be strongly and creative brand, primarily geared toward clever and effective supported as every year. A number of initiatives will contribute make-up solutions, Benefit successfully relies on its unique talent to enhancing the desirability of the Dior brand in liaison with to reconcile the serious side of its products and the playful and the Haute Couture and will be based on the search for excellence offbeat nature of their names and packaging. Several successful and the increased visibility of the brand’s points of sale around innovations, like Sugarbomb (a compact powder), Stay don’t Stray the world. (foundation) and Girl Meets Pearl (pearled liquid), marked the year 2010. The brand also focused on the development of its Guerlain’s objectives are also ambitious. A new evolution of the Brow Bars concept in perfume stores and expanded its digital Shalimar legend and a new communications plan for Idylle will media presence. be the high points of 2011 in perfume. In the beauty segment, Guerlain will further strengthen the Orchidée Impériale, Abeille Make Up For Ever recorded another year of exceptional growth in Royale and Terracotta lines and will roll out a new lipstick. revenue and profit. The brand grew in all its markets, particularly in North America and Europe. It increased its market share in The news from Parfums Givenchy will be dominated by Asia significantly and resumed control of its distribution in South the launch of a new perfume for women, developed with the Korea. In order to communicate about its new Rouge Artist lipstick, collaboration of the fashion house and strongly emblematic of the Make Up For Ever for the first time launched large-scale media values of Givenchy. campaigns in France and the United States. The two star lines Aqua and HD (High Definition) were expanded with the introduction Parfums Kenzo will launch a new fragrance for women while it of Aqua Cream and HD Blush. While intensifying its success with unveils a new and very original variant of FlowerbyKenzo. the general public, the brand recorded a high growth rate in the professional make-up segment and boosted its brand recognition Benefit will continue to illustrate its dynamic innovative ability with the entertainment world. through the year and will expand distribution in all its key markets. The brand will open its first boutique in New York. Fresh and Parfums Loewe recorded solid growth. The American brand expanded its face and body skincare offer with new Make Up For Ever will focus on strengthening its two star products containing natural ingredients. The Spanish company product lines Aqua and HD, while at the same time expanding demonstrated remarkable resistance in its country of origin and its offer in the professional make-up segment.

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1.5 Watches and Jewelry to its prestigious heritage which traveled the world as part of a partnership operation with Tesla Motors. 2010 2009 2008 Hublot Revenue (EUR millions) 985 764 879 Revenue by geographic region After demonstrating remarkable resistance in 2009, Hublot of delivery (%) accelerated its growth on several fronts in 2010. France 8 9 8 Its Nyon manufacturing facility increased capacity with the Europe (excluding France) 25 27 28 inclusion of the “Confrérie Horlogère”, a unit for research and United States 17 18 19 development in advanced watchmaking, and the development of Japan 12 12 12 its own chronograph movement UNICO. Asia (excluding Japan) 21 17 16 Hublot also expanded its network of boutiques by opening stores Other markets 17 17 17 in strategic locations in Paris (Place Vendôme), Beijing, Singapore, Total 100 100 100 New York, Miami, and St Thomas, giving the brand high visibility Profit from recurring operations and strong positioning in the luxury watch market. 128 63 118 (EUR millions) Hublot increased its marketing investment expenditures with Operating margin (%) 13.0 8.2 13.4 original and highly publicized partnerships like the World Cup Operating investments 46 23 39 of Soccer until 2014, the F1 World Championship, and New York (EUR millions) Fashion Week. Number of stores 122 114 104 Hublot continued to steadily improve its positioning as a luxury TAG Heuer brand with the King Power line, the Big Bang line of chronographs for women, Tutti Frutti, which is set with precious stones, and In 2010, TAG Heuer stylishly celebrated its 150th anniversary, a number of high-end watch complications developed by its achieving strong organic revenue growth in all markets, including manufacturing facility and its “Confrérie Horlogère”. As a result, very steady expansion in China, double-digit growth in the United Hublot substantially increased its market share of the high-end States, and a solid performance in Japan. watch segment. The brand also began to establish a presence in TAG Heuer completed the industrial production of its automatic China, with highly visible stores in partnership with actors Jet Li chronograph movement, the Calibre 1887, launched successfully and Fan Bing Bing. in the Carrera line. This development earned the Geneva Grand Finally, Hublot was awarded the “Walpole Award for Excellence Prix de l’Horlogerie and enjoyed excellent commercial success. At 2010” which recognizes the most prestigious luxury brands. the Basel Trade Show, TAG Heuer also introduced the Pendulum, a magnetic regulator concept, an innovative alternative to traditional Zenith regulating movements. Manufacture Zenith achieved an extremely energetic recovery after In the women’s watch segment, TAG Heuer expanded its offer with the restructuring completed at the end of 2009. the steel and ceramic F1, and demand for the model exceeded the The new strength of its collections, inspired by a return to classic most optimistic projections. watches and by the legendary expertise of the Manufacture, was Finally, TAG Heuer expanded its network with twenty new stores, praised by customers and opinion leaders. both owned and franchised, notably in China and Southeast Asia, The reduction in the number of catalogue items and the emphasis but in Japan, Russia and Paris as well. The brand now has over one on the continued unequaled performance of the celebrated El hundred stores worldwide (owned and franchised), the productivity Primero movement generated dynamic demand in all markets. of which increased significantly. The brand partnered with celebrities who are true pioneers in their The famous Chinese actor Chen Dao Ming joined the professions, like the explorer Jean-Louis Etienne, reflecting the prestigious team of TAG Heuer Ambassadors. The brand avant-garde spirit of the company in watchmaking. The El Primero boosted its marketing investments, focusing on television and Striking 10th chronograph, with direct reading to one-tenth of a the Internet. It used the occasion of its 150th anniversary to second, is an innovation that perfectly illustrates this pioneering intensify its communication campaign and highlight its avant- spirit and was so successful that inventories were quickly depleted. garde positioning, its values of daring and performance, and its technological expertise. Highly visible initiatives punctuated Zenith recorded remarkable growth in Chinese Asia where the the year, including the “Odyssey of Pioneers” exhibit, a tribute brand is highly appreciated and recognized.

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Other brands A line of Force 10 rings enhanced the success of the famous bracelet inspired by the world of sailing and re-introduced in 2008. Inspired by its history, Chaumet developed original and recognizable theme lines, in both jewelry and watches. The The advertising campaign focused on ambassador Kate Moss was Josephine collection, the top innovation of 2010, references the expanded. Fred’s top priority was to improve the productivity of historic crown designs by Chaumet artisans and pays tribute to its network of existing stores. In December, the brand launched Empress Joséphine, the first major customer of the brand’s founder. its online sale site in the French market, www.fred.com. The launch of this collection was enormously successful. Chaumet also enhanced its collections of jeweled watches. Outlook Chaumet expanded significantly in Asia with new stores opened In 2011, the Watch and Jewelry business group’s strategy of in different Chinese cities and in Singapore. It also gained market profitable growth will be continued and expanded with ambitious share in its traditional markets of France and Japan, at the same targets. time improving the productivity of its stores and its profitability. Sophie Marceau, the ambassador of Chaumet, illustrated a new Communications investments will be continued, including on the advertising campaign that highlights the sensuality and purity Internet, and will remain highly targeted on brands and priority of the jewelry lines. markets. Chinese Asia will receive particular attention, although the objective is still to develop balanced activity on the principal Montres Dior continued to reduce its distribution network and continents. expanded its presence in Dior Couture boutiques. The business group will expand its network of boutiques in China, New watch designs supported the upscaling of the strategic a country with strong potential, and will develop it selectively in Christal line. The Mini D product line, which has completed and other markets. New stores are planned by Hublot in New York enhanced the D de Dior collection since 2009, is a perfect cap to an on Madison Avenue, TAG Heuer at Las Vegas City Center, elegant and prestigious positioning in women’s watches. Zenith in Hong Kong, and De Beers in Beijing and Hong Kong among others. The TAG Heuer, Hublot and Chaumet brands are De Beers generated strong growth, improved the productivity initiating a major program of new stores in Asia. Fred will open of its stores and strengthened communication of its expertise as a boutique in Paris in the Marais district. a diamond jeweler. TAG Heuer and Hublot plan to increase their own production New classic collections were added to round out the Brand’s of watch movements to ensure they have the best resources to product offer. Sales of engagement rings rose significantly in all continue their quest for extreme quality. markets, and the De Beers stores are now recognized as a legitimate destination for an investment this substantial. Sales of high-end jewelry also rose, with increased demand for exceptional stones. Zenith intends to launch a renovation program at its Manufacture in Le Locle to increase capacity and productivity. In addition, after the success of the brand in Hong Kong and Taiwan, the new store at Marina Bay Sands in Singapore confirmed In January 2011, the watch brands are introducing their new the interest of Asian customers in the brand. collections in Switzerland and worldwide, even before the traditional Basel trade show in late March. A large number of Fred, a jeweler offering extremely contemporary designs, innovations will be unveiled in each of their iconic product lines, continued targeted growth in France and Japan with steady work reflecting a continuing effort in creativity and in high quality in on its iconic Force 10 and Success lines. all market segments.

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1.6. Selective Retailing “Platinum” program designed for our most important customers, which includes specific communications, exclusive events and 2010 2009 2008 personalized assistance in making their choices and purchases under optimum conditions. This concept, which DFS inaugurated at Revenue (EUR millions) 5,378 4,533 4,376 Hong Kong Sun Plaza, is now being extended to other destinations. Revenue by geographic region of delivery (%) Miami Cruiseline France 22 24 24 Europe (excluding France) 8 10 11 Miami Cruiseline benefited from a gradual recovery in cruise activity, the impact of which was particularly strong in the second United States 37 37 38 half. The revenue growth recorded in 2010 was driven primarily Japan 2 2 3 by the commissioning of the Oasis of the Seas from Royal Caribbean, Asia (excluding Japan) 24 20 19 an enormous ship where Miami Cruiseline has a space that is an Other markets 7 7 5 ideal showcase for its expertise. Total 100 100 100 While it continued to work to improve profitability, the company Profit from recurring operations 536 388 388 also intensified its strategy aimed at differentiating its sales (EUR millions) approach and its product offer as a function of the customer base Operating margin (%) 10.0 8.6 8.9 specific to each cruise line. Operating investments 196 183 228 (EUR millions) Sephora Number of stores Sephora recorded remarkable performances all over the world. Sephora 1,070 986 898 This momentum, which generated new gains in market share in Other (1) 76 89 155 all its regions, was particularly noteworthy because it followed (1) The method for counting DFS stores was changed as of 2009. Had the new method very solid growth in 2009. been applied in 2008, the number of stores for that year would have been 80. A unique global player in the selective retailing of perfumes and DFS cosmetics, the brand continued to trust the vectors of its global success: a strong and differentiated concept that combines freedom, DFS, which celebrated its fiftieth anniversary in 2010, recorded pleasure and assistance; a very complete and particularly innovative a year of strong growth. Its business was driven by the continued offer that brings together a unique range of major selective brands, growth in Asian tourism and by the appreciation of the yen against a series of exclusive brands, and the Sephora product lines; the the US dollar, which resulted in increased numbers of Japanese contribution of increasingly sophisticated and successful customer customers. The stores in Hong Kong, Macao and Singapore, highly loyalty programs that assist in refining and personalizing the popular destinations for Asian travelers, recorded remarkable relationship with customers. Sephora relies, finally and particularly, growth: DFS clearly reaped the rewards of a strategy that has long on the continued development of the skills of its sales assistants anticipated the expansion in this high-potential customer base and managers thanks to a very advanced training policy designed and of the work completed to better target the product offer and in Paris by Sephora University and adapted around the world. services dedicated to this base. Hawaii, Guam and North America Skincare was a very special focus in 2010. were also dynamic markets. The recent concessions in Abu Dhabi in the Middle East and Mumbai in India recorded steady growth. In Europe, Sephora continued to affirm its leadership status and recorded the most rapid growth in the market. The brand The investments made in strategic stores continued in 2010. confirmed and extended its place as the leader in France, and The Galleria at Sun Plaza in Hong Kong, which completed its intensified its gains in other key countries. Its expertise, appeal renovation and expansion, was the stage for the celebration of and innovations are increasingly recognized by the perfumes and the fiftieth anniversary of DFS when it re-opened in November. cosmetics industry, as highlighted by the press, the awards earned The second site in Macao, City of Dreams, was completed in the and consumer surveys. As of December 31, 2010, the European summer. In Hawaii, in the first stage of the eventual complete network represented a total of 673 stores. While existing stores renovation of the Galleria, the Beauty space was expanded to offer continued to be actively modernized, 34 net new stores were a unique range of brands and services for this destination. opened during the year. Extremely beautiful stores were opened in exceptional locations, including Milan, Italy and Madrid, Spain. DFS continued to base its strategy on the growing appeal and The flagship store on the Champs-Élysées in Paris was reorganized the qualitative improvement of its stores in all destinations. to improve fluidity and visibility. The policy is based primarily on an offer that continues to move toward luxury brands and products and on the expansion of services The exceptional vitality of the brand in the United States, offered to customers. The many initiatives last year included the where revenue growth continued from one quarter to the next,

36 Reference Document 2010 Management Report of the Board of Directors LVMH group was coupled with resounding success in Canada, a market that Exhibits, literary meetings and other image-making events were is growing and confirming its strong potential. Both on that organized throughout the year. All this was in line with the side of the Atlantic and in Europe, 2010 was a year full of new strategy of giving Le Bon Marché the aspects of a special place developments: exclusive products, new products, the deployment of discoveries and cultural experiences above and beyond its very of the “Beauty Studios”, highly innovative initiatives in new selective commercial goals. media (a cellphone application, space on the social networks, and more). Sephora also launched a major program to renovate its Outlook stores and enhance its merchandising, which when implemented DFS has a solid outlook for growth in the coming months, driven should enrich the customer experience even more. The Sephora by the continued positive trends in 2010. The program to expand network in North America represented 276 stores as of and renovate the Gallerias will actively continue in Macao Four December 31, 2010. Seasons, Hawaii, Singapore and Okinawa. In addition to these The year 2010 was highlighted by the acquisition of Sack’s, the investments, DFS will continue to enhance the services offered leader in online sales of selective perfumes and cosmetics in Brazil, to its customers and will maintain its strategy of moving toward a transaction that marks Sephora’s first entrance in Latin America. high-end products with the addition of categories of high-potential In November, the company signed a joint venture agreement to products (watches, beauty products, and more) and the arrival establish a presence in Mexico, the second largest beauty market of new luxury brands. DFS has also just announced a plan, in in Latin America after Brazil. partnership with Hysan Development, to open a third Galleria in Hong Kong in 2012 in the Causeway Bay district, a commercial In China, which it entered in 2005, Sephora continued its growth area very popular with local customers and tourists. This initiative and continued to refine its offer in this vast country which now has reflects the desire of DFS to seize all opportunities that might nearly 100 stores. It earned significant market share in Shanghai strengthen its outlook for future growth. and Beijing (approximately twenty stores in each city). In south Asia, the flagship Singapore Ion Orchard store was enormously Miami Cruiseline will benefit in 2011 from the contribution successful. Sephora expanded its presence in this territory with the of several new cruise ships and from the trend toward larger and opening of an extraordinary store in Marina Bay Sands. The brand larger vessels. The growth in new categories of passengers and the recorded an excellent year in the Middle East, a market it entered development of new itineraries is also a positive factor. In order more recently, where it had 20 stores as of December 31, 2010. to take advantage of these trends, Miami Cruiseline continues Finally, the online sales sites operating in the United States, France to adapt its product offer to the specific characteristics of each and China continued to innovate, expanded their services, and cruise line. recorded strong growth driven by the global expansion of this sales channel. To continue its solid momentum, Sephora has ambitious objectives for growth and gains in market share in 2011. The Le Bon Marché brand is stepping up the rate of store openings in the key countries where it intends to consolidate its leadership position and in high- After solidly navigating the year 2009, Le Bon Marché recorded potential markets like China where it wants to rapidly establish a sharp recovery in revenue in 2010, led more than ever by the strong positions. Substantial investments will also be made to luxury and fashion segments. modernize the existing stores in Europe and the United States and The activity of the department store on the Left Bank was driven by to develop the business generated by the websites. The focus will the investments made over several years to strengthen its identity be increasingly on the innovative aspect of the product offer and and unique character in the Parisian commercial landscape. The services and on expanding loyalty programs. All these measures year 2010 marked a decisive stage in the process of transforming will be backed by sustained marketing investments. the company. In the spring, the inauguration of the “Maison d’Edition” highlighted the strong elements of the architectural Building on the latest developments to reinforce its unique heritage of the building, particularly its magnificent original glass positioning with demanding Parisian and international customers, ceiling. An inspired space, a faithful reflection of the creative and Le Bon Marché is targeting strong growth in its business in 2011. selective spirit of Le Bon Marché, the “Maison d’Edition” showcases The department store on the Left Bank will continue to focus on a world dedicated to the art of living over the entire second floor. the exceptional values that define its unique character as a “Concept The fall signaled the opening of the new news-making “Balthazar”, Store.” In 2011, this will mean the partial reorganization of the the unveiling of an enormous 3,800 m2 space dedicated to men. sales spaces on the ground floor to give more room to the luxury A very high-end shoe department, offering a unique selection in brands. But it will also mean continued efforts to improve the Paris, was one of the outstanding elements of this new “dressing quality of service and to implement new services, all designed to room for men.” enhance customer loyalty to the store.

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2. Operational risk factors and Counterfeiting and parallel distribution have an immediate adverse insurance policy effect on revenue and profit and may damage the brand image of the relevant products over time. LVMH takes all possible measures to protect itself against these risks. 2.1 Strategic and operational risks Action plans have been specifically drawn up to address the counterfeiting of products, in addition to the systematic protection 2.1.1 Threats to the Group’s image and reputation of brand and product names discussed above. This involves close cooperation with governmental authorities, customs officials and Around the world, the LVMH group is known for its brands, lawyers specializing in these matters in the countries concerned, unrivaled expertise and production methods unique to its products. as well as with market participants in the digital world, whom The reputation of the Group’s brands rests on the quality and LVMH also ensures are made aware of the adverse consequences exclusiveness of its products, their distribution networks, as of counterfeiting. The Group also plays a key role in all of the well as the promotional and marketing strategies applied. trade bodies representing the major names in the luxury goods Products or marketing strategies not in line with brand image industry, in order to promote cooperation and a consistent global objectives, inappropriate behavior by brand ambassadors, as well as message, all of which are essential in successfully combating the detrimental information circulating in the media might endanger problem. In addition, the Group takes various measures to fight the the reputation of the Group’s brands and adversely impact sales. sale of its products through parallel retail networks, in particular The net value of brands and goodwill recorded in the Group’s by developing product traceability, prohibiting direct sales to balance sheet as of December 31, 2010 amounted to 13.7 billion those networks, and taking specific initiatives aimed at better euros. controlling retail channels. LVMH maintains an extremely high level of vigilance with respect Beyond Europe’s borders, LVMH is not subject to any legal to any inappropriate use by third parties of its brand names, in constraints that might impede the full exercise of its selective retail both the physical and digital worlds. In particular, this vigilance distribution policy, or limit its ability to bring proceedings against involves the systematic registration of all brand and product any third parties distributing Group products without proper names, whether in France or in other countries, communications approval. In the European Union, competition law guarantees to limit the risk of confusion between LVMH brands and others strictly equal treatment of all economic operators, particularly with similar names, and constant monitoring, which may prompt in terms of distribution, potentially posing an obstacle to legal action by the Group, if required. Initiatives pursued by the companies refusing to distribute their products outside a network Group in favor of a legal framework suited to the digital world, of authorized distributors. However, Commission Regulation (EC) prescribing the responsibilities of the various participants, are an No. 2790/1999 of December 22, 1999 (known as the 1999 Block integral part of this vigilance. Exemption Regulation), by authorizing selective retail distribution Furthermore, the Group supports and develops the reputations of systems, established an exemption to this fundamental principle, its brands by working with seasoned and innovative professionals under which LVMH operates. This exemption was confirmed in in various fields (creative directors, oenologists, cosmetics research April 2010, when the Commission renewed the Block Exemption specialists, etc.), with the involvement of the most senior executives Regulation, and extended its application to retail sales over the in strategic decision-making processes (collections, distribution Internet. This legal protection gives the Group more ammunition and communication). In this regard, LVMH’s key priority is to in the fight against counterfeit goods and the parallel distribution respect and bring to the fore each brand’s unique personality. All of its products, a battle waged as much in the digital as in the LVMH employees are conscious of the importance of acting at all physical world. times in accordance with the ethical guidelines communicated In 2010, anti-counterfeiting measures generated internal and within the Group. Finally, in order to protect against risks related external costs, in the amount of approximately 20 million euros. to an eventual public campaign against the Group or one of its brands, LVMH monitors developments in the media on a constant 2.1.3 Constraints related to contractual commitments basis and maintains a permanent crisis management unit. In the context of its business activities, the Group enters into 2.1.2 Counterfeit and parallel retail networks multi-year agreements with its partners and some of its suppliers (especially lease, concession, distribution and procurement The Group’s brands, expertise and production methods can be agreements). Should any of these agreements be terminated before counterfeited or copied. Its products, in particular leather goods, its expiration date, compensation is usually provided for under the perfumes and cosmetics, may be distributed in parallel retail agreement in question, which would represent an expense without networks, including Web-based sales networks, without the any immediate offsetting income item. As of December 31, 2010, Group’s consent. the total amount of minimum commitments undertaken by the

38 Reference Document 2010 Management Report of the Board of Directors LVMH group

Group in respect of multi-year lease, concession, and procurement 2.1.5 Loss or damage resulting from the use of the agreements amounted to 5.3 billion euros. Detailed descriptions Group’s products of these commitments may be found in Notes 29.1 and 29.2 to the consolidated financial statements. However, no agreement exists In France, the European Union and all other countries in which whose termination would be likely to result in significant costs the Group operates, many of its products are subject to specific at Group level. regulations. Regulations apply to production and manufacturing conditions, as well as to sales, consumer safety, product labeling Any potential agreement that would result in a commitment by and composition. the Group over a multi-year period is subjected to an approval In addition to industrial safety, the Group’s companies also work process at the Group company involved, adjusted depending on to ensure greater product safety and traceability to reinforce the the related financial and operational risk factors. Agreements are Group’s anticipation and responsiveness in the event of a product also reviewed by the Group’s in-house legal counsel, together with recall. its insurance brokers. In all markets where they sell their products, the Group’s Wines In addition, the Group has entered into commitments to its and Spirits brands are subject to numerous regulations intended partners in some of its business activities to acquire the stakes held to inform and protect consumers against risks related to excessive by the latter in the activities in question should they express an alcohol consumption. In addition to cross-cutting regulations that interest in such a sale, according to a contractual pricing formula. govern the promotion of products, as well as places of sale and As of December 31, 2010, this commitment is valued at 3.7 billion consumption, specific regulations also apply to precise segments euros and is recognized in the Group’s balance sheet under Other of the population: minors, pregnant women, employees in the non-current liabilities (see Note 19 to the consolidated financial workplace. Apart from ensuring compliance with these regulations, statements). Moët Hennessy maintains a policy, which it reviews on an ongoing basis, designed to effectively communicate information relating to The Group has also made commitments to some of the shareholders the health risks of excessive alcohol consumption through awareness of its subsidiaries to distribute a minimum amount of dividends, campaigns promoting moderate consumption, in accordance with provided the subsidiaries in question have access to sufficient the cultural specificities of its markets and motivated by a constant cash resources. This relates in particular to the businesses of desire to educate its target audience, which comprises consumers, Moët Hennessy, for which the minimum dividend amount is visitors to its production facilities and other sites open to the contractually agreed to be 50% of the consolidated net profit, public, as well as its own employees. as well as DFS, for which the minimum dividend amount is contractually agreed to be 50% of the consolidated net profit. A legal intelligence team has also been set up in order to better manage the heightened risk of liability litigation, notably that to 2.1.4 International exposure of the Group which the Group’s brands are particularly exposed.

The Group conducts business internationally and as a result is 2.1.6 Seasonality subject to various types of risks and uncertainties. These include Nearly all of the Group’s activities are subject to seasonal variations changes in customer purchasing power and the value of operating in demand. Historically, a significant proportion of the Group’s assets located abroad, economic changes that are not necessarily sales – approximately 30% of the annual total for all businesses, simultaneous from one geographic region to another, and provisions with the exception of Wines and Spirits, for which the proportion of corporate or tax law, customs regulations or import restrictions is 35% – has been generated during the peak holiday season in the imposed by some countries that may, under certain circumstances, fourth quarter of the year. Unexpected events in the final months penalize the Group. of the year may have a significant effect on the Group’s business volume and earnings. In order to protect itself against the risks associated with an inadvertent failure to comply with a change in regulations, the 2.1.7 Supply sources and strategic competencies Group has established a regulatory monitoring system in each of the regions where it operates. The attractiveness of the Group’s products depends on the availability, in sufficient quantity, of certain raw materials The Group maintains very few operations in politically unstable meeting the quality criteria demanded by the Group. This mainly regions. The legal and regulatory frameworks governing the countries involves the supply of grapes and eaux-de-vie in connection with where the Group operates are well established. Furthermore, it the activities of the Wines and Spirits business group, as well as is important to note that the Group’s activity is spread for the leathers, canvases and furs in connection with the activities of the most part between three geographical and monetary regions: Asia, Fashion and Leather Goods business group. In order to guarantee Western Europe and the United States. This geographic balance sources of supply corresponding to its demands, the Group sets up helps to offset the risk of exposure to any one area. preferred partnerships with the suppliers in question. Although the

Reference Document 2010 39 Management Report of the Board of Directors LVMH group

Group enters into these partnerships in the context of long term In addition, prevention and protection schemes include contingency commitments, it is constantly on the lookout for new suppliers also planning to ensure business continuity. able to meet its requirements. With respect to supply sources and sub-contracting, please refer in addition to the Business description 2.2 Insurance policy section of the Reference Document. LVMH has a dynamic global risk management policy based In addition, LVMH’s professions require highly specific skills and primarily on the following: expertise, in the area of leather goods, for example. In order to avoid -- systematic identification and documentation of risks; any dissipation of this know-how, LVMH implements a range of measures to encourage training and to safeguard those professions, -- risk prevention and mitigation procedures for both persons and which are essential to the quality of its products. industrial assets; -- implementation of international contingency plans; 2.1.8 Information systems -- a comprehensive risk financing program to limit the consequences The Group is exposed to the risk of information systems failure, as of major events on the Group’s financial position; a result of a malfunction or malicious intent. The occurrence of this -- optimization and coordination of global ‘‘master” insurance type of risk event may result in the loss or corruption of sensitive data, programs. including information relating to products, customers or financial data. Such an event may also involve the partial or total unavailability LVMH’s overall approach is primarily based on transferring its of some systems, impeding the normal operation of the processes risks to the insurance markets under reasonable financial terms, concerned. In order to protect against this risk, the Group puts in and under conditions available in those markets both in terms of place a decentralized architecture to avoid any propagation of this scope of coverage and limits. The extent of insurance coverage is risk, a full set of measures designed to protect sensitive data, as well directly related either to a quantification of the maximum possible as business continuity plans at each of its Houses. loss, or to the constraints of the insurance market. Compared with LVMH’s financial capacity, the Group’s level 2.1.9 Industrial and environmental risks of self-insurance is not significant. The deductibles payable by In the context of its production and storage activities, the Group Group companies in the event of a claim reflect an optimal balance is exposed to the occurrence of losses such as fires, water damage, between coverage and the total cost of risk. Insurance costs paid or natural catastrophes. by Group companies are less than 0.25% of consolidated annual revenue. A detailed presentation of the Group’s environmental risk factors and of the measures taken to ensure compliance by its business The financial ratings of the Group’s main insurance partners are activities with legal and regulatory provisions is provided in the reviewed on a regular basis, and if necessary one insurer may be section entitled “LVMH and the environment” of the Management replaced by another. Report of the Board of Directors. The main insurance programs coordinated by the Group are To identify, analyze and provide protection against industrial designed to cover property damage and business interruption, and environmental risks, the Group relies on a combination of transportation, credit, third party liability and product recall. independent experts and qualified professionals from various Group 2.2.1 Property and business interruption insurance companies, and in particular safety, quality and environmental managers. The definition and implementation of the risk Most of the Group’s manufacturing operations are covered under a management policy are handled by the Finance Department. consolidated international insurance program for property damage and associated loss of gross margin. The protection of the Group’s assets is part of a policy on industrial risk prevention meeting the highest safety standards (NFPA fire Property damage insurance limits are line with the values of safety standards). Working with its insurers, LVMH has adopted assets insured. Business interruption insurance limits reflect gross HPR (Highly Protected Risk) standards, the objective of which margin exposures of the Group companies for a period of indemnity is to significantly reduce fire risk and associated operating losses. extending from 12 to 24 months based on actual risk exposures. Continuous improvement in the quality of risk prevention is an The coverage limit of this program is 1.1 billion euros per claim, important factor taken into account by insurers in evaluating these an amount determined on the basis of the Group’s maximum risks and, accordingly, in the granting of comprehensive coverage possible loss. at competitive rates. Coverage for “natural events” provided under the Group’s This approach is combined with an industrial and environmental international property insurance program is limited to 75 million risk monitoring program. In 2010, engineering consultants euros per claim and 150 million euros per year. As a result of devoted about 140 audit days to the program. a Japanese earthquake risk modeling study performed in 2009,

40 Reference Document 2010 Management Report of the Board of Directors LVMH group specific coverage in the amount of 150 million euros was taken out 2.3.2 Counterparty risk for this risk. These limits are in line with the Group companies’ The financial crisis of 2008–2010 had a considerable impact on risk exposures. the banking sector worldwide, necessitating heightened controls 2.2.2 Transportation insurance and a more dynamic approach to the management of counterparty risk. Risk diversification is a key objective and special attention is All Group operating entities are covered by an international cargo given to the credit ratings of bank counterparties selected by the and transportation insurance contract. The coverage limit of this Group, which must always be in the top-level categories. program (60 million euros) corresponds to the maximum possible single transport loss. Banking counterparty risk is monitored on a regular and comprehensive basis, a task facilitated by the centralization of 2.2.3 Third-party liability risk management.

The LVMH group has established a third-party liability and 2.3.3 Foreign exchange risk product recall insurance program for all its subsidiaries throughout the world. This program is designed to provide the most A substantial portion of the Group’s sales is denominated in comprehensive coverage for LVMH’s risks, given the insurance currencies other than the euro, particularly the US dollar (or capacity and coverage available internationally. currencies tied to the US dollar such as the Hong Kong dollar or the Chinese yuan, among others) and the Japanese yen, while most Coverage levels are in line with those of companies with comparable of its manufacturing expenses are euro-denominated. business operations. Exchange rate fluctuations between the euro and the main Both environmental losses arising from gradual as well as sudden currencies in which the Group’s sales are denominated can therefore and accidental pollution and environmental liability (Directive significantly impact its revenue and earnings reported in euros, and 2004/35/EC) are covered under this program. complicate comparisons of its year-on-year performance. Specific insurance policies have been implemented for countries The Group actively manages its exposure to foreign exchange where work-related accidents are not covered by state insurance risk in order to reduce its sensitivity to unfavorable currency or social security schemes, such as the United States. Coverage fluctuations by implementing hedges such as forward sales and levels are in line with the various legal requirements imposed by options. An analysis of the sensitivity of the Group’s net profit to the different states. fluctuations in the main currencies to which the Group is exposed, 2.2.4 Coverage for special risks as well as a description of the extent of cash flow hedging for 2011 relating to the main invoicing currencies are provided in Note 21.5 Insurance coverage for political risks, directors’ and officers’ to the consolidated financial statements. liability, fraud and malicious intent, acts of terrorism, loss of or corruption of computer data, and environmental risks is obtained Owning substantial assets denominated in currencies other than through specific worldwide or local policies. euros (primarily the US dollar and Swiss franc) is also a source of foreign exchange risk with respect to the Group’s net assets. This currency risk may be hedged either partially or in full through 2.3 Financial risks the use of borrowings or financial futures denominated in the same currency as the underlying asset. An analysis of the Group’s 2.3.1 Credit risks exposure to foreign exchange risk related to its net assets for Because of the nature of its activities, the majority of the Group’s the main currencies involved is presented in Note 21.5 to the sales are not affected by customer credit risk. Sales are made directly consolidated financial statements. to customers through the Selective Retailing network, the Fashion and Leather Goods stores and, to a lesser extent, the Perfumes and 2.3.4 Interest rate risk Cosmetics stores. Together, these sales accounted for approximately The Group’s exposure to interest rate risk may be assessed with 62% of total revenue in 2010. respect to the amount of its consolidated net financial debt, which Furthermore, for the remaining 38% of revenue, the Group’s totaled 2.7 billion euros as of December 31, 2010. After hedging, businesses are not dependent on a limited number of customers 48% of gross debt was subject to a fixed rate of interest and 52% whose default would have a significant impact on Group activity was subject to a floating interest rate. An analysis of borrowings level or earnings. The extent of insurance against customer credit by maturity and type of rate applicable as well as an analysis of the risk is very satisfactory, with a cover ratio of around 96% as of sensitivity of the cost of net financial debt to changes in interest December 31, 2010. rates are presented in Notes 17.4 and 17.6 to the consolidated financial statements.

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Since the Group’s debt is denominated in various different base (bonds and commercial paper), and the quality of its banking currencies, the Group’s exposure to fluctuations in interest rates relationships, whether evidenced or not by confirmed credit lines. underlying the main currency-denominated borrowings (euro, In addition, as is customary, the applicable margin on drawdowns Swiss franc, Japanese yen and US dollar) varies accordingly. of certain long term credit lines depends on the Group’s rating (by This risk is managed using interest rate swaps and by purchasing Standard & Poor’s). As of December 31, 2010, no drawdown had options (protections against an increase in interest rate) designed to been performed under these schemes. Furthermore, should these limit the adverse impact of unfavorable interest rate fluctuations. clauses be triggered, this would not have a significant impact on the Group’s cash flow. 2.3.5 Equity market risk Agreements governing financial debt and liabilities are not The Group’s exposure to equity market risk relates on the one hand associated with any none-standard clause likely to significantly to its treasury shares which are held primarily in coverage of stock modify their terms and conditions. option plans and bonus share plans. The Group also holds LVMH share-settled calls to cover these commitments. LVMH treasury The breakdown of financial liabilities by contractual maturity is shares, as well as call options on LVMH shares, are considered as presented in Note 21.7 to the consolidated financial statements. equity instruments under IFRS, and as such have no impact on the consolidated income statement. In addition, the Group holds 2.3.7 Organization of foreign exchange, interest rate and a 20.2% stake in Hermès International SCA. equity market risk management Other quoted securities may be held by some of the funds in which The Group applies an exchange rate and interest rate management the Group has invested, or even directly within non-current or strategy designed primarily to reduce any negative impacts of current available for sale financial assets. foreign currency or interest rate fluctuations on its business and investments. The Group may use derivatives in order to reduce its exposure to risk. Derivatives may serve as a hedge against fluctuations in This management is primarily centralized at the level of the parent share prices. For instance, equity swaps in LVMH shares allow company and by Group Cash Pooling. cash-settled compensation plans index-linked to the change in the The Group has implemented a stringent policy, as well as strict LVMH share-price to be covered. Derivatives may also be used to management guidelines to measure, manage and monitor these synthetically build a buyer position. market risks. 2.3.6 Liquidity risk These activities are organized based on a segregation of duties between risk measurement, hedging (treasury and front office), The Group’s local liquidity risks are generally not significant. Its administration (back office) and financial control. overall exposure to liquidity risk can be assessed with regard to the amount of the short term portion of its net financial debt before The backbone of this organization is an integrated information hedging net of cash and cash equivalents, nil as of December 31, system which allows hedging transactions to be monitored in real 2010 or with regard to outstanding amounts in respect of its time. commercial paper program (0.3 billion euros). Should any of The Group’s hedging strategy is presented to the Performance these borrowing facilities not be renewed, the Group has access Audit Committee. Hedging decisions are made according to a to undrawn confirmed credit lines totaling 3.3 billion euros. clearly established process that includes regular presentations Therefore, the Group’s liquidity is based on the large amount of its to the Group’s Executive Committee and detailed supporting investments and long term borrowings, the diversity of its investor documentation.

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3. Financial policy • The decrease in the cost of net financial debt, which was 151 million euros as of December 31, 2010, down from 187 million euros the previous year. During the year, the Group’s financial policy focused on: This change results in particular from the decline in the average • Improving the Group’s financial structure, as evidenced by the net financial debt during the year, the substantial proportion of key indicators listed below: variable-rate borrowings in a context of low rates, but also better -- substantial growth in equity, yields on cash investments. -- lower net debt, • Pursuing a dynamic dividend payout policy to shareholders, to -- access to Group liquidity, in particular through its French enable them to benefit from the company’s very strong performance commercial paper program at attractive rates, finding favor with over the year: a number of investors, -- an interim dividend for 2010 of 0.70 euros was paid in -- maintaining a substantial level of cash and cash equivalents, December 2010; -- the Group’s financial flexibility, based on a significant reserve -- proposal of a dividend payment of 2.10 euros per share for the of confirmed credit lines. period (final dividend of 1.40 euros available for distribution in 2011). As a result, total dividend payments to shareholders by Thanks to substantial cash flow from operations, net financial debt LVMH in respect of 2010 would amount to 1,029 million euros, was reduced from 2,994 million euros as of December 31, 2009 to before the impact of treasury shares. 2,679 million euros at year-end 2010.

Equity before appropriation of profit increased by 23% to 3.1 Consolidated cash flow 18,204 million euros as of December 31, 2010, compared to 14,785 million euros a year earlier. This improvement is attributable The consolidated cash flow, which is shown in the consolidated both to the level of net profit in 2010 and the positive impact of financial statements, details the main cash flows for the 2010 gains arising on currency translation due to the appreciation of the fiscal year. US dollar and the Japanese yen against the euro between year-end 2009 and year-end 2010, despite dividend payments amounting Net cash from (used in) operating activities and operating to 1,111 million euros. investments (free cash flow)

• Maintaining a prudent foreign exchange and interest rate (EUR billions) 2010 2009 risk management policy designed primarily to hedge the risks Cash from operations before 4.8 3.9 generated directly and indirectly by the Group’s operations and changes in working capital investments. Income tax paid (0.9) (0.9) With regard to foreign exchange risks, the Group continued Cost of net financial debt: interest paid (0.1) (0.2) to hedge the risks of exporting companies using call options or Changes in working capital 0.3 0.1 ranges to limit the negative impact of currency depreciation while Operating investments (1.0) (0.7) retaining most of the gains in the event of currency appreciation. Total 3.1 2.2 This strategy was successful in an extremely volatile year. It enabled the Group to obtain a significantly better forward rate for the US Cash from operations before changes in working capital increased dollar than that obtained in 2009, which was also better than by 23%, to 4,848 million euros as of December 31, 2010, from the average exchange rate for the year, and a significantly better 3,928 million euros a year earlier. forward rate for the Japanese yen than that obtained in 2009, which was broadly in line with the average exchange rate for the year. Net cash from operations before changes in working capital (i.e. after interest and income tax) amounted to 3,802 million euros, • A high level of cash and cash equivalents managed centrally, an increase of 34% compared to the 2,843 million euros recorded owing to good operating performance and the continuing in 2009. development of cash management procedures on an international scale. Interest paid in 2010 amounted to 149 million euros, down from Apart from its cash and cash equivalents, the Group applies a 185 million euros the previous year, reflecting the decline in the Group’s average financial debt over the year and the substantial diversified short and long term investment policy. It benefited from proportion of variable-rate borrowings in a context of low rates. continuing high yields for bonds from top-quality issuers, with a permanent focus on ensuring a proactive and dynamic approach Income tax paid in 2010 amounted to 897 million euros, thus to counterparty risk management. nearly stable compared to the 900 million euros paid in 2009.

Reference Document 2010 43 Management Report of the Board of Directors LVMH group

Working capital requirements decreased by 247 million euros. In the year ended December 31, 2010, LVMH SA paid 953 million Although changes in inventories increased cash requirements by euros in dividends, excluding the amount attributable to treasury 126 million euros, due in particular to growth in the Selective shares, of which 618 million euros were distributed in May in Retailing businesses and the modest recovery in purchases of respect of the final dividend on 2009 profit and 335 million euros distilled alcohol inventories for cognac, the increase in trade in December in respect of the interim dividend for fiscal year accounts payable balances generated 295 million euros in cash, 2010. Furthermore, the minority shareholders of consolidated especially at DFS and the French perfumes and cosmetics houses. subsidiaries received 158 million euros in dividends, mainly Changes in working capital requirements compared to 2009 are corresponding to dividends paid to Diageo with respect to its primarily attributable to business growth in 2010 and, for the 34% stake in Moët Hennessy and to minority interests in DFS. French brands, to the impact on the 2009 financial statements of Lastly, the Group acquired an additional 40.1% stake in the the entry into effect of the French Law on the Modernization of Samaritaine for a consideration of 185 million euros, thus raising the Economy. its total ownership interest to 98.5%. Operating investments for the period, net of disposals, resulted After all operating, investment and equity-related activities, in net cash outflows of 976 million euros. These investments, including the impact of the additional investment in Hermès mainly focused on the retail networks of flagship brands and trade International and the dividend payment, the total cash surplus names such as Louis Vuitton, Sephora and DFS, reflect the Group’s amounted to 338 million euros as of December 31, 2010. growth momentum. Given the extent of this cash surplus, very little funds were raised Net cash from operating activities and operating investments thus in 2010. Bond issues and new borrowings provided a cash inflow amounted to 3,073 million euros, compared to 2,205 million euros of 564 million euros. LVMH SA did not issue any public bonds the previous year. during the period, nor did it conclude any private placements Net cash from (used in) financial investments, through its Euro Medium Term Notes program. However, the transactions relating to equity and financing activities Group did make use of its French commercial paper program, the outstanding portion of which amounted to 272 million euros as (EUR billions) 2010 2009 of December 31, 2010.

Net cash from (used in) financial investments (1.7) (0.3) In 2010, the resources and cash described above were used to Net cash from (used in) transactions pay down borrowings in the amount of 1,290 million euros, (1.0) (0.9) relating to equity 715 million euros of which corresponded to the redemption of a o/w interim and final dividends paid by LVMH (1.0) (0.8) euro-denominated bond issued in 2003. Net cash from (used in) financing activities (0.8) 0.7 As of December 31, 2010, cash and cash equivalents net of bank overdrafts amounted to 2,042 million euros. Acquisitions of non-current available for sale financial assets, net of disposals, together with the net impact of the purchase and sale of consolidated investments, resulted in an outflow of 3.2 Financial structure 1,715 million euros in 2010, compared to 322 million euros a LVMH’s consolidated balance sheet, which is shown on the year earlier. As of December 31, 2010, acquisitions of non-current consolidated financial statements, totaled 37.2 billion euros as of available for sale financial assets included the additional investment December 31, 2010, representing an increase of 15.8% compared in Hermès International, in the amount of 1,655 million euros. The with December 31, 2009. net impact of the purchase and sale of consolidated investments primarily corresponds to the acquisition by Sephora of a 70% stake Non-current assets in Sack’s, a Brazilian retailer of perfumes and cosmetics. (EUR billions) 2010 2009 Variation Transactions relating to equity generated an outflow of 1,020 million euros over the period. Fixed assets 20.9 19.1 1.8 Share subscription options exercised in 2010 raised a total of Other assets 5.1 2.0 3.1 o/w Non-current available 120 million euros. The Company proceeded with the cancellation 3.9 0.5 3.4 for sale financial assets of a number of shares equivalent to the total issued. Total 26.0 21.1 4.8 Disposals of LVMH shares and LVMH-share settled derivatives by the Group, net of acquisitions, generated an inflow of 155 million Non-current assets amounted to 26.0 billion euros, compared to euros. 21.1 billion euros at year-end 2009, a significant increase mainly attributable to the additional investment in Hermès International.

44 Reference Document 2010 Management Report of the Board of Directors LVMH group

Non-current assets thus represent 70% of total assets, up from Equity and non-current liabilities 66% a year earlier. (EUR billions) Tangible and intangible fixed assets increased to 20.9 billion 2010 2009 Variation euros from 19.1 billion euros at year-end 2009. Brands and other Equity, Group share 17.2 13.8 3.4 intangible assets amounted to 9.1 billion euros, up from 8.7 billion Minority interests 1.0 1.0 0.0 euros as of December 31, 2009. This increase chiefly reflects the Long term borrowings 3.4 4.1 (0.6) impact of exchange rate fluctuations on brands and other intangible Other 7.2 1.3 assets recognized in US dollars, such as the DFS trade name and 8.5 the Donna Karan brand, and in Swiss francs, in particular the Total 30.1 26.1 4.0 TAG Heuer and Hublot brands. The Group share of equity before appropriation of profit increased Goodwill increased significantly, to 5.0 billion euros from to 17.2 billion euros from 13.8 billion euros at year-end 2009. 4.3 billion euros at year-end 2009, primarily reflecting the increase This strong improvement in 2010 is attributable to the significant in share purchase commitments. amount of the Group’s share of net profit for the year and to The increase in property, plant and equipment, to 6.7 billion euros the positive change in the cumulative translation adjustment at year-end 2010, is due in part to the translation adjustment but resulting from the rise in most currencies against the euro, an also reflects the impact of the Group’s operating investments, net impact exceeding by far the payment of dividends in the amount of the depreciation charge for the year. These investments mainly of 1.0 billion euros. relate to the retail networks of Louis Vuitton, Sephora and DFS, Minority interests remained stable at 1.0 billion euros. This as well as to certain real estate assets, located at the heart of cities stability results from the share of minority interests in the net where the Group’s brands enjoy significant recognition. profit for the year after the distribution of dividends, the positive Taken together, investments in associates, non-current available impact of the appreciation of the US dollar on minority interests for sale financial assets, other non-current assets and deferred in DFS, and the negative impact of the acquisition of an additional tax increased by 3.1 billion euros to 5.1 billion euros, mainly as 40.1% stake in the Samaritaine. a result of the additional investment in Hermès International, Total equity thus amounted to 18.2 billion euros and represented which brought the Group’s stake in this company to 20.2%. As of 49% of the balance sheet total, compared to 46% a year earlier. December 31, 2010, non-current available for sale financial assets included the investment in Hermès International in the amount As of December 31, 2010, non-current liabilities amounted of 3.3 billion euros. to 11.9 billion euros, including 3.4 billion euros in long term borrowings. This compares to 11.3 billion euros at year-end Current assets 2009, including 4.1 billion euros in long term borrowings. The decrease in long term borrowings is more than offset by increases (EUR billions) 2010 2009 Variation in share purchase commitments, provisions for contingencies Inventories and work in progress 6.0 5.6 0.3 and losses, and deferred tax. The proportion of non-current liabilities in the balance sheet total came to 32%, down from Trade accounts receivable 1.6 1.5 0.1 35% a year earlier. Cash and cash equivalents 2.3 2.4 (0.2) Equity and non-current liabilities thus amounted to 30.1 billion Other 1.3 1.4 (0.1) euros, and exceeded total non-current assets by 4.1 billion euros. Total 11.2 11.0 0.2 Current liabilities Inventories came to 6.0 billion euros, up from 5.6 billion euros at year-end 2009, due to the impact of exchange rate fluctuations, the (EUR billions) 2010 2009 Variation development of retail networks, mainly that of Sephora, and the Short term borrowings 1.8 1.7 0.1 moderate replenishment of distilled alcohol inventories for cognac. Trade accounts payable 2.3 1.9 0.4 Trade accounts receivable amounted to 1.6 billion euros, thus Other 3.0 2.4 0.5 returning to their level at year-end 2008. Total 7.1 6.0 1.0 In spite of the cash outflow resulting from the acquisition of shares in Hermès International, cash and cash equivalents, excluding Current liabilities increased to 7.1 billion euros, from 6.0 billion current available for sale financial assets, remained high at euros at year-end 2009. Their relative weight in the balance sheet 2.3 billion euros, close to the amount of 2.4 billion euros recorded total remained stable at 19%. as of December 31, 2009.

Reference Document 2010 45 Management Report of the Board of Directors LVMH group

Long term and short term borrowings, including the market value Most of these amounts cover scientific research and development of interest rate derivatives used as hedging instruments, and net of costs for skincare and make-up products of the Perfumes and cash, cash equivalents and current available for sale financial assets, Cosmetics business group. amounted to 2.7 billion euros as of December 31, 2010, compared to 3.0 billion euros a year earlier. This represents a gearing of 15%, 4.3 Investments in production facilities and retail compared to 20% at year-end 2009. networks Cash and cash equivalents again exceeded short term borrowings. Apart from investments in communication, promotion and As of December 31, 2010, the Group’s undrawn confirmed research and development, operating investments are geared credit lines amounted to 3.3 billion euros, largely exceeding the towards improving and developing retail networks as well as outstanding portion of its commercial paper program, which came guaranteeing adequate production capabilities. to 0.3 billion euros. Total operating investments (acquisitions of property, plant and equipment and intangible assets) for the last three fiscal years were as follows, in absolute values and as a percentage of cash from 4. Operating investments operations before changes in working capital:

4.1 Communication and promotion expenses 2010 2009 2008 Operating investments: Over the last three fiscal years the Group’s total investments in - in millions of euros 1,002 748 1,039 communication, in absolute values and as a percentage of revenue, - as % of cash from operations 20.7 19.0 25.4 were as follows: before changes in working capital

2010 2009 2008 Following the model of the Group’s Selective Retailing companies Communication and which directly operate their own stores, Louis Vuitton distributes promotion expenses: its products exclusively through its own stores. The products of - in millions of euros 2,267 1,809 2,031 the Group’s other brands are marketed by agents, wholesalers, or - as % of revenue 11.2 10.6 11.8 distributors in the case of wholesale business, and by a network of directly owned stores or franchises for retail sales. These expenses mainly correspond to advertising campaign costs, In 2010, operating investments mainly related to point of sale especially for the launch of new products, public relations and assets, with the total network of the Group’s stores increasing promotional events, and expenses incurred by marketing teams from 2,423 to 2,545 stores. In particular, Sephora continued to responsible for all of these activities. expand its worldwide retail network, which reached 1,070 stores at the end of 2010, compared to 986 the previous year. Parfums 4.2 Research and development costs Christian Dior continued to update its retail fixtures and fittings to promote the brand’s image. DFS plans to open its third Galleria The Group’s research and development investments in the last in Hong Kong in 2012. three fiscal years were as follows: In Wines and Spirits, investments in 2010 were strictly limited to (EUR millions) 2010 2009 2008 necessary replacements of barrels and industrial equipment. The new bottling plant for the Glenmorangie and Ardbeg brands, the Research and development costs 46 45 43 project for which was launched in 2009, was implemented in 2010.

46 Reference Document 2010 Management Report of the Board of Directors LVMH group

5. Main locations and properties

5.1 Production

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

(in hectares) 2010 2009

Total of which under Total of which under production production

France: Champagne name 1,816 1,679 1,809 1,675 Cognac name 245 180 245 177 Vineyards in Bordeaux 252 159 244 148 International: California (United States) 470 341 469 361 Argentina 1,388 879 1,390 891 Australia, New Zealand 569 530 610 520 Brazil 232 67 232 57 Spain 55 50 52 47

In the table above, the total number of hectares owned presented Rossimoda owns its office premises and its production facility in is determined exclusive of surfaces not useable for . The Stra and Vigonza in Italy. difference between the total number of hectares owned and the The other facilities utilized by this business group are either leased number of hectares under production represents areas that are or included within manufacturing subcontracting agreements. planted, but not yet productive, and areas left fallow. The Group also owns industrial and office buildings, wineries, Perfumes and Cosmetics cellars, warehouses, and visitor and customer centers for each of Buildings located near Orleans in France housing the Group’s its main Champagne brands or production operations in France, Research and Development operations of Perfumes and Cosmetics California, Argentina, Australia, Spain, Brazil and New Zealand, as as well as the manufacturing and distribution of Parfums Christian well as distilleries and warehouses in Cognac, the United Kingdom Dior are owned by Parfums Christian Dior and occupy a surface and Poland. The total surface area is approximately 740,000 square area of 122,000 square meters. meters in France and 280,000 square meters abroad. Guerlain owns its two manufacturing centers in Chartres and Fashion and Leather Goods Orphin (France), for a total surface area of approximately 27,000 square meters. Louis Vuitton owns nineteen leather goods and shoe production facilities located primarily in France, although some significant Parfums Givenchy owns two plants in France, one in Beauvais workshops are also located near Barcelona in Spain, and in San and the other in Vervins, which handles the production of both Dimas, California. The company owns its warehouses in France; Givenchy and Kenzo product lines, corresponding to a total surface those located outside France are leased. Overall, production facilities area of 19,000 square meters. The company also owns distribution and warehouses owned by the Group represent approximately facilities in Hersham, United Kingdom. 195,000 square meters. Watches and Jewelry Fendi owns its own manufacturing facility near Florence, Italy, as well as its company headquarters, the Fendi Palazzo, in Rome, TAG Heuer leases all of its manufacturing facilities in La Chaux- Italy. de-Fonds and the Jura region of Switzerland. Céline also owns manufacturing and logistics facilities near Zenith owns the Manufacture, which houses its movement and Florence in Italy. watch manufacturing facilities in Le Locle, Switzerland. All of its European warehouses are leased. Berluti’s shoe production factory in Ferrara (Italy) is owned by the Group. Hublot owns its production facilities and its office premises.

Reference Document 2010 47 Management Report of the Board of Directors LVMH group

The facilities operated by this business group’s remaining brands, Saint-Tropez, for a total surface area of approximately 11,000 Chaumet, Fred, De Beers and Montres Dior, are leased. square meters. Céline and Loewe also own the buildings housing some of their 5.2 Retail distribution stores in Paris and Spain. Retail distribution of the Group’s products is most often carried In the Selective Retailing business group: out through exclusive stores. Most of the stores in the Group’s retail -- Le Bon Marché and Franck et Fils own the buildings in Paris network are leased and only in exceptional cases does LVMH own that house their department stores, corresponding to a total sales 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 Guam, Saipan and Hawaii. Guam, Hawaii, Seoul, Taipei, Sydney, Rome, Genoa, Cannes,

As of December 31, 2010, the Group’s store network breaks down as follows:

(in number of stores) 2010 2009 2008

France 364 353 331 Europe (excluding France) 646 620 596 United States 570 531 531 Japan 303 307 256 Asia (excluding Japan) 518 470 485 Other markets 144 142 115 Total 2,545 2,423 2,314

(in number of stores) 2010 2009 2008

Fashion and Leather Goods 1,188 1,164 1,090 Perfumes and Cosmetics 75 65 62 Watches and Jewelry 122 114 104 Selective Retailing: Sephora 1,070 986 898 Other, including DFS 76 89 155 1,146 1,075 1,053 Other 14 5 5 Total 2,545 2,423 2,314

As of December 31, 2009, DFS harmonized its methodology for The Group holds a 40% stake in the company owning the building counting its stores across all geographic regions, now including housing its headquarters on Avenue Montaigne in Paris. The only the number of concessions rather than the number of points Group also owns three buildings in New York (total surface area of sale per concession. If the methodology introduced in 2009 were of about 26,000 square meters) and a building in Osaka (about applied to 2008, the total number of stores would have amounted 5,000 square meters) that house the offices of subsidiaries. to 2,239 rather than 2,314. Lastly, the Group owns investment property, for the most part located in Paris and mainly in the vicinity of the Samaritaine and 5.3 Administrative sites and investment property Le Bon Marché, for a total surface area of approximately 50,000 square meters. Most of the Group’s administrative buildings are leased, with the exception of the headquarters of certain brands, particularly those The group of properties previously used for the business operations of Louis Vuitton, Parfums Christian Dior and Zenith. of the Samaritaine is subject to a redevelopment project.

48 Reference Document 2010 Management Report of the Board of Directors LVMH group

6. Stock option plans in force at host. Asserting that it did not have jurisdiction to evaluate the subsidiaries extent of losses caused by some of eBay’s sites outside France, the Court reduced the amount of punitive damages to 2.2 million euros for Louis Vuitton Malletier and 0.7 million euros for the Group’s None. Perfumes and Cosmetics brands, as the initial amount had been determined on the basis of eBay’s worldwide operations. In response, eBay has filed an appeal on points of law with the Cour de Cassation. 7. Litigation and exceptional events Following the announcement by LVMH in October 2010 of its entry into the capital of Hermès International, the Autorité As part of its day-to-day management, the Group is party to various des Marchés Financiers indicated that it would be launching an legal proceedings concerning trademark rights, the protection of investigation into the market and financial disclosures relating to intellectual property rights, the protection of Selective Retailing Hermès and LVMH securities. networks, licensing agreements, employee relations, tax audits, and any other matters inherent to its business. The Group believes that In January 2011, the Paris Administrative Court cancelled the the provisions recorded in the balance sheet in respect of these risks, order issued in 2007 that had granted Fondation Louis Vuitton a litigation proceedings and disputes that are in progress and any building permit for the construction of a modern and contemporary others of which it is aware at the year-end, are sufficient to avoid art museum in the Bois de Boulogne. The Fondation is financed by its consolidated financial net worth being materially impacted in Group contributions as part of the Group’s cultural sponsorship the event of an unfavorable outcome. activities. The Fondation and the City of Paris have appealed the ruling of the Paris Administrative Court. In parallel with this, Following the decision delivered in March 2006 by the Conseil considering the public interest vocation of the project, the French de la Concurrence (the French antitrust authority) regarding the parliament has launched a review of a bill of law which would luxury perfume sector in France, and the judgment rendered on validate the cancelled building permits on the grounds advanced June 26, 2007 by the Paris Court of Appeal, the Group companies by the Administrative Court. concerned took their case to the Cour de Cassation, the highest court in France. In July 2008, the Cour de Cassation overturned To the best of the Company’s knowledge, there are no pending the decision of the Paris Court of Appeal and referred the case or impending administrative, judicial or arbitration procedures to the same jurisdiction, formed differently. In November 2009, that are likely to have, or have had over the twelve-month period the Court of Appeal set aside the judgment of the Conseil de la under review, any significant impact on the financial position or Concurrence due to the excessive length of the proceedings. In profitability of the Company and/or the Group. November 2010, the Cour de Cassation overturned the decision of the Court of Appeal and referred the matter back to the same jurisdiction, formed differently. 8. Subsequent events In 2006, Louis Vuitton Malletier and the French companies of No significant subsequent events occurred between December 31, the Perfumes and Cosmetics business group filed lawsuits against 2010 and February 3, 2011, the date on which the financial eBay in the Paris Commercial Court. Louis Vuitton Malletier statements were approved for publication by the Board of Directors. demanded compensation for losses caused by eBay’s participation in the commercialization of counterfeit products and its refusal to implement appropriate procedures to prevent the sale of such [Updated after the date of the Board of Directors’ meeting that goods on its site. The Perfumes and Cosmetics brands sued eBay approved the financial statements for publication: for undermining their selective retailing networks. In a decision Pursuant to an agreement concluded on March 6, 2011, the Bulgari delivered on June 30, 2008, the Paris Commercial Court ruled family, majority shareholder of the Italian House established in in favor of LVMH, ordering eBay to pay 19.3 million euros to 1884 by Sotirio Bulgari, has decided to join forces with the LVMH Louis Vuitton Malletier and 3.2 million euros to the Group’s group in order to reinforce the long term development of the Perfumes and Cosmetics brands. The court also barred eBay from Bulgari Group. Bulgari occupies a strong leadership position in running listings for perfumes and cosmetics under the Dior, the jewelry and watch segment, while playing an important role Guerlain, Givenchy and Kenzo brands. eBay filed a petition in the fragrance, cosmetic and accessories segments as well. with the Paris Court of Appeal. On July 11, 2008, the President of the Paris Court of Appeal denied eBay’s petition to stay the Under the agreement, which was approved unanimously by the provisional execution order delivered by the Paris Commercial Boards of Directors of LVMH Moët Hennessy - Louis Vuitton Court. In September 2010, the Paris Court of Appeal confirmed SA and Bulgari SpA, the controlling family investment in the the ruling against eBay handed down in 2008, classifying this share capital of Bulgari SpA, which comprises152.5 million shares company’s business as that of a broker and not merely an Internet (50.43% of the share capital) before exercising the entitlement

Reference Document 2010 49 to acquire additional shares, will be tendered to LVMH. This 9. Recent developments and prospects contribution will be remunerated by issuing 16.5 million new LVMH shares; the Bulgari family will thus become the second- largest family shareholder of the LVMH group. Moreover, after LVMH is very well placed to continue to deliver robust growth this contribution is completed, in view of the fact that Bulgari in all of its businesses in 2011. The Group’s strategy will remain SpA is listed on the Milan stock exchange, LVMH will submit a focused on communicating the core values of its brands and public purchase offer at the price of 12.25 euros per share for the building on their successes through a sustained commitment to shares held by minority shareholders, in compliance with Italian innovation, quality, and expansion in the most promising markets. stock market regulations. Under this agreement, the price paid Bolstered by its organization’s ability to adapt quickly to changing by LVMH for the entire share capital of Bulgari amounts to 4.3 circumstances, and reinforced by the good balance between the billion euros, of which 1.9 billion euros is represented by new Group’s different businesses and its wide geographical presence, LVMH shares to be issued, and 2.4 billion euros will be financed LVMH enters 2011 with confidence and continues to set itself in cash and by issuing financial debt. the goal of strengthening its leadership position in the worldwide The Bulgari family will furthermore be entitled to appoint two luxury goods market. representatives to the LVMH Board of Directors and Francesco Trapani, CEO of Bulgari SpA, will join the Executive Committee of LVMH and will assume in the second half of 2011 the management of the LVMH Watches and Jewelry business group.]

50 Reference Document 2010 Management report of the board of directors

Parent company: LVMH Moët Hennessy - Louis Vuitton SA

Page

1. Comments on the financial statements 52 1.1 Comments on the balance sheet 52 1.2 Parent company results and future prospects 53

2. Appropriation of earnings for the year 53

3. Shareholders - share capital - stock option plans - allocation of bonus shares 54 3.1 Main shareholders 54 3.2 Shares held by members of the management and supervisory bodies 54 3.3 Employee share ownership 54 3.4 Share purchase options plans and share subscription option plans 54 3.5 Allocation of bonus shares and performance bonus shares 58

4. Financial authorizations 59 4.1 Status of current delegations and authorizations 59 4.2 Authorizations proposed to the Shareholders’ Meeting 60

5. Share repurchase programs 62

6. Remuneration of company officers 64

7. Summary of TRANSACTIONS INVOLVING lvmh shares during the fiscal year by directors and related persons 66

8. Administrative matters 66 8.1 List of positions and offices held by the Directors 66 8.2 Board of Directors 66

9. Information that could have a bearing on a takeover bid or exchange offer 67

Reference Document 2010 51 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

Parent company: LVMH Moët Hennessy - Louis Vuitton SA

1. Comments on the financial statements

The balance sheet, income statement and notes to the financial associated interest rate risk, as well as foreign exchange operations statements of LVMH Moët Hennessy - Louis Vuitton SA (hereafter, carried out for its own account. “LVMH” or “the Company”) for the year ended December 31, 2010 The financial structure as of December 31, 2010 and 2009 reflects have been prepared in accordance with French legal requirements these changes: in October 2009, receivables from controlled and the same accounting policies and methods as those used in entities and borrowings from related companies resulting from the the previous year. cash pooling arrangements were settled and the foreign exchange hedging contracts taken out on behalf of its subsidiaries were 1.1 Comments on the balance sheet cancelled. The income statement records the impact of the cash pooling arrangements and of foreign exchange hedges on behalf 1.1.1 Change in the equity investment portfolio of the subsidiaries until October 2009. The gross value of the investment portfolio was 14.2 billion euros, an increase of 0.2 billion euros compared to year-end 2009. 1.1.3 Hedging transactions This increase reflects, in the total amount of 165 million euros, LVMH regularly uses financial instruments. This practice meets the acquisition of a 99.99% stake in the holding company Eley the foreign currency and interest rate hedging needs for financial Finance SA, followed by the subscription to a capital increase by assets and liabilities, including dividends receivable from foreign this company. LVMH also subscribed to the capital increase of its investments; each instrument used is allocated to the hedged subsidiary LVMH Services Limited (London, UK) in the amount financial balances or transactions. of 32 million euros. Following these transactions, LVMH had an ownership interest in these two companies of 99.99% and 100%, Given the role of LVMH within the Group, financial instruments respectively. designed to hedge net assets denominated in foreign currency may be used in the consolidated financial statements but not matched 1.1.2 Financial structure in the parent company financial statements, or are allocated to In 2010, LVMH did not proceed with any bond issues. The 2003 underlying amounts maintained at historical exchange rates, such bond issue in a nominal amount of 750 million euros, partially as equity investments. redeemed and cancelled in 2009 in the amount of 35 million euros, Counterparties for hedging contracts are selected on the basis of was fully redeemed at its maturity for 715 million euros. their credit rating as well as for reasons of diversification. Until October 2009, LVMH had cash pooling arrangements 1.1.4 Share capital in euros and foreign currencies with its French subsidiaries and certain European subsidiaries. It also centralized their financing During the fiscal year, 2,012,478 shares were created by the exercise requirements and managed interest rate risk on borrowings. of subscription options and 1,775,900 shares were retired. As of LVMH also centralized the foreign exchange hedges of its French December 31, 2010, the share capital comprised 490,642,232 fully subsidiaries and certain European subsidiaries. These foreign paid-up shares and amounted to 147.2 million euros. exchange hedging contracts taken out by LVMH on behalf of its subsidiaries were symmetrically covered in the market in terms 1.1.5 Information on payment terms of hedge type, currency, amount and maturity. As of December 31, 2010, trade accounts payable amounted to Since these roles are now assumed by a subsidiary, LVMH continues 109 million euros, the major portion of which were not yet due. only to manage the Group’s long-term borrowings and the The average payment term is 45 days.

52 Reference Document 2010 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

1.2 Parent company results and outlook for the future Operating income chiefly consisted of dividends received from Net exceptional income chiefly consisted of changes in impairment subsidiaries and other investments; its increase in 2010 was due to on investments and of changes in provisions for contingencies an exceptional dividend distribution by the subsidiary Sofidiv SAS. and losses. The net financial expense was primarily attributable to the cost Finally, with regard to the preparation of the Company’s income tax of net financial debt and related interest rate derivatives in the return, no expenses were considered as having to be re-integrated into amount of 148 million euros and losses on foreign exchange taxable profit or non-deductible within the meaning of Articles 39-4, transactions and derivatives in the amount of 228 million euros. 39-5, 54 quater and 223 quinquies of the French General Tax Code.

2. Appropriation of net profit for the year

The proposed appropriation of the amount available for distribution Should this appropriation be approved, the total dividend would for the fiscal year is as follows: be 2.10 euros per share. As an interim dividend of 0.70 euros per share was paid on December 2, 2010, the final dividend per share (EUR) is 1.40 euros; this will be paid as of May 25, 2011. Net profit for the year ended 2,317,934,132.70 December 31, 2010 With respect to this dividend distribution, individuals whose Allocation to the legal reserve (7,097.34) tax residence is in France will be entitled to the 40% deduction Retained earnings before distribution 2,595,765,841.88 provided under Article 158 of the French Tax Code. Total amount available for distribution 4,913,692,877.24 Finally, should the Company hold, at the time of payment of Proposed appropriation: this balance, any treasury shares under prior authorizations, the • statutory dividend of 5%, corresponding amount of unpaid dividends will be allocated to 7,359,633.48 or EUR 0.015 per share retained earnings. • additional dividend of 1,022,989,053.72 EUR 2.085 per share • retained earnings after appropriation 3,883,344,190.04 4,913,692,877.24

For information, as of December 31, 2010, the Company held 11,939,973 of its own shares, corresponding to an amount not available for distribution, equivalent to the acquisition cost of the shares, i.e. 594.5 million euros.

As required by law, the Board of Directors observes that the dividends per share paid out in respect of the past three fiscal years were as follows:

Fiscal year Nature Payment date Gross dividend Tax deduction (1) (EUR) (EUR)

2009 Interim December 2, 2009 0.35 0.14 Final May 25, 2010 1.30 0.52 Total 1.65 0.66 2008 Interim December 2, 2008 0.35 0.14 Final May 25, 2009 1.25 0.50 Total 1.60 0.64 2007 Interim December 3, 2007 0.35 0.14 Final May 23, 2008 1.25 0.50 Total 1.60 0.64 (1) For individuals with tax residence in France.

Reference Document 2010 53 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

3. Shareholders - share capital - stock option plans - allocation of bonus shares

3.1 Main shareholders laws for the plans launched since 2007, and to 95% of this same reference price for all earlier plans. Each plan has a term of ten years. As of December 31, 2010, Groupe Arnault controlled 47.64% of Options granted before 2004 may be exercised after the end of a the Company’s capital, compared with 47.38% as of December 31, period of three years from the plan’s commencement date, while 2009 and held 63.66% of the voting rights, compared with options granted in 2004 and later years may be exercised after the 63.64% as of December 31, 2009. end of a period of four years. For all plans, one option gives the right to one share. 3.2 Shares held by members of the management and supervisory bodies Apart from conditions relating to attendance within the Group, the exercise of options granted in 2009 is contingent on performance As of December 31, 2010, the members of the Board of Directors conditions, based on the following three indicators: profit from and Executive Committee held directly, personally and in the form recurring operations, net cash from operating activities and of registered shares, less than 0.5% of the share capital. operating investments, or the Group’s current operating margin.

3.3 Employee share ownership Options granted to senior executive officers may only be exercised if, in three of the four fiscal years from 2009 to 2012, either one of As of December 31, 2010, the employees of the Company and its those three indicators shows a positive change compared to 2008. affiliates, within the meaning of Article L. 225-180 of the French Options granted to other beneficiaries may only be exercised if, for Commercial Code, held less than 0.5% of the share capital in fiscal years 2009 and 2010, any of these indicators shows a positive connection with corporate savings plans. change compared to 2008. The performance condition was met with respect to the 2009 and 2010 fiscal years. 3.4 Share purchase option plans and share subscription Both senior executive officers and other company officers must option plans also comply with operating restrictions relating to the exercise The beneficiaries of the option plans are selected in accordance period for their options. with the following criteria: performance, development potential In relation to options granted under plans set up since 2008, if and contribution to a key position. either the Chairman and Chief Executive Officer or the Group Seven share purchase option plans and seven share subscription Managing Director decides to exercise his options, he must option plans set up by LVMH between 2001 and 2009 were in retain possession, until the conclusion of his term of office, of a force as of December 31, 2010. The exercise price of options is number of shares determined on the basis of the exercise date and equal to the reference price calculated in accordance with applicable corresponding to a percentage of his total gross compensation.

54 Reference Document 2010 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

3.4.1 Share purchase option plans

Date of Shareholders’ Meeting 06/08/1995 05/17/2000 05/17/2000 05/17/2000 05/17/2000 05/17/2000 05/17/2000 05/17/2000 Date of Board of 01/19/2000 01/23/2001 03/06/2001 05/14/2001 09/12/2001 01/22/2002 05/15/2002 01/22/2003 Total Directors’ meeting Total number of 376,110 (1) 2,649,075 40,000 552,500 50,000 3,284,100 8,560 3,213,725 10,174,070 options granted o/w Company officers (2) 122,500 (1) 987,500 - 450,000 - 1,215,000 - 1,220,000 3,995,000 Bernard Arnault (3) 80,000 (1) 600,000 - - - 600,000 - 600,000 1,880,000 Antoine Arnault (3) ------Delphine Arnault (3) ------Nicolas Bazire (3) 6,000 (1) 115,000 - - - 200,000 - 200,000 521,000 Antonio Belloni (3) - - - 300,000 - 200,000 - 200,000 700,000 Pierre Godé (3) 20,000 (1) 150,000 - - - 200,000 - 200,000 570,000 Gilles Hennessy (3) 1,500 (1) 7,500 - - - 15,000 - 20,000 44,000 Patrick Houël (3) 7,000 (1) 35,000 - - - 40,000 - 50,000 132,000 o/w Top ten employees (2) 81,000 (1) 445,000 40,000 102,500 50,000 505,000 8,560 495,000 1,727,060 Number of beneficiaries 552 786 1 4 1 993 2 979 Earliest option exercise date 01/19/2003 01/23/2004 03/06/2004 05/14/2004 09/12/2004 01/22/2005 05/15/2005 01/22/2006 Expiry date 01/18/2010 01/22/2011 03/05/2011 05/13/2011 09/11/2011 01/21/2012 05/14/2012 01/21/2013 Purchase price (EUR) 80.10 65.12 63.53 61.77 52.48 43.30 (4) 54.83 37.00 (4) Number of options 486,650 1,465,570 20,000 438,378 - 1,530,147 - 668,085 4,608,830 exercised in 2010 Number of options 1,077,800 500 - - - - - 500 1,078,800 expired in 2010 Total number of options 518,400 2,122,880 40,000 538,378 - 2,764,995 3,000 2,756,347 8,744,000 exercised as of 12/31/2010 Total number of options 1,183,050 307,650 - - - 221,678 - 127,550 1,839,928 expired as of 12/31/2010 Options outstanding - 218,545 - 14,122 50,000 297,427 5,560 329,828 915,482 as of December 31 (1) Number of options as of the plan’s commencement date, without any restatement for the July 2000 five-for-one stock split. (2) Number of options allocated to active company officers/employees as of the plan’s commencement date. (3) Active company officers as of 2010. (4) Exercise price in euros for Italian and American residents:

Exercise price for Exercise price for Plans Italian residents American residents 01/22/2002 45.70 43.86 01/22/2003 38.73 -

Exercise of such options does not lead to any dilution for shareholders, since they are options to purchase existing shares.

Reference Document 2010 55 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

3.4.2 Share subscription option plans

Date of Shareholders’ Meeting 05/15/2003 05/15/2003 05/11/2006 05/11/2006 05/11/2006 05/11/2006 05/14/2009 Date of Board 01/21/2004 05/12/2005 05/11/2006 05/10/2007 05/15/2008 05/14/2009 07/29/2009 Total of Directors’ meeting Total number of 2,747,475 1,924,400 1,789,359 1,679,988 1,698,320 1,301,770 2,500 11,143,812 options granted o/w Company officers (1) 972,500 862,500 852,500 805,875 766,000 541,000 - 4,800,375 Bernard Arnault (2) 450,000 450,000 450,000 427,500 400,000 200,000 - 2,377,500 Antoine Arnault (2) - - - 9,500 9,500 9,500 - 28,500 Delphine Arnault (2) 10,000 10,000 10,000 9,500 9,500 9,500 - 58,500 Nicolas Bazire (2) 150,000 150,000 150,000 142,500 142,500 100,000 - 835,000 Antonio Belloni (2) 150,000 150,000 150,000 142,500 142,500 100,000 - 835,000 Pierre Godé (2) 150,000 40,000 30,000 15,000 40,000 100,000 - 375,000 Gilles Hennessy (2) 20,000 20,000 20,000 19,000 22,000 22,000 - 123,000 Patrick Houël (2) 42,500 42,500 42,500 40,375 - - - 167,875 o/w Top ten employees (1) 457,500 342,375 339,875 311,544 346,138 327,013 2,500 2,126,945 Number of beneficiaries 906 495 520 524 545 653 1 Earliest option 01/21/2008 05/12/2009 05/11/2010 05/10/2011 05/15/2012 05/14/2013 07/29/2013 exercise date Expiry date 01/20/2014 05/11/2015 05/10/2016 05/09/2017 05/14/2018 05/13/2019 07/28/2019 Purchase price (EUR) 55.70 (3) 52.82 (3) 78.84 (3) 86.12 72.50 (3) 56.50 (3) 57.10 Number of options 896,120 699,968 408,390 - - 8,000 - 2,012,478 exercised in 2010 Number of options 700 21,950 34,310 26,327 22,844 11,676 - 117,807 expired in 2010 Total number of options 1,277,245 968,647 408,390 - - 8,000 - 2,662,282 exercised as of 12/31/2010 Total number of options 101,650 86,225 83,560 62,760 49,919 13,201 - 397,315 expired as of 12/31/2010 Options outstanding 1,368,580 869,528 1,297,409 1,617,228 1,648,401 1,280,569 2,500 8,084,215 as of December 31 (1) Options granted to active company officers/employees as of the plan’s commencement date. (2) Options granted to company officers active as of 2010. (3) Exercise price in euros for Italian residents: Plans Exercise Price 01/21/2004 58.90 05/12/2005 55.83 05/11/2006 82.41 05/15/2008 72.70 05/14/2009 56.52

The potential dilutive effect resulting from the allocation of these options represents 1.65% of share capital. However, since a number of shares equivalent to the number of shares issued in connection with the exercise of options is retired, there is no dilutive effect for shareholders.

56 Reference Document 2010 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

3.4.3 Options granted to and exercised by company officers and by the Group’s top ten employees during the fiscal year • Options granted: No option plans were created in 2010.

