CONSOLIDATED FINANCIAL STATEMENTS

73 C ONSOLIDATED B ALANCE S HEET

ASSETS (EUR million) Notes 2006 2005 2004(1) Brands and other intangible assets – net 3 10,885 11,186 10,495 Goodwill – net 4 5,120 5,058 4,634 Property, plant, and equipment – net 6 5,432 5,258 4,798 Investments in associates 7 128 131 117 Non-current available for sale financial assets 8 505 451 718 Other non-current assets 693 701 666 Deferred tax 26 451 361 278 Non-current assets 23,214 23,146 21,706 Inventories and work in progress 9 4,524 4,270 3,723 Trade accounts receivable 10 1,539 1,437 1,419 Income taxes 514 317 115 Other current assets 11 1,635 1,279 1,336 Cash and cash equivalents 13 1,359 1,510 1,066 Current assets 9,571 8,813 7,659 Total assets 32,785 31,959 29,365

LIABILITIES AND EQUITY (EUR million) Notes 2006 2005 2004(1) Share capital 363 363 363 Share premium account 2,205 2,205 2,205 Treasury shares and related derivatives (229) (157) (155) Revaluation reserves 418 292 245 Other reserves 1,447 1,021 626 Cumulative translation adjustment (53) 126 (89) Group share of net profit 797 618 549 Equity – Group share 14 4,948 4,468 3,744 Minority interests 16 8,026 7,400 6,321 Total equity 12,974 11,868 10,065 Long-term borrowings 17 4,188 4,443 5,092 Provisions 18 991 952 886 Deferred tax 26 3,786 3,846 3,389 Other non-current liabilities 19 3,758 3,370 3,246 Non-current liabilities 12,723 12,611 12,613 Short-term borrowings 17 2,661 3,376 2,984 Trade accounts payable 1,967 1,772 1,629 Income taxes 695 377 203 Provisions 18 263 312 265 Other current liabilities 20 1,502 1,643 1,606 Current liabilities 7,088 7,480 6,687 Total liabilities and equity 32,785 31,959 29,365

(1) Data published previously under French accounting standards has been restated under IFRS.

74 C ONSOLIDATED I NCOME S TATEMENT

(EUR million, except for earnings per share) Notes 2006 2005 2004(1)

Revenue 22-23 16,016 14,556 13,060 Cost of sales (5,745) (5,228) (4,533)

Gross margin 10,271 9,328 8,527

Marketing and selling expenses (5,707) (5,201) (4,832) General and administrative expenses (1,355) (1,336) (1,282)

Profit from recurring operations 22-23 3,209 2,791 2,413

Other operating income and expenses 22-24 (127) (226) (203)

Operating profit 3,082 2,565 2,210

Cost of net financial debt (230) (234) (265) Other financial income and expenses 123 43 1

Net financial income(expense) 25 (107) (191) (264)

Income taxes 26 (850) (728) (488) Income (loss) from investments in 7 8 8 (15) associates

Net profit 2,133 1,654 1,443 of which: minority interests 1,336 1,036 894 Group share 797 618 549

Basic Group share of net earnings 27 4.49 3.48 3.09 per share (in euros) Number of shares on which the 177,522,442 177,655,990 177,774,420 calculation is based

Diluted Group share of net 27 4.45 3.45 3.07 earnings per share (in euros) Number of shares on which the 179,242,114 179,002,963 178,737,153 calculation is based

(1) Data published previously under French accounting standards has been restated under IFRS.

75 C ONSOLIDATED S TATEMENT OF C HANGES IN E QUITY

Net Treasury profit Total Equity Share shares and Cumulative and Number of Share premium Related Revaluation translation other Group Minority shares capital account derivatives reserves adjustment reserves share interests Total (EUR million) Notes 14.1 14.2 14.4 14.5 16

As of January 1, 2004 (1) 181,727,048 363 2,205 (130) 219 – 761 3,418 6,031 9,449

Translation adjustment (89) (89) (176) (265) Income and expenses recognized directly in equity 26 26 48 74 Net profit 549 549 893 1,442 Total recognized income and expenses – – – 26 (89) 549 486 765 1,251 Stock option plan expenses 27 27 28 55 (Acquisition)/disposal of treasury (25) (9) (34) (75) (109) shares and related derivatives Interim and final dividends paid (162) (162) (340) (502) Changes in scope consolidation – 9 9 (19) (10) Effects of purchase commitments for minority interests – (69) (69)

As of December 31, 2004 (1) 181,727,048 363 2,205 (155) 245 (89) 1,175 3,744 6,321 10,065

Translation adjustments 215 215 381 596 Income and expenses recognized directly in equity 47 47 64 111 Net profit 618 618 1,036 1,654 Total recognized income and expenses – – – 47 215 618 880 1,481 2,361 Stock option plan expenses 17 17 15 32 (Acquisition)/disposal of treasury (2) 1 (1) 27 26 shares and related derivatives Interim and final dividends paid (172) (172) (371) (543) Changes in scope consolidation – (74) (74) Effects of purchase commitments for minority interests –11

As of December 31, 2005 181,727,048 363 2,205 (157) 292 126 1,639 4,468 7,400 11,868

Translation adjustments (179) (179) (321) (500) Income and expenses recognized directly in equity 126 126 174 300 Net profit 797 797 1,336 2,133

Total recognized income and expenses – – – 126 (179) 797 744 1,189 1,933 Stock option plan expenses 23 23 21 44 Change in treasury shares and related derivatives (72) 1 (71) (8) (79) Capital increase of subsidiaries 66 Interim and final dividends paid (216) (216) (439) (655) Changes in scope consolidation – (6) (6) Effects of purchase commitments for minority interests – (137) (137)

As of December 31, 2006 181,727,048 363 2,205 (229) 418 (53) 2,244 4,948 8,026 12,974

(1) Data published previously under French accounting standards has been restated under IFRS.

76 C ONSOLIDATED C ASH F LOW S TATEMENT

(EUR million) Notes 2006 2005 2004 (1) I - OPERATING ACTIVITIES Operating profit 3,082 2,565 2,210 Net increase in depreciation, amortization and provisions, excluding tax and 515 671 562 financial items Other unrealized gains and losses, excluding financial items (17) (92) (21) Dividends received 33 52 26 Other adjustments (20) (11) 12 Cash from operations before changes in working capital 3,593 3,185 2,789 Cost of net financial debt: interest paid (225) (268) (266) Income taxes paid (788) (620) (401) Net cash from operations before changes in working capital 2,580 2,297 2,122 Change in inventories and work in progress (362) (281) (276) Change in trade accounts receivable (157) (77) 21 Change in trade accounts payable 234 18 (88) Change in other receivables and payables 37 53 110 Total change in working capital (248) (287) (233) Net cash from operating activities 2,332 2,010 1,889 II - INVESTING ACTIVITIES Purchase of tangible and intangible fixed assets (807) (755) (711) Proceeds from sale of tangible and intangible fixed assets 11 21 63 Guarantee deposits paid and other operating investments 12 7 (13) Operating investments (784) (727) (661) Purchase of non-current available for sale financial assets (88) (69) (57) Proceeds from sale of non-current available for sale financial assets 8 172 469 95 Impact of purchase and sale of consolidated investments (68) (604) (401) Other financial investments – 64 – Financial investments 16 (140) (363) Net cash from (used in) investing activities (768) (867) (1 024) III - TRANSACTIONS RELATING TO EQUITY Capital increases subscribed by minority interests 6 3 1 Purchase and proceeds from sale of treasury shares and related derivatives (72) 30 (156) Interim and final dividends paid by Christian (216) (172) (162) Interim and final dividends paid to minority interests in consolidated (439) (371) (340) subsidiaries Net cash from (used in) transactions relating to equity (721) (510) (657) IV - FINANCING ACTIVITIES Proceeds from borrowings 1,286 1,267 1,662 Repayment of borrowings (2,136) (1,621) (1,717) Purchase and proceeds of current available for sale financial assets (181) (40) 11 Net cash from (used in) financing activities (1,031) (394) (44) V - EFFECT OF EXCHANGE RATE CHANGES (1) 34 2 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (I+II+III+IV+V) (189) 273 166

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13 988 715 549 CASH AND CASH EQUIVALENTS AT END OF PERIOD 13 799 988 715

Transactions generating no change in cash: – acquisition of assets by means of finance lease 8 9 56

(1) Data published previously under French accounting standards has been restated under IFRS.

77 N OTES TO THE C ONSOLIDATED F INANCIAL S TATEMENTS

Page

1 ACCOUNTING POLICIES 79 2 CHANGES IN THE SCOPE OF CONSOLIDATION 89 3 BRANDS, TRADE NAMES, AND OTHER INTANGIBLE ASSETS 92 4 GOODWILL 94 5 IMPAIRMENT TESTING OF INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES 95 6 PROPERTY, PLANT AND EQUIPMENT 96 7 INVESTMENTS IN ASSOCIATES 97 8 NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS 98 9 INVENTORIES AND WORK IN PROGRESS 99 10 TRADE ACCOUNTS RECEIVABLE 100 11 OTHER CURRENT ASSETS 100 12 CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS 101 13 CASH AND CASH EQUIVALENTS 101 14 EQUITY 102 15 STOCK OPTION AND SIMILAR PLANS 104 16 MINORITY INTERESTS 110 17 BORROWINGS 111 18 PROVISIONS 115 19 OTHER NON-CURRENT LIABILITIES 116 20 OTHER CURRENT LIABILITIES 116 21 DERIVATIVES 116 22 SEGMENT INFORMATION 120 23 REVENUE AND EXPENSES BY NATURE 123 24 OTHER OPERATING INCOME AND EXPENSES 124 25 NET FINANCIAL INCOME/EXPENSE 125 26 INCOME TAXES 125 27 EARNINGS PER SHARE 129 28 PROVISIONS FOR PENSIONS, MEDICAL COSTS AND SIMILAR COMMITMENTS 129 29 OFF BALANCE SHEET COMMITMENTS 132 30 RELATED PARTY TRANSACTIONS 134 31 SUBSEQUENT EVENTS 136

78 N OTES TO THE C ONSOLIDATED F INANCIAL S TATEMENTS

NOTE 1 - ACCOUNTING POLICIES

1.1 General framework As required by Regulation (EC) No. 1606/2002 of July 19, 2002, the consolidated financial statements for the year ended December 31, 2006 were established in accordance with international accounting standards (IAS/IFRS) adopted by the European Union and applicable on February 14, 2007, the date on which these financial statements were approved for publication by the Board of Directors. These standards have been applied consistently to the fiscal years presented. The Group has applied IAS 32 and IAS 39 with effect from January 1, 2004, including the amendments to IAS 39 pertaining to the cash flow hedge accounting of forecast intragroup transactions and the fair value option.

1.2 Changes in the accounting framework in 2006 • Standards, amendments and interpretations for which application is mandatory in 2006 The following standards, amendments and interpretations, which are applicable to the Group and were implemented as of January 1, 2006, do not have a significant impact on the consolidated financial statements presented: – amendments to IAS 39 and IFRS 4 pertaining to financial guarantees ; – IFRIC Interpretation 4, which includes the criteria used to determine whether an arrangement contains an implicit lease ; – amendment to IAS 21 pertaining to the recognition of the net investment in a foreign consolidated entity ; – limited amendment to IAS 19 pertaining to the recognition and disclosure of actuarial gains and losses arising from the calculation of employee benefit commitments. • Standards, amendments and interpretations for which application is optional in 2006 The following standards, amendments and interpretations will only be applied in the consolidated financial statements from 2007 onwards : – IFRS 7 Financial instruments – Disclosures ; – amendment to IAS 1, which introduces additional disclosure requirements relating to capital ; – IFRIC 8 Scope of IFRS 2, the standard dealing with share-based payments ; – IFRIC 9 Reassessment of embedded derivatives ; – IFRIC 10 Interim financial reporting and impairment. The impacts of these texts on the consolidated financial statements are in the process of being quantified.

79 1.3 First-time adoption of IFRS The first accounts prepared by the Group in accordance with IFRS were the financial statements for the year ended December 31, 2005, with a transition date of January 1, 2004. IFRS 1 allowed for exceptions to the retrospective application of IFRS at the transition date. The procedures implemented by the Group with respect to these exceptions are listed below: • business combinations : the exemption from retrospective application was not applied. The Christian Dior Group has retrospectively restated acquisitions made since 1988, the date of the initial consolidation of LVMH. IAS 36 Impairment of Assets and IAS 38 Intangible Assets were applied retrospectively as of this date; • measurement of property, plant and equipment and intangible assets : the option to measure these assets at fair value at the date of transition was not applied, with the exception of the entire real estate holdings of Christian Dior Couture; • employee benefits : actuarial gains and losses previously deferred under French GAAP at the date of transition were recognized; • foreign currency translation of the financial statements of foreign subsidiaries: translation reserves relating to the consolidation of subsidiaries that prepare their accounts in foreign currency were reset to zero as of January 1, 2004 and offset against “Other reserves”; • share-based payment : IFRS 2 Share-Based Payment was applied to all share subscription and share purchase option plans that were open at the date of transition, including those created before November 7, 2002, the date before which application is not mandatory.

1.4 Use of estimates For the purpose of preparing the consolidated financial statements, measurement of certain balance sheet and income statement items requires the use of hypotheses, estimates or other forms of judgment. This is particularly true of the valuation of intangible assets, purchase commitments for minority interests and of the determination of the amount of provisions for contingencies and losses or for impairment of inventories and, if applicable, deferred tax assets. Such hypotheses, estimates or other forms of judgment which are undertaken on the basis of the information available, or situations prevalent at the date of preparation of the accounts, may prove different from the subsequent actual events.

1.5 Methods of consolidation The subsidiaries in which the Group holds a direct or indirect de facto or de jure controlling interest are fully consolidated. Jointly controlled companies are consolidated on a proportionate basis. For distribution subsidiaries operating in accordance with the contractual distribution arrangements with the Diageo Group, only the portion of assets and liabilities and results of operations relating to Group activities is included in the consolidated financial statements (see Note 1.23).

Companies where the Group has significant influence but no controlling interest are accounted for using the equity method.

80 1.6 Foreign currency translation of the financial statements of foreign subsidiaries The consolidated financial statements are stated in euros; the financial statements of subsidiaries stated in a different functional currency are translated into euros: • at the period-end exchange rates for balance sheet items; • at the average rates for the period for income statement items. Translation adjustments arising from the application of these rates are recorded in equity under “Cumulative translation adjustment”.

1.7 Foreign currency transactions and hedging of exchange rate risks Foreign currency transactions of consolidated companies are translated to their functional currencies at the exchange rates prevailing at the transaction dates. Accounts receivable, accounts payable and debts denominated in foreign currencies are translated at the applicable exchange rates at the balance sheet date. Unrealized gains and losses resulting from this translation are recognized: • within gross margin in the case of commercial transactions; • within net financial income/expense in the case of purely financial transactions. Foreign exchange gains and losses arising from the translation of inter-company transactions or receivables and payables denominated in foreign currencies, or from their elimination, are recorded in the income statement unless they relate to long term inter-company financing transactions which can be considered as transactions relating to equity. In the latter case, translation adjustments are recorded in equity under “Cumulative translation adjustment”. Derivatives which are designated as hedges of commercial foreign currency transactions are recognized in the balance sheet at their market value at the balance sheet date and any change in the market value of such derivatives is recognized: • within gross margin for the effective portion of hedges of receivables and payables recognized in the balance sheet at the end of the period; • within equity (as a revaluation reserve) for the effective portion of hedges of future cash flows (this part is transferred to gross margin at the time of recognition of the hedged assets and liabilities); • within net financial income/expense for the ineffective portion of hedges; changes in the value of discount and premium associated with forward contracts, as well as the time value component of options, are systematically considered as ineffective portions. When derivatives are designated as hedges of subsidiaries’ equity in foreign currency (net investment hedge), any change in market value of the derivatives is recognized within equity under “Cumulative translation adjustment” for the effective portion and within net financial income/expense for the ineffective portion.

1.8 Brands, trade names and other intangible assets Only acquired brands and trade names that are well known and individually identifiable are recorded as assets at their values calculated on their dates of acquisition. Costs incurred in creating a new brand or developing an existing brand are expensed.

81 Only brands, trade names and other intangible assets with finite useful lives are amortized over their useful lives. The classification of a brand or trade name as an asset of definite or indefinite useful life is generally based on the following criteria: • the brand or trade name’s positioning in its market expressed in terms of volume of activity, international presence and notoriety; • its expected long term profitability; • its degree of exposure to changes in the economic environment; • any major events within its business segment liable to compromise its future development; • its age. Amortizable lives of brands and trade names, depending on their estimated longevity, range from 5 to 40 years. Amortization and any impairment expense of brands and trade names are recognized within “Other operating income and expenses”. Impairment tests are carried out for brands, trade names and other intangible assets using the methodology described in Note 1.12. Research expenditure is not capitalized. New product development expenditure is not capitalized unless the final decision to launch the product has been taken. Intangible assets other than brands and trade names are amortized over the following periods:

• leasehold rights: based on market conditions, generally between 100% and 200% of the lease period • development expenditure: 3 years at most • software: 1 to 5 years

1.9 Goodwill When the Group takes de jure or de facto exclusive control of an enterprise, its assets, liabilities and contingent liabilities are estimated at their fair value and the difference between the cost of taking exclusive control and the Group’s share of the fair value of those assets, liabilities and contingent liabilities is recognized as goodwill. The cost of taking exclusive control is the price paid by the Group in the context of an acquisition, or an estimate of this price if the transaction is carried out without any payment of cash. Pending specific guidance from current standards, the difference between the cost and carrying amount of minority interests purchased after control is acquired is recognized as goodwill. Goodwill is accounted for in the functional currency of the acquired entity. Goodwill is not amortized but is subject to annual impairment testing. Any impairment expense recognized is included within “Other operating income and expenses”.

1.10 Purchase commitments for minority interests The Group has granted put options to minority shareholders of certain fully consolidated subsidiaries.

82 Pending guidance from IFRS on this subject, the Group recognizes these commitments as follows at each period-end: – the contractual value of the commitment at this date appears in “Other non-current liabilities”; – the corresponding minority interests are reclassified and included in the above amount; – the difference between the amount of the commitment and the reclassified minority interests is recorded as goodwill. This accounting policy has no effect on the presentation of minority interests within the income statement. The accounting treatment described above nevertheless elicits the following observation: certain interpretations of these texts lead to the recognition of the entire amount of goodwill as a deduction from equity; under other interpretations, goodwill is maintained under assets but in an amount frozen at the acquisition date, with subsequent changes being taken directly to the income statement.

