C OMBINED O RDINARY A ND E XTRAORDINARY S HAREHOLDERS’MEETING O N M AY 11, 2006

Chairman’s Message 2

Managing and Auditing Bodies 4

Simplified Organization Chart 5

Financial Highlights 6

Management Report of the Board of Directors 8

Report of the Chairman of the Board to the Shareholders’ Meeting 59

Consolidated Financial Statements 67 • Highlights 69 • Balance Sheet 70 • Income Statement 71 • Statement of Changes in Shareholders’ Equity 72 • Cash Flow Statement 73 • Notes to the Financial Statements 74 • Statutory Auditors’ Report 145

1 CHAIRMAN’S MESSAGE

I am particularly pleased to speak to you, our loyal shareholders, at a time when the Christian Group is breaking record after record. Year after year, you have demonstrated your support for the Group’s development policy and your vision as well as your patience are now being rewarded. The market price soared 50% in 2005 and is again rising at the beginning of 2006, as I write these lines.

What is being recognized, I believe, is the quality of our business model, which delivers steady growth in our results. In 2005, the Christian Dior Group recorded the highest revenue and earnings in its history and we are projecting very substantial growth in profitability again in 2006.

In 2005, the hundredth anniversary celebration of the birth of Christian Dior was an extraordinary success, demonstrating the unique brilliance of the brand. Both its rich history and tradition, combined with its dynamic appeal driven by the talents of our three designers, are the forces driving this unparalleled interest.

Backed by its traditional values, which are only enhanced by its contemporary image, the Christian Dior brand is attracting new customers and becoming a leader worldwide, including the newest consumer countries like China and India. In mainland China, we have developed a network of twenty-five boutiques and are present in the best locations in most of the major cities. The company recorded a very significant percentage of its revenue in Asia, in a context of rapid growth and profitable expansion. This success has deep roots and is anchored in all our businesses, whether it is in the traditional segments like leather goods and ready-to-wear, or the newest ventures like menswear or jewelry. We recently opened a flagship boutique for men in Shanghai and the new jewelry collections, perceived as both innovative and exquisite by customers, have been very successful. The new store opened early in 2006 in New Delhi, India is another demonstration that Christian Dior never rests on its laurels.

In addition to India, growth will continue in 2006 and will focus on regions with strong potential. The vitality of the brand can also be seen in all the product lines designed and developed by our designers. Ready-to-wear, leather goods and women’s footwear continue to record rapid

2 growth. Menswear continues to confirm its initial success, backed by an expanded line of new products and the opening of dedicated and specific points of sale, like the store opened in Shanghai earlier this year. Finally, our jewelry has earned an unqualified success.

The creativity of our teams and the controlled expansion of our network drove the steady growth in revenue for Christian Dior in 2005, particularly in Asia, the United States and Europe.

The performance of LVMH in 2005 met our expectations. Our revenue rose in all geographic regions. While the United States and Asia were the primary engines of that growth, Europe also contributed, despite a sluggish economic environment. In addition, all our business groups increased their profit from recurring operations, and the Group’s cash flow improved again.

Last year was yet another demonstration of the power of our leading brands, which are profit models and the foundation of our success and again gained market share because of their exceptionally dynamic innovations.

2005 was also an illustration of our ability to gradually move the brands that carry our long- term ambitions toward the status of star brands. With the Group’s support, these brands are following their road map, step by step, and continue to confirm their potential. , the Italian star, is one of the companies that has made the most progress. Justifying our strong hopes and the investments we have made, it is highly attractive today, its revenue is growing rapidly and its results have improved significantly. All the elements are in place to accelerate its growth.

In 2006, we will continue to reap the benefits of a number of developments last year and pursue our strategy focused on the growth of our flagship brands. We will maintain our efforts to develop the brands that represent our vectors for growth and we are accelerating the development of the brands that show the greatest potential.