• Options exercised by senior executive officers

Beneficiaries Company granting Date of Number of Exercise price the options the plan options (EUR) Bernard Arnault LVMH 01/23/2001 600,000 65.12 “ “ 01/22/2002 600,000 43.30 “ “ 05/12/2005 187,670 52.82 “ Christian Dior 02/15/2000 200,000 56.70 “ “ 02/21/2001 220,000 45.95 Antonio Belloni LVMH 05/14/2001 300,000 61.77 “ “ 01/22/2002 200,000 43.30 “ “ 01/22/2003 200,000 37.00

• Options exercised by other company officers

Beneficiaries Company granting Date of Number of Exercise price the options the plan options (EUR) Delphine Arnault Christian Dior 02/17/2004 15,000 49.79 “ “ 05/12/2005 20,000 52.21 Nicolas Bazire LVMH 01/21/2004 25,000 55.70 “ “ 05/11/2006 150,000 78.84 Pierre Godé LVMH 01/23/2001 40,000 65.12 “ “ 01/22/2003 50,000 37.00 “ Christian Dior 02/15/2000 60,000 56.70 Gilles Hennessy LVMH 01/23/2001 7,500 65.12 “ “ 01/22/2002 15,000 43.30 Patrick Houël LVMH 01/19/2000 35,000 80.10 “ “ 01/23/2001 35,000 65.12 “ “ 01/21/2004 35,000 55.70 “ “ 05/12/2005 35,000 52.82

• Options exercised 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 01/19/2000 185,000 80.10 “ 01/23/2001 222,000 65.12 “ 03/06/2001 20,000 63.53 “ 01/22/2002 232,822 43.30 “ 01/22/2003 160,800 37.00 “ 01/22/2004 151,000 55.70 “ 05/12/2005 170,000 52.82 “ 05/11/2006 82,500 78.84

Reference Document 2010 57 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

3.5 Allocation of bonus shares and performance bonus shares Beneficiaries of bonus shares are selected among the employees of Performance bonus shares are only allocated if LVMH’s consolidated the Group’s subsidiaries on the basis of their level of responsibility financial statements for the 2010 and 2011 fiscal years show a and their individual performance. positive change compared to fiscal year 2009 in relation to one or more of the following indicators: profit from recurring operations, The allocation of bonus shares to their beneficiaries is definitive net cash from operating activities and operating investments, or after a two-year vesting period, which is followed by a two-year the Group’s current operating margin. The performance condition holding period, after which beneficiaries are free to sell them. Since was met with respect to the 2010 fiscal year. 2009, bonus shares allocated to beneficiaries who are not French residents for tax purposes have been definitive after a vesting period In the event of the vesting of their share allocations, the Chairman of four years and are freely transferable at that time. and Chief Executive Officer or the Group Managing Director are required to retain possession of half of these shares in pure In 2010, the scheme combines the allocation of traditional registered form until the conclusion of their term in office. bonus shares and the allocation of performance bonus shares in proportions determined in accordance with the beneficiary’s level in the hierarchy and status.

Date of Shareholders’ Meeting 05/15/2008 05/15/2008 05/15/2008 05/15/2008 Date of Board of Directors’ meeting 05/15/2008 05/14/2009 07/29/2009 04/15/2010 Total Performance Bonus shares Bonus shares Bonus shares Bonus shares bonus shares

Number of shares provisionally allocated 162,972 311,209 833 195,069 274,367 944,450 o/w Company officers (1): - - - - 108,837 108,837 Bernard Arnault - - - - 40,235 40,235 Antoine Arnault - - - - 1,911 1,911 Delphine Arnault - - - - 1,911 1,911 Nicolas Bazire - - - - 20,118 20,118 Antonio Belloni - - - - 20,118 20,118 Pierre Godé - - - - 20,118 20,118 Gilles Hennessy - - - - 4,426 4,426 o/w First ten employees (1) 32,415 48,165 833 27,372 67,350 176,135 Number of beneficiaries 347 642 1 627 639 Vesting date 05/15/2010 05/14/2011 (3) 07/29/2011 04/15/2012 (3) 04/15/2012 (3)

Date as of which the shares may be sold 05/15/2012 05/14/2013 07/29/2013 04/15/2014 04/15/2014

Number of share allocations vested in 2010 149,590 - - - - 149,590

Number of share allocations expired in 2010 6,856 7,009 - - - 13,865

Total number of share allocations vested 151,874 2,333 (2) - - - 154,207 as of 12/31/2010 Total number of share allocations expired 11,098 8,534 - - - 19,632 as of 12/31/2010 Remaining bonus share allocations - 300,342 833 195,069 274,367 770,611 as of December 31 (1) Bonus shares allocated to company officers/employees active as of the provisional allocation date. (2) Anticipated allocation following the death of the beneficiary. (3) Definitive allocation on May 14, 2013 and April 15, 2014 for beneficiaries who are not French residents for tax purposes.

Bonus shares vested do not involve any dilution for the shareholders, since existing shares are remitted for the settlement.

58 Reference Document 2010 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

• Provisional allocations of performance bonus shares during the fiscal year to senior executive officers

Beneficiaries Company granting Date of Number of Value of shares the shares the plan bonus shares (EUR) Bernard Arnault LVMH 04/15/2010 40,235 3,497,629 “ Christian Dior 04/15/2010 27,000 2,167,830 Antonio Belloni LVMH 04/15/2010 20,118 1,748,858

See also the table shown on page 58 for the other terms and conditions of allocation.

• Bonus shares and performance bonus shares allocated on a provisional basis during the fiscal year to other company officers This information is provided in the table shown on page 58. Mrs. Delphine Arnault also received an allocation of 2,362 bonus shares and 4,388 performance bonus shares from Christian Dior SA under the plan dated April 15, 2010.

• Bonus shares vested during the fiscal year to senior executive officers and other company officers No bonus shares were allocated definitively in 2010.

• Bonus shares vested during the year to the Group’s ten employees (1), other than company officers, having received the largest number of shares:

Company granting shares Plan commencement date Number of shares LVMH Moët Hennessy - Louis Vuitton SA May 15, 2008 33,782

(1) Active employees as of the date of definitive allocation.

4. Financial authorizations

4.1 Status of current delegations and authorizations

• Share repurchase program (L. 225-209 et seq. of the French Commercial Code)

Type Authorization Expiry/ Amount Use as of date Duration authorized December 31, 2010 Share repurchase program April 15, 2010 October 14, 2011 10% of share capital Movements during the fiscal year (2) Maximum purchase price: 130 euros (17th resol.) (18 months) (1) 49,064,223 shares Purchases: 1,736,231 Disposals: 1,741,231

Reduction of capital through the April 15, 2010 October 14, 2011 10% of share capital Shares retired: 1,775,900 (3) retirement of shares purchased (18th resol.) (18 months) (1) per 24-month period under the repurchase program 49,064,223 shares (1) A resolution renewing this authorization will be presented to the Shareholders’ Meeting of March 31, 2011. See §4.2 below. (2) Movements between April 15 and December 31, 2010, excluding the liquidity contract. For purchases, including calls exercised. See also §5.1 below. (3) As 2,012,478 shares were created in 2010 through the exercise of subscription options, the share capital totals 147,192,669.60 euros, divided into 490,642,232 shares as of December 31, 2010.

Reference Document 2010 59 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

• Authorizations to increase the share capital (L. 225-129, L. 225-129-2 and L. 228-92 of the French Commercial Code)

Type Authorization Expiry/ Amount Issue price Use as of date Duration authorized determination December 31, 2010 method With preferential subscription rights: May 14, 2009 July 13, 2011 50 million euros Free None ordinary shares, investment securities (13th resol.) (26 months) 166,666,667 shares (1) (2) giving access to the share capital, incorporation of reserves (L. 225-130)

Without preferential subscription rights: May 14, 2009 July 13, 2011 50 million euros At least equal None ordinary shares and investment securities (14th resol.) (26 months) 166,666,667 shares (1) (2) to the minimum giving access to the share capital via price required by a public offer or private placement regulations (L. 225-135 et seq.)

In connection with a public exchange offer May 14, 2009 July 13, 2011 50 million euros Free None (L. 225-148) (16th resol.) (26 months) 166,666,667 shares (1)

In connection with in-kind contributions May 14, 2009 July 13, 2011 10% of share capital Free None (L. 225-147) (17th resol.) (26 months) 49,064,223 shares (1) (1) Maximum nominal amount. The nominal amount of any capital increase decided in application of other delegations of authority would be offset against this amount. (2) Provided the overall maximum ceiling of 50 million euros referred to in (1) is not exceeded, this amount may be increased subject to the limit of 15% of the initial issue in the event that the issue is oversubscribed (Shareholders’ Meeting of May 14, 2009, 15th resolution) (L. 225-135-1).

• Employee share ownership

Type Authorization Expiry/ Amount Issue price Use as of date Duration authorized determination December 31, 2010 method Share subscription May 14, 2009 July 13, 2012 3% of the share capital Average share price • granted: 2,500 or purchase options (18th resol.) (38 months) 14,698,122 shares over the 20 trading • available to be granted: (L. 225-177 et seq.) days preceding 14,695,622 the grant date

Bonus shares allocation May 15, 2008 July 14, 2011 1% of the share capital Not applicable • granted: 944,450 (L. 225-197-1 et seq.) (12th resol.) (38 months) 4,899,374 shares • available to be granted: 3,954,924

Capital increase reserved for May 14, 2009 July 13, 2011 3% of the share capital Average share price None employees who are members (19th resol.) (26 months) 14,698,122 shares over the 20 trading of a corporate savings plan days preceding (L. 225-129-6) the grant date subject to a maximum discount of 30%

4.2 Authorizations proposed to the Shareholders’ Meeting

• Share repurchase program (L. 225-209 et seq. of the French Commercial Code)

Type Resolution Duration Amount authorized

Share repurchase program 13th 18 months 10% of the share capital Maximum purchase price: 200 euros 49,064,223 shares

Reduction of capital through the retirement 15th 18 months 10% of the share capital of shares purchased under the repurchase program per 24-month period 49,064,223 shares

60 Reference Document 2010 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

• Share capital increase (L. 225-129, L. 225-129-2 and L. 228-92 of the French Commercial Code)

Type Resolution Duration Amount Issue price authorized determination method Through incorporation of reserves (L. 225-130) 14th 26 months 50 million euros Not applicable 166,666,667 shares (1) (2) With preferential subscription rights - ordinary shares and 16th 26 months 50 million euros Free investment securities giving access to the share capital 166,666,667 shares (1) (2)

Without preferential subscription rights – ordinary shares and investment securities giving access to the share capital - by means of public offer 17th 26 months 50 million euros At least equal to the (L. 225-135 et seq.) 166,666,667 shares (1) (2) minimum price required by regulations (3) - by means of private placement 18th 26 months 50 million euros At least equal to the (L. 225-135 et seq.) 166,666,667 shares (1) (2) minimum price required by regulations (3)

In connection with a public exchange offer 21st 26 months 50 million euros Free (L. 225-148) 166,666,667 shares (1)

In connection with in-kind contributions 22nd 26 months 10% of the share capital Free (L. 225-147) 49,064,223 shares (1) (1) Maximum nominal amount. The nominal amount of any capital increase decided in application of other delegations of authority would be offset against this amount (24th resolution). (2) Provided the overall maximum ceiling of 50 million euros referred to in (1) is not exceeded, this amount may be increased subject to the limit of 15% of the initial issue in the event that the issue is oversubscribed (20th resolution) (L. 225-135-1). (3) Up to a maximum of 10% of the share capital, the Board of Directors may freely determine the issue price, provided that this price is at least equal to 90% of the weighted average of the share price over the three days preceding its determination (19th resolution).

• Employee share ownership

Type Resolution Duration Amount Issue price authorized determination method Bonus share allocation 25th 38 months 1% of the share capital Not applicable (L. 225-197-1 et seq.) 4,906,422 shares

Capital increase reserved for employees 23rd 26 months 1% of the share capital Average share price who are members of a corporate savings plan 4,906,422 shares (1) over the 20 trading (L. 225-129-6) days preceding the grant date subject to a maximum discount of 20% (1) Subject to not exceeding a total ceiling of 50 million euros in (1) above, to which this amount would be offset.

Reference Document 2010 61 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

5. Share repurchase programs

5.1 Information on share repurchase programs The purpose of this section is to inform the Shareholders’ Meeting Finance on September 23, 2005, the Company acquired 2,411,215 of the purchase transactions in treasury shares that were carried LVMH shares at the average price per share of 92.13 euros and out, between January 1, 2010 and December 31, 2010, by the sold 2,387,215 LVMH shares at the average price per share of Company as part of the share repurchase programs authorized by 92.98 euros. the Combined Shareholders’ Meetings held on May 14, 2009 and April 15, 2010, respectively. These transactions generated expenses of 0.3 million euros. Under the liquidity contract concluded by the Company with The table below groups by purpose the transactions carried out at Oddo & Cie Entreprise d’Investissement and Oddo Corporate value date during the period January 1, 2010 to December 31, 2010:

(number of shares unless otherwise stated) Liquidity Coverage Coverage of Exchange or Share Total contract of plans securities giving payment in retirements access to connection with Company shares acquisitions Balance as of December 31, 2009 76,000 15,184,093 - - 820,000 16,080,093 Purchases 674,984 - - - - 674,984 Average price (in euros) 80.36 - - - - 80.36 Sales (645,984) - - - - (645,984) Average price (in euros) 81.77 - - - - 81.77 Share purchase options exercised - (1,497,994) - - - (1,497,994) Average price (in euros) - 61.89 - - - 61.89 Call options exercised - 451,000 - - - 451,000 Average price (in euros) - 40.09 - - - 40.09 Allocations of bonus shares ------Reallocations for other purposes ------Shares retired - (233,545) - - (820,000) (1,053,545) Balance as of April 15, 2010 105,000 13,903,554 - - - 14,008,554 Purchases 1,736,231 - - - - 1,736,231 Average price (in euros) 96.71 - - - - 96.71 Sales (1,741,231) - - - - (1,741,231) Average price (in euros) 97.14 - - - - 97.14 Share purchase options exercised - (3,110,836) - - - (3,110,836) Average price (in euros) - 51.87 - - - 51.87 Call options exercised - 1,919,200 - - - 1,919,200 Average price (in euros) - 41.70 - - - 41.70 Allocations of bonus shares - (149,590) - - - (149,590) Reallocations for other purposes ------Shares retired - (722,355) - - - (722,355) Balance as of December 31, 2010 100,000 11,839,973 - - - 11,939,973

• During this period, the Company exercised call options on • Between January 1 and December 31, 2010, the Company 2,370,200 shares. As of December 31, 2010, given the fact that retired 1,775,900 shares which had been purchased for cancellation no call options were acquired during the year, the Company held or to cover share subscription option plans. call options on 300,000 shares, in order to cover commitments to share purchase option plans.

62 Reference Document 2010 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

5.2 Description of the main characteristics of the share repurchase program presented to the Combined Shareholders’ Meeting of March 31, 2011 • Securities concerned: shares issued by LVMH Moët Hennessy - -- buy shares to cover stock option plans, the granting of bonus Louis Vuitton SA. shares or any other allocation of shares or share-based payment schemes, benefiting employees or company officers of LVMH or a • Maximum portion of the capital that may be purchased by the related company as defined under Article L. 225-180 of the French Company: 10%. Commercial Code; • Maximum number of its own shares that may be acquired by the -- retire the shares acquired; Company, based on the number of shares making up share capital as of December 31, 2010: 49,064,223, but taking into account -- buy shares to cover securities giving access to the Company’s the 11,939,973 shares held as treasury shares and the 300,000 call shares, notably by way of conversion, tendering of a coupon, options held as of December 31, 2010, only 36,824,250 treasury reimbursement or exchange; shares are available to be acquired. -- buy shares to be held and later presented for consideration • Maximum price per share: 200 euros. as an exchange or payment in connection with external growth operations. • Objectives: -- buy and sell securities under the liquidity contract implemented • Term of the program: 18 months as from the Ordinary by the Company; Shareholders’ Meeting of March 31, 2011.

5.3 Summary table disclosing the transactions performed by the issuer involving its own shares from January 1 to December 31, 2010 The table below, prepared in accordance with the provisions of As of December 31, 2010: AMF Instruction No. 2005-06 of February 22, 2005 in application Percentage of own share capital of Article 241-2 of the AMF’s General Regulations, provides a held directly or indirectly: 2.43% summary overview of the transactions performed by the Company involving its own shares from January 1, 2010 to December 31, 2010. Number of shares retired in the last 24 months: 1,864,860 Number of shares held in the portfolio Number of shares held in the portfolio: 11,939,973 as of December 31, 2009: 16,080,093 Book value of the portfolio: 594,518,000 euros Market value of the portfolio: 1,469,810,676 euros

Cumulative gross Open positions as of December 31, 2010 transactions Purchases Sales/ Open buy positions Open sell positions Transfers Purchased Forward Sold call Forward call options purchases options sales Number of shares 4,781,415 8,921,535 300,000 - - - of which: • liquidity contract 2,411,215 2,387,215 • purchases to cover plans - - • exercise of purchase options - 4,608,830 • exercise of call options 2,370,200 - • bonus share awards - 149,590 • purchases of shares to be retired - - • share retirements - 1,775,900 Average maximum maturity - - 21 months Average trading price (1) (in euros) 92.13 92.98 Average exercise price (in euros) 41.40 55.12 39.10 - - - Amounts (in euros) 320,265,075 476,017,488 (1) Excluding bonus share awards and share retirements.

Reference Document 2010 63 Management Report of the Board of Directors Parent company: LVMH Moët Hennessy - Louis Vuitton SA

6. Remuneration of company officers

6.1 Summary of the remuneration, options and performance bonus shares granted to senior executive officers (1)

Senior executive officers Remuneration due in respect Valuation of options granted Valuation of bonus shares granted (EUR) of the fiscal year during the fiscal year during the fiscal year (2) 2010 2009 2010 2009 2010 2009 Bernard Arnault 3,928,399 3,879,396 - 5,152,000 5,665,459 - Antonio Belloni 5,485,493 5,325,703 - 1,710,000 1,748,858 - (1) Gross remuneration and benefits in kind paid or borne by the Company and companies controlled, in addition to remuneration and benefits in kind paid or borne by Financière Jean Goujon and Christian Dior, subject to the provisions of Article L. 225-102-1 of the French Commercial Code. Excludes directors’ fees. (2) The breakdown of equity securities or securities conferring entitlement to capital allocated to members of the Board of Directors during the fiscal year as well as the performance conditions to be met for the definitive allocation of shares are presented in §3.5.

6.2 Summary of the remuneration of each senior executive officer (1)

Bernard Arnault

Compensation Amounts due Amounts paid (EUR) for the fiscal year in the fiscal year 2010 2009 2010 2009

Fixed compensation 1,728,399 1,679,396 1,728,399 1,704,672 (2) Variable compensation 2,200,000 2,200,000 (3) 2,200,000 2,200,000 (4) Exceptional compensation - - - - Directors’ fees 118,464 119,695 119,695 119,060 Benefits in kind Company car Company car Company car Company car Total 4,046,863 3,999,091 4,048,094 4,023,732

Antonio Belloni

Compensation Amounts due Amounts paid (EUR) for the fiscal year in the fiscal year 2010 2009 2010 2009

Fixed compensation 3,170,243 3,155,153 3,174,302 3,170,243 Variable compensation 2,315,250 2,170,550 (5) 2,170,550 2,170,550 (4) Exceptional compensation - - - - Directors’ fees 87,245 87,245 87,245 87,245 Benefits in kind Company car Company car Company car Company car Total 5,572,738 5,412,948 5,432,097 5,428,038 (1) Gross remuneration and benefits in kind paid or borne by the Company and companies controlled, in addition to remuneration and benefits in kind paid or borne by Financière Jean Goujon and Christian Dior, subject to the provisions of Article L. 225-102-1 of the French Commercial Code. (2) The differences between the amounts due and the amounts paid are attributable to changes in foreign exchange rates. (3) 50% based on the achievement of qualitative objectives and 50% based on the achievement of budget objectives regarding revenue, operating profit and cash flow, each item bearing the same weight. The objectives for fiscal year 2010 were met. (4) Amounts paid in respect of the prior fiscal year. (5) One-third based on the achievement of qualitative objectives and two-thirds based on the achievement of budget objectives regarding revenue, operating profit and cash flow, each item bearing the same weight. The objectives for fiscal year 2010 were met.

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6.3 Work contract, specific pension, leaving indemnities and non-competition clause in favor of senior executive officers

Senior executive officers Work contract Supplementary Indemnities or benefits due Indemnities relating pension (1) or likely to become due to a non-competition on the cessation or clause change of functions Yes No Yes No Yes No Yes No Bernard Arnault X X X X Chairman and Chief Executive Director Antonio Belloni X X X X (2) Group Managing Director (1) This supplementary pension is only acquired if the potential beneficiary has been present for at least six years on the Group’s Executive Committee and simultaneously asserts his rights to his standard legal pension entitlement. It is determined on the basis of a reference remuneration that is equal to the annual remuneration received over the last three calendar years preceding the retirement year, subject to a maximum of thirty-five times the annual social security ceiling. The annual supplementary pension is equal to the difference between 60% of the reference remuneration (i.e. 742,392 euros as of January 1) and all pension amounts paid by the general social security regime and the additional ARRCO and AGIRC regimes. Amount of the commitment as of December 31, 2010, determined in accordance with the principles defined by IAS 19 Employee benefits: - Bernard Arnault: 17,270,250 euros; - Antonio Belloni: 9,210,868 euros. (2) Covenant not to compete for a twelve-month period included in the employment contract – suspended during the term of the mandate of Group Managing Director – providing for the monthly payment during its application of a compensation equal to the monthly remuneration on the termination date of his functions, supplemented by one twelfth of the last bonus received.

6.4 Summary of directors’ fees, compensation, benefits in kind and commitments given to other company officers (1)

Members of the Board of Directors Directors’ fees Fixed remuneration paid Variable remuneration paid (EUR unless otherwise stated) paid in during the fiscal year during the fiscal year 2010 2009 2010 2009 2010 2009 Antoine Arnault (2) 45,000 45,000 195,000 170,000 65,000 53,000 Delphine Arnault (2) 58,158 58,158 90,000 90,000 30,000 30,000 Nicolas Bazire (2) (3) (5) 55,000 55,000 1,235,000 1,235,000 2,450,000 2,450,000 Antoine Bernheim 610,195 930,060 - - - - Bernadette Chirac 33,750 - - - - - Nicholas Clive Worms 54,375 67,500 - - - - Charles de Croisset 60,000 67,500 - - - - Diego Della Valle 30,000 45,000 - - - - Albert Frère 67,500 67,500 - - - - Pierre Godé (2) (3) 176,375 146,414 1,500,000 1,500,000 2,000,000 2,000,000 Gilles Hennessy (2) (3) (5) 67,500 67,500 525,000 525,000 303,533 336,315 Patrick Houël (2) 74,745 74,245 200,000 (4) 383,333 (4) - - Lord Powell of Bayswater 37,500 45,000 205,000 (6) 205,000 (6) - - Felix G. Rohatyn 22,500 45,000 25,000 (7) 300,000 (7) - - Yves-Thibault de Silguy 45,000 30,000 - - - - Hubert Védrine 37,500 45,000 - - - - (1) Directors’ fees, gross remuneration and/or fees and benefits in kind paid or borne by the Company and the companies controlled, in addition to remuneration and benefits in kind paid or borne by Financière Jean Goujon and Christian Dior, subject to the provisions of Article L. 225-102-1 of the French Commercial Code. (2) The breakdown of equity securities or securities conferring entitlement to capital granted to members of the Board of Directors during the financial year is presented in §3.5. (3) Benefits in kind: company car. (4) Contract as a consultant. (5) Other benefits: supplementary pension. (6) In pounds sterling. (7) In US dollars.

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6.5 Breakdown of equity shares or securities granting access to capital allocated to members of the Board of Directors during the fiscal year This breakdown appears in §3.5 above.

7. Summary of TRANSACTIONS INVOLVING lvmh shares during the fiscal year by directors and related persons as defined in article R. 621-43-1 of the Code Monétaire et Financier

Directors concerned Type of transaction Number of shares/ Average price other securities (EUR) Bernard Arnault Purchase of shares (1) 1,387,670 54.02 Company(-ies) related to the family of Bernard Arnault Transaction index-linked to the LVMH share price 818,152 91.67 Transaction index-linked to the LVMH share price “ 3,422,053 92.05 (renewal) Nicolas Bazire Purchase of shares (1) 175,000 75.53 “ Sale of shares 150,000 92.86 Person(s) related to Nicolas Bazire Sale of shares 8,332 94.28 Antonio Belloni Purchase of shares (1) 700,000 49.42 Person(s) related to Antonio Belloni Sale of shares 700,000 96.43 Company(-ies) related to Albert Frère Purchase of shares 72,900 104.01 “ Sale of shares 39,900 101.00 Pierre Godé Purchase of shares (1) 90,000 49.50 “ Sale of shares 15,000 117.39 Company(-ies) related to Pierre Godé Sale of shares 10,000 87.46 Gilles Hennessy Purchase of shares (1) 22,500 50.57 “ Sale of shares 22,500 97.95 “ Sale of calls 40,000 9.40 “ Purchase of puts 40,000 9.40 Patrick Houël Purchase of shares (1) 140,000 63.44 “ Sale of shares 50,816 85.10 (1) Exercise of share purchase or share subscription options.

8. Administrative matters

8.1 List of positions and offices held by the Directors 8.2 Board of Directors The list of all positions and offices held by each Director, currently It is recommended that you appoint Mrs. Delphine Arnault and and during the last five years, is provided in the Governance section Mrs. Marie-Josée Kravis and Messrs. Nicolas Bazire, Antonio of the Reference Document. Belloni, Charles de Croisset, Diego Della Valle, Pierre Godé and Gilles Hennessy as Directors. It is also recommended that you appoint Mr. Patrick Houël as Advisory Board Member.

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9. 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 total nominal amount not to exceed 50 million euros, or 34% of Commercial Code, information that could have a bearing on a the Company’s current share capital, takeover bid or exchange offer is presented below: -- grant share subscription options, within the limit of 3% of the • capital structure of the Company: the Company is controlled share capital, and by Groupe Arnault, which controlled 47.64% of the capital and -- allocate bonus shares, to be issued, within the limit of 1% of 63.66% of the voting rights as of December 31, 2010; the share capital, • share issuance and buybacks: under various resolutions, the -- acquire Company shares up to 10% of the share capital. Shareholders’ Meeting has delegated to the Board of Directors Any delegation whose application would be likely to cause the full powers to: operation to fail is suspended during the period of a takeover bid -- increase the share capital, with or without shareholders’ or exchange offer. preferential rights and via public offer or private placement, in a

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Human resources

Page

1. Group reporting on employee-related issues 70 1.1 Analysis and development of the workforce 70 1.2 Work time 75 1.3 Compensation 76 1.4 Equality and diversity 77 1.5 Professional development of employees 79 1.6 Health and safety 81 1.7 Employee relations 82 1.8 Relations with third parties 82 1.9 Compliance with international conventions 84

2. STATUTORY AUDITORS’ REPORT ON THE REVIEW OF CERTAIN SOCIAL INDICATORS 85

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Human resources

1. Group reporting on employee-related issues

Work performed by the Human Resources Department in 2010 A descriptive sheet is available for each social indicator specifying aimed at reinforcing the quality and reliability of social reporting its relevance, the elements of information tracked, the procedure within the Group focused in particular on the development of an to be applied to gather information, and the various controls to be e-learning module, which was made available to all participants in performed when entering data. In addition, information system the social reporting process. The purpose of this training module controls are in place throughout reporting procedures in order to is to familiarize users with the objectives of social reporting, verify the reliability and consistency of data entered. deepen understanding of key indicators, and refine the calculation Workforce information provided below relates to all consolidated methodology used. Control procedures were also reinforced at each companies, including LVMH’s share in joint ventures. organizational entity through the implementation of an electronic signature system at the final validation of social reporting Other social indicators were calculated for a scope of 507 documents. organizational entities covering more than 99.6% of the worldwide workforce and encompass all staff employed during the year, The mapping between organizational and legal entities ensures including those employed by joint ventures. consistency between the social and financial reporting systems. Accordingly, the scope of social reporting covers all staff employed Since the 2007 fiscal year, the Group’s employee-related disclosures by Group companies consolidated on a full or proportional basis, have been audited each year by one of the Group’s statutory auditors, but does not include equity-accounted associates. Deloitte & Associés, assisted by its Sustainable Development team.

1.1 Analysis and development of the workforce

1.1.1 Breakdown of the workforce The Group’s average Full Time Equivalent (FTE) workforce in 2010 comprised 72,951 employees, a rise of 4.2% on 2009. The The LVMH group’s total workforce as of December 31, 2010 main changes are due to the opening of new stores, mainly in amounted to 83,542 employees, an increase of 8% compared to the United States and China. The Fashion and Leather Goods, 2009. Of this total, 73,981 employees worked under permanent Perfumes and Cosmetics and Selective Retailing business groups contracts and 9,561 worked under fixed-term contracts. Part-time thus saw average workforce increases of between 4% and 6%. employees represented 19% of the total workforce, or 15,748 Among the changes in the scope of consolidation, we should note individuals. The portion of staff outside France increased by the disposal of the La Brosse et Dupont group in September 2010. 2 points on the previous year to 77% of the workforce worldwide.

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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) 2010 % 2009 % 2008 %

Wines and Spirits 6,063 7 6,032 8 6,438 8 Fashion and Leather Goods 25,013 30 23,012 30 22,467 29 Perfumes and Cosmetics 17,715 21 17,374 22 17,163 22 Watches and Jewelry 2,332 3 2,091 3 2,261 3 Selective Retailing 30,998 37 27,389 35 27,347 36 Other 1,421 2 1,404 2 1,411 2 Total 83,542 100 77,302 100 77,087 100

Average headcount during the period (2) Wines and Spirits 6,204 9 6,230 9 6,470 9 Fashion and Leather Goods 22,744 31 21,414 31 20,793 30 Perfumes and Cosmetics 16,951 23 16,269 23 15,908 23 Watches and Jewelry 2,175 3 2,133 3 2,161 3 Selective Retailing 23,500 32 22,587 32 22,945 33 Other 1,377 2 1,370 2 1,202 2 Total 72,951 100 70,003 100 69,479 100 (1) Total permanent and fixed-term headcount. (2) Average permanent and fixed-term headcount on full-time equivalent basis.

Breakdown by geographic region

Total headcount as of December 31 (1) 2010 % 2009 % 2008 %

France 19,495 23 19,310 25 19,737 26 Europe (excluding France) 17,428 21 16,793 22 17,226 22 United States 19,650 23 16,567 21 16,723 22 Japan 4,658 6 4,798 6 4,929 6 Asia (excluding Japan) 18,168 22 15,996 21 14,831 19 Other 4,143 5 3,838 5 3,641 5 Total 83,542 100 77,302 100 77,087 100

Average headcount during the period (2) France 18,679 26 18,590 26 18,980 27 Europe (excluding France) 15,526 21 15,360 22 15,060 22 United States 13,828 19 13,000 19 13,666 20 Japan 4,687 6 4,855 7 4,937 7 Asia (excluding Japan) 16,491 23 14,642 21 13,717 20 Other 3,740 5 3,556 5 3,119 4 Total 72,951 100 70,003 100 69,479 100 (1) Total permanent and fixed-term headcount. (2) Average permanent and fixed-term headcount on full-time equivalent basis.

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Breakdown by professional category

Total headcount at December 31 (1) 2010 % 2009 % 2008 %

Managers 13,915 16 13,022 17 12,809 17 Technicians and team leaders 8,141 10 8,075 10 8,036 10 Office and sales personnel 50,055 60 45,075 58 44,616 58 Labor and production workers 11,431 14 11,130 15 11,626 15 Total 83,542 100 77,302 100 77,087 100

Average headcount during the period (2) Managers 13,451 18 12,910 18 12,230 17 Technicians and team leaders 8,044 11 7,979 11 7,673 11 Office and sales personnel 40,221 55 38,180 55 38,622 56 Labor and production workers 11,235 16 10,934 16 10,954 16 Total 72,951 100 70,003 100 69,479 100 (1) Total permanent and fixed-term headcount. (2) Average permanent and fixed-term headcount on full-time equivalent basis.

Average age and breakdown by age The average age of staff employed under permanent contracts worldwide is 36 years and the median age is 33 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 13.2 6.6 9.7 18.3 6.1 20.7 13.9 25-29 years 21.0 14.8 18.6 21.0 21.1 28.6 23.9 30-34 years 18.3 15.9 20.4 15.4 28.8 18.0 21.5 35-39 years 14.8 16.1 17.8 11.7 21.4 12.0 15.2 40-44 years 11.2 14.2 13.1 9.5 11.0 8.0 10.8 45-49 years 9.0 12.8 9.4 8.5 6.6 6.3 6.4 50-54 years 6.4 10.7 5.7 6.4 3.6 3.6 4.5 55-59 years 4.2 7.5 3.6 4.7 1.2 2.0 2.5 60 years and over 1.9 1.4 1.7 4.5 0.2 0.8 1.3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Average age 36 39 37 36 35 33 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 ranges from five to seven 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 high-growth markets, where there is a greater fluidity of employment.

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

Length of service: less than 5 years 59.1 37.3 57.0 71.6 47.8 72.8 74.4 5-9 years 18.6 20.5 22.5 15.9 32.0 13.3 12.6 10-14 years 10.0 14.5 10.8 7.2 12.1 6.8 7.5 15-19 years 4.5 7.7 4.4 2.5 4.6 3.6 1.9 20-24 years 3.9 9.3 2.7 1.6 2.5 2.2 1.8 25-29 years 1.8 4.8 1.1 0.7 0.6 0.7 0.9 30 years and over 2.1 5.9 1.5 0.5 0.4 0.6 0.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Average length of service 7 11 6 5 7 5 5 (1) Excluding France. (2) Excluding Japan.

1.1.2 Recruitment policy the world. To this end, LVMH’s Group Managing Director gave a presentation in October 2010 to 150 MBA students in New York. The LVMH group is enjoying strong growth, prompting the recruitment of external talent, seen by the Group as a key For many years, LVMH has cultivated and maintained key management task and a determining element for the success of partnerships with the most highly regarded universities and each of its entities in the short, medium and long term. business schools across all continents. For example, the Group maintains close ties with ESSEC (through the endowment of a chair For businesses where creativity and know-how are of utmost in luxury brand marketing), with HEC (as sponsor of an orientation importance, it is clearly essential to be able to enlist the highest- seminar for international students), and with INSEAD (through performing, most appropriate and promising talent. In this highly participation in work on China). competitive business environment, it is the quality of teams and of each of their members that makes the difference. In addition, the Group’s membership in CEMS (a strategic global alliance of leading business schools and multinational companies) Since 2009, LVMH has decided to make the career opportunities gives access to graduates of all nationalities from top institutions within what the Group calls its “ecosystem” better known. This has in more than 20 countries. a unique appeal in the luxury world, and motivates the best talents to join one of the Group companies. It is also a system of values Lastly, the Group maintained its close relations with leading founded upon the delegation of responsibility, an entrepreneurial fashion schools, the Institut Français de la Mode in Paris, Central spirit, and a network of skills and expertise organized around Saint Martins College of Arts and Design in London, Parsons the quest for excellence. A corporate communications campaign the New School for Design in New York, and the Hong Kong on various venues online (banners on the Web sites of LinkedIn, Polytechnic University School of Design. Financial Times, MBA Exchange, etc.) was extended in 2010 to social networking sites, achieving excellent results in terms of In order to communicate most effectively about the Group’s visibility and interactions with the LVMH recruitment site. values and its professions and meet the increasingly exacting demands of students, the Group has organized a series of “LVMH This determination to give the Group the means to continually Rendez-Vous” events over the last two years. Apart from providing reinforce its image as an employer of choice is already very widely an opportunity to present the Group and its businesses, these recognized in France. In 2010, LVMH retained its status as the meetings serve to expose interested candidates to the universe most preferred employer by upcoming graduates of leading French of the Group’s artisanal brand marketing. Following events at business schools in two major surveys: Trendence, and for the fifth Harvard, London Business School, and IMD in Lausanne, in consecutive year, Universum. October 2010 a group of students preparing MBAs at three of the In a globalized world, the circulation of people and ideas, the Group’s partners in Asia – INSEAD, NUS and Nanyang – were worldwide reach of educational opportunities and the development invited to take part in an “LVMH Rendez-Vous” in Singapore. of emerging markets prompt companies to identify the best Selected by our Human Resources teams, these students had the resources wherever they may be found, sometimes following chance to work on the development and management of luxury pathways quite distinct from traditional recruitment avenues. brands, using forum content developed at LVMH House. As one of the participants remarked, “this format, very different from In spite of the large number of unsolicited applications, this remains the corporate presentations of other companies, allowed us to a proactive approach that seeks out the best talent available around understand the Group’s strategy, and even better, genuinely get

Reference Document 2010 73 Management Report of the Board of Directors Human resources to grips with its unique culture, at the intersection of innovation to be used in interviews in order to ensure the objectivity of the and tradition.” evaluation to the greatest extent possible, and the development of recruitment days. In all, about a hundred events of various kinds are organized every year at universities and specialized schools around the world, with Since 2008, the Group has employed the services of an independent a view to familiarizing students with LVMH and its brands. firm to test the responses of the Group’s Human Resources personnel to applications submitted in response to adverts As part of the FuturA program, an international initiative by on its Web site. This firm makes use of a particularly rigorous LVMH to nurture and recruit experienced, talented individuals, methodology, meeting the highest ethical standards, to analyze the Group’s “Recruitment Days” were brought to the United States responses to applicants whose profiles might tend to result in and Asia. The methodology behind these full-day events, which is discrimination. As part of a random selection process following based on the principle of real on-the-job scenarios, has proven its statistical principles, 18% of job offers were tested in this manner. effectiveness for the identification of high-potential talents. It is In 2010, out of 848 opportunities posted, no discriminatory also very much appreciated by the applicants, each and every one practices were observed in the processing of applications. of whom receives personalized feedback on their participation. The integration of these new management-level staff members 1.1.3 Movements during the year: joiners, leavers and is the focus of special efforts so that these individuals, in joining internal mobility other young, high-potential managers already identified within the Group, are entrusted with assignments permitting them to In 2010, 18,962 individuals were hired under permanent contracts, demonstrate and develop their talents and enjoy good visibility at including 2,268 in France. A total of 4,695 people were recruited LVMH. In this way, LVMH strives on a constant basis to serve as in France under fixed-term contracts. The seasonal sales peaks, at a breeding ground for talent of the highest quality, of exemplary the end of year holiday season and the harvest season, are the two diversity in terms of nationalities, skills and professions, in order main reasons for using fixed-term contracts. to create the senior management teams of the future. Departures from Group companies in 2010 (all causes combined) affected a total of 14,250 employees working under permanent LVMH aims to serve as a model corporate citizen in terms of its contracts, of which more than 45% were employed within the human resources practices, especially with regard to the recruitment Selective Retailing business group, which traditionally experiences of future staff members. LVMH’s recruitment practices must reflect a high turnover rate. The leading causes for departure were the Group’s values and the highest standards of responsibility and resignations (70.0% of total departures), individual layoffs (14.4% respect for all, on a daily basis everywhere in the world. To this of total departures) and layoffs due to economic conditions (5.8% end, the Group’s human resources teams use a code of conduct for of total departures). The exceptional sweep of the worldwide recruitment. Intended to be applied by all recruitment process economic crisis had significantly reduced movements of personnel participants, this code of conduct reflects the goals, standards and in 2009. The sharp upturn in the luxury goods sector in 2010 led best practices to be observed by each company in terms of the to a substantial increase in joiners and leavers, which rose by 56% respect for applicants and the effectiveness of methods, regardless and 12% compared to the prior year, respectively. of the type of position, the profession or the country involved. Various initiatives have also been implemented to foster greater The overall turnover rate as of December 31, 2010 thus increased professionalism in terms of the identification and selection of future by 5% from its level a year earlier and continues to show marked staff members: notably, reinforcement of the offer of training in the differences across geographic regions: the highest rates are recorded context of recruitment, sharing of evaluation tools and methods in North America and Asia, where labor markets are more fluid.

Turnover by geographic region

(as %) 2010 France Europe (4) USA Japan Asia (5) Other 2009 2008 markets

Total turnover (1) 19.3 10.1 16.4 28.0 8.7 25.9 21.6 18.2 25.0 o/w: voluntary turnover (2) 13.5 4.3 11.4 21.2 7.5 19.4 16.5 11.4 18.5 involuntary turnover (3) 5.1 4.5 4.5 6.4 1.1 6.4 4.8 6.3 5.9 (1) All reasons. (2) Resignations. (3) Redundancies/end of trial period. (4) Excluding France. (5) Excluding Japan.

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Breakdown of movements (1) of employees working under permanent contracts by business group and geographic region

(number) Joiners Leavers

2010 2009 2008 2010 2009 2008

Wines and Spirits 526 242 868 637 623 750 Fashion and Leather Goods 4,964 3,267 5,427 3,461 3,221 3,693 Perfumes and Cosmetics 4,213 2,709 4,283 3,185 2,665 2,812 Watches and Jewelry 472 294 459 355 482 339 Selective Retailing 8,648 5,509 11,607 6,470 5,557 9,713 Other 139 110 151 142 123 376 Total 18,962 12,131 22,795 14,250 12,671 17,683 France 2,268 1,416 2,814 1,838 1,679 2,424 Europe (excluding France) 3,240 2,086 4,126 2,607 2,616 2,835 United States 5,804 3,198 8,417 4,197 3,869 7,092 Japan 405 370 691 365 510 560 Asia (excluding Japan) 6,266 4,271 5,943 4,431 3,327 4,316 Other 979 790 804 812 670 456 Total 18,962 12,131 22,795 14,250 12,671 17,683

(1) Under permanent contract, including conversions of fixed-term contracts to permanent contracts and excluding internal mobility within the Group.

The Group has made internal mobility, whether geographic or positions were filled internally. Among key points worth noting, functional, one of the pillars of its human resources policy. The two-thirds of key positions are currently occupied by internally diversity of its brands, their strong identities as well as their recruited talent and 20% of career moves in 2010 were to another expertise in their respective fields, each with its own very specific Group House. characteristics, foster these two types of mobility and offer many LVMH also fosters mobility between professional categories by paths to professional fulfillment suited to the aspirations and encouraging its employees to acquire new skills, especially by capabilities of each employee. pursuing qualifying training or degree programs. A total of 3,887 More than 1,200 career moves through internal mobility were staff members were promoted in 2010, representing about 5.3% accomplished in 2010, which means that half of all manager of the workforce employed under permanent contract.

1.2 Work time

1.2.1 Work time organization Worldwide, 15% of employees benefit from variable or adjusted working hours and 38% 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 (1) (as %) Global France Europe (2) USA Japan Asia (3) Other workforce markets

Variable/adjusted schedules 15 35 15 5 14 1 1 Part-time 19 11 22 41 1 7 17 Teamwork or alternating hours 38 9 10 69 81 56 41 (1) Percentages are calculated on the basis of the total headcount in France (employees under both permanent and fixed-term contracts). For the other regions, they are calculated in relation to the number of employees under permanent contracts, except for part-time workers, in which case the percentages are calculated with respect to the total headcount. (2) Excluding France. (3) Excluding Japan.

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

Employees affected (1) (as %) Workforce Managers Technicians and Office and sales Labor and France team leaders personnel production workers

Variable/adjusted schedules 35 37 52 50 1 Part-time 11 3 6 25 7 Teamwork or alternating hours 9 - 6 2 33 Employees benefiting from time off in lieu 12 - 19 18 12 (1) Percentages are calculated on the basis of the total headcount (employees under both permanent and fixed-term contracts).

1.2.2 Overtime The cost of the volume of overtime is 38.1 million euros, or an average of 1.5% of the worldwide payroll. This cost varies between 0.9% and 1.8% of the payroll depending on the geographic region. Percentage of overtime by region

(% of payroll) Global France Europe (1) USA Japan Asia (2) Other markets workforce Overtime 1.5 1.5 1.7 1.3 1.8 1.6 0.9 (1) Excluding France. (2) Excluding Japan.

1.2.3 Absenteeism The worldwide absentee rate of the Group for employees working (2.4%) and maternity leave (1.4%). The overall absentee rate of under permanent and fixed-term contracts is 4.8%. It decreased the European entities is twice as high as that recorded in other by nearly 8% compared with the previous year (5.2% in 2009 geographic regions. and 4.5% in 2008). The two main causes of absence are illness Absentee rate (1) by region and by reason

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

Illness 2.4 3.7 3.7 1.0 0.4 1.3 1.1 Work/work-travel accidents 0.2 0.3 0.2 0.2 - 0.1 0.1 Maternity 1.4 1.5 2.5 0.5 2.6 0.8 0.8 Paid absences (family events) 0.5 0.2 0.5 0.2 0.4 1.1 - Unpaid absences 0.4 0.5 0.3 0.2 0.2 0.7 0.4 Overall absenteeism rate 4.8 6.2 7.2 2.1 3.6 4.0 2.4 (1) Number of days absent divided by the theoretical number of days worked. (2) Excluding France. (3) Excluding Japan.

1.3 Compensation Group companies offer attractive and motivating compensation Initiatives and tools specific to each entity are put in place to packages. International salary surveys, in relation to specific reduce the salary gap between men and women within the same professions and sectors, are carried out annually and are used to professional category. Studies and actions conducted at the brands ensure that the Group maintains a favorable position against the mainly relate to equal pay, access through promotion to positions market on a permanent basis. By means of variable pay components of greater responsibility, and the distribution of levels of individual based on both individual performance and that of the Group, performance. managers have a vested interest in the success of its companies.

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The study conducted in 2010 on the breakdown of levels of 1.4 Equality and diversity individual performance found that the distribution was identical for women and men. LVMH is a signatory of the United Nations Global Compact and, in France, of the Diversity Charter and the Enterprise Charter for Most of the Group’s French companies pay all of their employees Equal Opportunity in Education. very substantial amounts in profit sharing and/or incentives. Finally, in 2010 LVMH maintained its program for granting of In concrete terms, these commitments are demonstrated by bonus shares, to encourage the loyalty of staff members making Human Resources teams at all Group companies through various the greatest contribution to its performance. actions. The ongoing analysis, by an independent firm, of a sampling of job offers published on the Web site lvmh.fr, helps 1.3.1 Average salary to keep a watchful eye on recruitment practices, by evaluating The table below shows the gross average monthly compensation and confirming their objectivity. In order to round out awareness paid to Group employees in France under permanent contracts actions, nearly 650 managers serving as tutors and mentors who were employed throughout the year: for new staff members have been trained in the prevention of discrimination and the management of diversity. Through their Employees concerned (as %) 2010 2009 2008 “JobStyle” initiatives, Sephora and Make Up For Ever help job seekers with special challenges find employment: young people Less than 1,500 euros 4.0 7.8 10.7 lacking qualifications, those from minority ethnic backgrounds, 1,501 to 2,250 euros 34.3 33.3 29.3 applicants seeking vocational retraining, people with disabilities. 2,251 to 3,000 euros 21.9 21.6 23.5 In 2010, more than 300 job seekers received coaching and were Over 3,000 euros 39.8 37.3 36.5 prepared for job interviews through individual and group image- Total 100.0 100.0 100.0 building workshops. At the 2010 edition of the Trophées de la Diversité, LVMH was 1.3.2 Personnel costs once again honored with the Special Jury Prize, in recognition of Worldwide personnel costs break down as follows: its actions in favor of the employment of disabled persons. Also this past year, Sephora received the Special Jury Prize at the third (EUR millions) 2010 2009 2008 edition of the Trophée National de l’Entreprise Citoyenne in Gross payroll - Fixed term or recognition of its “JobStyle” coaching workshops for job seekers. 2,528.8 2,295.8 2,210.5 permanent contracts This year’s list of awards is testament to the policies pursued in Employers’ social security all Group companies. 653.5 592.9 573.4 contributions Temporary staffing costs 113.4 85.5 128.2 1.4.1 Equality of opportunity for men and women Total personnel costs 3,295.8 2,974.2 2,912.1 Creativity and diversity are two of LVMH’s founding values, and women naturally find their place in the Group: 74% of the Outsourcing and temporary staffing costs increased appreciably workforce is female. This strong feminine presence is an essential compared to the previous year, accounting for 6.1% of the characteristic of the Group. It is related to the fact that 85% of total payroll worldwide, including employer’s social security Group customers are women but it is also explained by the very contributions. nature of LVMH’s businesses. Women are particularly prominent in Perfumes and Cosmetics (84%), Selective Retailing (81%) and 1.3.3 Incentive schemes, profit sharing and company Fashion and Leather Goods (73%). Conversely, the majority of staff savings plans in Wines and Spirits are men, representing 65% of the workforce All companies in France with at least 50 employees have an in this business group. incentive scheme, profit sharing or company savings plan. These Furthermore, women make up 61% of managers within the plans accounted for a total expense of 92.1 million euros in 2010, Group and more than 30% of Group Houses’ executive committee paid in respect of 2009, a slight decrease compared to previous years. members are female. Six Group companies are chaired by women: Krug, Fred, Loewe, Montres Dior, Kenzo Parfums, and Acqua (EUR millions) 2010 2009 2008 di Parma. Profit sharing 53.2 67.7 62.3 Incentive 32.6 31.5 36.9 Employer’s contribution to 6.3 5.5 5.6 company savings plans Total 92.1 104.7 104.8

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

(% of women) Joiners Group employees

2010 2009 2008 2010 2009 2008

Breakdown by business group Wines and Spirits 46 40 44 35 35 35 Fashion and Leather Goods 70 67 70 73 73 73 Perfumes and Cosmetics 86 87 83 84 82 82 Watches and Jewelry 56 64 57 57 57 55 Selective Retailing 81 82 70 81 80 80 Other 50 45 60 44 47 57

Breakdown of personnel by professional category Managers 61 58 57 61 60 59 Technicians and team leaders 70 71 66 67 69 69 Office and sales personnel 81 82 76 81 81 81 Labor and production workers 66 54 58 64 63 63

Breakdown by geographic region France 72 71 70 68 67 67 Europe (excluding France) 79 76 79 76 75 76 United States 79 80 66 76 76 74 Japan 81 79 78 78 77 77 Asia (excluding Japan) 77 78 73 76 75 76 Other 75 77 73 65 63 62

LVMH group 77% 77% 71% 74% 73% 73%

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

Equality of opportunity also prevails in career advancement. Lastly, Hennessy, Moët Hennessy Diageo and Le Bon Marché all Accordingly, 73% of staff promoted in 2010 were women. signed collective agreements in 2010 relating to gender equality, including provisions on workplace conditions, equal pay, career The quest for gender equality, an agent of transformation with development, and achieving a better balance between private and respect to diversity generally, encouraging the complementarity professional life. of sensitivities and professional behaviors, colors all major human resources management actions. The Group’s Human Resources 1.4.2 Actions in favor of older employees at LVMH Department develops a full range of programs designed to facilitate access by women to positions of greater responsibility: monitoring Access to employment by older staff and their retention are areas of remuneration practices, management of international mobility, of constant concern for the Group. Workgroups formed at the access to management training, diversity considerations in instigation of the Group’s Human Resources Department have the context of succession planning for key positions or in the sought to implement a global approach to the management and recruitment of managers. As part of these efforts, in May 2010 professional development of older staff, and Group companies more than 200 senior executives and managers attended a gender have been able to adapt this policy to their specific characteristics. equality presentation given by Brigitte Grésy, France’s general In this connection, among the priorities identified, 80% of the inspector for social affairs, rapporteur of the Committee on the Group’s Houses took on quantified commitments to end-of-career Image of Women in the Media, and author of a 2009 report planning, while 68% vowed to improve workplace conditions. commissioned by the French Labor Ministry on gender equality In France, 30 actions plans and 12 collective agreements have in the workplace. In addition, the Group has developed strong ties been implemented to promote the recruitment, employment with associative networks and movements, such as HEC au Féminin and career development of staff over the age of 50. Louis Vuitton and Business & Professional Women International (BPWI). and Parfums Givenchy are among Group companies that have developed international “Senior-Junior” mentoring schemes to ensure the successful transmission of unequaled know-how.

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Human resources managers at all of the brands have received training In keeping with the international reach of its business activities, in the conduct of a mid-career interview, following a program LVMH sees to it that its policies with respect to the employment of established by the Group’s Human Resources Department, in order persons with disabilities are consistently applied outside France as to better manage the careers of older employees and to offer all staff well: in Spain, Loewe has forged a partnership, staffed by employee over the age of 50 a specially designed career development assessment. volunteers, with two associations working to integrate persons with mental disabilities into the workplace, using innovative A posture and movement training program is also implemented at pedagogical methods, in particular dog training and painting. In all production sites to prevent musculoskeletal disorders and to assist Japan, the employment of disabled staff at Louis Vuitton and Marc older employees through constant efforts to improve workplace Jacobs stores has led to the adjustment of a number of training conditions. Measures in favor of the employment of older staff have programs and the adaptation of job requirements. already been implemented in several Group companies: Parfums Givenchy, Guerlain, Moët & Chandon and Le Bon Marché have Disabled staff represent 1.1% of the Group’s workforce worldwide. signed agreements relating to the anticipatory management of jobs This proportion has been increasing steadily for several years and skills with union representatives in order to organize and develop in France, where 2.8% of Group employees are persons with the career prospects of older employees. Givenchy has introduced disabilities. In addition, services sub-contracted to sheltered a mentor system to facilitate the transfer of know-how, pairing workshops totaled about 5.5 million euros in 2010, equivalent to the premier d’atelier (the head of the design studio) or the second the addition of more than 140 indirect jobs. d’atelier (the former’s deputy) with a tutor or an apprentice. Kenzo has adopted a procedure for preventing discrimination on the basis 1.5 Professional development of employees of age during the recruitment process. Since 2007, Moët Hennessy has been working with a recruitment consultancy specializing in the LVMH strives to give its employees the means to help them develop placement of older employees. All Group companies have developed their own career paths. The annual review of the Group’s talent specific plans in relation to older staff. pool and its succession planning (Organizational Management Worldwide, 12.5% of the LVMH group’s active workforce are Review) is one of the key processes in analyzing and building the over the age of 50. In France, this population accounts for 19.6% added value of human capital across the Group. This review focuses of employees. the attention of Group companies by defining key positions, internal resources and requirements needed to ensure the growth 1.4.3 Employment of disabled persons of the Group’s Houses. This process also supports the professional development of staff within the Group by identifying career Mission Handicap LVMH, a joint initiative by 30 Group Houses, opportunities in the medium or long term and by putting together provides added impetus for the promotion of policies facilitating individual development plans to prepare staff for their future the employment of disabled persons. Training and awareness efforts responsibilities. LVMH also makes use of frequent performance intensified in 2010, through 25 events in 15 companies covering appraisals. These appraisals serve to reveal employees’ strong points about 70% of their employees: a sensory deprivation workshop (“In as well as areas in need of improvement, to better understand Pitch Blackness”) for 240 researchers at LVMH Research’s summer their professional development ambitions and to outline concrete university (raising awareness of visual deficiencies), HandiChat actions that will assist them with their career plans. An e-learning (recruitment of disabled persons online via direct interactions with module, combining videos and interactive exercises, was developed companies), mystery shopping, etc. in 2010, targeting 14,000 managers within the Group worldwide The Group is particularly attentive to the need to ensure that and designed to facilitate the implementation of these performance employees who become disabled are able to continue working, as management and professional development procedures. illustrated by the specially designed facilities at Moët & Chandon, The Group offers an environment particularly conducive to career Parfums Christian Dior and Guerlain, which allow staff members development. The Group’s breadth and size make possible a wide with medical limitations to continue to work in their jobs under range of career trajectories, across varied sectors and professions, appropriate conditions. Over the last two years, more than a broad spectrum of brands and companies, and a multitude of 80 employees affected by disabilities have thus been accommodated geographical locations. Thanks to internal mobility, employees at their workstations thanks to these specially equipped workshops. take on new responsibilities, enhance their professional skill sets, In the area of recruitment, LVMH has developed a methodology develop their personalities and fulfill their aspirations. In order based on real-life scenarios for disabled applicants: the “Handi- to facilitate mobility within the Group, systematic and regular Talents” assessment centers. These innovative recruitment reviews are organized in order to align opportunities for new sessions pay no heed to the applicants’ résumés but instead seek positions with individuals interested in developing their careers. to objectify the recruitment process and identify transferable skills Significant results were able to be obtained over the last several and competencies of individuals having followed atypical career years: more than 1,200 career moves through internal mobility paths. Forty disabled employees were hired in 2010, a third more were accomplished in 2010, which means that half of all manager than in 2009. positions were filled internally. Across the Group, two-thirds of

Reference Document 2010 79 Management Report of the Board of Directors Human resources all individuals serving in key positions represent talent that was recently joined the Group, is a true voyage of discovery through sourced internally. the stores and brands of the Group, an exploration of its strategy and philosophy. As they pursue their careers at LVMH and in order Training serves as a powerful career-building driver, enabling the to accelerate their professional development, these same managers acquisition or enhancement of skills and favoring exchanges both take part in the “LVMH Perspectives” program, which explores two inside and outside the Group. In this regard, the forums held at facets: the self-knowledge required to be able to build their own LVMH House in London make a novel contribution to the sharing of future at the Group’s brands over the medium term and exposure knowledge across the Group in terms of the management of brands, to the strategic challenges faced in LVMH’s five business groups product creativity and innovation as well as customer relations in through exchanges with key managers at these companies. the luxury goods industry. In 2010, 17 forums were organized, bringing together 400 participants representing 29 countries and A substantial portion of training also takes place on the job on a 30 brands. With a 35% increase in LVMH managers attending daily basis and is not factored into the indicators presented below: these forums compared to 2009, the Group continues to ensure the large-scale dissemination among its staff in supervisory positions Global workforce 2010 2009 2008 (1) of best practices identified by its senior executives. LVMH House Training investment (EUR millions) 61.7 53.7 57.9 has also implemented new managerial training modules in the various geographic regions where the Group is present, with the Portion of total payroll (as %) 2.4 2.3 2.6 Number of days training notable launch of its “Clients Insight Forums” in the United 2.5 2.4 2.7 per employee States and Asia. Complementing these fundamental forums, a Average cost of training 728 689 751 certain number of brands have collaborated with LVMH House per employee (in euros) on the creation of similar sessions tailored to their businesses, Employees trained during 65.0 59.1 63.5 including Fendi, Moët & Chandon, Loewe and DFS. As the the year (as %) development of leadership potential remains a priority in the (1) In 2008, a new more restrictive definition of training initiatives was applied for global Group’s training efforts, members of the Executive Committee social reporting purposes. Note: Indicators are calculated on the basis of the total headcount (employees under both have given generously of their time by taking part in leadership permanent and fixed-term contracts) present at the workplace during the year, with the forums designed for high-level managers. In 2010, the Group also exception of the percentage of employees trained during the year, which is calculated on launched its first leadership development program, which will be the basis of those employed under permanent contracts and present at the workplace as of December 31 of the fiscal year. rolled out in Asia, the United States, and Europe, thus allowing the Group’s brands to offer this type of training to all levels of In 2010, training expenses incurred by the Group’s companies management. Furthermore, two sessions of a new “Strategic HR” throughout the world represented a total of 61.7 million euros, forum, designed and prepared by LVMH House and specifically or 2.4% of total payroll. Following a decline seen in 2009 due intended for the Group’s Human Resources community, were held to the difficult economic environment, indicators relating to the in 2010, with the aim being to extend its reach to the 120 key Group’s overall training effort registered a significant increase in managers in this function over the next three years. Combining 2010 and have returned to levels comparable to those recorded in both economic and operational management approaches and previous years. addressing the themes specific to the human resources function, these forums also deal with organizational effectiveness, change The average training investment per full-time equivalent person management, and intercultural communication. amounts to nearly 730 euros. In 2010, the total number of training days amounted to 213,749 days, representing an equivalent of Furthermore, the Group offers a wide range of training programs around 970 people receiving full-time training for the entire year. to its employees in order to support their professional development within the Group. In 2010, nearly 2,200 management-level staff Other indicators, such as the training penetration date and the participated in internships and in-house seminars offered at the average number of days training per employee also improved in Group’s four main training centers in France, Japan, elsewhere in comparison to 2009. Thus a total of 65% of employees received at Asia, and the United States. least one day of training during the year and the average number of days training came to 2.5 days per employee. The training Other new programs were developed by the Group in 2010. investment is spread across all professional categories and “LVMH Experience”, which is offered to managers having just geographic regions in accordance with the table below.

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Breakdown of training investment by geographic region and professional category

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

Training investment (EUR millions) 24.3 10.8 10.8 4.9 9.3 1.6

Portion of total payroll (as %) 3.3 2.1 1.8 2.4 2.5 1.8 Employees trained during the year (as %) 63.4 55.9 58.5 86.0 73.4 74.0 o/w: Executives and managers 72 62 44 77 71 61 Technicians and team leaders 67 55 32 82 79 84 Office and sales personnel 51 54 67 88 73 74 Labor and production workers 66 57 41 91 81 83 (1) Excluding France. (2) Excluding Japan. Note: Indicators are calculated on the basis of the total headcount (employees under both permanent and fixed-term contracts) present at the workplace during the year, with the exception of the percentage of employees trained during the year, which is calculated on the basis of those employed under permanent contracts and present at the workplace as of December 31 of the fiscal year.

Moreover, LVMH organizes integration and awareness seminars for new hires focusing on the culture of the Group, its values, its key management principles and knowledge of its brands. A total of 19,540 employees attended seminars of this type in 2010.

1.6 Health and safety In 2010, there were a total of 863 work accidents resulting in leave of absence which resulted in 16,650 lost working days. Frequency and severity rates have been improving steadily for several years. The frequency rate for fatal work-related injuries was 2.52 in 2010 (2 such accidents for an average workforce of 79,500 people) and 310 commuting accidents were also recorded, resulting in 6,830 lost working days.

Lost time accidents by business group and geographic region break down as follows:

Number of Frequency Severity accidents rate (1) rate (2) Breakdown by business group Wines and Spirits 124 9.67 0.23 Fashion and Leather Goods 174 3.68 0.07 Perfumes and Cosmetics 134 3.93 0.06 Watches and Jewelry 11 2.30 0.03 Selective Retailing 394 7.45 0.15 Other 26 8.59 0.11 Breakdown by geographic region France 406 13.59 0.31 Europe (excluding France) 136 4.11 0.07 United States 142 4.62 0.11 Japan 6 0.64 0.01 Asia (excluding Japan) 142 3.95 0.04 Other 31 3.98 0.06 LVMH group 2010 863 5.87 0.11 2009 811 5.98 0.13 2008 971 7.07 0.14 (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 (3). (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 (3). (3) For companies located outside France, the total number of hours worked per employee is estimated at 2,000 on a full-time equivalent basis.

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LVMH invested over 14.2 million euros in Health and Safety in savings plans). Specific agreements related to the employment of 2010. This includes expenses for occupational medical services, disabled persons, professional equality between women and men, small protective equipment as well as programs for improving anticipatory management of jobs and skills, labor-management personal safety and health, such as compliance, the posting of dialogue, and the prevention of psychosocial risks have been signed warnings, replacement of protective devices, fire prevention at Group companies. training, noise reduction. 1.7.2 Social and cultural activities The total amount of expenditure and investments promoting health and safety in the workplace and improvements in working In 2010, in France, the Group allocated a budget of over conditions amounted to almost 43 million euros in 2010, 13.4 million euros, or 1.8% of total payroll expenses, to social and representing 1.7% of the Group’s gross payroll worldwide. cultural activities in France via contributions to works councils. More than 17,600 Group company employees received safety Total catering costs for all Group employees represent a budget training worldwide. of 11.7 million euros.

The Group makes every effort to prevent and deal with phenomena 1.8 Relations with third parties such as harassment and stress in the workplace. Accordingly, the Group developed a new plan for the prevention of psychosocial risks 1.8.1 Relations with suppliers in 2010, covering the following points: diagnostics/barometers (Hennessy), steering committees, awareness raising and training LVMH places a priority on maintaining and promoting stable for affected staff, support units (Parfums Christian Dior, Veuve relations with responsible partners (suppliers, distributors, sub- Clicquot, Guerlain, etc.), work organization reviews, balance contractors, etc.). between private and professional life, organization overhauls, Since 2008, all of the Group’s brands have adopted and harassment prevention. promulgated the Supplier Code of Conduct which sets forth the Moët & Chandon, Le Bon Marché and Sephora have signed Group’s requirements in terms of social responsibility (forced labor, agreements on the prevention of psychosocial risks calling in some discrimination, harassment, child labor, compensation, hours of cases for the creation of a dedicated monitoring center, involving work, freedom of association and collective bargaining, health the participation of the occupational health services and the health, and safety, etc.), the environment (impact reduction, use of green safety and working conditions committee (CHSCT). Louis Vuitton technologies, waste reduction, compliance with regulations and has also developed a prevention program encompassing all of standards), and the fight against corruption. Relations with any its entities. Other innovative initiatives have been taken, in partner necessitate the latter’s commitment to comply with all collaboration with occupational health services staff: for example, ethical principles enunciated in this Code. This Code of Conduct holistic massages for the production staff at Guerlain’s sites. also sets forth the principle and procedures for the control and audit of compliance with these guidelines. 1.7 Employee relations Among many initiatives by Group companies illustrating this commitment, Moët & Chandon, for example, establishes 1.7.1 Status of collective agreements a specifications document presented for signature to its subcontractors that addresses respect for the environment and In France, Group companies have works councils, employee fundamental labor law compliance, among other issues. Audits representatives, as well as health and safety committees. The Group are also carried out on suppliers. In its supplier specifications Committee was formed in 1985. documents, Sephora includes clauses dealing with the individual In 2010, employee representatives attended 1,270 meetings: rights of employees, child labor prevention, equality of opportunity and treatment, working time policy, and the protection of the Nature of the meetings Number environment. Louis Vuitton has put in place an ethical system of Works council 477 preliminary audits founded on compliance with local regulations as well as the SA 8000 social accountability standard, which is Employee representatives 440 based on international workplace norms included in the ILO Health and Safety Committee 183 conventions: no child labor, no forced labor, providing a safe and Other 170 healthy work environment, freedom of association and the right Total 1,270 to collective bargaining, no discrimination, disciplinary practices, compliance with working hour and wage regulations. To ensure As a result of these meetings, 107 company-wide agreements that they will be able to perform preliminary audits independently, were signed (such as annual negotiations on wages and work Louis Vuitton’s buyers receive theoretical training covering the schedules, incentive and profit sharing agreements and company approach and criteria as well as practical training in the field in the

82 Reference Document 2010 Management Report of the Board of Directors Human resources company of an SA 8000 auditor. Donna Karan International has 1.8.2 Impact of the business on local communities in developed a Vendor Code of Conduct designed to ensure respect terms of employment and regional development for fundamental principles of industrial relations and labor law and for the highest ethical standards. It has also developed a Vendor LVMH follows a policy of maintaining and developing employment. Profile Questionnaire, a document signed by the subcontractor Thanks to the strong and consistent growth achieved by its brands, when the pre-approval request is submitted. The company has many sales positions are created in all countries where the Group also introduced a Vendor Compliance Agreement, which calls is present, particularly as a result of the expansion of the brands’ for independent audits of suppliers to ensure that commitments retail networks. have been observed. Similarly, TAG Heuer requires that all new Non-disciplinary layoffs, including those due to economic international suppliers submit a written pledge indicating their conditions, represent 5.5% of total departures. compliance with the SA 8000 standard. The same is true for Parfums Christian Dior, Parfums Givenchy, and Guerlain, who A number of the Group’s companies have been established for have introduced specifications documents including compliance many years in specific regions of France and play a major role in with the SA 8000 standard among their provisions. creating jobs in their respective regions: Parfums Christian Dior in Saint-Jean de Braye (near Orleans), Veuve Clicquot Ponsardin and Moët & Chandon in the Champagne region, and Hennessy Workgroups comprising experts from various Group Houses in the Cognac region have developed long-standing relationships presented, as they have each year, a review of their accomplishments with local authorities, covering cultural and educational aspects and progress made during an annual meeting that provides an as well as employment. Sephora, which has stores throughout opportunity to exchange best practices, to implement shared tools France (two-thirds of its workforce is employed outside the Paris and reference guides, and to identify new areas meriting attention. region), regularly carries out a range of measures encouraging the development of job opportunities at the local level. In 2010, this work resulted in the creation of a shared supplier database for the Perfumes and Cosmetics business group and the Moët & Chandon’s actions to promote diversity were unanimously establishment of a common reference guide for supplier assessment. applauded by the Champagne region’s Equal Opportunities This reference guide will facilitate exchanges between the various Commission, chaired by its prefect. Group companies and follow-ups on social and environmental As major employers in several labor markets, the Group’s companies audits, their findings, and any action plans put in place. are attentive to the social particularities of their regions and have forged partnerships, as described below, with associations or non- In 2010, 262 social audits were carried out, nearly 95% of which governmental organizations to help with the social and professional by specialized external service providers, at 217 of our suppliers. integration of the underprivileged. Nearly one-quarter of these audits showed results in line with our standards and 46% identified minor non-compliance issues. Audits 1.8.3 Relations with educational institutions and whose conclusions indicated a need for significant improvement by apprenticeship associations suppliers or the existence of major non-compliance issues accounted for 26% and 2% of audits performed, respectively. In all, 109 LVMH continues to nurture many partnerships and develop its corrective action plans were implemented at our suppliers where multiple ties with educational institutions to raise the profile of the audits had identified areas in need of improvement. Occasionally, Group’s professions internationally and encourage young people to Group brands are compelled to take more extreme measures. For pursue careers in these fields. Over the years, the Group has forged example, the Perfumes and Cosmetics business group has declined strong ties with the Institut Français de la Mode, in relation to to continue working with a specific site operated by one of its the training of its employees and the recruitment of the institute’s suppliers that did not meet the standards of its code of conduct graduates, whose dual specialization is appreciated. LVMH is also for workplace safety and overtime compensation. Additionally, a privileged partner of CEMS, the Global Alliance in Management the Donna Karan brand has terminated its relationships with two Education, and takes part in many actions in favor of graduates of of its suppliers. top universities in more than 20 countries. Key Group companies give presentations on the campuses of these universities several times a year. The schedule of these events in France and abroad In the interest of continued improvement in this area, all of the may be accessed on LVMH’s Web site. Group’s Houses will continue their supplier audit programs in 2011, together with follow-ups on action plans. Apart from LVMH also devotes resources and establishes partnerships to meetings at the Group level for the sharing of experiences, three encourage access by young people from disadvantaged backgrounds workgroups (Europe, Americas and Asia) have been created to to its professions and allow them to reach their maximum facilitate and increase the frequency of exchanges within each potential. In France, many initiatives to promote the occupational region. A new initiative for the optimization of transport at the integration of young people are undertaken to allow all employees Group level will also be launched in 2011. to participate actively in the Group’s commitment to society. For

Reference Document 2010 83 Management Report of the Board of Directors Human resources example, in partnership with “Nos Quartiers ont des Talents”, rebuilding of a school complex for the most disadvantaged children about a hundred senior-level staff members have mentored 146 in the town of Saint-Marc. In South America, Moët Hennessy young graduates from underprivileged neighborhoods. These do Brasil participates in initiatives promoting the professional graduates have been able to land their first job in half the time. In integration of struggling youths or those from underprivileged the same vein, LVMH has signed a partnership agreement with backgrounds and Moët Hennessy Argentina offers educational the city of Montfermeil, one of the most proactively oriented of programs for the families of its employees in partnership with Paris suburbs, to facilitate the social advancement of young people training organizations. from underprivileged neighborhoods, by welcoming trainees and older role models. Similarly, in Cosmetic Valley, the production In order to promote the integration of young people through site of Parfums Christian Dior has hired and trained a group of education regardless of their background or origin, LVMH funds employees from vulnerable populations, in partnership with the ten scholarships offered by the association “Promotion des Talents”. local association PARE. In the same spirit, Hennessy funds scholarships for African- American students in the United States. Illustrating the Group’s partnership with the Institut d’Etudes Politiques (Sciences Po) in conjunction with its affirmative- Lastly, as a signatory of the Apprenticeship Charter, the Group action program “Conventions d’Education Prioritaire”, for the devotes considerable efforts to the development of apprenticeship last two years senior-level staff from LVMH have served on the opportunities, which facilitate young people’s access to admissions jury for youths from schools located in underprivileged qualifications. In 2010, more than 550 employees were able to take areas. From time to time, Group managers give talks at secondary advantage of work-study arrangements in France. Eighty percent schools in the Paris suburbs through a partnership with the French of those offered a professionalization contract have found stable corporate-sponsored equal educational opportunity network employment afterwards. As of December 31, 2010, there were 522 (Réseau national des entreprises pour l’égalité des chances dans young people working under apprenticeship or professionalization l’éducation, RNEECE). contracts in all of the Group’s French companies. Always with the aim of furthering access to employment based only on merit and commitment, LVMH is a participating member 1.9 Compliance with international conventions of the RNEECE. This association arranges actions by companies in schools located in underprivileged areas and welcomes their graduates as interns. Taking each individual, his or her freedom and dignity, personal growth and health into consideration in each decision is the Other initiatives are pursued around the world by Group companies. foundation of a doctrine of responsibility to which all Group In India, Moët Hennessy employees are encouraged to give of their companies adhere. time to assist street children and ensure that they attend school. In China, Moët Hennessy Diageo has mentored a group of young Accordingly, all Group companies have policies for equal secondary school pupils from Sichuan province since the earthquake opportunity and treatment irrespective of gender, race, religion in 2009, with remedial assistance provided by its employees and and political opinion, etc. as defined in the standards of the the funding of educational materials. Similarly, through the International Labor Organization. This culture and these practices operation “Hand in Hand for Haiti” launched in the aftermath of also generate respect for freedom of association, respect for the the earthquake in January 2010, DFS has been contributing to the individual, and the prohibition of child and forced labor.

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2. STATUTORY AUDITORS’ REPORT ON THE REVIEW OF CERTAIN SOCIAL INDICATORS

Pursuant to your request and in our capacity as Statutory Auditors of the LVMH group, we have performed a review with the aim of providing moderate assurance on certain social indicators (1) for fiscal year 2010 (the “Data”) selected by the Group in the 2010 Reference Document (“Human Resources” section of the Management Report of the Board of Directors). The conclusions expressed below relate solely to this Data and not to all social indicators published in the 2010 Reference Document. This Data has been prepared under the responsibility of the Human Resources Department, in accordance with the internal measurement and reporting criteria for social data that is available for consultation at the Human Resources Department (the “Reporting Criteria”). It is our responsibility, based on the procedures performed, to express a conclusion on the selected Data.

Nature and scope of our procedures We have conducted our procedures in accordance with the applicable professional guidelines. We conducted the following procedures in order to provide moderate assurance that the selected Data does not contain any material anomalies. A higher level of assurance would have required more extensive work. For the selected Data, we have:

• assessed the Reporting Criteria with respect to its relevance, reliability, objectivity, clarity and completeness; • conducted interviews with individuals responsible for the application of the Reporting Criteria in the Human Resources Department and at selected subsidiaries (2); • examined, on a sampling basis, the application of the Reporting Criteria in the selected subsidiaries and conducted consistency tests with respect to their consolidation. This selection of subsidiaries represented 28% of total Group employees. To assist us in conducting our work, we referred to the sustainable development experts of our firm under the responsibility of Mr. Eric Dugelay.

Comments on the procedures During the performance of our work, we noted that, although improved generally, the collection of certain data relating to training (number of individuals trained and number of training hours) and health and safety (number of work-related accidents with sick leave, number of days of sick leave) needs to be improved in certain subsidiaries.

Conclusion Based on our work, we did not identify any anomaly likely to call into question the fact that the selected Data has been prepared, in all material respects, in accordance with the above-mentioned Reporting Criteria.

Neuilly-sur-Seine, February 16, 2011

One of the Statutory Auditors

DELOITTE & ASSOCIES Thierry Benoit

(1) The verification covered the “total Group” value of the following social indicators for 2010: total employees, number of executives, voluntary employee turnover, involuntary employee turnover, new hirings, percentage of women executives, employees trained during the year, average number of days of training per employee, work-related accidents with sick leave, accidents to and from work, number of working days lost, frequency and severity rates. (2) Subsidiaries: Sephora NA (USA), Louis Vuitton France (Société Louis Vuitton Services, Société Louis Vuitton Magasins, Société des Ateliers Louis Vuitton), Sephora SA (France), MHCS (France), Starboard Cruise Services (USA).

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking readers.

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LVMH and the environment

Page

1. Effects of operations on the environment 88 1.1 Water, raw material and energy consumption requirements 88 1.2 Soil use conditions, emissions into the air, water and soil 91 1.3 Limitation of damage to ecosystem balance, natural habitats, animal and plant species 94 1.4 Environmental protection methods within the Group 94

2. REPORT ISSUED BY ONE OF THE STATUTORY AUDITORS ON SELECTED ENVIRONMENTAL INDICATORS 98

Reference Document 2010 87 Management Report of the Board of Directors LVMH and the environment

1. Effects of operations on the environment

The reporting scope for environmental indicators included the impact on operations. The indicators retained were selected by following sites in 2010: the Group’s environmental department and validated by the • Production facilities, warehouses and administrative sites: 175 Environment and Sustainable Development Department of Ernst & of the 191 sites owned and/or operated by companies controlled by Young, one of the Group’s statutory auditors. Since fiscal year 2002, the Group are covered. The 16 sites that are not covered correspond the Group’s annual environmental data reporting has been verified primarily to the production facilities of Hublot, and Wen Jun each year by Ernst & Young, assisted by its Environment and Distillery, in addition to the administrative sites of Benefit, Berluti, Sustainable Development Department. Donna Karan, Emilio Pucci, Fresh, Marc Jacobs, and Thomas Pink. • Stores: The French stores of Céline and Guerlain, the French 1.1 Water, raw material and energy consumption stores and certain international stores of Louis Vuitton, Le Bon requirements Marché, DFS stores, the Spanish stores of Loewe, and some French, US and Canadian stores of Sephora are covered. The reporting scope 1.1.1 Water consumption concerned can vary significantly for the various environmental Water consumption is analyzed based on the following: indicators concerned: -- process requirements: use of water for cleaning purposes (tanks, -- energy consumption and greenhouse gas emissions: the reporting products, equipment, floors), air conditioning, employees, product scope covers 53% of the total sales area of Sephora’s US and Canadian manufacturing, etc; such water consumption generates waste stores; some Louis Vuitton and DFS stores are not covered; water; -- water consumption: the reporting scope covers 28% of the total -- agricultural requirements: water consumption for vine irrigation sales area of Sephora’s stores in France. The US and Canadian stores outside France, as irrigation is not practiced in France. As such, water of Sephora are not covered; is taken directly from its natural environment for irrigation purposes. -- waste production: the stores of Céline and Fendi, the Spanish Its consumption varies each year according to changes in weather stores of Loewe, the French, US and Canadian stores of Sephora and conditions. However, it is worth noting that the measurement by the the stores of Louis Vuitton (with the exception of certain Japanese sites of water consumption for agricultural purposes is less precise stores) are not covered; than the measurement of process water consumption. For stores, no other environmental indicator is concerned. (in m3) 2010 2009 Change (%) In 2010 the reporting scope for stores covers 40% of the sales area for energy consumption and 17% for water consumption. Process requirements 1,734,339 2,074,369 (16) Agricultural requirements The environmental indicators of the stores that are not covered 6,521,146 6,539,212 - are deduced by extrapolation, based on the average of the actual (vine irrigation) ratios per unit of sales area. Water consumption used for the process requirements of the The reporting scope of the stores does not cover the stores operated Group’s companies decreased 16% in absolute terms between under franchise by the Group’s Perfumes and Cosmetics, and its 2009 and 2010 and amounted to approximately 1.73 million Fashion and Leather Goods companies. cubic meters. Water consumption by retail sales areas excluded from the reporting scope (83% of water consumption attributable The changes in the reporting scope with respect to 2009 relate to to retail space) is estimated at 1,053,469 cubic meters. In 2010, the integration of Royal Van Lent, Chandon Do Brasil, Numanthia a workshop in the Fashion and Leather Goods business group and and Louis Vuitton stores as well as the disposal of La Brosse et a store in the Selective Retailing business group used a total of Dupont. For Fendi, 2009 data were applied again in 2010. 212,033 cubic meters of water for cooling needs. This water is Pursuant to Decree No. 2002-221 of February 20, 2002, known returned to the environment without undergoing any significant as the “NRE decree” (Nouvelles régulations économiques), the physical, chemical or biological alterations within the workshop following sections provide information concerning the nature and and circulated in a closed circuit system at the store. It has not importance of the elements that have a relevant and significant been consolidated by the Group.