1.11 Property, plant and equipment With the exception of vineyard land and the entire real estate holdings of Christian Dior Couture, the gross value of property, plant and equipment is stated at acquisition cost. Any borrowing costs incurred prior to use of assets are expensed. Vineyard land is recognized at the market value at the balance sheet date. This valuation is based on official published data for recent transactions in the same region, or on independent appraisals. Any difference compared to historical cost is recognized within equity in “Revaluation reserves”. If market value falls below acquisition cost the resulting impairment is charged to the income statement. Vines for champagnes, cognacs and other wines produced by the Group, are considered as biological assets as defined in IAS 41 Agriculture. As their valuation at market value differs little from that recognized at historical cost, no revaluation is undertaken for these assets. Investment property is measured at cost. Assets acquired under finance leases are capitalized on the basis of the lower of their market value and the present value of future lease payments. Property, plant and equipment is depreciated on a straight-line basis over its estimated useful life:

• buildings including investment property: 20 to 50 years • machinery and equipment: 3 to 25 years • store improvements: 3 to 10 years • producing vineyards: 18 to 25 years The depreciable amount of property, plant and equipment comprises its acquisition cost less any estimated residual value. Expenses for maintenance and repairs are charged to the income statement as incurred.

1.12 Impairment testing of fixed assets Intangible and tangible fixed assets are subject to impairment testing whenever there is any indication that an asset may be impaired, and in any event at least annually in the case of

83 intangible assets with indefinite useful lives (mainly brands, trade names and goodwill). When the carrying amount of such assets is greater than the higher of their value in use or net selling price, the resulting impairment loss is recognized within “Other operating income and expenses”, allocated in priority to any existing goodwill. 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 comparison with recent similar transactions or on the basis of valuations performed by independent experts. Cash flows are forecast for each business segment defined as one or several brands or trade names under the responsibility of a specific management team. Smaller scale cash generating units, e.g. a group of stores, may be distinguished within a particular business segment. Brands and goodwill are chiefly valued on the basis of the present value of forecast cash flows, or of comparable transactions (i.e. using the revenue and net profit coefficients employed for recent transactions involving similar brands), or of stock market multiples observed for related businesses. Other complementary methods may also be employed: the royalty method, involving equating a brand’s value with the present value of the royalties required to be paid for its use; the margin differential method, only applicable when a measurable difference can be identified between the amount of revenue generated by a branded product in comparison with an unbranded product; finally the equivalent brand reconstitution method involving, in particular, estimation of the amount of advertising required to generate a similar brand. The forecast data required for the cash flow methods is based on budgets and business plans prepared by management of the related business segments. Detailed forecasts cover a five- year period with the exception of certain brands undergoing strategic repositioning for which a longer period is retained. Moreover, a final value is also estimated, which corresponds to the capitalization in perpetuity of cash flows most often arising from the last year of the plan. When several forecast scenarios are developed, the probability of occurrence of each scenario is assessed. Forecast cash flows are discounted on the basis of the rate of return to be expected by an investor in the applicable business and include assessment of the risk factor associated with each business.

1.13 Available for sale financial assets Available for sale financial assets are classified as current or non current based on their nature and the estimated period for which they will be held. Non-current available for sale financial assets mainly include strategic and non-strategic participating investments. Current available for sale financial assets include temporary investments in shares, shares of “SICAV” and “FCP” funds, excluding investments made as part of the daily cash management, accounted for as cash and cash equivalents (see Note 1.16). Available for sale financial assets are measured at their listed value at balance sheet date in the case of quoted investments, and at their net realizable value in the case of unquoted investments. Positive or negative changes in value are taken to equity within “Revaluation reserves”. If an impairment loss is judged to be definitive, a provision for impairment is recognized and charged to net financial income/expense; in the case of investments in shares, impairment is only reversed through the income statement at the time of sale.

84 1.14 Inventories and work in progress Inventories other than wine produced by the Group are recorded at the lower of cost (excluding interest expense) and net realizable value; cost comprises manufacturing cost (finished goods) or purchase price, plus incidental costs (raw materials, merchandise). Wine produced by the Group, especially champagne, is measured at the applicable harvest market value, as if the harvested grapes had been purchased from third parties. Until the date of the harvest, the value of grapes is calculated pro rata temporis on the basis of the estimated yield and market value. Inventories are valued using the weighted average cost or FIFO methods. Due to the length of the aging process required for champagne and cognac, the holding period for these inventories generally exceeds one year. However, in accordance with industry practices, these inventories are nevertheless classified as current assets. Provisions for impairment of inventories are chiefly recognized for businesses other than Wines and Spirits. They are generally required because of product obsolescence (date of expiry, end of season or collection...) or lack of sales prospects.

1.15 Trade accounts receivable Trade accounts receivable generally represent less than two months’ sales and are recorded at their face value. A provision for impairment is recorded if their net realizable value, based on the probability of their collection, is less than their carrying amount.

1.16 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits as well as highly liquid monetary investments subject to an insignificant risk of changes in value. Monetary investments are measured at their market value and at the exchange rate prevailing at the balance sheet date, with any changes in value recognized as part of net financial income/expense.

1.17 Provisions A provision is recognized whenever an obligation exists towards a third party resulting in a probable disbursement for the Group, the amount of which may be reliably estimated. When execution of its obligation is expected to be deferred by more than one year, the provision amount is discounted, the effects of which are generally recognized in net financial income/expense.

1.18 Borrowings Borrowings are measured at nominal value net of premium and issue expenses, which are charged progressively to net financial income/expense using the effective interest method. In the case of hedging against fluctuations in the capital amount of borrowings resulting from interest rate risk, both the hedged amount of borrowings and the related hedges are measured at their market value at the balance sheet date, with any changes in those values recognized within net financial income/expense for the period.

85 In the case of hedging of future interest payments, the related borrowings remain measured at their amortized cost whilst any changes in value of the effective hedge portions are taken to equity as part of revaluation reserves. Changes in value of non-hedge derivatives, and of the ineffective portions of hedges, are recognized within net financial income/ expense. Financial debt bearing embedded derivatives is measured at market value as allowed by the fair value option under IAS 39. Net financial debt comprises short and long term borrowings, the market value at the balance sheet date of interest rate derivatives, less the value of current available for sale and other financial assets and cash and cash equivalents at that date.

1.19 Derivatives The Group enters into derivative transactions as part of its strategy for hedging foreign exchange and interest rate risks. IAS 39 subordinates the use of hedge accounting to demonstration and documentation of the effectiveness of hedging relationships when hedges are implemented and subsequently throughout their existence. A hedge is considered to be effective if the ratio 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%. Derivatives are recognized in the balance sheet at their market value at the balance sheet date. Changes in their value are accounted for as described in Note 1.7 in the case of foreign exchange hedges, and as described in Note 1.18 in the case of interest rate hedges. Market value is based on market data and on commonly used valuation models, and may be confirmed in the case of complex instruments by reference to values quoted by independent financial institutions. Derivatives with maturities in excess of twelve months are disclosed as non-current assets and liabilities.

1.20 Christian Dior and LVMH treasury shares and related derivatives • Christian Dior treasury shares Christian Dior shares that are held by the Group are measured at their acquisition cost and recognized as a deduction from consolidated equity, irrespective of the purpose for which they are held. The cost of disposals of shares is determined by allocation category (see Note 14.2) using the FIFO method with the exception of shares held under stock option plans for which the calculation is performed for each plan using the weighted average cost method. Gains and losses on disposal, net of income taxes, are taken directly to equity.

• LVMH treasury shares Purchases and sales by LVMH of its own shares, resulting in changes in percentage holdings of Christian Dior Group in LVMH, are treated in the consolidated accounts of Christian Dior Group as acquisitions and disposals of minority interests. Options to purchase LVMH shares that are held by the Group in order to cover stock option plans are measured at their acquisition cost and recognized as a deduction from consolidated equity.

86 1.21 Pensions, medical costs and other employee or retired employee commitments When payments are made by the Group in respect of retirement benefits, pensions, medical costs and other commitments to third party organizations which are liable for the payment of benefits or medical expense reimbursements, these contributions are expensed in the period in which they fall due with no liability recorded on the balance sheet. When retirement benefits, pensions, medical costs and other commitments are undertaken directly by the Group, a provision is recorded in the balance sheet in the amount of the corresponding actuarial commitment, and any changes in this commitment are expensed within profit from recurring operations over the period, including effects of discounting. When this commitment is either partially or wholly funded by payments made by the Group to external financial organizations, these payments are deducted from the actuarial commitment recorded in the balance sheet. The actuarial commitment is calculated based on individual country and company assessments. In particular, these assessments include assumptions regarding salary increases, inflation, life expectancy, staff turnover and the return on plan assets. Cumulative actuarial gains or losses are amortized if, at the year-end, they exceed 10% of the higher of the total commitment or the market value of the funded plan assets. These gains or losses are amortized in the period following their recognition over the average residual active life of the relevant employees.

1.22 Current and deferred tax Deferred tax is recognized in respect of temporary differences arising between the amounts of assets and liabilities for purposes of consolidation and the amounts resulting from application of tax regulations. Deferred tax is measured on the basis of the income tax rates enacted at the balance sheet date; the effect of changes in rates is recognized during the periods in which changes are enacted. Future tax savings from tax losses carried forward are recorded as deferred tax assets on the balance sheet and impaired where appropriate; only amounts for which future use is deemed probable are recognized. Deferred tax assets and liabilities are not discounted. Taxes payable in respect of the distribution of retained earnings of subsidiaries are provided for if distribution is deemed probable.

1.23 Revenue recognition • Revenue Revenue mainly comprises direct sales to customers and sales through distributors. Sales made in stores owned by third parties are treated as revenue if the risks and rewards of ownership of the inventories are not transferred to those third parties. Direct sales to customers are made through retail outlets for Fashion and Leather Goods, certain Perfumes and , certain Watches and Jewelry brands and Selective Retailing. These sales are recognized at the time of purchase by retail customers.

87 Wholesale sales through distributors are made for Wines and Spirits, certain Perfumes and Cosmetics and certain Watches and Jewelry brands. The Group recognizes revenue when title transfers to third party customers, i.e. generally on shipment of products from Group facilities. Revenue includes shipment and transportation costs re-billed to customers only when these costs are included in products’ selling prices as a lump sum. Revenue is presented net of all forms of discount. In particular, payments made in order to have products referenced or, in accordance with agreements, to participate in advertising campaigns with the distributors, are deducted from revenue and the corresponding trade accounts receivable. • Provisions for product returns Perfumes and Cosmetics and, to a lesser extent, Fashion and Leather Goods and Watches and Jewelry companies may accept the return of unsold or outdated products from their customers and distributors. Where this practice is applied, revenue and the corresponding trade receivables are reduced by the estimated amount of such returns, and a corresponding entry is made to inventories. The estimated rate of returns is based on statistics of historical returns. • Businesses undertaken in partnership with Diageo A significant proportion of revenue for the Group’s Wines and Spirits businesses is achieved within the framework of distribution agreements with Diageo, generally taking the form of shared entities which sell and deliver both groups’ brands to customers. Because the distribution agreements provide specific rules for allocating these entities’ net profit and assets and liabilities between LVMH and Diageo, LVMH only recognizes the portion of their revenue and expenses attributable to its own brands.

1.24 Advertising and promotion expenses Advertising and promotion expenses include the costs of producing advertising media, purchasing media space, manufacturing samples and publishing catalogs, and in general, the cost of all activities designed to promote the Group’s brands and products. Advertising and promotion expenses are recognized as expenses for the period in which they are incurred; the cost of media campaigns in particular is time-apportioned over the duration of these campaigns and the cost of samples and catalogs is recognized when they are made available to customers.

1.25 Stock option and similar plans Share purchase and subscription option plans give rise to recognition of an expense based on the expected gain for plan beneficiaries calculated, using the Black & Scholes method, at the date of the Board Meeting at which the decision to initiate the plans is made. This expense is apportioned on a straight-line basis over the option vesting period with a corresponding adjustment increasing the amount of consolidated reserves. For bonus share plans, the expected gain is calculated on the basis of the closing share price on the day before the Board Meeting at which the decision to initiate the plan is made, and dividends expected to accrue during the vesting period.

88 With respect to LVMH share-based incentives, which are settled in cash and not in shares, the corresponding annual expense is recorded as a liability on the balance sheet in an equivalent amount.

1.26 Profit from recurring operations and other operating income and expenses The Group’s main business is the management and development of its brands and trade names. Profit from recurring operations is derived from these activities, whether they are recurring or nonrecurring, core or incidental transactions. Other operating income and expenses comprises income statement items which, due to their nature, amount or frequency, may not be considered as inherent to the Group’s recurring operations. This caption reflects in particular the impact of changes in the scope of consolidation and the impairment of brands and goodwill, as well 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 distort the comparability of profit from recurring operations from one period to the next.

1.27 Earnings per share Earnings per share are calculated based on the weighted average number of shares outstanding during the period, excluding treasury shares. Diluted earnings per share are calculated based on the weighted average number of shares before dilution and adding the weighted average number of shares that would result from the exercise of all existing subscription options during the period or any other diluting instrument. It is assumed for the purposes of this calculation that the funds received from the exercise of options (see Note 1.25) would be employed to re-purchase Christian Dior shares at a price corresponding to their average trading price over the period.

NOTE 2 - CHANGES IN THE SCOPE OF CONSOLIDATION No changes in the scope of consolidation occurred in fiscal years 2005 or 2006 that could affect the comparability of the consolidated financial statements for these two periods. However, although it does not represent a change in the scope of consolidation, the impacts of the business suspension of the Samaritaine department store in in June 2005 should be taken into account for the purposes of analyzing the income statements presented (see Note 22 Segment information and Note 24 Other operating income and expenses).

2.1 Fiscal year 2006 In 2006 changes in the scope of consolidation concerned the acquisition of minority interests, mainly in Fresh and Donna Karan, in addition to certain distribution subsidiaries in Asia.

2.2 Fiscal year 2005 • Wines and Spirits: Following a friendly takeover bid finalized at the end of December 2004, in January 2005, the Group acquired 99% of the share capital of Glenmorangie plc, a UK company listed in London, followed by the remaining 1% in February and March 2005 as the result of a delisting procedure.

89 The cost of this acquisition was 459 million euros (316 million pounds sterling), including 8 million euros in acquisition costs. In accordance with the bid terms, 51 million pounds sterling of this total price were paid in the form of Loan Notes, bearing interest at GBP Libor less 0.80%. The Loan Notes are repayable at par value on demand of their holders, at the earliest on December 15, 2005 and at the latest on December 15, 2012, on the biannual interest payment dates of June 15 and December 15. Glenmorangie was fully consolidated with effect from January 1, 2005. The table below summarizes the purchase price allocation, on the basis of Glenmorangie’s balance sheet as of December 31, 2004:

Value retained Carrying (EUR million) by the Group amount

Intangible assets 290 1 Property, plant and equipment 54 58 Inventories 130 123 Other current assets and liabilities, net (22) (10) Cash and cash equivalents 21 21 Borrowings (66) (66) Employee commitments (12) – Deferred tax and provisions (95) (7) Goodwill 159 –

Total cost of acquisition 459 –

The Glenmorangie, Ardberg, and Glen Moray brands are recognized in intangible assets for a total of 289 million euros, of which 234 million euros represents the Glenmorangie brand. Goodwill is generated by the synergies to be created due to the integration of Glenmorangie in the Moët distribution network. In April 2005, the Group acquired for consideration of 120 million US dollars the 30% interest in Millennium that was owned by the latter’s minority shareholder, thus increasing its total holding to 100%. This investment represents an increase in the Group’s share of the distribution license held by Millennium of 79 million euros. The Group’s interest in MountAdam was sold in July 2005. • Fashion and Leather Goods: Christian Lacroix was sold in January 2005. • Other activities: The 49.9% interest in Bonhams Brooks PS&N Ltd, accounted for by the equity method, was sold in July 2005.

2.3 Fiscal year 2004 • Wines and Spirits : In March 2004, the Group increased its interest in Millennium Import LLC, acquired in July 2002, from 40% to 70%. The corresponding investment of 103 million US dollars was fully consolidated as of that date.

90 • Fashion and Leather Goods: In March 2004, the Group increased its interest in Donna Karan from 89% to 98%, at a cost of 44 million US dollars, and in May 2004, the Group’s interest in was increased from 84% to 94%, at a cost of 112 million euros. • Perfumes and Cosmetics: In July 2004, the Group acquired 10% of for 26 million US dollars, increasing the Group’s stake to 80% following this transaction. • Watches and Jewelry: The sale of Ebel to the American group Movado, based on a memorandum of understanding dated December 2003, became effective in February 2004; Ebel was removed from the scope of consolidation as of this date.

2.4 Impact of changes in the scope of consolidation on cash and cash equivalents (EUR million) 2006 2005 2004

Purchase of consolidated investments (71) (623) (455) Positive cash balance / (net overdraft) of companies acquired – (6) 5 Proceeds from sale of consolidated investments 3 34 49 (Positive cash balance) / net overdraft of companies sold – (9) –

Impact of changes in the scope of consolidation on cash and cash equivalents (68) (604) (401)

In 2006, the impact on the Group’s cash and cash equivalents of changes in the scope of consolidation was mainly the result of the staggered payment for minority interests in Fendi in the amount of 25 million euros, the acquisition of minority interests in Donna Karan for 8 million euros and 15% of Fresh for 4 million euros. In 2005, the overall impact on the Group’s cash and cash equivalents of changes in the scope of consolidation was a decrease of 604 million euros. This amount was chiefly attributable to the acquisition of Glenmorangie, accounting for 438 million euros, and to the acquisition of minority interests in Millennium, accounting for 92 million euros. In 2004, the impact on the Group’s cash and cash equivalents of changes in the scope of consolidation was mainly the result of the acquisition of, and staggered payments for, minority interests in Fendi in the amount of 197 million euros, the acquisition of a 30% stake in Millennium for 82 million euros, the acquisition of an additional 9% stake in Donna Karan and an additional 10% stake in BeneFit Cosmetics for 56 million euros.