Despite the monetary uncertainties, the economic context is buoyant because of the growth in the world’s major economies and rapid expansion in the emerging countries. We will strengthen the presence of our brands in the major markets and continue to expand in new territories: the Asian countries that hold significant growth potential for luxury products, Russia, and the most advanced countries of Central and Eastern Europe with their developing economies…

Innovation, the primary engine of our success, will continue to hold pride of place. will launch new and innovative leather goods. Among other initiatives, Dior plans to launch major skin care and make-up products, and and will introduce a new women’s perfume. TAG Heuer and will accelerate their innovations, and Dior Montres will capitalize on the huge success of its new Christal line, which will be expanded with new models.

With confidence in our prospects, we have again in 2006 set an objective for very strong growth in our results.

3 M ANAGING A ND A UDITING B ODIES

BOARD OF DIRECTORS PERFORMANCE AUDIT COMMITTEE Eric GUERLAIN Chairman Chairman

Eric GUERLAIN (1)(2) Pierre GODE Vice-Chairman Christian de LABRIFFE Sidney TOLEDANO Chief Executive Officer

Antoine BERNHEIM (1)(2) NOMINATING AND COMPENSATION COMMITTEE Denis DALIBOT (2) Alessandro VALLARINO GANCIA (3) Antoine BERNHEIM Chairman Pierre GODE Christian de LABRIFFE (2) Pierre GODE Jaime de MARICHALAR y SÁENZ de Eric GUERLAIN TEJADA (3) Raymond WIBAUX Raymond WIBAUX (1) Board Members

EXECUTIVE MANAGEMENT STATUTORY AUDITORS

ERNST & YOUNG AUDIT Sidney TOLEDANO represented by Christian MOUILLON Chief Executive Officer

MAZARS & GUERARD represented by Denis GRISON

(1) Independent Board Member. (2) Reelection proposed at the General Meeting on May 11, 2006. (3) Election proposed at the General Meeting on May 11, 2006.

4 S IMPLIFIED O RGANIZATION C HART ON D ECEMBER 31, 2005

* Listed company

5 F INANCIAL H IGHLIGHTS

Consolidated revenue by business group (in millions of euros)

5% 5% Christian Dior Couture 663 Wines and Spirits 17% 18% 2644

Fashion and Leather Goods 4812

33% 33% Consolidated revenue by geographical area of destination

Perfumes and Cosmetics (in millions of euros) 2285 16% 15% France 2282 Watches and Jewelry 16% 16% 573 4% 4% Selective Retailing Europe (excl. France) 3648 2954 25% 25% 20% 20%

Other Activities and Eliminations United States 2004 2005 (69) 3805

26% 26% Consolidated revenue by currency Japan (in millions of euros) 2111 15% 14% Euro 4355 Asia (excl. Japan) 2412 16% 17% 32% 30%

Other markets 7% 7% 992

US dollar 2004 2005 4561

31% 31%

Yen 2152 15% 15%

4% 5% Pound sterling 666 3% 3% Hong Kong dollar 15% 16% 508 Other currencies 2314 2004 2005

6 F INANCIAL H IGHLIGHTS

2005 2004(1) (in millions of euros)

Revenue by business group Christian Dior Couture 663 595 Wines and Spirits 2,644 2,259 Fashion and Leather Goods 4,812 4,366 Perfumes and Cosmetics 2,285 2,128 Watches and Jewelry 573 493 Selective Retailing 3,648 3,276 Other activities and eliminations (69) (57)

Total 14,556 13,060

Percentage earned outside France 84% 84%

Profit from recurring operations(1) 2,791 2,413

(in millions of euros)

Net income – Group share 618 549

(in euros)

Net income per share Net income – Group share 3.48 3.09 Net income – Group share after dilution 3.45 3.07 Dividend per share(2) 1.16 0.97

(in millions of euros)

Total balance sheet 31,959 29,365

Average workforce 57,778 55,121

(1) Following restatement under IFRS of data previously published under French GAAP. (2) For financial year 2005, the amount proposed at the General Meeting on May 11, 2006.

7 M ANAGEMENT R EPORT O F T HE B OARD O F D IRECTORS

Ladies and Gentlemen, This report summarizes the significant events affecting the life of the Christian Dior Group in 2005. We shall review in order the consolidated results, the situation by business group and your Company’s performance.

I. CONSOLIDATED RESULTS In 2005, the Christian Dior Group recorded the highest level of revenue and profits in its history. All geographic areas in which the Group is present made progress, with a notable acceleration of growth in the United States, Asia and Europe. In this context, net income made strong progress and grew faster than revenue.