88 Reference Document 2010 Management Report of the Board of Directors LVMH and the environment

Water consumption by business group

(Process requirements in m3) 2010 2009 Change (%)

Wines and Spirits 928,934 1,141,986 (19) (1) Fashion and Leather Goods 261,641 253,682 3 Perfumes and Cosmetics 213,450 283,711 (25) (2) Watches and Jewelry 9,120 8,687 5 Selective Retailing 295,230 366,516 (19) (3) Other activities 25,964 19,787 31 (4) Total 1,734,339 2,074,369 (16) (1) Change due to the decrease in business volumes at certain Glenmorangie sites. (2) Change due to an improvement in the performance of Parfums Christian Dior production sites. (3) Change in the number of stores included in the reporting scope. (4) Change due to the integration of Royal Van Lent.

Water consumption for vineyard irrigation purposes is essential for 1.1.2 Energy consumption the preservation of vines in California, Argentina, Australia and Energy consumption corresponds to primary energy sources New Zealand due to the climate in these areas. This practice is closely consumed internally (combustion on a Group site, such as fuel supervised by the local authorities that deliver authorizations. The oil, butane, propane and natural gas) added to secondary energy Group has also taken measures to limit consumption: sources (energy originates from off-site combustion). -- recovery of rain water by Domaine Chandon California, Domaine Chandon Australia, Bodegas Chandon Argentina; reuse of treated In 2010, the subsidiaries included in the reporting scope consumed waste water by Domaine Chandon Carneros, California; recovery 554,425 MWh provided by the following sources: 65% electricity, of water run-off by the creation of artificial lakes by Newton and 19% natural gas, 7% heavy fuel oil, 5% fuel oil, 2% butane- Cape Mentelle; propane, 1% steam, and less than 1% renewable energies. This -- drafting of agreements on measures and specifications with represents an increase of 3% compared to 2009. respect to water requirements: analyses of ground humidity, leaves, This consumption corresponds, in decreasing order of use to visual vine inspections, adaptation of supplies according to the Selective Retailing (35%), Wines and Spirits (28%), Fashion and requirements of each land plot (Domaine Chandon Australia); Leather Goods (19%), and Perfumes and Cosmetics (13%). The -- standardized drip method of irrigation: between 73% and 100% remaining 5% is generated by Watches and Jewelry and the other of wine-producing regions have now adopted this method; activities of the Group. -- weather forecasts for optimized irrigation (weather stations at Energy consumption by retail sales areas excluded from the Domaine Chandon California); reporting scope (60% of total retail space) is estimated at -- periodical inspections of irrigation systems to avoid the risk of 289,913 MWh. leakage; By way of comparison, for the manufacturing sector in -- adoption of the “reduced loss irrigation” technique, which France, electricity and natural gas consumption amount to reduces water consumption and actually improves the quality of 123,000,000 MWh and 154,000,000 MWh, respectively (French the grapes, the size of the vine, yielding an enhanced concentration Ministry of Finance, 2007). of aroma and color.

Reference Document 2010 89 Management Report of the Board of Directors LVMH and the environment

Energy consumption by business group

(in MWh) 2010 2009 Change (%)

Wines and Spirits 155,882 167,769 (7) Fashion and Leather Goods 104,439 83,180 26 (1) Perfumes and Cosmetics 70,816 67,167 5 Watches and Jewelry 7,217 7,546 (4) Selective Retailing 196,266 197,841 (1) Other activities 19,805 12,435 59 (2) Total 554,425 535,938 3 (1) Change due to the integration of new Louis Vuitton sites. (2) Change due to the integration of Royal Van Lent.

Consumption by energy source in 2010

(in MWh) Electricity Natural gas Heavy fuel oil Fuel oil Butane Propane Steam Wines and Spirits 59,837 37,233 37,334 14,756 6,722 - Fashion and Leather Goods 76,803 22,116 - 267 4,023 932 Perfumes and Cosmetics 39,133 30,635 - 99 - 649 Watches and Jewelry 4,393 2,824 - - - - Selective Retailing 167,991 9,347 - 14,118 - 4,810 Other activities 13,578 5,245 2 43 29 908 Total 361,735 107,400 37,336 29,283 10,774 7,299

Also including 598 MWh of solar thermal energy for the Perfumes and Cosmetics and Fashion and Leather Goods business groups.

Two key areas are targeted in particular by LVMH: the transportation manufactured solar panels on the roofs of its four buildings in of both raw materials and finished products as well as the buildings Chaux-de-Fonds, one of the largest such installations in all of used by the Group. As the lighting in its 2,416 stores is one of the French-speaking Switzerland. Annual energy production is main causes of greenhouse gas emissions within the Group, various expected to reach 100,000 kWh. research and innovation efforts have been pursued with the aim of reducing energy consumption without in any way compromising 1.1.3 Raw material consumption the extremely high quality of lighting. As one example, for its Given the variety of the Group’s operations and the many different refurbishment of the Balthazar men’s department, Le Bon Marché types of raw materials used, the only significant, relevant criterion installed a highly innovative lighting system combining metal used by all of the Group’s brands retained for the analysis of raw halide bulbs and LEDs which, without diminishing the overall material consumption is the quantity, measured in metric tons, of lighting quality, has already brought consumption down to 30 W primary and secondary packaging used for consumer goods placed per square meter. The refurbishment of the Parfums Christian on the market: Dior counter at Galeries Lafayette Haussmann is another example, -- Wines and Spirits: bottles, boxes, caps, etc. incorporating LED systems, thus reducing energy consumption for direct lighting to 50 W per square meter. -- Fashion and Leather Goods: boutique bags, pouches, cases, etc. -- Perfumes and Cosmetics: bottles, cases, etc. As a proponent of renewable energies, Louis Vuitton, for example, -- Watches and Jewelry: cases and boxes, etc. installed 2,000 square meters of solar membrane roofing and 64 solar panels at its Cergy 1 warehouse in early October 2010, with -- Selective Retailing: boutique bags, pouches, cases, etc. estimated annual energy production of 90 MWh. TAG Heuer has The packaging used for transport is excluded from this analysis. also announced the installation of 750 square meters of European-

90 Reference Document 2010 Management Report of the Board of Directors LVMH and the environment

Packaging placed on the market

(in metric tons) 2010 2009 Change (%)

Wines and Spirits 148,145 115,950 28 Fashion and Leather Goods 5,711 4,764 20 Perfumes and Cosmetics 21,974 20,800 6 Watches and Jewelry 440 386 14 Selective Retailing 1,327 1,327 - Total 177,597 143,227 24 (1)

(1) Change due to increase in business volumes.

Breakdown of the total weight of packaging placed on the market, by type of material, in 2010

Glass Paper-cardboard Plastic Metal Other packaging (in metric tons) material Wines and Spirits 125,656 17,547 2,296 1,315 1,331 Fashion and Leather Goods - 4,724 7 14 966 Perfumes and Cosmetics 11,815 4,171 4,562 600 826 Watches and Jewelry - 177 - - 263 Selective Retailing 232 140 871 49 35 Total 137,703 26,759 7,736 1,978 3,421

The Group’s Houses have at their disposal various customized located on farmland with no history of pollution. Finally, the tools and training programs, to help them to take environmental Group’s manufacturing operations require very little soil use, factors fully into account when designing their products. Eco- except for wine production. design involves reductions in packaging weight and volume, the Integrated grape growing (viticulture raisonnée) is an advanced selection of ingredients and raw materials, the use of more energy- method that combines cutting-edge technology with traditional efficient production processes, and efforts to ensure compliance methods, covering all stages of the wine producing process. This with the REACH Regulation. Among other examples, in 2010 method, used for several years by Wines and Spirits, was developed the Champagne houses used bottles made of lightweight glass for further this year. For example, Moët & Chandon and Veuve Clicquot their non-vintage brut products, thus reducing glass tonnage by are developing their “third way” approach, combining the use of 1,755 metric tons, a saving of 792 metric tons of CO equivalent. 2 synthetic products, applied during the critical flowering period, Bodegas Chandon in Argentina also reduced the weight of its and organic products, applied at the beginning and the end of the bottles, representing a saving of 1,576 metric tons of glass, or 693 season when vines are less vulnerable to attacks by pests. The use metric tons of CO equivalent. For Kenzo Flower, Parfums Kenzo 2 of plant protection products has been further reduced by 15-20% created two completely innovative solutions for the replenishment this year thanks to the adaptation of doses employed in the fight of empty perfume bottles – refills with minimal packaging and against mildew depending on the height of the vegetation. The in-store fragrance fountains. At the 2010 edition of Eco-Emballages, French state has introduced Ecophyto 2018, a plan that seeks to Parfums Kenzo was awarded the top prize in the Company gradually reduce the use of plant protection products in agriculture Partnerships category, in recognition of these two initiatives. by 50%, if possible, between now and 2018. The test phase of this plan has been launched and Hennessy has filed an application 1.2 Soil use conditions, emissions into the air, to be accepted as a participant. For its part, the “Green Team” water and soil created by Domaine Chandon California has invested considerable efforts in the preservation of California’s natural habitats, especially 1.2.1 Soil use those located near its Carneros estate. Following an audit of its soil Soil pollution arising from old manufacturing facilities composition, current grape-growing practices in its vineyards, and (cognac, wine and champagne production, trunk production) is its anti-erosion plan, Carneros South Ranch obtained Fish Friendly insignificant. The more recent production facilities are generally Farming certification for all of its producing vineyards.

Reference Document 2010 91 Management Report of the Board of Directors LVMH and the environment

1.2.2 Greenhouse gas emissions as defined in section 1.1.2. These include direct emissions (on-site combustion) and indirect emissions (from the generation of Given the nature of the Group’s operations, the only emissions that have electricity and vapor used by the sites). CO emission factors are a significant impact on the environment are greenhouse gas emissions. 2 updated every year for each energy source, notably for electricity.

Estimated greenhouse gas emissions in tons of CO2 (carbon dioxide) This update may lead to significant changes. equivalent correspond to the site energy consumption emissions,

Breakdown of emissions by business group in 2010

(in metric tons of CO equivalent) 2 CO2 emissions Of which: CO2 emissions Change (%)

in 2010 direct CO2 Indirect CO2 in 2009 emissions emissions Wines and Spirits 37,380 23,763 13,617 46,226 (19) Fashion and Leather Goods 25,199 5,566 19,633 20,222 25 (1) Perfumes and Cosmetics 11,635 6,338 5,297 11,432 2 Watches and Jewelry 742 582 160 887 (16) Selective Retailing 72,281 5,752 66,529 76,186 (5) Other activities 3,021 1,099 1,922 1,318 129 (2) Total 150,258 43,100 107,158 156,271 (4) (1) Change due to the integration of new Louis Vuitton sites. (2) Change due to the integration of Royal Van Lent.

Greenhouse gas emissions generated by retail sales areas excluded Project 2010, which rates companies on the integration of climate from the reporting scope (60% of total retail space) are estimated change awareness within their strategies and their progress in at 154,524 metric tons of CO2 equivalent. limiting greenhouse gas emissions. Apart from the fact that this score represents a three-point improvement compared to 2009, LVMH has long stressed the importance of addressing climate LVMH was also ranked among the top twenty French companies change in its business activities and has carried out Bilan Carbone® in the Carbon Disclosure Leadership Index (CDLI) France for 2010. assessments of the following brands since 2002: Moët & Chandon, Veuve Clicquot, Hennessy, Parfums Christian Dior, Guerlain, 1.2.3 Discharges to water Parfums Kenzo, Parfums Givenchy, Make Up For Ever, DFS, Sephora and Le Bon Marché. The action plans resulting from the The most significant and relevant emissions of note are the findings and objectives of these assessments continue to contribute discharges of substances causing eutrophization by Wines and to improvements with respect to the fight against climate change. Spirits and Perfumes and Cosmetics operations. The Group’s Guerlain carried out a new Bilan Carbone® assessment in 2009 and other business groups have a very limited impact on water quality. set itself three objectives for 2010: environmental management at Eutrophization is the excessive build-up of algae and aquatic plants its sites, eco-design, and biodiversity. In two years, the perfume caused by excess nutrients in the water (particularly phosphorus), which reduces water oxygenation and adversely impacts the house has already reduced its CO2 emissions by 15%. Following the global Bilan Carbone® assessment conducted by Sephora, the environment. The parameter used is the Chemical Oxygen Demand retail chain’s US subsidiary carried out its own Bilan Carbone® (COD) calculated after treatment of the discharges in the Group’s assessment in 2010, as a first step in its climate change action plan own plants or external plants with which the Group has partnership organized around energy consumption reduction targets relating agreements. The following operations are considered as treatment: to lighting systems in its stores. city and county waste water collection and treatment, independent collection and treatment (aeration basin) and land application. In In recognition of its commitments, in 2010 LVMH obtained a 2010, COD discharges decreased by 35.7%. score of 75 on the 100-point scale used by the Carbon Disclosure

COD after treatment (metric tons/year) 2010 2009 Change (%)

Wines and Spirits 2,107.0 3,291.2 (36.0) (1) Perfumes and Cosmetics 18.3 14.2 28.9 (2) Total 2,125.3 3,305.4 (35.7) (1) Change due to the decrease in business volumes at certain Glenmorangie sites. (2) Change due to the increase in business volumes and the improvement in the measurement of discharges.

92 Reference Document 2010 Management Report of the Board of Directors LVMH and the environment

As a particularly precious resource for the Group’s businesses, and discharge systems. Water is an essential and fundamental element especially for the activities of its Wines and Spirits and Perfumes for all LVMH group businesses, and in particular for those of the and Cosmetics business groups, water is the focus of considerable Wines and Spirits business group. Bodegas Chandon has developed attention: each year, ambitious goals are set to limit consumption an extremely effective process for the recycling of wastewater and renewed efforts are made to curtail discharges into water. All generated by vinification for use in irrigating its fields: this year, of this requires that the best technologies available be employed, 5 hectares planted with eucalyptus and 1.3 hectares planted with whether in relation to water reuse systems, more economical grapes were irrigated using this process. processes and/or closed-loop cycle technologies, or even zero-

1.2.4 Waste Group companies continued their efforts with respect to the sorting Among other developments, 2010 saw the inauguration of Centre and recovery of waste. On average, 92% of the waste was recovered Environnemental de Déconditionnement et Recyclage Ecologique in 2010 (92% in 2009). In parallel, waste production increased (CEDRE), a new recovery and recycling facility to handle waste by 2% in 2010. generated by the Perfumes and Cosmetics houses and by Sephora. This French center is able to receive several types of waste: obsolete Recovered waste is waste for which the final use corresponds to packaging materials, surplus advertising materials, testers used in one of the following channels: stores, and empty packaging returned to stores by customers. In its -- reuse, i.e. the waste is used for the same purpose for which the first year of operation, the facility managed to process 800 metric product was initially designed; tons of waste and was able to pass on the various materials resulting -- recycling, i.e. the direct reintroduction of waste into its original from its processes – glass, cardboard, wood, metal, plastics, alcohol manufacturing cycle resulting in the total or partial replacement of and cellophane – to a network of specialized recyclers. an unused raw material, controlled composting or land treatment of organic waste to be used as fertilizer; Through its ambitious environmental “g2 Revolution” program, Sephora North America has reinforced its commitment to the -- incineration for energy production, i.e. the recovery of the energy recycling of fragrances, skincare, and make-up products that may in the form of electricity or heat by burning the waste. no longer be marketed, but also make-up accessories, small electrical devices and even the waste generated by demonstration workshops.

Waste produced

(in metric tons) Waste produced Of which: hazardous Waste produced Change in waste in 2010 waste produced in 2009 produced (%) in 2010 (1) Wines and Spirits 37,795 196 38,482 (2) Fashion and Leather Goods 7,504 73 6,391 17 (3) Perfumes and Cosmetics 6,819 776 (2) 6,301 8 Watches and Jewelry 215 17 214 - Selective Retailing 3,607 17 3,978 (9) Other activities 1,323 111 647 104 (4) Total 57,263 1,190 56,013 2 (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) Change due to the integration of new Louis Vuitton sites. (4) Change due to the integration of Royal Van Lent.

Reference Document 2010 93 Management Report of the Board of Directors LVMH and the environment

Waste recovery in 2010

(as %) Re-used Material Energy Total recovery recovery recovery Wines and Spirits 33 60 4 97 Fashion and Leather Goods 5 42 18 65 Perfumes and Cosmetics 6 64 26 96 Watches and Jewelry - 55 23 78 Selective Retailing 9 66 12 87 Other activities - 52 48 100 Total 24 58 10 92

1.3 Limitation of damage to ecosystem balance, natural 1.4 Environmental protection methods within the Group habitats, animal and plant species 1.4.1 Organization Fashion and Leather Goods, and Watches and Jewelry implemented LVMH has had an environment management team since 1992. procedures to improve compliance with the convention on In 2001 it established an “Environment Charter” signed by international trade in endangered species (CITES). Through the Chairman of the Group, which requires that each company a system of import-export permits, this convention was set up undertakes to set up an effective environment management system, to prevent certain species of endangered fauna and flora against create think-tanks to assess the environmental impacts of the overexploitation. Group’s products, manage risks and adopt the best environmental The Research & Development teams of the Perfumes and Cosmetics practices. In 2003, Bernard Arnault joined the United Nations’ business group have been working in the field of ethnobotany Global Compact program. In 2007, he also endorsed Gordon for a number of years. They seek to identify plant species with Brown’s Millennium Development Goals. a particular interest as components of cosmetics products The Group undertakes to adopt the following environmental while contributing to the preservation of these species and to measures: local economic development. As such, Parfums Christian Dior -- apply precaution to all issues impacting the environment; continues to develop its “Jardins de Dior” whose aim is to ensure that ingredients with the potential to be particularly interesting -- undertake initiatives to promote greater environmental for cosmetics are sourced and prepared in strict observance of four responsibility; main values: active ingredients offering a high level of performance; -- favor the development and distribution of environmentally- genuine traceability of these ingredients, from their sourcing friendly technologies. context to their use; a strong commitment to ethics; and, of course, The Group’s environment management team was set up with the the protection of the environment. An example of this approach following objectives: is the partnership maintained since 2006 with an association in -- implement the environmental policies of the Group companies, Madagascar representing individuals who gather longoza, a species based on the LVMH Charter; of wild ginger used as one of the ingredients in the eye-care product Capture Totale; a portion of the profits earned by this product are -- conduct audits to assess Group companies’ environmental used to finance large-scale initiatives, such as the creation of a performance; Maison du Riz and improvements in school facilities. To date, seven -- monitor regulatory and technical issues; Jardins have been officially established around the world. Through -- create management tools; the Orchidarium, its worldwide orchid research platform, Guerlain -- help companies anticipate risks; has strengthened its partnership with TianZi, the biodiversity research and development center founded nearly ten years ago -- train employees and increase environmental awareness at all management levels; by Dr. Joseph Margraf. Located at the heart of Yunnan province in China, this center conducts research on the reforestation and -- define and consolidate the environmental indicators; protection of an ecosystem containing thousands of species and is -- work alongside the various key players (associations, rating home in particular to Guerlain’s Réserve Exploratoire. agencies, government authorities, etc.).

94 Reference Document 2010 Management Report of the Board of Directors LVMH and the environment

LVMH’s Environmental Charter requires that all Group Houses The Group requires all Houses to put in place environmental adapt this document for their internal purposes so as to reflect the management systems. All of the Cognac, Champagne and vodka nature of their own operations. Not only have all the Houses begun Houses have now obtained ISO 14001 certification, each having implementing their own environmental management systems, passed a follow-up or renewal audit in 2010 without any noted but an ever increasing number of them have established their own compliance shortcomings or observations. From Australia to environmental committees to supervise the deployment of this California, LVMH’s Wines and Spirits Houses garnered a number approach across their organizations. of distinctions in 2010. Cape Mentelle became the first wine estate in to achieve membership in EntWine Each Group House has appointed an environmental management Australia, a certification scheme recognizing compliance with representative. They meet as part of the LVMH Environment exacting environmental standards. It also won the inaugural Commission coordinated by the Group’s environment management Best Sustainable Practices Award at the Western Australia Wine team once every three months and post their conclusions on the Industry Awards. This prize recognizes the efforts pursued by the Group’s Environment Extranet page, LVMH Mind, which is winery in both its vineyards and in the area of vinification. In the accessible to all employees. United States, by the end of 2010 Domaine Chandon California In 2010, almost all of the companies, in all of the Group’s business had nearly completed all of the steps to become certified as a Napa groups, continued their employee training and awareness programs Green winery, the most exhaustive scheme verifying best practices this year. These programs comprised 12,577 hours in 2010, a by winemakers. Having obtained ISO 14001 certification for its 27% decrease compared to 2009 (17,260 hours). This decrease French logistics sites, its headquarters at the Pont Neuf in Paris, was mainly due to the implemented environmental management and its Barbera workshop in Spain, Louis Vuitton continued its systems’ becoming fully operational. efforts in this area in 2010 by focusing on its French workshops and its facilities in Fiesso, Italy. Lastly, after its international center in New executives at LVMH are briefed in the Group’s environmental Saint-Jean de Braye, Parfums Christian Dior obtained certification policy, the available tools and its environmental safety network as this year for its distribution facility in Singapore. part of their orientation seminar. Beyond these initiatives, the Group’s Houses also disseminate LVMH’s Watches and Jewelry branch is a member of the Responsible written information concerning the environment. Over the years, Jewellery Council (RJC), an organization bringing together more awareness of the relevant issues has been raised successfully among than 260 member companies committed to promoting ethical most of the Group’s employees. For example, Guerlain maintains a behavior, human rights and social and environmental practices Sustainable Development Steering Committee bringing together throughout the industry, from mine to point of sale. The RJC has representatives of all of its departments, expanded this year to developed a certification system, which applies to all members include fourteen members from all geographic regions. In order involved in the diamond and gold jewelry supply chain and to raise the awareness of its employees, Guerlain has organized requires that compliance with the system be verified by accredited, several workshops on specific topics, including bees, biodiversity independent auditors. Certification is currently in progress within and the training of sales representatives. For its part, Louis Vuitton the Watches and Jewelry business group for TAG Heuer, Hublot, develops games and visual campaigns coinciding with major Zenith, Chaumet and Fred, as well as the business group’s retail national and international meetings devoted to the environment subsidiaries in the United Kingdom, Japan and the United States. or sustainable development so as to alert its employees to challenges Since the 2002 fiscal year, the Group’s annual environmental in these areas. In the United States, in honor of Earth Day 2010, data reporting has been audited, based on data from LVMH, by Louis Vuitton launched its Earth Day Corporate Contest, with the Environment and Sustainable Development department of the aim of identifying the best proposal from its staff to reduce Ernst & Young, one of the Group’s statutory auditors. the human impact on the environment, along with other special events within the company. Hennessy continues to communicate 1.4.3 Measures to ensure compliance with applicable laws on the theme of water conservation. In 2010, the House organized and regulations a contest among its staff on the use of water worldwide and implemented a number of efforts targeting its suppliers. Group companies are audited on a regular basis, either by third parties, insurers or internal auditors, which enables them to keep 1.4.2 Evaluation and certification programs their compliance monitoring plan up-to-date. In 2010, 40% of In accordance with the LVMH Environment Charter, each all manufacturing, logistics and administrative sites were audited, company is responsible for designing and implementing its own for a total of 39 external audits and 37 internal audits. These environment management system, in particular for defining goals, audits correspond to an inspection of one or more sites of the same and more precisely for drafting its own environmental policy. Each company based on all relevant environmental issues - waste, water, company has access to an LVMH self-assessment guide and can, if it energy, and environmental management - and are documented in wishes, apply for ISO 14001 or EMAS certification for its system. a written report including recommendations.

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This figure does not include the numerous compliance controls 1.4.5 Provisions and guarantees given for environmental that may be performed on a specific environmental regulation risks, and compensation paid during the year pursuant to topic, e.g. a waste sorting inspection, performed periodically a court decision by the Group companies on their sites. Since 2003, a review of No provision was established for environmental risks in fiscal environmental regulatory compliance is also performed by the year 2010. insurance companies, which now includes an environmental inspection during their fire safety visits to Group company sites. 1.4.6 Objectives assigned by the Group to its subsidiaries A total of 30 sites were evaluated in 2010. abroad LVMH continues to put in place its action plans relating to The Group requires each subsidiary, regardless of its geographic the REACH Regulation and makes every effort to anticipate location, to apply the Group’s environmental policy as set forth in future developments. The workgroup set up by the Group’s the Charter, which stipulates that each subsidiary defines its own environmental department promotes the collection of feedback environmental objectives and communicates the annual indicators and exchanges between all parties. With respect to this regulation, included in this section. all LVMH entities have prepared and/or made the necessary changes to contractual and commercial documents and have sent 1.4.7 Consumer safety questionnaires to their suppliers. Each company has established LVMH’s policy concerning the sensitive issue of animal testing a REACH Committee whose role is to raise awareness among to evaluate the safety of finished products is clear: its aim is to staff members so that they are able to give precise answers to any guarantee the safety of consumers who use our products while questions that may be posed. The growing public demand for taking into account respect for animal life. It is for this reason that, information concerning the products they purchase is a widespread since 1989, none of the Perfumes and Cosmetics companies have challenge that has notably inspired the French state to develop conducted tests on animals for the products they put on the market, an approach whose purpose is to raise consumer awareness of the thus well in advance of the official ban on animal testing imposed environmental impact of products beginning in July 2011. The by European Union legislation in 2004. The LVMH group has LVMH group is an active participant in these efforts, particularly played a decisive role in the development of alternative methods in relation to its Perfumes and Cosmetics and Fashion and Leather for testing product safety as a participant in European programs Goods businesses. (EPAA, ECVAM, Colipa, FP7, etc.) or through partnerships 1.4.4 Expenses incurred to anticipate the effects of with university researchers working in this area. This strategy operations on the environment has allowed the Group’s Perfumes and Cosmetics companies to simultaneously meet the twofold demand: consumer safety and Amounts were recognized under the relevant environmental respect for animal life. The development of alternative methods expense headings in accordance with the recommendations of the is a genuine scientific challenge and the LVMH group has made CNC (French National Accounting Council). Operating expenses clear that it will continue to devote all efforts necessary to comply and capital expenditure were recognized for each of the following with legislation, ensure consumer safety and respect animal life. headings: Furthermore, the regulatory framework for cosmetics changed with -- air and climate protection; the adoption of Regulation (EC) No. 1223/2009 of November 30, -- waste water management; 2009 on cosmetic products. This text, most of whose provisions -- waste management; will enter into application in July 2013, is intended to replace 76/768/EEC. The main objective of the Commission’s legislation -- protection and purification of the ground, underground water is to guarantee a high level of safety for cosmetic products: and surface water; -- noise and vibration reduction; -- by reinforcing the responsibility of the manufacturer: clarification of minimum requirements relating to the assessment -- biodiversity and landscape protection; of product safety; -- radiation protection; -- by reinforcing market surveillance: obligation to notify the -- research and development; competent authorities of serious undesirable effects. -- other environmental protection measures. LVMH has been working over the last several months to set up procedures to ensure its readiness once the new regulation enters Environmental protection expenses in 2010 break down as follows: into application. This text is considered by experts as one of -- operating expenses: 6.9 million euros; the most rigorous among those governing the production and -- capital expenditure: 6 million euros. marketing of cosmetic products worldwide. It covers all substances

96 Reference Document 2010 Management Report of the Board of Directors LVMH and the environment used by the cosmetics industry and imposes that a risk assessment though they may be in use by other manufacturers, if their safety be carried out for each product by a qualified party and under its does not seem to be fully guaranteed. This anticipatory perspective responsibility, taking into account actual conditions of use. In is made possible thanks to the efforts of our experts, who regularly addition, the European Commission’s Scientific Committee on take part in the workgroups of national and European authorities Consumer Products (SCCP) evaluates the safety of substances used and are very active in professional organizations. This monitoring in cosmetic products on an ongoing basis. and anticipation of regulatory developments has led the LVMH group to prohibit the use of many substances and to reformulate Other European regulations have entered into application, some some of its products. of which relatively recently: -- the GHS (Globally Harmonized System) which aims to In the area of environmental protection, developments in harmonize the classification and labeling of chemicals; scientific knowledge and regulations may sometimes result in the substitution of certain ingredients. For example, the Group decided -- the Regulation on Registration, Evaluation, Authorization that triclosan would no longer be used in its products due to its and Restriction of Chemicals (REACH), which streamlines and potential risk to the environment, although the safety of consumers improves the EU’s pre-existing legislative framework on chemicals. exposed to this ingredient received a favorable assessment from The main aims of REACH are to ensure a high level of protection European scientific authorities (Scientific Steering Committee of human health and the environment against the risks that can be and SCCP) in 2002. Today, none of the products marketed by the posed by chemicals, to promote alternative testing methods and Group contain this ingredient. This is also the case for phtalates the free circulation of substances on the internal market, and to and formaldehyde-releasing preservatives. enhance competitiveness and innovation. The LVMH group’s policies in this area are guided by compliance The LVMH group is in compliance with this new legislation. with regulations in force, but also by the anticipation of future The Group remains particularly vigilant to ensure continuing regulations through the application of strict guidelines. These compliance with regulatory requirements, while monitoring the extremely high standards allow us to guarantee the safety of our opinions of scientific committees, and the recommendations of cosmetic products but do not cease to apply when the products industry associations. Not only are the Group’s products compliant are released into the market. A cosmetovigilance network set with the most rigorous regulations in the world, such as those up by the Group handles the analysis of all claims received from of the European Union, the United States, and Japan, but they consumers. Any claim, whether relating to a simple intolerance or a also comply with the regulations of all countries where they are severe allergic reaction, is given due consideration by a specialized marketed. Moreover, all LVMH products must abide by a set of team. Studies of each case by professional researchers allow for strict internal guidelines imposed by the Group as criteria for the determination of any causal link between the effect observed their development. LVMH also requires that its suppliers adhere and the product used. Visits to a dermatologist may be offered to these same guidelines. to consumers. Study findings are included in the product safety Honoring its commitments in this area for the last several years, the file made available to the competent authorities. Furthermore, LVMH group has accompanied this policy with an approach that the analysis of these claims and the review of cosmetovigilance aims to anticipate developments in international regulations. The cases prompts us to explore new areas of research and improve the Group thus refrains from using certain cosmetic ingredients, even quality of our products.

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2. REPORT ISSUED BY ONE OF THE STATUTORY AUDITORS ON SELECTED ENVIRONMENTAL INDICATORS

To the Shareholders, Following your request and in our capacity as one of the Statutory Auditors of LVMH Moët Hennessy - Louis Vuitton, we have performed procedures to obtain reasonable assurance that selected environmental indicators (1) for fiscal year 2010 (the “Indicators”) have been prepared, in all material respects, in accordance with the LVMH Environmental Reporting Protocol, Version 7, dated September 5, 2010 (the “Criteria”). These Indicators are presented in the Reference Document, in paragraph 1 of the “LVMH and the environment” section of the Management Report of the Board of Directors. The LVMH Environment Department is responsible for preparing the Indicators and the Criteria, and for ensuring that they are made available. Our role is to express an opinion on the Indicators based on our procedures. We conducted our procedures pursuant to ISAE 3000 (International Standard on Assurance Engagements) issued by the IFAC (International Federation of Accountants) in December 2003, respecting the principle of independence defined by applicable laws and regulations, and the code of ethics governing our profession. The opinion presented below applies only to the Indicators and does not apply to the entire set of environmental indicators included in the reference document, in paragraph 1 of the “LVMH and the environment” section of the Management Report of the Board of Directors. This opinion does not apply to retail activities that are not directly integrated in the environmental indicator reporting scope and are estimated by extrapolation.

2.1 Nature and scope of our procedures In order to formulate our opinion, we performed the following procedures: • We assessed the Criteria for their accuracy, clarity, objectivity, completeness and relevance having regard to the Group’s activities and reporting practices of the sector. • At Group level: -- we conducted interviews with managers responsible for reporting the Indicators, -- we analyzed the risk of misstatements and their significance, -- we assessed the application of the Criteria, implemented analytical procedures and consistency checks, and verified, on a test basis, the consolidation of the Indicators. • We selected a sample of sites representative of the Group’s activities and geographical locations, based on their contribution to the Indicators and previously identified risks of misstatement: -- the selected sites represent an average of 57% of the total value of the Indicators published by LVMH (2); -- at this level, we have verified the understanding and application of the Criteria, and conducted detailed verifications on a test basis which consisted in checking the calculation formulas and reconciling the data with the supporting documents. We reviewed the presentation of the Indicators listed in the reference document in paragraph 1 of the “LVMH and the environment” section of the Management Report of the Board of Directors.

(1) Percentage of sites audited for environmental purposes (%); total water consumption for process needs (m3); total COD after treatment (metric tons/year); total waste produced (metric tons); total hazardous waste produced (metric tons); percentage waste recovery (%); total energy consumption (MWh); total CO2 emissions (metric tons of CO2 equivalent); total packaging used for consumer goods placed on the market (metric tons). (2) The contributions per indicator are as follows: percentage of sites audited for environmental purposes: 47%; total water consumption for process needs (m3): 53%; total COD after treatment:

96%; total waste produced: 47%; total hazardous waste produced: 77%; percentage waste recovery: 48%; total energy consumption: 49%; total CO2 emissions: 45%; total packaging used for consumer goods placed on the market: 48%.

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To assist us in conducting our work, we referred to the sustainable development experts of our firm under the responsibility of Mr. Eric Duvaud. In view of the work carried out at the Group’s major entities over the last eight fiscal years and the measures conducted by LVMH to improve the understanding and application of the Criteria by the sites, we consider that our procedures provide a reasonable basis for the opinion expressed below.

2.2 Information about the Criteria We have the following comments concerning the Criteria: • With regard to retail sales activities, LVMH distinguishes between data obtained from the Indicator collection process and data estimated by extrapolation. The proportion attributable to estimated data has increased this year and still represents a significant proportion. • Efforts to strengthen internal controls applied to the Indicator collection process made over the last fiscal years have been effective on the whole, but disparities still exist between the various sites. These internal controls should be systematized and further reinforced, especially for sites where discrepancies have been identified and whose contribution to environmental indicators at the Group level is significant.

2.3 Opinion Regarding the Indicator “Percentage waste recovery”, we were not able to obtain all the supporting documents to ensure the appropriate categorization of the waste destinations. In our opinion, except for this matter, the Indicators have been established, in all material respects, in compliance with the Criteria.

Neuilly-sur-Seine, February 16, 2011

One of the Statutory Auditors

ERNST & YOUNG et Autres

Olivier Breillot Gilles Cohen

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking readers.

Reference Document 2010 99 100 Reference Document 2010 Report of the Chairman of the Board of Directors

Page

1. Corporate governance 102

2. Implementation of risk management and internal control procedures 106

3. STATUTORY AUDITORS’ REPORT PREPARED ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS OF THE COMPANY LVMH MOËT HENNESSY - LOUIS VUITTON 114

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Drawn up in accordance with the provisions of Article L. 225-37 a party. No information has been communicated with respect to of the French Commercial Code, this report was approved by the this obligation. Board of Directors at its meeting on February 3, 2011. The Company’s bylaws require each Director to hold, directly and Its purpose is to give an account of the membership of the Board personally, at least 500 of its shares. of Directors of LVMH Moët Hennessy - Louis Vuitton SA, the preparation and organization of its work, the compensation policy 1.2 Membership and missions applied to senior executives and company officers, as well as the risk management and internal control procedures established by the • During its meeting of February 3, 2011 the Board of Directors Board and in particular the procedures relating to the preparation proposed to submit resolutions to the Shareholders’ Meeting of and processing of accounting and financial information. March 31, 2011 for the appointments of Mrs. Delphine Arnault and Mrs. Marie-Josée Kravis, as well as Messrs. Nicolas Bazire, Antonio Belloni, Charles de Croisset, Diego Della Valle, Pierre Godé, and 1. Corporate governance Gilles Hennessy as Directors. It also proposed a resolution for the appointment of Mr. Patrick Houël as Advisory Board Member. 1.1 Board of Directors • The Board of Directors, subject to the decisions of the Shareholders’ Meeting of March 31, 2011, will thus consist of The Board of Directors is the strategic body of the Company which eighteen members: Mrs. Delphine Arnault, Mrs. Bernadette Chirac is primarily responsible for enhancing the Company’s value and and Mrs. Marie-Josée Kravis, and Messrs. Bernard Arnault, Antoine protecting its corporate interests. Its main missions involve the Arnault, Nicolas Bazire, Antonio Belloni, Antoine Bernheim, adoption of overall strategic orientations of the Company and the Nicholas Clive Worms, Charles de Croisset, Diego Della Valle, Group and ensuring these are implemented, the verification of the Albert Frère, Pierre Godé, Gilles Hennessy, Felix G. Rohatyn, truthfulness and reliability of information concerning the Company Yves-Thibault de Silguy, Hubert Védrine, and Lord Powell of and the Group and the overall protection of the Company’s assets. Bayswater. Eight of whom: Mrs. Bernadette Chirac and Mrs. Marie- The Board of Directors of LVMH Moët Hennessy - Louis Vuitton Josée Kravis, as well as Messrs. Antoine Bernheim, Nicholas Clive acts as guarantor of the rights of each of the shareholders and Worms, Charles de Croisset, Diego Della Valle, Yves-Thibault de ensures that shareholders fulfill all their duties. Silguy, and Hubert Védrine are considered as independent and hold no interests in the Company. The AFEP/MEDEF Code of Corporate Governance for Listed Companies is applied by the Company. This document may be Personal information relating to the Directors is included in viewed on the AFEP/MEDEF web site: www.code-afep-medef.com. the section “Other information – Governance” of the Reference Document. A Charter has been adopted by the Board of Directors which During its meeting of February 3, 2011 the Board of Directors outlines rules governing its membership, duties, procedures, and reviewed the status of each Director currently in office as well responsibilities. as each proposed appointee, in particular with respect to the Two Committees, the Performance Audit Committee and the independence criteria set forth in the AFEP/MEDEF Code of Nominations and Compensation Committee, whose membership, Governance of Listed Companies, and considered that: role and missions are defined by internal rules, have been established (i) Mrs. Bernadette Chirac and Messrs. Charles de Croisset, Diego by the Board. Della Valle, Yves-Thibault de Silguy and Hubert Védrine satisfy The Charter of the Board of Directors and the internal rules all criteria; governing the two committees are communicated to all candidates (ii) Mr. Antoine Bernheim is to be considered, given his personal for appointment as Director and to all permanent representatives situation, as an independent Director, despite having served as a of a legal entity before assuming their duties. board member of the Company’s Board of Directors for more than Pursuant to the provisions of the Board of Directors’ Charter, all twelve years and on the Boards of Directors of other companies that Directors must bring to the attention of the Chairman of the Board are subsidiaries of Groupe Arnault and LVMH group; any instance, even potential, of a conflict of interest that may exist (iii) Mr. Nicholas Clive Worms is to be considered, given his between their duties and responsibilities to the Company and personal situation, as an independent Director, despite having their private interests and/or other duties and responsibilities. served as a member of the Company’s Board of Directors for more They must also provide the Chairman with details of any fraud than twelve years; conviction, any official public incrimination and/or sanctions, any (iv) Mrs. Marie-Josée Kravis fulfills all of these criteria. disqualifications from acting as a member of an administrative or management body imposed by a court along with any bankruptcy, • Over the course of the 2010 fiscal year, the Board of Directors met receivership or liquidation proceedings to which they have been four times as convened by its Chairman, by written notice sent to

102 Reference Document 2010 report of the chairman of the board directors

each of the Directors at least one week in advance of the meeting. -- the Board’s strategic decisions were discussed in its meetings The average attendance rate of Directors at these meetings was 87%. and were put to a specific vote. The Board approved the annual and half-yearly consolidated and The ways in which the Group may respond to the ongoing changes parent company financial statements and reviewed the Group’s major in the economic and financial environment gave rise to exchanges strategic guidelines and decisions, its budget, the compensation between Directors and Executive Management. of senior executives and company officers, the establishment of a bonus share plan, the authorization for third party guarantees and Lastly, the broad outlines of the Group’s financial communication various agreements with related companies, and the renewal of the were the subject of discussions by the Board. authorization to issue bonds. It also conducted an evaluation of its capacity to meet the expectations of shareholders by reviewing its 1.3 Executive Management membership, organization, and procedures, making the necessary changes to its Charter and the Internal Rules and Regulations of The Board of Directors decided not to dissociate the roles of the Performance Audit Committee, in particular with regard to Chairman and Chief Executive Officer. It made no change in the the setting of “blackout periods” during which no transactions powers vested in the Chief Executive Officer. involving the Company’s shares by members of the Board of In response to the proposal of the Chairman and Chief Executive Directors are permitted, as well as the requirement to request Officer, the Board of Directors appointed a Group Managing an evaluation by an independent expert before entering into any Director, Mr. Antonio Belloni, who was granted the same powers significant related party transactions. as the Chief Executive Officer. The Board of Directors also decided to make a portion of the Directors’ fees paid to its members contingent upon their 1.4 Performance Audit Committee attendance at its meetings and at those of the Committees to which they belong, making the necessary changes to its Charter. In The main tasks of the Performance Audit Committee are the addition, the Board instituted procedures to ensure that renewals monitoring of the process of preparing financial information, the of Directors’ appointments are more uniform over time. effectiveness of internal control and risk management procedures, as well as the statutory audit of the individual company and • In its meeting of February 3, 2011, the Board of Directors consolidated financial statements by the external auditors. The reviewed its membership and carried out a fully documented Committee oversees the procedure for the selection of external review of its work, organization and procedures. It also amended auditors and ensures their independence. its Charter and the Internal Regulations of its Committees, in particular so as to take into account the findings of the AMF’s The Committee currently consists of three members, two of whom Report on Audit Committees as updated in July 2010. are independent, appointed by the Board of Directors. The current The Board came to the conclusion that its composition is in line members of the Performance Audit Committee are Messrs. Antoine with regard to its percentage of external Directors, the breakdown of Bernheim (Chairman), Nicholas Clive Worms and Gilles Hennessy. share capital, and with respect to the diversity and complementarity The Performance Audit Committee met four times in 2010. All of the skills and experiences of its members. The appointment of of these meetings were attended by all of the members of the Mrs. Bernadette Chirac as Director by the Shareholders’ Meeting of Committee, with the exception of one meeting where one of the April 15, 2010 and the proposed appointment of Mrs. Marie-Josée members of the Committee was unable to attend. Kravis submitted for the approval of the Shareholders’ Meeting of March 31, 2011 are representative of the commitment to progress Attendees at these meetings also included the External Auditors, towards a balanced representation of women and men on the Board the Chief Financial Officer, the Director of Management Control, of Directors. the Director of Internal Audit, the Director of Accounting, the Director of Tax, the Director of Legal Affairs, and depending on the The Board noted: issues discussed, the Financing and Treasury Director, the Director -- it had received the information required for the fulfillment of of Risk Management or the Director of Information Systems. its missions in timely fashion and that each Director, in addition In addition to reviewing the annual and half-yearly parent company to any discussions during Board meetings, had been able to ask and consolidated financial statements, and in liaison with the questions to executive management and obtain the requested detailed analysis of changes in the Group’s business volumes and details and explanations, scope of consolidation, the Committee’s work mainly addressed the -- the Group’s financial position was presented in a clear and following issues: the objectives and performance of internal audits, detailed manner when the annual and half-yearly financial internal control procedures applied within the Group, the follow-up statements were submitted for the Board’s approval, of risk management policies, currency hedging, the tax position, the -- the annual budget and a three-year strategic plan were presented valuation of brands and goodwill, as well as changes in accounting to the Directors and discussed with the Board, standards (IFRSs) in relation to lease agreements.

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1.5 Nominations and Compensation Committee They are appointed by the Shareholders’ Meeting on the proposal of the Board of Directors and are chosen from among the shareholders The main responsibilities of the Nominations and Compensation on the basis of their competences. Committee are to issue: Following the death on October 1, 2010 of Mr Killian Hennessy, • proposals on compensation, benefits in kind, bonus shares and the sole member of the Advisory Board, there are currently no share subscription or purchase options for the Chairman of the Advisory Board members. Board of Directors, the Chief Executive Officer and the Group Managing Director(s) of the Company, as well as on the allocation The appointment of Mr. Patrick Houël as Advisory Board of Directors’ fees paid by the Company; Member will be submitted to the Shareholders’ Meeting of March 31, 2011. • opinions on candidates for the positions of Director, Advisory Board member, Group Executive Committee member or member of Executive Management of the Company’s main subsidiaries. 1.7 Participation in Shareholders’ Meetings It currently consists of three members, two of whom are The terms and conditions of participation by shareholders in independent, appointed by the Board of Directors. The current Shareholders’ Meetings, and in particular the conditions for the members of the Nominations and Compensation Committee are attribution of dual voting rights to registered shares, are defined Messrs. Antoine Bernheim (Chairman), Charles de Croisset and in Article 23 of the bylaws (see the “Governance” section of the Albert Frère. Reference Document).

The Committee met twice during the 2010 fiscal year, in the 1.8 Information that might have an impact on a takeover presence of all its members. It (i) issued proposals on the allocation bid or exchange offer of Directors’ fees, as well as on the compensation and the allocation of performance bonus shares to the Chairman and Chief Executive Information that might have an impact on a takeover bid or Officer and to the Group Managing Director and (ii) gave its exchange offer, as required by Article L. 225-100-3 of the French opinion on compensation, performance bonus shares and benefits Commercial Code, is published in the “Management Report of the in kind granted by the Company and its subsidiaries to certain Board of Directors – Parent company: LVMH Moët Hennessy - Directors. It also issued an opinion on the proposed appointment Louis Vuitton SA” section of the Reference Document. of Mrs. Bernadette Chirac as Director and on the reappointment of the Directors whose terms in office were due to expire in 2010. 1.9 Compensation policy for company officers In addition, the Committee issued an opinion on the status of all Directors’ fees paid to the members of the Board of Directors members with regard to the independence criteria set forth within the AFEP/MEDEF Code, in particular. The Shareholders’ Meeting sets the total amount of Directors’ fees to be paid to the members of the Board of Directors. Prior to the Board of Directors’ meeting of February 3, 2011, the Committee issued recommendations, most notably on (i) This amount is divided among the members of the Board of the variable portion of compensation to be received for 2010 by Directors and members of the Advisory Board, in accordance with the Chairman and Chief Executive Officer, the Group Managing the rule defined by the Board of Directors, based on the proposal Director, and other Directors receiving compensation from the of the Directors’ Nominations and Compensation Committee, Company or any of its subsidiaries, as well as on (ii) the fixed namely: compensation to be received by these same individuals for 2011 and (i) two units for each Director or member of the Advisory Board; (iii) the setup of a medium term incentive scheme, which Mr. Gilles (ii) one additional unit for serving as a Committee member; Hennessy would benefit from. The committee issued an opinion on the nominations to be put to a vote at the Shareholders’ Meeting. (iii) two additional units for serving as both a Committee member and a Committee Chairman; (iv) two additional units for serving as either Chairman or Vice- 1.6 Advisory Board Chairman of the Company’s Board of Directors; Advisory Board members are invited to meetings of the Board with the understanding that the amount corresponding to one of Directors and are consulted for decision-making purposes, unit is obtained by dividing the overall amount allocated to although their absence cannot undermine the validity of the Board be paid as Directors’ fees by the total number of units to be of Directors’ deliberations. distributed.

104 Reference Document 2010 report of the chairman of the board directors

At its meeting of February 4, 2010, the Board of Directors decided Board of Directors – Parent company: LVMH Moët Hennessy Louis that a portion of Directors’ fees to be paid to its members would Vuitton SA” of the Reference Document. be contingent upon their attendance at meetings of the Board of Pursuant to the provisions of Article L. 225-42-1 of the French Directors and, where applicable, at those of the Committees to Commercial Code, at its meeting of February 4, 2010, the which they belong. A reduction in the amount to be paid is applied Board of Directors approved the non-compete clause included in to two-thirds of the units described under (i) above, proportional Mr. Antonio Belloni’s employment contract - suspended during the to the number of Board Meetings the Director in question does term of his mandate as Group Managing Director: this covenant not not attend. In addition, for Committee members, a reduction in to compete for a twelve-month period provides for the payment of the amount to be paid is applied to the additional fees mentioned a monthly compensation equal to the monthly remuneration on the under (ii) and (iii) above, proportional to the number of meetings termination date of his functions, which would be supplemented by Committee to which the Director in question participates which by one twelfth of the last bonus received. he or she does not attend. Notwithstanding this clause, no other senior executive officer of In respect of the 2010 fiscal year, LVMH paid a total gross amount the Company currently benefits from provisions granting them a of 1,040,625 euros in Directors’ fees to the members of its Board specific compensation payment should they leave the Company of Directors. or derogations from the rules governing the exercise of options or The Nominations and Compensation Committee is kept informed the definitive allocation of bonus shares subject to performance of the amount of Directors’ fees paid to senior executive officers conditions. by the Group’s subsidiaries in which they perform the role of Company officers are eligible for stock option or performance company officers. bonus share plans instituted by the Company. The information relating to the allocation terms and conditions of these plans is Other compensation presented in the section entitled “Management Report of the Compensation of senior executive officers is determined with Board of Directors – Parent company: LVMH Moët Hennessy reference to principles listed in the AFEP/MEDEF Corporate Louis Vuitton SA” of the Reference Document. Governance Code for Listed Companies. Upon their retirement, members of the Executive Committee, Compensation and benefits awarded to company officers are mainly and where applicable company officers, receive a supplemental determined on the basis of the degree of responsibility ascribed to retirement benefit provided they have been members of the their missions, their individual performance, as well as the Group’s Executive Committee of the Group for a period of at least six years performance and the achievement of targets. This determination and that they assert at the same time their entitlement to their also takes into account compensation paid by similar companies basic retirement benefits under compulsory pension schemes. This with respect to their size, industry segment and the extent of their supplemental retirement benefit is determined based on a reference international operations. remuneration amount equal to the average annual remuneration received over the three civil years preceding the retirement year, A portion of the compensation paid to senior executive officers capped at 35 times the annual social security ceiling. The annual of the Company is based on the attainment of both financial and supplemental retirement benefit is equal to the difference between qualitative targets. Quantitative and qualitative objectives carry 60% of the reference remuneration amount (i.e. 742,392 euros as an equal weighting for the purpose of determining the bonus of the of January 1, 2011) and all pension payments made by the general Chairman and Chief Executive Officer; for the Group Managing social security regime and the additional ARRCO and AGIRC Director, they carry the weighting of 2/3 and 1/3, respectively. regimes. Increase in provisions in 2010 for these supplemental The financial criteria are growth in revenue, operating profit and retirement benefits are included in the amount shown for post- cash flow, with each of these items representing one-third of the employment benefits under Note 30 of the consolidated financial total determination. The variable portion is capped at 180% of the statements. fixed portion for the Chairman and Chief Executive Officer and at 120% of the fixed portion for the Group Managing Director. An exceptional remuneration may be awarded to certain Directors with respect to any specific mission with which they have been The breakdown of compensation and benefits awarded to the entrusted. The amount of this remuneration shall be determined Chairman and Chief Executive Officer, and the Managing Director, by the Board of Directors and reported to the Company’s external is presented in the section entitled “Management Report of the auditors.

Reference Document 2010 105 report of the chairman of the board directors

2. Implementation of risk management of representation covering the assessment of risk management and and internal control procedures internal control procedures. These letters signed by the chairman and by the chief financial officer of each subsidiary and parent company are analyzed, followed up upon, and consolidated at each This section of the report draws upon the new Reference superior level of the Group’s organizational structure (Region, Framework issued by the AMF on July 22, 2010 relating to House, Business group) and then forwarded to the Finance processes for monitoring the effectiveness of risk management Department and to the Audit and Internal Control Department. and internal control systems and takes into account changes in laws They are also made available to the Statutory Auditors. and regulations introduced since 2007, in particular the Law of July 3, 2008 and the Order of December 8, 2008. In line with the These letters are signed by the Chairman and Chief Financial measures implemented since 2008 following the publication of its Officer of each entity. In 2010, on an optional basis, this signing first internal control reference guide, the Group has reviewed the authority was extended by certain entities to all executive extent to which its monitoring processes are consistent with this committee members. new framework and has decided to make use of the new suggested This year, a total of 117 entities submitted signed letters of structure for the drafting of this portion of the Chairman’s report. representation, thus providing coverage of nearly 80% of Group revenue. This total included both production and services 2.1 Scope, organizational and formalization principles companies, the regional holding companies as well as nine central financial functions: Finance, Treasury and Markets, LVMH is comprised of five main business groups: Wines and Tax, Consolidation, Financial Statements Closing, Interest and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Exchange Rate Monitoring, Information Systems, Investor Watches and Jewelry, and Selective Retailing. Other activities Relations, and Insurance. comprise the media division managed by Les Echos group, the yacht builder Royal Van Lent, real estate activities and holding These letters of representation attesting to the implementation of companies. The business groups are themselves composed of risk management and internal control procedures are supplemented companies of varying sizes owning prestigious brands, which in by the signing of annual letters certifying the entity’s financial turn are divided into subsidiaries operating worldwide. disclosures, including a paragraph devoted to internal control. The representation concerning internal control and the assessment of This organizational structure ensures that the different brands financial risks is thus extended to all of the LVMH group’s financial of the Group maintain their independence, while facilitating consolidation transactions. cohesion between the Group’s companies, especially those with similar businesses. Lastly, in line with European directives and the Order of December 8, 2008, it is worth noting that since 2009 the Group The risk management and internal control policy applied across has been engaged in a process of improving and integrating risk the Group is based on the following organizational principle: management and internal control systems, an approach known -- the parent company, LVMH SA, is responsible for its own risk by the acronym ERICA, “Enterprise Risk and Internal Control management and internal control systems, while also acting as Assessment”, which involves: leader and coordinator for all Group companies; -- a letter of representation that from 2010 explicitly covers all -- the President of a brand is responsible for the risk management strategic, operational and regulatory risks (see above); and internal control of all the subsidiaries that contribute to -- an approach to the formalization of procedures for the developing the brand worldwide; management of major risks, introduced this year within two -- each subsidiary’s President is similarly responsible for their own business groups (see §2.2.3 below); operations. -- the availability beginning in April 2010 of an application that The internal control and risk management mechanism, which will centralize all risk and internal control data and provide a has been formalized since 2003 to comply with the LSF (French framework for interconnections between these two areas (see §2.2.4 Financial Security Act), has adopted a similar structure; it is both: below). -- decentralized at business group and brand level: the guidance and management of the mechanism is the responsibility of the 2.2 Main risk management principles Executive Management of the operational and legal entities; -- unified around a shared methodology and a single reference 2.2.1 Definition and objectives guide, both of which are coordinated centrally by the LVMH SA According to the definition provided by the AMF’s Reference holding company and rolled out to all Group companies. Framework, risk represents the possibility of an event occurring The main brands and the business groups acknowledge their that could affect the Company’s personnel, assets, environment, responsibility in relation to these systems each year by signing letters objectives or reputation.

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Risk management is understood to apply in this very broad sense This project, named ERICA, provides a structure and formal rather than merely to the financial realm, and is essential to support the guidelines for risk management within the Group by offering: longevity and excellence of our brands. It is a powerful management -- a framework: each business group or major business unit included tool requiring the involvement of all of the Group’s senior executives in the project determines its own roles and responsibilities with in accordance with the principle of delegation and organization regard to a defined process and approach, as well as the eventual presented above. The objectives of risk management are to: criticality; -- protect the value, assets and reputation of the Group and its -- a process for the identification, analysis and handling of risks brands; backed by a single Group-wide reference guide and methodology; -- enhance the security of decision-making and operational -- a follow-up on action plans and the effectiveness of existing processes by way of a comprehensive perspective on the Group’s control systems with a regular review of the level of exposure to potential threats and opportunities; the identified risks. -- promote consistency between the actions of the Group and the The Group plans to extend this approach to all significant values of its brands; businesses in 2011. -- ensure that all employees embrace a shared vision of the main risks and challenges faced in our business activities. 2.2.4 Coordination of risk management with internal control 2.2.2 Organization and components of the risk management system Risk management and internal control systems complement each other in exerting the necessary oversight over the Group’s Risks relating to our brands and business activities are managed businesses. at the level of each of our business groups and Houses. As part of the budget cycle and in connection with the preparation of the The risk management system aims to identify and analyze the three-year plan, major risks affecting strategic, operational and principal risks that could affect an entity. Risks that exceed the financial objectives are systematically identified and evaluated, acceptable levels set are evaluated and, if deemed necessary, are and a formal account of the conclusions reached is included in the addressed through specific action plans. These plans may call corresponding sections of the reports issued. for the implementation of controls, a transfer of the financial consequences (through insurance or an equivalent mechanism) Risk mitigation (in frequency and severity) is achieved through or an adaptation of the entity’s organization. The controls to be preventive actions (industrial risks), internal control (risks implemented are part of the internal control system, which also associated with processes), or through the implementation of serves to guarantee their effectiveness. business continuity plans or operational action plans. Depending on the types of risk to which a particular brand or entity is exposed, For its part, the internal control system relies on the risk the latter may decide, in collaboration with the Group, to transfer management system to identify the main risks and principles that residual risk to the insurance market or instead to assume this risk. need to be controlled. Finally, as a complement to these processes, and in order to institute The articulation between these two systems has been reflected a single approach for all brands, the Group has launched a project in both: that seeks to create a formal framework for risk management and -- the new application features added to the ERICA evaluation internal control called ERICA, which is discussed in §2.2.3 below. platform; Specific monitoring procedures apply to some of the risks -- and the reference guide to major risks, with a presentation for associated with the Group’s businesses (damage to image or each major risk of the coverage measures in the internal control reputation, counterfeit goods and parallel markets, industrial reference guide. and environmental risks, foreign currency and interest rate risk, This articulation has been tested through the analysis of computer etc.). These risks are discussed in §2 “Operational risk factors and system failure risk and the links to the control system covering insurance policy” of the “Management Report of the Board of computer security and availability (Disaster Recovery Planning). Directors: LVMH group” included in the Reference Document. This coordination is also reflected in the “Risk factors” chapter 2.2.3 Establishment of formal procedures for the ERICA of the Management Report: for each type of risk discussed, system this report presents the evaluation approach and the control systems implemented and monitored by the Group or the brands As the logical outcome of the pilot study carried out in 2009, an involved. approach to the formalization of procedures for the management of major risks was introduced in 2010 for the Wines and Spirits business group and at Parfums Christian Dior.

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2.3 General internal control principles -- an information and communication system that enables responsibilities to be exercised efficiently and effectively; 2.3.1 Definition and objectives -- continual monitoring of the system. The Group uses an internal reference guide which is consistent All of these elements are centrally managed and coordinated, but with COSO principles (Committee of Sponsoring Organizations they are also reviewed each year by the larger entities within the of the Treadway Commission) together with the new Reference Group, through the established self-assessment procedure in force. Framework of the AMF. 2.3.3 The general control environment Therefore, at the behest of the Board of Directors, the Performance Audit Committee, Executive Management and other senior The internal control mechanism, which applies to all of LVMH’s managers of the parent companies and subsidiaries and as operations, aims primarily to create appropriate conditions for specified in this reference guide, internal control encompasses a a general internal control environment tailored to the Group’s set of resources, behaviors, procedures and actions adapted to the specificities. It also aims to anticipate and control the risk of individual characteristics of each Group entity that: errors and fraud, without however guaranteeing their complete -- contributes to control over its activities, the efficiency of its elimination. operations and the efficient use of its resources; The Group has always expressed its determination with regard to -- must enable the entity to appropriately assess significant these fundamentals, which are the management’s commitment operational, financial and compliance risks. to integrity and ethical behavior, the principle of honesty in More specifically, this system aims to provide reasonable assurance relations with customers, suppliers, employees and other business with respect to the achievement of the following objectives: partners, clear organizational structures, responsibilities and authorities defined and formalized according to the principle of -- compliance with applicable laws and regulations; the segregation of duties, regular monitoring of staff performance, -- the implementation of the instructions and directions given by and a commitment to skills management and the professional the Executive Management of the Group and the Management of development of Group employees. operational units (the Houses or brands and their subsidiaries); These ethical and good governance principles are included in -- the proper functioning of the entity’s internal processes, the LVMH Code of Conduct, which has been distributed since especially those relating to the protection of its assets and the May 2009 to all Group employees. This Code of Conduct serves as value of its capital; the common foundation and source of inspiration in this area for all -- the reliability of financial and accounting information. of our brands or business lines. In particular, the Group recommends The internal control system thus comprises a range of control and oversees the implementation of codes of conduct, supplier procedures and activities over and above those directly connected to charters, formalized procedures for declaring and monitoring the financial and accounting system; because it aims to ensure the conflicts of interest, and the implementation of delegation matrices control and continuity of all existing and new activities, the system that outline the responsibilities and powers of each employee. must enable the management of the houses and subsidiaries to In 2009, an intranet website (“LVMH Mind”) was launched to better focus fully on the strategy, development and growth of the Group. communicate internally the Group’s commitment to responsible Limits of internal control corporate citizenship. On this website, specifically devoted to social and environmental responsibility, employees can find the LVMH No matter how well designed and applied, the internal control Code of Conduct, but also the Environmental Charter first adopted system cannot provide an absolute guarantee that the Group’s in 2001 and the Supplier Charter introduced in 2008 to ensure objectives will be achieved. All internal control systems have their compliance across the entire supply chain with strict guidelines. limits most notably because of the uncertainty of the outside world, individual judgment or malfunctions as a result of human or other Skills management is a significant aspect of internal control. errors. LVMH pays special attention to matching employees’ profiles with corresponding responsibilities, formalizing annual performance 2.3.2 Internal control components reviews at individual and organizational level, ensuring the The Group’s internal control system includes five closely development of skills through training programs custom-designed interrelated components: for each level of seniority and encouraging internal mobility. Personnel reports are produced monthly by the Group’s Human -- a general control environment, based on clearly defined and Resources Department, presenting changes in staff and related appropriate roles and responsibilities; analyses as well as vacancies and internal movements. A dedicated -- a risk management system; Intranet site, LVMH Talents, is also for use by for the Group Human -- appropriate control activities, procedures and documentation; Resources.

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2.3.4 Risk management documentation of key activities in the form of a procedure in order to ensure consistent quality over time, regardless of who carries The risk management system is described in §2.2 Main risk them out. management principles. The activities relating to the control and remediation of internal 2.3.5 Control activities, procedures and documentation control weaknesses are reflected, documented and tracked as part Internal control practices and procedures are implemented by the of the management process that guides all the Group’s core entities companies’ internal control managers and is the responsibility of (cf. § 2.3.6). their Management Committees. The Group’s Risk Management Guidelines may also be found on Through its Finance Intranet, the Group disseminates all of the Finance Intranet, together with specially designed tools for the regularly updated procedures contributing to accounting the evaluation, prevention and coverage of risks. These materials and financial information and applicable to all the consolidated may be accessed by all personnel involved in the application of the companies, covering: accounting and financial procedures and Group’s risk management procedures. principally the accounting policies and standards, consolidation, 2.3.6 Information and communication systems taxation, investments, financial reporting (including budgetary procedures and strategic plans), cash flow and financing (including The strategic plans in terms of information and communication cash pooling, foreign exchange and interest rate hedging). The systems are coordinated by the Group Finance Department, which procedures available on the Finance Intranet also detail the format, ensures the standardization of the ERP (SAP) in operation as well content and frequency of financial reports. as business continuity. Aspects of internal control (segregation of duties and access rights) are integrated when employing new The finance intranet is also used for the dissemination of Internal information systems and these are regularly reviewed. Control principles and best practices: The information and telecommunications systems and their -- a top-level guide, “The Essentials of Internal Control”, describes the bases of the general environment and the salient features of the associated risks (physical, technical, internal and external security, main processes: Sales, Retail Sales, Purchases, Inventory, Financial etc.) are also subject to special procedures: a Business Continuity Statements Closing and Information Systems (general IT controls); Plan methodology kit has been distributed within the Group in order to define for each significant entity the broad outline of such -- in addition to this manual, the LVMH internal control reference a plan as well as those of an IT Disaster Recovery Plan. A Business guide covering a wide range of business processes has also been made Continuity Plan and a Disaster Recovery Plan have been developed available. This reference guide details, for each risk arising from a at the level of the parent company LVMH SA; both plans are tested given process, the key control activities expected. This reference on an annual basis. guide is regularly updated to take into account developments in information systems and procedures. Originally established All significant entities have appointed a head of IT Security (RSI), in accordance with COSO principles, the reference guide covers who reports directly to the Director of Information Systems. The most of the measures relating to the preparation of accounting activities of the RSIs are coordinated by the Group RSI. Together and financial information that are also included in the Reference they constitute a vigilance network to monitor the development Framework of the AMF; of risks affecting information systems and implement adequate -- best practices and implementation tools are available online via defenses depending on the likelihood of a given type of risk and this intranet site, covering the issues emphasized by the Group, its potential impact. conflicts of interest, delegation of powers, business continuity 2.3.7 Continuous monitoring of the internal control systems plans, IT disaster recovery plans, policies and guidelines for information system security, exception reports, the segregation There are several levels of monitoring, the main ones being: of duties and resulting conflicts relating to sensitive transactions, Ongoing monitoring of the processes and the control of media expenses. It is organized by the Directions in charge of operations in order to The Group and its internal control managers in the Houses ensure anticipate or detect incidents as soon as possible. Exception reports the implementation of the controls that are essential to achieving are used to determine whether corrective actions are required based the key process internal control objectives, where necessary. The on a departure from normal operating conditions, as a complement managers are asked to make a special effort in relation to the to preventive measures, such as the segregation of duties.

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Periodic monitoring of the mechanism -- the signing of the letter of representation by the Management of each entity. Periodic monitoring is performed by management staff and by the internal and external auditors: The letters of representation are consolidated in a “cascade”, from the subsidiaries to the parent companies, and from the parent -- by management or operational staff under the responsibility companies to the Group. of the internal control managers. The final deliverable of this supervision is the letter of representation on risk management Work and assessments performed by senior executives and internal control signed by the Chairman and CFO or by each These internal control formalization procedures are carried out member of the Management Committee of each significant entity on an internal basis, with independent external validation. This confirming their acceptance of responsibility for internal control in approach maximizes the involvement of operational managers, connection with the relaying of information on areas of weakness capitalizing on their knowledge and facilitating the process of and the remedies pursued (see §2.1); continuous improvement of internal control over time within the -- by LVMH Internal Audit and the external auditors, who provide Group. The Group’s external auditors are kept informed on the management of the entities and the Executive Management progress of this approach, as is the Performance Audit Committee, of the Group with the results of their review work and their by means of regular reports. recommendations. The Management of each significant entity carries out an annual 2.4 Risk management and internal control stakeholders self-assessment process. In addition to the contribution of all Group employees to the Self-assessment is based on the LVMH internal control reference success of these systems, the following participants fulfill specific guide. This reference guide covers 12 key processes: Sales, Retail roles with respect to internal control: Sales, Purchases, Licenses, Travel and Movements, Inventory, At Group level Production, Cash Management, Fixed Assets, Human Resources, Information Systems and Financial Statements Closing. Specific The Board of Directors processes have been developed and evaluated to reflect the particular As part of the responsibilities described above, the Board of needs of certain activities (Distilled Alcohol and Vineyard Land Directors contributes to the general control environment for Wines and Spirits, End-of-Season Operations for Fashion and through its underlying professional principles: the savoir-faire Leather Goods, Concessions for the Duty-Free businesses). and responsibility of its members, the clarity and transparency of its decisions, and the efficiency and effectiveness of its controls. In addition, at the level of the parent company LVMH SA and The Company refers to the AFEP/MEDEF Code of Corporate the Group, the nine key processes listed in §2.1 are analyzed to Governance for Listed Companies, for guidance. determine the related risks and action plans are subsequently defined and followed-up, so as to remediate any weaknesses. The Board of Directors is kept informed on a regular basis of the specific nature of risk management and internal control systems The self-assessment approach applied at each of the 117 significant and procedures, and ensures that major risks, which are disclosed entities identified in 2010 is tailored to the configuration and in the “Risk factors” section of its management report, are properly culture of the LVMH group and consists of: taken into account. -- a review of the general control environment at the entity; Also at regular intervals, the Board and its Performance Audit -- a detailed review of key control systems selected by each brand Committee receive information on the results of the operation of from the reference guide to business processes depending on the these systems, any weaknesses noted and the action plans decided materiality of these processes and the anticipated level of risk with a view to their resolution. coverage; for branches having launched the integrated ERICA approach in 2010, the entities calibrated their self-assessment The Executive Committee on a single set of 70 key controls. This list established by the The Executive Committee, comprised of executive, operational and Group’s Internal Control department constitutes the minimum functional directors, defines strategic objectives on the basis of the set of controls to be assessed by each entity; orientations decided by the Board of Directors, coordinates their -- a review of shortcomings and follow-up by the entity’s senior implementation, ensures that the organization adapts to changes in and middle managers of the measures implemented to remedy the business environment, and oversees both the definition and the these weaknesses; accomplishment of the responsibilities and delegations of authority of executive management. -- the formal documentation of this review and assessment process as well as the resulting action plans in the internal control data The Performance Audit Committee modeling and guidance tool, renamed ERICA, which has been As part of its responsibilities described above, the Performance adopted by other CAC 40 companies as well; Audit Committee controls the existence and application of internal

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control procedures. It also examines the results of the work of The plan can be modified in response to changes to the political Internal Audit and approves annual and midterm internal auditing and economic environment or internal strategy. orientation in terms of resources and geographic, business and Internal Audit reports on its work to management of the entity risk coverage. The Committee also receives information on the concerned and to Executive Management of the Group by way management of major risks. of an Executive Summary and a detailed report explaining its The Legal Department recommendations and setting out Management’s commitment to The Group’s Legal Department is responsible for monitoring the apply them within a reasonable period of time. Internal Audit sends proper application of laws and regulations in force in each of the copies of the reports that it issues to the external auditors and meets countries where the LVMH group has operations. It also fulfils a with them periodically to discuss current internal control issues. central legal review function and provides advice on legal matters The main features of the annual and multi-year audit plan, together as required by each of the LVMH group’s business groups. with the main conclusions of the year under review and the follow- The Risk Management Department up to the main recommendations of previous assignments, are Apart from the operational managers, who are responsible for presented to the Performance Audit Committee and to the business the risks inherent to their businesses, the Risk Management groups concerned. Department ensures that Group companies have access to tools Moreover, since 2003, Internal Audit has coordinated the Group’s and methodologies for the identification and evaluation of risks, compliance with LSF (French Financial Security Act) internal promotes effective loss prevention practices, and advises on risk control measures, and has devoted a specific team to internal coverage and financing strategies. controls. This team monitors and anticipates regulatory changes The Risk Management Department collaborates with the Internal so that the measures can be adapted. The alignment measures Audit team on the definition and implementation of evaluation implemented in response to the recommendations of the AMF’s methods and processes for handling certain major or large-scale Report on Audit Committees and to its new Reference Framework risks. were areas of particular attention during the past year. The Audit and Internal Control Department Group internal control coordinates a network of internal As of December 31, 2010, the Audit and Internal Control controllers responsible for ensuring compliance with the Group’s Department had a staff of some fifteen professionals, including internal control procedures and for preparing internal controls two individuals specifically responsible for the coordination of tailored to their businesses. These internal control managers are Internal Control. Although this team’s supervision is centralized, responsible for the various projects related to the internal control its members operate out of two offices in Paris and Hong Kong and risk management system and promote the dissemination and and are active throughout the Group. application of guidelines.

Between thirty and forty audit assignments are carried out each At subsidiary level year. In 2010, as planned in the context of the objectives for the year, special attention was focused on emerging countries (China, Management Committees Russia, Ukraine, India) and on certain transversal risks (stock The Management Committee within each subsidiary is responsible obsolescence, retirement benefit commitments, etc.). for implementing the procedures necessary to ensure an effective internal control mechanism for its scope of operations. The fact Follow-ups on recommendations made in the context of past that operational managers are personally accountable for internal assignments are reinforced through systematic on-site visits to controls in each company and in each of the key business processes companies with the most significant issues. is a cornerstone of the internal control system. The Internal Audit team applies a multi-year audit plan which The Management Committees of brands or entities are responsible is revised every year. The multi-year audit plan allows the degree for the implementation of action plans for the management of the to which the internal control system has been understood and major risks they identify and evaluate in the course of internal assimilated to be monitored and reinforced where necessary, and control self-assessment for their scope of operations. ensures the appropriate application of the procedures that are in place. The audit plan is prepared on the basis of an analysis of potential risks, either existing or emerging, by type of business 2.5 Risk management and internal controls related to (such as size, contribution to profits, geographical location and financial and accounting information quality of local management) and on the basis of meetings held with 2.5.1 Organization the operational managers concerned. Internal Audit intervenes in all Group companies, both in operational and financial matters. A Risk management and internal controls of accounting and financial review of the self-assessment process and its results is performed information are organized based on the cooperation and control of systematically for the significant entities involved. the following departments, which are all part of the Finance Team:

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Accounting and Consolidation, Management Control, Information generated directly or indirectly by Group companies. It is also Systems, Corporate Finance, Treasury, Markets, Tax and Investor responsible for applying a centralized interest rate and counterparty Relations. risk management strategy designed to limit the negative impact of interest rate fluctuations and credit risk on operations and Accounting and Consolidation is responsible for preparing investments. and producing the individual company accounts of the holding companies and the consolidated financial statements, in particular To this end, a management policy and strict procedures have the financial statements and financial documents published as of been established to measure, manage and consolidate these June 30 (the interim report) and as of December 31 (the reference market risks. Within this team, the separation of Front office document) in addition to the management reporting process. and Back office activities, coupled with an independent control To this end, Accounting and Consolidation defines and disseminates team reporting to Accounting Director allow for a greater the Group’s accounting policies, monitors and enforces their segregation of duties. This organization relies on an integrated application and organizes any related training programs that may computerized system allowing real-time controls on hedging be deemed necessary. Accounting and Consolidation also ensures transactions. The hedging mechanism is periodically presented that an appropriate financial reporting information system is to the Performance Audit Committee. Hedging decisions are maintained, while also coordinating the work of the Group’s taken by means of a clearly established process that includes Statutory Auditors. regular presentations to the Group’s Executive Committee and detailed documentation. Management Control is responsible for coordinating the budget process and its revisions during the year as well as the five-year The Tax Team coordinates the preparation of tax returns and strategic plan. It produces the monthly operating report and all ensures compliance with applicable tax laws and regulations, reviews required by Executive Management (see below § 2.5.4 provides advice to the different business groups and companies Management reporting); it also tracks capital expenditures and and defines tax planning strategy based on the Group’s operational cash flow, as well as producing statistics and specific operational requirements. It organizes appropriate training courses in response indicators. to major changes in tax law and coordinates the uniform reporting system for tax data (“SyRUS Tax”). By virtue of its area of competence and the high standards of the reports it produces, Management Control is a very important The Investor Relations Department is responsible for coordinating participant in the internal control and financial risk management all information issued to the financial community to enable it system. to acquire a clear, transparent and precise understanding of the Information Systems designs and implements the information Group’s performance and prospects. It also provides Executive systems needed by the Group’s central functions. It disseminates Management with the perceptions of the financial community on the Group’s technical standards, which are indispensable given the the Group’s strategy and its positioning within its competitive decentralized structure of the Group’s equipment, applications, environment. It defines the key messages to be communicated in networks, etc., and identifies any potential synergies between close collaboration with Executive Management and the business businesses while respecting brand independence. It develops and groups. It harmonizes and coordinates the distribution of corporate maintains a telecommunications system shared by the Group. It messages through various channels (publications such as the annual drives policies for system and data security and helps the brands and half-yearly reports, financial presentations, meetings with prepare emergency contingency plans. In cooperation with the shareholders and analysts, the website, etc.) subsidiaries, Information Systems supervises the creation of three- Each of these departments coordinates the financial aspects of year plans for all information systems across the Group, by business the Group’s internal control in its own area of activity via the group and entity. finance departments of business groups, the main companies and Corporate Finance is responsible for applying the Group’s financial their subsidiaries, which are in charge of similar functions in their policy, efficiently managing the balance sheet and financial respective entities. In this way, each of the central departments runs debt, improving the financial structure and executing a prudent its control mechanism through its functional chain of command policy for managing interest rate risks. Within this department, (controller, chief accountant, treasurer, etc.). International Treasury focuses particularly on Group cash pooling, The finance departments of the main companies of the Group ensuring optimal efficiency and preparing forecasts on the basis and the Departments of the parent company, LVMH, described of quarterly updates prepared by the companies involved. It is above periodically organize joint finance committees. Run and also responsible for applying a centralized foreign exchange risk coordinated by the Central Departments, these committees deal management strategy. particularly with applicable standards and procedures, financial Treasury Markets is responsible for the application of the Group’s performance and any corrective action needed, together with risk coverage policy, with the principal aim of covering risks internal controls applied to accounting and management data.