91 NOTE 3 - BRANDS, TRADE NAMES AND OTHER INTANGIBLE ASSETS 2006 2005 2004 Accumulated amortization and (EUR million) Gross impairment Net Net Net Brands 8,765 (343) 8,422 8,499 8,146 Trade names 3,383 (1,380) 2,003 2,204 1,983 License rights 224 (21) 203 226 122 Leasehold rights 278 (166) 112 120 136 Software 262 (190) 72 59 44 Other 183 (110) 73 78 64 Total 13,095 (2,210) 10,885 11,186 10,495

Of which: assets held under finance leases 14 (13) 1 1 1

3.1 Movements in the year Movements during the year ended December 31, 2006 in the net amounts of brands, trade names and other intangible assets were as follows: Other intangible Gross value (EUR million) Brands Trade names assets Total As of December 31, 2005 8,843 3,740 919 13,502 Acquisitions – – 91 91 Disposals – – (16) (16) Translation adjustment (78) (357) (41) (476) Other – (6) (6) As of December 31, 2006 8,765 3,383 947 13,095

Accumulated amortization and impairment Other intangible (EUR million) Brands Trade names assets Total As of December 31, 2005 (344) (1,536) (436) (2,316) Amortization expense (6) (81) (87) Disposals – – 14 14 Translation adjustment 6 156 12 174 Other 1 – 4 5 As of December 31, 2006 (343) (1,380) (487) (2,210)

Net carrying amount as of December 31, 2006 8,422 2,003 460 10,885

The translation adjustment mainly reflects the effects of changes in euro/US dollar exchange rates in the period on the valuation of intangible assets denominated in US dollars, especially the Donna Karan New York brand and the DFS trade name.

92 3.2 Movements in prior years Other Trade intangible Net carrying amount (EUR million) Brands names assets Total

As of January 1, 2004 8,197 2,116 268 10,581 Acquisitions – – 57 57 Disposals – – (5) (5) Changes in the scope of consolidation (7) – 130 123 Amortization expense (7) (2) (64) (73) Impairment expense (13) – (3) (16) Translation adjustment (24) (132) (12) (168) Other – 1 (5) (4)

As of December 31, 2004 8,146 1,983 366 10,495 Acquisitions 3 – 70 73 Disposals – – (5) (5) Changes in the scope of consolidation 289 – 78 367 Amortization expense (6) (1) (71) (78) Impairment expense – (24) – (24) Translation adjustment 66 260 34 360 Other 1 (14) 11 (2)

As of December 31, 2005 8,499 2,204 483 11,186

The effects of changes in the scope of consolidation in 2004 are mainly attributable to the first consolidation, using the full consolidation method, of the investment in Millennium; those in 2005 relate to the acquisition of Glenmorangie in the amount of 290 million euros and the final recognition of the acquisition of the distribution license held by Millennium for 62 million euros on a gross basis.

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

2006 2005 2004 Amortization (EUR million) Gross and impairment Net Net Net

Christian Dior Couture 25 – 25 25 25 Wines and Spirits 2,623 (8) 2,615 2,612 2,310 Fashion and Leather Goods 3,911 (303) 3,608 3,654 3,603 Perfumes and Cosmetics 1,287 (20) 1,267 1,274 1,267 Watches and Jewelry 871 (12) 859 887 894 Selective Retailing 3,383 (1,380) 2,003 2,204 1,983 Other Activities 48 – 48 47 47

Brands and trade names 12,148 (1,723) 10,425 10,703 10,129

93 The brands and trade names recognized in the table above are those that the Group has acquired. The principal acquired brands and trade names are : • Wines and Spirits: Hennessy, Moët, , Krug, Château d’Yquem, Newton Vineyards and Glenmorangie; • Fashion and Leather Goods: , Fendi, Céline, , Donna Karan New York, , , , and Pucci; • Perfumes and Cosmetics: Parfums Christian Dior, , , Kenzo, , BeneFit Cosmetics, Fresh and ; • Watches and Jewelry: Tag Heuer, , Fred, and Omas pens; • Selective Retailing: DFS, , Le Bon Marché; • Other Activities: La Tribune and print media publications. These brands and trade names are shown in the balance sheet at their value determined as of the date of their acquisition by the Group, which may be much less than their value in use or their net selling price as of the closing date for the consolidated financial statements. This is notably the case for the Louis Vuitton and Christian Dior Couture brands and the Sephora trade name, although this list cannot be considered exhaustive. Brands developed by the Group, notably Dom Pérignon, as well as the De Beers-LV trade name developed as a joint-venture with the De Beers Group, are not capitalized in the balance sheet.

3.4 License rights License rights notably include distribution rights for Belvedere and Chopin vodkas held by Millennium. Please refer also to Note 5 for the impairment testing of brands, trade names and other intangible assets with indefinite useful lives.

NOTE 4 - GOODWILL 2006 2005 2004 (EUR million) Accumulated Gross Impairment Net Net Net

Goodwill arising on consolidated investments 4,171 (1,093) 3,078 3,216 2,886 Goodwill arising on treasury shares (1) 259 – 259 273 280 Goodwill arising on purchase commitments 1,802 (19) 1,783 1,569 1,468 for minority interests (2)

Total 6,232 (1,112) 5,120 5,058 4,634

(1) Please refer to Note 1.20 and 14.2. (2) Please refer to Note 19 for goodwill arising on purchase commitments for minority interests.

94 Changes in goodwill break down as follows: 2006 2005 2004 Accumulated (EUR million) Gross impairment Net Net Net

As of January 1 6,224 (1,166) 5,058 4,634 4,441 Changes in the scope of consolidation 29 – 29 158 175 Changes in purchase commitments for 220 – 220 127 65 minority interests Changes in impairment – (15) (15) (24) (48) Changes in goodwill on treasury shares (14) – (14) (7) 47 Translation adjustment (227) 69 (158) 170 (46)

As of December 31 6,232 (1,112) 5,120 5,058 4,634

The effects of changes in the scope of consolidation in fiscal year 2005 were mainly attributable to the acquisition of Glenmorangie in the amount of 159 million euros; the corresponding effects in fiscal year 2004 were mainly attributable to the increase in the Group’s investment in Fendi and Millennium. The translation adjustment mainly reflects the effects of changes in euro/US dollar exchange rates in the period on the valuation of goodwill denominated in US dollars, especially Millennium, Miami Cruiseline and Donna Karan.

NOTE 5 - IMPAIRMENT TESTING OF INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES Brands, trade names, and other intangible assets with indefinite useful lives as well as the goodwill arising on acquisition have been subject to annual impairment testing. No significant impairment expense has been recognized in respect of these items during the course of fiscal year 2006. As described in Note 1.12, these assets are generally valued on the basis of the present value of forecast cash flows determined in the context of multi-year business plans. The main assumptions retained in 2006, similar to those used in 2005, for the determination of these forecast cash flows are as follows:

Period covered Pre-tax discount Growth rate for the Business Group by the plan rate period after the plan Wines and Spirits 5 years 8.5 to 9.5% 2% Fashion and Leather Goods 5 years 11 to 12% 2% Perfumes and Cosmetics 5 years 10.5 to 11.5% 2 to 2.5% Watches and Jewelry 5 years(*) 11 to 13% 2% Selective Retailing 5 years 9 to 10% 2% Other 5 years 9.5 to 10.5% 2%

(*) Five-year plans may be prolonged up to eight years for brands undergoing strategic repositioning. Growth rates applied for the period not covered by the plans are based on market estimates for the business groups concerned.

95 A one point change in the pre-tax discount rate or the growth rate for the period after the plan applied to the global cash flow forecast for each business group would not give rise to any impairment expense of related intangible assets, i.e. brands, trade names and goodwill.

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

2006 2005 2004 Depreciation (EUR million) Gross and impairment Net Net Net

Land 784 – 784 730 707 Vineyard land and producing vineyards 1,417 (69) 1,348 1,217 1,162 Buildings 1,744 (670) 1,074 1,146 1,081 Investment property 344 (46) 298 312 289 Machinery and equipment 3,572 (2,197) 1,375 1,363 1,076 Other tangible fixed assets (including assets in progress) 1,016 (463) 553 490 483

Total 8,877 (3,445) 5,432 5,258 4,798

Of which: assets held under finance leases 329 (144) 185 214 213 historical cost of vineyard land 531 (69) 462 459 453 and producing vineyards

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

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

As of December 31, 2005 1,280 2,520 354 3,420 938 8,512 Acquisitions 7 110 1 298 310 726 Change in the market value of 133 – – – – 133 vineyard land Disposals and retirements 1 (25) – (131) (36) (191) Translation adjustment (8) (94) (11) (136) (46) (295) Other 4 17 – 121 (150) (8)

As of December 31, 2006 1,417 2,528 344 3,572 1,016 8,877

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

As of December 31, 2005 (63) (644) (42) (2,057) (448) (3,254) Depreciation expense (6) (65) (5) (331) (76) (483) Impairment expense – – – (8) (1) (9) Disposals and retirements (1) 23 – 126 35 183 Translation adjustment 1 16 – 73 27 117 Other – – 1 – – 1

As of December 31, 2006 (69) (670) (46) (2,197) (463) (3,445)

Net carrying amount as of December 31, 2006 1,348 1,858 298 1,375 553 5,432

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

As of January 1, 2004 1,087 1,764 302 1,047 399 4,599 Acquisitions 7 124 11 250 280 672 Disposals and retirements (1) (32) – (5) (11) (49) Depreciation expense (5) (64) (3) (274) (69) (415) Impairment expense – – – (3) (22) (25) Change in the market value of 75 – – – – 75 vineyard land Changes in the scope of – 24 5 (1) (4) 24 consolidation Translation adjustment (4) (39) (5) (24) (17) (89) Other 3 11 (21) 86 (73) 6

As of December 31, 2004 1,162 1,788 289 1,076 483 4,798 Acquisitions 7 50 3 360 270 690 Disposals and retirements – (15) (3) (13) – (31) Depreciation expense (5) (55) (5) (304) (73) (441) Impairment expense – (2) – (22) – (24) Change in the market value of 43 – – – – 43 vineyard land Changes in the scope of (1) 18 – 23 1 41 consolidation Translation adjustment 10 65 10 50 31 165 Other 1 27 18 193 (222) 17

As of December 31, 2005 1,217 1,876 312 1,363 490 5,258

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

NOTE 7 - INVESTMENTS IN ASSOCIATES

2006 2005 2004 (EUR million) Gross Impairment Net Net Net

Share of net assets of associates as of January 1 135 (5) 130 117 105 Share of net profit (loss) for the period 8 – 8 8 (15) Dividends paid (7) – (7) (3) (4) Changes in the scope of consolidation (7) 5 (2) 10 32 Translation adjustment (1) – (1) (1) (1)

Share of net assets of associates as of December 31 128 – 128 131 117

97 In 2006, investments in associates consisted primarily of: • a 40% equity stake in Mongoual SA, a real estate company which owns a property held for rental in Paris () which is also the head office of LVMH Moët Hennessy Louis Vuitton SA; • a 23.1% equity stake in Micromania, the leading distributor of video games and consoles in the French market. Total rents invoiced by Mongoual SA to the Group amounted to 14 million euros in 2006 (14 million euros in 2005 and 2004).

NOTE 8 - NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS

2006 2005 2004 (EUR million) Gross Impairment Net Net Net

Total 537 (32) 505 451 718

As of December 31, 2004, non-current available for sale financial assets included an investment in Bouygues SA amounting to 401 million euros (see also Note 12 – Current available for sale financial assets). Non-current available for sale financial assets changed as follows in the periods presented: (EUR million) 2006 2005 2004

As of January 1 451 718 811 Acquisitions 86 107 13 Disposals at realized value (162) (469) (166) Impact of changes in market value 132 229 78 Reclassifications as investments in associates – (144) – current available for sale financial assets Net impairment expense 5 – (13) Translation adjustment (7) 10 (5)

As of December 31 505 451 718

In 2004 and 2005, the main disposals concerned the investment in Bouygues S.A.; as of December 31, 2005, the reminder of the group’s investment in Bouygues S.A. was classified under current available for sale financial assets. The main disposals in 2006 come from various equity interests held by FCPR L Capital. The net gain/loss on disposal is analyzed in Note 25 Net financial income/expense.

98 Non-current available for sale financial assets held by the Group include the following : Percentage Net Dividends (EUR million) interest value Received Equity (3) Net profit (3)

L Capital FCPR (France) (2) 46.1% 68 – 333 – L Capital 2 FCPR (France) (2) 18.5% 61 – – – Tod’s Spa (Italy) (1) 3.5% 65 1 462 39 Xinyu Hengdeli Holdings Ltd (1) 7.2% 56 – 77 13 Other investments NA 255 25 – –

505 26

(1) Market value of securities as of the close of trading on December 31, 2006. (2) Estimated realizable value of securities. (3) Figures provided reflect company information prior to December 31, 2006, as year-end accounting data was not available at the date of preparation of the consolidated financial statements. L Capital FCPR is an investment fund for which the by laws and the management schemes do not allow the Group to exercise exclusive or joint control, or significant influence, on shareholdings held.

NOTE 9 - INVENTORIES AND WORKS IN PROGRESS (EUR million) 2006 2005 2004

Wines and distilled alcohol in the process of aging 2,406 2,161 1,883 Other raw materials and work in progress 435 396 376

2,841 2,557 2,259 Goods purchased for resale 600 625 499 Finished products 1,629 1,689 1,535

2,229 2,314 2,034 Gross amount 5,070 4,871 4,293 Provision for impairment (546) (601) (570)

Net amount 4,524 4,270 3,723

The net change in inventories for the periods presented breaks down as follows: 2006 2005 2004

(EUR million) Gross Impairment Net Net Net

As of January 1 4,871 (601) 4,270 3,723 3,575 Change in gross inventories 357 – 357 281 263 Fair value adjustment for the harvest of the period 23 – 23 19 25 Change in provision for impairment – 21 21 (41) (39) Changes in the scope of consolidation 6 (3) 3 125 (27) Translation adjustment (187) 37 (150) 163 (74)

As of December 31 5,070 (546) 4,524 4,270 3,723

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

(EUR million) 2006 2005 2004

Fair value adjustment for the harvest of the period 41 34 46 Adjustment for inventory consumed (18) (15) (21)

Net effect on cost of sales of the period 23 19 25

NOTE 10 - TRADE ACCOUNTS RECEIVABLE

(EUR million) 2006 2005 2004

Trade accounts receivable – nominal amount 1,734 1,650 1,621 Provision for impairment (60) (72) (83) Provision for product returns (135) (141) (119)

Net amount 1,539 1,437 1,419

Of which: receivables factored in accordance – – 268 with the French Dailly law

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

NOTE 11 - OTHER CURRENT ASSETS

(EUR million) 2006 2005 2004

Current available for sale financial assets 607 422 201 Derivatives 252 151 396 Tax accounts receivable, excluding income taxes 239 194 214 Advances and payments on account to vendors 104 86 57 Prepaid expenses 237 219 205 Other receivables, net 196 207 263

Total 1,635 1,279 1,336

Prepaid expenses include samples and advertising materials, particularly for Perfumes and Cosmetics, in the amount of 88 million euros as of December 31, 2006 (72 million euros as of December 31, 2005, 74 million euros as of December 31, 2004). Please also refer to Note 12 Current available for sale financial assets and Note 21 Derivatives.

100 NOTE 12 - CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS

(EUR million) 2006 2005 2004

Unlisted securities, shares in non money market SICAV 462 281 191 and FCP mutual funds Listed securities 145 141 10

Total 607 422 201

Of which: historic cost of current available for sale financial assets 506 318 190

Current available for sale financial assets changed as follows in the periods presented:

(EUR million) 2006 2005 2004

As of January 1 422 201 202 Acquisitions 336 51 31 Disposals at net realized value (156) (11) (30) Changes in market value 42 49 11 Reclassification of non-current available for sale financial assets (1) 126 – Translation difference (36) 6 (13)

As of December 31 607 422 201

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

NOTE 13 - CASH AND CASH EQUIVALENTS

(EUR million) 2006 2005 2004

Fixed term deposits (less than 3 months) 126 94 89 SICAV and FCP money market funds 148 34 19 Ordinary bank accounts 1,085 1,382 958

Cash and cash equivalents 1,359 1,510 1,066

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 million) 2006 2005 2004

Cash and cash equivalents 1,359 1,510 1,066 Bank overdrafts (560) (522) (351)

Net cash and cash equivalents 799 988 715

101 NOTE 14 - EQUITY

14.1 Share capital As of December 31, 2006, issued and fully paid-up shares totaled 181,727,048 (181,727,048 shares as of December 31, 2005 and 2004), with a par value of 2 euros per share, including 126,581,274 shares with double voting rights. Double voting rights are granted to registered shares held for at least three years (120,948,264 as of December 31, 2005, 17,077,129 as of December 31, 2004).

14.2 Christian Dior and LVMH treasury shares and derivatives settled in LVMH shares The impact on the net situation of the Group of the Christian Dior shares and LVMH calls held within the framework of the stock option plans breaks down as follows:

(EUR million) 2006 2005 2004

Christian Dior treasury shares 181 157 155 Christian Dior portion in LVMH share-based calls (1) 48 ––

Treasury shares and related derivatives 229 157 155

(1) When the calls are exercised and securities are provided at a nearby date, the settlement of these transactions has no impact on the accounts. Until fiscal year 2006, LVMH shares to be delivered under share purchase option plans were held by LVMH and allocated to these plans as from the launch date of the plans. In the first half of 2006, this method of hedging was replaced for certain existing plans by the purchase of LVMH share purchase options (LVMH share-based calls). The LVMH shares that were replaced by the LVMH share-based calls were reallocated to cover plans other than share purchase option plans. The portfolio of Christian Dior shares is allocated as follows:

2006 2005 2004 (EUR million) Number Value Value Value

Share purchase option plans 4,162,097 180 156 136 Other 19,532 1 119

Total 4,181,629 181 157 155

102 The portfolio movements relating to Christian Dior’s treasury shares in 2006 were as follows: Number (EUR million) of shares Value

As of December 31, 2005 4,072,760 157 Purchases 444,582 34 Options exercised (335,713) (10) Proceeds from disposals – – Gross capital gain (loss) on disposal – –

As of December 31, 2006 4,181,629 181

As of December 31, 2006, the market value of other Christian Dior shares held was 1.6 million euros.

14.3 Dividends paid by the parent company Christian Dior 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 the value of treasury shares. As of December 31, 2006, the amount available for distribution was 2,513 million euros; after taking into account the proposed dividend distribution in respect of the 2006 fiscal year and excluding the effect of treasury shares, the amount available for distribution is 2,256 million euros.