Net revenue reached 14,556 million euros, up 11%; changes in the scope of consolidation and exchange rate variations had no impact on this growth.

The Group’s profit from recurring operations was 2,791 million euros, up 16% over 2004. This growth, much higher than growth in revenue, was due to the increase in the gross margin and control of operating costs. The ratio of profit from recurring operations to revenue reached 19%, up one point over 2004.

After accounting for other operating income and expenses, operating income was 2,565 million euros, which represents growth of 16%. This includes expenses of 226 million euros, including a provision of 179 million euros for “the department store”, which was closed to the public for security reasons.

Consolidated net income was 1,654 million euros, compared with 1,443 million euros in 2004, with Group share at 618 and 549 million euros respectively. This very positive growth reflects the growth of the above-mentioned operating income and the decrease in financial expenses, partially offset by an increase in tax expenses.

8 The main financial items were the following:

(in millions of euros) 2005 2004

Revenue 14,556 13,060 Profit from recurring operations 2,791 2,413 Operating income 2,565 2,210 Net income 1,654 1,443 Group share 618 549

Each of these business groups recorded positive growth. • Organic growth of Christian Dior Couture revenue was 11%, identical at constant currency. This performance resulted from the upward trend of sources of growth, for example Dior Homme, Shoes and Jewelry. All geographic regions contributed to this growth, notably Asia. • Organic growth in revenue of the Wines and Spirits group, on a constant structural and exchange rate basis, was 11%, and 17% in published data due to 4% and 9% growth in and Cognac volumes respectively. In 2005, the business group added Glenmorangie. The strongest growth in revenue was seen in Japan for Champagne, and the Asian countries, especially Continental China, for Cognac. • Organic revenue growth of the Fashion and Leather Goods group was 12%, and 10% in published data. Louis Vuitton recorded double-digit organic revenue growth. The year was also marked by very strong growth in Fendi revenue. For all brands of this business group, the most notable performances were recorded in Asia, Europe and the United States. • Revenue of the Perfumes and Cosmetics group saw organic growth of 7%, the same as the published rate. All brands of the business group have growing revenue, especially Christian Dior Perfumes, due to the success of new perfumes Miss Dior Chérie and Dior Homme.All brands of beauty and cosmetics product lines also made noticeable progress. The Asian countries showed the most significant growth. • Organic growth in revenue of the Watches and Jewelry group reached 17%, and 16% in published data. The strongest growth was in the United States where TAG Heuer and Zenith had the best performances, while all Group brands showed excellent performances in Asia. • The organic growth in revenue of Selective Distribution was 13%, and 12% in published data. The closing, for security reasons, of “the La Samaritaine department store” in had a negative effect of 2 points on revenue growth, whereas the effect of currencies was up 1 point.

9 Profit from recurring Net revenue operations (in millions of euros) 2005 2004 2005 2004 Christian Dior Couture 663 595 53 51 Wines and Spirits 2,644 2,259 869 813 Fashion and Leather Goods 4,812 4,366 1,467 1,309 Perfumes and Cosmetics 2,285 2,128 173 150 Watches and Jewelry 573 493 38 7 Selective Retailing 3,648 3,276 347 238 Other activities, eliminations and restatements (69) (57) (156) (155) Total 14,556 13,060 2,791 2,413

On first consolidation of LVMH in 1988, all brands then owned by LVMH were revalued in the accounts of the Christian Dior Group. In the Christian Dior consolidated financial statements, LVMH’s accounts are restated to account for valuation differences in appraisal of brands recorded prior to 1988 in the consolidated accounts of each of these companies. Consequently, the net results of LVMH were consolidated for 1,670 million euros compared with 1,668 million euros before restatement, and are included in the net income – Group share of Christian Dior for 636 million euros (identical amount before restatement). It should also be noted that, since the assets sold by LVMH have a consolidation value that is greater in Christian Dior’s books than the value recorded at LVMH, the consolidated results following their sale are written off by this difference.