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2.5.2 Accounting and management policies 2.5.4 Management reporting Subsidiaries adopt the accounting and management policies Each year, all of the Group’s consolidated entities produce a considered by the Group as appropriate for the individual strategic plan, a complete budget and annual forecasts. Detailed company and consolidated financial statements. A consistent set instructions are sent to the companies for each process. of accounting standards is applied throughout, together with These key steps represent opportunities to perform detailed consistent formats and tools to submit data to be consolidated. analyses of actual data compared with budget, and to foster ongoing Accounting and management reporting is also carried out through communication between companies and the Group - an essential the same system, thus ensuring the consistency of internal and feature of the financial internal control mechanism. published data. A team of controllers at Group level, specialized by business, is 2.5.3 Consolidation process in permanent contact with the business groups and companies The consolidation process is laid out in a detailed set of instructions concerned, thus ensuring better knowledge of performance and and has a specially adapted data submission system designed management decisions as well as appropriate control. to facilitate complete and accurate data processing, based on a The half-yearly and annual financial statements are closed out consistent methodology and within suitable timeframes. The at special results presentation meetings, in the presence of the Chairman and CFO of each company undertake to ensure the Group’s financial representatives and the companies concerned, quality and completeness of financial information sent to the during which the Statutory Auditors present their conclusions Group - including off-balance sheet items - in a signed letter of with regard to the quality of financial and accounting information representation which gives added weight to the quality of their and the internal control environment of the different companies financial information. of the Group, on the basis of the work that they performed during There are sub-consolidations at business unit and business group their review and audit assignments. level, which also act as primary control filters and help ensure consistency. Conclusions At Group level, the teams in charge of consolidation are specialized The LVMH group is pursuing its policy of constantly improving its by type of business and are in permanent contact with the business internal controls, which it has carried out since 2003, by bolstering groups and companies concerned, thereby enabling them to better the self-appraisal system and its adoption by the main stakeholders. understand and validate the reported financial data and anticipate the treatment of complex transactions. In response to changes in regulatory requirements, the Group launched the ERICA project in 2010, an approach integrating risk management and internal control, with the objective of extending its reach to all significant entities over the course of 2011.

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3. STATUTORY AUDITORS’ REPORT, PREPARED IN ACCORDANCE WITH ARTICLE L.225-235 OF THE FRENCH COMMERCIAL CODE (CODE DE COMMERCE), ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS OF THE COMPANY LVMH MOËT HENNESSY - LOUIS VUITTON

To the Shareholders, In our capacity 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, 2010. It is the Chairman’s responsibility to prepare and to submit for the Board of Director’s approval a report on internal control and risk management procedures implemented by the Company and to provide the other information required by Article L. 225-37 of the French Commercial Code relating to matters such as corporate governance. Our role is to: -- report on the information contained in the Chairman’s report in respect of the internal control procedures relating to the preparation and processing of the accounting and financial information, and -- confirm that the report also includes the other information required by Article L. 225-37 of the French Commercial Code. It should be noted that our role is not to verify the fairness of this other information. We conducted our work in accordance with professional standards applicable in France.

Information on the internal control and risk management procedures relating to the preparation and processing of accounting and financial information The professional standards require that we perform the necessary procedures to assess the fairness of the information provided in the Chairman’s report in respect of the internal control procedures relating to the preparation and processing of the accounting and financial information. These procedures consist mainly in: -- obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of the accounting and financial information on which the information presented in the Chairman’s report is based and of the existing documentation; -- obtaining an understanding of the work involved in the preparation of this information and of the existing documentation; -- determining if any material weakness in the internal control procedures relating to the preparation and processing of the accounting and financial information that we would have noted in the course of our work is properly disclosed in the Chairman’s report. On the basis of our work, we have nothing to report on the information in respect of the company’s internal control and risk management procedures relating to the preparation and processing of the accounting and financial information contained in the report prepared by the Chairman of the Board of Directors in accordance with Article L. 225-37 of the French Commercial Code.

Other information We confirm that the report prepared by the Chairman of the Board of Directors also contains the other information required by Article L. 225-37 of the French Commercial Code. Neuilly-Sur-Seine, February 16, 2011

The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG et Autres

Thierry Benoit Olivier Breillot Gilles Cohen

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking users. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.

114 Reference Document 2010 Financial statements

Consolidated financial statements

Page

Consolidated income statement 116

Consolidated statement of comprehensive gains and losses 117

Consolidated balance sheet 118

Consolidated cash flow statement 119

Consolidated statement of changes in equity 120

Notes to the consolidated financial statements 123

Consolidated companies 177

STATUTORY AUDITORS’ REPORT ON THE consolidated FINANCIAL STATEMENTS 183

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Consolidated income statement

(EUR millions, except for earnings per share) Notes 2010 2009 2008

Revenue 22-23 20,320 17,053 17,193 Cost of sales (7,184) (6,164) (6,012)

Gross margin 13,136 10,889 11,181 Marketing and selling expenses (7,098) (6,051) (6,104) General and administrative expenses (1,717) (1,486) (1,449)

Profit from recurring operations 22-23 4,321 3,352 3,628

Other operating income and expenses 24 (152) (191) (143)

Operating profit 4,169 3,161 3,485 Cost of net financial debt (151) (187) (257) Other financial income and expenses 763 (155) (24)

Net financial income (expense) 25 612 (342) (281)

Income taxes 26 (1,469) (849) (893) Income (loss) from investments in associates 7 7 3 7

Net profit before minority interests 3,319 1,973 2,318 Minority interests (287) (218) (292)

Net profit, Group share 3,032 1,755 2,026

Basic Group share of earnings per share (EUR) 27 6.36 3.71 4.28 Number of shares on which the calculation is based 476,870,920 473,597,075 473,554,813

Diluted Group share of earnings per share (EUR) 27 6.32 3.70 4.26 Number of shares on which the calculation is based 479,739,697 474,838,025 475,610,672

116 Reference Document 2010 Financial statements Consolidated financial statements

Consolidated statement of comprehensive gains and losses

(EUR millions) 2010 2009 2008

Net profit before minority interests 3,319 1,973 2,318 Translation adjustments 701 (128) 257 Tax impact 89 (20) 25

790 (148) 282

Change in value of available for sale financial assets 294 114 (186) Amounts transferred to income statement 38 (11) (66) Tax impact (35) (26) 21

297 77 (231)

Change in value of hedges of future foreign currency cash flows (20) 133 138 Amounts transferred to income statement (30) (125) (206) Tax impact 14 (2) 43

(36) 6 (25)

Change in value of vineyard land 206 (53) 172 Tax impact (71) 18 (59)

135 (35) 113 Gains and losses recognized in equity 1,186 (100) 139

Comprehensive gains and losses 4,505 1,873 2,457 Minority interests (375) (189) (352) Comprehensive gains and losses, Group share 4,130 1,684 2,105

Reference Document 2010 117 Financial statements Consolidated financial statements

Consolidated balance sheet

ASSETS Notes 2010 2009 2008 (1)

(EUR millions) Brands and other intangible assets - net 3 9,104 8,697 8,523 Goodwill - net 4 5,027 4,270 4,423 Property, plant and equipment - net 6 6,733 6,140 6,081 Investments in associates 7 223 213 216 Non-current available for sale financial assets 8 3,891 540 375 Other non-current assets 319 750 841 Deferred tax 26 668 521 670 Non-current assets 25,965 21,131 21,129

Inventories and work in progress 9 5,991 5,644 5,764 Trade accounts receivable 10 1,565 1,455 1,650 Income taxes 96 217 229 Other current assets 11 1,255 1,213 1,698 Cash and cash equivalents 13 2,292 2,446 1,013 Current assets 11,199 10,975 10,354

Total assets 37,164 32,106 31,483

LIABILITIES AND EQUITY Notes 2010 2009 2008 (1)

(EUR millions) Share capital 147 147 147 Share premium account 1,782 1,763 1,737 Treasury shares and LVMH-share settled derivatives (607) (929) (983) Revaluation reserves 1,244 871 818 Other reserves 11,370 10,684 9,430 Cumulative translation adjustment 230 (495) (371) Net profit, Group share 3,032 1,755 2,026 Equity, Group share 14 17,198 13,796 12,804 Minority interests 16 1,006 989 989 Total equity 18,204 14,785 13,793

Long term borrowings 17 3,432 4,077 3,738 Provisions 18 1,167 990 971 Deferred tax 26 3,354 3,117 3,113 Other non-current liabilities 19 3,947 3,089 3,253 Non-current liabilities 11,900 11,273 11,075

Short term borrowings 17 1,834 1,708 1,847 Trade accounts payable 2,298 1,911 2,292 Income taxes 446 221 304 Provisions 18 339 334 306 Other current liabilities 20 2,143 1,874 1,866 Current liabilities 7,060 6,048 6,615

Total liabilities and equity 37,164 32,106 31,483

(1) The balance sheet as of December 31, 2008 has been restated to reflect the retrospective application as of January 1, 2007 of IAS 38 Intangible assets as amended. See Note 1.2.

118 Reference Document 2010 Financial statements Consolidated financial statements

Consolidated cash flow statement

(EUR millions) Notes 2010 2009 2008 I. OPERATING ACTIVITIES AND OPERATING INVESTMENTS Operating profit 4,169 3,161 3,485 Net increase in depreciation, amortization and provisions, excluding tax and financial items 788 826 695 Other computed expenses, excluding financial items (126) (37) (42) Dividends received 20 21 17 Other adjustments (3) (43) (59) Cash from operations before changes in working capital 4,848 3,928 4,096 Cost of net financial debt: interest paid (149) (185) (222) Income taxes paid (897) (900) (866) Net cash from operating activities before changes in working capital 3,802 2,843 3,008 Change in inventories and work in progress (126) 69 (826) Change in trade accounts receivable (13) 206 (29) Change in trade accounts payable 295 (362) 135 Change in other receivables and payables 91 178 (10) Total change in working capital 247 91 (730) Net cash from operating activities 4,049 2,934 2,278 Purchase of tangible and intangible fixed assets (1,002) (748) (1,039) Proceeds from sale of tangible and intangible fixed assets 33 26 100 Guarantee deposits paid and other operating investments (7) (7) (8) Operating investments (976) (729) (947) Net cash from (used in) operating activities and operating investments (free cash flow) 3,073 2,205 1,331 II. FINANCIAL INVESTMENTS Purchase of non-current available for sale financial assets 8 (1,724) (93) (155) Proceeds from sale of non-current available for sale financial assets 8 70 49 184 Impact of purchase and sale of consolidated investments 2.4 (61) (278) (642) Net cash from (used in) financial investments (1,715) (322) (613) III. TRANSACTIONS RELATING TO EQUITY Capital increases of LVMH 14 120 30 5 Capital increases of subsidiaries subscribed by minority interests 16 1 11 4 Acquisition and disposals of treasury shares and LVMH-share settled derivatives 14.2 155 34 (143) Interim and final dividends paid by LVMH 14.3 (953) (758) (758) Interim and final dividends paid to minority interests in consolidated subsidiaries 16 (158) (175) (188) Purchase and proceeds from sale of minority interests 2.4 (185) - - Net cash from (used in) transactions relating to equity (1,020) (858) (1,080) IV. FINANCING ACTIVITIES Proceeds from borrowings 564 2,442 2,254 Repayment of borrowings (1,290) (2,112) (2,301) Purchase and proceeds from sale of current available for sale financial assets (32) 321 (47) Net cash from (used in) financing activities (758) 651 (94) V. EFFECT OF EXCHANGE RATE CHANGES 188 (120) 87 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (I+II+III+IV+V) (232) 1,556 (369) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13 2,274 718 1,087 CASH AND CASH EQUIVALENTS AT END OF PERIOD 13 2,042 2,274 718 Transactions included in the table above, generating no change in cash: - acquisition of assets by means of finance leases 6 12 11

Reference Document 2010 119 Financial statements Consolidated financial statements

Consolidated statement of changes in equity

(EUR millions) Number Share Share Treasury Cumulative Revaluation reserves Net Total equity of shares capital premium shares and translation profit account LVMH-share adjustment Available Hedges Vineyard and Group Minority Total settled for sale of future land other share interests derivatives financial foreign reserves assets currency cash flows

Notes 14.1 14.2 14.4 16 As of December 31, 2007 (1) 489,937,410 147 1,736 (877) (608) 367 76 533 10,123 11,497 937 12,434 Gains and losses recognized 237 (231) (17) 90 79 60 139 in equity Net profit 2,026 2,026 292 2,318 Comprehensive gains and losses - - - 237 (231) (17) 90 2,026 2,105 352 2,457 Stock option plan and 41 41 3 44 similar expenses (Acquisition)/disposal of treasury shares and LVMH- (110) 24 (86) - (86) share settled derivatives Exercise of share subscription 92,600 5 5 - 5 options Retirement of LVMH shares (92,600) (4) 4 - - - Capital increase in subsidiaries - 4 4 Interim and final dividends paid (758) (758) (188) (946) Effects of changes in control - 20 20 of consolidated entities Effects of acquisition and disposal of minority - - - interests’ shares Effects of purchase commitments - (139) (139) for minority interests As of December 31, 2008 489,937,410 147 1,737 (983) (371) 136 59 623 11,456 12,804 989 13,793 Gains and losses recognized (124) 77 4 (28) (71) (29) (100) in equity Net profit 1,755 1,755 218 1,973 Comprehensive gains and losses - - - (124) 77 4 (28) 1,755 1,684 189 1,873 Stock option plan and 43 43 3 46 similar expenses (Acquisition)/disposal of treasury shares and LVMH- 50 (57) (7) - (7) share settled derivatives Exercise of share subscription 557,204 30 30 - 30 options Retirement of LVMH shares (88,960) (4) 4 - - - Capital increase in subsidiaries - 11 11 Interim and final dividends paid (758) (758) (176) (934) Effects of changes in control - 11 11 of consolidated entities Effects of acquisition and disposal of minority - (8) (8) interests’ shares Effects of purchase commitments - (30) (30) for minority interests As of December 31, 2009 490,405,654 147 1,763 (929) (495) 213 63 595 12,439 13,796 989 14,785 (1) Equity as of December 31, 2007 has been restated to reflect the retrospective application as of January 1, 2007 of IAS 38 Intangible assets as amended. See Note 1.2.

120 Reference Document 2010 Financial statements Consolidated financial statements

(EUR millions) Number Share Share Treasury Cumulative Revaluation reserves Net Total equity of shares capital premium shares and translation profit account LVMH-share adjustment Available Hedges Vineyard and Group Minority Total settled for sale of future land other share interests derivatives financial foreign reserves assets currency cash flows

Notes 14.1 14.2 14.4 16 As of December 31, 2009 490,405,654 147 1,763 (929) (495) 213 63 595 12,439 13,796 989 14,785 Gains and losses recognized 725 297 (32) 108 1,098 88 1,186 in equity Net profit 3,032 3,032 287 3,319

Comprehensive gains and losses - - - 725 297 (32) 108 3,032 4,130 375 4,505 Stock option plan and 41 41 3 44 similar expenses (Acquisition)/disposal of treasury shares and LVMH- 221 (43) 178 - 178 share settled derivatives Exercise of share subscription 2,012,478 120 120 - 120 options Retirement of LVMH shares (1,775,900) (101) 101 - - - Capital increase in subsidiaries - 1 1 Interim and final dividends paid (953) (953) (158) (1,111) Effects of changes in control - (3) (3) of consolidated entities Effects of acquisition and disposal of minority (83) (83) (104) (187) interests’ shares Effects of purchase commitments (31) (31) (97) (128) for minority interests As of December 31, 2010 490,642,232 147 1,782 (607) 230 510 31 703 14,402 17,198 1,006 18,204

Reference Document 2010 121 122 Reference Document 2010 Financial statements Consolidated financial statements

Notes to the consolidated financial statements

Page 1. Accounting policies 124

2. Changes in the percentage of interest in consolidated entities 131

3. Brands, trade names and other intangible assets 134

4. Goodwill 136

5. Impairment testing of intangible assets with indefinite useful lives 137

6. Property, plant and equipment 138

7. Investments in associates 140

8. Non-current available for sale financial assets 141

9. Inventories and work in progress 142

10. Trade accounts receivable 143

11. Other current assets 144

12. Current available for sale assets 144

13. Cash and cash equivalents 145

14. Equity 145

15. Stock option and similar plans 148

16. Minority interests 151

17. Borrowings 152

18. Provisions 155

19. Other non-current liabilities 155

20. Other current liabilities 156

21. Financial instruments and market risk management 156

22. Segment information 162

23. Revenue and expenses by nature 165

24. Other operating income and expenses 166

25. Net financial income/expense 167

26. Income taxes 168

27. earnings per share 170

28. Provisions for pensions, medical costs and similar commitments 170

29. Off balance sheet commitments 173

30. Related party transactions 175

31. Subsequent events 176

Reference Document 2010 123 Financial statements Consolidated financial statements

Notes to the consolidated financial statements

1. Accounting policies

1.1 General framework and environment (EUR millions) Impact as of January 1, 2007 The consolidated financial statements for the year ended Intangible assets (13) December 31, 2010 were established in accordance with Goodwill 6 international accounting standards and interpretations (IAS/IFRS) Property, plant and equipment (7) adopted by the European Union and applicable on December 31, Deferred tax 40 2010. These standards and interpretations have been applied Inventories and work in progress (3) consistently to the fiscal years presented. The 2010 consolidated Other current assets (117) financial statements were approved for publication by the Board Consolidated equity (94) of Directors on February 3, 2011. of which: Group share (93) minority interests (1) 1.2 Changes in the accounting framework in 2010 Other current assets mainly relate to prepaid expenses recognized Standards, amendments and interpretations for which in respect of samples and advertising materials (primarily for application is mandatory in 2010 Perfumes and Cosmetics). The standards, amendments and interpretations applicable to the Net profit for fiscal year 2008 was not restated retrospectively, as LVMH group that have been implemented since January 1, 2010 the impact of applying IAS 38 as amended was considered to be relate to: similar to the impact as of January 1, 2007. -- IFRS 3 (Revised) on accounting for business combinations; Standards, amendments and interpretations for which -- IAS 27 (Revised) on the preparation of consolidated financial application is optional in 2010 statements; The following standards, amendments and interpretations -- Amendment to IAS 17 relating to land leases; applicable to LVMH, whose mandatory application date is -- IFRIC 16 relating to hedges of a net investment in a foreign January 1, 2011, were not applied early in 2010; they relate to: operation; -- amendments to IFRS 7 on financial instruments disclosures; -- Amendment to IAS 39 on items which are eligible for hedge -- amendments to IAS 24 on related party disclosures and accounting. transactions. These standards, amendments and interpretations do not have The application of these standards, amendments and interpretations a significant impact on the Group’s consolidated financial in 2011 is not expected to have a material impact on the Group’s statements. consolidated financial statements. Impacts of the amendment to IAS 38 Intangible assets Since fiscal year 2009, advertising and promotion expenses are recorded 1.3 First-time adoption of IFRS upon the receipt or production of goods or upon completion of services The first accounts prepared by the Group in accordance with rendered. Previously, such costs were recognized as expenses for the IFRS were the financial statements for the year ended December 31, period in which they were incurred; the cost of media campaigns 2005, with a transition date of January 1, 2004. IFRS 1 allowed for in particular was time-apportioned over the duration of these exceptions to the retrospective application of IFRS at the transition campaigns and the cost of samples and catalogs was recognized when date. The procedures implemented by the Group with respect to they were made available to customers. The impact of this change these exceptions are listed below: in accounting policy on consolidated equity amounts to 94 million -- business combinations: the exemption from retrospective euros as of January 1, 2007, when the retrospective application of this application was not applied. The recognition of the merger of amendment started; this amount breaks down as follows: Moët Hennessy and Louis Vuitton in 1987 and all subsequent acquisitions were restated in accordance with IFRS 3; IAS 36 Impairment of Assets and IAS 38 Intangible Assets were applied retrospectively as of this date;

124 Reference Document 2010 Financial statements Consolidated financial statements

-- measurement of property, plant and equipment and intangible -- at the average rates for the period for income statement items. assets: the option to measure these assets at fair value at the date Translation adjustments arising from the application of these rates of transition was not applied; are recorded in equity under “Cumulative translation adjustment”. -- employee benefits: actuarial gains and losses previously deferred under French GAAP at the date of transition were recognized; 1.7 Foreign currency transactions and hedging of -- foreign currency translation of the financial statements of foreign exchange rate risks subsidiaries: translation reserves relating to the consolidation of subsidiaries that prepare their accounts in foreign currency were Transactions of consolidated companies denominated in a reset to zero as of January 1, 2004 and offset against “Other currency other than their functional currencies are translated to reserves”; their functional currencies at the exchange rates prevailing at the -- share-based payment: IFRS 2 Share-Based Payment was transaction dates. applied to all share subscription and share purchase option plans Accounts receivable, accounts payable and debts denominated that were open at the date of transition, including those created in currencies other than the entities’ functional currencies are before November 7, 2002, the date before which application is translated at the applicable exchange rates at the balance sheet not mandatory. date. Unrealized gains and losses resulting from this translation are recognized: 1.4 Use of estimates -- within cost of sales in the case of commercial transactions; For the purpose of preparing the consolidated financial statements, -- within net financial income/expense in the case of financial measurement of certain balance sheet and income statement transactions. items requires the use of hypotheses, estimates or other forms of Foreign exchange gains and losses arising from the translation judgment. This is particularly true of the valuation of intangible or elimination of inter-company transactions or receivables assets, purchase commitments for minority interests and of the and payables denominated in currencies other than the entity’s determination of the amount of provisions for contingencies and functional currency are recorded in the income statement unless losses or for impairment of inventories and, if applicable, deferred they relate to long term inter-company financing transactions tax assets. Such hypotheses, estimates or other forms of judgment which can be considered as transactions relating to equity. In the which are undertaken on the basis of the information available, or latter case, translation adjustments are recorded in equity under situations prevalent at the date of preparation of the accounts, may “Cumulative translation adjustment”. prove different from the subsequent actual events. Derivatives which are designated as hedges of commercial transactions denominated in a currency other than the functional 1.5 Methods of consolidation currency of the entity are recognized in the balance sheet at their The subsidiaries in which the Group holds a direct or indirect de market value at the balance sheet date and any change in the market facto or de jure controlling interest are fully consolidated. value of such derivatives is recognized: Jointly controlled companies are consolidated on a proportionate -- within cost of sales for the effective portion of hedges of receivables and payables recognized in the balance sheet at the basis. end of the period; For distribution subsidiaries operating in accordance with the -- within equity (as a revaluation reserve) for the effective portion contractual distribution arrangements with the Diageo Group, of hedges of future cash flows (this part is transferred to cost of only the portion of assets and liabilities and results of operations sales at the time of recognition of the hedged assets and liabilities); relating to the LVMH group’s activities is included in the -- within net financial income/expense for the ineffective portion of consolidated financial statements (see Note 1.23). hedges; changes in the value of discount and premium associated Companies where the Group has significant influence but no with forward contracts, as well as the time value component of controlling interest are accounted for using the equity method. options, are systematically considered as ineffective portions. When derivatives are designated as hedges of subsidiaries’ equity 1.6 Foreign currency translation of the financial outside the euro zone (net investment hedge), any change in statements of subsidiaries outside the euro zone fair value of the derivatives is recognized within equity under “cumulative translation adjustment” for the effective portion and The consolidated financial statements are stated in euros; the within net financial income/expense for the ineffective portion. financial statements of subsidiaries stated in a different functional currency are translated into euros: Market value changes of derivatives not designated as hedges are -- at the period-end exchange rates for balance sheet items; recorded within net financial income/expense.

Reference Document 2010 125 Financial statements Consolidated financial statements

1.8 Brands, trade names and other intangible assets Intangible assets other than brands and trade names are amortized over the following periods: Only acquired brands and trade names that are well known and -- leasehold rights, key money: based on market conditions individually identifiable are recorded as assets at their values generally between 100% and 200% of the lease period; calculated on their dates of acquisition. -- development expenditure: 3 years at most; Brands and goodwill are chiefly valued on the basis of the present value of forecast cash flows, or of comparable transactions (i.e. -- software: 1 to 5 years. using the revenue and net profit coefficients employed for recent transactions involving similar brands), or of stock market multiples 1.9 Goodwill observed for related businesses. Other complementary methods may also be employed: the royalty method, involving equating a When the Group takes de jure or de facto control of an enterprise, its brand’s value with the present value of the royalties required to be assets, liabilities and contingent liabilities are estimated at their paid for its use; the margin differential method, applicable when fair value as of the date when control is obtained and the difference a measurable difference can be identified between the amount of between the cost of taking control and the Group’s share of the revenue generated by a branded product in comparison with an fair value of those assets, liabilities and contingent liabilities is unbranded product; and finally the equivalent brand reconstitution recognized as goodwill. method involving, in particular, estimation of the amount of The cost of taking control is the price paid by the Group in advertising required to generate a similar brand. the context of an acquisition, or an estimate of this price if the Costs incurred in creating a new brand or developing an existing transaction is carried out without any payment of cash, excluding brand are expensed. acquisition costs which are disclosed under “Other operating income and expenses”. Brands, trade names and other intangible assets with finite useful lives are amortized over their estimated useful lives. The As of January 1, 2010, in accordance with IAS 27 (Revised), the classification of a brand or trade name as an asset of definite or difference between the carrying amount of minority interests indefinite useful life is generally based on the following criteria: purchased after control is obtained and the price paid for their -- the brand or trade name’s positioning in its market expressed in acquisition is deducted from equity. terms of volume of activity, international presence and notoriety; Goodwill is accounted for in the functional currency of the acquired -- its expected long term profitability; entity. -- its degree of exposure to changes in the economic environment; Goodwill is not amortized but is subject to annual impairment -- any major event within its business segment liable to compromise testing using the methodology described in Note 1.12. Any its future development; impairment expense recognized is included within “Other -- its age. operating income and expenses”. Amortizable lives of brands and trade names with definite useful lives range from 15 to 40 years, depending on their estimated 1.10 Purchase commitments for minority interests period of utilization. The Group has granted put options to minority shareholders of Any impairment expense of brands and trade names and, in certain fully consolidated subsidiaries. some cases, amortization expense, are recognized within “Other operating income and expenses”. Pending specific guidance from IFRSs regarding this issue, the Impairment tests are carried out for brands, trade names and other Group recognizes these commitments as follows: intangible assets using the methodology described in Note 1.12. -- the value of the commitment at the closing date appears in Research expenditure is not capitalized. New product development “Other non-current liabilities”; expenditure is not capitalized unless the final decision to launch -- the corresponding minority interests are reclassified and the product has been taken. included in the above amount;

126 Reference Document 2010 Financial statements Consolidated financial statements

-- for commitments granted prior to January 1, 2010, the 1.12 Impairment testing of fixed assets difference between the amount of the commitments and reclassified minority interests is maintained as an asset on the balance sheet Intangible and tangible fixed assets are subject to impairment under goodwill, as well as subsequent changes in this difference. testing whenever there is any indication that an asset may be For commitments granted as of January 1, 2010, the difference impaired, and in any event at least annually in the case of intangible between the amount of the commitments and minority interests assets with indefinite useful lives (mainly brands, trade names and is recorded in equity, under “other reserves”. goodwill). When the carrying amount of such assets is greater than This accounting policy has no effect on the presentation of minority the higher of their value in use or net selling price, the resulting interests within the income statement. impairment loss is recognized within “Other operating income and expenses”, allocated in priority to any existing goodwill. 1.11 Property, plant and equipment Value in use is based on the present value of the cash flows expected to be generated by these assets. Net selling price is estimated by With the exception of vineyard land, the gross value of property, comparison with recent similar transactions or on the basis of plant and equipment is stated at acquisition cost. Any borrowing valuations performed by independent experts. costs incurred prior to the placed-in-service date or during the construction period of assets are capitalized. Cash flows are forecast for each business segment defined as one Vineyard land is recognized at the market value at the balance or several brands or trade names under the responsibility of a sheet date. This valuation is based on official published data specific management team. Smaller scale cash generating units, for recent transactions in the same region, or on independent e.g. a group of stores, may be distinguished within a particular appraisals. Any difference compared to historical cost is business segment. recognized within equity in “Revaluation reserves”. If market The forecast data required for the cash flow methods is based on value falls below acquisition cost the resulting impairment is budgets and business plans prepared by management of the related charged to the income statement. business segments. Detailed forecasts cover a five-year period, Vines for champagnes, cognacs and other wines produced by the a period which may be extended in the case of certain brands Group, are considered as biological assets as defined in IAS 41 undergoing strategic repositioning, or which have a production Agriculture. As their valuation at market value differs little from cycle exceeding five years. Moreover, a final value is also estimated, that recognized at historical cost, no revaluation is undertaken which corresponds to the capitalization in perpetuity of cash flows for these assets. most often arising from the last year of the plan. When several forecast scenarios are developed, the probability of occurrence of Investment property is measured at cost. each scenario is assessed. Forecast cash flows are discounted on Assets acquired under finance leases are capitalized on the basis the basis of the rate of return to be expected by an investor in of the lower of their market value and the present value of future the applicable business and include assessment of the risk factor lease payments. associated with each business. The depreciable amount of property, plant and equipment comprises its acquisition cost less estimated residual value, which 1.13 Available for sale financial assets corresponds to the disposal price of the asset at the end of its useful life. Financial assets are classified as current or non-current based on their nature. Property, plant and equipment is depreciated on a straight-line basis over its estimated useful life: Non-current available for sale financial assets comprise strategic and non-strategic investments whose estimated period and form -- buildings including investment property 20 to 50 years of ownership justify such classification. -- machinery and equipment 3 to 25 years -- store improvements 3 to 10 years Current available for sale financial assets include temporary investments in shares, shares of “SICAV”, “FCP” and other mutual -- producing vineyards 18 to 25 years funds, excluding investments made as part of the daily cash Expenses for maintenance and repairs are charged to the income management, which are accounted for as cash and cash equivalents statement as incurred. (see Note 1.16).

Reference Document 2010 127 Financial statements Consolidated financial statements

Available for sale financial assets are measured at their listed 1.16 Cash and cash equivalents value at balance sheet date in the case of quoted investments, and at their net realizable value at that date in the case of unquoted Cash and cash equivalents comprise cash on hand and highly liquid investments. monetary investments subject to an insignificant risk of changes in value. Positive or negative changes in value are taken to equity within Monetary investments are measured at their market value and at “Revaluation reserves”. If an impairment loss is judged to be the exchange rate prevailing at the balance sheet date, with any definitive, an impairment is recognized and charged to net changes in value recognized as part of net financial income/expense. financial income/expense; the impairment is only reversed through the income statement at the time of sale of the corresponding 1.17 Provisions available for sale financial assets. A provision is recognized whenever an obligation exists towards a third party resulting in a probable disbursement for the Group, 1.14 Inventories and work in progress the amount of which may be reliably estimated. Inventories other than wine produced by the Group are recorded When execution of its obligation is expected to be deferred by more at the lower of cost (excluding interest expense) and net realizable than one year, the provision amount is discounted, the effects of value; cost comprises manufacturing cost (finished goods) or which are recognized in net financial income/expense using the purchase price, plus incidental costs (raw materials, merchandise). effective interest rate method. Wine produced by the Group, especially champagne, is measured at the applicable harvest market value, as if the harvested grapes 1.18 Borrowings had been purchased from third parties. Until the date of the harvest, the value of grapes is calculated pro rata temporis on the Borrowings are measured at amortized cost, i.e. nominal value net basis of the estimated yield and market value. of premium and issue expenses, which are charged progressively to net financial income/expense using the effective interest method. Inventories are valued using the weighted average cost or FIFO methods. In the case of hedging against fluctuations in the capital amount of borrowings resulting from changes in interest rates, both the Due to the length of the aging process required for champagne and hedged amount of borrowings and the related hedges are measured cognac, the holding period for these inventories generally exceeds at their market value at the balance sheet date, with any changes one year. However, in accordance with industry practices, these in those values recognized within net financial income/expense for inventories are nevertheless classified as current assets. the period. Fair value of hedged borrowings is determined using Provisions for impairment of inventories are chiefly recognized similar methods as those described hereafter in Note 1.19. for businesses other than Wines and Spirits. They are generally In the case of hedging against fluctuations in future interest required because of product obsolescence (end of season or payments, the related borrowings remain measured at their collection, date of expiry, etc.) or lack of sales prospects. amortized cost whilst any changes in value of the effective hedge portions are taken to equity as part of revaluation reserves. 1.15 Trade accounts receivable, loans and other receivables Changes in value of non-hedge derivatives, and of the ineffective Trade accounts receivable are recorded at their face value. A portions of hedges, are recognized within net financial income/ provision for impairment is recorded if their net realizable value, expense. based on the probability of their collection, is less than their Financial debt bearing embedded derivatives is measured at fair carrying amount. value; changes in fair value are recognized within net financial The amount of long term loans and receivables (i.e. those falling income/expense. due in more than one year) is subject to discounting, the effects of Net financial debt comprises short and long term borrowings, the which are recognized under net financial income/expense using market value at the balance sheet date of interest rate derivatives, the effective interest rate method. less the value of current available for sale financial assets, cash and cash equivalents in addition to the market value at the balance sheet date of related foreign exchange derivatives at that date.

128 Reference Document 2010 Financial statements Consolidated financial statements

1.19 Derivatives If this commitment is either partially or wholly funded by payments made by the Group to external financial organizations, The Group enters into derivative transactions as part of its strategy these payments are deducted from the actuarial commitment for hedging foreign exchange and interest rate risks. recorded in the balance sheet. IAS 39 subordinates the use of hedge accounting to demonstration The actuarial commitment is calculated based on assessments that and documentation of the effectiveness of hedging relationships are specifically designed for the country and the Group company when hedges are implemented and subsequently throughout concerned. In particular, these assessments include assumptions their existence. A hedge is considered to be effective if the ratio regarding salary increases, inflation, life expectancy, staff turnover. of changes in the value of the derivative to changes in the value of the hedged underlying remains within a range of 80 to 125%. Cumulative actuarial gains or losses are amortized if, at the year- end, they exceed 10% of the higher of the total commitment or Derivatives are recognized in the balance sheet at their fair value the market value of the funded plan assets. These gains or losses at the balance sheet date. Changes in their value are accounted for are amortized in the period following their recognition over the as described in Note 1.7 in the case of foreign exchange hedges, average residual active life of the relevant employees. and as described in Note 1.18 in the case of interest rate hedges. Fair value is based on market data and on commonly used valuation 1.22 Current and deferred tax models, and may be confirmed in the case of complex instruments by reference to values quoted by independent financial institutions. Deferred tax is recognized in respect of temporary differences arising between the amounts of assets and liabilities for purposes Derivatives with maturities in excess of twelve months are disclosed of consolidation and the amounts resulting from application of as non-current assets and liabilities. tax regulations. Deferred tax is measured on the basis of the income tax rates 1.20 Treasury shares and LVMH-share settled enacted at the balance sheet date; the effect of changes in rates derivatives is recognized during the periods in which changes are enacted. LVMH shares and options to purchase LVMH shares that are held Future tax savings from tax losses carried forward are recorded by the Group are measured at their acquisition cost and recognized as deferred tax assets on the balance sheet and impaired if they as a deduction from consolidated equity, irrespective of the purpose are deemed not recoverable; only amounts for which future use is for which they are held. deemed probable are recognized. The cost of disposals of shares is determined by allocation category Deferred tax assets and liabilities are not discounted. (see Note 14.2) using the FIFO method with the exception of shares held under stock option plans for which the calculation is Taxes payable in respect of the distribution of retained earnings of performed for each plan using the weighted average cost method. subsidiaries are provided for if distribution is deemed probable. Gains and losses on disposal, net of income taxes, are taken directly to equity. 1.23 Revenue recognition

1.21 Pensions, medical costs and other employee or Revenue retired employee commitments Revenue mainly comprises retail sale within the Group’s store network and sales through distributors. Sales made in stores When payments are made by the Group in respect of retirement owned by third parties are treated as retail transactions if the indemnities, pensions, medical costs and other commitments risks and rewards of ownership of the inventories are retained to third party organizations which assume the payment of by the Group. indemnities, pensions or medical expense reimbursements, these contributions are expensed in the period in which they fall due Direct sales to customers are made through retail stores for Fashion with no liability recorded on the balance sheet. and Leather Goods and Selective Retailing, as well as certain Perfumes and Cosmetics and Watches and Jewelry brands. These When retirement benefits, pensions, medical costs and other sales are recognized at the time of purchase by retail customers. commitments are to be borne by the Group, a provision is recorded in the balance sheet in the amount of the corresponding actuarial Wholesale sales through distributors are made for Wines and commitment for the Group, and any changes in this provision are Spirits, and certain Perfumes and Cosmetics and Watches and expensed within profit from recurring operations over the period, Jewelry brands. The Group recognizes revenue when title transfers including effects of discounting. to third party customers, generally upon shipment.

Reference Document 2010 129 Financial statements Consolidated financial statements

Revenue includes shipment and transportation costs re-billed to which the plan is instituted, and the amount of dividends expected customers only when these costs are included in products’ selling to accrue during the vesting period. prices as a lump sum. For such plans, the expense is apportioned on a straight-line basis in Revenue is presented net of all forms of discount. In particular, the income statement over the vesting period, with a corresponding payments made in order to have products referenced or, in accordance impact on reserves in the balance sheet. with agreements, to participate in advertising campaigns with the For cash-settled compensation plans index-linked to the change distributors, are deducted from related revenue. in LVMH share price, the gain over the vesting period is estimated Provisions for product returns at each period-end based on the LVMH share price at that date, and is charged to the income statement on a pro rata basis over Perfumes and Cosmetics and, to a lesser extent, Fashion and the vesting period, with a corresponding balance sheet impact on Leather Goods and Watches and Jewelry companies may accept provisions. After the vesting period has expired, the change in the the return of unsold or outdated products from their customers expected benefit resulting from the change in the LVMH share and distributors. price is recorded in the income statement until the instrument Where this practice is applied, revenue and the corresponding trade is settled. receivables are reduced by the estimated amount of such returns, and a corresponding entry is made to inventories. The estimated 1.26 Definition of Profit from recurring operations and rate of returns is based on statistics of historical returns. Other operating income and expenses

Businesses undertaken in partnership with Diageo The Group’s main business is the management and development of its brands and trade names. Profit from recurring operations is A significant proportion of revenue for the Group’s Wines and derived from these activities, whether they are recurring or non- Spirits businesses are achieved within the framework of distribution recurring, core or incidental transactions. agreements with Diageo generally taking the form of shared entities which sell and deliver both groups’ brands to customers. Other operating income and expenses comprises income statement On the basis of the distribution agreements, which provide specific items which, due to their nature, amount or frequency, may not be rules for allocating these entities’ income statement items and considered as inherent to the Group’s recurring operations. This assets and liabilities between LVMH and Diageo, LVMH only caption reflects in particular the impact of changes in the scope of recognizes the portion of the income statement and balance sheet consolidation and the impairment of brands and goodwill, as well attributable to its own brands. as any significant amount of gains or losses arising on the disposal of fixed assets, restructuring costs, costs in respect of disputes, or any other non-recurring income or expense which may otherwise 1.24 Advertising and promotion expenses distort the comparability of profit from recurring operations from Advertising and promotion expenses include the costs of producing one period to the next. advertising media, purchasing media space, manufacturing samples and publishing catalogs, and in general, the cost of all 1.27 Earnings per share activities designed to promote the Group’s brands and products. Earnings per share are calculated based on the weighted average Advertising and promotion expenses are recorded upon receipt number of shares outstanding during the period, excluding or production of goods or upon completion of services rendered. treasury shares. Diluted earnings per share are calculated based on the weighted 1.25 Stock option and similar plans average number of shares before dilution and adding the weighted average number of shares that would result from the exercise of Share purchase and subscription option plans give rise to all existing subscription options during the period or any other recognition of an expense based on the expected benefit granted diluting instrument. It is assumed for the purposes of this to beneficiaries calculated on the basis of the closing share price on calculation that the funds received from the exercise of options, the day before the Board Meeting at which the plan is instituted, supplemented by the expense to be recognized for stock option and using the Black & Scholes method. similar plans (see Note 1.25), would be employed to re-purchase For bonus share plans, the expected benefit is calculated on the basis LVMH shares at a price corresponding to their average trading of the closing share price on the day before the Board Meeting at price over the period.

130 Reference Document 2010 Financial statements Consolidated financial statements

2. Changes in the percentage of interest in consolidated entities

2.1 Fiscal year 2010

Wines and Spirits August 2009. The table below summarizes the final purchase price allocation, on the basis of Château Cheval Blanc’s balance sheet as In December 2010, LVMH sold the Montaudon champagne house, of August 12, 2009: which was acquired in 2008 (See below). The rights held under grape supply contracts previously held by Montaudon as well as (EUR millions) Allocation of Carrying certain industrial assets were retained by LVMH. purchase price amount

Perfumes and Cosmetics Brand 183 - Vines and vineyard land 35 - The activity operated by La Brosse et Dupont was sold in Other tangible assets 3 4 September 2010. Inventories 9 4 Selective Retailing Working capital, excluding inventories (11) (8) Net financial debt 8 8 In July 2010, the Group acquired 70% of the share capital of Sack’s for a consideration of 75 million euros and entered into Deferred taxes (76) - a purchase commitment for the remaining 30%, exercisable Net assets acquired (50%) 151 8 from fiscal year 2015. Sack’s is Brazil’s leading online retailer of Goodwill 87 perfumes and cosmetics and is also a top player in the beauty Total cost of acquisition 238 retail sector in this country. Sack’s was fully consolidated with effect from August 2010. Provisional goodwill, determined on Goodwill corresponds to Château Cheval Blanc’s winemaking the basis of the portion of the net assets acquired by the Group, know-how, together with the synergies generated by its integration amounted to 76 million euros. The difference between the value within the Wines and Spirits business group. of the purchase commitment for the 30% of the share capital that was not acquired and minority interests, amounting to 31 million 2.3 Fiscal year 2008 euros, was deducted from equity. Wines and Spirits Other activities • In February 2008, the Group acquired the entire share capital of In November 2010, the Group increased its percentage interest the Spanish winery Bodega Numanthia Termes, a producer of wines in the Samaritaine’s real estate property from 57% to 99%, for from the Toro region, for total consideration of 27 million euros. consideration of 176 million euros. Acquisition costs, corresponding This acquisition was consolidated with effect from March 2008. primarily to registration fees, amounted to 9 million euros. The difference between the acquisition price, including acquisition • In December 2008, the Group acquired the entire share capital costs, and the carrying amount of minority interests was deducted of the Montaudon champagne house, owner of its eponymous brand, for total consideration of 30 million euros, including earn from Group equity, corresponding to an amount of 81 million out payments estimated at 4 million euros. This acquisition was euros. consolidated with effect from January 1, 2009.

2.2 Fiscal year 2009 Watches and Jewelry In April 2008, the Group acquired the entire share capital of the Wines and Spirits Swiss watchmaker Hublot for total consideration of 306 million In August 2009, the Group acquired from Groupe Arnault for euros (486 million Swiss francs), including 2 million euros in 238 million euros a 50% stake in the wine estate Château Cheval acquisition costs. Hublot was fully consolidated with effect from Blanc (Gironde, France), producer of the eponymous premium May 2008. The table below summarizes the final purchase price Saint-Émilion wine classified as premier grand cru classé A. Château allocation, on the basis of Hublot’s balance sheet as of May 1, 2008: Cheval Blanc has been consolidated on proportionate basis since

Reference Document 2010 131 Financial statements Consolidated financial statements

Brands and other intangible assets essentially comprise the (EUR millions) Allocation of Carrying purchase price amount financial daily Les Echos and subscriber databases. These intangible assets are amortized over periods of no more than fifteen years. Brand 219 - The amount recognized for goodwill mainly represents the human Property, plant and equipment 7 7 capital formed by the editorial teams of the Les Echos group, which Other non-current assets 1 2 cannot be isolated on the balance sheet. Inventories 39 43 • The business of the financial daily La Tribune, sold in Working capital, excluding inventories (3) (5) February 2008, was deconsolidated with effect from this date; Net financial debt (3) (3) • In October 2008, the Group acquired a 90% equity stake in Royal Deferred taxes (54) (6) Van Lent, the Dutch designer and builder of yachts sold under the Provisions (22) - Royal Van Lent - Feadship brand, with the remaining 10% stake of Net assets acquired 184 38 the share capital being subject to a purchase commitment. Royal Goodwill 122 Van Lent was fully consolidated with effect from October 2008. Total cost of acquisition 306 The table below summarizes the final allocation of the purchase price of 362 million euros, including acquisition costs in the The goodwill mainly represents the company’s expertise in amount of 3 million euros, on the basis of Royal Van Lent’s balance designing and manufacturing timepieces, and the synergies arising sheet as of October 1, 2008: from the brand’s integration into the distribution network of the Watches and Jewelry business group. (EUR millions) Allocation of Carrying purchase price amount Other activities Brands and other intangible assets 92 - • The equity stake in the Les Echos media group, acquired in Non-current assets 5 5 December 2007, was fully consolidated with effect from January 1, Work in-process 47 47 2008. The total consideration paid in 2007 for 100 percent of the Other current assets 18 18 share capital was 244 million euros, including 4 million euros Non-current liabilities (11) (9) in acquisition costs and excluding the assumption by LVMH of Current liabilities (15) (16) Pearson’s financial debt with respect to the Les Echos group, which amounted to 107 million euros. The table below summarizes the Deferred taxes (23) - purchase price allocation, on the basis of the balance sheet for the Minority interests (14) (14) Les Echos group as of January 1, 2008: Net assets acquired 99 31 Goodwill 263 (EUR millions) Allocation of Carrying Total cost of acquisition 362 purchase price amount Brands and other intangible assets 147 5 Goodwill represents the company’s know-how in the design and Property, plant and equipment 4 4 building of luxury yachts, as well as its relations with customers Other non-current assets 2 2 forged over time. Working capital (29) (26) Receivable vis-à-vis Pearson, assigned to LVMH 107 107 Cash and cash equivalents 21 21 Deferred taxes (48) (1) Provisions (14) (8) Net assets acquired 190 104 Goodwill 161 Total cost of acquisition 351

132 Reference Document 2010 Financial statements Consolidated financial statements

2.4 Impact on cash and cash equivalents of changes in the percentage of interest in consolidated entities

(EUR millions) 2010 2009 2008

Purchase price of consolidated investments (269) (287) (757) Positive cash balance/(net overdraft) of companies acquired (10) 9 156 Proceeds from sale of consolidated investments 38 - 2 (Positive cash balance)/net overdraft of companies sold (5) - (43) Impact of changes in the percentage of interest in consolidated entities (246) (278) (642) on cash and cash equivalents

• In 2010, the main impacts of changes in the percentage interest -- 24 million euros for the acquisition of minority interests in of consolidated entities break down as follows: certain subsidiaries of Sephora Europe. -- 185 million euros for the acquisition of minority interests in • In 2008, the main impacts of acquisitions of consolidated the Samaritaine; investments on the Group’s cash and cash equivalents broke down -- 75 million euros for the acquisition of 70% of Sack’s. as follows: -- 303 million euros for the acquisition of Hublot group; In 2010, the main impacts of disposals of consolidated investments -- 236 million euros for the acquisition of Royal Van Lent company; on the Group’s cash and cash equivalents break down as follows: -- 29 million euros for the acquisition of Montaudon; -- 20 million euros for the disposal of La Brosse et Dupont; -- 27 million euros for the acquisition of Bodega Numanthia -- 13 million euros for the disposal of Montaudon. Termes; • In 2009, the main impacts of acquisitions of consolidated -- lastly, cash and cash equivalents of the Les Echos group in the investments on the Group’s cash and cash equivalents broke down amount of 21 million euros. as follows: Amounts in respect of the sale of consolidated investments mainly -- 238 million euros for the acquisition of 50% of Cheval Blanc; correspond to impacts of the disposal of La Tribune.

2.5 Impact of acquisitions on period net profit Acquisitions carried out in 2010 and 2009 did not have a material impact on net profit for the fiscal year. If the 2008 acquisitions had been carried out as of January 1, the impact on the consolidated income statement would have been as follows:

(EUR millions) 2008 - Published consolidated Pro forma 2008 - Pro forma consolidated income statement restatements income statement Revenue 17,193 100 17,293 Profit from recurring operations 3,628 9 3,637 Net profit, Group share 2,026 8 2,034

Reference Document 2010 133 Financial statements Consolidated financial statements

3. Brands, trade names and other intangible assets

(EUR millions) 2010 2009 2008 (1) Gross Amortization and Net Net Net impairment

Brands 7,142 (425) 6,717 6,489 6,244 Trade names 3,339 (1,362) 1,977 1,853 1,909 License rights 98 (72) 26 41 43 Leasehold rights 284 (175) 109 91 102 Software 474 (336) 138 110 110 Other 287 (150) 137 113 115 Total 11,624 (2,520) 9,104 8,697 8,523 Of which: assets held under finance leases 14 (14) - - - (1) See Note 1.2 Application of IAS 38 as amended.

3.1 Movements in the year Movements during the year ended December 31, 2010 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, 2009 6,874 3,119 1,003 10,996 Acquisitions 1 - 135 136 Disposals and retirements - - (44) (44) Changes in the scope of consolidation (2) - - (2) Translation adjustment 269 220 49 538 As of December 31, 2010 7,142 3,339 1,143 11,624

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

As of December 31, 2009 (385) (1,266) (648) (2,299) Amortization expense (34) - (101) (135) Impairment expense - - - - Disposals and retirements - - 31 31 Changes in the scope of consolidation - - 4 4 Translation adjustment (6) (96) (19) (121) As of December 31, 2010 (425) (1,362) (733) (2,520)

Net carrying amount as of December 31, 2010 6,717 1,977 410 9,104

The translation adjustment is mainly attributable to intangible assets recognized in US dollars, and in Swiss francs, following the change in the exchange rate of those currencies with respect to the euro during the fiscal year. The DFS Galleria trade name and the Donna Karan brand for the US dollar and the TAG Heuer and Hublot brands for the Swiss franc were particularly affected. The gross value of amortized brands was 770 million euros as of December 31, 2010.

134 Reference Document 2010 Financial statements Consolidated financial statements

3.2 Movements in prior years

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

As of December 31, 2007 (1) 5,867 1,819 300 7,986 Acquisitions - - 111 111 Disposals and retirements (3) - (2) (5) Changes in the scope of consolidation 337 - 35 372 Amortization expense (21) - (93) (114) Impairment expense - - - - Translation adjustment 64 90 9 163 Other movements - - 10 10 As of December 31, 2008 6,244 1,909 370 8,523

Acquisitions - - 81 81 Disposals and retirements - - - - Changes in the scope of consolidation 277 - 2 279 Amortization expense (32) - (97) (129) Impairment expense - - - - Translation adjustment - (56) (1) (57) Other movements - - - - As of December 31, 2009 6,489 1,853 355 8,697

(1) See Note 1.2 Application of IAS 38 as amended.

Changes in the scope of consolidation for the year ended December 31, 2009 were mainly attributable to the acquisition of a 50% stake in Château Cheval Blanc in the amount of 183 million euros, and the recognition of the Royal Van Lent - Feadship brand in the amount of 92 million euros. Changes in the scope of consolidation for the year ended December 31, 2008 were mainly attributable to the acquisition of Hublot in the amount of 219 million euros and the acquisition of the Les Echos media group for 147 million euros. See also Note 2.

Reference Document 2010 135 Financial statements Consolidated financial statements

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

(EUR millions) 2010 2009 2008 Amortization and Gross Net Net Net impairment

Wines and Spirits 1,019 (34) 985 977 795 Fashion and Leather Goods 3,894 (338) 3,556 3,542 3,564 Perfumes and Cosmetics 618 (22) 596 594 596 Watches and Jewelry 1,386 (6) 1,380 1,167 1,166 Selective Retailing 3,292 (1,316) 1,976 1,853 1,909 Other activities 272 (71) 201 209 123 Brands and trade names 10,481 (1,787) 8,694 8,342 8,153

The brands and trade names recognized in the table above are those Group, which may be much less than their value in use or their net that the Group has acquired. The principal acquired brands and selling price as of the closing date for the consolidated financial trade names as of December 31, 2010 are: statements of the Group. This is notably the case for the brands -- Wines and Spirits: Veuve Clicquot, Krug, Château d’Yquem, Louis Vuitton, Veuve Clicquot, and Parfums Christian Dior, or the Château Cheval Blanc, Belvedere, Glenmorangie, Newton trade name Sephora, with the understanding that this list must Vineyards and Numanthia Termes; not be considered as exhaustive. -- Fashion and Leather Goods: Louis Vuitton, Fendi, Donna Karan Brands developed by the Group, notably Hennessy, Moët New York, Céline, Loewe, Givenchy, Kenzo, Thomas Pink, Berluti & Chandon, Dom Pérignon, Mercier and Ruinart champagnes, and Pucci; as well as the De Beers jewelry trade name developed as a joint- -- Perfumes and Cosmetics: Parfums Christian Dior, Guerlain, venture with the De Beers Group, are not capitalized in the Parfums Givenchy, Make Up for Ever, Benefit Cosmetics, Fresh balance sheet. and Acqua di Parma; Brands and trade names developed by the Group, in addition to Louis -- Watches and Jewelry: TAG Heuer, Zenith, Hublot, Chaumet Vuitton, Veuve Clicquot, Parfums Christian Dior and Sephora, and Fred; represented 29% of total brands and trade names capitalized in -- Selective Retailing: DFS Galleria, Sephora and Le Bon Marché; the balance sheet and 63% of the Group’s consolidated revenue -- Other activities: the publications of the media group Les Echos- in 2010. Investir and the Royal Van Lent-Feadship brand. Please refer also to Note 5 for the impairment testing of These brands and trade names are recognized in the balance sheet brands, trade names and other intangible assets with indefinite at their value determined as of the date of their acquisition by the useful lives.

4. Goodwill

(EUR millions) 2010 2009 2008 (1)

Gross Impairment Net Net Net

Goodwill arising on consolidated investments 4,525 (1,116) 3,409 3,335 3,338 Goodwill arising on purchase commitments 1,618 - 1,618 935 1,085 for minority interests Total 6,143 (1,116) 5,027 4,270 4,423

136 Reference Document 2010 Financial statements Consolidated financial statements

Changes in net goodwill during the fiscal years presented break down as follows:

(EUR millions) 2010 2009 2008 (1)

Gross Impairment Net Net Net

As of January 1 5,367 (1,097) 4,270 4,423 4,824 Changes in the scope of consolidation (55) 76 21 20 639 Changes in purchase commitments for minority interests 702 - 702 (96) (1,061) Changes in impairment - (54) (54) (56) (31) Translation adjustment 129 (41) 88 (21) 52 As of December 31 6,143 (1,116) 5,027 4,270 4,423

(1) See Note 1.2 Application of IAS 38 as amended.

Changes in the scope of consolidation in fiscal year 2010 are 87 million euros, the allocation of purchase price of Royal Van mainly attributable to the acquisition of a 70% equity stake in Lent to the brand, generating a 67 million euro deduction from Sack’s in the amount of 76 million euros, net of the effect resulting goodwill, and the finalization of the purchase price allocations of from the disposal of La Brosse et Dupont of 46 million euros. Montaudon and Hublot for 26 million euros. The translation adjustment is mainly attributable to goodwill Changes in the scope of consolidation for 2008 were attributable recognized in US dollars and Swiss francs, as a result of changes to the impact of the consolidation of the Les Echos media group for in the exchange rates of these currencies with respect to the euro 161 million euros, the Royal Van Lent acquisition in the amount during the fiscal year. The adjustment relates to Donna Karan, of 331 million euros, and the Hublot acquisition for 109 million DFS and the Miami Cruiseline activity for the US dollar, and to euros. See also Note 2. TAG Heuer and Hublot for the Swiss franc. Please refer also to Note 19 for goodwill arising on purchase Changes in the scope of consolidation for 2009 were attributable commitments for minority interests. to the acquisition of a 50% stake in Château Cheval Blanc for

5. Impairment testing of intangible assets with indefinite useful lives

Brands, trade names, and other intangible assets with indefinite are generally valued on the basis of the present value of forecast useful lives as well as the goodwill arising on acquisition have been cash flows determined in the context of multi-year business plans subject to annual impairment testing. No significant impairment drawn up over the course of each fiscal year. The main assumptions expense has been recognized in respect of these items during the retained in 2010, for the determination of these forecast cash flows course of fiscal year 2010. As described in Note 1.12, these assets are as follows:

Business group 2010 2009 2008 Discount rate Growth rate Post-tax Growth rate Post-tax Growth rate for the period discount rate for the period discount rate for the period Post-tax Pre-tax after the plan after the plan after the plan Wines and Spirits 7.5 to 11.6% 11 to 17.1% 2% 7.5 to 11.6% 2% 7.3 to 11.4% 2% Fashion and Leather Goods 8.7 to 12.8% 12.8 to 18.8% 2% 8.7 to 12.8% 2% 8.9 to 13% 2% Perfumes and Cosmetics 8.0% 11.8% 2% 8% 2% 9.1 to 11.5% 2% Watches and Jewelry 9.5 to 10.8% 14 to 15.9% 2% 9.5 to 10.8% 2% 11 to 12.3% 2% Selective Retailing 7.5 to 8.6% 11 to 12.6% 2% 7.5 to 8.6% 2% 8 to 9.1% 2% Other 7.5% to 10% 11 to 14.7% 2% 7.5% 2% 6.7 to 8% 2%

Reference Document 2010 137 Financial statements Consolidated financial statements

Plans generally cover a five-year period, but may be prolonged up As of December 31, 2010 the carrying amount of 9 business to ten years in case of brands for which production cycle exceeds segments (see Note 1.12) is close to their value in use. A change five years or brands undergoing strategic repositioning. of 0.5 points in the post-tax discount rate, or in the growth rate for the period not covered by the plans, compared to rates retained Considering the uncertainty surrounding the economic as of December 31, 2010, would give rise to impairment charges environment at the close of 2010, discount rates used in 2010 as detailed below: are identical to those of 2009. Growth rates applied for the period not covered by the plans are based on market estimates for the business groups concerned.

(EUR millions) Intangible assets Sensitivity with indefinite lives Change in post-tax Change in as of 12/31/2010 discount rate growth rate +0.5% -0.5%

Wines and Spirits 520 (26) (15) Fashion and Leather Goods 159 (20) (11) Selective Retailing 190 (19) (15) Other business groups 128 (12) (10) Total 997 (77) (51)

A change of 0.5 points in post-tax discount rate or in the growth rate for the period not covered by the plans, compared to rates retained as of December 31, 2010 would not induce any risk of impairment for the other business segments of the Group.

6. Property, plant and equipment

(EUR millions) 2010 2009 2008 (1) Gross Depreciation Net Net Net and impairment

Land 916 - 916 859 862 Vineyard land and producing vineyards 1,919 (91) 1,828 1,611 1,613 Buildings 1,781 (793) 988 890 880 Investment property 358 (61) 297 286 291 Machinery and equipment 4,858 (3,154) 1,704 1,647 1,631 Other tangible fixed assets (including assets in progress) 1,522 (522) 1,000 847 804 Total 11,354 (4,621) 6,733 6,140 6,081 Of which: assets held under finance leases 246 (131) 115 136 147 historical cost of vineyard land and producing vineyards 630 (92) 538 531 480

(1) See Note 1.2 Application of IAS 38 as amended.

138 Reference Document 2010 Financial statements Consolidated financial statements

6.1 Movements in the year Movements in property, plant and equipment during 2010 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, 2009 1,695 2,455 342 4,427 1,305 10,224 Acquisitions 5 115 3 358 367 848 Change in the market value of vineyard land 206 - - - - 206 Disposals and retirements (3) (9) (2) (283) (28) (325) Changes in the scope of consolidation 2 (16) - (9) (8) (31) Translation adjustment 11 117 9 239 54 430 Other movements, including transfers 3 35 6 126 (168) 2 As of December 31, 2010 1,919 2,697 358 4,858 1,522 11,354

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, 2009 (84) (706) (56) (2,780) (458) (4,084) Depreciation expense (6) (63) (5) (497) (79) (650) Impairment expense ------Disposals and retirements 1 7 1 274 15 298 Changes in the scope of consolidation (1) 6 - 8 5 18 Translation adjustment (1) (22) (1) (152) (27) (203) Other movements, including transfers - (15) - (7) 22 - As of December 31, 2010 (91) (793) (61) (3,154) (522) (4,621)

Net carrying amount as of December 31, 2010 1,828 1,904 297 1,704 1,000 6,733

Purchases of property, plant and equipment reflect investments by Louis Vuitton, Sephora and DFS in their retail networks, those of Parfums Christian Dior, the Champagne houses and Glenmorangie in their production equipment, as well as real estate investments dedicated to administrative or commercial use.

Reference Document 2010 139 Financial statements Consolidated financial statements

6.2 Movements in prior years

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, 2007 (1) 1,426 1,682 286 1,423 595 5,412 Acquisitions 24 46 - 425 462 957 Disposals and retirements (3) (32) - (16) (13) (64) Depreciation expense (6) (47) (5) (388) (68) (514) Impairment expense ------Change in the market value of vineyard land 173 - - - - 173 Changes in the scope of consolidation 1 13 - 6 1 21 Translation adjustment (6) 69 6 31 10 110 Other, including transfers 4 11 4 150 (183) (14) As of December 31, 2008 1,613 1,742 291 1,631 804 6,081

Acquisitions 4 44 3 316 326 693 Disposals and retirements (1) (3) - (8) (9) (21) Depreciation expense (6) (57) (4) (432) (75) (574) Impairment expense ------Change in the market value of vineyard land (53) - - - - (53) Changes in the scope of consolidation 43 16 - 1 (1) 59 Translation adjustment 3 (21) (3) (11) (5) (37) Other, including transfers 8 28 (1) 150 (193) (8) As of December 31, 2009 1,611 1,749 286 1,647 847 6,140

(1) See Note 1.2 Application of IAS 38 as amended.

Property, plant and equipment acquisitions in 2009 and 2008 consisted mainly of investments by Louis Vuitton, Sephora and DFS in their retail networks in addition to investments by Hennessy, Veuve Clicquot and Moët & Chandon in their production equipment. Additionally, in 2009, Parfums Christian Dior invested in new display counters and production facilities.

7. Investments in associates

(EUR millions) 2010 2009 2008

Gross Impairment Net Net Net Share of net assets of associates as of January 1 213 - 213 216 129 Share of net profit (loss) for the period 7 - 7 3 7 Dividends paid (5) - (5) (9) (7) Changes in the scope of consolidation - - - 8 84 Translation adjustment 8 - 8 (5) 3 Share of net assets of associates as of December 31 223 - 223 213 216

140 Reference Document 2010 Financial statements Consolidated financial statements

As of December 31, 2010, investments in associates consisted acquired in October 2008; sales by the Perfumes and Cosmetics primarily of: business group to Ile de Beauté amounted to 33 million euros -- a 40% equity stake in Mongoual SA, a real estate company in 2010 (22 million euros in 2009, 11 million euros from which owns a property held for rental in Paris (France), which October to December 2008); is the head office of LVMH Moët Hennessy - Louis Vuitton SA; -- a 49% equity stake in Edun, a fashion clothing company focused total rents invoiced by Mongoual SA to the Group amounted to on ethical trade and sustainable development, acquired during the 16 million euros in 2010 (16 million euros in 2009 and 15 million first half of 2009. euro in 2008); The 23.1% equity stake in the French retailer of video games -- a 45% equity stake in the group owning Ile de Beauté stores, Micromania was sold in 2008. one of the leading perfume and cosmetics retail chains in Russia,

8. Non-current available for sale financial assets

(EUR millions) 2010 2009 2008

Gross Impairment Net Net Net Total 3,949 (58) 3,891 540 375

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

2010 2009 2008 (EUR millions) Total Of which Hermès As of January 1 540 68 375 823 Acquisitions 2,756 2,717 89 62 Disposals at net realized value (70) - (38) (114) Changes in market value (114) (215) 93 (14) Changes in impairment (12) - (1) (34) Reclassifications from Other non-current assets to Non-current available 775 775 - - for sale financial assets Other reclassifications (3) - 29 (352) (1) Changes in the scope of consolidation - - (2) - Translation adjustment 19 - (5) 4 As of December 31 3,891 3,345 540 375 (1) This amount corresponds to the acquisition price of Les Echos group, reclassified under consolidated investments. See Note 2.

• Over the course of fiscal year 2010, LVMH raised its ownership The ELS contracts were agreed as cash-settled when concluded interest in the share capital of Hermès International (hereafter in 2008 and the terms of these agreements were then amended referred to as “Hermès”) to 20.21%, amounting to 3,345 million in October 2010, by way of riders to the original agreements, to euros based on the Hermès share price on the Paris stock exchange allow for settlement in shares, as of December 31, 2010. -- finally, purchases of 3.3 million Hermès shares on the market, The increased ownership interest in Hermès results from the for a total price of 496 million euros. following transactions during the fiscal year: As a result of the settlement of the ELS, the Group recognized in -- in October 2010, the reclassification of the 4.5 million the 2010 income statement a pre-tax gain, net of transaction costs, securities recognized previously as Other non-current assets due in the amount of 1,004 million euros representing, in relation to to the objective and the form of their ownership to Non-current the abovementioned number of shares, the difference between the available for sale financial assets, amounting to 775 million Hermès share price as of the ELS settlement date (the price used euros (419 million euros based on the Hermès share price as of for the recognition of these securities as non-current available for December 31, 2009), sale financial assets) and the Hermès share price as of December 31, -- the settlement in October 2010 of equity linked swaps in relation 2009 (see Note 25 Net financial income/expense). to 12.8 million Hermès shares (hereafter referred to as “ELS”).

Reference Document 2010 141 Financial statements Consolidated financial statements

As of December 31, 2010, the stake held by LVMH in Hermès, • Acquisitions in 2008 included the Montaudon champagne corresponding to 21.3 million shares, represented, on the basis of house in the amount of 29 million euros; this acquisition was the Hermès share price at that date, an amount of 3.3 billion euros, consolidated in fiscal year 2009. See Note 2. for a total amount of 3.0 billion euros on initial recognition, or • Disposals in 2008 include in particular the Group’s share in the 2.0 billion euros in cash after deducting the gain mentioned above. transactions carried out by the investment fund L Capital, notably Acquisition transactions conducted during fiscal year 2010 the sale of its stake in the French video game retailer Micromania. corresponded to a cash outflow of 1.7 billion euros. This amount • Impairment of non-current available for sale financial assets is comprises the market price for the securities acquired on the determined in accordance with the accounting policies described market as well as the reference price determined in 2008 and paid in Note 1.13. at the settlement of the ELS.

Non-current available for sale financial assets held by the Group as of December 31, 2010 include the following:

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

Hermès International (France) (1) 20.2% 3,345 344 1 1,790 (4) 289 (4) Hengdeli Holdings Ltd (China) (1) 6.8% 124 101 1 291 (4) 38 (4) Tod’s SpA (Italy) (1) 3.5% 78 31 5 655 (4) 86 (4) L Real Estate (Luxembourg) (2) 32.2% 68 (3) - 211 (5) - (5) L Capital 2 FCPR (France) (2) 18.5% 66 11 - 231 (5) (7) (5) Sociedad Textil Lonia (Spain) (2) 25.0% 22 14 4 91 (4) 22 (4) Other investments 188 32 3 Total 3,891 530 14 (1) Market value of securities as of the close of trading on December 31, 2010. (2) Valuation at estimated net realizable value. (3) Figures provided reflect company information prior to December 31, 2010, as year-end accounting data was not available at the date of preparation of the consolidated financial statements. (4) Consolidated data. (5) Company data.

9. Inventories and work in progress

(EUR millions) 2010 2009 2008 (1)

Wines and distilled alcohol in the process of aging 3,235 3,189 2,928 Other raw materials and work in progress 747 720 705 3,982 3,909 3,633 Goods purchased for resale 659 527 579 Finished products 2,015 1,851 2,125 2,674 2,378 2,704 Gross amount 6,656 6,287 6,337 Impairment (665) (643) (573) Net amount 5,991 5,644 5,764

142 Reference Document 2010 Financial statements Consolidated financial statements

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

(EUR millions) 2010 2009 2008 (1) Gross Impairment Net Net Net

As of January 1 6,287 (643) 5,644 5,764 4,809 Change in gross inventories 126 - 126 (69) 826 Fair value adjustment for the harvest of the period (3) - (3) 13 24 Changes in impairment - 16 16 (62) (62) Changes in the scope of consolidation (43) 4 (39) 38 84 Translation adjustment 300 (46) 254 (29) 89 Reclassifications (11) 4 (7) (11) (6) As of December 31 6,656 (665) 5,991 5,644 5,764 (1) See Note 1.2 Application of IAS 38 as amended.

The translation adjustment is mainly attributable to inventories held by the Group’s distribution subsidiaries in the United States, Japan and elsewhere in Asia, primarily for the Fashion and Leather Goods and Selective Retailing business groups. The effects on Wines and Spirits’ cost of sales of marking harvests to market are as follows:

(EUR millions) 2010 2009 2008

Fair value adjustment for the harvest of the period 36 43 53 Adjustment for inventory consumed (39) (30) (29) Net effect on cost of sales of the period (3) 13 24

10. Trade accounts receivable

(EUR millions) 2010 2009 2008

Trade accounts receivable - nominal amount 1,769 1,670 1,843 Provision for impairment (57) (62) (58) Provision for product returns (147) (153) (135) Net amount 1,565 1,455 1,650

The amount of the impairment expense in 2010 was 9 million of receivables from wholesalers or agents, who are limited in number euros (compared to 18 million euros in 2009 and 12 million euros and with whom the Group maintains ongoing relationships for the in 2008). most part. Credit insurance is taken out whenever the likelihood that receivables may not be recoverable is justified on reasonable Approximately 61% of the Group’s sales is generated through its grounds. own stores. The receivable auxiliary balance is comprised primarily

Reference Document 2010 143 Financial statements Consolidated financial statements

As of December 31, 2010, the breakdown of the nominal amount of trade receivables and of provisions for impairment by age was as follows:

(EUR millions) Nominal amount Impairment Net amount of receivables of receivables Not due: - less than 3 months 1,518 (12) 1,506 - more than 3 months 42 (1) 41 1,560 (13) 1,547 Overdue: - less than 3 months 130 (7) 123 - more than 3 months 79 (37) 42 209 (44) 165 Total 1,769 (57) 1,712

For each of the years presented, no single customer represented revenue exceeding 10% of the Group’s consolidated revenue. There is no difference between the present value of trade accounts receivable and their carrying amount.

11. Other current assets

(EUR millions) 2010 2009 2008

Current available for sale financial assets 219 218 590 Derivatives 209 302 265 Tax accounts receivable, excluding income taxes 271 199 284 Advances and payments on account to vendors 142 113 141 Prepaid expenses (1) 191 171 185 Other receivables, net 223 210 233 Total 1,255 1,213 1,698

(1) See Note 1.2. Application of IAS 38 as amended. There is no difference between the present 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) 2010 2009 2008

Unlisted securities, shares in non-money market SICAV and funds 32 71 471 Listed securities 187 147 119 Total 219 218 590 Of which: historical cost of current available for sale financial assets 280 336 679

144 Reference Document 2010 Financial statements Consolidated financial statements

Net value of current available for sale financial assets changed as follows during the fiscal years presented:

(EUR millions) 2010 2009 2008

As of January 1 218 590 879 Acquisitions 55 15 107 Disposals at net realized value (106) (343) (115) Changes in market value 74 50 (233) Changes in impairment (26) (31) (92) Reclassifications (as)/from Non-current available for sale financial assets - (59) - Changes in the scope of consolidation - (1) 1 Translation adjustment 4 (3) 43 As of December 31 219 218 590

See also Note 1.13 for the method used to determine impairment losses on current available for sale financial assets.

13. Cash and cash equivalents

(EUR millions) 2010 2009 2008

Fixed term deposits (less than 3 months) 545 130 64 SICAV and FCP money market funds 141 93 72 Ordinary bank accounts 1,606 2,223 877 Cash and cash equivalents per balance sheet 2,292 2,446 1,013

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) 2010 2009 2008

Cash and cash equivalents 2,292 2,446 1,013 Bank overdrafts (250) (172) (295) Net cash and cash equivalents per cash flow statement 2,042 2,274 718

14. Equity

14.1 Share capital As of December 31, 2010, issued and fully paid-up shares totaled 490,642,232 (490,405,654 shares as of December 31, 2009 and 489,937,410 shares as of December 31, 2008), with a par value of 0.30 euros per share, including 225,670,153 shares with double voting rights. Double voting rights are granted to registered shares held for more than three years (226,411,288 as of December 31, 2009, 226,413,842 as of December 31, 2008). Changes in the share capital, in value terms and in terms of the number of shares, break down as follows:

(EUR millions) 2010 2009 2008 Number Value Number Value Number Value

Share capital as of January 1 490,405,654 147 489,937,410 147 489,937,410 147 Exercise of share subscription options 2,012,478 - 557,204 - 92,600 - Retirement of LVMH shares (1,775,900) - (88,960) - (92,600) - Share capital as of December 31 490,642,232 147 490,405,654 147 489,937,410 147

Reference Document 2010 145 Financial statements Consolidated financial statements

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) 2010 2009 2008

Number Value Value Value

Share subscription option plans 9,093,593 429 504 446 Share purchase option plans 615,482 41 223 279 Bonus share plans 770,611 42 25 23 Other plans 1,360,287 70 5 41 Shares held for stock option and similar plans (2) 11,839,973 582 757 789

Liquidity contract 100,000 13 6 16 Retirement of shares - - 56 56 LVMH treasury shares 11,939,973 595 819 861

LVMH share-based calls (1) 300,000 12 110 122 LVMH treasury shares and derivatives settled in LVMH shares 12,239,973 607 929 983 (1) Number of shares which could be purchased if all of the calls outstanding at the balance sheet date were exercised and related premium paid on subscription. (2) See Note 15 regarding stock option and similar plans.

“Other plans” correspond to future plans. The market value of LVMH shares held under the liquidity contract as of December 31, 2010 amounts to 12 million euros. The portfolio movements in 2010 were as follows: LVMH shares LVMH share-based calls

(EUR millions) Number Value Effect (EUR millions) Number Value Effect on cash on cash

As of December 31, 2009 16,080,093 819 As of December 31, 2009 2,670,200 110 Share purchases, including Calls purchased - - - through the exercise of call 4,781,415 418 (321) Calls exercised (2,370,200) (98) - options Exercise of share purchase options (4,608,830) (317) 254 As of December 31, 2010 300,000 12 - Bonus shares definitively (149,590) (9) - allocated Retirement of shares (1,775,900) (101) - Proceeds from disposal at net realized value (2,387,215) (222) 222 Gain/(loss) on disposal 7 As of December 31, 2010 11,939,973 595 155

14.3 Dividends paid by the parent company LVMH SA In accordance with French regulations, dividends are deducted from the profit for the year and reserves available for distribution of the parent company, after deducting applicable withholding tax and the value attributable to treasury shares. As of December 31, 2010, the amount available for distribution was 6,232 million euros; after taking into account the proposed dividend distribution in respect of the 2010 fiscal year, the amount available for distribution is 5,545 million euros.

146 Reference Document 2010 Financial statements Consolidated financial statements

(EUR millions, except for data per share in EUR) 2010 2009 2008

Interim dividend for the current year (2010: 0.70 euros; 2009: 0.35 euros; 2008: 0.35 euros) 343 172 171 Impact of treasury shares (8) (6) (5) 335 166 166 Final dividend for the previous year (2009: 1.30 euros; 2008: 1.25 euros; 2007: 1.25 euros) 636 612 612 Impact of treasury shares (18) (20) (20) 618 592 592 Total gross amount disbursed during the period (1) 953 758 758

(1) Excludes the impact of tax regulations applicable to the beneficiary.

The final dividend for 2010, as proposed to the Shareholders’ Meeting of March 31, 2011 is 1.40 euros per share, representing a total amount of 687 million euros, excluding amount to be deducted in relation to treasury shares owned at date of payment.

14.4 Cumulative translation adjustment The change in the translation adjustment recognized under equity, Group share and the closing balance, net of hedging effects of net assets denominated in foreign currency, break down as follows by currency:

(EUR millions) 2010 Change 2009 2008

US dollar (148) 339 (487) (344) Swiss franc 376 283 93 91 Japanese yen 152 108 44 70 Hong Kong dollar 43 63 (20) 5 Pound sterling (73) 9 (82) (109) Other currencies 52 93 (41) (53) Foreign currency net investment hedges (172) (170) (2) (31) Total, Group share 230 725 (495) (371)

14.5 Strategy relating to the Group’s financial structure -- net cash from operating activities and operating investments (free cash flow); The Group firmly believes that the management of its financial -- proportion of long term debt in net financial debt. structure contributes, together with the development of the companies it owns and the management of its brand portfolio, Long term resources are understood to correspond to the sum of to its objective of driving value creation for its shareholders. equity and non-current liabilities. Furthermore, maintaining a strong credit rating and providing Where applicable, these indicators are adjusted to reflect the adequate security to the Group’s bondholders and bank creditors Group’s off-balance sheet financial commitments. are regarded as objectives in their own right. With respect to these indicators, the Group seeks to maintain levels The Group manages its financial structure so as to ensure allowing for significant financial flexibility. considerable flexibility, allowing it both to seize opportunities and enjoy significant access to markets offering favorable conditions. The Group also promotes financial flexibility by maintaining numerous and varied banking relationships, through the frequent To this end, the Group monitors a certain number of financial ratios recourse to several negotiable debt markets (both short and long and aggregate measures of financial risk, including: term), by holding a large amount of cash and cash equivalents, and -- net financial debt (see Note 17) to equity; through the existence of sizable amounts in undrawn confirmed -- net financial debt to cash from operations before changes in credit lines. working capital; 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 operations before changes in working capital; program.