(EUR million) 2006 2005 2004

Interim dividend for the current year (0.38 euro for 2006; 69 58 58 0.32 euro for 2005 and 2004) Impact of treasury shares (2) (1) (1)

67 57 57 Final dividend for the previous year (0.84 euro for 2005; 153 118 107 0.65 euro for 2004 and 2003) Impact of treasury shares (4) (3) (2)

149 115 105 Total disbursement for the period 216 172 162

The final dividend for 2006, as proposed to the Shareholders’ Meeting of May 10, 2007 is 1.03 euro per share, representing a total disbursement of 187 million euros excluding the effects of treasury shares.

14.4 Revaluation reserves Revaluation reserves record the unrealized gains and losses in respect of current and non-current available for sale financial assets, hedges of future foreign currency cash flows and vineyard land, primarily in Champagne.

103 These reserves changed as follows during the fiscal years presented: Hedges of Available future foreign Total for sale currency cash Vineyard Group (EUR million) financial assets flows land share As of January 1, 2004 (7) 71 155 219 Change in value 29 72 27 128 Transfer to profit for the year 3 (88) – (85) Tax impact (15) 5 (7) (17) Gains and losses recognized in equity 17 (11) 20 26

As of December 31, 2004 10 60 175 245 Change in value 167 (63) 17 121 Transfer to profit for the year (57) (31) – (88) Tax impact (11) 31 (6) 14 Gains and losses recognized in equity 99 (63) 11 47

As of December 31, 2005 109 (3) 186 292 Change in value 125 89 46 260 Transfer to profit for the year (69) (25) (94) Tax impact (1) (23) (16) (40) Gains and losses recognized in equity 55 41 30 126 As of December 31, 2006 164 38 216 418

14.5 Cumulative translation adjustment The change in the translation adjustment recognized under equity at December 31, 2006, net of hedging effects of net assets denominated in foreign currency, breaks down as follows by currency: (EUR million) 2006 Change 2005 2004 US dollar (68) (153) 85 (89) Hong Kong dollar (5) (14) 9 (7) Pound sterling 13 671 Other currencies (1) (23) 22 1 Hedges of foreign currency net assets 8 535 Total (53) (179) 126 (89)

NOTE 15 - STOCK OPTION AND SIMILAR PLANS • Options granted by Christian Dior SA The Shareholders’ Meeting of May 11, 2006 authorized the Board of Directors, for a period of thirty-eight months expiring in July 2009, to grant share subscription or purchase options to Group company employees or directors, on one or more occasions, in an amount not to exceed 3% of the company’s share capital.

104 As of December 31, 2006, no subscription plan had been allocated by Christian Dior SA. Each plan is valid for 10 years and the options may be exercised after a three or five years period. In certain circumstances, in particular in the event of retirement, the period of three or five years before options may be exercised is not applicable. For all plans, one option entitles the holder to purchase one Christian Dior share.

• LVMH SA share subscription or purchase options The Shareholders’ Meeting of May 11, 2006 authorized the Board of Directors, for a period of thirty-eight months expiring in July 2009, to grant share subscription or purchase options to Group company employees or directors, on one or more occasions, in an amount not to exceed 3% of the company’s share capital. Each plan is valid for ten years. The options may be exercised after a three or four-year period, depending on whether the plans were issued before or after 2004, with the exception of the share purchase option plan dated May 14, 2001 initially concerning 1,105,877 options, which is valid for eight years and for which the options may be exercised after a period of four years. In certain circumstances, in particular in the event of retirement, the period of three or four years before options may be exercised is not applicable. For all plans, one option entitles the holder to purchase one LVMH share.

• LVMH bonus share plans The Shareholders’ Meeting of May 12, 2005 authorized the Board of Directors, for a period of thirty-eight months expiring in July 2008, to grant bonus shares to 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. The allocation of shares to their beneficiaries becomes definitive after a two-year vesting period and the shares will need to be held by the beneficiaries for an additional two years.

• LVMH share subscription option plans Number of Number options Number of Exercise Vesting of options unexercised options price period of exercised as of Dec. Grant Date granted (EUR) rights in 2006 31, 2006

January 21, 2004 2,720,425 55.70 4 years – 2,689,175 “ 27,050 58.90 “ – 26,050 May 12, 2005 1,852,150 52.82 “ – 1,849,700 “ 72,250 55.83 “ – 72,250 May 11, 2006 1,674,709 78.84 “ – 1,674,709 “ 114,650 82.41 “ – 114,650

– 6,426,534

105 2006 2005 2004 Weighted Weighted Weighted average average average exercise exercise exercise price price price Number (EUR) Number (EUR) Number (EUR)

Options outstanding as of 4,637,175 54.57 2,747,475 55.73 – – January 1 Options granted during the 1,789,359 79.07 1,924,400 52.93 2,747,475 55.73 period Expired options ––(34,700) 55.59 – – Options exercised during the –––– –– period

Options outstanding as of 6,426,534 61.39 4,637,175 54.57 2,747,475 55.73 December 31

Options granted relate to the share subscription option plan set up on May 11, 2006 with an average unit exercise price of 79.07 euros. The vesting period is four years.

106 • Share purchase option plans Number of options Number of unexercised Number of Vesting options as options Exercise price period of exercised in of Grant date granted (1) (EUR) (2) (3) rights 2006 (3) 12. 31, 2006 (3)

LVMH May 30, 1996 233,199 34.15 3 years 535,990 – May 29, 1997 233,040 37.50 “ 93,400 531,835 January 29, 1998 269,130 25.92 “ 137,585 438,225 March 16, 1998 15,800 31.25 “ 15,400 55,000 January 20, 1999 320,059 32.10 “ 274,050 958,995 September 16, 1999 44,000 54.65 “ – 210,000 January 19, 2000 376,110 80.10 “ 1,750 1,794,900 January 23, 2001 2,649,075 65.12 “ 183,525 2,294,150 March 6, 2001 40,000 63.53 “ 5,000 35,000 May 14, 2001 1,105,877 66.00 4 years 24,225 529,694 May 14, 2001 552,500 61.77 3 years – 552,500 September 12, 2001 50,000 52.48 “ – 50,000 January 22, 2002 3,256,700 43.30 “ 713,108 2,292,617 January 22, 2002 27,400 45.70 “ 17,200 5,750 May 15, 2002 8,560 54.83 “ 3,000 5,560 January 22, 2003 3,155,225 37.00 “ 225,775 2,836,650 January 22, 2003 58,500 38.73 “ 12,950 45,050

Total LVMH 2,242,958 12,635,926

Christian Dior October 14, 1996 94,600(4) 25.95 3 years 207,000 – May 29, 1997 97,900 32.01 5 years 4,200 275,200 November 3, 1998 98,400 18.29 5 years 5,200 276,000 January 26, 1999 89,500 25.36 5 years 28,313 266,000 February 15, 2000 100,200 56.70 5 years 10,000 382,000 February 21, 2001 437,500 45.95 3 years 13,000 404,500 February 18, 2002 504,000 33.53 3 years 60,000 429,000 February 18, 2003 527,000 29.04 3 years 8,000 504,000 February 17, 2004 527,000 49.79 3 years – 495,000 May 12, 2005 493,000 52.21 3 years – 490,000 February 15, 2006 475,000 72.85(5) 3 years – 475,000 September 6, 2006 20,000 74.93 3 years – 20,000 Subtotal 335,713 4,016,700 Plans to come 145,397 – – – 145,397

Total Christian Dior 335,713 4,162,097

(1)Number of options on the plan commencement date not restated for adjustments relating to the one-for- ten bonus share allocations of June 1999 and for the five-for-one stocks split in July 2000 at LVMH, and not restated for adjustments linked to the division of the nominal amount by four in July 2000 at Dior. (2) Figures for periods prior to 1999 result from the translation into euros of data originally presented in French francs. (3) Restated following the operations referred to in (1) above. (4)Plan expired November 30, 2006. (5)Exercise price for residents of Italy: 77.16 euros

107 2006 2005 2004 Weighted Weighted Weighted average average average exercise exercise exercise price price price (EUR million) Number (EUR) Number (EUR) Number (EUR) LVMH Options outstanding 14,927,777 49.48 17,148,615 48.66 19,433,292 45.67 as of January 1 Options granted – – – – – – Expired options (48,893) 63.59 (956,498) 61.61 (106,425) 46.01 Options exercised (2,242,958) 39.83 (1,264,340) 29.21 (2,178,252) 22.10 during the period Options outstanding 12,635,926 51.36 14,927,777 49.48 17,148,615 48.66 as of December 31 Christian Dior Options outstanding 3,993,213 38.78 3,574,600 36.72 3,160,000 34.28 as of January 1 Options granted 495,000 73.02 493,000 52.21 527,000 49.79 Expired options (135,800) 36.96 – – – – Options exercised (335,713) 28.98 (74,387) 28.78 (112,400) 29.40 during the period Options outstanding 4,016,700 43.88 3,993,213 38.78 3,574,600 36.72 as of December 31

• LVMH bonus share plans

Number of Number shares of Vesting granted as of shares period Dec. 31, Date of Shareholders’ Meeting Grant date granted of rights 2006

May 12, 2005 May 12, 2005 97,817 2 years 97,142 May 12, 2005 May 11, 2006 164,306 ” 164,306

261,448

• LVMH share-based incentives LVMH share-based incentives that are settled in cash for amounts based on changes in the LVMH share price were set up on January 21, 2004 and May 12, 2005; they related initially to 206,750 and 187,300 shares respectively. Moreover, two plans equivalent to the award of 39,300 and 12,000 bonus shares were set up on May 11, 2006 and August 1, 2006, respectively. These plans vest over a period of four years.

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

At LVMH:

2006 Plans 2005 Plans 2004 Plans

LVMH share price on the grant date (EUR) 84.05 57.05 62.75 Average exercise price (EUR) 79.07 52.82 55.70 Volatility of LVMH shares (in %) 24.5 21.7 25.0 Dividend distribution rate (in %) 1.4 1.65 1.35 Risk-free investment rate (in %) 4.1 3.06 3.78 Vesting period 4 years 4 years 4 years

The volatility of LVMH’s shares is determined on the basis of their implicit volatility. The unit values of share subscription options and bonus shares allocated in 2006 are 25.06 euros and 81.70 euros, respectively. The expense for the period resulting from these valuations is presented below; in 2004, 2005 and 2006, all plans which had not yet vested as of January 1, 2004, the date of transition to IFRS, are taken into account.

(EUR million) 2006 2005 2004

Share subscription and purchase option plans, 34 25 50 bonus share plans LVMH-share based compensation plans 1 51

Expense for the year 35 30 51

At Christian Dior:

September February 2006 plan 2006 plan 2005 Plans 2004 Plans

Christian Dior share price on the grant 81.05 77.40 56.85 52.70 date (EUR) Average exercise price (EUR) 74.93 72.85 52.21 49.79 Volatility of Christian Dior shares (%) 24.50 24.50 21.70 25.00 Dividend distribution rate (%) 1.40 1.40 1.65 1.35 Risk-free investment rate (%) 4.10 4.10 3.06 3.78 Vesting period 3 years 3 years 3 years 3 years

The volatility of Christian Dior’s shares is determined on the basis of their implicit volatility.

109 The average Christian Dior share price in 2006 is 79.53 euros. • Share purchase option plans Based on the above assumptions and parameters, the unit values of the options allocated on February 15, 2006 and September 6, 2006, respectively, were 23.09 euros and 28.70 euros (from 15.83 euros for options allocated in 2005 and 18.89 euros for options allocated in 2004). The expense for the period recognized for the plans in 2006 was 9 million euros (7 million euros in 2005 and 5 million euros in 2004).

NOTE 16 - MINORITY INTERESTS

(EUR million) 2006 2005 2004 As of January 1 7,400 6,321 6,031 Minority interests’ share of net profit 1,336 1,036 893 Dividends paid to minority interests (439) (371) (340) Changes in the scope of consolidation: impact of LVMH treasury shares (8) 27 (75) consolidation of Millennium – –82 acquisition of minority interests in Millennium – (76) – acquisition of minority interests in Fendi (2) – (43) acquisition of minority interests in Donna Karan (4) – (23) other changes in the scope of consolidation – 2 (35) Total changes in the scope of consolidation (14) (47) (94) Minority interests’ share in the following changes: capital increase subscribed by minority interests 6 –– revaluation reserves 174 64 48 translation adjustment (321) 381 (176) stock option plan expenses 21 15 28 Effects of purchase commitments for minority interests (137) 1 (69)

As of December 31 8,026 7,400 6,321

110 NOTE 17 - BORROWINGS

17.1 Net financial debt

(EUR million) 2006 2005 2004

Long term borrowings 4,188 4,443 5,092 Short term borrowings 2,661 3,376 2,984

Gross amount of borrowings 6,849 7,819 8,076 Interest rate risk derivatives (83) (151) (121)

Borrowings net of interest rate risk derivatives 6,766 7,668 7,955 Current available for sale financial assets (607) (422) (201) Other financial assets (37) (30) (42) Cash and cash equivalents (1,359) (1,510) (1,066)

Net financial debt 4,763 5,706 6,646

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

17.2 Breakdown by nature

(EUR million) 2006 2005 2004

Perpetual bonds – 32 49 Bonds and EMTNs 3,039 3,133 3,496 Finance and other long term leases 132 157 151 Bank borrowings 1,017 1,121 1,396

Long term borrowings 4,188 4,443 5,092

Bonds and EMTNs 220 1,195 968 Finance and other long term leases 22 22 21 Bank borrowings 571 625 369 Commercial paper 516 323 513 Other borrowings and credit facilities 676 589 626 Perpetual bonds 12 –20 Bank overdrafts 560 522 351 Accrued interest 84 100 116

Short term borrowings 2,661 3,376 2,984

Total borrowings 6,849 7,819 8,076

Fair value of gross borrowings 6,865 7,885 8,162

111 17.3 Perpetual bonds (EUR million) Nominal interest rate 2006 2005 2004 FRF 5,000,000,000; 1990 6-month Euribor + 0.45% – –20 FRF 1,505,000,000; 1992 9.70% 12 32 49 Total 12 32 69

The above mentioned securities, issued as subordinated perpetual bonds were converted into perpetual bonds in 1996 following an amendment to the original 1990 issue agreement. Since that date, and given that these are ordinary unsecured receivables, perpetual bonds can only be repaid in the event of LVMH’s liquidation or voluntary dissolution, except for that resulting from a merger or spin-off. Although there are no fixed repayment terms, the perpetual bonds are recorded in the consolidated balance sheet for an amount that will be progressively reduced to zero after fifteen years, due to agreements entered into with third parties. Pursuant to these agreements and in return for a final lump sum payment by LVMH upon issuance, the third-party companies have undertaken to hold or purchase the securities from subscribers after fifteen years, and have agreed to relinquish all or almost all rights to interest on these securities after that time. Pursuant to these provisions: • the perpetual bonds were recorded in the balance sheet at their par value upon issuance net of the lump sum payments, and are amortized each year according to the income generated by the investment of these payments by the third party companies; • the interest paid on the par value, as well as the aforementioned amortization, are deducted from the consolidated net profit.

17.4 Bonds and EMTNs Initial effective interest rate (1) (EUR million) Maturity (%) 2006 2005 2004 EUR 600,000,000; 2005 2012 3.43 598 598 – EUR 600,000,000; 2004 2011 4.74 606 625 623 EUR 150,000,000; 2006 2011 4.37 150 –– EUR 750,000,000; 2003 2010 5.05 746 773 777 EUR 500,000,000; 2001 2008 6.27 508 525 536 EUR 800,000,000; 1999 2006 – – 808 824 EUR 600,000,000; 2000 2005 – – – 588 FRF 1,300,000,761; 1998 2005 – – –42 indexed Public bond issues 2,608 3,329 3,390 – in euros 593 641 632 – in foreign currencies 58 358 442 Private placements (EMTN) 651 999 1,074 Total Bonds and EMTNs 3,259 4,328 4,464

(1) Before impact of interest rate hedges set up at the time of, or subsequent to, each issuance.

112 The change in the amount of bond and EMTN issues in 2006 is mainly attributable to: • the repayment for an amount of 808 million euros, of the bond issue of a nominal amount of 800 million euros made in 1999, • the issue of a bond in November 2006 in the nominal amount of 150 million with a term of five years; issued at 101.29% of the nominal amount and reimbursable at par, the fixed coupon rate of 4.25% is payable annually.

17.5 Analysis of gross borrowings by payment date (EUR million) 2006

Maturity 2007 2,660 2008 1,144 2009 306 2010 777 2011 1,256 Thereafter 706

Total 6,849

On November 21, 2005, Christian Dior SA proceeded to restructure a syndicated loan of 500 million euros. The maturity date, initially fixed at November 15, 2009, was postponed to November 21, 2010. Christian Dior SA exercised its postponement option (in the amount of 490 million euros) until November 21, 2011.

17.6 Analysis of gross borrowings by currency after hedging (EUR million) 2006 2005 2004

Euro 4,557 5,378 5,885 US dollar 554 476 380 Swiss franc 814 881 881 Yen 358 512 588 Other currencies 483 421 221

Total 6,766 7,668 7,955

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

17.7 Analysis of gross borrowings by interest rate type after hedging (EUR million) 2006 2005 2004

Floating rate 2,601 1,514 1,847 Capped floating rate 1,475 2,606 3,178 Fixed rate 2,690 3,548 2,930

Total 6,766 7,668 7,955

113 17.8 Sensitivity Considering the Group’s different borrowings denominated in foreign currencies as of December 31, 2006, an immediate 1% increase in the exchange rates of the Group’s borrowing currencies would have a 29 million euros negative impact on its net financial income/expense for the period. An immediate 1% decrease in these rates would have a 70 million euros impact on the fair value of gross borrowings after hedging.

17.9 Liquidity risk In addition to local liquidity risks, which are generally immaterial, the Group’s exposure to liquidity risk can be assessed through its total net short term borrowings (0.7 billion euros) before hedging, or through the outstanding amount of its commercial paper program (0.5 billion euros). Should any of these liquidity facilities not be renewed, the Group has access to undrawn confirmed credit lines totaling 4.3 billion euros. The Group’s liquidity is based on the amount of its investments and long term borrowings, the diversity of its investor base (bonds and short term paper), and the quality of its banking relationships, whether evidenced or not by confirmed lines of credit.

17.10 Covenants As is normal practice for syndicated loans, Christian Dior Group has signed commitments to maintain a percentage interest and voting rights for certain of its subsidiaries, and to maintain a normal financing ratio in this regard. The Group has undertaken to comply with a certain financial covenant based on the ratio of net financial debt over cash flows for the year for certain long term credit lines. The current level of this ratio is very far from this critical level, which means that the Group has a high degree of financial flexibility with regard to these commitments.