Capital investment The net balance of investment operations (acquisitions and disposals) resulted in a cash outflow of 867 million euros. This includes, on the one hand, the operating investments (acquisitions of tangible and intangible assets) for 755 million euros, and on the other hand, non-recurring capital expenditures related to restructuring and acquisitions, including the acquisition of Glenmorangie, and the purchase of minority interests of 30% in Millennium thus bringing its holding to 100%.

Research and Development Research and development costs recorded during the accounting period were 38 million euros in 2005 (same amount in 2004). These amounts cover costs incurred in scientific research and new product development.

Debt At December 31, 2005, net consolidated debt was 5,706 million euros compared with shareholders’ equity of 11,868 million. The net debt ratio decreased from 66% in 2004 to 48% in 2005, which is lower than the target ratio of 50%. The improved financial structure explains, on the one hand, the increase in shareholders’ equity from 10,065 to 11,868 million euros and, on the other hand, the net debt decrease from 6,646 to 5,706 million euros.

10 The increase of 1,803 million euros in shareholders’ equity (including minority interests) primarily results from the net profit for the financial year of 1,654 million euros, less dividends paid of 543 million euros and currency translation differences of 596 million euros. The decrease in net financial debt by 940 million euros primarily reflects an operating cash flow of 2,010 million euros, less net capital investment during the year of 867 million euros and dividends paid of 543 million euros. Due to its financial structure and the geographic spread of its activities, the Group is subject, in particular, to the risk of interest rate increases and the decline of certain currencies in relation to the euro. These risks are actively managed, on the one hand, by the establishment of interest rate swaps and the purchase of caps to hedge the risk of interest rate hikes and, on the other hand, by futures and options to hedge exchange risks. The Group has signed covenants to meet certain financial ratios. These refer, for certain contracts, to the coverage of debt by the portfolio of assets and, for other contracts, the coverage of debt by the year’s financial flows. Nonetheless, the Group is more and more frequently not required to make commitments on financial ratios.

Consolidated Cash Flow Statement The consolidated cash flow statement, shown in the consolidated financial statements, provides details on the main financial cash flows during 2005. Cash flow from operations before changes in working capital increased to 3,185 million euros compared with 2,789 million for the previous year, an increase of 14%. Net cash from operations after interest and income tax amounted to 2,297 million euros compared with 2,122 million euros in 2004, reflecting an increase of 8%. Income tax paid was 620 million euros in 2005 compared with 401 million in 2004, essentially due to a non-recurring advance payment of income tax on French companies at the end of 2005. The working capital requirement increased by 287 million euros. In particular, the change in inventories generated cash requirements of 281 million euros, primarily as a result of increased activity and the corresponding restocking. Changes in customer receivables during the year generated requirements of 77 million euros, whereas changes in trade accounts brought 18 million euros. In total, net cash from operating activities was largely positive, at 2,010 million euros. The net balance of investment and disposal operations, both operational and financial, resulted in a cash outflow of 867 million euros. The Group’s operating investments, net of disposals, resulted in a decrease in cash flows of 727 million euros. Their increase reflects the strong performance and growth of the Group and its flagship brands such as Louis Vuitton, Christian Dior Couture, Christian Dior Perfumes, Fendi and . Non-current available for sale financial assets represented a net of 400 million euros inflow over the year. Changes in the scope of consolidation came to 604 million euros. This amount corresponds essentially to the impact of the acquisition of 100% of Glenmorangie and the remaining 30% of Millennium, respectively for 438 and 92 million euros. The change in cash flow from transactions relating to equity represents an expenditure of 510 million euros.

11 The dividends paid by Christian Dior S.A. in 2005, not including treasury shares, reached 172 million euros, of which 115 million were distributed in May as the final dividend for 2004 and 57 million paid in December as the interim dividend for 2005. In addition, the minority shareholders of consolidated subsidiaries received dividends totaling 371 million euros. Surplus cash after all operating, investing, and capital activities thus climbed to 633 million euros. Some borrowings and financial debt were redeemed for an amount of 1,621 million euros, significantly greater than new borrowings and financial debt. Issues and subscriptions to borrowings and financial debt enabled 1,267 million euros to be raised. In June 2005, the Group raised a nominal amount of 600 million euros through a public bond issue, with a maturity of 7 years, and on acquisition of Glenmorangie, the Group issued Loan Notes, of which 60 million euros remained outstanding at December 31, 2005. Moreover, the Group continued its financing in Japan through private holdings made as part of its Euro Medium Term Notes program. On November 21, 2005, Christian Dior S.A. completed restructuring of a syndicated loan of 500 million euros. The maturity, initially set for November 15, 2009, was extended to November 21, 2010, with optional renewal every year, for the subsequent two years. Net debt was decreased by reducing long term debt, by increasing cash and cash equivalents, and by the reduction by 190 million euros from the Group’s commercial paper program. The net cash flow balance at the end of 2005 was 988 million euros.