Reference Document 2010 147 Financial statements Consolidated financial statements

15. Stock option and similar plans

Share purchase option and subscription plans The allocation of bonus shares to the beneficiaries who are French residents for tax purposes becomes definitive after a two-year The Shareholders’ Meeting of May 14, 2009 renewed the vesting period, which is followed by a two-year holding period authorization given to the Board of Directors, for a period of thirty- during which the beneficiaries may not sell their shares. eight months expiring in July 2012, to grant share subscription or purchase options to Group company employees or directors, Bonus shares allocated to beneficiaries who are not French residents on one or more occasions, in an amount not to exceed 3% of the for tax purposes shall be definitive after a vesting period of four company’s share capital. years and shall be freely transferable at that time. Each plan is valid for 10 years. The options may be exercised after Cash-settled share-based compensation plans index- a three-year period, for plans issued before 2004, or a four-year linked to the change in the LVMH share price period, for plans issued from 2004. In place of share option and bonus share plans, the Group has In certain circumstances, in particular in the event of retirement, issued plans which are equivalent in terms of gains as for the the period of three or four years before options may be exercised beneficiaries of share purchase option plans and bonus share plans, is not applicable. but are settled in cash rather than shares. These plans have a four- For all plans, one option entitles the holder to purchase one year vesting period. LVMH share. Performance conditions Bonus share plans Since 2009, certain share subscription option plans and bonus The Shareholders’ Meeting of May 15, 2008 renewed the share plans have been subject to performance conditions that authorization given to the Board of Directors, for a period of thirty- determine whether the beneficiaries are entitled to receive the eight months expiring in July 2011, to grant bonus shares to definitive allocation of these plans. Group company employees or directors, on one or more occasions, in an amount not to exceed 1% of the Company’s share capital on the date of this authorization.

15.1 Share purchase option plans The main characteristics of share purchase option plans and changes having occurred during the year are as follows:

Grant date Number Exercise price Vesting period Number Number Number of of options (EUR) of rights of options of options options to be granted exercised expired exercised as of in 2010 in 2010 Dec. 31, 2010

January 19, 2000 (1) (3) 376,110 80,10 (2) 3 years (486,650) (2) (1,077,800) (2) - January 23, 2001 2,649,075 65.12 “ (1,465,570) (500) 218,545 March 6, 2001 40,000 63.53 “ (20,000) - - May 14, 2001 552,500 61.77 “ (438,378) - 14,122 September 12, 2001 50,000 52.48 “ - - 50,000 January 22, 2002 3,256,700 43.30 “ (1,525,947) - 295,877 January 22, 2002 27,400 45.70 “ (4,200) - 1,550 May 15, 2002 8,560 54.83 “ - - 5,560 January 22, 2003 3,155,225 37.00 “ (664,855) (500) 300,858 January 22, 2003 58,500 38.73 “ (3,230) - 28,970 (4,608,830) (1,078,800) 915,482 (1) Number of options on the plan commencement date not restated for adjustments relating to the five-for-one stock split in July 2000. (2) Restated following the operations referred to in (1) above. (3) Plan expired on January 18, 2010.

148 Reference Document 2010 Financial statements Consolidated financial statements

The number of unexercised purchase options and the weighted average exercise price changed as follows during the years presented:

2010 2009 2008

Number Weighted Number Weighted Number Weighted average exercise average exercise average exercise price (EUR) price (EUR) price (EUR) Share purchase options 6,603,112 58.05 7,862,248 57.73 8,253,029 56.74 outstanding as of January 1 Expired options (1,078,800) 80.07 (568,634) 63.93 (112,555) 41.35 Options exercised (4,608,830) 55.06 (690,502) 49.59 (278,226) 35.20 Share purchase options 915,482 47.15 6,603,112 58.05 7,862,248 57.73 outstanding as of December 31

15.2 Share subscription option plans The main characteristics of share subscription option plans and changes having occurred during the year are as follows:

Number Exercise price Vesting period Number Number Number of of options (EUR) of rights of options of options options to be Grant date granted exercised expired exercised as of in 2010 in 2010 Dec. 31, 2010

January 21, 2004 2,720,425 55.70 4 years (837,570) (700) 1,355,480 “ 27,050 58.90 “ (58,550) - 13,100 May 12, 2005 1,852,150 52.82 “ (643,718) (21,250) 825,678 “ 72,250 55.83 “ (56,250) (700) 43,850 May 11, 2006 1,712,959 78.84 “ (382,490) (33,360) 1,248,559 “ 76,400 82.41 “ (25,900) (950) 48,850 May 10, 2007 1,679,988 86.12 “ - (26,327) 1,617,228 May 15, 2008 1,621,882 72.50 “ - (22,844) 1,571,963 “ 76,438 72.70 “ - - 76,438 May 14, 2009 1,266,507 56.50 “ (8,000) (4,201) 1,252,781 “ 35,263 56.52 “ - (7,475) 27,788 July 29, 2009 2,500 57.10 “ - - 2,500 (2,012,478) (117,807) 8,084,215

The number of subscription options not exercised and the weighted average exercise prices changed as follows over the course of the fiscal years included below:

2010 2009 2008 Number Weighted Number Weighted Number Weighted average exercise average exercise average exercise price (EUR) price (EUR) price (EUR) Share subscription options 10,214,500 66.99 9,569,660 67.76 8,015,393 66.60 outstanding as of January 1 Options granted during the period - - 1,304,270 56.50 1,698,320 72.51 Options expired during the period (117,807) 72.09 (102,226) 72.41 (51,453) 66.52 Options exercised during the period (2,012,478) 59.62 (557,204) 54.37 (92,600) 55.71 Share subscription options 8,084,215 68.79 10,214,500 66.99 9,569,660 67.76 outstanding as of December 31

Reference Document 2010 149 Financial statements Consolidated financial statements

Share subscription options granted under the plan dated May 14, current operating margin rate shows a positive change compared 2009 may only be exercised if, in fiscal years 2009 and 2010, (or, to 2008. The performance condition, which was met in 2009 and for senior executive officers, in three of the four fiscal years from 2010, was also considered to have been met for the future fiscal 2009 to 2012) either profit from recurring operations, net cash years, for the purpose of determining the expense for 2010. from operating activities and operating investments, or the Group’s

15.3 Bonus share plans The main characteristics of bonus share plans and changes having occurred during the year are as follows:

Grant date Number of Vesting periods Expired Shares Non-vested shares allocated of rights allocations vested shares as of initially in 2010 in 2010 Dec. 31, 2010

May 15, 2008 162,972 2 or 4 years (1) (6,856) (149,590) - May 14, 2009 311,209 “ (7,009) - 300,342 July 29, 2009 833 “ - - 833 April 15, 2010 469,436 “ - - 469,436 (13,865) (149,590) 770,611 (1) The vesting period is two years for beneficiaries with tax residence in France and four years for beneficiaries with tax residence outside France.

The number of non-vested shares allocated changed as follows during the period:

(number of shares) 2010 2009 2008

Non-vested shares as of January 1 464,630 311,459 311,504 Allocations of non-vested shares 469,436 312,042 162,972 Shares vested (149,590) (149,612) (154,090) Expired allocations (13,865) (9,259) (8,927) Non-vested shares as of December 31 770,611 464,630 311,459

The bonus share plan launched in 2010 is partly subject to compared to 2009. The performance condition, which was met performance conditions to a variable extent depending on for fiscal year 2010, was considered to have been met for fiscal beneficiaries. Bonus shares may only be definitively granted if, in year 2011, for the purpose of determining the expense for 2010. fiscal years 2010 and 2011, either profit from recurring operations, net cash from operating activities and operating investments, or Owned shares were remitted in settlement of the bonus shares the Group’s current operating margin shows a positive change vested during the periods presented.

15.4 Cash-settled compensation plans index-linked to the change in LVMH share price The plans in force as of December 31, by type and number of equivalent share-based plans, together with the provision recognized in the year-end balance sheet, break down as follows:

2010 2009 2008

Type of plan (in equivalent number of shares): Share purchase option plan 21,450 113,500 322,945 Bonus share plan 93,848 136,538 147,511 Provision as of December 31 (EUR millions) 10 10 4

150 Reference Document 2010 Financial statements Consolidated financial statements

15.5 Expense for the period

(EUR millions) 2010 2009 2008

Share subscription and purchase option plans, bonus share plans 44 46 44 Cash-settled share-based compensation plans index-linked to the change in the LVMH share price 6 7 (6) Expense for the period 50 53 38

In the calculation presented above, 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:

2009 Plans 2008 Plans

LVMH share price on the grant date (EUR) 57.28 75.01 Average exercise price (EUR) 56.50 72.51 Volatility of LVMH shares 37.0% 27.5% Dividend distribution rate 2.8% 2.4% Risk-free investment rate 2.7% 4.1%

The LVMH share price on the grant date of the 2010 plan amounted to 90.39 euros. The volatility of LVMH’s shares is determined on the basis of their implicit volatility. The average unit value of non-vested bonus shares granted in 2010 was 86.93 euros for beneficiaries with tax residence in France and 83.05 euros for beneficiaries with tax residence outside France.

16. Minority interests

(EUR millions) 2010 2009 2008 (1)

As of January 1 989 989 937 Minority interests' share of net profit 287 218 292 Dividends paid to minority interests (158) (176) (188) Effects of changes in control of consolidated entities consolidation of Royal Van Lent - - 14 other movements (3) 11 6 Effects of acquisition and disposal of minority interests’ shares acquisition of minority interests in the Samaritaine (104) - - other movements - (8) - Total effects of changes in the percentage of interests in consolidated entities (107) 3 20 Capital increases subscribed by minority interests 1 11 4 Minority interests' share in gains and losses recognized in equity 88 (29) 60 Minority interests' share in stock option plan expenses 3 3 3 Effects of purchase commitments for minority interests (97) (30) (139) As of December 31 1,006 989 989 (1) See Note 1.2 Application of IAS 38 as amended.

Reference Document 2010 151 Financial statements Consolidated financial statements

The change in minority interests’ share in gains and losses recognized in equity is as follows:

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

As of December 31, 2007 (129) 15 103 (11) Changes for the year 45 (8) 23 60

As of December 31, 2008 (84) 7 126 49 Changes for the year (24) 2 (7) (29)

As of December 31, 2009 (108) 9 119 20 Changes for the year 65 (4) 27 88

As of December 31, 2010 (43) 5 146 108

17. Borrowings

17.1 Net financial debt

(EUR millions) 2010 2009 2008

Long term borrowings 3,432 4,077 3,738 Short term borrowings 1,834 1,708 1,847 Gross amount of borrowings 5,266 5,785 5,585

Interest rate risk derivatives (82) (89) (70) Other derivatives 5 6 (4) Gross borrowings after derivatives 5,189 5,702 5,511 Current available for sale financial assets (219) (218) (590) Other current financial assets - (44) (39) Cash and cash equivalents (2,292) (2,446) (1,013) Net financial debt 2,678 2,994 3,869

Net financial debt does not take into consideration purchase commitments for minority interests included in “Other non-current liabilities” (see Note 19).

152 Reference Document 2010 Financial statements Consolidated financial statements

17.2 Breakdown by nature

(EUR millions) 2010 2009 2008

Bonds and Euro Medium Term Notes (EMTNs) 2,776 3,425 2,735 Finance and other long term leases 131 121 128 Bank borrowings 525 531 875 Long term borrowings 3,432 4,077 3,738

Bonds and Euro Medium Term Notes (EMTNs) 815 723 127 Finance and other long term leases 17 23 23 Bank borrowings 179 135 126 Commercial paper 272 200 717 Other borrowings and credit facilities 224 352 492 Bank overdrafts 250 172 295 Accrued interest 77 103 67 Short term borrowings 1,834 1,708 1,847

Total borrowings 5,266 5,785 5,585

Market value of gross borrowings 5,422 5,979 5,697

No amount of financial debt was recognized in accordance with the fair value option as of December 31, 2010, 2009 and 2008. See Note 1.18.

17.3 Bonds and EMTNs

Nominal amount; date of issuance Maturity Initial effective 2010 2009 2008 (EUR millions) interest rate (1) (%)

EUR 1,000,000,000; 2009 2014 4.52 1,021 998 - CHF 200,000,000; 2008 2015 4.04 161 135 135 CHF 200,000,000; 2008 2011 3.69 161 135 135 EUR 760,000,000; 2005 and 2008 (2) 2012 3.76 755 752 749 CHF 300,000,000; 2007 2013 3.46 243 206 206 EUR 600,000,000; 2004 2011 4.74 609 611 609 EUR 750,000,000; 2003 2010 5.05 - 723 (3) 742 Public bond issues 2,950 3,560 2,576 EUR 250,000,000; 2009 2015 4.59 257 251 - EUR 150,000,000; 2009 2017 4.81 153 149 - Private placements in foreign currencies 231 188 286 Private placements (EMTNs) 641 588 286

Total bonds and EMTNs 3,591 4,148 2,862

(1) Before impact of interest rate hedges set up at the time of, or subsequent to, each issuance. (2) Accumulated amounts and weighted average initial effective interest rate for a 600 million euro bond issued in 2005 at an initial effective interest rate of 3.43%, which was supplemented in 2008 by an amount of 160 million euros issued at an effective rate of 4.99%. (3) The nominal amount of this bond issue was reduced by 35 million euros thanks to buy-backs and subsequent cancellations performed in 2009.

Reference Document 2010 153 Financial statements Consolidated financial statements

17.4 Analysis of gross borrowings by payment date and by type of interest rate

(EUR millions) Gross borrowings Effects of derivatives Gross borrowings after derivatives

Fixed rate Floating Total Fixed rate Floating Total Fixed rate Floating Total rate rate rate

Maturity: 2011 1,611 223 1,834 (258) 249 (9) 1,353 472 1,825 2012 865 17 882 (600) 598 (2) 265 615 880 2013 490 207 697 176 (169) 7 666 38 704 2014 1,028 153 1,181 (1,000) 950 (50) 28 1,103 1,131 2015 422 1 423 (250) 236 (14) 172 237 409 Thereafter 174 75 249 (150) 141 (9) 24 216 240 Total 4,590 676 5,266 (2,082) 2,005 (77) 2,508 2,681 5,189

See Note 21.4 regarding fair value of interest rate risk derivatives.

The breakdown by quarter of the amount falling due in 2011 is 27 million euros after hedging, and would lower the market value as follows: of gross fixed-rate borrowings by 33 million euros after hedging; -- an instantaneous decline of 1 point in these same yield curves (EUR millions) Falling due in 2011 would lower the cost of net financial debt by 27 million euros First quarter 791 after hedging, and would raise the market value of gross fixed-rate Second quarter 209 borrowings by 33 million euros after hedging. Third quarter 632 These changes would have no impact on the amount of equity as Fourth quarter 202 of December 31, 2010, due to the absence of hedging of future Total 1,834 interest payments.

17.7 Covenants 17.5 Analysis of gross borrowings by currency after hedging In connection with certain long-term loan agreements, the Group has undertaken to comply with a financial covenant based on a ratio

(EUR millions) 2010 2009 2008 of net financial debt to total equity.

Euro 3,587 4,317 3,984 The current level of this ratio is very far from its contractual level, which means that the Group has a high degree of financial US dollar 221 172 145 flexibility with regard to this commitment. Swiss franc 988 806 806 Japanese yen 208 235 383 Other currencies 185 172 193 17.8 Undrawn confirmed credit lines Total 5,189 5,702 5,511 As of December 31, 2010, unused confirmed credit lines totaled 3.3 billion euros. In general, the purpose of foreign currency borrowings is to hedge net foreign currency-denominated assets of consolidated companies 17.9 Guarantees and collateral located outside of the euro zone. As of December 31, 2010, borrowings hedged by collateral were 17.6 Sensitivity less than 200 million euros. On the basis of debt as of December 31, 2010: -- an instantaneous increase of 1 point in the yield curves of the Group’s debt currencies would raise the cost of net financial debt by

154 Reference Document 2010 Financial statements Consolidated financial statements

18. Provisions

(EUR millions) 2010 2009 2008

Provisions for pensions, medical costs and similar commitments 261 240 230 Provisions for contingencies and losses 886 725 707 Provisions for reorganization 20 25 34 Non-current provisions 1,167 990 971

Provisions for pensions, medical costs and similar commitments 9 8 6 Provisions for contingencies and losses 274 242 229 Provisions for reorganization 56 84 71 Current provisions 339 334 306

Total 1,506 1,324 1,277

In 2010, the changes in provisions were as follows:

(EUR millions) 2009 Increases Amounts Amounts Changes in Other items 2010 used released the scope of (including consolidation translation adjustment) Provisions for pensions, medical costs 248 56 (34) - (4) 4 270 and similar commitments Provisions for contingencies and losses 967 358 (136) (47) - 18 1,160 Provisions for reorganization 109 25 (51) (8) (1) 2 76 Total 1,324 439 (221) (55) (5) 24 1,506 Of which: profit from recurring operations 179 (129) (31) net financial income (expense) 45 - - other 215 (92) (24)

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

19. Other non-current liabilities

(EUR millions) 2010 2009 2008

Purchase commitments for minority interests 3,686 2,841 2,963 Derivatives 2 22 27 Employee profit sharing (1) 88 80 88 Other liabilities 171 146 175 Total 3,947 3,089 3,253

(1) French companies only, pursuant to legal provisions.

Reference Document 2010 155 Financial statements Consolidated financial statements

Moët Hennessy SNC and MH International SAS (“Moët Hennessy”) fair value was determined by applying the share price multiples own the investments in the Group’s Wines and Spirits businesses, of comparable firms to Moët Hennessy’s consolidated operating with the exception of Château d’Yquem, Château Cheval Blanc results. and certain Champagne vineyards. Purchase commitments for minority interests also include As of December 31, 2010, 2009 and 2008 purchase commitments commitments relating to minority shareholders in Benefit (20%), for minority interests mainly include the put option granted to Royal Van Lent (10%) and subsidiaries of Sephora in various Diageo plc for its 34% share in Moët Hennessy, with six-months’ countries. advance notice and for 80% of its fair value at the exercise date of The market value of the other non-current liabilities is identical the commitment. With regard to this commitment valuation, the to their carrying amount.

20. Other current liabilities

(EUR millions) 2010 2009 2008

Derivatives 145 92 166 Employees and social institutions 687 581 562 Employee profit sharing (1) 72 67 66 Taxes other than income taxes 317 252 245 Advances and payments on account from customers 203 228 203 Deferred payment for tangible and financial non-current assets 177 186 170 Deferred income 76 61 69 Other 466 407 385 Total 2,143 1,874 1,866

(1) French companies only, pursuant to legal provisions. The present value of the other current liabilities is identical to their carrying amount. Derivatives are analyzed in Note 21.

21. Financial instruments and market risk management

Financial instruments are mainly used by the Group to hedge risks These activities are organized based on a strict segregation of duties arising from Group activity and protect its assets. between risk measurement, hedging (front office), administration (back office) and financial control. 21.1 Foreign exchange, interest rate and equity market The backbone of this organization is an integrated information risk management system which allows hedging transactions to be monitored quickly. The management of foreign exchange, interest rate and equity The Group’s hedging strategy is presented to the Audit Committee. market risks and of transactions involving financial instruments Hedging decisions are made according to an established process is centralized. that includes regular presentations to the Group’s Executive Committee and detailed documentation. The Group has implemented a stringent policy, as well as rigorous management guidelines to measure, manage and monitor these Counterparties are selected based on their rating and in accordance market risks. with the Group’s risk diversification strategy.

156 Reference Document 2010 Financial statements Consolidated financial statements

21.2 Presentation of financial instruments in the balance sheet

Breakdown and fair value of financial assets and liabilities according to the measurement categories defined by IAS 39

(EUR millions) Notes 2010 2009 2008

Balance Fair Balance Fair Balance Fair sheet value sheet value sheet value value value value Non-current available for sale financial assets 8 3,891 3,891 540 540 375 375 Current available for sale financial assets 12 219 219 218 218 590 590 Available for sale financial assets (see Note 1.13) 4,110 4,110 758 758 965 965 Other non-current assets, excluding derivatives 256 256 624 624 648 648 Trade accounts receivable 10 1,565 1,565 1,455 1,455 1,650 1,650 Other current assets, excluding derivatives, 11 636 636 522 522 658 658 available for sale financial assets and prepaid expenses Loans and receivables (see Note 1.15) 2,457 2,457 2,601 2,601 2,956 2,956 Cash and cash equivalents (see Note 1.16) 13 2,292 2,292 2,446 2,446 1,013 1,013 Financial assets, excluding derivatives 8,859 8,859 5,805 5,805 4,934 4,934 Long term borrowings 17 3,432 3,582 4,077 4,269 3,738 3,848 Short term borrowings 17 1,834 1,840 1,708 1,710 1,847 1,849 Trade accounts payable 2,298 2,298 1,911 1,911 2,292 2,292 Other non-current liabilities, excluding derivatives and purchase 19 259 259 226 226 263 263 commitments for minority interests Other current liabilities, excluding derivatives and deferred income 20 1,922 1,922 1,721 1,721 1,631 1,631 Financial liabilities, excluding derivatives (see Note 1.18) 9,745 9,901 9,643 9,837 9,771 9,883

Derivatives (see Note 1.19) 21.3 123 123 314 314 265 265

Fair value may be considered as nearly equivalent to market value, the latter being defined as the price that an informed third party acting freely would be willing to pay or receive for the asset or liability in question.

Reference Document 2010 157 Financial statements Consolidated financial statements

Breakdown of financial assets and liabilities measured at fair value by measurement method

(EUR millions) 2010 2009 2008

Available for Derivatives Cash and cash Available for Derivatives Cash and cash Available for Derivatives Cash and cash sale assets equivalents sale assets equivalents sale assets equivalents Valuation based on: Published price 3,750 - 2,292 356 - 2,446 266 - 1,013 quotations Formula based 119 270 - 191 428 - 471 458 - on market data Private quotations 241 - - 211 - - 199 - - Other ------29 - - Assets 4,110 270 2,292 758 428 2,446 965 458 1,013 Valuation based on: Published price ------quotations Formula based - 147 - - 114 - - 193 - on market data Private quotations ------Liabilities - 147 - - 114 - - 193 -

The valuation methods used correspond to the following levels in the IFRS 7 fair value measurement hierarchy: -- Quoted prices Level 1 -- Formulas based on market data Level 2 -- Private quotations Level 3

The amount of financial assets valued on the basis of private quotations changed as follows in 2010:

(EUR millions) 2010 As of January 1 211 Purchases 13 Proceeds from disposals (at net realized value) (12) Gains and losses recognized in income statement (28) Gains and losses recognized in equity 57 As of December 31 241

158 Reference Document 2010 Financial statements 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 2010 2009 2008

Interest rate risk Assets: non-current 41 46 36 current 66 90 80 Liabilities: non-current (1) (21) (25) current (24) (26) (21) 21.4 82 89 70 Foreign exchange risk Assets: non-current 8 6 17 current 139 211 185 Liabilities: non-current (1) (1) (2) current (121) (56) (70) 21.5 25 160 130 Other risks Assets: non-current 12 74 140 current 4 1 - Liabilities: non-current - - - current - (10) (75) 16 65 65

Total Assets: non-current 61 126 193 current 11 209 302 265 Liabilities: non-current 19 (2) (22) (27) current 20 (145) (92) (166) 123 314 265

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, 2010 break down as follows:

(EUR millions) Nominal amounts by maturity Market value (1)

2011 2012 Beyond Total Fair value Unallocated Total to 2015 2015 hedges amounts

Interest rate swaps in euros: - fixed rate payer 500 166 - 666 (7) (10) (17) - floating rate payer 765 1,850 150 2,765 95 - 95 - floating rate / floating rate - 152 - 152 - 1 1 Foreign currency swaps 31 117 - 148 - 3 3 Total 88 (6) 82

(1) Gain / (Loss).

Reference Document 2010 159 Financial statements Consolidated financial statements

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

Derivatives used to manage foreign exchange risk outstanding as of December 31, 2010 break down as follows:

Nominal amounts by fiscal year (EUR millions) Market value (1) of allocation 2010 2011 Thereafter Total Fair value Future Foreign Not Total hedges cash flow currency net allocated hedges investment hedges

Options purchased Put USD 247 227 - 474 - 3 - 2 5 Put JPY 50 96 - 146 - - - (1) (1) Other 39 7 - 46 1 2 - 1 4 336 330 - 666 1 5 - 2 8 Ranges Written USD 247 1,961 112 2,320 2 93 - (1) 94 Written JPY 27 348 62 437 - (11) - (1) (12) Other - 8 - 8 - - - - - 274 2,317 174 2,765 2 82 - (2) 82 Forward exchange contracts (2) USD 315 109 - 424 3 12 (37) 1 (21) JPY 82 193 53 328 (2) (2) - (2) (6) GBP - (3) - (3) - - - - - Other 936 65 - 1,001 (2) (2) - (1) (5) 1,333 364 53 1,750 (1) 8 (37) (2) (32) Foreign exchange swaps (2) USD 1,682 - - 1,682 - - (37) (36) (73) CHF 232 - - 232 - - (25) (1) (26) GBP (9) - - (9) - - - 1 1 JPY (6) - - (6) - - (1) 34 33 Other (746) - - (746) (1) - - 33 32 1,153 - - 1,153 (1) - (63) 31 (33)

Total 1 95 (100) 29 25 (1) Gain/(Loss). (2) Sale/(Purchase). The impact on income statement of gains and losses on hedges of future cash flows as well as the future cash flows hedged, using these instruments, will be recognized in 2011; the amount will depend on exchange rates at this date.

160 Reference Document 2010 Financial statements Consolidated financial statements

The impacts on the net profit for fiscal year 2010 of a variation of 10% in the value of the US dollar, the Japanese yen, the Swiss franc and the Hong Kong dollar with respect to the euro, including impact of foreign currency hedges outstanding during the period, would have been as follows:

(EUR millions) US dollar Japanese yen Swiss franc Hong Kong dollar

+10% -10% +10% -10% +10% -10% +10% -10%

Impact of: - change in collection rates of foreign currency-denominated sales (24) (57) (7) 7 - - - - - conversion to euro of net profit of consolidated entities outside the euro zone 34 (34) 12 (12) 11 (11) 100 (100) Impact on net profit 10 (91) 5 (5) 11 (11) 100 (100)

The data presented in the table above should be assessed on the basis of the characteristics of the hedging instruments outstanding in fiscal year 2010, mainly comprising options and ranges. As of December 31, 2010, forecast cash collections for 2011 in US dollars and Japanese yen are both hedged in the proportion of 82%. The Group’s net equity (excluding net profit) exposure to foreign currency fluctuations as of December 31, 2010 is assessed by measuring the effect of a change of 10% in the value of the US dollar, the Japanese yen, the Swiss franc and the Hong Kong dollar from their values as of this date: (EUR millions) US dollar Japanese yen Swiss franc Hong Kong dollar

+10% -10% +10% -10% +10% -10% +10% -10% Conversion to euro of foreign-currency 328 (328) 65 (65) 183 (183) 164 (164) denominated net assets Impact on market value of net investment (112) 92 (7) 6 (69) 56 (59) 49 hedges, after tax Net impact on equity, excluding net profit 216 (236) 58 (59) 114 (127) 105 (115)

21.6 Financial instruments used to manage equity risk of December 31, 2010 would induce a net impact on the Group’s profit for an amount of 0.3 million euros. Derivatives used to The Group’s investment policy is designed to take advantage of a manage equity risk outstanding as of December 31, 2010 had a long term investment horizon. Occasionally, the Group may invest positive fair value of 16 million euros. Most of these instruments in equity-based financial instruments with the aim of enhancing mature in 2014. the dynamic management of its investment portfolio.

The Group is exposed to risks of share price changes either directly, 21.7 Liquidity risk as a result of its holding of equity investments and current available In addition to local liquidity risks, which are generally immaterial, for sale financial assets, or indirectly, as a result of its holding of the Group’s exposure to liquidity risk can be assessed in relation funds which are themselves partially invested in shares. to the amount of its short term borrowings excluding derivatives, net of cash and cash equivalents, which is zero as of December 31, The Group may also use equity-based derivatives to create 2010, or through the outstanding amount of its commercial paper synthetically an economic exposure to certain assets, or to hedge program, i.e. 0.3 billion euros. Should any of these instruments cash-settled compensation plans index-linked to the LVMH not be renewed, the Group has access to undrawn confirmed credit share price. The carrying amount of these unlisted financial lines totaling 3.3 billion euros. instruments corresponds to the estimate of the amount, provided by the counterparty, of the valuation at the balance sheet date. The The Group’s liquidity is based on the amount of its investments, valuation of financial instruments thus takes into consideration its capacity to raise long term borrowings, the diversity of its market parameters such as interest rates, share prices and volatility. investor base (bonds and short term paper), and the quality of its Considering nominal values of 28 million euros for those derivatives, banking relationships, whether evidenced or not by confirmed a uniform variation of 1% in their underlying assets’ share prices as lines of credit.

Reference Document 2010 161 Financial statements Consolidated financial statements

The following table presents the contractual schedule of disbursements for financial liabilities (excluding derivatives) recognized as of December 31, 2010, at nominal value and with interest, excluding discounting effects:

(EUR millions) 2011 2012 2013 2014 2015 Over Total 5 years

Bonds and EMTNs 930 850 502 1,042 425 161 3,910 Bank borrowings 197 126 266 155 - 4 748 Other borrowings and credit facilities 224 - - - - - 224 Finance and other long term leases 24 22 20 18 17 354 455 Commercial paper 272 - - - - - 272 Bank overdrafts 250 - - - - - 250 Gross financial debt 1,897 998 788 1,215 442 519 5,859 Other financial liabilities (1) 2,008 35 33 36 18 51 2,181 Trade accounts payable 2,298 - - - - - 2,298 Other financial liabilities 4,306 35 33 36 18 51 4,479 Total financial liabilities 6,203 1,033 821 1,251 460 570 10,338 (1) Corresponds to Other current liabilities (excluding derivatives and deferred income) for 1,922 million euros and to Other non-current liabilities (excluding derivatives and purchase commitments for minority interests) for 259 million euros, see Note 21.2.

See Note 29.3 regarding contractual maturity dates of collateral and other guarantees commitments. See Notes 21.4 and 21.5 regarding foreign exchange derivatives and Notes 17.4 and 21.4 regarding interest rate risk derivatives.

22. Segment information

The Group’s brands and trade names are organized into six business Retailing business and holding group comprises the Group’s own- groups. Four business groups – Wines and Spirits, Fashion and label retailing activities. Other activities comprise brands and other Leather Goods, Perfumes and Cosmetics, Watches and Jewelry – businesses that are not associated with any of the abovementioned comprise brands dealing with the same category of products that business groups, most often relating to the Group’s new businesses use similar production and distribution processes. The Selective and holding or real estate companies.

162 Reference Document 2010 Financial statements Consolidated financial statements

22.1 Information by business group

Fiscal year 2010

(EUR millions) Wines Fashion Perfumes Watches Selective Other and Eliminations Total and and Leather and and Retailing holding and not Spirits Goods Cosmetics Jewelry companies allocated (1)

Sales outside the Group 3,252 7,549 2,806 970 5,360 383 - 20,320 Sales between business groups 9 32 270 15 18 26 (370) - Total revenue 3,261 7,581 3,076 985 5,378 409 (370) 20,320 Profit from recurring operations 930 2,555 332 128 536 (141) (19) 4,321 Other operating income (21) (30) (39) (3) (26) (33) - (152) and expenses Operating investments (2) 97 351 112 47 194 183 - 984 Depreciation and 97 314 106 29 201 38 - 785 amortization expense Impairment expense - 21 - - 17 16 - 54

Brands, trade names, 2,853 4,675 911 1,712 2,729 867 - 13,747 licenses and goodwill (3) Inventories 3,626 770 275 403 935 70 (88) 5,991 Other operating assets 2,700 2,034 686 336 1,485 2,689 7,496 (4) 17,426 Total assets 9,179 7,479 1,872 2,451 5,149 3,626 7,408 37,164 Equity ------18,204 18,204 Operating liabilities 1,069 1,334 971 221 1,188 641 13,536 (5) 18,960 Total liabilities and equity 1,069 1,334 971 221 1,188 641 31,740 37,164

Fiscal year 2009

(EUR millions) Wines Fashion Perfumes Watches Selective Other and Eliminations Total and and Leather and and Retailing holding and not Spirits Goods Cosmetics Jewelry companies allocated (1)

Sales outside the Group 2,732 6,274 2,520 752 4,517 258 - 17,053 Sales between business groups 8 28 221 12 16 20 (305) - Total revenue 2,740 6,302 2,741 764 4,533 278 (305) 17,053 Profit from recurring operations 760 1,986 291 63 388 (135) (1) 3,352 Other operating income (41) (71) (17) (32) (19) (13) 2 (191) and expenses Operating investments (2) 96 284 96 26 182 90 - 774 Depreciation and amortization expense 92 268 99 27 175 40 - 701 Impairment expense - 20 20 - 5 11 - 56

Brands, trade names, 2,254 4,612 918 1,450 2,522 897 - 12,653 licenses and goodwill (3) Inventories 3,548 701 226 369 738 128 (66) 5,644 Other operating assets 2,540 1,855 644 257 1,342 2,389 4,782 (4) 13,809 Total assets 8,342 7,168 1,788 2,076 4,602 3,414 4,716 32,106 Equity ------14,785 14,785 Operating liabilities 1,013 1,137 805 176 1,001 614 12,575 (5) 17,321 Total liabilities and equity 1,013 1,137 805 176 1,001 614 27,360 32,106

Reference Document 2010 163 Financial statements Consolidated financial statements

Fiscal year 2008

(EUR millions) Wines Fashion Perfumes Watches Selective Other and Eliminations Total and and Leather and and Retailing holding and not Spirits Goods Cosmetics Jewelry companies allocated (1)

Sales outside the Group 3,117 5,976 2,665 863 4,361 211 - 17,193 Sales between business groups 9 34 203 16 15 17 (294) - Total revenue 3,126 6,010 2,868 879 4,376 228 (294) 17,193 Profit from recurring operations 1,060 1,927 290 118 388 (136) (19) 3,628 Other operating income 13 (61) (28) (1) (28) (38) - (143) and expenses Operating investments (2) 157 338 146 39 228 160 - 1,068 Depreciation and 75 236 111 23 148 35 - 628 amortization expense Impairment expense - 20 - - - 11 - 31

Brands, trade names, 2,070 4,651 931 1,434 2,630 903 - 12,619 licenses and goodwill (3) (6) Inventories (6) 3,406 850 292 400 776 109 (69) 5,764 Other operating assets (6) 2,564 1,945 725 317 1,390 2,431 3,728 (4) 13,100 Total assets 8,040 7,446 1,948 2,151 4,796 3,443 3,659 31,483 Equity (6) ------13,793 13,793 Operating liabilities 1,069 1,141 883 189 1,111 690 12,607 (5) 17,690 Total liabilities and equity 1,069 1,141 883 189 1,111 690 26,400 31,483 (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 sales transactions to 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. As of December 31, 2010, they include the 20.2% shareholding in Hermès International, representing an amount of 3,345 million euros, see Note 8 (487 million euros as of December 31, 2009, of which 419 classified under ”Other non-current assets” and 68 classified under “Non-current available for sale financial assets”, and 522 million euros as of December 31, 2008, of which 449 classified under “Other non-current assets” and 73 classified under “Non-current available for sale financial assets”). (5) Liabilities not allocated include borrowings and both current and deferred tax liabilities. (6) See Note 1.2 Application of IAS 38 as amended.

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

(EUR millions) 2010 2009 2008 (EUR millions) 2010 2009 2008

France 2,725 2,478 2,464 France 389 319 499 Europe (excluding France) 4,236 3,664 4,095 Europe (excluding France) 230 130 187 United States 4,611 3,840 3,925 United States 134 106 164 Japan 1,784 1,683 1,779 Japan 31 18 18 Asia (excluding Japan) 4,991 3,850 3,404 Asia (excluding Japan) 152 149 141 Other 1,973 1,538 1,526 Other 48 52 59 Revenue 20,320 17,053 17,193 Operating investments 984 774 1,068

No geographic breakdown of segment assets is provided since a significant portion of these assets consists of brands and goodwill, which must be analyzed on the basis of the revenue generated by these assets in each region, and not in relation to the region of their legal ownership. Operating investments correspond to the amounts capitalized during the fiscal year rather than payments made during the fiscal year.

164 Reference Document 2010 Financial statements Consolidated financial statements

22.3 Quarterly information Quarterly sales by business group break down as follows:

(EUR millions) Wines Fashion Perfumes Watches Selective Other and Eliminations Total and and Leather and and Retailing holding Spirits Goods Cosmetics Jewelry companies

First quarter 635 1,729 736 204 1,181 78 (91) 4,472 Second quarter 667 1,787 705 239 1,238 73 (82) 4,627 Third quarter 846 1,948 805 244 1,294 68 (94) 5,111 Fourth quarter 1,113 2,117 830 298 1,665 190 (103) 6,110 Total 2010 3,261 7,581 3,076 985 5,378 409 (370) 20,320 First quarter 540 1,598 663 154 1,085 62 (84) 4,018 Second quarter 539 1,390 622 192 1,042 68 (60) 3,793 Third quarter 682 1,549 686 187 1,040 68 (77) 4,135 Fourth quarter 979 1,765 770 231 1,366 80 (84) 5,107 Total 2009 2,740 6,302 2,741 764 4,533 278 (305) 17,053 First quarter 640 1,445 717 211 1,011 56 (78) 4,002 Second quarter 652 1,323 645 206 979 54 (62) 3,797 Third quarter 746 1,471 719 239 1,015 43 (73) 4,160 Fourth quarter 1,088 1,771 787 223 1,371 75 (81) 5,234 Total 2008 3,126 6,010 2,868 879 4,376 228 (294) 17,193

23. Revenue and expenses by nature

23.1 Revenue Revenue consists of the following:

(EUR millions) 2010 2009 2008

Revenue generated by brands and trade names 19,957 16,737 16,850 Royalties and license revenue 119 89 94 Income from investment property 81 75 66 Other revenue 163 152 183 Total 20,320 17,053 17,193

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

(EUR millions) 2010 2009 2008

Advertising and promotion expenses 2,267 1,809 2,031 Commercial lease expenses 1,248 1,055 976 Personnel costs 3,589 3,175 3,055 Research and development expenses 46 45 43

Advertising and promotion expenses mainly consist of the cost of media campaigns and point-of-sale advertising, and also include personnel costs dedicated to this function. As of December 31, 2010, a total of 2,545 stores were operated by the Group worldwide (2,423 in 2009, 2,314 in 2008), particularly by Fashion and Leather Goods and Selective Retailing.

Reference Document 2010 165 Financial statements Consolidated financial statements

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) 2010 2009 2008

Fixed or minimum lease payments 561 487 417 Variable portion of indexed leases 205 178 175 Airport concession fees - fixed portion or minimum amount 279 244 221 Airport concession fees - variable portion 203 146 163 Commercial lease expenses for the period 1,248 1,055 976

Personnel costs consist of the following elements:

(EUR millions) 2010 2009 2008 Salaries and social charges 3,473 3,059 2,986 Pensions, medical costs and similar expenses in respect of defined benefit plans 66 63 31 Stock option plan and related expenses 50 53 38 Personnel costs 3,589 3,175 3,055

24. Other operating income and expenses

(EUR millions) 2010 2009 2008

Net gains (losses) on disposals of fixed assets (36) 1 14 Restructuring costs (32) (98) (83) Impairment or amortization of brands, trade names, goodwill and other property (87) (88) (57) Other, net 3 (6) (17) Other operating income and expenses (152) (191) (143)

In 2010, net losses on disposals mainly relate to the disposals of 14 million euros and costs for the restructuring of industrial and La Brosse et Dupont and of Montaudon. See Note 2 Changes in commercial processes in the amount of 83 million euros. These the percentage interest of consolidated entities. amounts related to the discontinuation of certain product lines, the closure of retail stores considered as insufficiently profitable and In 2009, restructuring costs comprised the cost of various industrial the reorganization of the operations of Glenmorangie. The latter and commercial restructuring plans, relating mainly to the Fashion notably included the gradual withdrawal from activities performed and Leather Goods and Watches and Jewelry business groups. on behalf of third parties and the disposal of certain assets, notably In 2008, other operating income and expenses comprised capital the industrial facility in Broxburn (United Kingdom) as well as gains realized on the sale of various assets in the amount of the Glen Moray brand and distillery.

166 Reference Document 2010 Financial statements Consolidated financial statements

25. Net financial income/expense

(EUR millions) 2010 2009 2008

Borrowing costs (168) (208) (258) Income from cash, cash equivalents and current available for sale 18 20 18 Fair value adjustment of borrowings and hedges (1) 1 (17) Cost of net financial debt (151) (187) (257)

Dividends received from non-current available for sale financial assets 14 11 11 Ineffective portion of foreign currency hedges (96) (46) (64) Net gain/(loss) related to available for sale financial assets and other financial instruments 865 (94) 53 Other items - net (20) (26) (24) Other financial income and expenses 763 (155) (24)

Net financial income/(expense) 612 (342) (281)

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

(EUR millions) 2010 2009 2008 Income from cash and cash equivalents 12 11 15 Interest from current available for sale financial assets 6 9 3 Income from cash, cash equivalents and current available for sale financial assets 18 20 18

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

(EUR millions) 2010 2009 2008

Hedged financial debt (17) (20) (12) Hedging instruments 15 20 11 Unallocated derivatives 1 1 (14) Debt recognized in accordance with the fair value option - - (2) Effects of revaluation of financial debt and rate instruments (1) 1 (17)

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

(EUR millions) 2010 2009 2008

Financial cost of commercial foreign exchange hedges (124) (55) (71) Financial cost of foreign-currency denominated net investment hedges 1 13 11 Change in the fair value of unallocated derivatives 27 (4) (4) Ineffective portion of foreign exchange derivatives (96) (46) (64)

The net gain related to available for sale financial assets and other In 2010, excluding the Hermès transactions, as in 2009, the net financial instruments includes an amount of 1,004 million euros gain/loss related to available for sale financial assets and other related to the Hermès transactions (see Note 8 Non-current financial instruments was due to changes in market performance available for sale financial assets). This amount represents the gain, and the recognition of impairment losses on current and non- net of transaction costs, recorded on the settlement of equity linked current available for sale financial assets. In 2008, this item notably swaps, corresponding to the difference between the market value of included the share attributable to LVMH in the capital gains arising the securities acquired at the settlement date and their value based on the sale of the French video game retailer Micromania as well on the Hermès share price as of December 31, 2009. as various impairment losses on available for sale financial assets.

Reference Document 2010 167 Financial statements Consolidated financial statements

26. Income taxes

26.1 Analysis of the income tax expense

(EUR millions) 2010 2009 2008 Current income taxes for the period (1,501) (785) (911) Current income taxes relating to previous periods (5) 4 5 Current income taxes (1,506) (781) (906) Change in deferred income taxes 35 (68) 13 Impact of changes in tax rates on deferred taxes 2 - - Deferred income taxes 37 (68) 13 Total tax expense per income statement (1,469) (849) (893)

Tax on items recognized in equity (3) (30) 30

The effective tax rate is as follows:

(EUR millions) 2010 2009 2008 Profit before tax 4,781 2,819 3,204 Total income tax expense (1,469) (849) (893) Effective tax rate 30.7% 30.1% 27.9%

26.2 Analysis of net deferred tax on the balance sheet Net deferred taxes on the balance sheet include the following assets and liabilities:

(EUR millions) 2010 2009 2008 (1) Deferred tax assets 668 521 670 Deferred tax liabilities (3,354) (3,117) (3,113) Net deferred tax asset (liability) (2,686) (2,596) (2,443)

(1) See Note 1.2 Application of IAS 38 as amended.

26.3 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) 2010 2009 2008 French statutory tax rate 34.4 34.4 34.4 Changes in tax rates (0.1) - - Differences in tax rates for foreign companies (5.4) (6.4) (5.8) Tax losses and tax loss carry forwards (0.1) (0.4) (1.9) Difference between consolidated and taxable income, income taxable at reduced rates 1.5 2.0 0.9 Withholding taxes 0.4 0.5 0.3 Effective tax rate of the Group 30.7 30.1 27.9

Since 2000, French companies have been subject to additional income tax, at a rate of 3.3% for 2008, 2009 and 2010, bringing the theoretical tax rate to 34.4% in each fiscal year.

168 Reference Document 2010 Financial statements Consolidated financial statements

26.4 Sources of deferred taxes

In the income statement

(EUR millions) 2010 2009 2008

Valuation of brands (65) (9) (38) Other revaluation adjustments 4 (11) 3 Gains and losses on available for sale financial assets 3 (5) - Gains and losses on hedges of future foreign currency cash flows 8 (4) (3) Provisions for contingencies and losses (1) 24 10 (12) Intercompany margin included in inventories 39 (20) 85 Other consolidation adjustments (1) 34 5 11 Losses carried forward (10) (34) (33) Total 37 (68) 13

In equity

(EUR millions) 2010 2009 2008

Fair value adjustment of vineyard land (71) 18 (59) Gains and losses on available for sale financial assets (22) - (7) Gains and losses on hedges of future foreign currency cash flows 14 (2) 19 Total (79) 16 (47)

In the balance sheet

(EUR millions) 2010 (3) 2009 (3) 2008 (2) (3)

Valuation of brands (2,532) (2,385) (2,300) Fair value adjustment of vineyard land (568) (496) (503) Other revaluation adjustments (370) (330) (300) Gains and losses on available for sale financial assets (48) (21) (23) Gains and losses on hedges of future foreign currency cash flows (1) (22) (14) Provisions for contingencies and losses (1) 182 153 143 Intercompany margin included in inventories 312 268 288 Other consolidation adjustments (1) 295 187 179 Losses carried forward 44 50 87 Total (2,686) (2,596) (2,443) (1) Mainly tax-driven provisions, accelerated tax depreciation and finance lease. (2) See Note 1.2 Application of IAS 38 as amended. (3) Asset / (Liability).

26.5 Tax loss carry forwards As of December 31, 2010, unused tax loss carry forwards and tax credits, for which no deferred tax assets were recognized, had a potential positive impact on the future tax expense of 290 million euros (321 million euros in 2009, 307 million euros in 2008).

Reference Document 2010 169 Financial statements Consolidated financial statements

26.6 Tax consolidation • Tax consolidation agreements in France allow virtually all French • The application of other tax consolidation agreements, notably companies of the Group to combine their taxable profits to calculate in the United States and Italy, generated current tax savings of the overall tax expense for which only the parent company is liable. 82 million euros in 2010 (96 million euros in 2009, 96 million euros in 2008). This tax consolidation agreement generated a decrease in the current tax expense of 107 million euros in 2010 (104 million euros in 2009, 117 million euros in 2008).

27. earnings per share

2010 2009 2008

Net profit, Group share (EUR millions) 3,032 1,755 2,026 Average number of shares in circulation during the period 490,124,174 490,076,711 489,958,810 Average number of treasury shares owned during the period (13,253,254) (16,479,636) (16,403,997) Average number of shares on which the calculation before dilution is based 476,870,920 473,597,075 473,554,813

Basic Group share of earnings per share (EUR) 6.36 3.71 4.28

Average number of shares on which the above calculation is based 476,870,920 473,597,075 473,554,813 Dilution effect of stock option plans 2,868,777 1,240,950 2,055,859 Other dilution effects - - - Average number of shares in circulation after dilution 479,739,697 474,838,025 475,610,672

Diluted Group share of earnings per share (EUR) 6.32 3.70 4.26

As of December 31, 2010, all of the instruments in circulation that No events occurred between December 31, 2010 and the date on may dilute earnings per share have been taken into consideration which the financial statements were approved for publication that when determining the impact of dilution, given that all of the would have significantly affected the number of shares outstanding outstanding purchase and subscription options are considered to or the potential number of shares. be available to be exercised at that date, since the LVMH share price is higher than the exercise price of these options.

28. Provisions for pensions, medical costs and similar commitments

28.1 Expense for the year

(EUR millions) 2010 2009 2008

Service cost 46 43 37 Interest cost 31 30 23 Expected return on plan assets (19) (16) (18) Amortization of actuarial gains and losses 6 4 (11) Past service cost 2 2 2 Changes in regimes - - (2)

Total expense for the period for defined benefit plans 66 63 31

Effective return on/(cost of) plan assets 24 46 (77)

170 Reference Document 2010 Financial statements Consolidated financial statements

28.2 Net recognized commitment

(EUR millions) 2010 2009 2008

Benefits covered by plan assets 685 573 549 Benefits not covered by plan assets 140 142 113 Defined benefit obligation 825 715 662

Market value of plan assets (488) (420) (351)

Actuarial gains and losses not recognized in the balance sheet (78) (58) (79) Past service cost not yet recognized in the balance sheet (6) (8) (17) Unrecognized items (84) (66) (96)

Net recognized commitment 253 229 215

Of which: Non-current provisions 261 240 230 Current provisions 9 8 6 Other assets (17) (19) (21) Total 253 229 215

28.3 Breakdown of the change in net recognized commitment

(EUR millions) Defined benefit Market value Unrecognized Net recognized obligation of plan assets amounts commitment As of December 31, 2009 715 (420) (66) 229 Net expense for the period 77 (19) 8 66 Payments to beneficiaries (39) 27 - (12) Contributions to plan assets - (35) - (35) Contributions of employees 3 (3) - - Changes in scope and reclassifications (4) 1 1 (2) Changes in regimes 4 (1) (3) - Actuarial gains and losses: experience adjustments (14) (4) 18 - Actuarial gains and losses: changes in assumptions 37 (1) (36) - Translation adjustment 46 (33) (6) 7 As of December 31, 2010 825 (488) (84) 253

Actuarial gains and losses resulting from experience adjustments related to the fiscal years 2006 to 2009 amounted to:

(EUR millions) 2006 2007 2008 2009 Experience adjustments on the defined benefit obligation 9 (1) (2) (16) Experience adjustments on the fair value of plan assets (11) - 96 (29) Actuarial gains and losses resulting from experience adjustments (2) (1) 94 (45)

Reference Document 2010 171 Financial statements Consolidated financial statements

The actuarial assumptions applied to estimate commitments as of December 31, 2010 in the main countries where such commitments have been undertaken, were as follows:

(percentage) 2010 2009 2008 France United United Japan France United United Japan France United United Japan States Kingdom States Kingdom States Kingdom

Discount rate (1) 4.50 5.1 5.4 1.75 5.25 5.5 5.75 2.25 5.5 6.0 6.0 2.25 Average expected return 4.0 7.75 6.0 4.0 4.0 7.75 5.75 4.0 4.5 7.75 5.75 4.0 on investments Future rate of increase 3.0 4.0 4.2 2.0 3.0 4.0 4.25 2.0 3.5 4.5 3.75 2.5 of salaries (1) Discount rates were determined with reference to market yields of AA-rated corporate bonds at the year-end in the countries concerned. Bonds with maturities comparable to those of the commitments were used.

The average expected rate of return on investments by type of asset The assumed rate of increase of medical expenses in the United is as follows by type of investment: States is 7.8% for 2011, then it is assumed to decline progressively as of 2012 to reach a rate of 4.5% in 2030. (percentage) 2010 A rise of 0.5% in the discount rate would result in a reduction of Shares 6.6 47 million euros in the amount of the defined benefit obligation Bonds as of December 31, 2010. A decrease of 0.5% in the discount rate - Private issues 4.5 would result in a rise of 39 million euros in the amount of the - Public issues 2.6 defined benefit obligation as of December 31, 2010. Real estate, cash and other assets 2.6

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

(EUR millions) 2010 2009 2008

Retirement and other indemnities 127 114 111 Medical costs of retirees 46 54 42 Jubilee awards 11 11 11 Supplementary pensions 617 517 478 Early retirement indemnities 3 4 9 Other 21 15 11 Defined benefit obligation 825 715 662

The geographic breakdown of the defined benefit obligation is as follows:

(EUR millions) 2010 2009 2008

France 308 276 257 Europe (excluding France) 265 219 196 United States 147 144 126 Japan 93 65 74 Asia (excluding Japan) 12 11 9 Defined benefit obligation 825 715 662

172 Reference Document 2010 Financial statements Consolidated financial statements

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, 2010 pension schemes, set up in the United Kingdom by certain Group are as follows: companies, as well as the TFR (Trattamento di Fine Rapporto) in -- in France, these commitments include the commitment Italy, a legally required end-of-service allowance, paid regardless of to members of the Group’s Executive Committee and senior the reason for the employee’s departure from the company, and in executives, who are covered by a supplementary pension plan after Switzerland, participation by Group companies in the mandatory a certain number of years’ service, the amount of which is linked Swiss occupational pension scheme, the LPP (Loi pour la Prévoyance to their last year’s remuneration; they also include jubilee awards Professionnelle); and retirement indemnities, the payment of which is determined -- in the United States, the commitment relates to defined benefit by French law and collective bargaining agreements, respectively plans or schemes for the reimbursement of medical expenses of after a certain number of years of service or upon retirement; retirees set up by certain Group companies.

28.5 Analysis of related plan assets The breakdown of market value of plan assets by type of investment is as follows:

(percentage) 2010 2009 2008

Shares 45 42 43 Bonds - Private issues 23 27 36 - Public issues 18 19 13 Real estate, cash and other assets 14 12 8 Fair value of related plan assets 100 100 100

These assets do not include any real estate assets operated by the Group or any LVMH shares for significant amounts. The additional sums that will be paid into the funds to build up these assets in 2011 are estimated at 45 million euros.

29. Off balance sheet commitments

29.1 Purchase commitments

(EUR millions) 2010 2009 2008

Grapes, wines and distilled alcohol 1,139 1,336 1,671 Other purchase commitments for raw materials 67 68 64 Industrial and commercial fixed assets 168 109 180 Investments in joint venture shares and non-current available for sale financial assets 96 56 63

Some Wines and Spirits companies have contractual purchase arrangements with various local producers for the future supply of grapes, still wines and distilled alcohol. These commitments are valued, depending on the nature of the purchases, on the basis of the contractual terms or known year-end prices and estimated production yields. As of December 31, 2010, 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 582 480 77 1,139 Other purchase commitments for raw materials 58 9 - 67 Industrial and commercial fixed assets 79 89 - 168 Investments in joint venture shares and non-current available for sale financial assets 2 88 6 96

Reference Document 2010 173 Financial statements Consolidated financial statements

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, 2010:

(EUR millions) 2010 2009 2008

Less than one year 885 846 772 One to five years 2,237 2,045 2,009 More than five years 1,022 922 1,023 Commitments given for operating leases and concession fees 4,144 3,813 3,804

Less than one year 20 20 24 One to five years 42 32 50 More than five years 5 6 8 Commitments received for sub-leases 67 58 82

Finance leases The amount of the Group’s irrevocable commitments under finance lease agreements as of December 31, 2010 breaks down as follows:

(EUR millions) 2010 2009 2008 Minimum future Present value Minimum future Present value Minimum future Present value payments of payments payments of payments payments of payments

Less than one year 24 24 29 31 25 25 One to five years 77 55 71 50 79 60 More than five years 354 69 336 63 364 66 Total future minimum payments 455 436 468 Of which: financial interest (307) (292) (317) Present value of minimum future payments 148 148 144 144 151 151

29.3 Collateral and other guarantees As of December 31, 2010, these commitments break down as Maturity dates of these commitments are as follows: follows:

(EUR millions) 2010 2009 2008 (EUR millions) Less than One to More than Total one year five years five years

Securities and deposits 46 69 59 Securities and deposits 17 18 11 46 Other guarantees 78 66 48 Other guarantees 37 40 1 78 Guarantees given 124 135 107 Guarantees given 54 58 12 124 Guarantees received 25 33 25 Guarantees received 20 2 3 25

174 Reference Document 2010 Financial statements Consolidated financial statements

29.4 Contingent liabilities and outstanding litigation risks, litigation or disputes, known or outstanding at year-end, are sufficient to avoid its consolidated financial net worth being As part of its day-to-day management, the Group is party to materially impacted in the event of an unfavorable outcome. various legal proceedings concerning brand rights, the protection of intellectual property rights, the set-up of selective retailing 29.5 Other commitments networks, licensing agreements, employee relations, tax audits and other areas relating to its business. The Group believes that The Group is not aware of any significant off balance sheet the provisions recorded in the balance sheet in respect of these commitments other than those described above.

30. Related party transactions

30.1 Relations of LVMH with Christian Dior and Relations of LVMH with Groupe Arnault and Groupe Arnault Financière Agache The LVMH group is consolidated within Christian Dior SA, a Groupe Arnault SAS provides assistance to LVMH in the areas public company listed on the Eurolist by Euronext Paris, which of development, engineering, corporate and real estate law. In is controlled by Groupe Arnault SAS via its subsidiary Financière addition, Groupe Arnault leases office premises to LVMH. Agache SA. LVMH leases office space to Groupe Arnault SAS and Financière Relations of LVMH with Christian Dior Agache SA and LVMH also provides them with various forms of administrative assistance. LVMH, via its subsidiaries Parfums Christian Dior and Montres Dior, coordinates its communications efforts with Christian Transactions between LVMH and Groupe Arnault and Financière Dior SA and its subsidiaries, in particular Christian Dior Agache may be summarized as follows:

Couture SA. Christian Dior also provides creative assistance to (EUR millions) 2010 2009 2008 LVMH for the design of Dior perfume bottles and watches, as well Amounts billed by Groupe as in the course of its advertising and promotional campaigns. Arnault SAS and Financière Agache (5) (5) (5) Montres Dior watches are manufactured by a company equally to LVMH owned by Christian Dior and LVMH. Amount payable outstanding - (2) - as of December 31 LVMH distributes Christian Dior products through its Selective Amounts billed by LVMH to Groupe Retailing businesses, and distributes Montres Dior watches 2 2 2 Arnault SAS and Financière Agache through its Watches and Jewelry business group’s distribution Amount receivable outstanding - - 1 network. Christian Dior purchases the products manufactured by as of December 31 Parfums Christian Dior and Montres Dior from LVMH, which it sells in its network of retail stores. 30.2 Relations with Diageo Finally, LVMH provides administrative assistance to the subsidiaries of Christian Dior located outside France. Moët Hennessy SNC and Moët Hennessy International SAS Transactions between LVMH and Christian Dior, which are (hereafter referred to as “Moët Hennessy”) are the holding companies completed at market prices, may be summarized as follows, in for LVMH’s Wines and Spirits businesses, with the exception of value: Château d’Yquem, Château Cheval Blanc and certain champagne vineyards. Diageo holds a 34% stake in Moët Hennessy. In 1994, (EUR millions) 2010 2009 2008 at the time when Diageo acquired this 34% stake, an agreement LVMH purchases from Christian Dior (13) (16) (19) was concluded between Diageo and LVMH for the apportionment Amount payable outstanding of holding company expenses between Moët Hennessy and the (12) (12) (14) as of December 31 other holding companies of the LVMH Group.

LVMH sales to Christian Dior 7 9 13 Under this agreement, Moët Hennessy assumed 20% of shared Amount receivable outstanding expenses in 2010 (20% in 2009, 23% in 2008) representing an 1 4 1 as of December 31 amount of 9 million euros in 2010 (17 million euros in 2009 and in 2008).

Reference Document 2010 175 Financial statements Consolidated financial statements

30.3 Executive bodies The total compensation paid to the members of the Executive Committee and the Board of Directors, in respect of their functions within the Group, breaks down as follows:

(EUR millions) 2010 2009 2008 Gross compensation, employers’ 56 51 51 charges and benefits in kind Post-employment benefits 10 10 9 Other long term benefits 13 6 11 End of contract indemnities - - - Stock option and similar plans 24 22 19 Total 103 89 90

The commitment recognized as of December 31, 2010 for post- employment benefits, net of related financial assets was 18 million euros (7 million euros as of December 31, 2009 and 8 million euros as of December 31, 2008).

31. Subsequent events

No significant subsequent events occurred between December 31, 2010 and February 3, 2011, the date on which the accounts were approved for publication by the Board of Directors.

176 Reference Document 2010 Financial statements Consolidated financial statements

Consolidated companies

Companies Registered office Percentage Companies Registered office Percentage Control Interest Control Interest Moët Hennessy Diageo Hong Kong Ltd Hong Kong, China (3) 100% 66% WINES AND SPIRITS Moët Hennessy Diageo Macau Ltd Macao, China (3) 100% 66% MHCS SCS Epernay, France 100% 66% Riche Monde (China) Ltd Shanghai, China (3) 100% 66% Champagne Des Moutiers SA Epernay, France 100% 66% Moët Hennessy Diageo Singapore Pte Ltd Singapore (3) 100% 66% Société Viticole de Reims SA Epernay, France 100% 66% Riche Monde Malaisie SDN BHD Petaling Jaya, Malaysia (3) 100% 66% Cie Française du Champagne Epernay, France 100% 66% (3) et du Luxe SA Riche Monde Taïpei Ltd Taipei, Taiwan 100% 66% (3) Chamfipar SA Epernay, France 100% 66% Diageo Moët Hennessy Thailand Ltd Bangkok, Thailand 100% 66% STM Vignes SAS Epernay, France 95% 63% MH Champagne and Wines Korea Inc Ichon, South Korea 100% 66% Champagne de Mansin SAS Gye sur Seine, France 100% 66% Moët Hennessy Shanghai Ltd Shanghai, China 100% 66% Champagne Montaudon SARL Reims, France 100% 66% Moët Hennessy India Pvt Ltd New Delhi, India 100% 66% Moët Hennessy Taiwan Ltd Taipei, Taiwan 100% 65% Société Civile des Crus Reims, France 100% 66% de Champagne SA MHD Chine Co Ltd Shanghai, China (3) 100% 66% Moët Hennessy Italia Spa Milan, Italy 100% 66% MHWH Limited Limassol, Cyprus 50% 33% Moët Hennessy UK Ltd London, United Kingdom 100% 66% Moët Hennessy Whitehall Russia SA Moscow, Russia 100% 33% Moët Hennessy España SA Barcelona, Spain 100% 66% Moët Hennessy Vietnam Ho Chi Minh City, Vietnam 100% 65% Importation Co Ltd Moët Hennessy (Suisse) SA Geneva, Switzerland 100% 66% Moët Hennessy Vietnam Ho Chi Minh City, Vietnam 51% 33% Moët Hennessy Deutschland GmbH Munich, Germany 100% 66% Distribution Co Pte Ltd Moët Hennessy de Mexico, SA de C.V. Mexico City, Mexico 100% 66% Moët Hennessy Rus LLC Moscow, Russia 100% 66% Moët Hennessy Belux SA Brussels, Belgium 100% 66% Moët Hennessy Diageo KK Tokyo, Japan (3) 100% 66% Moët Hennessy Osterreich GmbH Vienna, Austria 100% 66% Moët Hennessy Asia Pacific Pte Ltd Singapore 100% 65% Moët Hennessy Suomi OY Helsinki, Finland 100% 66% Moët Hennessy Australia Ltd Rosebury, Australia 100% 65% Moët Hennessy Polska SP Z.O.O. Warsaw, Poland 100% 66% Millennium Import LLC Minneapolis, Minnesota, USA 100% 66% Moët Hennessy Czech Republic Sro Prague, Czech Republic 100% 66% Polmos Zyrardow Zyrardow, Poland 100% 66% Moët Hennessy Sverige AB Stockholm, Sweden 100% 66% The Glenmorangie Company Ltd Edinburgh, United Kingdom 100% 66% Moët Hennessy România Srl Bucharest, Romania 100% 66% Macdonald & Muir Ltd Edinburgh, United Kingdom 100% 66% Moët Hennessy Norge AS Hoevik, Norway 100% 66% The Scotch Malt Whisky Society Ltd Edinburgh, United Kingdom 100% 66% Moët Hennessy Danmark A/S Copenhagen, Denmark 100% 66% Wenjun Spirits Company Ltd Chengdu, China 55% 36% Moët Hennessy Nederland BV Baarn, Netherlands 100% 66% Wenjun Spirits Sales Company Ltd Chengdu, China 55% 36% Moët Hennessy USA, Inc New York, USA 100% 66% FASHION AND LEATHER GOODS MHD Moët Hennessy Diageo SAS Courbevoie, France (3) 100% 66% Louis Vuitton Malletier SA Paris, France 100% 100% Clicquot, Inc New York, USA * 100% 66% Manufacture de Souliers Louis Vuitton Srl Fiesso d’Artico, Italy 100% 100% Opera Vineyards SA Buenos Aires, Argentina (1) 50% 33% Louis Vuitton South Europe Srl Milan, Italy 100% 100% Domaine Chandon, Inc Yountville (California), USA 100% 66% Louis Vuitton Saint Barthélémy SNC Saint Bartholomew, French 100% 100% Ltd Margaret River, Australia 100% 66% Antilles Veuve Clicquot Properties, Pty Ltd Sydney, Australia 100% 66% Louis Vuitton Cantacilik Ticaret AS Istanbul, Turkey 100% 100% Moët Hennessy do Brasil – Vinhos E Sao Paulo, Brazil 100% 66% Louis Vuitton Editeur SAS Paris, France 100% 100% Destilados Ltda Louis Vuitton International SNC Paris, France 100% 100% Ltd Blenheim, New Zealand 100% 66% Les Ateliers de Pondichery Private Ltd Pondichery, India 100% 100% Bodegas Chandon Argentina SA Buenos Aires, Argentina 100% 66% Louis Vuitton India Holding Private Ltd Bangalore, India 100% 100% Domaine Chandon Australia Pty Ltd Coldstream Victoria, 100% 66% Australia Société des Ateliers Louis Vuitton SNC Paris, France 100% 100% Newton Vineyards LLC St Helena (California), USA 90% 59% Les Tanneries de la Comète SA Estaimpuis, Belgium 60% 60% Château d’Yquem SA Sauternes, France 65% 65% Louis Vuitton Bahrein Manama, Bahrain (4) (4) Château d’Yquem SC Sauternes, France 64% 64% Société Louis Vuitton Services SNC Paris, France 100% 100% (4) (4) Société Civile Cheval Blanc (SCCB) Saint Emilion, France (1) 50% 50% Louis Vuitton Qatar LLC Doha, Qatar La Tour du Pin SAS Saint Emilion, France (1) 50% 50% Société des Magasins Louis Vuitton Paris, France 100% 100% France SNC Jas Hennessy & Co SCS Cognac, France 99% 65% Belle Jardinière SA Paris, France 100% 100% Distillerie de la Groie SARL Cognac, France 100% 65% Belle Jardinière Immo SAS Paris, France 100% 100% SICA de Bagnolet Cognac, France 100% 3% Sedivem SNC Paris, France 100% 100% Sodepa SARL Cognac, France 100% 65% Les Ateliers Horlogers Louis Vuitton SA La Chaux-de-Fonds, 100% 100% Diageo Moët Hennessy BV Amsterdam, Netherlands (3) 100% 66% Switzerland Hennessy Dublin Ltd Dublin, Ireland 100% 66% Louis Vuitton Monaco SA Monte Carlo, Monaco 100% 100% Edward Dillon & Co Ltd Dublin, Ireland (2) 40% 26% ELV SNC Paris, France 100% 100% Hennessy Far East Ltd Hong Kong, China 100% 65% Louis Vuitton Services Europe Sprl Brussels, Belgium 100% 100%

Reference Document 2010 177 Financial statements Consolidated financial statements

Companies Registered office Percentage Companies Registered office Percentage Control Interest Control Interest Louis Vuitton UK Ltd London, United Kingdom 100% 100% Louis Vuitton Korea Ltd Seoul, South Korea 100% 100% Louis Vuitton Ireland Ltd Dublin, Ireland 100% 100% LVMH Fashion Group Trading Seoul, South Korea 100% 100% Korea Ltd Louis Vuitton Deutschland GmbH Dusseldorf, Germany 100% 100% Louis Vuitton Hungaria Sarl Budapest, Hungary 100% 100% Louis Vuitton Ukraine LLC Kiev, Ukraine 100% 100% Louis Vuitton Argentina SA Buenos Aires, Argentina 100% 100% Catalana Talleres Artesanos Barcelona, Spain 100% 100% Louis Vuitton SA Louis Vuitton Vostock LLC Moscow, Russia 100% 100% Atepeli – Ateliers de Ponte de Lima SA Ponte de Lima, Portugal 100% 100% LV Colombia SA Santafe de Bogota, 100% 100% Colombia Louis Vuitton BV Amsterdam, Netherlands 100% 100% Louis Vuitton Maroc Sarl Casablanca, Morocco 100% 100% Louis Vuitton Belgium SA Brussels, Belgium 100% 100% Louis Vuitton South Africa Ltd Johannesburg, 100% 100% Louis Vuitton Luxembourg SARL Luxembourg, Luxembourg 100% 100% South Africa Louis Vuitton Hellas SA Athens, Greece 100% 100% Louis Vuitton Macau Company Ltd Macao, China 100% 100% Louis Vuitton Cyprus Limited Nicosia, Cyprus 100% 100% LVMH Fashion Group (Shanghai) Shanghai, China 100% 100% Louis Vuitton Portugal Maleiro, Ltda Lisbon, Portugal 100% 100% Trading Co Ltd Louis Vuitton Ltd Tel Aviv, Israel 100% 100% LVJ Group KK Tokyo, Japan 99% 99% Louis Vuitton Danmark A/S Copenhagen, Denmark 100% 100% Louis Vuitton North America Inc New York, USA * 100% 100% Louis Vuitton Aktiebolag SA Stockholm, Sweden 100% 100% Louis Vuitton Canada, Inc Toronto, Canada 100% 100% Louis Vuitton Suisse SA Geneva, Switzerland 100% 100% Marc Jacobs International, LLC New York, USA * 96% 96% Louis Vuitton Ceska s.r.o. Prague, Czech Republic 100% 100% Marc Jacobs International (UK) Ltd London, United Kingdom 100% 100% Louis Vuitton Osterreich GmbH Vienna, Austria 100% 100% Marc Jacobs Trademark, LLC New York, USA * 33% 33% LV US Manufacturing, Inc New York, USA 100% 100% Marc Jacobs Japon KK Tokyo, Japan 50% 48% Somarest SARL Sibiu, Romania 100% 100% Marc Jacobs international Italia Srl Milan, Italy 100% 96% Louis Vuitton Hawaii, Inc Honolulu (Hawaii), USA 100% 100% Marc Jacobs International France Paris, France 100% 99% Atlantic Luggage Company Ltd Hamilton, Bermuda 100% 40% Loewe SA Madrid, Spain 100% 100% Louis Vuitton Guam, Inc Guam 100% 100% Loewe Hermanos SA Madrid, Spain 100% 100% Louis Vuitton Saipan, Inc Saipan, Mariana Islands 100% 100% Manufacturas Loewe SL Madrid, Spain 100% 100% Louis Vuitton Norge AS Oslo, Norway 100% 100% LVMH Fashion Group France SNC Paris, France 100% 100% San Dimas Luggage Company New York, USA 100% 100% Loewe Hermanos UK Ltd London, United Kingdom 100% 100% Louis Vuitton Liban (Beyrouth) SAL Beirut, Lebanon 100% 100% Loewe Saïpan, Inc Saipan, Mariana Islands 100% 100% Louis Vuiton Liban Holding SAL Beirut, Lebanon 100% 100% Loewe Guam, Inc Guam 100% 100% Louis Vuitton Vietnam Company Ltd Hanoi, Vietnam 100% 100% Loewe Hong Kong Ltd Hong Kong, China 100% 100% Louis Vuitton Suomy Oy Helsinki, Finland 100% 100% Loewe Commercial & Trading Co, Ltd Shanghai, China 100% 100% Louis Vuitton România Srl Bucharest, Romania 100% 100% Loewe Fashion Pte Ltd Singapore 100% 100% LVMH FG Brasil Ltda Sao Paulo, Brazil 100% 100% Loewe Fashion (M) SDN BHD Kuala Lumpur, Malaysia 100% 100% Louis Vuitton Panama Inc Panama City, Panama 100% 100% Loewe Taïwan Ltd Taipei, Taiwan 100% 98% Louis Vuitton Mexico S de RL de C.V. Mexico City, Mexico 100% 100% Loewe Korea Ltd Seoul, South Korea 100% 100% Louis Vuitton Uruguay SA Montevideo, Uruguay 100% 100% Loewe Macao Ltd Macao, China 100% 100% Louis Vuitton Chile Ltda Santiago de Chile, Chile 100% 100% Berluti SA Paris, France 100% 100% Louis Vuitton (Aruba) N.V Oranjestad, Aruba 100% 100% Société de Distribution Paris, France 100% 100% Louis Vuitton Republica Dominica Srl Santo Domingo, 100% 100% Robert Estienne SNC Dominican Republic Manufattura Ferrarese Srl Ferrara, Italy 100% 100% LVMH Fashion Group Pacific Ltd Hong Kong, China 100% 100% Berluti LLC New York, USA 100% 100% LV Trading Hong Kong Ltd Hong Kong, China 100% 100% Berluti UK Ltd London, United Kingdom 100% 100% Louis Vuitton Hong Kong Ltd Hong Kong, China 100% 100% Rossimoda Spa Vigonza, Italy 97% 97% Louis Vuitton (Philippines), Inc Makati, Philippines 100% 100% Rossimoda USA Ltd New York, USA 100% 97% LVMH Fashion (Singapore) Pte Ltd Singapore 100% 100% Rossimoda France SARL Paris, France 100% 97% LV IOS Private Ltd Singapore 100% 100% Brenta Suole Srl Vigonza, Italy 65% 63% PT Louis Vuitton Indonesia Jakarta, Indonesia 98% 98% LVMH Fashion Group Services SAS Paris, France 100% 100% Louis Vuitton (Malaysia) SDN BHD Kuala Lumpur, Malaysia 100% 100% Montaigne KK Tokyo, Japan 100% 99% Louis Vuitton (Thailand) SA Bangkok, Thailand 100% 100% Interlux Company Ltd Hong Kong, China 100% 100% Louis Vuitton Taïwan, Ltd Taipei, Taiwan 98% 98% Céline SA Paris, France 100% 100% Louis Vuitton Australia, PTY Ltd Sydney, Australia 100% 100% Avenue M International SCA Paris, France 100% 100% Louis Vuitton (China) Co Ltd Shanghai, China 100% 100% Enilec Gestion SARL Paris, France 100% 100% Louis Vuitton Mongolia LLC Ulaan Baatar, Mongolia 100% 100% Montaigne SA Paris, France 100% 100% LV New Zealand Limited Auckland, New Zealand 100% 100% Celine Monte-Carlo SA Monte-Carlo, Monaco 100% 100% Louis Vuitton Trading India Private Ltd New Delhi, India 51% 51% Celine Production Srl Florence, Italy 100% 100% Louis Vuitton EAU LLC Dubai, United Arab Emirates (4) (4) Celine Suisse SA Geneva, Switzerland 100% 100% Louis Vuitton FZCO Dubai, United Arab Emirates 65% 65% Celine UK Ltd London, United Kingdom 100% 100%

178 Reference Document 2010 Financial statements Consolidated financial statements

Companies Registered office Percentage Companies Registered office Percentage Control Interest Control Interest Celine Inc New York, USA * 100% 100% Fendi Taiwan Ltd Taipei, Taiwan 100% 100% Celine Hong Kong Ltd Hong Kong, China 100% 100% Fendi Hong Kong Ltd Hong Kong, China 100% 100% Celine Commercial & Trading (Shanghai) Shanghai, China 100% 100% Fendi China Boutiques Ltd Hong Kong, China 100% 100% Co Ltd Fendi (Singapore) Pte Ltd Singapore 100% 100% Celine Guam Inc Tumon, Guam 100% 100% Fendi Fashion (Malaysia) Snd. Bhd. Kuala Lumpur, Malaysia 100% 100% Celine Korea Ltd Seoul, South Korea 100% 100% Fendi Switzerland SA Geneva, Switzerland 100% 100% Celine Taïwan Ltd Taipei, Taiwan 100% 99% Fun Fashion FZCO LLC Dubai, United Arab Emirates 60% 60% CPC International Ltd Hong Kong, China 100% 100% Fendi Marianas, Inc Tumon, Guam 100% 100% CPC Macau Ltd Macao, China 100% 100% Fun Fashion Kuwait Co. WLL Kuwait City, Kuwait (4) (4) LVMH FG Services UK Ltd London, United Kingdom 100% 100% Fendi Macau Company Ltd Macao, China 100% 100% Kenzo SA Paris, France 100% 100% Fendi Germany GmbH Stuttgart, Germany 100% 100% E-Kenzo SAS Paris, France 60% 60% Fun Fashion Napoli Srl Rome, Italy 51% 51% Kenzo Belgique SA Brussels, Belgium 100% 100% Fendi (Shanghai) Co Ltd Shanghai, China 100% 100% Kenzo Homme UK Ltd London, United Kingdom 100% 100% Fun Fashion India Pte Ltd Mumbai, India (4) (4) Kenzo Japan KK Tokyo, Japan 100% 100% Interservices & Trading SA Lugano, Switzerland 100% 100% Kenzo Accessories Srl Lentate Sul Seveso, Italy 51% 51% Fendi Silk SA Lugano, Switzerland 51% 51% Givenchy SA Paris, France 100% 100% Outshine Mexico, S. de RL de C.V. Mexico City, Mexico 100% 100% Givenchy Corporation New York, USA 100% 100% Maxelle SA Neuchatel, Switzerland 100% 51% Givenchy China Co Ltd Hong Kong, China 100% 100% Taramax USA Inc New Jersey, USA 100% 51% Givenchy Shanghai Commercial and Shanghai, China 100% 100% Primetime Inc New Jersey, USA 100% 51% Trading Co, Ltd Taramax SA Neuchatel, Switzerland 51% 51% GCCL Macau Co Ltd Macao, China 100% 100% Taramax Japan KK Tokyo, Japan 100% 51% Gabrielle Studio, Inc New York, USA 100% 100% Support Retail Mexico, S. de RL de C.V. Mexico City, Mexico 100% 100% Donna Karan International Inc New York, USA * 100% 100% Emilio Pucci Srl Florence, Italy 100% 100% The Donna Karan Company LLC New York, USA 100% 100% Emilio Pucci International BV Baarn, Netherlands 67% 67% Donna Karan Service Company BV Oldenzaal, Netherlands 100% 100% Emilio Pucci, Ltd New York, USA 100% 100% Donna Karan Company Store Ireland Ltd Dublin, Ireland 100% 100% Emilio Pucci Hong Kong Co Ltd Hong Kong, China 100% 100% Donna Karan Studio LLC New York, USA 100% 100% EP (Shanghai) Commercial Ltd Shanghai, China 100% 100% The Donna Karan Company Store LLC New York, USA 100% 100% Emilio Pucci UK Ltd London, United Kingdom 100% 100% Donna Karan Company Store UK London, United Kingdom 100% 100% Holdings Ltd Thomas Pink Holdings Ltd London, United Kingdom 100% 100% Donna Karan Management Company London, United Kingdom 100% 100% Thomas Pink Ltd London, United Kingdom 100% 100% UK Ltd Thomas Pink BV Rotterdam, Netherlands 100% 100% Donna Karan Company Stores UK London, United Kingdom 100% 100% Thomas Pink Inc New York, USA * 100% 100% Retail Ltd Thomas Pink Ireland Ltd Dublin, Ireland 100% 100% Donna Karan Company Store (UK) Ltd London, United Kingdom 100% 100% Thomas Pink Belgium SA Brussels, Belgium 100% 100% Donna Karan HK Ltd Hong Kong, China 100% 100% Thomas Pink France SAS Paris, France 100% 100% Donna Karan (Italy) Srl Milan, Italy 100% 100% Thomas Pink Canada Inc Toronto, Canada 100% 100% Donna Karan (Italy) Production Milan, Italy 100% 100% Services Srl Edun Apparel Ltd Dublin, Ireland (2) 49% 49% Fendi International BV Baarn, Netherlands 100% 100% Nowness, LLC New York, USA * 100% 100% Fen Fashion Hellas SA Athens, Greece 51% 51% PERFUMES AND COSMETICS Fendi Prague S.r.o. Prague, Czech Republic 100% 100% Parfums Christian Dior SA Paris, France 100% 100% Fun Fashion Qatar Doha, Qatar (4) (4) LVMH P&C Thailand Co Ltd Bangkok, Thailand 49% 49% Fendi International SA Paris, France 100% 100% LVMH Parfums & Cosmétiques Sao Paulo, Brazil 100% 100% Fun Fashion Emirates LLC Dubai, United Arab Emirates (4) (4) do Brasil Ltda Fendi SA Luxembourg, Luxembourg 100% 100% France Argentine Cosmetics SA Buenos Aires, Argentina 100% 100% Fun Fashion Bahrain WLL Manama, Bahrain (4) (4) LVMH P&C Shanghai Co Ltd Shanghai, China 100% 100% Fendi Srl Rome, Italy 100% 100% Parfums Christian Dior Finland Oy Helsinki, Finland 100% 100% Fendi Dis Ticaret LSi Istanbul, Turkey 100% 100% LVMH P&C Inc New York, USA 100% 100% Fendi Adele Srl Rome, Italy 100% 100% SNC du 33 avenue Hoche Paris, France 100% 100% Fendi Italia Srl Rome, Italy 100% 100% LVMH Fragrances & Cosmetics Singapore 100% 100% Fendi UK Ltd London, United Kingdom 100% 100% (Sinpagore) Pte Ltd Fendi France SAS Paris, France 100% 100% Parfums Christian Dior Orient Co Dubai, United Arab Emirates 60% 60% Fendi North America Inc New York, USA * 100% 100% Parfums Christian Dior Emirates Dubai, United Arab Emirates 51% 31% (2) Fendi Guam Inc Tumon, Guam 100% 100% EPCD SP.ZO.O. Warsaw, Poland 20% 20% Fendi (Thailand) Company Ltd Bangkok, Thailand 100% 100% Parfums Christian Dior (UK) Ltd London, United Kingdom 100% 100% Fendi Asia Pacific Ltd Hong Kong, China 100% 100% Parfums Christian Dior BV Rotterdam, Netherlands 100% 100% Fendi Korea Ltd Seoul, South Korea 100% 100% Iparkos BV Rotterdam, Netherlands 100% 100%