17.11 Undrawn confirmed credit lines As of December 31, 2006, unused confirmed credit lines totaled 4.3 billion euros.

17.12 Guaranties and collateral As of December 31, 2006, borrowings hedged by collateral were less than 100 million euros.

114 NOTE 18 - PROVISIONS (EUR million) 2006 2005 2004

Provisions for pensions, medical costs and similar commitments 263 267 261 Provisions for contingencies and losses 690 631 581 Provisions for reorganization 38 54 44

Non-current provisions 991 952 886 Provisions for pensions, medical costs and similar commitments 4 54 Provisions for contingencies and losses 149 159 194 Provisions for reorganization 110 148 67

Current provisions 263 312 265

Total 1,254 1,264 1,151

In 2006, the changes in provisions were as follows: Other items Changes in (including December, 31 Amounts Amounts scope of translation December, 31 (EUR million) 2005 Increases used released consolidation adjustment) 2006

Provisions for pensions, 272 42 (34) – – (13) 267 medical costs and similar commitments Provisions for 790 206 (136) (25) – 4 839 contingencies and losses Provisions for 202 31 (71) (3) – (11) 148 reorganization

Total 1,264 279 (241) (28) – (20) 1,254

Of which : profit from 141 (89) (23) recurring operations net financial ––– income (expense) other 138 (152) (5)

Provisions for pensions, medical costs and similar commitments are examined in Note 28. 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. Regarding provisions for reorganization, please refer also to Note 24 “Other operating income and expenses” concerning the business suspension of The Samaritaine department store in Paris.

115 NOTE 19 - OTHER NON-CURRENT LIABILITIES (EUR million) 2006 2005 2004

Purchase commitments for minority interests 3,490 3,151 3,013 Fair value of derivatives 18 28 34 Employee profit-sharing (1) 100 63 55 Other liabilities 150 128 144

Total 3,758 3,370 3,246

(1) French companies only, pursuant to legal provisions. As of December 31, 2004, 2005 and 2006 purchase commitments for minority interests mainly include the put option granted to Diageo plc for its 34% share in Moët Hennessy SNC, with six-month’s advance notice and for 80% of its market value at that date. With regard to this commitment valuation, the market value was determined by applying the share price multiples of comparable firms to Moët Hennessy’s operating results. Purchase commitments for minority interests also include commitments relating to minority shareholders in Fendi (6%) and BeneFit (20%), calculated using various formulae which may include a minimum value.

NOTE 20 - OTHER CURRENT LIABILITIES (EUR million) 2006 2005 2004

Fair value of derivatives 44 132 188 Employees and social institutions 517 508 468 Employee profit-sharing 29 44 13 Taxes other than income taxes 245 217 210 Advances and payments on account 71 107 95 Deferred payment for tangible and financial non-current assets 170 192 200 Deferred income 47 46 59 Other 379 397 373

Total 1,502 1,643 1,606

Derivatives are analyzed in Note 21.

NOTE 21 - DERIVATIVES Financial instruments are used by the Group to hedge risks arising from Group activity and protect its assets. These instruments, most often traded on organized markets, are mainly centralized. Counterparties are chosen according to their international rating as well as for diversification purposes.

116 21.1 Summary of derivatives Derivatives are recorded in the balance sheet for the amounts and in the captions detailed as follows: (EUR million) Notes 2006 2005 2004

Interest rate risk Assets: non current 40 96 154 current 89 121 180 Liabilities: non current (16) (17) (34) current (30) (49) (179)

21.2 83 151 121 Foreign exchange risk Assets: non current 4 36 62 current 163 30 216 Liabilities: non current (2) (11) – current (14) (83) (9)

21.3 151 (28) 269

Total Assets: non current 44 132 216 current 11 252 151 396 Liabilities: non current 19 (18) (28) (34) current 20 (44) (132) (188)

234 123 390

21.2 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).

117 Derivatives used to manage interest rate risk outstanding as of December 31, 2006 break down as follows:

Maturity (1) Market value (2) 2008 Fair value Unallocated (EUR million) 2007 to 2011 Total hedges amounts Total

Interest rate swaps in euros – fixed rate payer 475 1,320 1,795 16 10 26 – floating rate payer 698 2,463 3,161 54 (10) 44 – floating / floating 350 1,200 1,550 3 3 Other operations in euros – caps purchased 1,400 – 1,400 – 6 6 – collars 75 – 75 – – – Cross-currency swaps – 39 39 – 4 4

Total 70 13 83

(1) Nominal amounts (2) Gain/(loss)

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

118 Derivatives used to manage foreign exchange risk outstanding as of December 31, 2006 break down as follows:

Allocated to fiscal year (1) Market value (2) Future Fair Net 2007 and cash flow value asset Not (EUR million) 2006 thereafter Total hedges hedges hedges allocated Total

Options purchased Put USD 45 1,293 1,338 78 – – 4 82 Put JPY 76 90 166 8 – – 5 13 Other 5 5 121 1,388 1,509 86 – – 9 95 Collars Written USD – 12 12 – – – – – Written JPY – 225 225 13 – – – 13 Other 9 – 9 – – – 1 1 9 237 246 13 – – 1 14 Forward exchange contracts (3) USD 154 66 220 (1) 2 – 4 5 JPY 169 74 243 14 11 1 5 31 GBP 91 56 147 – – – – – Other 57 (5) 52 1 – – – 1 471 191 662 14 13 1 9 37 Foreign exchange swaps (3) CHF 784 – 784 – – – 11 11 USD 361 (84) 277 – – – (2) (2) GBP (26) – (26) – – – (1) (1) JPY (190) – (190) – – 2 (5) (3) Other 76 – 76 – – – – – 1,005 (84) 921 – – 2 3 5 Total 113 13 3 22 151

(1) Nominal amounts (2) Gain/(loss) (3) Sale/(purchase)

21.4 Derivatives used to manage equity risk As the Group’s investment policy is long term, the portfolio of available for sale financial assets is not hedged.

119 NOTE 22 - SEGMENT INFORMATION

22.1 Information by business group Since De Beers-LV was reclassified in 2006 from Other activities and Holding companies to Watches and Jewelry, data for 2004 and 2005 was restated to facilitate comparability with 2006 data.

Year ended December 31, 2006

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

Sales outside the 720 2,989 5,190 2,379 724 3,879 135 – 16,016 Group Sales between 11 5 32 140 13 12 16 (229) – business groups

Total revenue 731 2,994 5,222 2,519 737 3,891 151 (229) 16,016 Profit from 56 962 1,633 222 80 400 (137) (7) 3,209 recurring operations Other operating – (12) (44) (30) (9) (27) (5) – (127) income and expenses Operating 55 107 308 99 25 186 50 – 830 investments (2) Depreciation and 38 61 208 98 21 117 16 – 559 amortization Impairment – – 5 – – 7 10 – 22

Brands, trade 42 4,956 5,048 1,639 1,009 2,643 411 – 15,748 names, licenses and goodwill (3) Inventories 142 2,730 603 244 235 558 50 (38) 4,524 Other operating 580 2,220 1,752 648 229 1,575 1,180 4,329 12,513 assets

Total assets 764 9,906 7,403 2,531 1,473 4,776 1,641 4,291 32,785

Equity – – – – – – – 12,974 12,974 Operating 163 1,025 935 736 156 1,010 272 15,514 19,811 liabilities

Total liabilities 163 1,025 935 736 156 1,010 272 28,488 32,785 and equity

120 Year ended December 31, 2005

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

Sales outside the 663 2,639 4,781 2,161 575 3,637 100 – 14,556 Group Sales between 5 31 124 10 11 23 (204) – business groups

Total revenue 663 2,644 4,812 2,285 585 3,648 123 (204) 14,556 Profit from 53 869 1,467 173 21 347 (142) 3 2,791 recurring operations Other operating – (3) (25) (10) – (183) (5) – (226) income and expenses Operating 48 100 302 115 26 135 36 – 762 investments (2) Depreciation and 36 59 187 91 19 112 29 – 533 amortization Impairment – – – – – 72 11 – 83

Brands, trade 25 4,847 5,101 1,657 1,041 2,861 455 – 15,987 names, licenses and goodwill (3) Inventories 136 2,479 661 227 219 534 64 (50) 4,270 Other operating 440 1,933 1,672 669 220 1,542 848 4,378 11,702 assets

Total assets 601 9,259 7,434 2,553 1,480 4,937 1,367 4,328 31,959

Equity – – – – – – 11,868 11,868 Operating 130 932 960 666 145 1,043 203 16,012 20,091 liabilities

Total liabilities 130 932 960 666 145 1,043 203 27,880 31,959 and equity

121 Year ended December 31, 2004 Fashion Christian Wines and Perfumes Watches Other and Dior and Leather and and Selective holding Eliminations (EUR million) Couture Spirits Goods Cosmetics Jewelry Retailing (6) companies (1)(4)(5) 2004

Sales outside the 595 2,255 4,339 2,017 490 3,266 98 – 13,060 Group Sales between – 4 27 111 10 10 21 (183) – business groups

Total revenue 595 2,259 4,366 2,128 500 3,276 119 (183) 13,060 Profit from 51 813 1,309 150 (10) 238 (146) 8 2,413 recurring operations Other operating – (19) (51) (36) (34) (37) (26) – (203) income and expenses Operating 69 69 253 86 20 181 63 – 741 investments (2) Depreciation 31 48 173 89 18 109 27 – 495 and amortization Impairment – 3 12 20 24 25 17 – 101

Brands, trade 25 4,083 4,993 1,643 1,049 2,618 474 – 14,885 names, licenses and goodwill (3) Inventories 125 2,141 555 230 180 477 58 (43) 3,723 Other operating 407 1,687 1,633 622 203 1,440 970 3,795 10,757 assets

Total assets 557 7,911 7,181 2,495 1,432 4,535 1,502 3,752 29,365

Equity – – – – – – – 10,065 10,065 Operating 137 767 894 606 112 882 706 15,196 19,300 liabilities

Total liabilities 137 767 894 606 112 882 706 25,261 29,365 and equity

(1) Eliminations correspond to sales between business groups; these generally consist of sales from business groups other than Selective Retailing to Selective Retailing. Selling prices between the different business groups correspond to the prices applied in the normal course of business for transactions involving wholesalers or distributors outside the Group. (2) Operating investments correspond to amounts capitalized during the fiscal year rather than payments made during the fiscal year with respect to these investments. (3) Brands, trade names, licenses, and goodwill correspond to the net carrying amounts shown under Notes 3 and 4. (4) Assets not allocated include investments in associates, available for sale financial assets, other financial assets, and income tax receivables. (5) Liabilities not allocated include borrowings and both current and deferred tax liabilities. (6) Of which revenue for the Samaritaine department store: 14, 51 and 101 million euros respectively, as of December 31, 2006, 2005 and 2004.

122 22.2 Information by geographic region Revenue by geographic region of delivery breaks down as follows: (EUR million) 2006 2005 2004

France 2,295 2,282 2,108 Europe (excluding France) 3,531 2,954 2,678 United States 4,141 3,805 3,438 Japan 2,086 2,111 1,928 Asia (excluding Japan) 2,798 2,412 2,038 Other 1,165 992 870

Revenue 16,016 14,556 13,060

Operating investments by geographic region breakdown as follows: (EUR million) 2006 2005 2004

France 327 323 257 Europe (excluding France) 128 135 96 United States 142 138 108 Japan 92 29 112 Asia (excluding Japan) 87 81 40 Other 54 56 128

Operating investments 830 762 741

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

NOTE 23 - REVENUE AND EXPENSES BY NATURE 23.1 Revenue Revenue consists of the following: (EUR million) 2006 2005 2004

Revenue generated by brands and trade names 15,657 14,339 12,900 Royalties and license revenue 132 126 123 Income from investment property 34 33 23 Other 193 58 14

Total revenue 16,016 14,556 13,060

23.2 Expenses by nature Profit from recurring operations includes the following expenses: (EUR million) 2006 2005 2004

Advertising and promotion expenses 1,850 1,463 1,332 Commercial lease expenses 1,026 946 800 Personnel costs 2,570 2,574 2,361

123 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, 2006, a total of 2,074 stores were operated by the Group worldwide (1,917 in 2005 and 1,877 in 2004), particularly by Fashion and Leather Goods and Selective Retailing.

In certain countries, leases for stores are contingent on the payment of a minimum amount 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 million) 2006 2005 2004

Fixed or minimum lease payments 424 342 324 Variable portion of indexed leases 173 185 178 Airport concession fees – fixed portion or minimum amount 232 248 220 Airport concession fees – variable portion 197 171 158

Commercial lease expenses for the period 1,026 946 880

• Personnel costs consist of the following elements:

(EUR million) 2006 2005 2004

Salaries and social charges 2,463 2,508 2,231 Pensions, medical costs and similar expenses in respect of defined benefit 63 29 74 plans Stock option plan and related expenses 44 37 56

Total 2,570 2,574 2,361

NOTE 24 - OTHER OPERATING INCOME AND EXPENSES (EUR million) 2006 2005 2004

Amortization of brands (6) (7) (9) Impairment of brands and goodwill (15) (49) (54) Impairment of tangible assets (7) (34) (47) Net gains (losses) on disposal of fixed assets – – (14) Restructuring costs (63) (132) (27) Net impact on foreign exchange gains and losses – (3) (36) of the transition to IFRS Other (36) (1) (16)

Other operating income and expenses (127) (226) (203)

In 2006, restructuring costs, which were of a commercial or industrial nature, mainly relate to the Fashion and Leather Goods and the Perfumes and Cosmetics business groups. In 2005, other operating income and expenses included an exceptional expense of 179 million euros following the closure of the Samaritaine department store in Paris, which was required in order to carry out major renovation work to bring the premises into compliance with safety regulations and other standards.

124 In 2004, other operating income and expenses consisted of impairment on non-strategic brands of relatively little unitary value; the impairment of real estate assets with insufficient profitability; proceeds from disposals, relating in particular to Christian Lacroix, in addition to reorganization costs after closing certain markets or discontinuing secondary and unprofitable activities.

NOTE 25 - NET FINANCIAL INCOME/EXPENSE (EUR million) 2006 2005 2004

Borrowing costs, excluding perpetual bonds (254) (245) (262) Interest and income from current available for sale financial 26 15 26 assets Fair value adjustment of borrowings and hedges, excluding – 1 (13) perpetual bonds Net cost of perpetual bonds (2) (5) (16)

Cost of net financial debt (230) (234) (265) Dividends received from non-current available for sale financial 26 49 16 assets Ineffective portion of foreign currency hedges (45) (105) (10) Net gain (loss) on the sale of available for sale financial assets 163 128 – Other items – net (21) (29) (5)

Other financial income and expenses 123 43 1

Net financial income/(expenses) (107) (191) (264)

The disposals of available for sale financial assets made in 2006 generated capital gains of 164 million euros. These are essentially attributable to the disposal of Bouygues shares and of various investments held by L Capital FCPR.

In 2005, the net gain on the sale of available for sale financial assets included 99 million euros in respect of gains on the sale of Bouygues shares.

NOTE 26 - INCOME TAXES 26.1 Analysis of the income tax expense (EUR million) 2006 2005 2004

Current income taxes for the period (990) (599) (530) Current income taxes for prior periods 4 10 42

Current income taxes (986) (589) (488) Change in deferred income taxes 136 (135) (67) Effect of changes in tax rate on deferred income taxes – (4) 67

Deferred income taxes 136 (139) –

Total tax expense (850) (728) (488)

Tax on items recognized in equity (80) 23 (42)

125 The effective tax rate is as follows: (EUR million) 2006 2005 2004

Profit before tax 2,975 2,374 1,946 Total income tax expense (850) (728) (488) Effective tax rate 28.6% 30.7% 25.1%

26.2 Sources of deferred taxes

In the income statement:

(EUR million) 2006 2005 2004

Fair value adjustment of brands (45) (19) 73 Fair value adjustment of vineyard land – 11 Other revaluation adjustments (3) –11 Gains and losses on available for sale financial assets (3) (86) (23) Gains and losses on hedges of future foreign currency cash (8) 810 flows Provisions for contingencies and losses (1) 22 (2) 1 Intercompany margin included in inventories 26 15 24 Other consolidation adjustments (1) 105 (51) (51) Losses carried forward 42 (5) (46)

Total 136 (139) –

(1) Mainly tax-driven provisions, accelerated tax depreciation and finance leases.

In equity:

(EUR million) 2006 2005 2004

Fair value adjustment of vineyard land (36) (13) (16) Gains and losses on available for sale financial assets (2) (26) (35) Gains and losses on hedges of future foreign currency cash (42) 62 9 flows

Total (80) 23 (42)

126 In the balance sheet:

(EUR million) 2006 2005 2004

Fair value adjustment of brands (3,115) (3,201) (3,004) Fair value adjustment of vineyard land (412) (350) (248) Other revaluation adjustments (316) (315) (314) Gains and losses on available for sale financial assets (36) (27) 76 Gains and losses on hedges of future foreign currency cash flows (25) 23 (52) Provisions for contingencies and losses (1) 94 45 38 Intercompany margin included in inventories 212 174 161 Other consolidation adjustments (1) 89 (6) 68 Losses carried forward 174 172 164

Total (3,335) (3,485) (3,111)

(1) Mainly tax-driven provisions, accelerated tax depreciation and finance leases.

Net deferred taxes on the balance sheet include the following assets and liabilities: (EUR million) 2006 2005 2004

Deferred tax assets 451 361 278 Deferred tax liabilities (3,786) (3,846) (3,389)

Net deferred tax asset (liability) (3,335) (3,485) (3,111)

26.3 Analysis of the difference between the theoretical and effective income tax rates The theoretical 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 taxes) 2006 2005 2004

French statutory tax rate 34.4 34.9 35.4 – changes in tax rates 0.1 0.2 (3.4) – differences in tax rates for foreign companies (3.1) (2.7) (3.7) – tax losses and tax loss carry forwards (5.1) (3.0) (6.3) – difference between consolidated and taxable income, income 1.9 0.5 taxable at reduced rates 2.6 – withholding taxes 0.4 0.8 0.5

Effective tax rate of the Group 28.6 30.7 25.1

Since 2000, French companies have been subject to additional income tax, at a rate of 6.3% for 2004. The rate for this supplementary income tax was reduced to 4.8% for 2005 and 3.3% for 2006, bringing the theoretical tax rate to 34.4% in 2006, 34.9% in 2005 and 35.4% in 2004.