Workforce The Group’s workforce at December 31, 2005 had increased by 4%, mainly due to the inclusion of newly acquired companies, but also due to organic growth in the most buoyant business groups. The dynamism of all the economic segments enabled the Group to create more jobs than it lost through the disposal of entities. The average workforce of the Christian Dior Group was as follows: 2005 2004 Christian Dior Couture 2,595 2,304 Wines and Spirits 5,134 4,697 Fashion and Leather Goods 18,071 18,326 Perfumes and Cosmetics 13,628 13,488 Watches and Jewelry 1,844 1,777 Selective Retailing 21,544 20,045 Other activities 867 877

Total 63,683 61,514

12 II. RESULTS BY BUSINESS GROUP

The results by business group shown below are those of Christian Dior Couture and those published by LVMH, which are not therefore restated.

1. Christian Dior Couture A – Highlights 2005 was marked by the following factors: • Continued expansion of revenue and earnings Christian Dior Couture’s revenue grew by 11% to 663 million euros, at current exchange rates. This growth follows a strong upward trend in revenue in 2004 that was already at 14%. Operating income increased by 6% and reached 8% of revenue. • Growth balanced by different product lines 2005 confirmed the continued development of priority business activities for future growth of the brand, especially Dior Homme that returned vigorous success over its entire product range, and also Jewelry and Shoes that continue to record strong progress. The end of the contract license and the assumption of direct management of the Bijoux fantaisie activity, with the May addition of the production facility in Pforzheim (Germany) were accompanied by the implementation of a development strategy that bore fruit in 2005. Leather Goods (launching of Détective and Dior Flight lines) as well as the women’s Ready-to-wear (success of the Veste Dior) also contributed to growth with the development of top-of-the-range products that were very well received. • Continued controlled growth of the network The network had 194 points of sale at December 31, 2005, up from 184 in 2004, an increase of 10 points of sale. ➤ Asia was a major axis of expansion with 3 new points of sale. Mainland China’s contribution to the development of the area was major with a revenue growth of over 60%. ➤ Japan opened 3 new points of sale including a flagship boutique in Osaka. ➤ In the United States, the brand opened a new flagship boutique at Wynn Las Vegas. The 8 Neiman Marcus points of sale, previously operated directly by the brand, were converted to points of sale managed by the department store. Dior enlarged its geographic presence on the American continent with an additional 2 openings in Canada, 2 in Mexico and 1 in Brazil. ➤ In Europe, a Dior Homme boutique was inaugurated in Berlin.

B – Consolidated Results of the Couture Business Revenue from the Couture business, at 663 million euros, grew by 11% compared with 2004. At a constant exchange rate, revenue would be 662 million euros, or an 11% increase compared with the previous year. Operating income recorded a profit of 53.4 million euros, growth of 6% compared with the previous year. This growth carried the impact of investments in the distribution network.

13 The financial result is an expense of 8.6 million euros, an increase of 48% over 2004. This additional expense essentially represents the cost of financing the investments made to enlarge the network. The tax expense was 19.1 million euros, an increase of 18% over 2004, a year that benefited from a reduction in the tax charge. All the above factors contributed to net income – Group share of 23.3 million euros, up from 25.4 million euros in 2004. The share attributable to third parties was 2.5 million euros.