Reference Document 2010 179 Financial statements Consolidated financial statements

Companies Registered office Percentage Companies Registered office Percentage Control Interest Control Interest Parfums Christian Dior S.A.B. Brussels, Belgium 100% 100% Kenzo Parfums Singapore Singapore 100% 100% Parfums Christian Dior (Ireland) Ltd Dublin, Ireland 100% 100% BeneFit Cosmetics LLC San Francisco (California), USA 80% 80% Parfums Christian Dior Hellas S.A. Athens, Greece 100% 100% BeneFit Cosmetics Ireland Ltd Dublin, Ireland 100% 80% Parfums Christian Dior A.G. Zurich, Switzerland 100% 100% BeneFit Cosmetics UK Ltd London, United Kingdom 100% 80% Christian Dior Perfumes LLC New York, USA 100% 100% BeneFit Cosmetics Services Canada Inc Vancouver, Canada 100% 80% Parfums Christian Dior Canada Inc Montreal, Canada 100% 100% BeneFit Cosmetics Korea Seoul, South Korea 100% 80% LVMH P&C de Mexico SA de C.V. Mexico City, Mexico 100% 100% BeneFit Cosmetics SAS Boulogne-Billancourt, 100% 80% France Parfums Christian Dior Japon K.K. Tokyo, Japan 100% 100% BeneFit Cosmetics Hong Kong Hong Kong, China 100% 80% Parfums Christian Dior (Singapore) Pte Ltd Singapore 100% 100% Fresh Inc Boston (Massachusetts), USA 80% 80% Inalux SA Luxembourg, Luxembourg 100% 100% Fresh Cosmetics Ltd London, United Kingdom 100% 80% LVMH P&C Asia Pacific Ltd Hong Kong, China 100% 100% LVMH Cosmetics Services KK Tokyo, Japan 100% 100% Fa Hua Fragrance & Cosmetic Co Ltd Hong Kong, China 100% 100% Parfums Christian Dior China Shanghai, China 100% 100% WATCHES AND JEWELRY LVMH P&C Korea Ltd Seoul, South Korea 100% 100% TAG Heuer International SA Luxembourg, Luxembourg 100% 100% Parfums Christian Dior Hong Kong Ltd Hong Kong, China 100% 100% LVMH Swiss Manufactures SA La Chaux-de-Fonds, 100% 100% LVMH P&C Malaysia Sdn berhad Inc Kuala Lumpur, Malaysia 100% 100% Switzerland Fa Hua Hong Kong Co, Ltd Hong Kong, China 100% 100% LVMH Relojeria & Joyeria España SA Madrid, Spain 100% 100% Pardior SA de C.V. Mexico City, Mexico 100% 100% LVMH Montres & Joaillerie France SA Paris, France 100% 100% Parfums Christian Dior A/S Ltd Copenhagen, Denmark 100% 100% LVMH Watch & Jewelry Bad Homburg, Germany 100% 100% Central Europe GmbH LVMH Perfumes & Cosmetics Sydney, Australia 100% 100% Group Pty Ltd LVMH Watch & Jewelry UK Ltd Manchester, United Kingdom 100% 100% Parfums Christian Dior AS Ltd Hoevik, Norway 100% 100% LVMH Watch & Jewelry USA (Inc) Springfield (New Jersey), 100% 100% USA Parfums Christian Dior AB Stockholm, Sweden 100% 100% LVMH Watch & Jewelry Canada Ltd Toronto, Canada 100% 100% Parfums Christian Dior Auckland, New Zealand 100% 100% (New Zealand) Ltd LVMH Watch & Jewelry Far East Ltd Hong Kong, China 100% 100% Parfums Christian Dior GmbH Austria Vienna, Austria 100% 100% LVMH Watch & Jewelry Singapore Pte Ltd Singapore 100% 100% Cosmetic of France Inc Miami (Florida), USA 100% 100% LVMH Watch & Jewelry Malaysia Sdn Bhd Kuala Lumpur, Malaysia 100% 100% GIE LVMH Recherche Saint-Jean de Braye, France 100% 100% LVMH Watch & Jewelry Capital Pte Ltd Singapore 100% 100% GIE Parfums et Cosmétiques Levallois Perret, France 100% 100% LVMH Watch & Jewelry Japan KK Tokyo, Japan 100% 100% Information Services - PCIS LVMH Watch & Jewelry Australia Pty Ltd Melbourne, Australia 100% 100% Perfumes Loewe SA Madrid, Spain 100% 100% LVMH Watch & Jewelry Hong Kong Ltd Hong Kong, China 100% 100% Acqua Di Parma Srl Milan, Italy 100% 100% LVMH Watch & Jewelry Taiwan Ltd Hong Kong, China 100% 100% Acqua Di Parma LLC New York, USA 100% 100% LVMH Watch & Jewelry India Pvt Ltd New Delhi, India 100% 100% Guerlain SA Paris, France 100% 100% LVMH Watch & Jewelry (Shanghai) Shanghai, China 100% 100% LVMH Parfums & Kosmetik Dusseldorf, Germany 100% 100% Commercial Co Ltd Deutschland GmbH Chaumet International SA Paris, France 100% 100% Guerlain GesmbH Vienna, Austria 100% 100% Chaumet London Ltd London, United Kingdom 100% 100% Guerlain SA (Belgique) Fleurus, Belgium 100% 100% Chaumet Horlogerie SA Bienne, Switzerland 100% 100% Guerlain Ltd London, United Kingdom 100% 100% Chaumet Monte-Carlo SAM Monte Carlo, Monaco 100% 100% LVMH Perfumes e Cosmetica Lda Lisbon, Portugal 100% 100% Chaumet Korea Chusik Hoesa Seoul, South Korea 100% 100% Guerlain SA (Suisse) Geneva, Switzerland 100% 100% LVMH Watch & Jewelry Italy Spa Milan, Italy 100% 100% Guerlain Inc New York, USA 100% 100% Delano SA La Chaux-de-Fonds, 100% 100% Guerlain Canada Ltd Montreal, Canada 100% 100% Switzerland Guerlain De Mexico SA Mexico City, Mexico 100% 100% LVMH W&J Services (Suisse) SA La Chaux-de-Fonds, 100% 100% Switzerland 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), 100% 100% Make Up For Ever SA Paris, France 100% 100% USA * Make Up For Ever UK Ltd London, United Kingdom 100% 100% Fred Londres Ltd London, United Kingdom 100% 100% Make Up For Ever LLC New York, USA * 100% 100% Dior Montres SARL Paris, France (1) 50% 50% LVMH Fragrance Brands SA Levallois Perret, France 100% 100% Les Ateliers Horlogers Dior SA La Chaux-de-Fonds, 50% 50% Parfums Givenchy Ltd London, United Kingdom 100% 100% Switzerland (1) Parfums Givenchy GmbH Düsseldorf, Germany 100% 100% Hublot SA Nyon, Switzerland 100% 100% Parfums Givenchy LLC New York, USA * 100% 100% Bentim International SA Luxembourg, Luxembourg 100% 100% Parfums Givenchy Canada Ltd Toronto, Canada 100% 100% Hublot SA Genève Geneva, Switzerland 100% 100% Parfums Givenchy KK Tokyo, Japan 100% 100% MDM Conseil et Gestion SA Nyon, Switzerland 100% 100% Parfums Givenchy WHD, Inc New York, USA * 100% 100% Hublot of America, Inc Ft Lauderdale, USA 100% 100% LVMH P&K GmbH Dusseldorf, Germany 100% 100% Hublot Japan KK Ltd Tokyo, Japan 100% 100% Kenzo Parfums NA LLC New York, USA * 100% 100% De Beers LV Ltd London, United Kingdom (1) 50% 50%

180 Reference Document 2010 Financial statements Consolidated financial statements

Companies Registered office Percentage Companies Registered office Percentage Control Interest Control Interest Gateshire Marketing Sdn Bhd. Kuala Lumpur, Malaysia 100% 61% SELECTIVE RETAILING DFS Merchandising Ltd Delaware, USA 100% 61% Sephora SA Boulogne-Billancourt, 100% 100% France DFS New Caledonia Sarl Noumea, New Caledonia 100% 61% Sephora Luxembourg SARL Luxembourg, Luxembourg 100% 100% DFS New Zealand Ltd Auckland, New Zealand 100% 61% LVMH Iberia SL Madrid, Spain 100% 100% TRS New Zealand Ltd Auckland, New Zealand (2) 45% 28% LVMH Italia Spa Milan, Italy 100% 100% Commonwealth Investment Saipan, Mariana Islands 97% 59% Company, Inc Sephora Portugal Perfumaria Lda Lisbon, Portugal 100% 100% DFS Saipan Ltd Saipan, Mariana Islands 100% 61% Sephora Pologne Spzoo Warsaw, Poland 100% 100% Kinkaï Saipan L.P. Saipan, Mariana Islands 100% 61% Sephora Marinopoulos SA Alimos, Greece (1) 50% 50% Saipan International Boutique Partners Saipan, Mariana Islands (2) 50% 31% Sephora Marinopulos Romania SA Bucharest, Romania (1) 100% 50% DFS Palau Ltd Koror, Palau 100% 61% Sephora S.R.O. Prague, Czech Republic 100% 100% Difusi Information Technology & Shanghai, China 100% 61% Sephora Monaco SAM Monaco 99% 99% Development Co. Ltd Sephora Cosmeticos España Madrid, Spain (1) 50% 50% DFS Information Technology (Shanghai) Shanghai, China 100% 61% S+ Boulogne-Billancourt, 100% 100% Company Limited France Hainan DFS Retail Company Limited Hainan, China 100% 61% Sephora Marinopoulos Bulgaria EOOD Sofia, Bulgaria (1) 100% 50% DFS Galleria Taiwan Ltd Taipei, Taiwan 100% 61% Sephora Marinopoulos Cyprus Ltd Nicosia, Cyprus (1) 100% 50% DFS Taiwan Ltd Taipei, Taiwan 100% 61% Sephora Unitim Kozmetik AS Istanbul, Turkey 100% 100% Tou You Duty Free Shop Co. Ltd Taipei, Taiwan 100% 61% Perfumes & Cosmeticos Gran Via SL Madrid, Spain (1) 45% 45% DFS Singapore (Pte) Ltd Singapore 100% 61% Sephora Marinopoulos D.O.O. Zagreb, Croatia (1) 100% 50% DFS Trading Singapore (Pte) Ltd Singapore 100% 61% Sephora Marinopoulos Cosmetics D.O.O. Belgrade, Serbia (1) 100% 50% DFS Venture Singapore (Pte) Ltd Singapore 100% 61% Sephora Nederland BV Amsterdam, Netherlands 100% 100% TRS Singapore Pte Ltd Singapore (2) 45% 28% Sephora Moyen Orient SA Fribourg, Switzerland 60% 60% Singapore International Singapore (2) 50% 31% Sephora Middle East FZE Dubai, United Arab Emirates 100% 60% Boutique Partners Sephora Holding Asia Shanghai, China 100% 100% DFS India Private Ltd Mumbai, India 70% 43% Sephora (Shanghai) Cosmetics Co. Ltd Shanghai, China 81% 81% DFS Vietnam (S) Pte Ltd Singapore 70% 43% Sephora (Beijing) Cosmetics Co. Ltd Beijing, China 81% 81% New Asia Wave International (S) Pte Ltd Singapore 70% 43% Sephora Hong Kong Hong Kong, China 100% 100% IPP Group (S) Pte Ltd Singapore 70% 43% Sephora Singapore Pte Ltd Singapore 60% 60% Stempar Pte Ltd Singapore (2) 50% 31% Sephora USA, Inc San Francisco (California), 100% 100% L Development & Management Ltd Hong Kong, China (2) 40% 53% USA * DFS Group L.P. Delaware, USA 61% 61% Sephora Beauty Canada, Inc San Francisco (California), 100% 100% USA LAX Duty Free Joint Venture 2000 Los Angeles (California), USA 77% 47% Sephora Puerto Rico, LLC San Francisco (California), 100% 100% Royal Hawaiian Insurance Company Ltd Hawaii, USA 100% 61% USA Hawaii International Boutique Partners Honolulu (Hawaii), USA (2) 50% 31% Kendo Group Inc San Francisco (California), 100% 100% New York, USA 80% 49% USA JFK Terminal 4 Joint Venture 2001 Dotcom group Comercio de Presentes SA Rio de Janeiro, Brazil 70% 70% DFS Guam L.P. Tamuring, Guam 61% 61% (2) United Europe S.B. Moscow, Russia (2) 45% 45% Guam International Boutique Partners Tamuring, Guam 50% 31% Galonta Holdings Limited Nicosia, Cyprus (2) 45% 45% DFS Liquor Retailing Ltd Delaware, USA 61% 61% Beauty in Motion Sdn. Bhd. Kuala Lumpur, Malaysia 60% 60% Twenty Seven - Twenty Eight Corp. Delaware, USA 61% 61% (2) Le Bon Marché SA Paris, France 100% 100% TRS Hawaii LLC Honolulu (Hawaii), USA 45% 28% (2) SEGEP SNC Paris, France 99% 99% TRS Saipan Saipan, Mariana Islands 45% 28% (2) Franck & Fils SA Paris, France 100% 100% TRS Guam Tumon, Guam 45% 28% DFS Holdings Ltd Hamilton, Bermuda 61% 61% Tumon Entertainment LLC Tamuning, Guam 100% 100% DFS Australia Pty Ltd Sydney, Australia 100% 61% Comete Guam Inc Tamuning, Guam 100% 100% Travel Retail Shops Pte Ltd Sydney, Australia (2) 45% 28% Tumon Aquarium LLC Tamuning, Guam 97% 97% DFS Group Ltd Delaware, USA 100% 61% Comete Saipan Inc Saipan, Mariana Islands 100% 100% DFS China Partners Ltd Hong Kong, China 100% 61% Tumon Games LLC Tamuning, Guam 100% 100% DFS Hong Kong Ltd Hong Kong, China 100% 61% Cruise Line Holdings Co Delaware, USA 100% 100% TRS Hong Kong Ltd Hong Kong, China (2) 45% 28% On Board Media, Inc Delaware, USA 100% 100% DFS Okinawa K.K. Okinawa, Japan 100% 61% Starboard Cruise Services, Inc Delaware, USA 100% 100% TRS Okinawa Okinawa, Japan (2) 45% 28% Starboard Holdings Ltd Delaware, USA 100% 100% JAL/DFS Co. Ltd Chiba, Japan (2) 40% 24% International Cruise Shops Ltd Cayman Islands 100% 100% DFS Korea Ltd Seoul, South Korea 100% 61% Vacation Media Ltd Kingston, Jamaica 100% 100% DFS Seoul Ltd Seoul, South Korea 100% 61% STB Srl Florence, Italy 100% 100% DFS Cotai Limitada Macao, China 100% 61% Parazul LLC Delaware, USA 100% 100% DFS Sdn. Bhd. Kuala Lumpur, Malaysia 100% 61% Y.E.S. Your Extended Services LLC Delaware, USA (1) 33% 33%

Reference Document 2010 181 Financial statements Consolidated financial statements

Companies Registered office Percentage Companies Registered office Percentage Control Interest Control Interest Flavius Investissements SA Paris, France 100% 100% OTHER ACTIVITIES LBD HOLDING SA Boulogne-Billancourt, 100% 100% Groupe Les Echos SA Paris, France 100% 100% France Les Echos Services SAS Paris, France 100% 100% Eley Finance SA Boulogne-Billancourt, 100% 100% Radio Classique SAS Paris, France 100% 100% France Prélude & Fugue Paris, France (2) 49% 49% Ashbury Finance SA Boulogne-Billancourt, 100% 100% France DI Régie SAS Paris, France 100% 100% Ivelford Business SA Boulogne-Billancourt, 100% 100% SFPA SARL Paris, France 100% 100% France La Fugue SAS Paris, France 75% 75% Bratton Service SA Boulogne-Billancourt, 100% 100% Les Echos SAS Paris, France 100% 100% France Les Echos Formation SAS Paris, France 100% 100% LVMH Hotel Management SAS Boulogne-Billancourt, 100% 100% France Hera SAS Paris, France 100% 100% Altair Holding LLC New York, USA * 100% 100% Les Echos Médias SNC Paris, France 100% 100% Moët Hennessy Inc New York, USA * 100% 66% Percier Publications SNC Paris, France 100% 100% One East 57th Street LLC New York, USA * 100% 100% EUROSTAF - Europe Stratégie Analyse Paris, France 100% 100% Financière SAS LVMH Moët Hennessy Louis Vuitton Inc New York, USA * 100% 100% Investir Publications SAS Paris, France 100% 100% Moët Hennessy Acquisition Sub Inc New York, USA * 100% 100% SID Développement SAS Paris, France 100% 100% Sofidiv Art Trading LLC New York, USA * 100% 100% SID Editions SAS Paris, France 100% 100% Sofidiv Inc New York, USA * 100% 100% Magasins de la Samaritaine SA Paris, France 99% 99% 598 Madison Leasing Corp New York, USA * 100% 100% Royal Van Lent Shipyard BV Kaag, Netherlands 100% 90% 1896 Corp New York, USA * 100% 100% RVL Holding BV Baarn, Netherlands 90% 90% LVMH Participations BV Naarden, Netherlands 100% 100% Probinvest SAS Boulogne-Billancourt, 100% 100% LVMH Moët Hennessy Louis Vuitton BV Naarden, Netherlands 100% 100% France LVP Holding BV Naarden, Netherlands 100% 100% Ufipar SAS Boulogne-Billancourt, 100% 100% LVMH Services BV Baarn, Netherlands 100% 100% France LVMH Finance Belgique Brussels, Belgium 100% 100% L Capital Management SAS Paris, France 100% 100% Hannibal SA Luxembourg, Luxembourg 100% 100% Sofidiv SAS Boulogne-Billancourt, 100% 100% France L Real Estate SA Luxembourg, Luxembourg (2) 49% 49% GIE LVMH Services Boulogne-Billancourt, 100% 85% Ufilug SA Luxembourg, Luxembourg 100% 100% France Delphilug SA Luxembourg, Luxembourg 100% 100% Moët Hennessy SNC Boulogne-Billancourt, 66% 66% Hanninvest SA Brussels, Belgium 100% 100% France LVMH Publica SA Brussels, Belgium 100% 100% LVMH Services Ltd London, United Kingdom 100% 100% Sofidiv UK Ltd London, United Kingdom 100% 100% UFIP (Ireland) Dublin, Ireland 100% 100% LVMH Moët Hennessy Louis Vuitton KK Tokyo, Japan 100% 100% Moët Hennessy Investissements SA Boulogne-Billancourt, 100% 66% France Osaka Fudosan Company Ltd Tokyo, Japan 100% 100% LVMH Fashion Group SA Paris, France 100% 100% LVMH Asia Pacific Ltd Hong Kong, China 100% 100% Moët Hennessy International SAS Boulogne-Billancourt, 66% 66% LVMH Shanghai Management and Shanghai, China 100% 100% France Consultancy Co, Ltd Creare Luxembourg, Luxembourg 100% 86% LVMH South & South East Asia Pte Ltd Singapore 100% 100% Société Montaigne Jean Goujon SAS Paris, France 100% 100% LVMH Moët Hennessy Louis Vuitton SA Paris, France Parent company Delphine SAS Boulogne-Billancourt, 100% 100% France * The address given corresponds to the company’s administrative headquarters; the corporate registered office is LVMH Finance SA Boulogne-Billancourt, 100% 100% located in the state of Delaware. France (1) Consolidated on a proportional basis. Primae SA Boulogne-Billancourt, 100% 100% (2) Accounted for using the equity method. France (3) Joint venture companies with Diageo: only the Moët Hennessy activity is consolidated. Eutrope SAS Boulogne-Billancourt, 100% 100% (4) The Group’s percentages of control and interest are not disclosed, the result of these companies being France consolidated on the basis of the Group’s contractual share in their business.

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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 hereby report to you, for the year ended December 31, 2010, on: -- the audit of the accompanying consolidated financial statements of the company LVMH Moët Hennessy – Louis Vuitton; -- the justification of our assessments; -- the specific verification required by French law. These 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 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 verifying, by audit sampling and other selective testing procedures, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used, the significant estimates made by the management, and the overall financial statements presentation. We believe that the evidence we have gathered in order to form our opinion is adequate and relevant. In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as of December 31, 2010, and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

II. JUSTIFICATION OF ASSESSMENTS In accordance with the requirements of Article L. 823-9 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring to your attention the following matters: -- the valuation of brands and goodwill has been tested under the method described in Note 1.12. to the consolidated financial statements. Based on the aforementioned, 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; -- we have verified that Note 1.10 to the consolidated financial statements provides an appropriate disclosure on the accounting treatment of commitments to purchase minority interests as such treatment is not provided for by the IFRS framework as adopted by the European Union. These assessments were made as part of our audit of the consolidated financial statements taken as a whole and, therefore, served in forming our audit opinion expressed in the first part of this report.

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III. SPECIFIC VERIFICATION

As required by law we have also verified in accordance with professional standards applicable in France the information related to the Group presented in the management report. We have no matters to report regarding its fair presentation and consistency with the consolidated financial statements.

Neuilly-sur-Seine, February 16, 2011

The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG et Autres

Thierry Benoit Olivier Breillot Gilles Cohen

This is a free translation into English of the statutory auditors’ report on the consolidated financial statements issued in French and it is provided solely for the convenience of English speaking users. The statutory auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the audit opinion on the consolidated financial statements and includes an explanatory paragraph discussing the auditors’ assessment of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account balances, transactions, or disclosures. This report also includes information relating to the specific verification of information given in the management report. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

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Parent Company Financial statements: LVMH Moët Hennessy - Louis Vuitton SA

Page

Balance sheet 186

Income statement 188

Cash flow statement 189

Company results over the last five fiscal years 190

Notes to the financial statements 191

Investment portfolio 205

Subsidiaries and investments 205

STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 206

STATUTORY AUDITORS’ SPECIAL REPORT ON REGULATED RELATED PARTY AGREEMENTS AND COMMITMENTS 208

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Balance sheet

Assets

(EUR millions) Notes 2010 2009 2008 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 34.8 - 34.8 33.7 32.4 Buildings - - - - - Technical fittings and machinery - - - - - Other property, plant and equipment 8.6 (1.1) 7.5 7.7 7.9 Advances and downpayments - - - - - Non-current financial assets Investments 10 14,231.2 (1,508.4) 12,722.8 11,644.5 10,926.0 Receivables from controlled entities 11 - - - 130.2 3,116.8 Other investment securities - - - - - Loans - - - - - Treasury shares 13 459.9 - 459.9 560.9 504.7 Other non-current financial assets 0.1 - 0.1 0.1 0.2 14,734.6 (1,509.5) 13,225.1 12,377.1 14,588.0 Current assets Advances and downpayments - - - - - Trade accounts receivable - - - - - Other receivables 12 410.6 (16.7) 393.9 380.4 936.9 Treasury shares 13 134.7 - 134.7 258.0 302.1 Short term investments - - - - - Cash and cash equivalents 64.6 - 64.6 25.0 113.1

Prepayments and accrued income Prepaid expenses 0.2 - 0.2 1.8 2.9 610.1 (16.7) 593.4 665.2 1,355.0 Deferred charges - - - - - Bond redemption premiums 6.9 - 6.9 10.8 10.0 Cumulative translation adjustments 14 162.5 - 162.5 66.1 65.7

Total assets 15,514.1 (1,526.2) 13,987.9 13,119.2 16,018.7

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Liabilities and equity

(EUR millions) Notes 2010 2009 2008 Before Before Before appropriation appropriation appropriation

Equity Share capital (fully paid up) 15 147.2 147.1 147.0 Share premium account 15 1,781.9 1,763.1 1,737.1 Revaluation adjustments 16 41.5 41.5 41.5 Legal reserve 14.7 14.7 14.7 Regulated reserves 16 331.3 331.3 331.3 Other reserves 16 195.0 195.0 195.0 Retained earnings 2,595.8 2,943.9 2,802.3 Interim dividends (335.2) (166.0) (165.6) Profit for the year 2,317.9 436.1 898.9 Regulated provisions 0.1 0.1 0.1 15 7,090.2 5,706.8 6,002.3

Provisions 18 Provisions for contingencies 759.4 455.2 475.4 Provisions for losses 31.5 28.0 29.1 790.9 483.2 504.5

Liabilities 19 Bonds 3,544.2 4,165.8 2,866.6 Bank loans and borrowings 172.5 155.7 615.9 Miscellaneous loans and borrowings 2,211.2 2,173.1 5,479.1 Trade accounts payable 108.9 82.0 84.2 Tax and social security liabilities 54.0 52.1 32.7 Other liabilities 15.7 300.4 368.1

Accruals and deferred income Prepaid income 0.3 - 65.3 6,106.8 6,929.1 9,511.9 Cumulative translation adjustments - 0.1 -

Total liabilities and equity 13,987.9 13,119.2 16,018.7

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Income statement

(EUR millions) Notes 2010 2009 2008

Income from investments 1,983.4 1,075.6 1,173.1 Services provided, other revenues 188.4 186.2 195.9

Income from investments and other revenues 3 2,171.8 1,261.8 1,369.0

Reversal of depreciation, amortization and provisions 18 37.5 88.2 38.9 Other operating income - - -

Total operating income 2,209.3 1,350.0 1,407.9

Purchases and external charges 218.7 207.8 204.6 Taxes, duties and similar levies 3.3 4.4 3.7 Wages, salaries and social security expenses 75.2 80.4 78.0 Depreciation and amortization 0.2 0.2 0.2 Provisions 18 20.3 39.1 82.9 Other expenses 0.9 1.3 1.1

Total operating expenses 318.6 333.2 370.5

Reversal of provisions and expense transfers 18 158.5 106.9 12.0 Interest and similar income 4 5.0 51.9 195.5 Foreign exchange gains 5 363.3 2,604.7 2,616.6 Net gains on sales of short term investments 7.8 7.1 5.7

Total financial income 534.6 2,770.6 2,829.8

Provisions 18 207.9 61.4 217.9 Interest and similar expenses 6 283.5 234.0 356.7 Foreign exchange losses 5 432.4 2,478.9 2,655.4 Net losses on sales of short term investments 1.3 1.0 14.2

Total financial expenses 925.1 2,775.3 3,244.2

Profit from recurring operations before tax 1,500.2 1,012.1 623.0

Exceptional income from operations - 0.6 91.6 Exceptional capital gains - - - Reversal of provisions and expense transfers 18 936.2 14.3 102.1

Total exceptional income 936.2 14.9 193.7

Exceptional expenses from operations - 2.4 4.0 Exceptional capital losses - 0.5 56.2 Depreciation, amortization and provisions 18 223.4 603.1 105.2

Total exceptional expenses 223.4 606.0 165.4

Exceptional income (loss) 7 712.8 (591.1) 28.3 Income tax (income)/expense 8 (104.9) (15.1) (247.6)

Net profit 2,317.9 436.1 898.9

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Cash flow statement

(EUR millions) 2010 2009 2008

Operating activities Net profit 2,317.9 436.1 898.9 Depreciation and amortization of fixed assets (880.7) 582.2 63.9 Change in other provisions 210.1 (87.8) 191.7 Gains on sale of fixed assets and LVMH treasury shares (33.9) (6.1) 61.7

Cash from operations before changes in working capital 1,613.4 924.4 1,216.2 Change in inter-company current accounts 168.4 (319.3) 830.6 Change in other receivables and payables (265.0) 253.7 (263.5)

Net cash from operating activities 1,516.8 858.8 1,783.3

Investing activities Purchase of tangible and intangible fixed assets (1.1) (1.2) (4.5) Purchase of equity investments - (0.1) (0.1) Proceeds from sale of equity investments and similar transactions - - 3.0 Subscription to capital increases carried out by subsidiaries (197.3) (1,100.5) (1,450.0)

Net cash from (used in) investing activities (198.4) (1,101.8) (1,451.6)

Financing activities Capital increase 120.0 26.1 0.8 Change in treasury shares 155.7 48.2 (86.2) Dividends and interim dividends paid during the year (953.5) (757.7) (757.6) Proceeds from financial debt 119.8 1,437.3 1,328.1 Repayments in respect of financial debt (720.8) (599.0) (893.0) Changes in listed securities - - -

Net cash used in financing activities (1,278.8) 154.9 (407.9)

Net increase/(decrease) in cash and cash equivalents 39.6 (88.1) (76.2)

Cash and cash equivalents at beginning of year 25.0 113.1 189.3 Cash and cash equivalents at end of year 64.6 25.0 113.1

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Company results over the last five fiscal years

(EUR millions, except earnings per share, expressed in euros) 2006 2007 2008 2009 2010

1. Share capital at year-end • Share capital 147.0 147.0 147.0 147.1 147.2 • Number of ordinary shares outstanding 489,937,410 489,937,410 489,937,410 490,405,654 490,642,232 • Maximum number of future shares to be created: - through conversion of bonds ------through exercise of equity warrants ------through exercise of share subscription options 6,426,534 8,015,393 9,569,660 10,214,500 8,084,215

2. Operations and profit for the year • Income from investments and other revenues 1,123.0 917.1 1,369.0 1,261.8 2,171.8 • Profit before taxes, depreciation, 804.7 962.8 904.5 915.3 1,532.6 amortization and movements in provisions • Income tax (income)/expense (1) - - - - - • Profit after taxes, depreciation, 1,027.5 783.4 898.9 436.1 2,317.9 amortization and movements in provisions (2) • Profit distributed as dividends (3) 685.9 783.9 783.9 809.2 1,030.3

3. Earnings per share • Earnings per share after taxes but before depreciation, 1.44 1.95 1.64 1.90 3.34 amortization and movements in provisions • Earnings per share after taxes, depreciation, 2.10 1.60 1.83 0.89 4.72 amortization and movements in provisions (2) • Gross dividend distributed per share (4) 1.40 1.60 1.60 1.65 2.10

4. Employees • Average number of employees 24 25 26 23 22 • Total payroll 31.0 33.8 59.8 64.5 61.4 • Amounts paid in respect of social security 9.0 10.7 18.2 15.9 13.8

(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 2010, amount proposed at the Shareholders’ Meeting of March 31, 2011. (4) Excludes the impact of tax regulations applicable to the beneficiary.

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Notes to the financial statements

1. Business activity

In addition to managing its portfolio of investments in its Changes in financial structure from one year to the next, and capacity as the Group’s holding company, LVMH Moët Hennessy foreign exchange gains and losses recorded in the income statement, - Louis Vuitton SA (“LVMH”, “the Company”) manages and mainly resulted from these transactions. coordinates the operational activities of all of its subsidiaries, and This role is now assumed by a subsidiary; LVMH continues to offers them various management support services, for which they manage the Group’s long term borrowings and the associated are invoiced, particularly in legal, financial, tax and insurance interest rate risk, as well as foreign exchange operations carried matters. out for its own account. Until October 2009, LVMH had cash pooling arrangements The financial structure as of December 31, 2010 and 2009 reflects in euros and foreign currencies with its French subsidiaries and these changes: in October 2009, receivables from controlled certain European subsidiaries. It also centralized their financing entities and borrowings from affiliates resulting from the cash requirements and managed the interest rate risk on borrowings. pooling arrangements were settled and the foreign exchange LVMH also centralized foreign exchange hedges underwritten by hedging contracts taken out by LVMH on behalf of its subsidiaries its French subsidiaries and certain European subsidiaries. These were canceled. The income statement records the impact of the cash foreign currency hedges were symmetrically covered in the market pooling arrangements and of foreign exchange hedges on behalf of in terms of hedge type, currency, amount and maturity. the subsidiaries until October 2009.

2. Accounting policies and methods

2.1 General framework; changes in accounting policies 2.3 Non-current financial assets The balance sheet and income statement of LVMH have been Non-current financial assets, excluding receivables, loans and prepared in accordance with French legal provisions, particularly deposits, are stated at acquisition cost (excluding incidental costs) Regulation 99-03 of the CRC (Comité de la Réglementation Comptable) or at contribution value. and accounting principles generally accepted in France. When net realizable value as of the year-end is lower than the However, in view of the fact that the Company’s direct operations carrying amount, a provision is recorded in the amount of the exclusively comprise financial and real estate transactions, difference. The net realizable value is measured with reference dividends received from subsidiaries and equity investments, to the value in use or the net selling price. Value in use is based in addition to the Company’s share in income of partnerships on the entities’ forecast future cash flows; the net selling price is subject to statutory clauses providing for the allocation of income calculated with reference to ratios or share prices of similar entities, to partners, are recorded in operating income. on the basis of valuations performed by independent experts or by comparison with recent similar transactions. 2.2 Property, plant and equipment Changes in the amount of provisions for impairment of the equity investment portfolio are classified under exceptional income Property, plant and equipment are stated at acquisition cost expense. (purchase price and incidental costs, excluding acquisition expenses) or at contribution value, with the exception of property, Portfolio investments held as of December 31, 1976 were revalued plant and equipment acquired prior to December 31, 1976 which in 1978 (revaluation pursuant to the French law of 1976). was revalued in 1978 (revaluation pursuant to the French law of 1976).

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2.4 Accounts receivable With respect to LVMH shares allocated to share purchase option plans: Accounts receivable are recorded at their face value. Impairment -- if the plan is non-exercisable (market value of the LVMH share for doubtful accounts is recorded if their net realizable value, based lower than the exercise price of the option), the calculation of the on the probability of their collection, is lower than their carrying impairment, charged to operating profit, is made in relation to the amount. average price of all non-exercisable plans involved; -- if the plan is exercisable (market value of the LVMH share greater 2.5 Short term investments than the exercise price of the option), a provision for losses is Short term investments, including money market investments on recognized and calculated as described in §2.6.3 below. which interest is rolled up, are stated at acquisition cost (excluding No impairment is recognized for LVMH shares allocated to bonus transaction costs); when their market value is lower than their share plans or shares recorded in long term investments. acquisition cost, an impairment expense is recorded in financial income/expense for the amount of the difference. 2.6.3 Expense relating to stock option and bonus share plans based on LVMH treasury shares The market value of listed investments is calculated based on average listed share prices during the last month of the year and The expense relating to stock option and bonus share plans based translated, where applicable, at year-end exchange rates. The on LVMH shares is calculated as follows: market value of non-listed securities is calculated based on their -- for share purchase option plans, as the difference between estimated realizable value. the portfolio value of shares allocated to these plans and the corresponding exercise price, if lower; This calculation is performed on a line-by-line basis, without offsetting any unrecognized capital gains and losses. -- for bonus share plans, as the portfolio value of shares allocated to these plans. In the event of partial investment sales, any gains or losses are calculated based on the FIFO method. Share subscription option plans do not give rise to the recognition of an expense. 2.6 LVMH treasury shares and LVMH-share settled The expense relating to stock option and bonus share plans derivatives; stock option and bonus share plans based on LVMH shares is allocated on a straight-line basis over the vesting periods for the plans. It is recognized in the income 2.6.1 LVMH treasury shares statement under the heading “Salaries and social charges”, offset by a provision for losses recorded in the balance sheet. Treasury shares are recorded, on their date of delivery, at their acquisition cost excluding transaction costs. 2.6.4 LVMH-share settled derivatives Treasury shares acquired under share repurchase programs or Under the terms of share purchase option plans, as an alternative under the terms of the liquidity contract are recorded as short term to holding shares allocated to these plans, LVMH may acquire investments with the exception of shares held on a long term basis, derivatives settled in shares. These derivatives consist of LVMH or intended to be cancelled or exchanged at a later date, which are share purchase options (“calls”), acquired when the plan was set recorded as non-current financial assets. up or after that date until the end of the vesting period. The Treasury shares held for share purchase option plans and bonus premiums paid in respect of these options are recognized as assets shares are allocated to these plans. in “Other receivables”. These premiums give rise where applicable to the recognition of impairment charged to net financial income/ The cost of disposals is determined by allocation category using the expense, according to the same rules as those defined above for FIFO method, with the exception of shares held in share purchase LVMH shares allocated to the share option plans, with the value option plans for which the calculation is performed for each plan of LVMH shares held in the portfolio being replaced for these individually using the weighted average cost method. purposes by the amount of the premium paid supplemented by 2.6.2 Impairment of LVMH treasury shares the exercise price of the calls. If the market value of LVMH shares recorded in short term 2.7 income from investments investments, calculated in accordance with the method described in Note 2.5 above, falls below their acquisition cost, impairment Amounts distributed by subsidiaries and other investments, in is recognized and charged to net financial income/expense in the addition to the share in income from partnerships subject to amount of the difference. statutory clauses providing for the allocation of income to partners, are recognized as of the date that they accrue to the shareholders or partners.

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2.8 Foreign currency transactions • In the case of derivatives designated as hedging instruments, any unrealized gains or losses resulting from this remeasurement are: Foreign currency transactions are recorded at the exchange rates -- recorded in the income statement as an offset against unrealized prevailing on the dates of transactions. gains and losses on the assets and liabilities hedged by these Foreign currency receivables and payables are revalued at year-end instruments; exchange rates and any resulting unrealized gains and losses are -- deferred, if these instruments have been allocated to future recorded in the cumulative translation adjustment. Provisions are transactions. recorded for unrealized foreign exchange losses at the year-end, • In the case of derivatives not designated as hedging instruments: except for losses offset by potential gains in the same currency. -- any unrealized gains resulting from their remeasurement at Year-end foreign exchange gains and losses on foreign currency year-end exchange rates are deferred, while only gains realized cash and cash equivalents are recorded in the income statement. definitively on the maturity of the instrument are taken to the income statement; -- any unrealized losses give rise to a provision for losses. 2.9 Hedging instruments Interest rate derivatives designated as hedging instruments are Gains and losses arising from derivatives are recognized under net recognized on a pro rata basis over the term of the contracts, without financial income/expense, under foreign exchange gains and losses any impact on the face value of the debt whose rate is hedged. in the case of foreign exchange derivatives, and under interest and similar income/expenses for interest rate derivatives. Interest rate derivatives not designated as hedging instruments are remeasured at market value as of the balance sheet date. Any Foreign exchange derivatives are remeasured at year-end exchange unrealized gains resulting from this remeasurement are deferred; rates: any unrealized losses give rise to a provision for losses.

2.10 Bond issue premiums

Bond issue premiums are amortized over the life of bonds. Issue costs are expensed upon issuance.

3. Financial income from investments and other revenues

(EUR millions) 2010 2009 2008

Financial income from subsidiaries and other investments: - dividends received from French companies 1,754.0 900.9 852.7 - share of income from French partnerships 229.4 174.7 320.4 1,983.4 1,075.6 1,173.1 Real estate revenues 6.5 6.5 6.7 Services provided 181.9 179.7 189.2 2,171.8 1,261.8 1,369.0

The increase in financial income from subsidiaries and other investments in 2010 was due to an exceptional dividend distribution by the subsidiary Sofidiv SAS, in the amount of 752.6 million euros. 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.

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4. Interest and similar income

Interest and similar income breaks down as shown below:

(EUR millions) 2010 2009 2008

Income from loans and advances to affiliates 1.0 48.7 178.6 Income from short term investments and other financial income 4.0 3.2 16.9 5.0 51.9 195.5

5. Foreign exchange gains and losses

Foreign exchange gains and losses correspond to those arising on foreign exchange derivatives entered into for the purposes described in Note 20.

6. Interest and similar expenses

Interest and similar expenses break down as follows:

(EUR millions) 2010 2009 2008

Interest and premiums on bonds 118.9 130.4 114.5 Interest on current accounts and advances to affiliates 39.4 33.0 152.4 Interest on bank loans 6.1 13.7 17.9 Interest on commercial paper - 12.4 50.9 LVMH shares: premiums on exercised call options (1) 90.2 10.6 7.9 Other interest and financial charges 28.9 33.9 13.1 283.5 234.0 356.7

(1) See Note 18.

7. Exceptional income (loss)

Net exceptional income in 2010 included a net reversal of In 2009, net exceptional income chiefly consisted of changes in impairment on investments in the amount of 881 million euros, impairment on investments. a reversal related to the impact of the change in the value of the In 2008, LVMH acquired for a nominal amount, under terms of a US dollar on the valuation of US subsidiaries and, more generally, purchase option, the perpetual bonds issued in 1992, which were to the increase in the value of investments resulting from the cancelled immediately after their acquisition. The exceptional strong recovery in business activity in 2010. It also included an income for fiscal year 2008 includes a gain of 89 million euros, increase in provisions for general contingencies in the amount of corresponding to the non-amortized amount of the perpetual bonds 168 million euros. at that date.

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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 before Tax (expense)/ Net does not alter the tax expense or the right to the benefit from the tax income profit Profit from recurring tax losses carried forward of the subsidiaries concerned: their tax 1,500.2 56.5 1,556.7 operations position with respect to LVMH, insofar as they remain part of the Exceptional income 712.8 - 712.8 consolidated tax group, remains identical to that which would have (loss) been reported had the subsidiaries been taxed individually. Any 2,213.0 56.5 2,269.5 additional tax savings or tax expense, i.e. the sum of any difference Tax in respect - 3.9 3.9 between the tax recorded by each consolidated company and the of prior years Impact of tax tax resulting from the calculation of taxable income for the tax - 44.5 44.5 group, is recorded by LVMH. consolidation 2,213.0 104.9 2,317.9 As of December 31, 2010, under this tax consolidation agreement, the amount of tax losses that may be reclaimed from LVMH by subsidiaries totaled 3,506 million euros, including 2,824 million euros that may be reclaimed by structurally loss-making holding companies.

8.3 Deferred tax Deferred taxes arising from timing differences amount to a net debit balance of 30 million euros as of December 31, 2010, including 6 million euros relating to timing differences that are expected to reverse in 2011.

9. Intangible assets and property, plant and equipment

(EUR millions) 2010 Net amount of fixed assets as of December 31, 2009 41.4 Additions 1.1 Disposals and retirements - Net change in depreciation/amortization (0.2) Net amount of fixed assets as of December 31, 2010 42.3

10. Investments

(EUR millions) 2010 2009 2008 Gross amount of investments 14,231.2 14,033.9 12,733.4 Impairment (1,508.4) (2,389.4) (1,807.4) Net amount of investments 12,722.8 11,644.5 10,926.0

The investment portfolio is presented in the “Subsidiaries and investments” and “Investment portfolio” tables. In November 2010, LVMH subscribed to the capital increase of the holding company Eley Finance SA in its entirety, for an amount of 165 million euros.

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Methods used for calculating impairment of equity investments are described in Note 2.3. In most cases, impairment is calculated in reference to the value in use of the investment in question, which is determined on the basis of forecast cash flows generated by the entity in question. The change in impairment of investment portfolio is analyzed in Note 18.

11. Receivables from controlled entities

The movement in outstanding receivables from controlled entities is chiefly attributable to changes in LVMH’s activity in 2009, as described in Note 1.

12. Other receivables

Other receivables break down as follows:

(EUR millions) 2010 2009 2008 Gross Impairment Net Net Net Receivables from related companies 312.7 - 312.7 188.1 551.6 o/w: tax consolidation current accounts 83.4 - 83.4 13.4 56.7 share of profit from flow-through subsidiaries to be received 229.3 - 229.3 174.7 320.4 premiums paid on foreign exchange options - - - - 147.4 Receivables from the state 15.2 - 15.2 141.7 129.0 Other receivables 82.7 (16.7) 66.0 50.6 256.3 o/w: premiums paid for foreign exchange options - - - - 200.8 premiums paid for LVMH calls 12.2 (12.2) - - - 410.6 (16.7) 393.9 380.4 936.9

All these receivables mature within one year, with the exception of a portion of the premiums paid for call options (See Note 13.2 Derivatives settled in LVMH shares).

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, 2010:

(EUR millions) 2010 2009 2008 Gross Impairment Net Net Net Share subscription option plans 429.1 - 429.1 503.5 446.4 Other allocations 30.8 - 30.8 1.4 2.3 Pending retirement - - - 56.0 56.0 Long term investments 459.9 - 459.9 560.9 504.7

Share purchase option plans 41.2 - 41.2 222.5 225.3 Bonus share option plans 41.8 - 41.8 25.4 22.9 Future plans 39.3 - 39.3 4.5 38.1 Liquidity contract 12.4 - 12.4 5.6 15.8 Short term investments 134.7 - 134.7 258.0 302.1

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Portfolio movements over the period were as follows:

(EUR millions) Long term investments

Share subscription Other Pending retirement Total option plans Number Gross value Number Gross value Number Gross value Number Gross value As of January 1 10,682,744 503.5 29,623 1.4 820,000 56.0 11,532,367 560.9 Purchases ------Transfers (633,251) (29.4) 633,251 29.4 - - - - Shares retired (955,900) (45.0) - - (820,000) (56.0) (1,775,900) (101.0) As of December 31 9,093,593 429.1 662,874 30.8 - - 9,756,467 459.9

(EUR millions) Short term investments

Share purchase Other plans Liquidity contract Total option plans Number Gross value Number Gross value Number Gross Value Number Gross value As of January 1 3,932,912 222.5 538,814 29.9 76,000 5.6 4,547,726 258.0 Purchases 2,370,200 195.7 - - 2,411,215 222.2 4,781,415 417.9 Sales - - - - (2,387,215) (215.4) (2,387,215) (215.4) Transfers (1,078,800) (60.4) 1,078,800 60.4 - - - - Options exercised (4,608,830) (316.6) - - - - (4,608,830) (316.6) Share allocations - - (149,590) (9.2) - - (149,590) (9.2) As of December 31 615,482 41.2 1,468,024 81.1 100,000 12.4 2,183,506 134.7

The gain recognized on disposals under the liquidity contract amounted to 6.5 million euros. As of December 31, 2010, the stock market value of shares held under this contract is 12.4 million euros.

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, 2010 may be exercised at any the movements were as follows: time in accordance with the following schedule:

Number Premiums paid (EUR millions) Total exercise price (EUR millions)

As of December 31, 2009 2,670,200 109.8 Exercisable at latest in 2012 4.3 Purchased - - 2013 7.4 Exercised (2,370,200) (97.6) As of December 31, 2010 300,000 12.2 Total 11.7

14. Cumulative translation adjustments

Cumulative translation adjustments recorded as assets relate to the revaluation as of December 31, 2010 of receivables, payables and other bonds denominated in foreign currencies.

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15. Share capital and share premium account

15.1 Share capital The Company’s share capital comprises 490,642,232 fully paid-up As of December 31, 2010, the Company’s share capital can be shares, each with a par value of 0.30 euros. broken down as follows:

All the shares comprising the Company’s share capital have the Number % same voting and dividend rights, except for registered shares held for at least three years which have double voting rights. Treasury Shares with double voting rights 225,670,153 46.00 shares do not have voting or dividend rights. Shares with single voting rights 253,032,106 51.57 478,702,259 97.57 During the fiscal year, 2,012,478 shares were created by the exercise of subscription options and 1,775,900 shares were cancelled. LVMH treasury shares 11,939,973 2.43 Total number of shares 490,642,232 100.00

15.2 Change in equity The change in equity during the period may be analyzed as follows:

(EUR millions) Number Share Share Other Retained Interim Net Total of shares capital premium reserves earnings dividend profit equity account As of December 31, 2009 490,405,654 147.1 1,763.1 582.6 2,943.9 (166.0) 436.1 5,706.8 before appropriation Appropriation of net profit for 2009 - - - - 436.1 - (436.1) - 2009 dividends - - - - (807.4) 171.6 - (635.8) of which treasury shares - - - - 23.2 (5.6) - 17.6 As of December 31, 2009 490,405,654 147.1 1,763.1 582.6 2,595.8 - - 5,088.6 after appropriation Exercise of subscription options 2,012,478 0.6 119.4 - - - - 120.0 Retirement of shares (1,775,900) (0.5) (100.6) - - - - (101.1) 2010 interim dividend - - - - - (343.4) - (343.4) of which treasury shares - - - - - 8.2 - 8.2 Net profit for 2010 ------2,317.9 2,317.9 As of December 31, 2010 490,642,232 147.2 1,781.9 582.6 2,595.8 (335.2) 2,317.9 7,090.2 before appropriation

The appropriation of net profit for 2009 resulted from the resolutions of the Combined Shareholders’ Meeting of April 15, 2010.

16. Reserves and revaluation adjustments

16.1 Regulated reserves 16.2 Other reserves Regulated reserves comprise the special reserve for long term Following changes in the law relating to long term capital capital gains and restricted reserves, in the amount of 2.2 million gains introduced by the amended French Finance Act for 2004 euros, which were created as a result of the reduction of capital (Article 39) and by decision of the Shareholders’ Meeting of performed at the same time as the conversion of the Company’s May 12, 2005, an amount of 200 million euros was transferred, share capital into euros. The special reserve for long term capital in 2005, from the special reserve for long term capital gains to an gains may only be distributed after tax has been levied. ordinary reserve 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.

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16.3 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) 2010 2009 2008

Vineyards and other land 17.9 17.9 17.9 Equity investments (Parfums Christian Dior) 23.6 23.6 23.6 Total 41.5 41.5 41.5

17. Stock option and similar plans

17.1 Plan characteristics

Share subscription and purchase option plans The allocation of bonus shares to beneficiaries who are French residents for tax purposes becomes definitive after a two-year The Shareholders’ Meeting of May 14, 2009 renewed the vesting period, which is followed by a two-year holding period authorization granted to the Board of Directors, for a period during which the beneficiaries may not sell their shares. of thirty-eight months expiring in July 2012, to allocate share subscription or purchase options to employees or directors of Group The allocation of bonus shares to beneficiaries who are not French companies, on one or more occasions, in an amount not to exceed residents for tax purposes becomes definitive after a vesting period 3% of the Company’s share capital. of four years and the shares may be freely transferred at that time. Each plan is valid for ten years. The options may be exercised after Cash-settled compensation plans indexed to the change in a three-year period for plans issued before 2004 or after a four-year the LVMH share price period for plans issued in 2004 or later years. As a replacement for its stock option and bonus share plans, the Under certain circumstances, in particular in the event of Group has established plans equivalent to share purchase option retirement, the three- or four-year vesting period does not apply. plans or to bonus share plans in terms of the gains received by the For all plans, one option entitles the holder to purchase one LVMH beneficiary, but which are settled in cash rather than in shares. The share. vesting period for these plans is four years.

Bonus share plans Performance conditions The Shareholders’ Meeting of May 15, 2008 renewed the Since 2009, some share subscription option plans or bonus share authorization granted to the Board of Directors, for a period of plans have been subject to performance conditions, which must thirty-eight months expiring in July 2011, to allot existing or be met in order to fully benefit from these plans. newly issued shares as bonus shares to employees or directors of Group companies, on one or more occasions, in an amount not to exceed 1% of the Company’s share capital on the date of this authorization.

17.2 Movements during the year relating to stock option and similar plans Movements during the year relating to rights allocated under the various plans based on LVMH shares were as follows:

Number Share subscription Share purchase Bonus Cash-settled option plan option plans share plans plans Rights not exercised as of January 1, 2010 10,214,500 6,603,112 464,630 250,038 Allocations - - 469,436 - Expired options and allocations (117,807) (1,078,800) (13,865) (800) Options exercised/Definitive allocation of shares (2,012,478) (4,608,830) (149,590) (133,940) Rights not exercised as of December 31, 2010 8,084,215 915,482 770,611 115,298

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The bonus share allocation plan opened on April 15, 2010 is purposes of determining the expense for 2010. The settlement of subject to performance conditions to a variable extent depending definitive allocations has been satisfied using shares held. on beneficiaries: bonus shares are only definitively allocated The total expense recognized in 2010 for stock option and similar if, for the 2010 and 2011 fiscal years, any one of the following plans was 24.4 million euros (2009: 16.1 million euros; 2008: indicators shows a positive change compared to fiscal year 2009: 12.1 million euros). See also Note 18. profit from recurring operations, net cash from operating activities and operating investments, or the Group’s current operating The value serving as the basis for the calculation of the mandatory margin. The performance conditions, which were fulfilled for fiscal 10% social security contribution for the plan opened in 2010 is year 2010, were considered to have been fulfilled in 2011 for the 86.93 euros per share allocated.

18. Movements in impairment and provisions

Movements in asset impairment and provisions break down as follows:

(EUR millions) December 31, Provisions Used Released December 31, 2009 2010 Equity investments for impairment of assets: - investments 2,389.4 55.3 - (936.2) 1,508.5 - LVMH shares: premuim paid for LVMH calls 109.8 - - (97.6) 12.2 - other assets 4.4 - - - 4.4

Provisions for contingencies and losses: - for general contingencies 284.8 168.1 - - 452.9 - for share option and similar plans 28.5 23.2 (4.2) (9.2) 38.3 - for unrealized forex losses 111.0 203.8 - (45.0) 269.8 - for other losses 58.9 24.4 (25.8) (27.6) 29.9 Total 2,986.8 474.8 (30.0) (1,115.6) 2,316.0 o/w: operating profit (loss): - wages, salaries and social security expenses 23.2 (4.2) (9.2) - other 20.3 (25.8) (11.7) financial income (expense) 207.9 - (158.5) exceptional income (expense) 223.4 - (936.2) 474.8 (30.0) (1,115.6)

Provisions for general contingencies correspond to an estimate of the impact on assets and liabilities of risks, disputes, or actual or probable litigation arising from the Company’s activities or those of its subsidiaries; such activities are carried out worldwide, within what is often an imprecise regulatory framework that is different for each country, changes over time, and applies to areas ranging from product composition to the tax computation. See also Notes 7 and 10.

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19. 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 which Of which (EUR millions) accrued related less than from 1 to more than expenses companies 1 year 5 years 5 years Bonds 3,544.2 822.2 2,572.0 150.0 31.1 - Bank loans and borrowings 172.5 20.5 152.0 - 0.5 - Miscellaneous loans and borrowings 2,211.2 2,211.2 - - 7.4 2,211.2 Financial debt 5,927.9 3,053.9 2,724.0 150.0 39.0 2,211.2 Trade payables 108.9 108.9 - - 104.3 78.2 Tax and social liabilities 54.0 54.0 - - 31.3 - Other debt: 15.7 15.7 - - 0.5 8.0 o/w: premiums received on foreign exchange options 5.5 5.5 - - - - tax consolidation current accounts 8.0 8.0 - - - 8.0 Deferred income 0.3 0.3 - - - - Total 6,106.8 3,232.8 2,724.0 150.0 175.1 2,297.4

19.1 Bonds Bonds consist of public issues and private placements, which have been made since May 2000 as part of an EMTN (Euro Medium Term Notes) issue program of 10 billion euros, and total 3,544 million euros as of December 31, 2010.

(EUR millions) Nominal Floating-rate Issuance Maturity Nominal Accrued interest Total interest rate swap price value as of after swap (in % of the December 31, par value) 2010

Public issues: EUR 600,000,000, 2004 4.625% total 99.427% 2011 600.0 5.7 605.7 CHF 300,000,000, 2007 3.375% - 99.840% 2013 239.9 0.9 240.8 EUR 760,000,000, 2005 and 2008 (1) 3.375% partial (2) 98.598% 2012 760.0 13.5 773.5 CHF 200,000,000, 2008 3.625% - 100.048% 2011 160.0 0.5 160.5 CHF 200,000,000, 2008 4.00% - 100.090% 2015 160.0 3.7 163.7 EUR 1,000,000,000, 2009 4.375% total 99.648% 2014 1,000.0 3.4 1,003.4 Private placements: JPY 5,000,000,000, 2008 floating - 100% 2011 31.1 0.1 31.2 JPY 15,000,000,000, 2008 floating - 100% 2013 116.1 3.0 119.1 JPY 5,000,000,000, 2009 1.229% - 100% 2013 46.0 0.1 46.1 EUR 250,000,000, 2009 4.50% total 99.732% 2015 250.0 0.2 250.2 EUR 150,000,000, 2009 4.775% total 100% 2017 150.0 - 150.0 Total 3,513.1 31.1 3,544.2 (1) The par value corresponds to the cumulative total of a 600 million euro bond issued in 2005 at a price of 99.828% and a supplement to this bond in the amount of 160 million euros issued in 2008 at a price of 93.986%; the issuance price corresponds to the weighted average of these two components. (2) Amount hedged using floating rate borrower swaps for the 600 million euro tranche, issued in 2005.

Unless otherwise indicated, bonds are redeemable at par upon maturity.

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The interest rate swaps presented in the table above were entered 19.3 Covenants into on the issue date of the bonds. Subsequent optimization transactions may also have been performed. LVMH has undertaken to comply with a net financial debt to equity ratio calculated based on consolidated data, in connection with No bond issues were subscribed during the fiscal year. The 2003 bond certain credit lines. As of December 31, 2010, this provision applies issued in a nominal amount of 750 million euros, partially redeemed to undrawn credit lines in a total amount of 100 million euros. and cancelled in 2009 in the amount of 35 million euros, was fully The current level of this ratio is significantly lower than the redeemed at its maturity in April 2010 for 715 million euros. contractual levels, meaning that LVMH has a high level of financial flexibility with regard to this commitment. 19.2 Loans and borrowings 19.4 Guarantees and collateral As of December 31, 2010, loans and borrowings mainly consisted of a current account liability with respect to the company responsible As of December 31, 2010, financial debt was not subject to any for pooling the Group’s cash resources. See also Note 1. guarantees or collateral.

19.5 Debt analysis by foreign currency As of December 31, 2010 the breakdown by currency of the Company’s total borrowings of 5,928 million euros (see Note 20), taking into account any hedging arrangements contracted at the time of recognition of debts or subsequently, is as follows:

Currency Equivalent stated (EUR millions) On issue After taking into account hedging instruments Euro 2,955 2,721 Swiss franc 565 947 Pound sterling - - Other currency 197 49 Financial debt outside LVMH Group 3,717 3,717 Related companies 2,211 Total financial debt 5,928

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.

20. Market risk exposure

LVMH regularly uses financial instruments. This practice meets underlying amounts maintained at historical exchange rates, such the foreign currency and interest rate hedging needs for financial as equity investments. assets and liabilities, including dividends receivable from foreign Counterparties for hedging contracts are selected on the basis of investments; each instrument used is allocated to the financial their international rating as well as for reasons of diversification. balances or hedged transactions.

Given the role of LVMH within the Group, financial instruments 20.1 Interest rate instruments designed to hedge net assets denominated in foreign currency may be used in the consolidated financial statements but not matched Interest rate instruments are generally allocated to borrowings in the parent company financial statements, or are allocated to falling due either at the same time as, or after, the instruments.

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The types of instruments outstanding as of December 31, 2010, the underlying amounts broken down by expiration period and their fair value are as follows:

(EUR millions) Nominal amount Expiration period Market value (1) Expiring within Expiring between Expiring in more 1 year 1 and 5 years than 5 years Fixed-rate payer swaps 666.2 500.0 166.2 - (16.3) Floating-rate payer swaps 2,900.0 631.0 2,118.9 150.0 132.8

(1) Gain/(Loss).

20.2 Foreign exchange hedging instruments The nominal values of hedges outstanding as of December 31, 2010 for all currencies, revalued at the year-end exchange rates, are as follows:

Type Currency Nominal Market value (1) (EUR millions) amounts

Forward purchases/sales HKD 811.7 (37.4) USD 12.0 0.3

Options JPY 50.1 (0.9)

Foreign exchange swaps USD 1,526.0 (36.7) CHF 382.0 (25.2) JPY 52.5 (1.4) (1) Gain/(Loss).

All of the contracts presented in the table above mature within one year.

21. Other information

21.1 Compensation of executive bodies As of December 31, 2010, the commitment that has not been recognized, net of financial assets covering this commitment, The total gross compensation paid to Company Officers and determined according to the same principles as those used for members of the Company’s Executive Committee for 2010 the Group’s consolidated financial statements, amounts to amounted to 23.0 million euros, including 1.0 million euros in 38.8 million euros. directors’ fees. Commitments are estimated on the basis of the following actuarial Due to the nature of the Company’s business, as described under assumptions: Note 1 Business activity, a significant portion of this compensation -- Discount rate 4.5% is reinvoiced to Group companies in connection with management support services. -- Long term rate of return on investments 4% The payments made to cover this commitment are recognized 21.2 Commitments given in respect of supplementary under the heading “Wages, salaries and social security expenses” pension and retirement benefits (nil in 2010). Most of these commitments relate to members of the Executive Committee who, after a certain length of service in their office, benefit from an additional pension plan, the amount of which is linked to their last year’s remuneration.

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21.3 Share purchase commitments 21.6 Average headcount Share purchase commitments amount to 3,686 million euros and In 2010, the Company had an average headcount of 22 (2009: represent the contractual commitments entered into by the Group 23; 2008: 26). to purchase minority interests’ shares in consolidated companies, shareholdings or additional shareholdings in unconsolidated 21.7 Fees paid to the statutory auditors companies, or for additional payments in connection with transactions already entered into. This amount includes the impact (EUR millions) of the memorandum of understanding entered into on January 20, ERNST & YOUNG DELOITTE & ASSOCIÉS 1994 between LVMH and Diageo, according to which LVMH 2010 2009 2010 2009 agreed to repurchase Diageo’s 34% interest in Moët Hennessy SNC Statutory audit work 1.3 1.6 0.6 0.9 and Moët Hennessy International SAS, with six months’ notice, Work relating directly to 0.2 0.1 0.1 0.1 for an amount equal to 80% of its market value at the exercise date the statutory audit work of the commitment. 1.5 1.7 0.7 1.0

21.4 Other commitments given 21.8 Related party transactions

(EUR millions) December 31, No new related party agreements, within the meaning of Article 2010 R. 123-198 of the French Commercial Code, were entered into Guarantees and comfort letters granted to during the fiscal year in significant amounts and under conditions 6,342.3 subsidiaries or other Group companies other than normal market conditions. In 1994, at the time when Diageo acquired a stake in the Moët 21.5 Other commitments given in favor of LVMH Hennessy group, an agreement was concluded between Diageo and LVMH for the apportionment of common holding company (EUR millions) December 31, expenses between Moët Hennessy SNC and the other holding 2010 companies of the LVMH group, including the parent company, LVMH. Undrawn confirmed long term lines of credit 1,925.0 Undrawn confirmed short term lines of credit 815.0 Pursuant to this agreement, the proportion of common holding company expenses attributed to LVMH was 80% in 2010, 2,740.0 representing an amount of 33 million euros. LVMH-share based calls (1) 25.2 (1) Amount corresponding to the difference between the exercise price of the calls and the LVMH share price as of the balance sheet date. 21.9 Identity of the consolidating parent company The financial statements of LVMH Moët Hennessy - Louis Vuitton SA are fully consolidated by Christian Dior SA - 30, avenue Montaigne - 75008 Paris, France.

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Investment portfolio

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 31,482,978 shares in Moët Hennessy International SAS with a par value of EUR 13.82 each 58.67 74.4 23,743,069 shares in LVMH Fashion Group SA with a par value of EUR 1.50 each 99.95 822.1 68,959 shares in Parfums Christian Dior SA with a par value of EUR 38 each 99.98 76.5 508,493,000 shares in Sofidiv SAS with a par value of EUR 17 each 100.00 9,847.9 1,961,048 shares in Le Bon Marché SA with a par value of EUR 15 each 99.99 259.2 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 1.1 9,660 shares in Loewe SA (Spain) with a par value of EUR 30 each 5.44 6.7 34,414,870 shares in LVMH Services Ltd (UK) with a par value of GBP 1 each 100.00 29.3 35,666,395 shares in LVMH Finance SA with a par value of EUR 15 each 99.99 405.1 164 999 994 shares in Eley Finance SA with a par value of EUR 1each 99.99 165.0 Total 12,722.8

See also Note 13.1 Treasury shares.

Subsidiaries and investments

Company Head office Currency Share Equity Percentage Carrying amount Loans and Deposits Revenue Net profit Dividends capital (1) other share capital of shares held (3) advances and sureties excluding (loss) received in than share held provided (3) granted (3) taxes (1) from the 2010 (3) capital (1) (2) previous (all amounts in millions) Gross Net year (1)

1. Subsidiaries (>50%)

Boulogne- Moët Hennessy SNC EUR 428.7 2,236.4 58.67 1,019.0 1,019.0 - - 595.9 390.9 - Billancourt Moët Hennessy Inter. SAS “ EUR 151.6 317.0 58.67 74.4 74.4 - - 94.7 93.7 14.8 Sofidiv SAS “ EUR 8,427.4 1,420.6 100.00 10,116.4 9,847.9 - - 2,451.5 1,726.0 752.6 LVMH Finance SA “ EUR 535.0 (137.2) 99.99 1,630.5 405.1 - - 3.4 (56.7) - Eley Finance SA “ EUR 165.0 1.3 99.99 165.0 165.0 - - 0.0 (0.1) - LVMH Fashion Group SA Paris EUR 35.6 3,034.4 99.95 822.1 822.1 - - 2,290.9 2,284.3 866.6 Parfums Christian Dior SA Paris EUR 2.6 364.4 99.98 76.5 76.5 - 5.2 947.1 180.9 100.0 Le Bon Marché SA Paris EUR 29.4 102.9 99.99 259.2 259.2 - - 259.7 17.9 20.0 LVMH KK Tokyo JPY 1,150.0 583.7 100.00 7.6 7.6 - 411.4 895.5 117.7 - LVMH Services Ltd London GBP 34.4 (9.3) 100.00 43.8 29.3 - 5.8 1.7 (1.8) -

2. Other shareholdings (>10% and <50%)

Boulogne- GIE LVMH Services EUR 44.3 0.7 20.00 8.9 8.9 - - 2.2 0.7 - Billancourt

3. Other investments (<10%)

Loewe SA Madrid EUR 5.3 12.0 5.44 6.7 6.7 - - 78.5 11.6 -

4. Other 1.1 1.1

Total 14,231.2 12,722.8 - 422.4 1,754.0 (1) In local currency for foreign subsidiaries. (2) Prior to the appropriation of earnings for the year. (3) EUR millions. Reference Document 2010 205 Financial statements Parent company financial statements: LVMH Moët Hennessy - Louis Vuitton SA

STATUTORY AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS

To the Shareholders, In accordance with our appointment as Statutory Auditors at your Annual General Meeting, we hereby report to you for the year ended December 31, 2010 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. The 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 practice standards applicable in France. These 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, using sample testing techniques or other selection methods, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made, as well as evaluating the overall financial statements presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide 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, 2010 and the results of its operations for the year then ended in accordance with accounting principles generally accepted in France.

II. JUSTIFICATION OF OUR ASSESSMENTS In accordance with Article L. 823-9 of the French Commercial Code (Code de Commerce) relating to the justification of our assessments, we bring the following matters to your attention: Note 2.3. to the financial statements describes the accounting principles and methods applicable to long-term investments. As part of our assessment of the accounting policies implemented 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. These assessments were performed as part of our audit approach for the financial statements taken as a whole and therefore contributed to the expression of our opinion in the first part of this report.

206 Reference Document 2010 Financial statements Parent company financial statements: LVMH Moët Hennessy - Louis Vuitton SA

III. SPECIFIC PROCEDURES AND DISCLOSURES We have also performed the other specific procedures required by law, in accordance with professional practice standards applicable in France. We have no matters to report regarding the fair presentation and consistency with the financial statements of the information given in the management report of the Board of Directors and the documents addressed to the shareholders in respect of the financial position and the financial statements. Concerning the information given in accordance with the requirements of Article L. 225-102-1 of the French Commercial Code relating to remuneration and benefits received by the corporate officers and any other commitments made in their favor, we have verified its consistency with the financial statements, or with the underlying information used to prepare these financial statements and, where applicable, with the information obtained by your Company, from companies controlling your Company or controlled by it. Based on this work, we attest that such information is accurate and fair. It being specified that, as indicated in the management report, this information relates to the remuneration and benefits in-kind paid or borne by your Company and the companies which it controls as well as the remuneration and benefits paid or borne by the companies Financière Jean Goujon and Christian Dior. Pursuant to the law, we have verified that the management report contains the appropriate disclosures as to the identity of and percentage interests and votes held by shareholders.

Neuilly-sur-Seine, February 16, 2011

The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG et Autres

Thierry Benoit Olivier Breillot Gilles Cohen

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking readers. The Statutory Auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the opinion on the Parent company financial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the Parent company financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the Parent company financial statements. This report should be read in conjunction and construed in accordance with, French law and professional auditing standards applicable in France.

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STATUTORY AUDITORS’ SPECIAL REPORT ON REGULATED RELATED PARTY AGREEMENTS AND COMMITMENTS

To the Shareholders, In our capacity as Statutory Auditors of your Company, we hereby report on regulated related party agreements and commitments. Our responsibility is to inform you, on the basis of the information provided to us, of the terms and conditions of the agreements and commitments that have been indicated to us or that we would have identified performing our role. We are not required to comment as to whether they are beneficial or appropriate, or to ascertain the existence of any other agreements or commitments. It is your responsibility, in accordance with Article R.225-31 of the French Commercial Code, to evaluate the benefits resulting from these agreements and commitments prior to their approval. However, we are required, if any, to inform you in accordance with Article R.225-31 of the French Commercial Code of the implementation during the year of related party agreements and commitments already approved by the Shareholder’s Meeting. We performed those procedures which we considered necessary to comply with professional guidance issued by the French Institute of Statutory Auditors (Compagnie nationale des commissaires aux comptes) relating to this type of engagement. These procedures consisted in verifying that the information provided to us is consistent with the documentation from which it has been extracted.

AUTHORIZED AGREEMENTS AND COMMITMENTS SUBMITTED TO THE APPROVaL OF THE SHAREHOLDERS’ MEETING

Agreements and commitments Authorized during the year In accordance with Article L.225-40 of the French Commercial Code (Code de commerce), we have been advised of the following related party agreements and commitments previously authorized by your Board of Directors.

Agreement entered into with GROUPE ARNAULT SAS Directors involved: Messrs. Bernard Arnault, Nicolas Bazire, Albert Frère and Pierre Godé. Nature, purpose, terms and conditions: Amendment to the service agreement entered into with Groupe Arnault SAS on July 31, 1998. On February 4, 2010, the Board of Directors authorized the signature of an amendment to the service agreement entered into between your Company and Groupe Arnault SAS. The amendment modifies the annual fees set by this agreement to 5,000,000 euros per year (exclusive of VAT) as from January 1, 2010. Pursuant to this agreement, your Company paid 5,000,000 euros to Groupe Arnault SAS in 2010.

AUTHORIZED AGREEMENTS AND COMMITMENTS ALREADY APPROVED BY THE SHAREHOLDERS’ MEETING

Authorized agreements and commitments approved in prior years In accordance with Article R. 225-30 of the French Commercial Code (Code de commerce), we have been advised that the following agreements and commitments which were approved in prior years remained current during the year.

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1. LVMH Group holding company cost-sharing agreement Nature, purpose, terms and conditions The LVMH group holding company cost-sharing agreement with Diageo Plc (formerly Guinness Plc) dated January 20, 1994, based on the annual revenue generated by the “Wines and Spirits” business group on one side and other activities on the other side, was continued in 2010. The portion borne by Moët Hennessy SNC during the year totaled 9 million euros.

2. Legal services agreement Nature, purpose, terms and conditions 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, was continued in 2010. Pursuant to this service agreement, your Company has received 45,750 euros (excluding VAT) for the year 2010.

3. Funding of the supplemental pension scheme Nature, purpose, terms and conditions The supplemental pension scheme set up in 1999 (and managed by an insurance company) for the benefit of the Executive Committee members, some of whom are also Directors, was continued in 2010. The resulting expense for your Company in 2010 is included in the amount under Note 30.3 to the consolidated financial statements.

4. Amendment to the bank borrowing guarantee Nature, purpose, terms and conditions Your Company and LVMH Inc are joint borrowing parties to a 650 million US dollars loan agreement. Your Company has agreed to guarantee the portion borrowed by LVMH Inc. from a banking syndicate represented by Citibank International plc up, subject to a maximum of 110% of the nominal amount. On July 27 2009, the Board of Directors authorized an amendment to this loan agreement, under which your Company extends the period of the guarantee granted to LVMH Inc. until October 30, 2011. No commission was received by your Company in respect of this guarantee in 2010.

Neuilly-sur-Seine, February 16, 2011

The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG et Autres

Thierry Benoit Olivier Breillot Gilles Cohen

This is a free translation into English of the statutory auditors’ special report issued in French and is provided solely for the convenience of English speaking users. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.

Reference Document 2010 209 210 Reference Document 2010 Other Information

Governance

Page

1. Principal positions and offices of members of the Board of Directors 212

2. Statutory Auditors 222

3. Charter of the Board of Directors 223

4. Internal rules of the Performance Audit Committee 224

5. Internal rules of the Nominations and Compensation Committee 226

6. Bylaws 227

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Governance

1. Principal positions and offices of members of the Board of Directors

1.1 Currently serving Directors

Mr. Bernard ARNAULT, Chairman and Chief Executive Officer Other: Date of birth: March 5, 1949. French. • France: -- Carrefour SA: Director; Business address: LVMH – 22, avenue Montaigne – 75008 Paris (France). -- Lagardère SCA: Member of the Supervisory Board. Date of first appointment: September 26, 1988. Positions and offices that have terminated after January 1, 2006 Expiration of term: Annual Meeting convened in 2013. • France: Number of LVMH shares held in a personal capacity: 6,990 shares. -- Métropole Télévision “M6” SA: Member of the Supervisory Board. Mr. Bernard Arnault began his career as an engineer with Ferret- -- Raspail Investissements SA: Director. Savinel, where he became Senior Vice-President for Construction in 1974, Chief Executive Officer in 1977 and finally Chairman Mr. Antoine ARNAULT and Chief Executive Officer in 1978. Date of birth: June 4, 1977. French. He remained with this company until 1984, when he became Chairman and Chief Executive Officer of Financière Agache and of Business address: Berluti – 31, rue Marbeuf – 75008 Paris (France). Christian Dior. Shortly thereafter he spearheaded a reorganization Date of first appointment: May 11, 2006. of Financière Agache following a development strategy focusing on luxury brands. Christian Dior was to become the cornerstone Expiration of term: Annual Meeting convened in 2012. of this new structure. Number of LVMH shares held in a personal capacity: 57,297 shares. In 1989, he became the leading shareholder of LVMH Moët Mr. Antoine Arnault graduated from HEC Montreal and INSEAD. Hennessy - Louis Vuitton, and thus created the world’s leading In 2000 he created an internet company, Domainoo.com. luxury products group. He assumed the position of Chairman and Chief Executive Officer in January 1989. In 2002, he sold his holding in Domainoo.com and joined Louis Vuitton Malletier initially as marketing manager for the Current positions and offices brand, where he took some significant initiatives, notably with LVMH group/Arnault group: respect to advertising and then as Director of the provincial operations of Louis Vuitton France. In 2007, he became Director • France: of Communication at Louis Vuitton. In 2010, he was appointed -- LVMH Moët Hennessy - Louis Vuitton SA: Chairman and Chief Chairman of the Executive Board of Berluti. Executive Officer. Current positions and offices -- Christian Dior SA: Chairman of the Board of Directors; -- Christian Dior Couture SA: Director; LVMH group/Arnault group: -- Financière Jean Goujon SAS: Member of the Supervisory • France: Committee; -- LVMH Moët Hennessy - Louis Vuitton SA: Director. -- Groupe Arnault SAS: Chairman; -- Berluti SA: Chairman of the Executive Board; -- Société Civile du Cheval Blanc: Chairman of the Board of Directors; -- Les Echos SAS: Member of the Supervisory Board. -- Louis Vuitton pour la Creation, Fondation d’Entreprise: Positions and offices that have terminated after January 1, Chairman of the Board of Directors. 2006 • International: • International: -- LVMH Moët Hennessy - Louis Vuitton Inc. (United States): Director; -- Spot Runner, Inc. (United States): Member of the Supervisory -- LVMH Moët Hennessy - Louis Vuitton Japan KK (Japan): Board. Director.