127 The effective tax rate for fiscal year 2006 takes into consideration the following non-recurring items: • capitalization or utilization of prior period losses carried forward: impact of (3.3)%; • capital gains on the disposal of non-current available for sale financial assets taxable at a reduced rate or zero: impact of (1.4)%.

26.4 Tax loss carry forwards As of December 31, 2006, for LVMH SA tax savings from unused tax loss carry forwards, for which no deferred tax assets were recognized, amounted to 529 million euros (763 million euros in 2005, 844 million euros in 2004). As of December 31, 2006, for Christian Dior SA, ordinary tax loss carry forwards amounted to 83 million euros (87 million euros in 2005, 107 million euros in 2004). As it is considered likely that they will be recovered, they accounted for a deferred tax asset in the amount of 28 million euros (29 million euros in 2005, 37 million euros in 2004).

26.5 Tax consolidation • Tax consolidation agreements in France allow certain French companies of the Group to combine their taxable profits to calculate the overall tax expense for which only the parent company is liable. This tax consolidation agreement generated a tax saving of 63 million euros in 2006 for the Group, of which 46 million euros were for LVMH and 17 million euros for Christian Dior SA (150 million euros in 2005, 290 million euros in 2004 for the Group). • The application of other tax consolidation agreements in certain foreign countries, notably in the United States and Italy, generated additional tax savings of 113 million euros in 2006 (74 million euros in 2005, 40 million euros in 2004).

128 NOTE 27 - EARNINGS PER SHARE 2006 2005 2004

Group share of net profit (EUR million) 797 618 549 Average number of shares in circulation during 181,727,048 181,727,048 181,727,048 the period Average number of treasury shares owned (4,204,606) (4,071,058) (3,952,628) during the period

Average number of shares on which the 177,522,442 177,655,990 177,774,420 calculation before dilution is based Basic Group share of earnings per share 4.49 3.48 3.09 (EUR)

Average number of shares on which the above 177,522,442 177,655,990 177,774,420 calculation is based Dilution effect of stock option plans 1,719,672 1,346,973 962,733

Average number of shares in circulation after 179,242,114 179,002,963 178,737,153 dilution

Diluted Group share of earnings per share 4.45 3.45 3.07 (EUR)

NOTE 28 - PROVISIONS FOR PENSIONS, MEDICAL COSTS AND SIMILAR COMMITMENTS 28.1 Expense for the year (EUR million) 2006 2005 2004

Current service cost 48 40 38 Impact of discounting 22 20 21 Expected return on plan assets (14) (13) (9) Amortization of actuarial gains and losses 1 – Past service cost 2 2 Changes in regime 4 (20) 24

Total expense for the period for defined benefit plans 63 29 74

Effective yield/(cost) of related plan assets 25 22 14

129 28.2 Net recognized commitment

(EUR million) 2006 2005 2004

Benefits covered by plan assets 510 470 398 Benefits not covered by plan assets 135 140 159

Projected benefit obligation 645 610 557 Fair value of plan assets (385) (343) (287) Actuarial differences not recognized in the balance sheet 10 86 Past service cost not yet recognized (10) (12) (14)

Unrecognized items – (4) (8) Net recognized commitment 260 263 262

Of which: Non-current provisions 264 267 261 Current provisions 4 53 Plan assets (8) (9) (2)

Total 260 263 262

28.3 Breakdown of the change in commitment

Projected benefit Fair value of Unrecognized Net recognized (EUR million) obligation plan assets items commitment

As of December 31, 2005 610 (343) (4) 263 Net expense for the period 71 (14) 7 64 Payments to beneficiaries (30) 17 – (13) Contributions to plan assets – (42) – (42) Translation adjustment (20) 11 (3) (12) Changes in regime 8 (3) (5) – Actuarial differences: 9 (11) 2 – experience impacts Actuarial differences: change (3) – 3 – in assumptions

As of December 31, 2006 645 (385) – 260

130 The actuarial assumptions applied to estimate commitments as of December 31, 2006 in the main countries where such commitments have been undertaken, are as follows: 2006 2005 2004 United United United (%) France Japan States France Japan States France Japan States

Discount rate 4.50 2 5.75 4 2 5.75 4.75 2 5.75 Expected yield of 4.50 4 8 4 4 8 4.75 4 8 investments Future rate of 2 2 2 2 2 2 2 2 2 increase of salaries to 4 to 4 to 4.5 to 4.5 to 4.5 to 4.5 to 4 to 4 to 4

Moreover, for all the periods presented, the rate of increase of medical costs retained in the United States reduces from 9% to 5% over the first five years, and 5% thereafter. The impact of a 1% increase or decrease in the discount rate on the current service cost and the impact of discounting for 2006, in addition to the projected benefit obligation as of December 31, 2006 are as follows: Hypotheses (EUR million) -1% retained +1%

Impact on past service cost and discounting effect 75 71 68 Impact on projected benefit obligation 680 645 568

28.4 Analysis of benefits The breakdown of the projected benefit obligation by type of benefit plan is as follows: (EUR million) 2006 2005 2004

Retirement and other indemnities 89 88 78 Medical costs of retirees 49 53 57 Jubilee awards 11 12 10 Pensions 467 430 362 Early retirement indemnities 13 17 41 Other 16 10 9

Projected benefit obligation 645 610 557

Geographic breakdown of projected benefit obligation is as follows: (EUR million) 2006 2005 2004

France 281 264 284 Europe (excluding France) 191 169 108 United States 112 115 98 Japan 52 54 60 Asia (excluding Japan) 9 87

Projected benefit obligation 645 610 557

131 The main components of the Group’s net commitment for retirement and other benefit obligations as of December 31, 2006 are as follows: • in France, these commitments mainly include long service awards and post-employment benefits, the payment of which is determined by French law and collective bargaining agreements, respectively after a certain number of years of service or upon retirement; they also include the commitment to members of the executive committee, who are covered by an additional pension plan after a certain number of years’ service, the amount of which is linked to their last year’s remuneration; • in Europe (excluding France), the main commitments concern schemes for the reimbursement of the medical expenses of retirees, set up in the United Kingdom by certain Group companies, as well as the TFR (Trattamento di Fine Rapporto) in Italy, a legally required end-of-service allowance, paid whatever the reason for the employee’s departure from the company; • in the United States, the commitment relates to defined benefit plans or schemes for the reimbursement of medical expenses of retirees set up by certain Group companies.

28.5 Analysis of related plan assets Market value of the underlying investments in plan assets is as follows: (percentage) 2006 2005 2004

Shares 48 46 37 Bonds: – private issues 32 25 29 – public issues 15 22 24 Real estate, cash and other assets 5 710

Fair value of related plan assets 100 100 100

The above amounts do not include any real estate assets operated by the Group or any LVMH shares.

NOTE 29 - OFF BALANCE SHEET COMMITMENTS

29.1 Purchase commitments (EUR million) 2006 2005 2004

Grapes, wines and distilled alcohol 1,547 997 775 Industrial and commercial fixed assets 151 58 77 Investments in joint venture shares and non-current available for 84 59 76 sale financial assets

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, based on the contractual terms or known year-end prices and estimated production yields. Their increase in 2006 results from the signing of long term supply contracts.

132 As of December 31, 2006, the maturity dates of these commitments break down as follows: Less than One to More than (EUR million) one year five years five years Total

Grapes, wines and distilled alcohol 461 700 386 1,547 Industrial and commercial fixed assets 97 54 – 151 Investments in joint venture shares and non-current 53 31 – 84 available for sale financial assets

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

• Operating leases and concession fees The fixed or minimum portion of commitments in respect of operating lease or concession contracts over the irrevocable period of the contracts were as follows as of December 31, 2006: (EUR million) 2006 2005 2004

Less than one year 643 583 570 One to five years 1,460 1,606 1,474 More than five years 833 895 932

Commitments given for operating leases and concession fees 2,936 3,084 2,976

Less than one year 20 18 20 One to five years 46 44 47 More than five years 2 815

Commitments received for sub-leases 68 70 82

• Finance leases The amount of the Group’s irrevocable commitments under finance lease agreements as of December 31, 2006 breaks down as follows:

2006 2005 2004 Minimum Present Minimum Present Minimum Present future value of future value of future value of (EUR million) payments payments payments payments payments payments

Less than one year 27 27 32 29 16 14 One to five years 76 50 85 67 78 65 More than five years 395 76 464 81 424 78

Total future minimum payments 498 581 518 Of which: financial interest (345) (404) (361)

Present value of minimum 153 153 177 177 157 157 future payments

133 29.3 Contingent liabilities and outstanding litigation As part of its day-to-day management, the Group is party to various legal proceedings concerning brand rights, the protection of intellectual property rights, the set-up of selective retailing networks, licensing agreements, employee relations, tax audits and other areas relating to its business. The Group believes that the provisions recorded in the balance sheet in respect of these risks, litigation or disputes, known or outstanding at year-end, are sufficient to avoid its consolidated financial net worth being materially impacted in the event of an unfavorable outcome.

29.4 Collateral and other guarantees At December 31, 2006, these commitments break down as follows:

(EUR million) 2006 2005 2004

Securities and deposits 56 37 29 Other guarantees 56 54 48

Guarantees given 112 91 77

Guarantees received 63 35 8

Maturity dates of these commitments are as follows: Less than One to More than (EUR million) one year five years five years Total

Securities and deposits 7 45 4 56 Other guarantees 21 31 4 56

Guarantees given 28 76 8 112

Guarantees received 43 19 1 63

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

NOTE 30 - RELATED PARTY TRANSACTIONS 30.1 Relations of Christian Dior Group with Groupe Arnault and Groupe Financière Agache. The parent company of Christian Dior Group is Financière Agache SA, which is controlled by Groupe Arnault SAS. • Relations of Christian Dior Group with Groupe Arnault Groupe Arnault SAS provides assistance to Christian Dior Group in the areas of development, engineering, corporate law and real estate. In addition, Groupe Arnault leases office premises to LVMH. Christian Dior Group leases office space from these companies and also provides them various forms of administrative assistance.

134 Transactions between Christian Dior Group and Groupe Arnault may be summarized as follows: (EUR million) 2006 2005 2004

• Amounts billed by Groupe Arnault SAS to Christian Dior Group (9) (9) (10) Trade accounts payable as of December 31 (2) (2) (3) • Amounts billed by Christian Dior Group to Groupe Arnault SAS 2 22 Trade accounts receivable as of December 31 1 ––

• Relations of Christian Dior Group with Groupe Financière Agache Through its subsidiary John Galliano SA, Groupe Financière Agache provides artistic direction services to Christian Dior Couture. In order to optimize cash management, some Christian Dior Group companies are part of the cash pooling system of Financière Agache. As such, Financière Agache borrows funds from affiliates with excess cash and lends funds to affiliates which have borrowing needs. Transactions between Christian Dior Group and Groupe Financière Agache may be summarized as follows:

(EUR million) 2006 2005 2004

• Amounts billed by Groupe Financière Agache to Christian Dior (9) (8) 8 Group Trade accounts payable as of December 31 (2) (3) (5) • Amounts billed for financial interest to Christian Dior Group (4) (4) (3) Balance of current account liabilities as of December 31 (46) (108) (92) • Amounts billed by Christian Dior Group to Groupe Financière 1 –– Agache Trade accounts receivable as of December 31 1 –– • Amounts billed for financial interest to Groupe Financière Agache 1 –– Balance of current account assets as of December 31 – ––

30.2 Relations of Christian Dior Group with Diageo Moët Hennessy is the holding company for LVMH’s Wines and Spirits businesses, with the exception of Château d’Yquem and certain champagne houses. Since 1994, Diageo has held a 34% stake in Moët Hennessy. At this time an agreement has been concluded between Diageo and Moët Hennessy for the apportionment of holding company expenses between Moët Hennessy and the other holding companies of the LVMH Group. Under this agreement, Moët Hennessy assumed 24% of shared expenses in 2006 (23% in 2005, 24% in 2004). After taking into consideration the effects of the agreement, Moët Hennessy’s total administrative expenses amounted to 27 million euros in 2006 (25 million euros in 2005, 15 million euros in 2004); the total administrative expenses borne by the Wines and Spirits business group amounted to 48 million euros in 2006 (44 million in 2005, 34 million euros in 2004).

135 30.3 Executive bodies The total compensation paid to the members of the Board of Directors, comprising 10 individuals, in respect of their functions within the Group, breaks down as follows:

(EUR million) 2006 2005 2004

Gross salaries and benefits in kind 7 10 11 Post-employment benefits 1 11 Stock option and similar plans 13 12 14

Total 21 23 26

The net commitment recognized as of December 31, 2006 for post-employment benefits is 1 million euros (1 million euros as of December 31, 2005 and 5 million euros as of December 31, 2004).

NOTE 31 - SUBSEQUENT EVENTS There were no significant subsequent events as of the date on which the accounts were approved for publication.

136 CONSOLIDATED COMPANIES IN 2006

COMPANIES REGISTERED OFFICE PERCENTAGE OF Control Interest

Christian Dior SA Paris, France Parent company Financière J. Goujon Paris, France 100% 100% Sadifa Paris, France 100% 100% Lakenbleker Amsterdam, Netherlands 100% 100%

CHRISTIAN DIOR COUTURE Christian Dior Couture S.A. Paris, France 100% 100% Christian Dior Fourrure M.C. Monaco 100% 100% S.A.M Christian Dior GmbH Munich, Germany 100% 100% Christian Dior Inc New York, U.S.A. 100% 100% Christian Dior UK Ltd London, United Kingdom 100% 100% Christian Dior Switzerland S.A. Geneva, Switzerland 100% 100% Les Jardins d’Avron S.A.S Paris, France 100% 100% Mardi SpA Badia e Settimo, Italy 50% 50% Ateliers AS Pierre Bénite, France (2) 25% 25% Christian Dior Far East Ltd Hong Kong 100% 100% Christian Dior Fashion Malaysia Kuala Lumpur, Malaysia 100% 100% Sdn.Bhd. Christian Dior Hong Kong Ltd Hong Kong 100% 100% Christian Dior Taiwan Limited Taipei, Taiwan 90% 90% Christian Dior Singapore PTE Ltd Singapore 100% 100% Christian Dior Saipan Ltd Saipan, NMI 100% 100% Christian Dior Australia PTY Ltd Sydney, Australia 100% 100% Christian Dior New Zealand Ltd Auckland, New Zealand 100% 100% Christian Dior (Thailand) Co. Ltd Bangkok, Thailand 49% 49% Christian Dior K.K. (Kabushiki Tokyo, Japan 100% 100% Kaisha) Christian Dior Couture Korea Ltd Seoul, South Korea 100% 100% Christian Dior Guam Ltd Agana, Guam 100% 100% Christian Dior Espanola S.L. Madrid, Spain 100% 100% Christian Dior do Brasil Ltda Sao Paulo, Brazil 100% 100% Christian Dior Italia Srl Milan, Italy 100% 100% Christian Dior Belgique S.A. Brussels, Belgium 100% 100% Bopel Srl Lugagnano Val d’Arda, Italy 70% 70% P.T. Christian Dior Indonesia Jakarta, Indonesia 80% 80% Christian Dior Puerto Banus S.L. Puerto Banus, Spain 75% 75% Les Jardins d’Avron LLC New York, U.S.A. 100% 100%

137 Lucilla Srl Sieci, Italy 51% 51% Christian Dior Couture CZ Prague, Czech Republic 100% 100% Christian Dior Couture Maroc Marrakech, Morocco 100% 100% Christian Dior Couture FZE Dubai, United Arab Emirates 100% 100% Christian Dior Macau Company Macau, Macau 96% 96% Ltd Les Ateliers Bijoux Germany 100% 100% Christian Dior S. de R.L. de C.V. Lomas, Mexico 100% 100% Christian Dior Commercial Shanghai, China 100% 100% Shanghai Co. Ltd Ateliers Modèles S.A.S. Paris, France 100% 100% Ateliers Modèles Spain Barcelona, Spain 100% 100% Baby Siam Couture Company Ltd Nothaburi, Thailand 100% 100% CDC Abu-Dhabi LLC Abu Dhabi, United Arab 49% 49% Emirates CDCH SA Luxembourg 75% 75% Dior Greece S.A. Athens, Greece 51% 51% Christian Dior Couture RUS LLC Moscow, Russia 100% 100% Christian Dior Couture Moscow, Russia 100% 100% Stoleshnikov

WINES AND SPIRITS Champagne Moët & Chandon Epernay, France 60% 29% SCS Moët Hennessy UK Ltd London, United Kingdom 60% 29% Moët Hennessy España SA Barcelona, Spain 60% 29% Moët Hennessy (Switzerland) SA Geneva, Switzerland 60% 29% Champagne Des Moutiers SA Epernay, France 60% 29% Schieffelin Partner Inc New York, U.S.A. 60% 29% Moët Hennessy de Mexico, SA de Mexico, Mexico 60% 29% C.V. Chamfipar SA Ay, France 60% 29% Société Viticole de Reims SA Ay, France 60% 29% Cie Française du Champagne et Ay, France 60% 29% du Luxe SA Moët Hennessy Belux SA Brussels, Belgium 60% 29% Champagne de Mansin SAS Gye sur Seine, France 60% 29% Moët Hennessy Osterreich Vienna, Austria 54% 26% GmbH Schieffelin & Somerset New York, U.S.A. 60% 29% Moët Hennessy (Nederland) BV Naarden, Netherlands 60% 29% Moët Hennessy USA New York, U.S.A. 60% 29% MHD Moët Hennessy Diageo Courbevoie, France (3) 60% 29% SAS