C – Analysis of the development by business sector %at constant (in millions of euros) 2005 2004 % rate

License royalties 21.0 21.4 (2) (2) Wholesale revenue 126.6 116.1 9 9 Retail revenue and other 515.6 457.7 13 12

Total 663.2 595.2 11 11

LICENSES Royalties from licenses by geographic region were as follows:

%at constant (in millions of euros) 2005 2004 % rate

Europe 17.6 19.2 (8) (8) North America 2.5 1.9 30 30 Other 0.9 0.3 245 245

Total 21.0 21.4 (2) (2)

Christian Dior Couture licenses were 2% lower compared with 2004 due to the termination of the licensed concession for the Bijoux fantaisie business, which has been taken into direct management. Excluding this activity, other licenses are up 15%. Spectacles, in particular, represent a noteworthy area of expansion with the growth of Dior Homme brand spectacles and because of the enlarged product line adapted to market demand. Watches also strongly contributed to the growth with the launch of the Christal watch.

WHOLESALE REVENUE Wholesale revenue expanded by 9% in 2005. Shoes, Jewelry, Accessories and Homme products, in particular, contributed to this growth.

14 RETAIL REVENUE %at constant (in millions of euros) 2005 2004 % rate

Europe 211.6 201.4 5 5 North America 92.0 81.3 13 13 Asia Pacific 207.3 172.2 20 20 Other 4.7 2.8 71 47

Total 515.6 457.7 13 12

Dior Homme pursued its impressive growth with the opening of points of sale specific to the Man, for example in China where all products have been quite successful. In addition, the product line has been enlarged to include new accessories in leather goods, shoes and home products. The takeover of the Bijoux fantaisie license by Christian Dior Couture in May 2005 enabled a new product development strategy and direct management of the distribution network which will be continued in 2006. Dior Jewelry continued to enlarge the brand’s network of existing boutiques in 2005, benefiting from the accessibility and profile of Dior products in prestigious locations. It offered a range of products balanced between quality manufactured jewelry and mass commercial successes (for example, Gourmette and the “Oui” ring). The other product lines also contributed to growth. Women’s Ready-to-wear continued expanding, notably due to the success of the Veste Dior and the development of trench coats and overcoats. Handbag sales were boosted this year by the launch of several successful product lines: Dior Flowers, Dior Flight, Détective, Diorissimo, and the perennial lines such as Lady Dior and Saddle. In the retail network, all geographic regions contributed to growth, in particular, Asia and the United States. Major investments were made in Japan and the United States, especially with the opening of key new boutiques (Osaka Shinsaibashi, Washington, Wynn Las Vegas, etc.).

D – Outlook In 2006, growth in revenue is expected to continue at a steady rate. Profitability should also improve significantly, from greater productivity in the revenue network. Controlled expansion and disciplined management of margins and costs should contribute to the upward trend of operational profitability. The network should continue to extend to new markets. Dior is present in India where a first boutique in its name should open its doors in the first quarter, and in the Middle East where, following the success of the Dubai boutique, a new boutique will open in Abu Dhabi. The network will continue to be developed in the main cities in Continental China.

15 2. Wines and Spirits In 2005, the Wines and Spirits group recorded organic growth of 11% in revenue which reached 2,644 million euros, and its profit from recurring operations rose to 869 million euros, up 7% in an unfavorable monetary context. Overall revenue of Champagne and Wines recorded organic growth of 10%. Moët & Chandon confirmed its dynamism and further secured its rank as world leader. The brand consolidated its positions in traditional markets in Western Europe and recorded double-digit growth in new markets such as Eastern Europe and Asia. Growth was especially remarkable in Japan and China which, for champagne, are booming new territories. Lively revenue of Moët Rosé, which continued to grow significantly in all markets, also boosted the performance of Moët & Chandon. performed very well and was especially dynamic in the United States where the brand is in strong demand, as well as in the United Kingdom, Italy, Australia and Japan. The runaway success of non-vintage Veuve Clicquot Rosé, a new champagne launched in Japan in 2004, was confirmed in 2005. It will be launched worldwide in 2006 to benefit from the growth of a market segment that is currently the most dynamic for champagne. cognac confirmed its dynamism with volumes trending upwards 9%. Organic growth in revenue of cognac and spirits came to 13%. In the United States, the leading market for the Hennessy House remains in first place in volume and value in the cognac category. The brand has been boosted by three growth vectors: the increase in consumption of V.S., the pursuit of double-digit growth for V.S.O.P., and the implementation of quality procedures that have enabled the Prestige line to be highly successful in luxury establishments. In Asia, 2005 was marked by exceptional growth, especially in China, a country increasingly positioned for significant growth and that is already the largest X.O. market for Hennessy. In Japan, where the market for dark spirits is declining, Hennessy maintained its value strategy focused on X.O. and the Prestige line that recorded double-digit growth in volume. Within the European countries, Russia confirmed its potential. Hennessy benefited from a strong power of attraction and high profitability. Hennessy V.S. maintained its outstanding market share in Ireland. Moët Hennessy completed the acquisition of Glenmorangie plc in early 2005. This company has three international brands of high-quality Scotch malt whisky, Glenmorangie, Glen Moray and Ardbeg. Moët Hennessy also assumed control of operations of the company Millennium, which will enable the international growth of the brand to be intensified.