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Mr. Antoine BERNHEIM, Vice-Chairman -- Eurazeo SA: Member of the Supervisory Board; Date of birth: September 4, 1924. French. -- EuropaCorp SA: Director; -- Havas SA: Director; Mailing address: LVMH – 22, avenue Montaigne – 75008 Paris (France). -- Le Monde SA: Member of the Supervisory Board; -- Société Editrice du Monde SA: Member of the Supervisory Board; Date of first appointment: September 22, 1988. -- Société Française Générale Immobilière SA: Managing Director. Expiration of term: Annual Meeting convened in 2012. • International: Number of LVMH shares held in a personal capacity: 38,720 shares. -- Mediobanca (Italy): Director. Mr. Antoine Bernheim was Managing Partner of Lazard Frères & Positions and offices that have terminated after January 1, Cie from 1967 to 2000 and Partner of Lazard LLC from 2000 to 2006 2005. He served as Chairman and Chief Executive Officer of La • France: France SA from 1974 to 1997 and of Euromarché from 1981 to 1991. Chairman of Generali SpA from 1995 to 1999 and from -- Partena: Managing Partner. 2002 to April 2010, since that date he has served as this company’s • International: Honorary Chairman. -- Assicurazioni Generali SpA (Italy): Chairman;

Current positions and offices -- Compagnie Monégasque de Banque (Principality of Monaco): Director; Generali Group: -- Intesa Sanpaolo (Italy): Vice-Chairman of the Supervisory Board. • France: -- Generali France SA: Director. Mrs. Bernadette CHIRAC • International: Date of birth: May 18, 1933. French. -- Alleanza Toro (Italy): Vice-Chairman and Director; Mailing address: BP 70316 – F-75007 – Paris Cedex 07 (France). -- Assicurazioni Generali SpA (Italy): Honorary Chairman; Date of first appointment: April 15, 2010. -- BSI: Banca della Svizzera Italiana (Switzerland): Director; Expiration of term: Annual Meeting convened in 2013. -- Generali Deutschland Holding AG (Germany): Director; -- Generali España Holding SA (Spain): Director; Number of LVMH shares held in a personal capacity: 500 shares. -- Generali Holding Vienna AG (Austria): Director; Married to Mr. Jacques Chirac, President of France from 1995 to -- Graafschap Holland (Netherlands): Honorary Chairman. 2007, Mrs. Bernadette Chirac was elected to the local council of the town of Sarran in 1971 and was named as deputy mayor in LVMH group/Arnault group: 1977. She was elected as a member of the departmental council of Corrèze in 1979 and was reelected continuously until 2004. • France: In 1990, she founded the association Le Pont Neuf, and serves -- LVMH Moët Hennessy - Louis Vuitton SA: Vice-Chairman and as its President to this day. In 1994, she was named president of Director. Fondation Hôpitaux de Paris – Hôpitaux de France and took an -- Christian Dior SA: Director; active role in its “Pièces Jaunes” operation which, thanks to her -- Christian Dior Couture SA: Director; support and involvement, has become a widely recognized charity -- Financière Jean Goujon SAS: Vice-Chairman and Member of event in France. Since 2007, she has also served as president of the Supervisory Committee; Fondation Claude-Pompidou. -- LVMH Fashion Group SA: Vice-Chairman and Director; Current positions and offices -- LVMH Finance SA: Vice-Chairman and Director. LVMH group/Arnault group: • International: • France: -- LVMH Moët Hennessy - Louis Vuitton Inc. (United States): -- LVMH Moët Hennessy - Louis Vuitton SA: Director. Director. Other: Other: • France: • France: -- Bolloré SA: Vice-Chairman and Director; -- Fondation-Hôpitaux de Paris-Hôpitaux de France: Chairman; -- Ciments Français France SA: Director; -- Fondation Claude-Pompidou: Chairman.

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Mr. Nicholas CLIVE WORMS Current positions and offices Date of birth: November 14, 1942. French. Frère-Bourgeois group: Business address: Worms 1848 SAS – 48, rue Notre-Dame des • International: Victoires – 75002 Paris (France). -- Erbé SA (Belgium): Chairman of the Board of Directors; Date of first appointment: September 22, 1988. -- Financière de la Sambre SA (Belgium): Chairman of the Board of Directors; Expiration of term: Annual Meeting convened in 2013. -- Frère-Bourgeois SA (Belgium): Chairman of the Board of Number of LVMH shares held in a personal capacity: 3,330 shares. Directors; Mr. Nicholas Clive Worms was General Partner and later -- Groupe Bruxelles Lambert SA (Belgium): Chairman and Chief Managing Partner of Maison Worms & Cie between 1970 and Executive Officer; 1996, Managing Partner and subsequently Chairman of the -- Stichting Administratie Kantoor Frère-Bourgeois (Netherlands): Supervisory Board of Worms & Cie between 1991 and 2004. He Chairman of the Board of Directors. also served as Chairman and Chief Executive Officer and then Managing Partner of Pechelbronn between 1976 and 1991. He is LVMH group/Arnault group: currently Chairman of Worms 1848 SAS. • France: Current positions and offices -- LVMH Moët Hennessy - Louis Vuitton SA: Director. -- Groupe Arnault SAS: Permanent Representative of Belholding LVMH group/Arnault group: Belgium SA, Member of the Management Committee; • France: -- Société Civile du Cheval Blanc: Director. -- LVMH Moët Hennessy - Louis Vuitton SA: Director. Other: Other: • France: • France: -- GDF-Suez SA: Vice-Chairman of the Board of Directors and -- Financière de Services Maritimes SA: Director; Director; -- Worms 1848 SAS: Chairman. -- Métropole Télévision “M6” SA: Chairman of the Supervisory • International: Board. -- Permal UK Ltd (United Kingdom): Chairman of the Board of • International: Directors; -- GBL Energy (Luxembourg): Permanent Representative of Frère- -- Worms (Luxembourg): Chairman. Bourgeois SA, Director; -- GBL Vervaltung SARL (Luxembourg): Permanent Mr. Albert FRÈRE Representative of Frère-Bourgeois SA, Director; -- Pargesa Holding SA (Switzerland): Vice-Chairman, Managing Date of birth: February 4, 1926. Belgian. Director and Member of the Management Committee; Business address: Frère-Bourgeois – 12, rue de la Blanche Borne – -- Banque Nationale de Belgique (Belgium): Honorary Chairman. 6280 Loverval (Belgium). Positions and offices that have terminated after January 1, Date of first appointment: May 29, 1997. 2006 Expiration of term: Annual Meeting convened in 2012. • France: Number of LVMH shares held in a personal capacity: 500 shares. -- Raspail Investissements SA: Director; Having begun his career within the family metal products business, -- Suez SA: Vice-Chairman of the Board of Directors and Director. Mr. Albert Frère turned his focus to industrial acquisitions and • International: gained control, with his partners, of virtually all the steel industry -- Agesca Nederland NV (Netherlands): Director; around Charleroi. In 1981, he founded Pargesa Holding SA jointly -- Assicurazioni Generali SpA (Italy): Member of the International with several partners. The following year, this company acquired Committee; interests in Groupe Bruxelles Lambert. In 1987 he was appointed Chairman of its Board of Directors, a position he still holds today. -- Coparex International SA (Belgium): Director; He has also served as Chairman of the Board of Directors of Frère- -- Fingen SA (Belgium): Chairman of the Board of Directors; Bourgeois SA since 1970. -- Frère-Bourgeois Holding BV (Netherlands): Director;

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-- GBL Finance (Luxembourg): Director; Positions and offices that have terminated after January 1, -- Gruppo Banca Leonardo (Italy): Director; 2006 -- Parjointco NV (Netherlands): Director; • International: -- Petrofina (Belgium): Chairman of the Board of Directors; -- British Mediterranean Airways (United Kingdom): Director; -- Power Corporation du Canada (Canada): Member of the -- Falgos Investments Ltd (United Kingdom): Director; International Advisory Board. -- J. Rothschild Name Co Ltd (United Kingdom): Director; -- Sagitta Asset Management (United Kingdom): Chairman of Lord POWELL of BAYSWATER the Board of Directors; Date of birth: July 6, 1941. British. -- Yell Group Ltd (United Kingdom): Director. Business address: Lord Powell of Bayswater KCMG – 24 Queen Anne’s Gate – SW1H 9AA London (United Kingdom). Mr. Felix G. ROHATYN Date of first appointment: May 29, 1997. Date of birth: May 29, 1928. American. Expiration of term: Annual Meeting convened in 2012. Business address: Lazard Frères & Co. LLC – 30 Rockefeller Plaza – 62nd Floor – NY 10020, New York (United States). Number of LVMH shares held in a personal capacity: 550 shares. Date of first appointment: May 14, 2001. Lord Powell was Private Secretary and Advisor on Foreign Affairs and Defense to Prime Ministers Margaret Thatcher and John Major Expiration of term: Annual Meeting convened in 2013. from 1983 to 1991. He sits as a cross-bench member of the House Number of LVMH shares held in a personal capacity: 500 shares. of Lords, the British Parliament’s upper chamber. Mr. Felix G. Rohatyn was United States Ambassador to France Current positions and offices from 1997 to 2000. He previously was Managing Partner of Lazard LVMH group/Arnault group: Frères & Co LLC. He also served on the Board of the New York Stock Exchange from 1968 to 1972. He has been a Special Advisor • France: of the President of Lazard Ltd since January 2010. -- LVMH Moët Hennessy - Louis Vuitton SA: Director. Current positions and offices -- Financière Agache SA: Director. LVMH group/Arnault group: • International: -- LVMH Services Limited (United Kingdom): Chairman of the • France: Board of Directors. -- LVMH Moët Hennessy - Louis Vuitton SA: Director. Other: Other: • International: • France: -- Capital Generation Partners (United Kingdom): Chairman of -- Publicis Groupe SA: Member of the Supervisory Board. the Board of Directors; • International: -- Caterpillar Inc. (United States): Director; -- Carnegie Hall (United States): Honorary Vice-Chairman of the -- Hong-Kong Land Holdings (Bermuda): Director; Board of Directors; -- Magna Holdings (Bermuda): Chairman of the Board of Directors; -- Center for Strategic and International Studies (CSIS) (United -- Mandarin Oriental International Holdings (Bermuda): Director; States): Director; -- Matheson & Co Ltd (United Kingdom): Director; -- Council on Foreign Relations (United States): Advisor; -- Northern Trust Global Services (United Kingdom): Director; -- Lazard Ltd (United States): Special Advisor to the Chairman. -- Schindler Holding (Switzerland): Director; Positions and offices that have terminated after January 1, -- Singapore Millennium Foundation Limited (Singapore): 2006 Director; • France: -- Textron Corporation (United States): Director. -- Lagardère SCA: Member of the Supervisory Board; -- Rothschilds Continuation Holdings AG: Director; -- Suez: Director.

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• International: -- French Foreign Ministry: Member of the Foreign Affairs Council. -- Comcast Corporation (United States): Director; • International: -- Fiat SpA (Italy): Director; -- Société Monégasque de l’Electricité et du Gaz (Principality of -- Lazard Frères LLC (United States): Managing Partner; Monaco): Director; -- LVMH Moët Hennessy - Louis Vuitton Inc (United States): -- Solvay (Belgium): Director; Chairman. -- International Financial Reporting Standards Fondation (IFRS/ -- Comités de Conseil International Lehman Brothers (United IASB): Director; States): Chairman of the Board of Directors. -- Medef International: Chairman of France-Algeria and France- Qatar committees. Mr. Yves-Thibault de SILGUY Positions and offices that have terminated after January 1, Date of birth: July 22, 1948. French. 2006 Business address: YTSeuropa Consultants – 13bis avenue de la • France: Motte Picquet – 75007 Paris (France). -- Calédonienne des Eaux (CDE): Chairman of the Board of Date of first appointment: May 14, 2009. Directors; -- Degrémont: Director; Expiration of term: Annual Meeting convened in 2012. -- EEC: Director; Number of LVMH shares held in a personal capacity: 500 shares. -- Électricité de Tahiti (EDT): Director; Mr. Yves-Thibault de Silguy joined the French Ministry for Foreign -- Elyo: Member of the Supervisory Board; Affairs from 1976 to 1981, after which he worked for the European -- Fabricom: Director; Community as a member of the cabinet of Mr. Ortoli from 1981 to 1985 and from 1995 to 1999, as European Commissioner. He -- Lyonnaise Europe: Director; served as a cabinet member for Prime Ministers Jacques Chirac -- Marama Nui: Director; from 1986 to 1988 and Edouard Balladur from 1993 to 1995. -- Métropole Télévision “M6” SA: Member of the Supervisory Board; In 1988 he joined Usinor - Sacilor group, where he was Director -- Ondeo-Degrémont: Director; of international affairs until 1993. From 2000 to 2006, he -- Ondeo Services: Director; successively became member of the Management Board, Chief Executive, and Deputy Manager of Suez. In June 2006, he was -- Sita: Director; appointed Chairman of the Board of Directors of Vinci and, in -- Société Polynésienne des Eaux et de l’Assainissement (SPEA): May 2010, as Vice-Chairman and Senior Director. Since May 2010, Chairman of the Board of Directors; he has been President of YTSeuropa Consultants. -- Socif 4: Director; Current positions and offices -- Suez Energies Services: Director; -- Suez Environnement: Director; Vinci group: -- TPS Gestion: Permanent Representative of Lyonnaise Satellite, • France: Director; -- Société des Autoroutes du Sud de la France: Director; -- TPS Motivation: Permanent Representative of TPS, Director; -- Vinci: Vice-Chairman of the Board of Directors and Senior -- Unelco Vanuatu: Director; Director. -- Comité France-Chine du Medef: Vice-Chairman; LVMH group/Arnault group: -- Comité de Politique Européenne du Medef: Chairman; • France: -- French Defense Ministry: Member of the Economic Council -- LVMH Moët Hennessy - Louis Vuitton SA: Director. for Defense; Other: -- Université française d’Egypte: Chairman of the Board of Directors. • France: -- Sofisport SA: Chairman of the Supervisory Board; • International: -- VTB Bank France SA: Member of the Supervisory Board; -- Société Générale de Belgique (Belgium): Director; -- YTSeuropa consultants SARL: Chairman; -- Suez-Tractebel (Belgium): Director; -- ING Direct France SA: Member of the Advisory Committee; -- Swire Sita Waste Services Ltd (China): Director; -- AgroParisTech: Chairman of the Board of Directors; -- VTB (Russia): Director.

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Mr. Hubert VÉDRINE Current positions and offices Date of birth: July 31, 1947. French. LVMH group/Arnault group: Business address: Hubert Védrine (HV) Conseil – 21, rue Jean • France: Goujon – 75008 Paris (France). -- LVMH Moët Hennessy - Louis Vuitton SA: Director. Date of first appointment: May 13, 2004. -- Les Echos SAS: Member of the Supervisory Board; Expiration of term: Annual Meeting convened in 2013. -- Société Civile du Cheval Blanc: Director. Number of LVMH shares held in a personal capacity: 500 shares. • International: -- Emilio Pucci Srl (Italy): Director; Mr. Hubert Védrine has held a number of French government and administrative posts, notably as Diplomatic Advisor to the -- Emilio Pucci International BV (Netherlands): Director; Presidency from 1981 to 1986, Spokesperson for the Presidency -- Loewe SA (Spain): Director. from 1988 to 1991, General Secretary for the Presidency from Other: 1991 to 1995 and Minister for Foreign Affairs from 1997 to 2002. In early 2003, he founded a geopolitical management consulting • France: firm, “Hubert Védrine (HV) Conseil”. -- Etablissement Public de Sèvres - Cité de la Céramique: Director; Current positions and offices -- Métropole Télévision “M6” SA: Member of the Supervisory Board. LVMH group/Arnault group: Positions and offices that have terminated after January 1, • France: 2006 -- LVMH Moët Hennessy - Louis Vuitton SA: Director. • International: Other: -- Calto Srl (Italy): Chairman of the Board of Directors; • France: -- Manifatturauno Srl (Italy): Chairman of the Board of Directors. -- Hubert Védrine (HV) Conseil SARL: Managing Partner; -- Ipsos SA: Director. Mr. Nicolas BAZIRE, Senior Vice-President for Development and Acquisitions 1.2 Appointments Date of birth: July 13, 1957. French.

1.2.1 Directors Business address: LVMH – 22, avenue Montaigne – 75008 Paris (France). Mrs. Delphine ARNAULT Date of first appointment: May 12, 1999. Date of birth: April 4, 1975. French. Number of LVMH shares held in a personal capacity: 500 shares. Business address: Christian Dior – 30, avenue Montaigne – 75008 Paris (France). Mr. Nicolas Bazire became Chief of Staff of Prime Minister Edouard Balladur in 1993. He was Managing Partner at Rothschild & Date of first appointment: September 10, 2003. Cie Banque between 1995 and 1999 and has served as Managing Number of LVMH shares held in a personal capacity: 115,677 shares. Director of Groupe Arnault SAS since 1999. Mrs. Delphine Arnault began her career with the international Current positions and offices management consulting firm McKinsey & Co, where she worked LVMH group/Arnault group: as a consultant for two years. • France: In 2000, she moved to designer John Galliano’s company, where she helped in development, thereby acquiring concrete experience of -- LVMH Moët Hennessy - Louis Vuitton SA: Director. the fashion industry. In 2001, she joined the Executive Committee -- Agache Développement SA: Director; of Christian Dior where she currently serves as Deputy Managing -- Europatweb SA: Director; Director. She also is a member of Loewe’s Board of Directors, where -- Financière Agache SA: Managing Director and Permanent she is Senior Vice-President for Product Strategy. Representative of Groupe Arnault SAS, Director;

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-- Financière Agache Private Equity SA: Director; Current positions and offices -- Groupe Arnault SAS: Managing Director; LVMH group/Arnault group: -- Groupe Les Echos SA: Director; • France: -- Les Echos SAS: Vice-Chairman of the Supervisory Board; -- LVMH Moët Hennessy - Louis Vuitton SA: Group Managing -- LVMH Fashion Group SA: Director; Director and Director. -- Montaigne Finance SAS: Member of the Supervisory -- Givenchy SA: Director; Committee; -- Le Bon Marché, Maison Aristide Boucicaut SA: Director; -- Semyrhamis SAS: Member of the Supervisory Committee; -- LVMH Fragrance Brands SA: Permanent Representative of -- Louis Vuitton pour la Création, Fondation d’Entreprise: Director. LVMH Fashion Group, Director; Other: -- Sephora: Director; • France: -- Louis Vuitton pour la Création, Fondation d’Entreprise: Director. -- Atos Origin SA: Director; • International: -- Carrefour SA: Director; -- Benefit Cosmetics LLC (United States): Manager; -- Rothschild & Cie Banque SCS: Member of the Supervisory -- De Beers Diamond Jewellers Limited (United Kingdom): Director; Board; -- De Beers Diamond Jewellers Trademark Ltd (United Kingdom): -- Suez Environnement Company SA: Director. Director; -- DFS Group Limited (Bermuda): Director; Positions and offices that have terminated after January 1, 2006 -- DFS Holdings Limited (Bermuda): Director; -- Donna Karan International Inc. (United States): Director; • France: -- Edun Americas Inc. (United States): Director; -- Agache Développement SA: Permanent Representative of Sifanor SA, Director; -- Edun Apparel Limited (United Kingdom): Director; -- Ipsos SA: Director; -- Emilio Pucci Srl (Italy): Director; -- Emilio Pucci International BV (Netherlands): Director; -- La Tour du Pin SAS: Chairman; -- Fendi SA (Luxembourg): Director; -- Lyparis SAS: Member of the Supervisory Committee; -- Fendi Srl (Italy): Director; -- Sifanor SAS: Member of the Supervisory Committee; -- Fendi Adele Srl (Italy): Director; -- Société Financière Saint-Nivard SAS: Chairman; -- Fresh Inc. (United States): Director; -- Tajan SA: Director. -- LVMH (Shanghai) Management & Consultancy Co Ltd (China): • International: Chairman of the Board of Directors; -- Go Invest SA (Belgium): Director. -- RVL Holding BV (Netherlands): Member of the Supervisory Board; -- Sephora Marinopoulos (Greece): Director; Mr. Antonio BELLONI, Group Managing Director -- Thomas Pink Holdings Limited (United Kingdom): Director; Date of birth: June 22, 1954. Italian. -- Ufip (Ireland): Director. Business address: LVMH – 22, avenue Montaigne – 75008 Paris Positions and offices that have terminated after January 1, (France). 2006 Date of first appointment: May 15, 2002. • France: Number of LVMH shares held in a personal capacity: 7,000 shares. -- LVMH Fragrance Brands GIE: Member of the College of Directors; -- Parfums Luxe International – PLI SA: Chairman and Chief Mr. Antonio Belloni joined LVMH Group in June 2001, following Executive Officer. 22 years with Procter & Gamble. He was appointed head of Procter & Gamble’s European division in 1999, having previously • International: served as Chairman and Chief Executive Officer for the group’s -- DFS Group L.P. (United States): Director; Italian operations. He began his career at Procter & Gamble in -- DFS Guam L.P. (Guam): Director; Italy in 1978 and subsequently held a number of positions in -- LVMH Moët Hennessy - Louis Vuitton Inc. (United States): Switzerland, Greece, Belgium and the United States. Managing Director.

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Mr. Charles de CROISSET Mr. Diego DELLA VALLE Date of birth: September 28, 1943. French. Date of birth: December 30, 1953. Italian. Business address: Goldman Sachs International – Business address: Tod’s Spa – Corso Venisia 30 – 20121 Milan Peterborough Court, 133 Fleet Street – EC4A 2BB London (Italy). (United Kingdom). Date of first appointment: May 15, 2002. Date of first appointment: May 15, 2008. Number of LVMH shares held in a personal capacity: 500 shares. Number of LVMH shares held in a personal capacity: 1,000 shares. Mr. Diego Della Valle joined the family business in 1975. He played a fundamental role in the definition of the Company’s Mr. Charles de Croisset entered the Inspection des Finances in development strategy and the creation of the brands that have 1968. After a career in the administration, he joined Credit shaped its image. He developed an innovative marketing plan, Commercial de France (CCF) in 1980 as Corporate Secretary before which has since served as a model to other companies around the being appointed Deputy Chief Executive and then Chief Executive. world in the luxury goods industry. Since October 2000, he has In 1993, he was named Chairman and Chief Executive Officer of been Chairman and Managing Director of Tod’s SpA, which today CCF, then Executive Director of HSBC Holdings Plc in 2000. is a world leader in the luxury accessories sector. In March 2004, he joined Goldman Sachs Europe as its Vice- Current positions and offices Chairman and was named as International Advisor to Goldman Sachs International in 2006. LVMH group/Arnault group: • France: Current positions and offices -- LVMH Moët Hennessy - Louis Vuitton SA: Director. LVMH group/Arnault group: Other: • France: -- Le Monde Europe SA: Director. -- LVMH Moët Hennessy - Louis Vuitton SA: Director. • International: Other: -- ACF Fiorentina SpA (Italy): Honorary Chairman; • France: -- Assicurazioni Generali SpA (Italy): Director; -- Euler Hermès SA: Member of the Supervisory Board; -- Compagnia Immobiliare Azionaria (Italy): Director; -- Galeries Lafayette SA: Member of the Advisory Board; -- DDV partecipazioni SRL (Italy): Sole Director; -- DI.VI. Finanziaria SAPA (Italy): Managing Partner and Director; -- Renault SA: Director; -- Diego Della Valle & C. SAPA (Italy): Managing Partner and Director; -- Fondation du Patrimoine: Chairman. -- Ferrari SpA (Italy): Director; • International: -- Marcolin SpA (Italy): Director; -- Goldman Sachs International (United Kingdom): International -- RCS Mediagroup SpA (Italy): Director; Advisor. -- Tod’s SpA (Italy): Chairman of the Board of Directors and Positions and offices that have terminated after January 1, Managing Director; 2006 -- Fondazione Della Valle Onlus (Italy): Chairman of the Board of Directors. • France: Positions and offices that have terminated after January 1, -- Bouygues SA: Director; 2006 -- Thales SA: Director. • International: • International: -- Banca Nazionale del Lavoro SpA (Italy): Director; -- Thales Holdings Plc (United Kingdom): Advisor. -- Maserati SpA (Italy): Director.

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Mr. Pierre GODÉ, Vice-Chairman • International: Date of birth: December 4, 1944. French. -- LVMH Moët Hennessy - Louis Vuitton Japan KK (Japan): Director. Business address: LVMH – 22, avenue Montaigne – 75008 Paris (France). Mr. Gilles HENNESSY Date of first appointment: January 13, 1989. Date of birth: May 14, 1949. French. Number of LVMH shares held in a personal capacity: 695 shares. Business address: Moët Hennessy – 65, avenue de la Grande Armée Mr. Pierre Godé began his career as a lawyer admitted to the Lille – 75016 Paris (France). bar and has taught at the Lille and Nice university law faculties. Date of first appointment: June 6, 1990. He has been Managing Director of Groupe Arnault since 1986. Number of LVMH shares held in a personal capacity: 73,645 shares. Current positions and offices Mr. Gilles Hennessy joined Jas Hennessy & Co in 1971 as head of LVMH group/Arnault group: marketing and sales and participated in Hennessy’s expansion into the Japanese market in 1977, followed by the cognac producer’s • France: introduction into China, South Korea and Vietnam. He has served -- Christian Dior Couture SA: Director; as Vice-Chairman of Moët Hennessy since September 1, 2002. -- Financière Agache SA: Chairman and Chief Executive Officer; Current positions and offices -- Financière Jean Goujon SAS: Chairman; -- Groupe Arnault SAS: Managing Director; LVMH group/Arnault group: -- Les Echos SAS: Member of the Supervisory Board; • France: -- Louis Vuitton Malletier: Director; -- LVMH Moët Hennessy - Louis Vuitton SA: Director. -- Raspail Investissements SAS: Chairman; -- Jas Hennessy & Co SCS: Member of the Board of Limited -- SA du Château d’Yquem: Director; Partners; -- Semyrhamis SAS: Member of the Supervisory Committee; -- MHD Moët Hennessy Diageo SAS: Director; -- Sevrilux SNC: Legal Representative of Financière Agache, Manager; -- Moët Hennessy SNC: Vice-Chairman; -- Sofidiv SAS: Member of the Management Committee; -- Moët Hennessy Investissements SA: Permanent Representative of Moët Hennessy SNC, Director. -- Société Civile du Cheval Blanc: Director; -- Association du Musée Louis Vuitton: Permanent Representative • International: of LVMH Fashion Group, Director. -- Innovacion en Marcas de Prestigio SA de CV (Mexico): Director; • International: -- Millennium Brands Limited (Ireland): Director; -- LVMH Moët Hennessy - Louis Vuitton Inc. (United States): Director; -- Moët Hennessy Asia Pacific Pte Ltd (Singapore): Director; -- LVMH Publica (Belgium): Director; -- Moët Hennessy Belux SA (Belgium): Director; -- Sofidiv UK Limited (United Kingdom): Director. -- Moët Hennessy Danmark A/S (Denmark): Chairman of the Board of Directors; Other: -- Moët Hennessy de Mexico SA (Mexico): Director; • France: -- Moët Hennessy Inc. (United States): Director; -- Havas SA: Director; -- Moët Hennessy UK Ltd (United Kingdom): Director; -- Redeg SARL: Manager. -- Moët Hennessy USA Inc. (United States): Director; Positions and offices that have terminated after January 1, -- Polmos Zyrardow (Poland): Member of the Management 2006 Committee; • France: -- Schieffelin & Somerset (United States): Member of the Supervisory Board; -- Groupe Les Echos SA: Permanent Representative of LVMH, Director; -- The Glenmorangie Company Ltd (United Kingdom): Director. -- Sifanor SAS: Member of the Supervisory Committee. Other: • France: -- Groupe Alain Crenn: Director.

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Positions and offices that have terminated after January 1, 1.2.2 Advisory Board Member 2006 Mr. Patrick HOUËL • France: Date of birth: July 25, 1942. French. -- Champagne Moët & Chandon SCS: Permanent Representative of Jas Hennessy & Co, Member of the Board of Limited Partners; Business address: 10, avenue Frederic Le Play – 75007 Paris (France). -- France Champagne SA: Director; -- Krug, Vins Fins de Champagne SA: Chairman and Chief Date of first appointment on the Board of Directors: May 13, 2004. Executive Officer; Number of LVMH shares held in a personal capacity: 5,500 shares. -- Moët Hennessy SNC: Member of the Management Board; Mr. Patrick Houël worked at Credit Lyonnais for seven years before -- Moët Hennessy do Brasil (Brazil): Director; being named as Chief Financial Officer of Jas Hennessy & Co -- Moët Hennessy International SA: Director; in 1978. In 1983, he became Deputy Chief Financial Officer of -- Veuve Clicquot Ponsardin SCS: Member of the Board of Limited Moët Hennessy Group and took over the post of Chief Financial Partners. Officer of Moët Hennessy in 1985. In 1987, when Moët Hennessy merged with Louis Vuitton, he served as Chief Financial Officer • International: of the LVMH group until 2004. He was subsequently Advisor to -- Jas Hennessy & Co Ltd (Ireland): Chairman of the Board of Directors; the Chairman until January 2008. -- Moët Hennessy Shanghai Limited (China): Director. Current positions and offices Mrs. Marie-Josée KRAVIS LVMH group/Arnault group: Date of birth: September 11, 1949. American. • France: (1) Business address: The Museum of Modern Art - 11 West 53 Street ‑ -- LVMH Moët Hennessy - Louis Vuitton SA: Director New York, NY 10019 (United States). -- Guerlain SA: Permanent Representative of LVMH, Director; Mrs. Marie-Josée Kravis is an economist specializing in the fields -- L Capital FCPR: Member of the Supervisory Committee; of public policy and strategic planning. She started her career as -- L Capital 2 FCPR: Member of the Advisory Committee; financial analyst with Power Corporation of Canada and went on -- Le Bon Marché, Maison Aristide Boucicaut SA: Director; to work with the General Solicitor of Canada and the Canadian -- LVMH Fashion Group SA: Director; minister for Supply and Services. She is a member of the Board of -- Parfums Christian Dior SA: Permanent Representative of Trustees and a senior fellow of Hudson Institute, and since 2005 LVMH, Director; has been President of the Museum of Modern Art (MoMA) of New York. -- SA du Château d’Yquem: Director; -- Wine & Co SA: Director. Current positions and offices • International: • France: -- L Real Estate SA (Luxembourg): Director; -- Publicis SA: Member of the Supervisory Board. -- Sociedad Textil Lonia (Spain): Director. • International: Other: -- Federal Reserve Bank of New York (United States): Member of the International Advisory Board; • France: -- Memorial Sloan-Kettering Cancer Center (United States): -- LCL Obligations Euro SICAV: Director; Director and member of the Executive Committee; -- Mongoual SA: Permanent Representative of Société Montaigne -- Qatar Museum Authority (Qatar): Director; Jean Goujon, Director; -- The Museum of Modern Art of New York (United States): -- Objectif Small Caps Euro SICAV: Director; Chairman. -- PGH Consultant SARL: Manager. Positions and offices that have terminated after January 1, 2006 • International: -- Ford Motor Co. (United States): Director; -- Interactive Data Corporation (United States): Director. (1) Up to Shareholders’ Meeting to be held on March 31, 2011.

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2. Statutory Auditors

2.1 Principal Statutory Auditors

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

• ERNST & YOUNG et Autres 41, rue Ybry Annual Meeting convened to June 6, 1998 April 15, 2010 approve the financial statements 92576 Neuilly-sur-Seine Cedex for the 2015 fiscal year Represented by Olivier BREILLOT and Gilles COHEN

• DELOITTE & ASSOCIES 185 avenue Charles de Gaulle Annual Meeting convened to May 13, 2004 April 15, 2010 approve the financial statements 92524 Neuilly-sur-Seine Cedex for the 2015 fiscal year Represented by Thierry Benoit

2.2 Alternate Statutory Auditors

• AUDITEX Tour Ernst & Young Annual Meeting convened to 11 allée de l’Arche April 15, 2010 April 15, 2010 approve the financial statements 92037 Paris La Défense Cedex for the 2015 fiscal year

• Mr. Denis GRISON Annual Meeting convened to 61, rue Henri Regnault June 6, 1986 April 15, 2010 approve the financial statements 92075 Paris La Défense for the 2015 fiscal year

2.3 Fees paid in 2010

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

2010 2009 2010 2009

Amount % Amount % Amount % Amount %

Audit Statutory Audit, certification, audit of the individual company and consolidated financial statements: - LVMH Moët Hennessy - Louis Vuitton SA 1,280 11 1,604 13 645 12 866 13 - Consolidated subsidiaries 6,569 58 8,543 67 3,850 75 5,592 81 Other services relating directly to the Statutory Audit assignment: - LVMH Moët Hennessy - Louis Vuitton SA 242 2 45 - 55 1 70 1 - Consolidated subsidiaries 164 2 418 3 145 3 31 - 8,255 73 10,610 83 4,695 91 6,559 95 Other services provided by the firms to consolidated subsidiaries - Legal, tax, employee-related (1) 2,729 24 1,981 15 383 7 276 4 - Other 277 3 262 2 91 2 46 1 3,006 27 2,243 17 474 9 322 5

Total 11,261 100 12,853 100 5,169 100 6,881 100 (1) This mainly relates to tax advisory services performed outside France, to ensure that the Group’s subsidiaries and expatriates meet their local tax declaration obligations.

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3. Charter of the Board of Directors

The Board of Directors is the strategy body of LVMH Moët -- ensure that major risks to which the Company is exposed are in Hennessy - Louis Vuitton SA. The competence, integrity and keeping with its strategies and its objectives, and that they are responsibility of its members, clear and fair decisions reached taken into account in the management of the Company; collectively, and effective and secure controls are the ethical -- verify the quality, reliability and fairness of the information principles that govern the Board. provided to shareholders concerning the Company and the The key priorities pursued by LVMH’s Board of Directors are Group, in particular to ensure that the management structure enterprise value creation and the defense of the Company’s interests. and the internal control and risk management systems are able to guarantee the quality and reliability of financial information LVMH’s Board of Directors acts as guarantor of the rights of each published by the Company and to give a true and fair view of the of its shareholders and ensures that shareholders fulfill all of their results and the financial position of the Company and the Group; duties. -- set out the organization principles and procedures for the Performance Audit Committee; The Company adheres to the Code of Corporate Governance for Listed Companies published by AFEP and MEDEF. -- disseminate the collective values that guide the Company and its employees and that govern relationships with consumers and Each of these elements contributes to preserving the level of with partners and suppliers of the Company and the Group; enterprise performance and transparency required to retain the -- promote a policy of economic development consistent with a confidence of shareholders and partners in the Group. social and citizenship policy based on concepts that include respect for human beings and the preservation of the environment 3.1 Structure of the Board of Directors in which it operates.

The Board of Directors shall have a maximum of 18 members, 3.3 Operations of the Board of Directors a third of whom at least are appointed from among prominent independent persons with no interests in the Company. The Board of Directors shall hold at least four meetings a year. In determining whether a Director may be considered as Any individual who accepts the position of Director or permanent independent, the Board of Directors refers among others to representative of a legal entity appointed as Director of the the criteria set forth in the AFEP/MEDEF Code of Corporate Company shall agree to attend Board of Directors’ and Shareholders’ Governance for Listed Companies. Meetings regularly. The number of Directors or permanent representatives of legal On the recommendation of the Board’s Nominations and entities from outside companies, in which the Chairman of the Compensation Committee, repeated unjustified absenteeism LVMH Board of Directors or any LVMH Director serving as LVMH by a Director may cause the Board of Directors to reconsider his Chief Executive Officer or Managing Director holds an office, shall appointment. be limited to four. So that members of the Board of Directors can fully serve the function entrusted to them, the Chief Executive Officer provides 3.2 Missions of the Board of Directors members with any and all information necessary for the performance of their duties. Apart from the selection of the Company’s management structure Decisions by the Board of Directors shall be made by simple and the appointment of the Chairman of the Board of Directors, majority vote and are adopted as a board. Chief Executive Officer and Group Managing Director(s), the principal missions of the Board of Directors are to: If they deem appropriate, independent Directors may meet without requiring the presence of the other members of the Board of -- ensure that the Company’s interests and assets are protected; Directors. -- define the broad strategic orientations of the Company and the Group and ensure that their implementation is monitored; For special or important issues, the Board of Directors may establish one or more ad hoc committees. -- approve the Company’s annual and half-yearly financial statements; Each member of the Board of Directors shall act in the interests and on behalf of all shareholders. -- review the essential characteristics of the internal control and risk management systems adopted and implemented by the Once each year, the Board of Directors evaluates its procedures and Company; informs shareholders as to its conclusions in a report presented to

Reference Document 2010 223 other information Governance the Shareholders’ Meeting. In addition, at least once every three 3.5 Compensation years, a fully documented review of the work of the Board, its organization and its procedures is conducted. The Shareholders’ Meeting shall set the total amount of Directors’ fees to be paid to the members of the Board of Directors. 3.4 Responsibilities This amount shall be distributed among all members of the Board of Directors and the Advisors, if any, on the recommendation of The members of the Board of Directors shall be required to the members of the Directors’ Nominations and Compensation familiarize themselves with the general and specific obligations Committee, taking into account their specific responsibilities of their office, and with all applicable laws and regulations. on the Board (e.g. chairman, vice-chairman, participation on committees created within the Board). The members of the Board of Directors shall be required to respect the confidentiality of any information of which they may become The settlement of a portion of these fees shall be contingent aware in the course of their duties concerning the Company or the upon attendance by Directors at the meetings of the Board of Group, until such information is made public by the Company. Directors and, where applicable, the Committee(s) of which they are members, calculated according to a formula to be determined The members of the Board of Directors agree not to trade in the by the Board of Directors, acting upon a proposal submitted by Company’s shares, either directly or indirectly, for their own the Nominations and Compensation Committee. account or on behalf of any third parties, based on information Exceptional compensation may be paid to some Directors for any disclosed to them in the course of their duties that is not known special assignment and on the basis of the leadership role they to the public. Moreover, members of the Board of Directors shall assume. The amount shall be determined by the Board of Directors refrain from engaging in any stock market transactions involving and reported to the Company’s Statutory Auditors. the Company’s shares and from any exercise of options for the duration of a period: 3.6 Scope of application -- beginning on the 30th calendar day preceding the publication of the Company’s annual or interim consolidated financial This Charter shall apply to all members of the Board of Directors statements and ending the day after said publication; and the Advisory Board. It must be given to each candidate for the position of Director and to each permanent representative of -- beginning on the 15th calendar day preceding the Company’s a legal entity before they take office. quarterly consolidated revenue announcement and ending the day after said announcement.

The Directors agree to: 4. Internal rules of the Performance Audit Committee -- warn the Chairman of the Board of Directors of any instance, even potential, of a conflict of interest between their duties and responsibilities to the Company and their private interests and/ A specialized committee responsible for auditing performance or other duties and responsibilities; operates within the Board of Directors, acting under the responsibility of the Board of Directors. -- abstain from voting on any issue that concerns them directly or indirectly; 4.1 Structure of the Committee -- inform the Chairman of the Board of Directors of any operation or agreement entered into with any LVMH Group company to The Performance Audit Committee shall be made up of at least three which they are a party; Directors appointed by the Board of Directors. At least two-thirds -- provide details to the Chairman of the Board of Directors of of the members shall be independent Directors. The majority of the any formal investigation, conviction in relation to fraudulent Committee’s members must have held a position as a Managing offenses, any official public incrimination and/or sanctions, any Director or a position involving equivalent responsibilities or disqualifications from acting as a member of an administrative, possess specific expertise in financial and accounting matters. management or supervisory body imposed by a court as well as The Board of Directors shall appoint a Chairman of the Committee of any bankruptcy, receivership or liquidation proceedings to from among its members. The maximum term of the Chairman of which they have been a party. the Committee is five years. The Chairman of the Board of Directors shall apprize the Neither the Chairman of the Board of Directors nor any Director Performance Audit Committee upon receiving any information performing the duties of Chief Executive Officer or Group of this type. Managing Director of LVMH may be a member of the Committee.

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A Director may not be appointed as a member of the Committee The Committee shall meet at least twice a year, without the if he or she comes from a company for which an LVMH Director Chairman of the Board of Directors, the Chief Executive Officer serves as a member of a committee comparable in function. and the Group Managing Director(s), before the Board of Directors’ meetings in which the agenda includes a review of the annual and 4.2 Role of the Committee half-yearly parent company and consolidated financial statements. If necessary, the Committee may be required to hold special The principal missions of the Committee are to: meetings, when an event occurs that may have a significant effect -- monitor the process for preparing financial information, on the parent company or consolidated financial statements. particularly the individual company and consolidated financial statements, and verify the quality of this information; Before each meeting, all pertinent documents and analyses relating to the different items on the agenda for the meeting are sent to -- monitor the statutory audit of the individual company and each member of the Committee. consolidated financial statements by the Statutory Auditors, whose conclusions and recommendations it examines; Any document submitted to the Committee in connection with -- ensure the existence, pertinence, application and effectiveness its responsibilities shall be considered confidential as long as it has of internal control and risk management systems, monitor not been made public by the Company. the ongoing effectiveness of these systems, and make The proceedings of the Committee are confidential and shall not recommendations to the Chief Executive Officer concerning be discussed outside the Board of Directors. the priorities and general guidelines for the work of the Internal Audit team; Decisions of the Committee shall be made by simple majority vote and shall be deemed to have been reached as a board. -- examine risks to the Statutory Auditors’ independence and, if necessary, identify safeguards to be put in place in order to The proceedings of each Committee meeting shall be recorded in minimize the potential of risks to compromise their independence, minutes of the meeting. issue an opinion on the fees paid to the Statutory Auditors, as well as those paid to the network to which they belong, by 4.4 Prerogatives of Committee members the Company and the companies it controls or is controlled by, whether in relation to their statutory audit responsibilities The Committee shall report on its work to the Board of Directors. or other related assignments, oversee the procedure for the It shall submit to the Board its findings, recommendations and selection of the Company’s Statutory Auditors, and make a suggestions. recommendation on the appointments to be submitted to the Shareholders’ Meeting in consideration of the results of this The Committee may request any and all accounting, legal procedure; or financial documents it deems necessary to carry out its responsibilities. -- analyze the exposure of the Company and the Group to risks, and in particular to those identified by the internal control and The Committee may call upon the Company’s staff members risk management systems, as well as material off–balance sheet responsible for preparing the financial statements, carrying out commitments of the Company and the Group; internal control procedures, conducting internal audits, applying -- review major agreements entered into by Group companies and risk management or cash management procedures, investigating agreements entered into by any Group company with a third- tax or legal matters, as well as the Statutory Auditors, to appear party company in which a Director of the LVMH parent company before it on any number of occasions to address issues in detail, is also a senior executive or principal shareholder. Significant without requiring the presence of the Chairman of the Board, operations within the scope of the provisions of Article L. 225- the Chief Executive Officer, or Group Managing Director(s) of 38 of the French Commercial Code require an opinion issued LVMH. These meetings may also take place in the absence of those by an independent expert appointed upon the proposal of the responsible for the accounting and financial functions. Performance Audit Committee; After having duly notified the Chairman of the Board of Directors, -- assess any instances of conflict of interest that may affect a the Committee may seek assistance from external experts if Director and recommend suitable measures to prevent or correct circumstances require. them. 4.5 Compensation of Committee members 4.3 Operating procedures of the Committee The Committee members and its Chairman may receive a special A Director’s agreement to serve on the Committee shall imply Director’s fee, the amount of which shall be determined by the that he will devote the necessary time and attention to his duties Board of Directors and charged to the total financial package on the Committee. allocated by the Shareholders’ Meeting.

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5. Internal rules of the Nominations and It adopts positions on any supplemental pension schemes Compensation Committee established by the Company in favor of its senior executives and issues recommendations on any retirement benefits that might be paid to a particular executive officer upon leaving A specialized committee responsible for the nomination and the Company. compensation of Directors operates within the Board of Directors, acting under the authority of the Board of Directors. The Committee shall issue an opinion on the compensation and benefits in kind granted to the Company’s Directors and Advisors by the Group or its subsidiaries, and on the fixed or variable, 5.1 Structure of the Committee immediate or deferred compensation and incentive plans for the The Board’s Nominations and Compensation Committee shall be Group’s senior executives. It also expresses its opinion on the made up of at least three Directors and/or Advisors. The majority of general policy for the allocation of options and bonus shares within its members shall be independent. Its members shall be appointed the Group. by the Board of Directors. The Committee shall prepare a draft report every year for the The Board of Directors shall appoint a Chairman of the Committee Shareholders’ Meeting, which it shall submit to the Board of from among its members. Directors, on the compensation of Company officers, any bonus shares granted to them in the previous year as well as any stock Neither the Chairman of the Board of Directors, nor any Director options granted or exercised by said officers in the same period. serving as Chief Executive Officer or Group Managing Director The report shall also list the ten employees of the Company that of LVMH, or who are compensated by any LVMH subsidiary, may received and exercised the most options. be a member of the Committee. A Director may not be appointed as a member of the Committee 5.3 Operating procedures of the Committee if he or she comes from a company for which an LVMH Director serves as a member of a committee comparable in function. A Director’s agreement to serve on the Committee implies that he will devote the necessary time and energy to his duties on the Committee. 5.2 Role of the Committee The Committee shall meet whenever necessary, either at the After undertaking its own review, the Committee is responsible for initiative of the Chairman of the Board of Directors, or the Director issuing opinions on applications and renewals for the positions of serving as Chief Executive Officer, or of two Committee members. Director and Advisor, making certain that the Company’s Board of Directors includes prominent independent persons outside the The proceedings of the Committee are confidential and shall not Company. In particular, it discusses the independence of Board be discussed outside the Board of Directors. members with respect to applicable criteria. Decisions by the Committee shall be made by simple majority vote The Committee’s opinion may also be sought by the Chairman and shall be deemed to have been reached as a board. of the Board of Directors or by any Directors serving as Chief Executive Officer or Managing Director, on potential members 5.4 Prerogatives of the Committee of the Group’s Executive Committee or candidates for senior management positions at the Group’s major subsidiaries. It is the The Committee shall report on its work to the Board of Directors. consultative body responsible for defining the measures to be taken It shall submit to the Board its findings, recommendations and in the event that such an office falls prematurely vacant. suggestions. After review, the Committee shall make recommendations on the Members of the Committee may request any and all available distribution of directors’ fees paid by the Company and prepares a information that they deem necessary for the purposes of carrying summary table of directors’ fees effectively paid to each Director. out their responsibilities. It shall make recommendations on the compensation, benefits in Any unfavorable opinion issued by the Committee on any proposal kind, bonus shares and share purchase and subscription options must be substantiated. granted to the Company’s Chairman of the Board of Directors, Chief Executive Officer and Group Managing Director(s). In this 5.5 Compensation of Committee members capacity, it issues recommendations regarding the qualitative and quantitative criteria on the basis of which the variable portion of The members and Chairman of the Committee may receive a compensation for executive officers shall be determined as well as special director’s fee, the amount of which shall be determined by the performance conditions applicable to the exercise of options the Board of Directors and charged to the total financial package and the definitive allocation of bonus shares. allocated by the Shareholders’ Meeting.

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6. Bylaws Article 4 - Registered office

The registered office of the Company is at: Paris - 75008, 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 anonyme”, is governed by the provisions of the French Commercial of the Board of Directors subject to the approval of said decision Code as well as by the present Bylaws. by the next Ordinary Shareholders’ Meeting, and to any other place pursuant to a resolution of the Extraordinary Shareholders’ Article 2 - Corporate purpose Meeting.

1. Any taking of interests, through a direct or indirect equity Article 5 - Duration investment, a contribution, merger, spin-off, or joint-venture with any company or group existing or to be formed, operating any The Company, which came into existence on January 1, 1923, shall commercial, industrial, agricultural, personal property, real estate end on December 31, 2021, except in the event of early dissolution or financial operations, and among others: or extension as provided by these Bylaws. -- trade in champagne and other wines, cognac and other spirits and, more generally, any food or beverage product; Article 6 - Capital -- trade in all pharmaceutical products, perfumes and cosmetics and, more generally, products related to hygiene, beauty and 1. The share capital of the Company is one hundred and forty-six skincare; million eight hundred and eighty-nine thousand eight hundred and fifty-six euros and twenty cents (146,889,856.20), divided into -- the manufacture, sale and promotion of travel articles, luggage, four hundred and eighty-nine million six hundred and thirty-two bags, leather goods, clothing articles, accessories, as well as any thousand eight hundred and fifty-four (489,632,854) fully paid-up high quality and branded articles or products; shares with a par value of 0.30 euros each. -- the operation of vineyards, horticultural and arboricultural estates, as well as the development of any related biotechnological 287,232 shares of FRF 50 were issued further to the contribution process; in kind, valued at FRF 34,676,410, completed upon the merger with . -- the operation of any real estate; 772,877 shares of FRF 50 were issued further to the contribution -- the development of any trademark, signature, model, design and, more generally, any industrial, literary or artistic property right. by the shareholders of Jas Hennessy & Co. of 772,877 shares of said company, valued at FRF 407,306,179. 2. More generally, to undertake directly any commercial, industrial, agricultural, viticultural operations, or any operation 2,989,110 shares of FRF 50 were issued further to the contribution relating to personal or real property, movable or immovable in kind, valued at FRF 1,670,164,511, completed upon the merger property or financial, management or service operation in any of with Louis Vuitton. the fields of activities described in paragraph 1 above. 1,343,150 shares were issued further to the contribution made by BM Holding, of 1,961,048 shares of Le Bon Marché, Maison Article 3 - Corporate name Aristide Boucicaut, valued at FRF 1,700,000,000.

The name of the Company is: 2. The share capital may be increased by a resolution of the Extraordinary Shareholders’ Meeting. However, when the increase LVMH MOËT HENNESSY - LOUIS VUITTON of the capital is completed by way of capitalization of reserves, profits or issue premium, the Shareholders’ Meeting shall vote All deeds and documents originating from the Company subject to the quorum and majority conditions of the Ordinary and addressed to third parties, in particular letters, invoices, Shareholders’ Meetings. advertisements and publications of all kinds, must indicate this name immediately preceded or followed by the words “Société 3. The share capital may, by resolution of the Extraordinary Anonyme” or the initials “SA” which should appear legibly and Shareholders’ Meeting, be amortized by means of equal repayment the disclosure of the amount of the share capital, together with the for each share by use of profits or reserves other than the legal name of the Register of Commerce and Companies with which the reserve, without such amortization causing the reduction of the Company is registered and the number under which it is registered. capital.

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4. The share capital may also be reduced by resolution of the Each time it shall be necessary to hold a certain number of shares Extraordinary Shareholders’ Meeting either by reducing the in order to exercise a right, it will be the responsibility of the nominal value or the number of the shares. shareholder(s) having less than the required number to take the necessary actions to form a group with a sufficient number of Article 7 - Payment for the shares shares.

The amounts to be paid for the shares to be subscribed in cash Article 9 - Form and transfer of the shares pursuant to an increase of the capital are payable as provided by the Extraordinary Shareholders’ Meeting. Fully paid up shares are either in the registered or in the bearer form, as the shareholder may decide, subject however to the Upon subscription the initial payment is of at least one fourth of statutory provisions relating to the shares held by certain persons. the nominal value of the shares. The issue premium, if any, must be paid in full on subscription. The shares are registered in the accounts as provided by law and regulations in force. 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 However, certificates, or any other document, representing the later than five years from the date at which the increase in capital shares may be issued when and as provided by law. was completed. The ownership of the shares in the registered form is evidenced by Calls for funds shall be notified to the shareholders eight days their registration in registered accounts. before the time fixed for each payment, either by registered letter When the owner of the shares is not a French resident within with acknowledgement of receipt or by a notice inserted in a legal the meaning applied Article 102 of the French Civil Code, any gazette published where the registered office is located. intermediary may be registered on behalf of such owner. Such The sums payable for the unpaid part of the shares are subject to registration may be made in the form of a joint account or several a daily interest charge at a rate of 5% per annum, without need of individual accounts, each corresponding to one owner. Court action, as from the date at which they fell due. At the time such account is opened through either the issuing When the shares are not fully paid up, upon issuance, they must be Company or the financial intermediary authorized as account in the registered form and so remain until they are fully paid up. holder, the registered intermediary shall be required to declare his capacity as intermediary holding shares on behalf of another party. Article 8 - Rights and obligations attached to the shares The shares registered in accounts are freely transferable by transfer from one account to another. The rights and obligations attached to a share follow the share to any transferee to whom it may be transferred and the transfer Prior approval of the transferee is required only for partly paid includes all the payable and unpaid dividends and dividends up shares. payable, as well as, as the case may be, the corresponding share in All costs resulting from the transfer shall be borne by the transferee. reserves and provisions. Shares with payments in arrears may not be transferred. The ownership of a share shall imply ipso facto the acceptance of the present Bylaws and of the decisions of the Shareholders’ Meetings. Article 10 - Securities In addition to the right to vote which is attached by law to the The Company may issue any security authorized by law. shares, each of them carries a right to a share of corporate assets, of Certificates, or any other document, representing securities may profits, and of any liquidation surplus, proportional to the number be issued as and when provided by law. and nominal value of the existing shares.

As the case may be, and subject to any statutory provision, all Article 11 - Board of Directors tax exemptions or charges as well as all taxation which may be borne by the Company shall be taken into account prior to any 1. Subject to the exceptions provided by law, the Board of Directors reimbursement either within the course of the life of the Company is composed of three to eighteen members, who may be individuals or upon its liquidation so that, according to their nominal value, or legal entities appointed by the Ordinary Shareholders’ Meeting. all the existing shares of the same class shall receive the same net A legal entity must, at the time of its appointment, designate an amount irrespective of their origin or their date of issuance. individual, who will be its permanent representative on the Board The shareholders shall be responsible for any negative equity of the of Directors. The term of office of a permanent representative is the Company up to the nominal value of the shares they hold. same as the legal entity that he represents. When the legal entity

228 Reference Document 2010 other information Governance dismisses its permanent representative, it must at the same time The Director appointed to replace another Director shall remain provide for its replacement. The same applies in case of death or in office for the remaining term of office of its predecessor only. resignation of the permanent representative. 5. A salaried employee of the Company may be appointed as a 2. Each member of the Board of Directors must during its term Director provided that his employment contract antedates his of office own at least five hundred (500) shares of the Company. appointment and corresponds to a position actually held. In such case, he shall not lose the benefit of his employment contract. The If, at the time of its appointment, a member of the Board of number of Directors bound to the Company by an employment Directors does not own the required number of shares or if, during contract may not exceed one-third of the Directors in office. its term of office, it ceases to be the owner thereof, it shall dispose of a period of six 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 Directors 3. Nobody being more than seventy years old shall be appointed 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 The Board shall also determine the compensation to be paid to number, of the Directors in office. Whenever this limit is exceeded, the Chairman. the term in office of the oldest appointed member shall be deemed 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 have expired at the close of the Ordinary Shareholders’ Meeting 4. Directors are appointed for a term of three years. The duties of a convened to approve the financial statements of the fiscal year Director shall terminate at the close of the Ordinary Shareholders’ during which the limit was reached. Subject to this provision, the Meeting convened to approve the accounts of the preceding fiscal Chairman of the Board may always be re-elected. year and held in the year during which the term of office of said Director comes to an end. The Board may always elect one or several Vice-Chairman(men). It shall determine their term of office which cannot exceed that of However, in order to allow a renewal of the terms which is as their respective office as Director. egalitarian as possible and in any case complete for each period of three years, the Board of Directors will have the option to The officers of the meeting are the Chairman, the Vice- determine the order of retirement of the Directors by the impartial Chairman(men) and the Secretary. selection in a Board Meeting of one-third of the Directors each The Secretary may be chosen from outside the Directors or the year. Once the rotation has been established, renewals will take shareholders. The Board determines its term of office. The Secretary place according to seniority. 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, 1. The Board, convened by its Chairman, meets as often as required the Board of Directors may make provisional appointments by the interests of the Company. between two Shareholders’ Meetings. Notice is served in the form of a letter sent to each Director, at least Appointments made by the Board of Directors pursuant to the eight days prior to the meeting; it shall mention the agenda of the above paragraph are submitted to the ratification of the next meeting as set by the person(s) convening the meeting. Ordinary Shareholders’ Meeting. Should the Meeting of the However, the Board may meet without notice upon verbal notice shareholders fail to ratify these provisional appointments, this and the agenda may be set at the opening of the meeting: shall not affect the validity of prior resolutions and acts of the Board of Directors. -- all Directors in office are present or represented; or -- when it is convened by the Chairman during a Shareholders’ When the number of members of the Board of Directors falls Meeting. below the statutory minimum, the remaining Directors must 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

Reference Document 2010 229 other information Governance members of the Board, if the Board has not met for more than two Article 15 - Powers of the Chairman of the Board of months. In such case, they shall indicate the agenda of the meeting. Directors The meetings of the Board are held at the registered office or at 1. The Chairman of the Board of Directors chairs the meetings of any place, in France or abroad. the Board, and organizes and directs its work, for which he reports 2. Any Director may give to another Director, by letter, cable, to the Shareholders’ Meeting. He ensures the proper operation of telex, or fax, a proxy to another Director to be represented at a the corporate bodies and verifies, in particular, that the Directors meeting of the Board. However, each Director may only dispose are capable of fulfilling their assignments. of one proxy during the meeting. 2. In case of temporary disability or death of the Chairman, the The Board may validly act only if at least one-half of its members Board may temporarily delegate a Director to perform the duties are present. of the Chairman. Directors who participate in Board meetings by means of video­ In case of temporary disability this delegation is granted for a conferencing or other telecommunication methods under the limited duration; it is renewable. In case of death it is granted conditions defined by the internal rules and regulations of the until the election of the new Chairman. Board of Directors shall be deemed to be present for the purposes of calculating the quorum and majority. However, actual presence Article 16 - General Management or representation shall be necessary for any Board resolutions relating to the preparation of the annual financial statements 1. Choice between the two methods of General Management and consolidated financial statements, and to the drafting of the Company’s General Management is performed, under his Management report and the report on the Group’s Management. responsibility, either by the Chairman of the Board of Directors, Decisions are made by a majority of votes of the members present or by another individual appointed by the Board of Directors or represented, each Director being entitled to one vote for himself and bearing the title of Chief Executive Officer, depending upon and one for the Director he represents. In the event of a tie vote, the decision of the Board of Directors choosing between the two the Chairman’s vote is the deciding vote. methods of exercising the General Management function. It shall inform the shareholders thereof in accordance with the regulatory 3. An attendance register shall be kept and signed by all the conditions. Directors attending each meeting of the Board of Directors. When the Company’s General Management is assumed by the 4. To be valid, copies or abstracts of the minutes of the meetings Chairman of the Board of Directors, the following provisions of the Board of Directors shall be certified by the Chairman of the relating to the Chief Executive Officer shall apply to him. Board of Directors, the Chief Executive Officer, the Secretary, the Director temporarily delegated to perform the duties of Chairman 2. Chief Executive Officer or by a representative duly authorized to that effect. The Chief Executive Officer may or may not be chosen among the Directors. The Board sets his term of office as well as his Article 14 - Powers of the Board of Directors compensation. The age limit for eligibility to perform the duties of Chief Executive Officer is seventy-five years. Should the Chief The Board of Directors sets guidelines for the Company’s activities Executive Officer reach this age limit during his term of office, his and shall ensure their implementation. Subject to the powers appointment shall be deemed to have expired at the close of the expressly granted to the Shareholders’ Meetings and within the Ordinary Shareholders’ Meeting convened to approve the financial limits of the corporate purpose, it addresses any issue relating to statements of the fiscal year during which the limit was reached. the Company’s proper operation and settles the affairs concerning it through its resolutions. The Chief Executive Officer may be dismissed at any time by the Board of Directors. If the dismissal is decided without just cause, In its relations with third parties, the Company is bound even it may give rise to damages, unless the Chief Executive Officer by acts of the Board of Directors falling outside the scope of the assumes the duties of Chairman of the Board of Directors. corporate purpose, unless it demonstrates that the third party knew that the act exceeded such purpose or that it could not have ignored The Chief Executive Officer is vested with the most extensive it given the circumstances, it being specified that mere publication powers to act under any circumstances on behalf of the Company. of the Bylaws is not sufficient proof thereof. He exercises such powers within the limits of the corporate purpose, and subject to the powers expressly granted by law to The Board of Directors performs such monitoring and verifications the Shareholders’ Meeting and to the Board of Directors. as it deems appropriate. Each Director receives all necessary information for completing his assignment and may request any He shall represent the Company in its relations with third parties. documents he deems useful. The Company is bound even by acts of the Chief Executive Officer

230 Reference Document 2010 other information Governance falling outside the scope of the corporate purpose, unless it Article 18 - Agreements subject to authorization demonstrates that the third party knew that the act exceeded such purpose or could not have ignored it given the circumstances, it Any sureties, endorsements and guarantees granted by the being specified that mere publication of the Bylaws is not sufficient Company must be authorized by the Board of Directors as provided to establish such proof. by law. The provisions of the Bylaws or decisions of the Board of Directors Any agreement to be entered into between the Company and limiting the powers of the Chief Executive Officer are not binding one of its Directors or its Chief Executive Officer or one of its on third parties. Managing Directors, whether directly or indirectly or through an intermediary must be submitted to the prior authorization of the 3. Group Managing Directors Board of Directors under the conditions provided by law. Upon the proposal of the Chief Executive Officer, the Board of Directors may appoint one or more individuals responsible for Such prior authorization is also required for agreements between assisting the Chief Executive Officer, with the title of Group the Company and another enterprise, should one of the Directors Managing Director, for whom it shall set the compensation. or the Chief Executive Officer or one of the Group Managing Directors of the Company be the or an owner, partner with The number of Group Managing Directors may not exceed five. unlimited liability, company manager, director, chief executive Group Managing Directors may be dismissed at any time by officer, member of the Executive Board or Supervisory Board, or the Board of Directors, upon the proposal of the Chief Executive in a general sense top-ranking executive of this other enterprise. Officer. If the dismissal is decided without just cause, it may give The same shall hold for any agreement entered into with a rise to damages. shareholder holding a proportion of voting rights greater than When the Chief Executive Officer ceases to exercise his duties or is 10% or with any company which controls a company holding prevented from doing so, the Group Managing Directors remain more than 10% of the Company’s share capital. in office with the same powers until the appointment of the new The above provisions shall not apply to agreements relating Chief Executive Officer, unless resolved otherwise by the Board. to current operations entered into under normal terms. Such In agreement with the Chief Executive Officer, the Board of agreements are nevertheless made known to the Chairman of Directors sets the scope and duration of the powers granted to the Board of Directors by the interested party unless they are Group Managing Directors. With regard to third parties, they of no significance to any party, given their subject matter or shall have the same powers as the Chief Executive Officer. their financial implications. A list of such agreements and their respective subjects is sent by the Chairman to the members of the The age limit for eligibility to perform the duties of Managing Board of Directors and to the Statutory Auditors. Director is sixty-five years. Should a Group Managing Director reach this age limit during his term of office, his appointment shall be deemed to have expired at the close of the Ordinary Shareholders’ Article 19 - Prohibited agreements Meeting convened to approve the financial statements of the fiscal year during which the limit was reached. Directors, other than legal entities, are forbidden to contract loans from the Company in any form whatsoever, to secure an overdraft Article 17 - Delegation of powers from it, on current account or otherwise, or to have the Company guarantee or secure their undertakings toward third parties. The Board of Directors may grant one or more Directors, or third parties, whether shareholders or not, with the ability to replace The same prohibition applies to the Chief Executive Officer, the it, any authority, assignments and special offices for one or more Group Managing Directors and to permanent representatives specific purposes. of legal entities which are Directors. It also applies to spouses, ascendants and descendants of the persons referred to in this article It may resolve to create committees responsible for studying as well as to all persons acting as intermediaries. such issues as it or the Chief Executive Officer submit thereto for examination. Such committees shall perform their duties at the discretion of the Board, which sets their composition and Article 20 - Remuneration of the Directors responsibilities, as well as the compensation of their members, if any. 1. The Ordinary Shareholders’ Meeting may allow to the Directors The Chief Executive Officer and the Group Managing Directors in remuneration for their services a fixed sum as attendance fees, may, at their discretion, consent to partial delegations of authority the amount of which is to be included in the operating expenses to third parties. of the Company.

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The Board shall divide the amount of these attendance fees among One or more supplementary deputy Statutory Auditors, who may its members as it deems fit. be called to replace the regular Statutory Auditors in the event of death, disability, resignation or refusal to perform their duties, are 2. The Board may also authorize the reimbursement of the travel appointed by the Ordinary Shareholders’ Meeting. fares and expenses and of the expenses incurred by the Directors in the interest of the Company. Article 23 - Shareholders’ Meetings 3. The Board may allow special payments to Directors for projects assigned or delegated to them pursuant to the provisions 1. Shareholders’ Meetings shall be convened and held as provided of Article 17 of these Bylaws. These payments, to be included in by law. The agenda of the Meeting shall be mentioned on the the operating expenses of the Company, shall be subject to the convening notice and letters; it is set by the corporate body provisions of Article 18 of these Bylaws. convening the Meeting. 4. Apart from the amounts provided for under the three When the Shareholders’ Meeting has not been able to transact paragraphs above as well as from the salaries of the Directors business validly due to a lack of quorum, a second Meeting or, being employees of the Company, and from the compensation, as the case may be, a prorogated second Meeting, is convened in whether fixed or proportional, to be paid to the Chairman, or the the same way at least six days prior to the Meeting. Notice and Director temporarily delegated in the duties of Chairman, the convening letters relating to such second Meeting reproduce the Chief Executive Officer and, as applicable, the Group Managing date and agenda of the first Meeting. Directors, no other consideration, whether permanent or not, may The Meetings are held at the registered office or at any other place be paid to the Directors. mentioned in the convening notice.

Article 21 - Advisory Board The right to attend and vote at Shareholders’ Meetings is subject to the registration of the shareholder in the Company’s share register. The Shareholders’ Meeting may, upon proposal of the Board of A shareholder is entitled to attend and vote at any Meeting Directors, appoint Advisors the number of whom shall not exceed provided that the shares held are registered in the name of the nine. shareholder or intermediary authorized to act on his or her behalf In case of death or resignation of one or more Advisors, the Board as of the fourth business day preceding the Meeting at midnight, of Directors may make provisional appointments subject to their Paris time, either in the accounts of registered shares maintained ratification by the next Ordinary Shareholders’ Meeting. by the Company or in the accounts of bearer shares maintained by the officially authorized financial intermediary. The recording or The Advisors, who are chosen among the shareholders on the registration of bearer shares is certified by a statement delivered strength of their skills, shall constitute an Advisory Board. by the financial intermediary authorized as account holder. The Advisors are appointed for a term of three years ending at the A shareholder can always be represented in a valid manner close of the Ordinary Shareholders’ Meeting convened to approve at a Shareholders’ Meeting by his or her spouse or by another the accounts of the preceding fiscal year and held in the year during shareholder. which their term of office comes to an end. Shareholders may vote by mail at any Meeting in accordance with The Advisors are convened to the meetings of the Board of Directors applicable laws and regulations. To be taken into account, the and take part to the deliberations with a consultative vote. Their voting form must have been received by the Company at least absence cannot however affect the validity of such deliberations. three days prior to the date of the Meeting. The Board of Directors may allocate fees to the Advisors the amount Shareholders may address their proxy form and/or their voting of which will be set off from the attendance fees allocated by the form for any Meeting, in accordance with applicable laws and Shareholders’ Meeting to the members of the Board of Directors. regulations, either by mail or, if decided by the Board of Directors, by electronic transmission. Pursuant to the provisions of Article 22 - Statutory Auditors Article 1316-4, paragraph 2 of the French Civil Code, in the event of the use of an electronically submitted form, the shareholder’s The Company shall be audited, as provided by law, by one or more signature shall make use of a reliable identification process that Statutory Auditors legally entitled to be elected as such. When the ensures the link with the document to which it is attached. conditions provided by law are met, the Company must appoint at least two Statutory Auditors. A shareholder having voted either by mail or by electronic transmission, having sent a proxy or having requested an Each Statutory Auditor is appointed by the Ordinary Shareholders’ admittance card or certificate stating the ownership of shares may Meeting. not select another means of taking part in the Meeting.

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In accordance with the conditions set by applicable legal and This double voting right shall automatically lapse in the case of regulatory provisions, and pursuant to a decision of the Board of registered shares being converted into bearer shares or conveyed Directors, Shareholders’ Meetings may also be held by means of in property. However, any transfer by right of inheritance, by way video conference or through the use of any telecommunications of liquidation of community property between spouses or deed of media allowing the identification of shareholders. gift inter vivos to the benefit of a spouse or an heir shall neither cause the acquired right to be lost nor interrupt the abovementioned Any intermediary who meets the requirements set forth in three-year qualifying period. This is also the case for any transfer paragraphs 7 and 8 of Article L. 228-1 of the French Commercial due to a merger or spin-off of a shareholding company. Code may, pursuant to a general securities management agreement, transmit to a Shareholders’ Meeting the vote or proxy of a Votes shall be expressed either by raised hands or by standing up shareholder, as defined in paragraph 7 of that same article. or by a roll-call as decided by the officers of the Meeting. Before transmitting any proxies or votes to a Shareholders’ Meeting, However a secret ballot may be decided: the intermediary shall be required, at the request of the issuing -- either by the Board of Directors; corporation or its proxy, to provide a list of the non-resident owners -- or by the shareholders representing at least one-fourth of the of the shares to which such voting rights are attached. Such list capital if their request was made in writing and addressed to the shall be supplied as provided by applicable regulations. Board of Directors or the corporate body having convened the A vote or proxy issued by an intermediary who either is not declared Meeting, two days at least prior to the Meeting. as such, or does not disclose the identity of the shareholders, may 3. The Ordinary Shareholders’ Meeting makes decisions which not be counted. do not amend the Bylaws. When a Works Council exists within the Company, two of its It is convened at least once a year, within six months from the end members, appointed by the Council, may attend Shareholders’ of each fiscal year to vote on the accounts of that fiscal year. Meetings. At their request, their opinions must be heard on the occasion of any vote requiring the unanimous approval of In order to pass valid resolutions, the Ordinary Shareholders’ shareholders. Meeting, convened upon first notice, must consist of shareholders, present or represented, holding at least one-fifth of total voting A Shareholders’ Meeting is chaired by the Chairman of the Board shares. The deliberations of an Ordinary Shareholders’ Meeting, of Directors or, in his absence, by the oldest Vice-Chairman of the convened upon second notice, shall be valid regardless of the Board of Directors or, in the absence of the latter, by a Member of number of shareholders present or represented. the Board of Directors appointed by the Board for that purpose. If no chairman has been appointed, the Meeting elects its Chairman. The resolutions of the Ordinary Shareholders’ Meeting are approved by a majority of the votes of the shareholders present or represented. The two Members of the Meeting present, having the greatest number of votes, and accepting that role, are appointed as 4. Only the Extraordinary Shareholders’ Meeting may amend the Scrutinizers. The Officers of the Meeting appoint a Secretary, who Bylaws. However, in no event can it increase the duties of the may but need not be a shareholder. shareholders except in the case of transactions resulting from a duly completed regrouping of shares. An attendance sheet is drawn up, in accordance with the law. As to the Extraordinary Shareholders’ Meeting, the quorum 2. The voting right attached to a share is proportional to the share necessary, upon first convening notice, is one-fourth of the voting of the capital it represents. When having the same nominal value, shares, and one-fifth upon second convening notice or in the case each share, either in capital or redeemed (“de jouissance”), gives of prorogation of the second meeting. right to one vote. The resolutions of the Extraordinary Shareholders’ Meeting shall be However a voting right equal to twice the voting right attached carried out at a two-third majority of the votes of the shareholders to other shares, with respect to the portion of the share capital that present or represented. they represent, is granted: 5. The copies or abstracts of the minutes of the Meetings shall be -- to all fully paid up registered shares for which evidence of validly certified by the Chairman of the Board of Directors, the 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 forward or of issue premiums due to existing shares for which 6. During constitutive Extraordinary Shareholders’ Meetings, it was entitled to benefit from this right. which are those called to approve contributions in kind or benefits

Reference Document 2010 233 other information Governance in kind, the contributor or the beneficiary cannot vote either for body, or directly, to the persons appearing on that list and who himself or as a proxy. might be, in the Company’s opinion, registered on behalf of third parties. 7. When there are several classes of shares, the rights attached to the shares of one class cannot be modified without a proper vote of When they act as intermediaries, such persons shall be required to an Extraordinary Shareholders’ Meeting open to all shareholders disclose the identity of the owners of such shares. The information and without a proper vote of a Special Shareholders’ Meeting shall be provided directly to the authorized financial intermediary exclusively comprising owners of the shares of the class concerned. holding the account, who shall, in turn, be responsible for As to the Special Shareholders’ Meeting, the quorum necessary, communicating it to the issuing Company or the aforementioned upon first convening notice, is one-third of the voting shares, body, as applicable. and one-fifth upon second convening notice or in the case of prorogation of the second Meeting. Article 26 - Fiscal year The resolutions of the Special Shareholders’ Meeting shall be Each fiscal year has a duration of one year beginning on January 1 carried by a two-thirds majority vote of the shareholders present and ending on December 31. or represented. Article 27 - Annual accounts Article 24 - Information on shareholdings The Board of Directors shall keep regular accounts of the corporate Any individual or legal entity who becomes the owner of a fraction operations and shall draw up the annual accounts in conformity of capital of at least one per cent shall notify the total number of with the law and the commercial practice. shares it holds to the Company. Such notice should be given within fifteen days from the date at which this percentage is reached. Article 28 - Appropriation of results and allocation of The same obligation applies whenever the portion of capital held profits increases by at least one per cent. However, it shall cease to be applicable when the portion of capital held is equal to or greater From the profit for a fiscal year, minus prior losses, if any, an than 60% of the share capital. amount equal to at least 5% must be deducted and allocated to the formation of a “legal reserve” fund. This deduction is no longer In case of non-compliance with the above obligation and upon required when the amount of the legal reserve has reached one- the request of one or several shareholders holding at least 5% tenth of the share capital of the Company. of the capital and recorded in the minutes of the Shareholders’ Meeting, the shares in excess of the percentage to be declared shall Distributable earnings consist of the net profit of the fiscal year, be deprived of their right to vote at any Meeting held until the minus prior losses and the deduction described in the previous expiration of a period of three months as from the date at which paragraph, plus profits carried forward. proper notification pursuant to the above paragraph is eventually From these earnings, and subject to the decisions of the Shareholders’ made. Meeting, an initial deduction is made of the amount required to distribute to shareholders a preliminary dividend, equal to five Article 25 - Identification of the holders of securities percent (5%) of the amount paid up on the shares that has not been repaid to shareholders by the Company. The Company may, at any time, in accordance with the applicable laws and regulations, request the central depositary of financial Dividends do not accumulate from one fiscal year to the next. instruments to give it the name, nationality and address of natural From the remaining amount, the Shareholders’ Meeting may persons or legal entities holding securities conferring an immediate deduct the amounts it deems appropriate to allocate to all optional, or deferred right to vote at its own Shareholders’ Meetings, as ordinary or special reserve funds, or retain, in the proportions it well as the number of securities held by such natural persons or shall determine. legal entities and the restrictions, if any, which may exist upon the securities. The balance, if any, shall be divided among shareholders as a superdividend. In light of the list sent by the aforementioned body, the Company shall be entitled to request information concerning the owners In addition, the Shareholders’ Meeting may decide to distribute of the shares listed above, either through the intervention of that sums taken from the reserves, either to provide or supplement

234 Reference Document 2010 other information Governance a dividend, or as an exceptional distribution. In this case, the Article 31 - Loss of one-half of the share capital of resolution shall expressly indicate the reserve items against which the Company these amounts are charged. However, dividends shall be paid first from the distributable earnings for the fiscal year. If, as a consequence of losses showed by the Company’s accounts, the equity of the Company is reduced to below one-half of the share When a balance sheet, drawn up during, or at the end of the capital of the Company, the Board of Directors must, within four fiscal year, and certified by the Statutory Auditor, shows that months from the approval of the accounts showing such loss, convene the Company, since the close of the preceding fiscal year, after an Extraordinary Shareholders’ Meeting in order to decide whether having made the necessary depreciations and provisions and after the Company ought to be dissolved before its statutory term. deduction of the prior losses, if any, as well as of the amounts which are to be allocated to the reserves provided by law or by the Bylaws, If the dissolution is not resolved, the share capital must, at the and taking into account profits carried forward, if any, has available latest by the end of the second fiscal year following the fiscal year earnings, the Board of Directors may resolve the distribution of during which the losses were established and subject to the legal interim dividends prior to the approval of the accounts of the fiscal provisions concerning the minimum share capital of “Sociétés year, and may determine the amount thereof and the date of such anonymes”, be reduced by an amount at least equal to the losses distribution. The amount of such interim dividends cannot exceed which could not be charged to reserves, if during that period the the amount of the profits as defined in this paragraph. net assets have not been replenished to an amount at least equal to one half of the share capital. Any dividend distributed in violation of the foregoing rules is a fictitious dividend. In the absence of Shareholders’ Meeting or in the case where the 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 carried forward. If the balance is negative, it is carried forward Article 32 - Effect of dissolution again to be charged against the profits of subsequent fiscal years The Company is deemed to be in liquidation as soon as it is until it is extinguished. dissolved 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 The dividend payment terms are defined by the Shareholders’ shall retain the same powers as it did exercise during the life of Meeting or, if the Meeting fails to do so, by the Board of Directors. the Company. However, dividends must be paid within a maximum period of The shares shall remain transferable until the completion of the nine months after the fiscal year-end, unless such period is extended liquidation proceedings. by Court order. The dissolution of the Company is only valid vis-à-vis third parties No repayment of the dividend may be demanded from shareholders, as from the date at which it has been published at the Register of unless the following two conditions are met: Commerce and Companies. -- the distribution was made in violation of legal requirements; -- the Company has established that the beneficiaries were aware Article 33 - Appointment of liquidators - Powers of the irregularity of the distribution at the time it was made, Upon the expiration of the term of existence of the Company or could not ignore it given the circumstances. or in the case of its premature dissolution, the Shareholders’ Any recovery of dividends meeting the above conditions must be Meeting shall decide the methods of liquidation and appoint one carried out within the time period provided by law. or several liquidators whose powers it will determine, and who will exercise their duties according to the law. The appointment Dividends not claimed within five years after the date at which of the liquidator(s) terminates the office of the Directors, as well they became payable shall be void. as that of the Advisors, if any.