138 Opera Vineyards SA Buenos Aires, Argentina (1) 30% 15% France Champagne SA Epernay, France 60% 29% Domaine Chandon, Inc Yountville (California), U.S.A. 60% 29% Ltd Margaret River, Australia 60% 29% Veuve Clicquot Properties, Pty Sydney, Australia 60% 29% Ltd Moët Hennessy do Brasil— Sao Paulo, Brazil 60% 29% Vinhos E Destilados Ltda Ltd Blenheim, New Zealand 60% 29% Bodegas Chandon Argentina SA Buenos Aires, Argentina 60% 29% Domaine Chandon Australia Pty Coldstream Victoria, Australia 60% 29% Ltd Newton Vineyards LLC St Helena (California), U.S.A. 48% 23% Veuve Clicquot Ponsardin SCS Reims, France 60% 29% Société Civile des Crus de Reims, France 60% 29% Champagne SA Neggma SA Reims, France 30% 15% Veuve Clicquot U.K. Ltd London, United Kingdom 60% 29% Clicquot, Inc New York, U.S.A. (*) 60% 29% Veuve Clicquot Japan KK Tokyo, Japan 60% 29% Moët Hennessy Suomi OY Helsinki, Finland 60% 29% Moët Hennessy Sverige AB Stockholm, Sweden 60% 29% Moët Hennessy Norge AS Hoevik, Norway 60% 29% Moët Hennessy Danmark A/S Copenhagen, Denmark 60% 29% Moët Hennessy Deutschland Munich, Germany 60% 29% GmbH Moët Hennessy Italia S.p.a. Milan, Italy 60% 29% Krug SA Reims, France 60% 29% Champagne SA Reims, France 60% 29% Ruinart UK Ltd London, United Kingdom 60% 29% Ruinart Japan KK Tokyo, Japan 60% 29% Ruinart España S.L. Madrid, Spain 60% 29% Château d’Yquem SA Sauternes, France 38% 17% Château d’Yquem SC Sauternes, France 38% 17% Jas Hennessy & Co SCS Cognac, France 59% 29% Diageo Moët Hennessy BV LLC Amsterdam, Netherlands (3) 60% 29% Hennessy Dublin Ltd Dublin, Ireland 60% 29% Edward Dillon & Co Ltd Dublin, Ireland (2) 24% 11% Hennessy Far East Ltd Hong Kong, China 60% 29% Riche Monde Orient Ltd Hong Kong, China 60% 29% Riche Monde Ltd Hong Kong, China (3) 60% 29% Riche Monde (China) Ltd Shanghai, China (3) 60% 29% M.H.—U.D.G. (Far East) Ltd Hong Kong, China 60% 29%

139 Riche Monde Pte Ltd Singapore (3) 60% 29% Riche Monde Malaysia Inc Petaling Jaya, Malaysia (3) 30% 15% Riche Monde Taipei Taipei, Taiwan 60% 29% Riche Monde Bangkok Ltd Bangkok, Thailand (3) 60% 29% Moët Hennessy Korea Ltd Seoul, South Korea 60% 29% Moët Hennessy Shanghai Ltd Shanghai, China 60% 29% Moët Hennessy India Pvt. Ltd New Delhi, India 60% 29% Moët Hennessy Taiwan Ltd Taipei, Taiwan 60% 29% RMLDF Greater China Shanakai, China (3) 60% 29% MHD China Co Ltd Shanghai, China 60% 29% MHWH Limited Limassol, Cyprus 30% 15% Moët Hennessy Whitehall Rus SA Moscow, Russia 60% 15% Moët Hennessy Diageo KK Tokyo, Japan (3) 60% 29% Moët Hennessy Asia Pte Ltd Singapore 60% 29% Moët Hennessy Australia Ltd Rosebury, Australia 60% 29% Millennium Import LLC Minneapolis, MN, USA 60% 29% Millennium Brands Ltd Dublin, Ireland 60% 29% Polmos Zyrardow Zyrardow, Poland 59% 29% Moët Hennessy VR Ltd London, United Kingdom 60% 29% The Glenmorangie Company Ltd Edinburgh, United Kingdom 60% 29% Macdonald & Muir Ltd Edinburgh, United Kingdom 60% 29% Glenaird Ltd Edinburgh, United Kingdom 30% 15% The Scotch Malt Whisky Society Edinburgh, United Kingdom 60% 29% Ltd FASHION AND LEATHER GOODS Louis Vuitton Malletier SA Paris, France 60% 44% Manufacture de souliers Louis Fiesso d’Artico, Italy 60% 44% Vuitton S.r.l. Louis Vuitton Saint Barthélémy Saint Bartholomew, French SNC Antilles 60% 44% Société des Ateliers Louis Vuitton Paris, France 60% 44% SNC Société Louis Vuitton Services Paris, France 60% 44% SNC Société des Magasins Louis Paris, France 60% 44% Vuitton France SNC Belle Jardinière SA Paris, France 60% 44% Belle Jardinière Immo SAS Paris, France 60% 44% Sedivem SNC Paris, France 60% 44% Les Ateliers Horlogers Louis La Chaux-de-Fonds, Vuitton SA Switzerland 60% 44% Louis Vuitton Monaco SA Monte Carlo, Monaco 60% 44%

140 ELV SARL Paris, France 60% 44% LVMH Fashion Group UK Ltd London, United Kingdom 60% 44% Louis Vuitton Deutschland Düsseldorf, Germany 60% 44% GmbH Louis Vuitton Ukraine LLC Kiev, Ukraine 60% 44% Sociedad Catalana Talleres Barcelona, Spain 60% 44% Artesanos Louis Vuitton SA Louis Vuitton BV Amsterdam, Netherlands 60% 44% LVMH Fashion Group Belgium Brussels, Belgium 60% 44% Louis Vuitton Hellas SA Athens, Greece 60% 44% Louis Vuitton Portugal Maleiro, Lisbon, Portugal 60% 44% Ltda. Louis Vuitton Ltd Tel Aviv, Israel 60% 44% Louis Vuitton Danmark A/S Copenhagen, Denmark 60% 44% Louis Vuitton Aktiebolag SA Stockholm, Sweden 60% 44% LVMH Fashion Group Geneva, Switzerland 60% 44% Switzerland SA Louis Vuitton Ceska s.r.o. Prague, Czech Republic 60% 44% Louis Vuitton Osterreich G.m.b.H Vienna, Austria 60% 44% Louis Vuitton Cantacilik Ticaret Istanbul, Turkey 59% 44% Anonim Sirketi LV US Manufacturing, Inc New York, U.S.A. 60% 44% Somarest SARL Sibiu, Romania 60% 44% LVMH Fashion Group Hawaii Honolulu (Hawaii), U.S.A. 60% 44% Inc Atlantic Luggage Company Ltd Hamilton, Bermuda 60% 18% Louis Vuitton Guam, Inc Guam 60% 44% Louis Vuitton Saipan, Inc Saipan 60% 44% Louis Vuitton Norge Oslo, Norway 60% 44% San Dimas Luggage Company New York, U.S.A. 60% 44% LVMH FG Brasil Ltda Sao Paulo, Brazil 60% 44% Louis Vuitton Mexico S de RL de Mexico, Mexico 60% 44% CV Blinfar SA Montevideo, Uruguay 60% 44% Louis Vuitton Chile Ltda Santiago de Chile, Chile 60% 44% LVMH Fashion Group Pacific Hong Kong, China 60% 44% Ltd Milbrook Limited Hong Kong, China 60% 44% Louis Vuitton Hong Kong Ltd Hong Kong, China 60% 44% Louis Vuitton (Philippines), Inc Makati, Hong Kong, China 60% 44% LVMH Fashion (Singapore) Pte Singapore 60% 44% Ltd PT Louis Vuitton Indonesia Jakarta, Indonesia 59% 43% Louis Vuitton (Malaysia) SDN Kuala Lumpur, Malaysia 60% 44% BHD

141 Louis Vuitton (Thailand) SA Bangkok, Thailand 60% 44% Louis Vuitton Taiwan, Ltd Taipei, Taiwan 59% 43% Louis Vuitton Australia, PTY Ltd Sydney, Australia 60% 44% Louis Vuitton (China) Co LTD Shanghai, China 60% 44% LV New Zealand Limited Auckland, New Zealand 60% 44% Louis Vuitton Kuweit CSP Safat, Kuwait 36% 26% Louis Vuitton UAE LLC Dubai, United Arab Emirates 39% 29% LV Saudi Arabia LLC Jeddah, Saudi Arabia 39% 29% Louis Vuitton Korea Ltd Seoul, South Korea 60% 44% LVMH Fashion Group Trading Seoul, South Korea 60% 44% Korea Ltd Louis Vuitton Hungaria Sarl Budapest, Hungary 60% 44% Louis Vuitton Argentina SA Buenos Aires, Argentina 60% 44% Louis Vuitton Vostock LLC Moscow, Russia 60% 44% LV Colombia SA Santafe de Bogota, Colombia 60% 44% Louis Vuitton Morocco Sarl Casablanca, Morocco 60% 44% Louis Vuitton Venezuela SA Caracas, Venezuela 60% 44% Louis Vuitton South Africa Ltd Johannesburg, South Africa 60% 44% Louis Vuitton Macau Company Macao, China 60% 44% Ltd LVMH Fashion Group Shanghai, China 60% 44% (Shanghai) Trading Co Ltd LV Cup España S.L Valencia, Spain 60% 44% LVJ Group KK Tokyo, Japan 59% 44% LVMH Fashion Group Americas New York, U.S.A. (*) 60% 44% Inc Louis Vuitton Canada, Inc Toronto, Canada 60% 44% International, LLC New York, U.S.A. (*) 58% 42% Marc Jacobs Trademark, LLC New York, U.S.A. (*) 20% 15% Marc Jacobs International Japan Tokyo, Japan 60% 44% Co., Ltd Loewe SA Madrid, Spain 60% 44% Loewe Hermanos SA Madrid, Spain 60% 44% Loewe Textil SA Madrid, Spain 60% 44% Manufacturas Loewe S.L. Madrid, Spain 60% 44% LVMH Fashion Group France Paris, France 60% 44% SNC Loewe Hermanos UK Ltd London, United Kingdom 60% 44% Loewe Saïpan, Inc Saipan, Mariana Islands 60% 44% Loewe Guam, Inc Guam 60% 44% Loewe Hong Kong Ltd Quarry Bay, Hong Kong 60% 44% Loewe Commercial & Trading Co, Shanghai, China 60% 44% LTD Loewe Fashion Pte Ltd Singapore 60% 44%

142 Loewe Fashion (M) SDN BHD Kuala Lumpur, Malaysia 60% 44% Loewe Taiwan Ltd Taipei, Taiwan 60% 43% Loewe Australia Pte Ltd Sydney, Australia 60% 44% Berluti SA Paris, France 60% 44% Société Distribution Robert Paris, France 60% 44% Estienne SNC Manifattura Ferrarese S.r.l. Milan, Italy 60% 44% Caltunificio Rossi Moda SpA Vigonza, Italy 58% 43% Rossi Moda USA Ltd New York, U.S.A. 60% 43% Rossimoda France SARL Paris, France 60% 43% Brenta Suole S.r.l. Vigonza, Italy 39% 28% LVMH Fashion Group Services Paris, France 60% 44% SAS Montaigne KK Tokyo, Japan 60% 44% Modulo Italia S.r.l. Milan, Italy 60% 44% SA Paris, France 60% 44% Avenue M International SCA Paris, France 60% 44% Enilec Gestion SARL Paris, France 60% 44% Celine Montaigne SA Paris, France 60% 44% Celine Monte Carlo SA Monte Carlo, Monaco 60% 44% Celine Production S.r.l. Florence, Italy 60% 44% Celine Switzerland SA Geneva, Switzerland 60% 44% Celine UK Ltd London, United Kingdom 60% 44% Céline Inc New York, U.S.A. (*) 60% 44% Celine Hong Kong Ltd Hong Kong, China 59% 44% Celine Commercial & Trading Shanghai, China 60% 44% (Shanghai) Co Ltd Celine (Singapore) Pte Ltd Singapore 60% 44% Celine Guam Inc Tumon, Guam 60% 44% Celine Korea Ltd Seoul, South Korea 60% 44% Céline Taiwan Ltd Taipei, Taiwan 60% 44% CPC International Ltd Hong Kong, China 60% 44% Kami SA Montbazon, France 60% 44% Kenzo SA Paris, France 60% 44% Kenzo Belgique SA Brussels, Belgium 60% 44% Kenzo UK Ltd London, United Kingdom 60% 44% Kenzo Homme UK Ltd London, United Kingdom 60% 44% Kenzo Japan KK Tokyo, Japan 60% 44% Givenchy SA Paris, France 60% 44% Givenchy Corporation New York, U.S.A. 60% 44% Givenchy Co Ltd Tokyo, Japan 60% 44% Gentleman Givenchy Far East Ltd Hong Kong, China 60% 44% Givenchy China Co Ltd Hong Kong, China 60% 44% Gabrielle Studio, Inc New York, U.S.A. 60% 44%

143 Donna Karan International Inc New York, U.S.A.(*) 60% 44% The Donna Karan Company LLC New York, U.S.A. 60% 44% Donna Karan Service Company Oldenzaal, Netherlands 60% 44% BV Donna Karan Studio LLC New York, U.S.A 60% 44% The Donna Karan Company Store New York, U.S.A 60% 44% LLC Donna Karan Company Store UK London, United Kingdom 60% 44% Holdings Ltd Donna Karan Management London, United Kingdom 60% 44% Company UK Ltd Donna Karan Company Stores London, United Kingdom 60% 44% UK Retail Ltd Donna Karan Company Store London, United Kingdom 60% 44% (UK) Ltd Donna Karan H. K. Ltd Hong Kong, China 60% 44% Donna Karan (Italy) S.r.l. Milan, Italy 60% 44% Donna Karan (Italy) Production Milan, Italy 60% 44% Services S.r.l. Fendi International BV Amsterdam, Netherlands 60% 44% Fun Fashion Emirates LLC Dubai, UAE 36% 26% Fendi SA Luxembourg 56% 41% Fendi S.r.l. Rome, Italy 60% 41% Fendi Adele S.r.l. Rome, Italy 60% 41% Fendi Immobili Industriali S.r.l. Florence, Italy 60% 41% Fendi Italia S.r.l. Rome, Italy 60% 44% Fendi UK Ltd London, United Kingdom 60% 44% Fendi France SAS Paris, France 60% 44% Fendi North America Inc New York, U.S.A. (*) 60% 44% Fendi Australia Pty Ltd Sydney, Australia 60% 44% Fendi Guam Inc Tumon, Guam 60% 44% Fendi (Thailand) Co. Ltd Bangkok, Thailand 60% 44% Fendi Asia Pacific Ltd Hong Kong, China 60% 44% Fendi Korea Ltd Seoul, South Korea 60% 44% Fendi Taiwan Ltd Taipei, Taiwan 60% 44% Fendi Hong Kong Ltd Hong Kong, China 60% 44% Fendi China Boutiques Ltd Hong Kong, China 60% 44% Fendi (Singapore) Pte Ltd Singapore 60% 44% Fendi Fashion (Malaysia) Snd. Kuala Lumpur, Malaysia 60% 44% Bhd. Fendi Switzerland SA Geneva, Switzerland 60% 44% Fun Fashion FZCO LLC Dubai, UAE 36% 26% Fendi Marianas Inc Tumon, Guam 60% 44% Fun Fashion Kuwait WLL Kuwait City 48% 35% Fun Fashion Germany GmbH KG Stuttgart, Germany 31% 22%

144 Fendi Macau Ltd Macao, China 60% 44% Fendi Germany GmbH Stuttgart, Germany 60% 44% Fun Fashion Napoli Srl Naples, Italy 31% 22% Fendi Shanghai Co Ltd Shanghai, China 60% 31% Fendi Jeddah Jeddah, Saudi Arabia 36% 26% Fendi Riyadh Riyadh, Saudi Arabia 36% 26% Fun Fashion Spain SL Marbella, Spain 42% 31% Fun Fashion India Pte Ltd Mumbai, India 42% 31% S.r.l. Florence, Italy 60% 44% Emilio Pucci International BV Naarden, Netherlands 40% 29% Emilio Pucci, Ltd New York, U.S.A 60% 44% Thomas Pink Holdings Ltd London, United Kingdom 60% 44% Thomas Pink Ltd London, United Kingdom 60% 44% Thomas Pink BV Rotterdam, Netherlands 60% 44% Thomas Pink Inc New York, U.S.A. (*) 60% 44% Thomas Pink Ireland Ltd Dublin, Ireland 60% 44% Thomas Pink Belgium SA Brussels, Belgium 60% 44% Thomas Pink France SAS Paris, France 60% 44% e-Luxury.com Inc San Francisco (California), 60% 44% U.S.A.

PERFUMES AND COSMETICS Parfums Christian Dior SA Paris, France 60% 44% LVMH P&C Thailand Co Ltd Bangkok, Thailand 29% 22% LVMH Parfums & Cosmétiques Sao Paulo, Brazil 60% 44% do Brasil Ltda France Argentine Cosmetics SA Buenos Aires, Argentina 60% 44% LVMH P&C Shanghai Co Ltd Shanghai, China 60% 44% Parfums Christian Dior Finland Helsinki, Finland 60% 44% Dy LVMH P&C Inc New York, U.S.A. 60% 44% SNC du 33 avenue Hoche Paris, France 60% 44% Beauté SA Athens, Greece 60% 44% LVMH Fragrances & Cosmetics Singapore 60% 44% (Singapore) Pte Ltd Parfums Christian Dior Orient Co Dubai, United Arab Emirates 36% 26% Parfums Christian Dior Emirates Dubai, United Arab Emirates 31% 14% Parfums Christian Dior (UK) Ltd London, United Kingdom 60% 44% Parfums Christian Dior BV Rotterdam, Netherlands 60% 44% Iparkos BV Rotterdam, Netherlands 60% 44% Parfums Christian Dior S.A.B. Brussels, Belgium 60% 44% Parfums Christian Dior (Ireland) Dublin, Ireland 60% 44% Ltd Parfums Christian Dior Hellas Athens, Greece 60% 44% S.A.