Article 30 - Premature dissolution An Extraordinary Shareholders’ Meeting may at any time declare the premature dissolution of the Company.

Reference Document 2010 235 other information Governance

Article 34 - Liquidation - Termination Article 35 - Litigation After payment of the liabilities, the remaining assets shall be used Any dispute between the Company and any of its shareholders first for the payment to the shareholders of the amount paid for arising directly and/or indirectly from the present Bylaws shall their shares and not amortized. be settled by the Commercial Court of Paris. The balance, if any, shall be divided among all the shares. The shareholders are convened at the end of the liquidation in order to decide on the final accounts, to discharge the liquidators from liability for their acts of management and the performance of their office, and to formally acknowledge the termination of the liquidation process. The termination of the liquidation process shall be published as provided by law.

236 Reference Document 2010 Other Information

General Information Regarding the Parent Company; stock Market Information

Page

1. Information regarding the Parent Company 238 1.1 Role of the parent company within the Group 238 1.2 General information 238 1.3 Additional information 238

2. Information regarding the Capital 239 2.1 Share capital 239 2.2 Authorized share capital 239 2.3 Status of delegations and authorizations granted to the Board of Directors 239 2.4 Shareholders’ identification 239 2.5 Non-capital securities 239 2.6 Securities giving access to the Company’s capital 239 2.7 Three-year summary of changes in the parent company’s share capital 240

3. Analysis of share capital and voting rights 240 3.1 Share ownership of the Company 240 3.2 Changes in share ownership during the last three fiscal years 241 3.3 Pledges of pure registered shares by main shareholders 241 3.4 Natural persons or legal entities that may exercise control over the Company 242

4. Market for financial instruments issued by LVMH 242 4.1 Market for LVMH shares 242 4.2 Share repurchase program 243 4.3 LVMH bond markets 243 4.4 Dividend 244 4.5 Change in share capital 244 4.6 Performance per share 244

Reference Document 2010 237 other information General information regarding the parent company; stock market information

General Information Regarding the Parent Company; stock Market Information

1. Information regarding the Parent Company

1.1 Role of the parent company within the Group Date of incorporation - Term (Article 5 of the Bylaws): LVMH was incorporated on January 1, 1923 for a term of 99 years, which LVMH manages and coordinates the operational activities of all expires on December 31, 2021, unless the Company is dissolved its subsidiaries, and offers them various management assistance early or extended by a resolution of the Extraordinary Shareholders’ services, particularly in legal, financial, tax and insurance matters. Meeting. All these services are invoiced to the subsidiaries in question, based Location where documents concerning the Company may on the real cost price or normal market conditions, depending be consulted: the Bylaws, financial statements and reports, and on the type of service. For fiscal year 2010, LVMH billed its the minutes of Shareholders’ Meetings may be consulted at the subsidiaries 106.3 million euros for management assistance. registered office at the address indicated above. LVMH also manages the Group’s long term financial debt and the associated interest rate risk, in addition to foreign exchange 1.3 Additional information transactions for proprietary foreign exchange transactions. The complete text of the Bylaws is presented in the “Corporate Until October 2009, LVMH pooled the euro-denominated cash Governance” chapter of the reference document. resources and financing requirements of its French subsidiaries, as Corporate purpose (Article 2 of the Bylaws): any taking of interest well as certain European subsidiaries. LVMH also centralized the within any company or grouping of entities primarily engaged in foreign currency hedges for these subsidiaries, which it covered trade in champagne and other wines, cognac and other spirits or symmetrically on the market. These functions are now performed in any perfume and cosmetic products; in the manufacture, sale by a subsidiary. and promotion of leather goods, clothing, accessories as well as Since Group brands belong to the various operating subsidiaries, any other high-quality and branded articles or products; in the LVMH does not collect any royalties in connection with these operation of vineyards; or in the use of any intellectual property brands. right. Fiscal year (Article 26 of the Bylaws): from January 1 until 1.2 General information December 31. The complete text of the Bylaws is presented in the “Corporate Distribution of profits (Article 28 of the Bylaws): an initial Governance” section of the reference document. deduction is made from distributable earnings in the amount required to distribute to shareholders a preliminary dividend, Corporate name (Article 3 of the Bylaws): equal to 5% of the amount paid up on the shares that has not LVMH Moët Hennessy - Louis Vuitton. been repaid to shareholders by the Company. From the remaining Registered office (Article 4 of the Bylaws): 22, avenue Montaigne, amount, the Shareholders’ Meeting may deduct the amounts it F-75008 Paris. Telephone: +33 (0)1.44.13.22.22. deems appropriate to allocate to all optional, ordinary or special reserve funds, or retain. The balance, if any, shall be divided among Legal form (Article 1 of the Bylaws): Société anonyme (limited shareholders as a super-dividend. liability company). In addition, the Shareholders’ Meeting may decide to distribute Jurisdiction (Article 1 of the Bylaws): the Company is governed amounts taken from the reserves, either to provide or supplement by French law. a dividend, or as an exceptional distribution. Register of Commerce and Companies: the Company is Shareholders’ Meetings (Article 23 of the Bylaws): Shareholders’ identified in the Paris Register of Commerce and Companies under Meetings are convened and held under the conditions provided by number 775 670 417. APE code (Company activity code): 6420Z. the laws and decrees in effect.

238 Reference Document 2010 other information General information regarding the parent company; stock market information

Rights, preferences and restrictions attached to shares The Board of Directors, in its meeting of February 3, 2011, noted (Articles 6, 8, 23 and 28 of the Bylaws): all shares belong to the the increase in the share capital resulting from the exercise of options same category, whether issued in registered or bearer form. to subscribe to shares, then decided to reduce the share capital by a number equivalent to that of the shares issued. As of February 3, Each share gives the right to a proportional stake in the ownership 2011, the share capital amounts to 146,889,856.20 euros divided of the Company’s assets, as well as in the sharing of profits and of into 489,632,854 fully paid-up shares with a par value of 0.30 euros any liquidation surplus. Each time it shall be necessary to hold each. Of these 489,632,854 shares, 225,677,468 shares conferred a certain number of shares in order to exercise a right, it will double voting rights. be the responsibility of the shareholder(s) having less than the required number to take the necessary actions to form a group with a sufficient number of shares. 2.2 Authorized share capital A voting right equal to twice the voting right attached to the As of December 31, 2010, the Company’s authorized share other shares is granted to all fully paid-up registered shares was 202,787,833.50 euros, divided into 675,959,445 shares of for which evidence of registration under the name of the same authorized share capital with a par value of 0.30 euros each. shareholder may be demonstrated, as well as to shares issued in the The authorized share capital represents the maximum amount event of a capital increase through the incorporation of reserves, that the share capital could reach should the Board of Directors unappropriated retained earnings, or issue premiums, on the basis use all of the authorizations and delegations of authority granted of existing shares giving the holder such right. The Extraordinary by the Shareholders’ Meeting that permit the Company to increase Shareholders’ Meeting of June 6, 1986 increased the minimum its amount. registration period to three years (from two years previously). This right may be removed by a decision of the Extraordinary Shareholders’ Meeting after ratification by a Special Meeting of 2.3 Status of delegations and authorizations granted to beneficiaries of this right. the Board of Directors Declaration of thresholds (Article 24 of the Bylaws): This statement is included under paragraph 4.1 “Status of current independently of legal obligations, the Bylaws stipulate that any delegations and authorizations” in the “Management Report of individual or legal entity that becomes the owner of a fraction of the Board of Directors - Parent company: LVMH Moët Hennessy capital greater than or equal to 1% shall notify the total number Louis Vuitton SA” of the reference document. of shares held to the Company. This obligation applies each time the portion of capital owned increases by at least 1%. It ceases to 2.4 Shareholders’ identification apply when the shareholder in question reaches the threshold of 60% of the share capital. Article 25 of the Bylaws authorizes the Company to set up a shareholder identification procedure. Necessary action to modify the rights of shareholders: the Bylaws do not contain any stricter provision governing the modification of shareholders’ rights than those required by the law. 2.5 Non-capital shares Provisions governing changes in the share capital: the Bylaws The Company has not issued any non-capital shares. do not contain any stricter provision governing changes in the share capital than those required by the law. 2.6 Securities giving access to the Company’s capital No securities giving access to the Company’s capital, other than 2. Information regarding the Capital share subscription options described in Section 3.4.2 of the “Management report of the Board of Directors - Parent Company 2.1 Share capital LVMH Moët Hennessy - Louis Vuitton SA” of the reference document, are outstanding as of December 31, 2010. As of December 31, 2010, the Company’s share capital was 147,192,669.60 euros, consisting of 490,642,232 fully paid-up shares with a par value of 0.30 euros each.

Reference Document 2010 239 other information General information regarding the parent company; stock market information

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

(in thousands of euros) Change in capital Capital after transaction

Type of transaction Number Par value Premium Amount Accumulated of shares number of shares

As of December 31, 2007 146,981 489,937,410 Fiscal year 2008 Issue of shares (1) 92,600 28 5,131 147,009 490,030,010 “ Retirement of shares 92,600 (28) (4,313) 149,981 489,937,410 Fiscal year 2009 Issue of shares (1) 88,960 27 4,796 147,008 490,026,370 “ Retirement of shares 88,960 (27) (4,166) 146,981 489,937,410 “ Issue of share (1) 468,244 140 25,331 147,122 490,405,654 Fiscal year 2010 Issue of shares (1) 1,003,100 300 60,947 147,422 491,408,754 “ Retirement of shares 1,775,900 (532) (100,522) 146,889 489,632,854 “ Issue of shares (1) 1,009,378 302 58,434 147,192 490,642,232

As of December 31, 2010 147,192 490,642,232 (1) In connection with the exercise of share subscription options.

3. Analysis of share capital and voting rights

3.1 Share ownership of the Company As of December 31, 2010, the Company’s share capital comprised 490,642,232 shares. Of this total, taking into account shares held as treasury shares, voting rights were attached to 478,702,259 shares, including 225,670,153 with double voting rights. The breakdown of shares by type was as follows: -- 232,515,957 pure registered shares; -- 5,605,630 administered registered shares; -- 252,520,645 bearer shares.

Shareholders Number of Number of % of % of voting shares voting rights (2) capital rights

Arnault Group SAS and companies under its control (1) 233,760,436 448,391,426 47.64 63.66 Other shareholders 256,881,796 255,980,986 52.36 36.34 Total as of December 31, 2010 490,642,232 704,372,412 100.00 100.00 (1) Controlled by Mr. Bernard Arnault and his family, Groupe Arnault SAS is the holding company with ultimate control over LVMH. (2) Voting rights exercisable in Shareholders’ Meetings.

240 Reference Document 2010 other information General information regarding the parent company; stock market information

On the basis of registered shareholders and information as of as short term investments, with the main objective of covering December 2010 provided by a Euroclear survey of depositaries, commitments for share purchase option plans and bonus share the Company has about 167,000 shareholders. Resident and non- plans, while the remaining 9,756,467 shares were recognized resident shareholders respectively represent 72% and 28% of the as long term investments, with the main objective of covering Company’s share capital (see 2010 Annual Report, “Ownership commitments for existing share subscription option plans. In structure”). accordance with legal requirements, these shares are stripped of their voting rights. As of December 31, 2010, the Company also The Company’s main shareholders have voting rights identical to held 300,000 American call options, to cover commitments for those of other shareholders. share purchase option plans. To the best of the Company’s knowledge: As of December 31, 2010, the employees of the Company and of -- one shareholder held at least 5% of the Company’s share capital affiliated companies, as defined under Article L. 225-180 of the and voting rights as of December 31, 2010; Commercial Code, held LVMH shares in employee savings plans -- no other shareholder held 5% or more of the Company’s share equivalent to less than 0.5% of the Company’s share capital. capital or voting rights, either directly, indirectly, or acting in concert; During the 2010 fiscal year, BNP Paribas Asset Management, Amundi and UBS AG informed the Company on several occasions -- no shareholders’ agreement or any other agreement constituting that they had exceeded or fallen below statutory shareholding an action in concert existed involving at least 0.5% of the thresholds in the range between 1% and 3% of the Company’s Company’s share capital or voting rights. share capital. According to the latest notices received in 2010, As of December 31, 2010, members of the Executive Committee BNP Paribas Asset Management and UBS AG held less than 1% and of the Board of Directors directly and personally held less of the share capital and voting rights; Amundi held 2.04% of the than 0.5% of the Company’s share capital and voting rights as share capital and 1.43% of voting rights. registered shares. During the fiscal year ended December 31, 2010 and as of As of December 31, 2010, the Company held 11,939,973 shares February 16, 2011, no public tender or exchange offer nor price as treasury shares. Of these shares, 2,183,506 were recognized guarantee was made by a third party involving the Company’s shares.

3.2 Changes in share ownership during the last three fiscal years

Shareholders As of December 31, 2010 As of December 31, 2009 As of December 31, 2008

Number of % of % of voting Number of % of % of voting Number of % of % of voting shares capital rights (1) shares capital rights (1) shares capital rights (1)

Arnault Group 233,760,436 47.64 63.66 232,345,936 47.38 63.64 232,333,190 47.42 63.75 including: Financière Jean Goujon 207,821,325 42.36 59.01 207,821,325 42.38 59.32 207,821,325 42.42 59.42 Financière Agache and 25,939,111 5.28 4.65 24,524,611 5.00 4.32 24,511,865 5.00 4.33 related entities Treasury shares 11,939,973 2.43 16,080,093 3.28 - 16,876,191 3.44 - Public registered 3,336,178 0.68 0.87 4,885,270 0.99 1.35 4,837,205 0.99 1.35 Public bearer 241,605,645 49.25 35.47 237,094,355 48.35 35.01 235,890,824 48.15 34.90 Total 490,642,232 100.00 100.00 490,405,654 100.00 100.00 489,937,410 100.00 100.00 (1) Voting rights exercisable in Shareholders’ Meetings.

3.3 Pledges of pure registered shares by main shareholders The Company is not aware of any pledge of pure registered shares by the main shareholders.

Reference Document 2010 241 other information General information regarding the parent company; stock market information

3.4 Natural persons or legal entities that may exercise control over the Company As of December 31, 2010, Financière Jean Goujon held With respect to the various control holding companies of the 207,821,325 shares in the Company representing 42.36% of LVMH group: the share capital and 59.01% of the voting rights. The principal -- in December 2002, Financière Agache contributed its activity of Financière Jean Goujon is to hold LVMH shares. controlling interest in Christian Dior to its wholly owned As of December 31, 2010, Financière Jean Goujon was a wholly subsidiary Semyrhamis; owned subsidiary of Christian Dior, the parent company of -- in December 2004, Montaigne Participations et Gestion merged Christian Dior Couture SA. with Groupe Arnault SAS. As of the same date, Christian Dior, a company listed on Euronext In order to protect the rights of each and every shareholder, the Paris by Nyse Euronext, was controlled through direct and indirect Charter of the Board of Directors requires that at least one-third holdings totaling 69.96% of its share capital by Groupe Arnault of its appointed members be Independent Directors. In addition, SAS, itself controlled by Mr. Bernard Arnault and his family. at least two-thirds of the members of the Performance Audit Committee must be Independent Directors. A majority of the members of the Nominations and Compensation Committee must also be Independent Directors.

Simplified ownership structure as of December 31, 2010

GROUPE ARNAULT SAS and Arnault family

99.77% (a)

FINANCIERE AGACHE SA

69.96% (a) 100% CHRISTIAN DIOR SA (b) CHRISTIAN DIOR COUTURE SA

100%

FINANCIERE JEAN GOUJON SAS

47.64% of the share capital and 63.66% of the voting rights (c) (a) Direct and/or indirect ownership interest. (b) Company listed on the Euronext Paris Premier Marché. (c) Total ownership interest of Groupe Arnault, Financière Jean Goujon LVMH SA (b) Christian Dior owning directly 42.36% of the share capital, and Groupe Arnault SAS and various holding companies owning 5.28%.

Financière 4. Market for financial instruments issued by LVMH Jean Goujon

4.1 Market for LVMH shares (b) LVMH The Company’s shares are listed on Euronext Paris (ISIN code 324,282,645 LVMH shares were traded in 2010 for a total amount FR0000121014) and are eligible for the deferred settlement service of 30.2 billion euros. This corresponds to an average daily volume of Euronext Paris. LVMH shares are used as underlying assets for of 1,256,909 shares. negotiable options on NYSE Liffe. Since September 23, 2005, LVMH Moët Hennessy - Louis Vuitton LVMH is included in the principal French and European indices SA 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. Ethical Charter of AFEI (“Charte de déontologie de l’AFEI”) approved by the Autorité des Marchés Financiers in its decision LVMH’s market capitalization was 60 billion euros at year-end of March 22, 2005, as published in Bulletin des annonces légales 2010, making it the fourth largest on the Paris stock exchange. obligatoires dated April 1, 2005.

242 Reference Document 2010 other information General information regarding the parent company; stock market information

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

Opening price Closing price Highest* Lowest * Number of Value of first day last day (EUR) (EUR) shares traded shares traded (EUR) (EUR) (EUR billions) 2009 July 54.33 63.29 64.68 52.75 23,774,192 1.4 August 63.40 66.69 69.42 61.76 25,188,721 1.6 September 67.05 68.73 69.97 64.11 26,040,070 1.8 October 69.06 70.65 75.89 65.40 29,461,455 2.1 November 70.12 69.36 76.80 68.13 32,054,339 2.3 December 70.05 78.38 79.27 70.05 22,895,991 1.7 2010 January 78.61 79.07 82.30 76.60 22,664,073 1.8 February 78.03 79.60 82.24 74.19 25,513,567 2.0 March 80.00 86.54 87.99 79.82 26,424,106 2.2 April 87.10 86.84 92.36 84.12 29,526,612 2.6 May 86.17 86.22 92.50 78.26 49,840,380 4.3 June 85.59 89.81 96.96 83.66 34,151,203 3.1 July 88.73 93.62 95.40 84.85 27,660,215 2.5 August 93.92 91.77 97.72 89.12 20,676,856 1.9 September 92.00 107.60 109.50 91.52 24,794,058 2.5 October 107.50 112.60 119.40 104.15 21,697,640 2.4 November 113.40 116.85 122.20 112.00 23,645,186 2.7 December 117.45 123.10 129.05 117.40 17,688,749 2.2 Source: Euronext. * Prices recorded during market trading hours.

4.2 Share repurchase program Bonds listed in Luxembourg

LVMH has implemented a share repurchase program that allows Currency Amount Year of Year of Interest it to buy back up to 10% of its share capital. This program was outstanding issue maturity rate approved by the Shareholders’ Meeting of April 15, 2010. Within (in currency) this framework, between January 1 and December 31, 2010, stock EUR 250,000,000 2009 2015 4.5% market purchases of its own shares by LVMH SA amounted to EUR 1,000,000,000 2009 2014 4.375% 2,411,215 shares, or 0.5% of its share capital. LVMH also exercised JPY 5,000,000,000 2008 2011 variable 2,370,200 calls on its own shares in 2010. Disposals of shares, EUR 760,000,000 2005 2012 3.375% options exercised, bonus share allocations and share cancellations EUR 600,000,000 2004 2011 4.625% related to the equivalent of 8,921,535 LVMH shares. Bonds listed in Zurich 4.3 LVMH bond markets Currency Amount Year of Year of Interest Among the bonds issued by LVMH Moët Hennessy - Louis Vuitton outstanding issue maturity rate outstanding on December 31, 2010, the bonds presented below (in currency) are listed for trading. CHF 200,000,000 2008 2015 4.0% CHF 200,000,000 2008 2011 3.625% CHF 300,000,000 2007 2013 3.375%

Reference Document 2010 243 other information General information regarding the parent company; stock market information

4.4 Dividend 4.5 Change in share capital A dividend of 2.10 euros per share is being proposed for fiscal A total of 2,012,478 shares were issued during the year and year 2010 in respect of the 490,642,232 shares representing share 1,775,900 shares were retired, bringing the share capital to capital, an increase of 0.45 euros compared to the dividend paid 490,642,232 shares as of December 31, 2010. for fiscal year 2009. The total LVMH Moët Hennessy - Louis Vuitton distribution 4.6 Performance per share will amount to 1,030 million euros for fiscal year 2010, before the effect of treasury shares. (EUR) 2010 2009 2008 Dividend distribution in respect of fiscal years 2006 to 2010 Diluted Group share of net profit 6.32 3.70 4.26 Gross dividend 2.10 1.65 1.60 (1) Year Gross dividend per share Dividend distribution Change compared to (EUR) (EUR millions) previous year 27.3% 3.1% - (2) 2010 2.10 1,030 Highest share price 129.05 79.27 83.93 2009 1.65 809 Lowest share price 74.19 39.08 38.10 2008 1.60 784 Share price as of December 31 123.10 78.38 47.77 2007 1.60 784 Change compared to 2006 1.40 686 previous year 57.1% 64.1% (42.2)% (1) Excludes the impact of tax credits applicable to the beneficiary. (2) Proposed to the Shareholders’ Meeting of March 31, 2011.

The Company has a steady dividend distribution policy, designed to ensure a stable return to shareholders, while making them partners in the growth of the Group. Pursuant to current laws in France, dividends and interim dividends uncollected within five years become void and are paid to the French state.

244 Reference Document 2010 Resolutions for the approval of the combined shareholders’ meeting of March 31, 2011

Page

1. Ordinary resolutions 246

2. Extraordinary resolutions 249

STATUTORY AUDITORS’ REPORT ON THE PROPOSED DECREASE IN SHARE CAPITAL BY THE CANCELLATION OF OWN OR PURCHASED SHARES 255

STATUTORY AUDITORS’ REPORT ON THE ISSUE OF SHARES AND VARIOUS MARKETABLE SECURITIES WITH/WITHOUT CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS 256

STATUTORY AUDITORS’ REPORT ON THE ISSUE OF SHARES AND VARIOUS MARKETABLE SECURITIES WITH CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS RESERVED FOR EMPLOYEES WHO ARE MEMBERS OF A CORPORATE SAVINGS PLAN 258

STATUTORY AUDITORS’ REPORT ON THE FREE GRANTING OF EXISTING SHARES OR SHARES TO BE ISSUED TO EMPLOYEES AND CORPORATE OFFICERS OF THE COMPANY 260

Reference Document 2010 245 combined shareholders’ meeting Resolutions for the approval of the Combined Shareholders’ Meeting

Resolutions for the approval of the combined shareholders’ meeting of March 31, 2011

1. Ordinary resolutions

First resolution: Approval of the financial statements of Fourth resolution: Allocation of net profit – the parent company Determination of dividend The Shareholders’ Meeting, after examining the reports of the The Shareholders’ Meeting, on the recommendation of the Board Board of Directors, the Chairman of the Board, and the Statutory of Directors, decides to allocate and appropriate the distributable Auditors, hereby approves the financial statements of the parent profit for the fiscal year ended December 31, 2010 as follows: company for the fiscal year ended December 31, 2010, including the balance sheet, income statement and notes, as presented to the (EUR) Net profit for the year ended Meeting, as well as the transactions reflected in these statements 2,317,934,132.70 and summarized in these reports. December 31, 2010 Allocation to the legal reserve (7,097.34) Retained earnings before distribution 2,595,765,841.88 Second resolution: Approval of the consolidated financial statements Amount available for distribution 4,913,692,877.24 The Shareholders’ Meeting, after examining the reports of the Proposed appropriation: Statutory dividend of 5% or EUR 0.015 Board of Directors and of the Statutory Auditors, hereby approves 7,359,633.48 per share the consolidated financial statements for the fiscal year ended Additional dividend of EUR 2.085 per share 1,022,989,053.72 December 31, 2010, including the balance sheet, income statement and notes, as presented to the Meeting, as well as the transactions Retained earnings after appropriation 3,883,344,190.04 reflected in these statements and summarized in these reports. 4,913,692,877.24 For information, as of December 31, 2010, the Company held 11,939,973 of its own shares, corresponding to an amount not available for distribution of 594.5 million euros, equivalent Third resolution: Approval of related party agreements to the acquisition cost of the shares, i.e. 594.5 million euros. The Shareholders’ Meeting, after examining the special report of Should this appropriation be approved, the total dividend would the Statutory Auditors on the related party agreements described in be 2.10 euros per share. As an interim dividend of 0.70 euros per Article L. 225-38 of the French Commercial Code, hereby declares share was paid on December 2, 2010, the final dividend per share that it approves said agreements. is 1.40 euros; this will be paid as of May 25, 2011. With respect to this dividend distribution, individuals whose tax residence is in France will be entitled to the 40% deduction provided under Article 158 of the French Tax Code. 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.

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As required by law, the Shareholders’ Meeting observes that the gross dividends per share paid out in respect of the past three fiscal years were as follows:

Fiscal year Type Payment date Gross dividend Tax deduction (1) (EUR) (EUR) 2009 Interim December 2, 2009 0.35 0.14 Final May 25, 2010 1.30 0.52 Total 1.65 0.66 2008 Interim December 2, 2008 0.35 0.14 Final May 25, 2009 1.25 0.50 Total 1.60 0.64 2007 Interim December 3, 2007 0.35 0.14 Final May 23, 2008 1.25 0.50 Total 1.60 0.64 (1) For individuals with tax residence in France.

Fifth resolution: Appointment of Mrs. Delphine Arnault Ninth resolution: Appointment of Mr. Diego Della Valle as Director as Director The Shareholders’ Meeting decides to appoint Mrs. Delphine The Shareholders’ Meeting decides to appoint Mr. Diego Della Arnault as Director for a three-year term that shall expire at the Valle as Director for a three-year term that shall expire at the end of end of the Ordinary Shareholders’ Meeting convened in 2014 to the Ordinary Shareholders’ Meeting convened in 2014 to approve approve the financial statements for the previous fiscal year. the financial statements for the previous fiscal year.

Sixth resolution: Appointment of Mr. Nicolas Bazire Tenth resolution: Appointment of Mr. Pierre Godé as Director as Director The Shareholders’ Meeting decides to appoint Mr. Nicolas Bazire The Shareholders’ Meeting decides to appoint Mr. Pierre Godé as as Director for a three-year term that shall expire at the end of the Director for a three-year term that shall expire at the end of the Ordinary Shareholders’ Meeting convened in 2014 to approve the Ordinary Shareholders’ Meeting convened in 2014 to approve the financial statements for the previous fiscal year. financial statements for the previous fiscal year.

Seventh resolution: Appointment of Mr. Antonio Belloni Eleventh resolution: Appointment of Mr. Gilles Hennessy as Director as Director The Shareholders’ Meeting decides to appoint Mr. Antonio Belloni The Shareholders’ Meeting decides to appoint Mr. Gilles Hennessy as Director for a three-year term that shall expire at the end of the as Director for a three-year term that shall expire at the end of the Ordinary Shareholders’ Meeting convened in 2014 to approve the Ordinary Shareholders’ Meeting convened in 2014 to approve the financial statements for the previous fiscal year. financial statements for the previous fiscal year.

Eighth resolution: Appointment of Mr. Charles de Croisset Twelfth resolution: Appointment of Mrs. Marie-Josée as Director Kravis as Director The Shareholders’ Meeting decides to appoint Mr. Charles de The Shareholders’ Meeting decides to appoint Mrs. Marie-Josée Croisset as Director for a three-year term that shall expire at the Kravis as Director for a three-year term that shall expire at the end of the Ordinary Shareholders’ Meeting convened in 2014 to end of the Ordinary Shareholders’ Meeting convened in 2014 to approve the financial statements for the previous fiscal year. approve the financial statements for the previous fiscal year.

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Thirteenth resolution: Appointment of Mr. Patrick Houël The share acquisition transactions described above, as well as any as Advisory Board Member sale or transfer of these shares, may be carried out by any method in compliance with applicable laws and regulations, including The Shareholders’ Meeting decides to appoint Mr. Patrick Houël as through the use of derivatives and through block purchases or sales. Advisory Board Member for a three-year term that shall expire at the end of the Ordinary Shareholders’ Meeting convened in 2014 All powers are granted to the Board of Directors to implement to approve the financial statements for the previous fiscal year. this authorization. The Board may delegate to the Chief Executive Officer, or with the latter’s consent, to a Group Managing Director, such powers in order to place any and all stock market orders, Fourteenth resolution: Authorization to be granted to the enter into any and all agreements, sign any document, file all Board of Directors to trade in the Company’s shares declarations, carry out all formalities and generally take any and all The Shareholders’ Meeting, having examined the Report of the other actions required in the implementation of this authorization. Board of Directors, authorizes the latter to acquire Company shares, This authorization, which replaces the authorization granted by pursuant to the provisions of Articles L. 225-209 et seq. of the the Combined Shareholders’ Meeting of April 15, 2010, is hereby French Commercial Code and of Commission Regulation (EC) granted for a term of eighteen months as of the date of this Meeting. 2273/2003 of December 22, 2003. In particular, the shares may be acquired in order (i) to provide Fifteenth resolution: Delegation of authority to be market liquidity services (purchases/sales) under a liquidity granted to the Board of Directors in order to carry contract set up by the Company, (ii) to cover stock option plans, out capital increases through the capitalization of the allotment of bonus shares or any other form of share allocation unappropriated retained earnings, reserves, additional or share-based payment, in favor of employees or company officers paid-in capital, or other items either of the Company or of an affiliated company pursuant to the The Shareholders’ Meeting, having examined the report of French Commercial Code, in particular as provided for in its Articles the Board of Directors and pursuant to the provisions of the L. 225-180 and L. 225-197-2, (iii) to cover securities giving access French Commercial Code, in particular its Articles L. 225-129, to the Company’s shares, notably by way of conversion, tendering L. 225‑129-2 and L. 225-130, hereby: of a coupon, reimbursement or exchange, (iv) to be retired subject 1. delegates its authority to the Board of Directors to carry out, on to the approval of the 16th resolution, or (v) to be held so as to be one or more occasions, in such amounts and at such times as it may exchanged or presented as consideration at a later date for external deem fit, one or more capital increases through the capitalization growth operations. of all or a portion of unappropriated retained earnings, reserves, The purchase price at which the Company may buy its own shares additional paid-in capital, or other items as permitted by law and may not exceed 200 euros. In the event of a capital increase through the Bylaws, through the issue of new shares, or through an increase the capitalization of reserves and the allotment of bonus shares as in the par value of existing shares; well as in cases of a stock split or reverse stock split, the purchase 2. grants this delegation of authority for a period of twenty-six price indicated above will be adjusted by a multiplying coefficient months as of the date of this Meeting; equal to the ratio of the number of shares making up the Company’s 3. decides, should the Board of Directors make use of this delegation share capital before and after the operation. of authority, that the total nominal amount of capital increases that may be carried out under this delegation of authority may not The maximum number of shares that may be purchased shall not exceed fifty (50) million euros, subject to the provisions of the exceed 10% of the share capital, adjusted to reflect operations 25th resolution; affecting the share capital occurring after this Meeting, with the understanding that (i) if this authorization is used, the number of 4. takes note that this delegation of authority entails the granting treasury shares in the Company’s possession will need to be taken to the Board of Directors of all necessary powers, including the into consideration so that the Company remains at all times within option to delegate such powers to the Chief Executive Officer, or with the latter’s consent, to a Group Managing Director, in order the limit for the number of treasury shares held, which must not to implement this delegation, in accordance with the terms set exceed 10% of the share capital and that (ii) the number of treasury forth by law, and in particular in order to: shares provided as consideration or exchanged in the context of a merger, spin-off or contribution operation may not exceed 5% of -- determine the amount and nature of the items to be capitalized, the share capital as of the date of the operation. determine the number of new shares to be issued and/or the new par value of the shares comprising the share capital, set the date, As of December 31, 2010, this limit of 10% of the share capital even with retroactive effect, from which the new shares shall have corresponded to 49,064,223 shares. The maximum total amount dividend rights or the date on which the increase in the par value dedicated to these purchases may not exceed 9.8 billion euros. shall take effect,

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-- decide that fractional rights may not be traded, that the acquisition warrants issued on a standalone basis, giving either corresponding shares shall be sold and that the proceeds of the immediate or future access, at any time or on a predetermined sale shall be allotted to the holders of the rights, date, to the Company’s share capital or conferring entitlement to -- execute any agreement, take any action, and complete any and debt securities, by subscription, whether in cash or by offsetting all formalities required for the issuance; receivables, through conversion, exchange, repayment, tendering of a coupon or in any other manner, with the understanding that 5. decides that this authorization shall replace that granted by the debt securities may be issued with or without guarantees, in forms, Combined Shareholders’ Meeting of May 14, 2009. at rates and under terms and conditions that the Board of Directors shall deem appropriate, and that the issuance of preference shares is excluded from the scope of this delegation; 2. Extraordinary resolutions 2. grants this delegation of authority for a period of twenty-six months as of the date of this Meeting; Sixteenth resolution: Authorization to be granted to the 3. decides, should the Board of Directors make use of this delegation Board of Directors to reduce the share capital through of authority, that the total nominal amount of capital increases that the retirement of shares may be carried out under this delegation of authority, whether immediately or over time, may not exceed fifty (50) million euros, The Shareholders’ Meeting, having examined the report of the subject to the provisions of the 25th resolution. To this ceiling shall Board of Directors and the special report of the Statutory Auditors, be added, where applicable, the nominal amount of the shares to hereby: be issued in the event of further financial transactions carried out, 1. authorizes the Board of Directors to reduce the share capital as provided by law, to protect the rights of holders of securities of the Company, on one or more occasions, by retiring the shares giving access to the Company’s share capital; acquired pursuant to the provisions of Article L. 225-209 of the 4. decides, should the Board of Directors make use of this delegation French Commercial Code; of authority, that if subscriptions in respect of pro rata entitlements 2. grants this authorization for a period of eighteen months as of and, where applicable, subscriptions in respect of applications by the date of this Meeting; qualifying shareholders that may be reduced by decision of the Board, do not absorb the entirety of an issue of securities, the Board 3. sets the maximum amount of the capital reduction that may of Directors may have recourse, subject to the terms set forth by law be performed under this authorization over a twenty-four month and in the order it shall determine, to any of the options provided period to 10% of Company’s current capital; for by Article L. 225-134 of the French Commercial Code, and in 4. grants all powers to the Board of Directors to perform and record particular may offer to the general public all or a portion of the the capital reduction transactions, carry out all required acts and unsubscribed shares and/or securities; formalities, amend the Bylaws accordingly, and generally take any and 5. takes note that in the event of the exercise of this delegation all other actions required in the implementation of this authorization; of authority, the decision to issue securities giving access to the 5. decides that this authorization shall replace that granted by the Company’s share capital shall entail, in favor of the holders of Combined Shareholders’ Meeting of April 15, 2010. the issued securities, the express waiver by shareholders of their preferential right to subscribe to the shares to which the securities Seventeenth resolution: Delegation of authority to be so issued shall give access; granted to the Board of Directors in order to increase the 6. grants all necessary powers to the Board of Directors, including share capital with preferential subscription rights the option to delegate such powers to the Chief Executive Officer, or The Shareholders’ Meeting, having examined the report of the with the latter’s consent, to a Group Managing Director, in order to: Board of Directors and the special report of the Statutory Auditors -- implement this delegation of authority, under the terms and and pursuant to the provisions of the French Commercial Code, in conditions set forth by law, particular its Articles L. 225-129, L. 225-129-2 and L. 228‑92, -- apply the expenses of the share capital increases against the hereby: amount of the corresponding premiums and deduct from that 1. delegates its authority to the Board of Directors to proceed amount any sums necessary in order to bring the legal reserve to with the issue, on one or more occasions, in such amounts and at one-tenth of the new capital following each increase, such times as it may deem fit, on the French and/or international -- make all adjustments required in accordance with applicable market, by way of a public offering, whether denominated laws and regulations and determine the terms ensuring, where in euros or in any other currency or accounting unit based on applicable, the protection of the rights of holders of securities a basket of currencies, with preferential subscription rights for giving future access to the Company’s share capital; existing shareholders, of ordinary shares and more generally of 7. decides that this authorization shall replace that granted by the any other securities, composite or not, including subscription or Combined Shareholders’ Meeting of May 14, 2009.

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Eighteenth resolution: Delegation of authority to be Company’s share capital shall entail, in favor of the holders of granted to the Board of Directors in order to increase the the issued securities, the express waiver by shareholders of their share capital without preferential subscription rights preferential right to subscribe to the shares to which the securities though a public offering so issued shall give access; 6. decides, in accordance with Article L. 225-136 1° The Shareholders’ Meeting, having examined the report of the subparagraph 1 of the French Commercial Code, that the amount Board of Directors and the special report of the Statutory Auditors of the consideration accruing and/or to accrue at a later date to the and pursuant to the provisions of the French Commercial Code, Company for each of the shares issued or to be issued under this in particular its Articles L. 225-129, L. 225-129-2, L. 225-135, delegation of authority, taking into account, in the event of the L. 225-136 et seq. and L. 228-92, hereby: issue of standalone share subscription warrants, the issue price of 1. delegates its authority to the Board of Directors to proceed with such warrants, shall be at least equal to the minimum price set the issue, on one or more occasions, in such amounts and at such forth in legislative and regulatory provisions in force at the time times as it may deem fit, on the French and/or international market, of the issuance (equivalent as of the date of this Meeting to the by way of a public offering, either in euros or in any other currency weighted average of the share price over the last three trading or accounting unit based on a basket of currencies, of ordinary days on the regulated market of Euronext Paris preceding the shares and more generally of any other securities, composite or determination of the subscription price for the capital increase, not, including subscription or acquisition warrants issued on a less a maximum discount of 5%, after adjustment of such average standalone basis, giving either immediate or future access, at any for any difference in the dates from which the shares in question time or on a predetermined date, to the Company’s share capital or shall have dividend rights); conferring entitlement to debt securities, by subscription, whether 7. grants the same powers to the Board of Directors, including the in cash or by offsetting receivables, through conversion, exchange, option to delegate such powers to the Chief Executive Officer, or repayment, tendering of a coupon or in any other manner, with the with the latter’s consent, to a Group Managing Director, as those understanding that debt securities may be issued with or without specified under point 6 of the 17th resolution; guarantees, in forms, at rates and under terms and conditions that 8. decides that this authorization shall replace that granted by the the Board of Directors shall deem appropriate, and that the issuance Combined Shareholders’ Meeting of May 14, 2009. of preference shares is excluded from the scope of this delegation; 2. grants this delegation of authority for a period of twenty-six Nineteenth resolution: Delegation of authority to be months as of the date of this Meeting; granted to the Board of Directors in order to increase the 3. decides, should the Board of Directors make use of this delegation share capital without preferential subscription rights through a private placement reserved for qualified of authority, that the total nominal amount of capital increases that investors or a restricted group of investors may be carried out under this delegation of authority, whether immediately or over time, may not exceed fifty (50) million euros, The Shareholders’ Meeting, having examined the report of the subject to the provisions of the 25th resolution. To this ceiling shall Board of Directors and the special report of the Statutory Auditors be added, where applicable, the nominal amount of the shares to and pursuant to the provisions of the French Commercial Code, be issued in the event of further financial transactions carried out, in particular its Articles L. 225-129, L. 225-129-2, L. 225-135, as provided by law, to protect the rights of holders of securities L. 225-136 et seq. and L. 228-92, hereby: giving access to the Company’s share capital; 1. delegates its authority to the Board of Directors to proceed 4. decides to exclude the preferential right of shareholders to with the issue, on one or more occasions, in such amounts and at subscribe to any shares or other securities that may be issued under such times as it may deem fit, on the French and/or international this resolution, while leaving the Board of Directors free to grant market, by way of an offering provided for in Article L. 411-2 II of to shareholders, for such period and under such terms as it shall the French Monetary and Financial Code, either in euros or in any determine in accordance with the provisions of Article L. 225- other currency or accounting unit based on a basket of currencies, 135 of the French Commercial Code and for all or part of any of ordinary shares and more generally of any other securities, issuance made, a non-negotiable priority subscription right that composite or not, including subscription or acquisition warrants shall be exercised in proportion to the number of shares held by issued on a standalone basis, giving either immediate or future each shareholder, and that may be supplemented by subscriptions access, at any time or on a predetermined date, to the Company’s in respect of applications by qualifying shareholders; such share capital or conferring entitlement to debt securities, by subscriptions may be reduced by decision of the Board; subscription, whether in cash or by offsetting receivables, through 5. takes note that in the event of the exercise of this delegation conversion, exchange, repayment, tendering of a coupon or in of authority, the decision to issue securities giving access to the any other manner, with the understanding that debt securities

250 Reference Document 2010 combined shareholders’ meeting Resolutions for the approval of the Combined Shareholders’ Meeting may be issued with or without guarantees, in forms, at rates and Twentieth resolution: Authorization to be granted to under terms and conditions that the Board of Directors shall deem the Board of Directors to set the issue price of shares appropriate, and that the issuance of preference shares is excluded and/or other securities giving access to the Company’s from the scope of this delegation; share capital under certain conditions, in a total issue 2. grants this delegation of authority for a period of twenty-six amount not to exceed 10% of the share capital per year, months as of the date of this Meeting; in connection with a capital increase through the issue of shares and/or other investment securities without 3. decides, should the Board of Directors make use of this delegation preferential subscription rights of authority, that the total nominal amount of capital increases that may be carried out under this delegation of authority, whether The Shareholders’ Meeting, having examined the report of the immediately or over time, may not exceed fifty (50) million euros, Board of Directors and the special report of the Statutory Auditors subject to the provisions of the 25th resolution. To this ceiling shall and in accordance with the provisions of Article L. 225-136 1: be added, where applicable, the nominal amount of the shares to second subparagraph of the French Commercial Code, hereby be issued in the event of further financial transactions carried out, authorizes the Board of Directors, with the option to delegate this as provided by law, to protect the rights of holders of securities authority as provided by law, for issues decided under the 18th and giving access to the Company’s share capital. Furthermore, in 19th resolutions and in a total issue amount not to exceed 10% of accordance with the provisions of Article L. 225‑136 of the French the share capital per year as of the date of the issue, to depart from Commercial Code, the amount of shares that may be issued per rules for the determination of the issue price of shares to be issued year shall not exceed 20% of the Company’s share capital as of the under the abovementioned resolutions by applying a maximum date of the issuance; discount of 10% to the weighted average of the share price over the last three trading days on the regulated market of Euronext 4. decides, in accordance with Article L. 225-135 of the French Paris preceding the determination of the subscription price for Commercial Code, to exclude the preferential right of shareholders the capital increase. to subscribe to any securities that may be issued under this resolution; Twenty-first resolution: Delegation of authority to be 5. takes note that in the event that the Board of Directors makes granted to the Board of Directors in order to increase use of this delegation of authority, the decision to issue securities the number of shares to be issued for issues that are giving access to the Company’s share capital shall automatically oversubscribed entail, in favor of the holders of the issued securities, the express waiver by shareholders of their preferential right to subscribe to The Shareholders’ Meeting, having examined the report of the the shares to which the securities so issued shall give access; Board of Directors and the special report of the Statutory Auditors, hereby decides that in the event of an issue approved under the 6. decides, in accordance with Article L. 225-136 1 1°, delegation granted to the Board of Directors by virtue of the 17th, subparagraph 1 of the French Commercial Code, that the amount 18th and/or 19th resolutions, the number of shares to be issued may of the consideration accruing and/or to accrue at a later date to the be increased, if an issue is oversubscribed, under the conditions Company for each of the shares issued or to be issued under this and within the limits provided under Article L. 225-135-1 of the delegation of authority, taking into account, in the event of the French Commercial Code and its implementing decree, subject to issue of standalone share subscription warrants, the issue price of the maximum nominal amount set forth in the abovementioned such warrants, shall be at least equal to the minimum price set resolutions. forth in legislative and regulatory provisions in force at the time of the issuance (equivalent as of the date of this Meeting to the weighted average of the share price over the last three trading Twenty-second resolution: Delegation of authority to be days on the regulated market of Euronext Paris preceding the granted to the Board of Directors in order to increase the determination of the subscription price for the capital increase, share capital in connection with a public exchange offer less a maximum discount of 5%, after adjustment of such average The Shareholders’ Meeting, having examined the report of the for any difference in the dates as of which the shares in question Board of Directors and the special report of the Statutory Auditors shall have dividend rights); and pursuant to the provisions of the French Commercial Code, in 7. grants the same powers to the Board of Directors, including the particular its Articles L. 225-129, L. 225-129-2, L. 25-148 and option to delegate such powers to the Chief Executive Officer, or L. 228-92, hereby: with the latter’s consent, to a Group Managing Director, as those 1. delegates its authority to the Board of Directors to proceed specified under point 6 of the 17th resolution; with the issue, on one or more occasions, in such amounts and at 8. decides that this authorization shall replace that granted by the such times as it may deem fit, of shares and more generally of any Combined Shareholders’ Meeting of May 14, 2009. other securities giving access to the Company’s share capital or

Reference Document 2010 251 combined shareholders’ meeting Resolutions for the approval of the Combined Shareholders’ Meeting conferring entitlement to debt securities provided the underlying entitlement to debt securities provided that the underlying securities are shares, in consideration for shares contributed to a securities are shares, as consideration for contributions in kind public exchange offer for the shares of another company admitted granted to the Company and consisting of shares or securities to trading on a regulated market, as defined under Article L. 225- giving access to the Company’s share capital, in cases where the 148 of the French Commercial Code; provisions of Article L. 225-148 of the French Commercial Code 2. grants this delegation for a period of twenty-six months as of do not apply; the date of this Meeting; 2. grants this delegation for a period of twenty-six months as of 3. decides that the total nominal amount of capital increases that the date of this Meeting; may be carried out under this resolution may not exceed fifty 3. decides that the total number of shares to be issued under this (50) million euros, subject to the provisions of the 25th resolution. resolution may not exceed 10% of the Company’s share capital as To this ceiling shall be added, where applicable, the nominal of the date of issue, subject to the provisions of the 25th resolution. amount of the shares to be issued in the event of further financial To this ceiling shall be added, where applicable, the nominal transactions carried out, as provided by law, to protect the rights of amount of the shares to be issued in the event of further financial holders of securities giving access to the Company’s share capital; transactions carried out, as provided by law, to protect the rights of 4. decides, should the Board of Directors make use of this holders of securities giving access to the Company’s share capital; delegation of authority, including the option to sub-delegate this 4. decides, should the Board of Directors make use of this authority within the limits set forth by law, that the Board or delegation, that it shall have full powers to carry out all necessary its sub-delegatee shall have full powers to carry out all necessary measures, particularly in order to: measures, particularly in order to: -- approve the Contribution Auditor’s report and the valuation of -- approve the list of securities tendered in the exchange, approve the contribution, the terms of the issuance, the exchange ratio and where applicable -- determine the date from which the new shares shall have the amount of the residual cash balance to be paid as well as to dividend rights, determine the terms and conditions of the issuance, whether in connection with a public exchange offer, an alternative takeover -- apply where applicable any expenses arising in connection with bid or exchange offer, a public offering covering the acquisition or capital increases against the amount of the contribution premiums exchange of the relevant securities against settlement in securities and deduct from such amount the sum required in order to bring and cash, or a principal takeover bid (OPA) or exchange offer (OPE) the legal reserve to one-tenth of the new capital after each increase, combined with a subsidiary OPE or OPA, -- amend the Bylaws accordingly; -- determine the date from which the new shares shall have 5. decides that this authorization shall replace that granted by the dividend rights, Combined Shareholders’ Meeting of May 14, 2009. -- apply where applicable any expenses arising in connection with capital increases against the amount of the contribution premiums Twenty-fourth resolution: Delegation of authority to be and deduct from such amount the sum required in order to bring granted to the Board of Directors to carry out capital the legal reserve to one-tenth of the new capital after each increase, increases reserved for Group employees -- amend the Bylaws accordingly; The Shareholders’ Meeting, having examined the report of the 5. decides that this authorization shall replace that granted by the Board of Directors and the special report of the Statutory Auditors Combined Shareholders’ Meeting of May 14, 2009. and acting pursuant to the provisions of Articles L. 225-129-2, L. 225-138 and L. 225-138-1 of the French Commercial Code Twenty-third resolution: Delegation of authority to be and to the provisions of Articles L. 3332-1 et seq. of the French granted to the Board of Directors in order to increase the Labor Code, while also satisfying the requirements of Article share capital in connection with contributions in kind L. 225‑129‑6 of the French Commercial Code, hereby: The Shareholders’ Meeting, having examined the report of the 1. delegates its authority to the Board of Directors (i) to increase Board of Directors and the special report of the Statutory Auditors the Company’s share capital through the issue of shares or more and pursuant to the provisions of the French Commercial Code, in generally of any other securities, on one or more occasions, as provided by Articles L. 3332-18 et seq. of the French Labor Code, particular its Article L. 225-147, hereby: that would be reserved for employees of the Company and of any 1. delegates to the Board of Directors such powers as are necessary other affiliated companies within the meaning of Article L. 3344- in order to proceed with the issue, on one or more occasions, at such 1 of the French Labor Code, who have enrolled in a company times as it may deem fit, of shares and more generally of any other savings plan and (ii) to allot, where applicable, bonus shares securities giving access to the Company’s share capital or conferring subject to performance conditions or securities giving access to

252 Reference Document 2010 combined shareholders’ meeting Resolutions for the approval of the Combined Shareholders’ Meeting the Company’s share capital as a replacement, in full or in part, for -- decide whether shares must be subscribed to directly by the discount set forth in point 4 below, under the conditions and employees enrolled in one of the group’s company savings plans within the limits provided by Article L. 3332‑21 of the French (PEEs) or whether they must be subscribed to via a corporate Labor Code, with the understanding that, as necessary, the Board of investment fund (FCPE) or via a unit trust available exclusively Directors may substitute for all or a portion of this capital increase, to employee shareholders (SICAVAS); the transfer, under the same conditions, of securities already issued -- draw up the list of companies whose employees may benefit by the Company; from the subscription offer; 2. grants this delegation for a period of twenty-six months as of -- determine whether a specific time limit should be granted to the date of this Meeting; employees in order to pay up their securities; 3. decides, subject to the provisions of the 25th resolution, that -- set the conditions for enrollment in the group’s company savings the total number of shares that may result from issuances under plan(s) and draw up or amend their regulations; this delegation, including those resulting from shares or securities giving access to the Company’s share capital that may be allotted -- set the opening and closing dates for the subscription period as bonus shares as a full or partial replacement for the discount and the issue price for securities; as provided by Articles L. 3332-18 et seq. of the French Labor -- proceed with the allotment of bonus shares or of securities Code may not exceed 1% of the Company’s share capital as of giving access to the Company’s share capital, within the limits the date of this Meeting. To this total number shall be added, set forth by Articles L. 3332-18 et seq. of the French Labor where applicable, the additional number of shares to be issued, Code, and set the type and amount of reserves, unappropriated as provided by law, to protect the rights of holders of securities retained earnings, or additional paid-in capital to be capitalized; giving access to the Company’s share capital; -- approve the number of new shares to be issued and the reduction 4. decides that (i) the subscription price of newly issued shares may rules applicable in the event that an issued is oversubscribed; neither be greater than the average of the opening price for existing -- apply the expenses of the share capital increases and of the issue shares on the regulated market of Euronext Paris during the twenty of other securities giving access to the Company’s share capital trading sessions preceding the day of the decision by the Board of against the amount of the corresponding premiums and deduct Directors or the Chief Executive Officer setting the opening date from that amount any sums necessary in order to bring the legal for the subscription period nor more than 20% lower than this reserve to one-tenth of the new capital following each increase; average, with the understanding that the Board of Directors or the Chief Executive Officer may, where applicable, reduce or eliminate 7. decides that this authorization shall replace that granted by the the discount which might otherwise apply, in order to take into Combined Shareholders’ Meeting of May 14, 2009. account, in particular, legal frameworks or tax regimes applicable outside France or decide to fully or partially replace this maximum discount of 20% with the allotment of bonus shares and/or of Twenty-fifth resolution: Determination of an overall securities giving access to the Company’s share capital and that (ii) ceiling for all capital increases decided under the issue price for securities giving access to the Company’s share delegations of authority capital shall be determined as provided by Article L. 3332-21 of The Shareholders’ Meeting, having examined the report of the the French Labor Code; Board of Directors and pursuant to the provisions of Article 5. decides to exclude the preferential right of shareholders to L. 225‑129-2 of the French Commercial Code, decides that the subscribe to any shares or to any securities giving access to the cumulative nominal amount of issues that might be decided by Company’s share capital that may be issued under this delegation virtue of the delegations of authority granted to the Board of and reserved for employees as set forth above and to require the Directors under the preceding resolutions may not exceed fifty waiver of any rights to receive shares or securities giving access to (50) million euros. It is to be understood that this amount shall be the Company’s share capital that might be allotted free of charge augmented by the nominal amount of capital increases to be carried under the terms of this resolution; out, as provided by law, to protect the rights of holders of the securities issued previously. In the event of a capital increase by way 6. grants full powers to the Board of Directors, including the option of the capitalization of additional paid-in capital, unappropriated to sub-delegate its authority as provided by law, to implement this retained earnings or other items in the form of an allotment of bonus delegation and in particular to: shares during the validity period of such delegations of authority, -- determine the length of service requirements that must be met the aforementioned maximum nominal amount (excluding issue in order to participate in the operation, within any limits set forth premiums) shall be adjusted by a multiplying coefficient equal to by law, and, where applicable, the maximum number of shares that the ratio of the number of shares making up the Company’s share may be subscribed by each employee; capital before and after the operation.

Reference Document 2010 253 combined shareholders’ meeting Resolutions for the approval of the Combined Shareholders’ Meeting

Twenty-sixth resolution: Authorization to be granted to set forth in Article L. 341-4 of the French Social Security Code the Board of Directors to allot bonus shares to Group shall become definitive before the end of the applicable vesting employees and officers period. Moreover, in this case, the shares in question shall be freely transferable; The Shareholders’ Meeting, having examined the report of the 4. authorizes the Board of Directors to make, where applicable Board of Directors and the special report of the Statutory Auditors during the vesting period, any adjustments to the number of shares and in accordance with the provisions of Articles L. 225-197-1 et in connection with any transactions involving the Company’s share seq. of the French Commercial Code, hereby: capital, in order to protect the rights of beneficiaries; 1. authorizes the Board of Directors, at its sole discretion, to allot 5. takes note that if the allotment involves an issue of new shares, existing or newly issued shares as bonus shares, on one or more this authorization entails the automatic waiver by shareholders, occasions, to employees or company officers of the Company or of in favor of the beneficiaries of bonus shares, of their preferential any affiliated entities within the meaning of Article L. 225‑197‑2 of right to subscribe to the new shares to be issued; the French Commercial Code, or to certain categories of employees or company officers, with the understanding that the total amount 6. decides, should the Board of Directors make use of this of bonus shares allotted may not exceed 1% of the Company’s share delegation of authority, including the option to sub-delegate this capital as of the date of this Meeting; authority within the limits set forth by law, that the Board or its sub-delegatee shall have full powers to carry out all necessary 2. grants this authorization for a period of thirty-eight months as measures, particularly in order to: of the date of this Meeting; -- draw up the lists of bonus share beneficiaries, 3. decides that the allotment of shares to their beneficiaries shall become definitive either (i) after a minimum vesting period of two -- set the terms and conditions and, where applicable, the allotment years, the beneficiaries being required in this case to hold the shares criteria, for a minimum of two more years once fully vested or (ii) after a -- make the vesting of any portion or all of the shares subject to one minimum vesting period of four years, without any requirement or more performance conditions that it shall determine, to hold the shares once fully vested. The Board of Directors shall -- set the dates from which shares shall have dividend rights, be entitled to choose between these two options, making use of them either alternately or concurrently and may, in the first case, -- where applicable, record the completion of each capital increase, extend the vesting period and/or the holding period and, in the amend the Bylaws accordingly, and more generally take any and second case, extend the vesting period and/or set a holding period. all actions required in the implementation of this authorization; However, the allotment of shares to beneficiaries with a disability 7. decides that this authorization shall replace that granted by the corresponding to a classification in the second or third category Combined Shareholders’ Meeting of May 15, 2008.

254 Reference Document 2010 combined shareholders’ meeting

STATUTORY AUDITORS’ REPORT ON THE PROPOSED DECREASE IN SHARE CAPITAL BY THE CANCELLATION OF OWN OR PURCHASED SHARES

Combined Shareholders’ Meeting of March 31, 2011 (Sixteenth resolution)

To the Shareholders, In our capacity as Statutory Auditors of LVMH Moët Hennessy Louis Vuitton and in accordance with the procedures provided for in Article L. 225-209 of the French Commercial Code (Code de commerce) on the decrease in share capital by the cancellation of shares purchased, we hereby report to you on our assessment of the reasons for and the terms and conditions of the proposed decrease in share capital. Shareholders are requested to confer all necessary powers on the Board of Directors, during a period of eighteen months starting from the day of this Meeting, to cancel, on one or several occasions, up to a maximum of 10% of its share capital per 24-month period, the shares purchased by the Company pursuant to the authorization to purchase its own shares up to a maximum of 10% of its share capital, under the provisions of the above-mentioned Article; this purchase authorization, otherwise submitted for approval to your Shareholders’ Meeting (fourteenth resolution), is to be given for a period of 18 months. We performed the procedures that we considered necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) applicable to this engagement. Our procedures consisted, in particular, in verifying the fairness of the reasons for and the terms and conditions of the proposed decrease in share capital, which does not interfere with the equal treatment of shareholders. We have no comments on the reasons for and the terms and conditions of the proposed decrease in share capital.

Neuilly-sur-Seine, February 16, 2011

The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG et Autres

Thierry Benoit Olivier Breillot Gilles Cohen

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction, and construed in accordance with, French law and professional auditing standards applicable in France.

Reference Document 2010 255 combined shareholders’ meeting

STATUTORY AUDITORS’ REPORT ON THE ISSUE OF SHARES AND VARIOUS MARKETABLE SECURITIES WITH/WITHOUT CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS

Combined Shareholders’ Meeting of March 31, 2011 (Seventeenth, eighteenth, nineteenth, twentieth, twenty-second and twenty-third resolutions)

To the Shareholders, In our capacity as Statutory Auditors of LVMH Moët Hennessy - Louis Vuitton and in accordance with the procedures more specifically provided for in Articles L. 225-135, L. 225-136 and L. 228-92 of the French Commercial Code (Code de commerce), we hereby report to you on the proposed delegations to the Board of Directors of the authority to proceed with a number of share and marketable securities issues, transactions on which you are asked to vote. Your Board of Directors recommends that, having considered its report: • you confer on it, for a period of twenty-six months, the authority to decide the following transactions, set the final terms and conditions of these issues and, if applicable, cancel your preferential subscription rights: -- issuance, on one or several occasions, through a public offering, of ordinary shares and/or any and all marketable securities, including share subscription or purchase warrants issued separately, conferring immediate or future entitlement, at any time or on a fixed date, to shares in the Company or debt securities, with preferential subscription rights (seventeenth resolution); -- issuance, on one or several occasions, through a public offering, of ordinary shares and/or any and all marketable securities, including share subscription or purchase warrants issued separately, conferring immediate or future entitlement, at any time or on a fixed date, to shares in the Company or debt securities, without preferential subscription rights (eighteenth resolution); -- issuance, on one or several occasions, through an offering governed by Title II of Article L. 411-2 of the French Monetary and Financial Code (Code Monétaire et Financier), of ordinary shares and/or any and all marketable securities, including share subscription or purchase warrants issued separately, conferring immediate or future entitlement, at any time or on a fixed date, to shares in the Company or debt securities, without preferential subscription rights and up to a maximum of 20% per year of the share capital of the Company (nineteenth resolution); -- issuance, on one or several occasions, of ordinary shares and/or any and all marketable securities, conferring immediate or future entitlement, at any time or on a fixed date, to shares in the Company or debt securities, provided the primary security is a share, in consideration for securities contributed in connection with a public offering to exchange the securities of another company listed on a regulated market as provided for in Article L. 225-148 of the French Commercial Code (twenty-second resolution); • you confer on it the authority, under the twentieth resolution and in connection with the implementation of the delegations provided for in the eighteenth and nineteenth resolutions, to set the issue price within the legally applicable limit of 10% per year of the share capital of the Company as assessed on the issue date; • you delegate to it, for a period of twenty-six months, the authority to set the terms and conditions of the issuance of shares or marketable securities conferring entitlement to shares in the Company or debt securities, provided the primary security is a share in consideration for contributions in kind to the Company comprising equity or marketable securities with entitlement to shares in the Company within the limit of 10% of the share capital as assessed on the issue date (twenty-third resolution).

256 Reference Document 2010 combined shareholders’ meeting

The cumulated maximum par value amount of share capital increases which may be decided under the delegations of authority to the Board of Directors may not exceed 50 million euros, pursuant to the twenty-fifth resolution, it being specified that this overall maximum shall be applied to share capital increases resulting from issues decided under the seventeenth, eighteenth, nineteenth, twenty-second, twenty-third and twenty-fourth resolutions subject to this Meeting’s approval. The number of new securities to be issued in connection with the implementation of the delegations provided for in the seventeenth, eighteenth and nineteenth resolutions may be increased under the terms and conditions provided for in Article 225-135-1 of the French commercial code and within the above-mentioned overall maximum, should you decide to adopt the twenty-first resolution. It is the Board of Directors’ responsibility to prepare a report in accordance with Articles R. 225-113, R. 225-114 and R. 225-117 of the French Commercial Code. Our role is to express an opinion on the fairness of the quantified data extracted from the financial statements, on the proposed cancellation of preferential subscription rights and on certain other information pertaining to these transactions, as presented in this report. We performed the procedures that we considered necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) applicable to this engagement. Such procedures consisted in verifying the content of the Board of Directors’ report as it relates to these transactions and the conditions in which the issue price of the equity securities to be issued shall be determined. Subject to the subsequent review of the terms and conditions of the issues that may be decided, we have no comments on the conditions, as given in the Board of Directors’ report, under which the issue price of the equity securities to be issued shall be determined under the eighteenth, nineteenth and twentieth resolutions. In addition, as this report does not contain the conditions in which the issue price of the equity securities to be issued in connection with the implementation of the seventeenth, twenty-second and twenty-third resolutions shall be determined, we cannot express an opinion on the items selected for issue price calculation purposes. As the issue price of the equity securities to be issued has not been determined, we express no opinion on the final terms and conditions under which the shares shall be issued and, consequently, on the proposed cancellation of preferential subscription rights on which you are asked to decide under the eighteenth, nineteenth and twentieth resolutions. In accordance with Article R. 225-116 of the French Commercial Code, we shall issue a supplementary report, where necessary, when these delegations are utilized by your Board of Directors, should it issue shares with cancellation of preferential subscription rights and marketable securities conferring entitlement to shares in the Company and/or debt securities.

Neuilly-sur-Seine, February 16, 2011

The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG et Autres

Thierry Benoit Olivier Breillot Gilles Cohen

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction, and construed in accordance with, French law and professional auditing standards applicable in France.

Reference Document 2010 257 combined shareholders’ meeting

STATUTORY AUDITORS’ REPORT ON THE ISSUE OF SHARES AND VARIOUS MARKETABLE SECURITIES WITH CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS RESERVED FOR EMPLOYEES WHO ARE MEMBERS OF A CORPORATE SAVINGS PLAN

Combined Annual and Extraordinary General Meeting of March 31, 2011 (Twenty-fourth resolution)

To the Shareholders, In our capacity as Statutory Auditors of LVMH Moët Hennessy Louis - Vuitton and in accordance with the procedures provided for in Articles L. 225-135, L.225-138 and L. 228-92 of the French Commercial code (Code de commerce), we hereby report to you on the proposed delegation to the Board of Directors of the authority: -- to issue, on one or several occasions, ordinary shares or more generally any and all marketable securities conferring entitlement to the share capital of the Company, with cancellation of preferential subscription rights, such issue being reserved for employees of the Company or affiliated companies, within the meaning of Article L. 3344-1 of the French Labor Code (Code du travail), who are members of a corporate savings plan, a transaction on which you are asked to vote. Shareholders are asked to approve this share capital increase pursuant to Article L. 225-129-6 of the French Commercial Code and Article L. 3332-18 et seq. of the French Labor Code. Subject to a maximum of 50 million euros nominal set in the twenty-fifth resolution for all delegations of authority to the Board of Directors as resulting from this Meeting’s resolutions, the total number of shares likely to result from all the shares issued under this delegation – including those resulting from shares or marketable securities conferring entitlement to the share capital of the Company potentially granted for no consideration to fully or partially offset the discount under the terms and conditions set forth in Article L. 3332‑18 et seq. of the French Labor Code – may not exceed 1% of the share capital of the Company to date. Your Board of Directors recommends that, having considered its report, you confer on it, for a period of twenty-six months, the authority to decide one or more issues and waive your preferential subscription rights. If applicable, it shall be responsible for determining the final issuance terms and conditions of this transaction. It is the Board of Directors’ responsibility to prepare a report in accordance with Articles R. 225-113, R. 225-114 and R. 225-117 of the French Commercial Code. Our role is to express an opinion on the fairness of the quantified data extracted from the financial statements, on the proposed cancellation of preferential subscription rights and on certain other information pertaining to the issuance as presented in this report.

258 Reference Document 2010 combined shareholders’ meeting

We performed the procedures that we considered necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) applicable to this engagement. Such procedures consisted in verifying the content of the Board of Directors’ report as it relates to this transaction and the conditions in which the issue price of the equity securities to be issued was determined. Subject to our review in due course of the terms and conditions of the proposed issue, we have no comments on the procedures for determining the share issue price of the equity securities to be issued presented in the Board of Directors’ report. As the issue price of the equity securities to be issued has not been determined, we express no opinion on the final terms and conditions under which the shares shall be issued and, consequently, on the proposed cancellation of preferential subscription rights on which you are asked to vote. In accordance with Article R. 225-116 of the French Commercial Code, we shall issue a supplementary report, where necessary, when this delegation is utilized by your Board of Directors.

Neuilly-sur-Seine, February 16, 2011

The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG et Autres

Thierry Benoit Olivier Breillot Gilles Cohen

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction, and construed in accordance with, French law and professional auditing standards applicable in France.

Reference Document 2010 259 combined shareholders’ meeting

STATUTORY AUDITORS’ REPORT ON THE FREE GRANTING OF EXISTING SHARES OR SHARES TO BE ISSUED TO EMPLOYEES AND CORPORATE OFFICERS OF THE COMPANY

Combined Shareholders’ Meeting of March 31, 2011 (Twenty-sixth resolution)

To the Shareholders, In our capacity as Statutory Auditors of LVMH Moët Hennessy Louis - Vuitton and in accordance with the procedures provided for in Article L. 225-197-1 of the French Commercial Code (Code de commerce), we have prepared this report on the proposed free granting, on one or several occasions, of existing shares or shares to be issued to employees and corporate officers of the Company or affiliated companies within the meaning of Article L. 225-197-2 of the French Commercial Code, or to certain categories of employees and corporate officers, subject to the total amount of shares granted for no consideration not exceeding 1% of the share capital of the Company as of the date of the Shareholders’ Meeting. The Board of Directors also recommends that you confer on it the authority to grant shares for no consideration, whether existing or to be issued. It is responsible for preparing a report on this transaction with which it wishes to proceed. Our role is to inform you of our comments, if any, on the information thus given to you on the proposed transaction. We performed the procedures that we considered necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) applicable to this engagement. Our work consisted in verifying more specifically that the proposed procedures and data presented in the Board of Directors’ report comply with the legal provisions. We have no comments on the information given in the Board of Directors’ report in connection with the proposed granting of shares for no consideration.

Neuilly-sur-Seine, February 16, 2011

The Statutory Auditors

DELOITTE & ASSOCIÉS ERNST & YOUNG et Autres

Thierry Benoit Olivier Breillot Gilles Cohen

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction, and construed in accordance with, French law and professional auditing standards applicable in France.

260 Reference Document 2010 Statement of responsible company officer; financial information

Page

1. Statement by the company officer responsible for the incorporated by reference 262

2. Information incorporated 263

3. Documents on display 263

Reference Document 2010 261 responsible company officer; financial information

Company officer responsible for the reference document; financial information

1. STATEMENT BY THE COMPANY OFFICER RESPONSIBLE FOR THE REFERENCE DOCUMENT

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 page 24 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. In their report on the 2009 consolidated financial statements, incorporated by reference, the Statutory Auditors had highlighted Note 1.2 of the notes to the consolidated financial statements, relating to changes in accounting policies resulting from standards, amendments and interpretations implemented by the Company. In their report on the 2008 parent company financial statements, incorporated by reference, the Statutory Auditors had highlighted Note 2.1 of the notes to the financial statements, which described a change in accounting policy, pursuant to CRC (Comité de la Réglementation Comptable) Regulation 2008-15 published on December 30, 2008.

Paris, March 9, 2011

Under delegation from the Chief Executive Officer Jean-Jacques GUIONY Chief Financial Officer, Member of the Executive Committee

262 Reference Document 2010 responsible company officer; financial information

2. Information incorporated by reference

In application of Article 28 of Commission Regulation (EC) No. 809/2004, the following information is incorporated by reference in this reference document: -- the 2009 consolidated financial statements, prepared in accordance with IFRS, accompanied by the report of the statutory auditors on these statements, included on pages 110-175 and 176-177, respectively, of the 2009 reference document, filed with the AMF on March 23, 2010 under the number D. 10-0150; -- the 2008 consolidated financial statements, prepared in accordance with IFRS, accompanied by the report of the statutory auditors on these statements, included on pages 80-141 and 142, respectively, of the 2008 reference document, filed with the AMF on April 17, 2009 under the number D. 09-0265; -- the developments in the Group’s financial situation and in the results of its operations between the 2009 and 2008 fiscal years, presented on pages 24-47 of the 2009 reference document, filed with the AMF on March 23, 2010 under the number D. 10-0150; -- the developments in the Group’s financial situation and in the results of its operations between the 2008 and 2007 fiscal years, presented on pages 28-65 of the 2008 reference document, filed with the AMF on April 17, 2009 under the number D. 09-0265; -- the 2009 parent company financial statements, prepared in accordance with French GAAP, accompanied by the report of the statutory auditors on these statements, included on pages 180-199 and 200-201, respectively, of the 2009 reference document, filed with the AMF on March 23, 2010 under the number D. 10-0150; -- the 2008 parent company financial statements, prepared in accordance with French GAAP, accompanied by the report of the statutory auditors on these statements, included on pages 204-223 and 224-225, respectively, of the 2008 reference document, filed with the AMF on April 17, 2009 under the number D. 09-0265; -- the statutory auditors’ special report on related party agreements and commitments of the 2009 fiscal year, included on pages 202-204 of the 2009 reference document, filed with the AMF on March 23, 2010 under the number D. 10-0150; -- the statutory auditors’ special report on related party agreements and commitments of the 2008 fiscal year, included on pages 226-228 of the 2008 reference document, filed with the AMF on April 17, 2009 under the number D. 09-0265. The sections of the 2009 and 2008 reference documents that are not incorporated are either not relevant to investors or are included in the present document

3. DOCUMENTS on display

The Bylaws of LVMH Moët Hennessy - Louis Vuitton SA 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 reference document filed by LVMH with the Autorité des Marchés Financiers (AMF), the 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 web site at the following address: www.lvmh.com.

Reference Document 2010 263 264 Reference Document 2010 TABLEs of CONCORDANCE

Page

1. Table of Concordance with headings presented in annex 1 of commission regulation (EC) 809/2004 266

2. TABLE of Concordance with the annual financial report 268

Reference Document 2010 265 1. Table of Concordance with headings presented in annex 1 of commission regulation (EC) 809/2004

Headings Page Headings Page

1 - Persons responsible 262 13 - Profit forecasts or estimates N/A

2 - Statutory Auditors 222 14 -  Administrative, management, and supervisory bodies and 3 - Selected financial information senior management 3.1 Historical information 2-3 ; 190 14.1  Administrative, management, 5 3.2 Interim information N/A and supervisory bodies and senior management 4 - Risk factors 38-42 ; 156-162 14.2 Administrative, management, and supervisory bodies and senior 102; 224 5 - Information about the Company management conflicts of interest 5.1 History and development 1 ; 9-22 ; 238 15 - Remuneration and benefits 64-66 ; 176 of the Company 5.2 Investments 46 ; 163-164 ; 173 16 - Board practices 16.1 Date of expiration of the current 6 - Business overview 9-22 212-221 term of office 7- Organizational structure 16.2 Members of the administrative, management or supervisory bodies’ 64-66 ; 104-105 7.1 Brief description 6-7 service contracts 7.2 List of significant subsidiaries 177-182 16.3 Information about the Audit Committee and Remuneration 103-105 ; 224-226 47-48 8 - Property, plant and equipment Committee 9 - Operating and financial review 24-37 ; 43-46 16.4 Corporate government 102-105 ; 223-226

10 - Capital resources 17 - Employees 17.1 Number of employees 70-72 10.1 Capital resources of the issuer 42-43 17.2 Shareholdings and stock options 54-59 10.2 Sources and amounts of cash flows 43-46 17.3  Arrangements for involving the 60-61 10.3 Borrowing requirements 43-46 ; 152-154 ; employees in the capital of the issuer and funding structure 201-202 ; 243 10.4 Restrictions on the use of capital 18 - Major shareholders resources that have affected, or could N/A 18.1  Shareholders having an interest in affect, the issuer’s operations 240-242 the capital of voting rights of over 5% 10.5 Anticipated sources of financing 43-46 ; 147 ; 154 18.2 Existence of different voting rights 233; 239-241 11 - Research and development, 18.3 Control of the issuer 242 18-19 ; 46 patents and licenses 18.4  Arrangements known to the issuer, the operation of which may at 241 12 - Trend information 50 a subsequent date result in a change in control of the issuer

N/A : non applicable.

266 Reference Document 2010 Headings Page Headings Page

21.1.5. Acquisition rights and/or obligations 175 ; 208-209 19 - Related party transactions over authorized but unissued capital or N/A an undertaking to increase the capital 20 - Financial information 21.1.6. Options on the capital and agreements 54-60; 148-150 concerning the issuer’s to put the capital under option assets and liabilities, financial position and profits and losses 21.1.7. History of share capital 145 ; 240 20.1 Historical financial information 116-176 ; 263 21.2 Memorandum and Articles of Association 20.2 Pro forma financial information 133 20.3 Individual company financial 21.2.1. Corporate purpose 227 ; 238 186-205 ; 263 statements of LVMH Moët Hennessy- 21.2.2. Provisions with respect to the members Louis Vuitton SA of the administrative, management and 228-232 20.4 Auditing of historical annual financial 183-184 ; 206-207 ; supervisory bodies information 263 21.2.3. Rights, preferences and restrictions attaching to each class of the existing 228 ; 239 20.5 Age of latest financial information December 31, 2010 shares 21.2.4. Necessary action to change 239 the rights of holders of the shares 20.6 Interim and other financial information N/A 21.2.5. Conditions governing 232-234 ; 238-239 annual general meetings 20.7 Dividend policy 235 ; 244 21.2.6. Provision that would have an effect of delaying, deferring or preventing N/A 20.8 Legal and arbitration proceedings 49 a change in control of the issuer 21.2.7. Ownership threshold above which 234 ; 239 20.9 Significant change in the issuer’s shareholder ownership must be disclosed N/A financial or trading position 21.2.8. Conditions governing changes 239 in the capital 21 - Additional information 22 - Material contracts N/A 21.1 Share capital 23 - Third party information and 21.1.1. Issued capital, and information statement by experts and N/A 145 ; 239-240 for each class of share capital declarations of interest 21.1.2. Shares not representing capital 239 24 - Documents on display 238 ; 263 21.1.3. Shares held by or on behalf of the issuer 146 ; 196-197 21.1.4. Convertible, exchangeable securities 239 141-142 or securities with warrants 25 - Information on holdings

Reference Document 2010 267 2. TABLE of Concordance with the annual financial report (1)

Information Page

1 – Parent company financial statements 186

2 – Consolidated financial statements 116

3 – Statutory Auditors’ report on the parent company financial statements 206-207

4 – Statutory Auditors’ report on the consolidated financial statements 183-184

5 – Management report 5.1  Analysis of the change in revenue, results and financial position, principal risks and contingencies, 24-49 ; 52-53 financial risk management policy 5.2 Summary table of valid delegations of authority granted by the Shareholders’ Meeting to 59-60 the Board of Directors regarding capital increases 5.3 Factors liable to have an impact in the event of a public takeover offer 67 5.4 Purchases of treasury shares 62-63 5.5 Statement by the Company Officer responsible for the management report 262

6 – Statutory Auditors’ fees 222

7 – Report of the Chairman of the Board of Directors 102-113

8 – Statutory Auditors’ Report of the Report of the Chairman of the Board of Directors 114

(1) In application of Articles L. 451-1-2 of the Monetary and Financial Code (Code monétaire et financier) and 222-3 of the General Rules and Regulation of the AMF.

268 Reference Document 2010 The original French version of this document was submitted to the Autorité des Marchés Financiers on March 9, 2011 pursuant to Article 212-13 of its General Rules and Regulations. The original French version of this document may be used for the purposes of public capital and financial operations if it is supplemented by a transaction note approved by the Autorité des Marchés Financiers. The original French version of this document was prepared by the issuer, and its signatories are responsible for its content.

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