145 Parfums Christian Dior A.G. Zurich, Switzerland 60% 44% Christian Dior Perfumes LLC New York, U.S.A. 60% 44% Parfums Christian Dior Canada Montreal, Canada 60% 44% Inc LVMH P&C de Mexico SA de Mexico, Mexico 60% 44% CV Parfums Christian Dior Japan Tokyo, Japan 60% 44% K.K. Parfums Christian Dior Singapore 60% 44% (Singapore) Pte Ltd Inalux SA Luxembourg 60% 44% LVMH P&C Asia Pacific Ltd Hong Kong, China 60% 44% Fa Hua Fragrance & Cosmetic Co Kowloon, Hong Kong, China 60% 44% Ltd LVMH P&C Shanghai Co, Ltd Shanghai, China 60% 44% LVMH P&C Korea Ltd Seoul, South Korea 60% 44% Parfums Christian Dior Hong Hong Kong, China 60% 44% Kong Ltd LVMH P&C Malaysia Sdn Kuala Lumpur, Malaysia 60% 44% berhad Inc Fa Hua Hong Kong Co, Ltd Hong Kong, China 60% 44% Pardior SA de CV Mexico, Mexico 60% 44% Parfums Christian Dior A/S Ltd Copenhagen, Denmark 60% 44% LVMH Perfums & Cosmetics Sydney, Australia 60% 44% Group Pty Ltd Parfums Christian Dior AS Ltd Hoevik, Norway 60% 44% Parfums Christian Dior AB Stockholm, Sweden 60% 44% Parfums Christian Dior (New Auckland, New Zealand 60% 44% Zealand) Ltd Parfums Christian Dior GmbH Vienna, Austria 60% 44% Austria Cosmetic of France Inc Miami (Florida), U.S.A. 60% 44% GIE LVMH P&C Recherche Paris, France 60% 44% GIE Parfums et Cosmétiques Levallois Perret, France 60% 44% Information Services – PCIS Perfumes Loewe SA Madrid, Spain 60% 44% Acqua Di Parma S.r.l. Milan, Italy 60% 44% Acqua Di Parma LLC New York, U.S.A. 60% 44% Guerlain SA Paris, France 60% 44% LVMH Parfums & Kosmetik Wiesbaden, Germany 60% 44% Deutschland GmbH Guerlain GesmbH Vienna, Austria 60% 44% Cofra GesmbH Vienna, Austria 60% 44% Guerlain SA (Belgium) Fleurus, Belgium 60% 44% Oy Guerlain AB Helsinki, Finland 60% 44%

146 Guerlain Ltd London, United Kingdom 60% 44% LVMH Perfumeria e Cosmetica Lisbon, Portugal 60% 44% Lda Guerlain SA (Switzerland) Geneva, Switzerland 60% 44% Guerlain Inc New York, U.S.A. 60% 44% Guerlain Canada Ltd Montreal, Canada 60% 44% Guerlain De Mexico SA Mexico, Mexico 60% 44% Guerlain Puerto Rico, Inc San Juan, Puerto Rico 60% 44% Guerlain Asia Pacific Ltd (Hong Hong Kong, China 60% 44% Kong) Guerlain KK Tokyo, Japan 60% 44% Guerlain Oceania Australia Pty Melbourne, Australia 60% 44% Ltd Make Up For Ever SA Paris, France 60% 44% Make Up For Ever UK Ltd London, United Kingdom 60% 44% Make Up For Ever LLC New York, U.S.A. (*) 60% 44% Make Up For Ever Italy S.r.l. Milan, Italy 60% 44% Parfums Givenchy SA Levallois Perret, France 60% 44% Parfums Givenchy Ltd London, United Kingdom 60% 44% Parfums Givenchy GmbH Düsseldorf, Germany 60% 44% Parfums Givenchy LLC New York, U.S.A. (*) 60% 44% Parfums Givenchy Canada Ltd Toronto, Canada 60% 44% Parfums Givenchy KK Tokyo, Japan 60% 44% Parfums Givenchy WHD, Inc New York, U.S.A. (*) 60% 44% Kenzo Parfums France SA Paris, France 60% 44% Kenzo Parfums NA LLC New York, U.S.A. (*) 60% 44% La Brosse et Dupont SAS Villepinte, France 60% 44% La Brosse et Dupont Portugal SA S. Domingos de Rana, Portugal 60% 44% Mitsie SAS Tarare, France 60% 44% LBD Iberica SA Barcelona, Spain 60% 44% LBD Ménage SAS Beauvais, France 60% 44% LBD Belux SA Brussels, Belgium 60% 44% SCI Masurel Tourcoing, France 60% 44% SCI Sageda Orange, France 60% 44% LBD Italia S.r.l. Stezzano, Italy 60% 44% Etablissements Mancret Père & Grenoble, France 60% 44% Fils SA Inter-Vion Spolka Akeyjna SA Warsaw, Poland 31% 22% Europa Distribution SAS Saint Etienne, France 60% 44% LBD Hong Kong Hong Kong, China 60% 44% LBD Antilles SAS Ducos, Martinique, France 60% 44% BeneFit Cosmetics LLC San Francisco (California), 48% 35% U.S.A.

147 BeneFit Cosmetics UK Ltd London, United Kingdom 60% 35% BeneFit Cosmetics Korea Seoul, South Korea 60% 35% BeneFit Cosmetics SAS Boulogne Billancourt, France 60% 35% BeneFit Cosmetics Hong Kong Hong Kong, China 60% 35% Fresh Inc Boston (Massachusetts), U.S.A. 48% 35% LVMH Cosmetics Services KK Tokyo, Japan 60% 44% Parfums Luxe International SAS Boulogne Billancourt, France 60% 44%

WATCHES AND JEWELRY TAG Heuer International SA Luxembourg, Luxembourg 60% 44% TAG Heuer SA La Chaux-de-Fonds, 60% 44% Switzerland LVMH Relojeria & Joyeria Madrid, Spain 60% 44% España SA LVMH Montres & Joaillerie Paris, France 60% 44% France SA LVMH Watch & Jewelry Italy Milan, Italy 60% 44% Holding SpA LVMH Watch & Jewelry Central Bad Homburg, Germany 60% 44% Europe GmbH Timecrown Ltd Manchester, United Kingdom 60% 44% LVMH Watch & Jewelry UK Ltd Manchester, United Kingdom 60% 44% Tag Heuer Ltd Manchester, United Kingdom 60% 44% LVMH Watch & Jewelry USA Springfield (New Jersey), 60% 44% (Inc) U.S.A. LVMH Watch & Jewelry Canada Toronto, Canada 60% 44% Ltd LVMH Watch & Jewelry Far Hong Kong, China 59% 44% East Ltd LVMH Watch & Jewelry Singapore 60% 44% Singapore Pte Ltd LVMH Watch & Jewelry Kuala Lumpur, Malaysia 60% 44% Malaysia Sdn Bhd LVMH Watch & Jewelry Japan Tokyo, Japan 60% 44% K.K. LVMH Watch & Jewelry Melbourne, Australia 60% 44% Australia Pty Ltd LVMH Watch & Jewelry Hong Hong Kong, China 60% 44% Kong Ltd LVMH Watch & Jewelry Taiwan Taipei, Taiwan 60% 44% Ltd Cortech SA Cornol, Switzerland 60% 44% LVMH Watch et Jewelry Coral Gables (Florida), U.S.A. 60% 44% Carribean & Latin America Inc

148 ArteLink S.r.l. Fratte di S. Giustina in Colle, 60% 44% Italy LVMH Watch & Jewelry India New Delhi, India 60% 44% Pvt Ltd LVMH Watch & Jewelry China Shanghai, China 60% 44% Chaumet International SA Paris, France 60% 44% Chaumet London Ltd London, United Kingdom 60% 44% Chaumet Horlogerie SA Bienne, Switzerland 60% 44% Chaumet Monte Carlo SAM Monte Carlo, Monaco 60% 44% Chaumet Korea Chusik Hoesa Seoul, South Korea 31% 22% Zenith International SA Le Locle, Switzerland 60% 44% Zenith Time Co Ltd Manchester, United Kingdom 60% 44% LVMH Watch et Jewelry Italy Milan, Italy 60% 44% SpA De Beers LV Ltd London, United Kingdom 30% 22% Omas S.r.l. Bologna, Italy 60% 44% Delano SA La Chaux-de-Fonds, 60% 44% Switzerland Les Ateliers Horlogers LVMH SA La Chaux-de-Fonds, 60% 44% Switzerland Fred Paris SA Paris, France 60% 44% Joaillerie de Monaco SA Monte Carlo, Monaco 60% 44% Fred Inc Beverly Hills (California), 60% 44% U.S.A. (*) Fred London Ltd London, United Kingdom 60% 44% Benedom SARL Paris, France 60% 44%

SELECTIVE RETAILING Sephora SA Boulogne Billancourt, France 60% 44% Sephora Luxembourg SARL Luxembourg, Luxembourg 60% 44% LVMH Iberia SL Madrid, Spain 60% 44% LVMH Italia SpA Milan, Italy 60% 44% Sephora Portugal Perfumeria Lda Lisbon, Portugal 60% 44% Sephora Poland Spzoo Warsaw, Poland 46% 33% Sephora Deutschland GmbH Bad Homburg, Germany 60% 44% Clab S.r.l. Milan, Italy 60% 44% Sephora Marinopoulos SA Alimos, Greece (1) 30% 22% Beauty Shop Romania SA Bucarest, Romania (1) 30% 22% Spring Time Cosmetics SA Athens, Greece (1) 30% 22% Sephora Tchéquie SRO Prague, Czech Republic 60% 44% Sephora Monaco SAM Monaco 59% 44% Sephora Patras Alimos, Greece (1) 31% 11% Sephora Cosmeticos España Madrid, Spain (1) 30% 22% S+ Boulogne Billancourt, France 60% 44%

149 Sephora Marinopoulos Cyprus Cyprus (1) 30% 22% Sephora Moyen Orient Fribourg, Switzerland 60% 24% Sephora Middle East FZE JAFZ, Dubai, UAE 60% 24% Sephora Emirates Dubai, UAE 60% 24% Sephora Bahrain Manama, Bahrain 60% 24% Sephora China Shanghai, China 49% 36% Sephora Holding Asia Shanghai, China 60% 44% Sephora Beijing Cosmetics Co. Beijing, China 49% 36% Ltd Sephora USA, Inc San Francisco (California), 60% 44% U.S.A. (*) Sephora Beauty Canada, Inc San Francisco (California), 60% 44% U.S.A. Magasins de SA Paris, France 33% 25% Le Bon Marché SA Paris, France 60% 44% SEGEP SNC Paris, France 59% 44% Franck & Fils SA Paris, France 60% 44% Balthazar SNC Paris, France 60% 44% DFS Holdings Ltd Hamilton, Bermuda 37% 27% DFS Australia Pty Ltd Sydney, Australia 60% 27% Travel Retail Shops Pte Ltd Sydney, Australia (2) 27% 12% DFS European Logistics Ltd Hamilton, Bermuda 60% 27% DFS Credit Systems Limited Hamilton, Bermuda 60% 27% DFS Group Ltd Delaware, USA 60% 27% DFS China Partners Ltd Kowloon, Hong Kong, China 60% 27% DFS Macau Ltd Hong Kong, China 60% 27% Duty Free Shoppers Hong Kong Hong Kong, China 60% 27% Ltd Hong Kong International Hong Kong, China 30% 14% Boutique Partners TRS Duty Free Shoppers Hong Hong Kong, China (2) 27% 12% Kong Ltd Preferred Products Limited Hong Kong, China 60% 27% DFS Okinawa K.K. Okinawa, Japan 60% 27% TRS Okinawa Okinawa, Japan (2) 27% 12% JAL/DFS Co., Ltd Chiba, Japan (2) 24% 11% DFS Korea Ltd Seoul, South Korea 60% 27% DFS Seoul Ltd Seoul, South Korea 60% 27% DFS Cotai Limitada Macao, China 60% 27% DFS Sdn. Bhd. Kuala Lumpur, Malaysia 60% 27% Gateshire Marketing Sdn Bhd. Kuala Lumpur, Malaysia 60% 27% DFS Merchandising Ltd Netherlands Antilles 60% 27% DFS New Caledonia Sarl Noumea, New Caledonia 60% 27% DFS New Zealand Ltd Auckland, New Zealand 60% 27%

150 TRS New Zealand Ltd Auckland, New Zealand (2) 27% 12% Commonwealth Investment Saipan, Mariana Islands 58% 26% Company, Inc DFS Saipan Ltd Saipan, Mariana Islands 60% 27% Kinkaï Saipan L.P. Saipan, Mariana Islands 60% 27% Saipan International Boutique Saipan, Mariana Islands 30% 14% Partners DFS Palau Ltd Koror, Palau 60% 27% Difusi Information Technology & China 60% 27% Development Co. Ltd DFS Information Technology China 60% 27% (Shanghai) Company Limited Hainan DFS Retail Company China 60% 27% Limited DFS Galleria Taiwan Ltd Taipei, Taiwan 60% 27% DFS Taiwan Ltd Taipei, Taiwan 60% 27% Tou You Duty Free Shop Co. Ltd Taipei, Taiwan 60% 27% DFS Singapore (Pte) Ltd Singapore 60% 27% DFS Trading Singapore (Pte) Ltd Singapore 60% 27% DFS Venture Singapore (Pte) Ltd Singapore 60% 27% TRS Singapore Pte Ltd Singapore (2) 27% 12% Singapore International Boutique Singapore 30% 14% Partners DFS Group L.P. Delaware, U.S.A 37% 27% LAX Duty Free Joint Venture Los Angeles (California), U.S.A 46% 21% 2000 Royal Hawaiian Insurance Hawaii, U.S.A. 60% 27% Company Ltd Hawaii International Boutique Honolulu (Hawaii) U.S.A. 30% 14% Partners JFK Terminal 4 Joint Venture New York, U.S.A. 48% 22% 2001 DFS Guam L.P. Tamuning, Guam 37% 27% Guam International Boutique Tamuning, Guam 30% 14% Partners DFS Liquor Retailing Ltd Delaware, U.S.A. 37% 27% Twenty –Seven–Twenty Eight Delaware, U.S.A. 37% 27% Corp. TRS Hawaii LLC Honolulu (Hawaii), U.S.A. (2) 27% 12% TRS Saipan Saipan, Iles Mariannes (2) 27% 12% TRS Guam Tumon, Guam (2) 27% 12% Tumon Entertainment LLC Tamuning, Guam 60% 44% Comete Guam Inc Tamuning, Guam 60% 44% Tumon Games LLC Tamuning, Guam 60% 44%

151 Tumon Aquarium LLC Tamuning, Guam 60% 44% Comete Saipan Inc Saipan NMI 60% 44% Cruise Line Holdings Co Delaware, U.S.A. 60% 44% On-Board Media, Inc Delaware, U.S.A. 60% 44% Starboard Cruise Services, Inc Delaware, U.S.A. 60% 44% Starboard Holdings Ltd Delaware, U.S.A. 60% 44% International Cruise Shops, Ltd Cayman Islands 60% 44% South Florida Custom Brokers Miami (Florida), U.S.A. 40% 29% Miami Airport Duty-Free Joint Miami (Florida), U.S.A. 40% 29% Venture Fort Lauderdale Partnership Ft Lauderdale (Florida), U.S.A. 45% 33%

OTHER ACTIVITIES DI Group SA Paris, France 60% 44% DI Services SAS Paris, France 60% 44% Imprimerie Desfossés SARL Paris, France 60% 44% Tribune Desfossés SAS Paris, France 60% 44% Radio Classique SAS Paris, France 60% 44% Les Editions Classique Affaires Paris, France 60% 44% SARL DI Régie SAS Paris, France 60% 44% SFPA SARL Paris, France 60% 44% D2I SAS Paris, France 60% 44% Investir Publications SAS Paris, France 60% 44% Investir Formation SARL Paris, France 60% 44% Compo Finance SARL Paris, France 60% 44% SID Presse SARL Paris, France 60% 44% SID Développement SAS Paris, France 60% 44% SID Editions SAS Paris, France 60% 44% SID Magazine SA Paris, France 60% 44% SOFPA SA Lausanne, Switzerland 60% 44% Ufipar SAS Boulogne Billancourt, France 60% 44% L Capital Management SAS Paris, France 60% 44% Sofidiv SAS Boulogne Billancourt, France 60% 44% GIE LVMH Services Boulogne Billancourt, France 60% 37% Moët Hennessy SNC Boulogne Billancourt, France 40% 29% LVMH Services Ltd London, United Kingdom 60% 44% Moët Hennessy Investissements Boulogne Billancourt, France 60% 29% LVMH Fashion Group SA Paris, France 60% 44% Moët Hennessy International SA Boulogne Billancourt, France 40% 29% Creare SA Luxembourg, Luxembourg 60% 38% Creare Pte Ltd Singapore 60% 38% Société Montaigne Jean Goujon Paris, France 60% 44% SAS

152 Delphine SAS Boulogne Billancourt, France 60% 44% LVMH Finance SA Boulogne Billancourt, France 60% 44% Primae SA Boulogne Billancourt, France 60% 44% Eutrope SAS Boulogne Billancourt, France 60% 44% Flavius Investissements SA Paris, France 60% 44% LBD HOLDING SA Boulogne Billancourt, France 60% 44% LV Capital SA Paris, France 60% 44% Micromania SAS Nice, France 60% 44% Fondation Louis Vuitton pour la Boulogne Billancourt, France 60% 44% Création Moët Hennessy Inc New York, U.S.A. (*) 60% 29% One East 57th Street LLC New York, U.S.A. (*) 60% 44% LVMH Moët Hennessy Louis New York, U.S.A. (*) 60% 44% Vuitton Inc 598 Madison Leasing Corp New York, U.S.A. (*) 60% 44% 1896 Corp New York, U.S.A. (*) 60% 44% LVMH Participations BV Baarn, Netherlands 60% 44% LVMH Moët Hennessy Louis Baarn, Netherlands 60% 44% Vuitton BV Louis Vuitton Prada Holding BV Amsterdam, Netherlands 60% 44% Sofidiv UK Ltd London, United Kingdom 60% 44% LVMH Moët Hennessy Louis Tokyo, Japan 60% 44% Vuitton KK Osaka Fudosan Company Ltd Tokyo, Japan 60% 44% LVMH Asia Pacific Ltd Hong Kong, China 60% 44% LVMH Moët Hennessy Louis Paris, France 60% 44% Vuitton SA (*) The address given corresponds to the companies’ administrative registered office, as the corporate registered office is located in the state of Delaware. (1) Consolidated on a proportional basis. (2) Accounted for using the equity method. (3) Joint venture companies with Diageo: only the Moët Hennessy activity is consolidated.

153 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FISCAL YEAR ENDED DECEMBER 31, 2006

MAZARS & GUERARD ERNST & YOUNG AUDIT Tour Exaltis Faubourg de l’Arche 61, rue Henri Regnault 11, allée de l’Arche 92400 Courbevoie 92037 Paris-La Défense Cedex S.A. au capital de €8,320,000 S.A.S à capital variable Statutory auditors Statutory auditors Member of the Versailles Member of the Versailles regional organization regional organization

To the Shareholders, In compliance with the assignment entrusted to us by your Annual General Meeting, we have audited the accompanying consolidated financial statements of Christian Dior for the year ended December 31, 2006. The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit.

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

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

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

Courbevoie and Paris-La Défense, April 6, 2007 The Statutory Auditors

MAZARS & GUERARD ERNST & YOUNG AUDIT

Denis Grison Christian Mouillon

155