Outlook for 2006 In 2006, the Wines and Spirits business group will pursue its value strategy. This strategy will continue to focus on a constant employee training program, major advertising and promotion investments, and a sustained price policy. The focus on innovation and strengthening of brand image will be maintained in strategic markets. The portfolio of brands, marketed by teams with proven track-records, will help reinforce the leader position now enjoyed by LVMH in the world of luxury wines and spirits.

16 3. Fashion and Leather Goods In 2005, the Fashion and Leather Goods group recorded organic growth of 12% in revenue at 4,812 million euros, and an expansion of 12% in its profit from recurring operations which rose to 1,467 million euros. Once again it reinforced its market shares. In 2005, Louis Vuitton again recorded double-digit organic growth in revenue. With good performance in North America, continuous sustained growth in Europe, acceleration of revenue in Japan and the confirmed success of its brand in Asia, especially in China, the flagship brand of the business group continued to gain market share. Strong revenue growth continues to be accompanied by exceptional profitability due to the unusual attractiveness of the brand, the great quality of its products, and the strong responsiveness of the overall organization of the company. Louis Vuitton enlarged the size of its distribution network to 345 boutiques by the end of 2005. There were five new openings and fifty noteworthy renovations. Throughout the year, major inaugurations took place throughout the world: Hong Kong, Beijing, Las Vegas, Okinawa, etc. Indisputably the most remarkable was Maison Louis Vuitton on the Champs- Elysées in Paris, in October 2005, the most astounding luxury boutique in the world. Fendi finished an excellent race in 2005, the year of its 80th birthday. The Italian brand recorded double-digit revenue growth that, combined with the strengthening of its organization and the growth of the productivity of its stores, led to significant improvement in profitability. Fendi pursued the improvement of its distribution network. This work resulted in the redesign of twenty boutiques according to the new luminous, contemporary and luxurious concept that was adopted to express the values of the Italian brand. The celebration of its 80th birthday was marked by the greatly publicized inauguration of the Palais Fendi in Rome, and also of a flagship boutique in New York. Donna Karan reaped the fruit of efforts intended to improve its creations. Revenue of accessories, products holding strong potential for brand development, showed strong growth. Donna Karan also benefited from increased selectivity of its distribution and the progressive implementation of a new concept of exclusive boutique, of a size better adapted to its product lines, bringing more productivity and value to its image. In 2005, Donna Karan recorded improved profit from recurring operations, confirming the pertinence of its new strategy and the quality of the background work performed by its teams since its entry in the LVMH group.

Outlook for 2006 In 2006, the Fashion and Leather Goods group’s objective is to continue increasing its market share through a strategy of continuous innovation and by extending its distribution network. At its ready-to-wear fashion shows, Louis Vuitton will unveil new high-impact leather goods: Suède, Monogram Perforé, new colors for denim, etc. The brand will continue to grow and improve its network of boutiques. It will reinforce its international presence by establishing operations in four new countries. Having established solid bases for its development, Fendi will focus on growth and further improve its profitability in 2006. The business group’s other brands will pursue efforts dedicated to improving different components of their growth model.

17 4. Perfumes and Cosmetics The Perfumes and Cosmetics group recorded 7% organic growth in revenue, greater than the market average, to which all its brands contributed. This revenue rose to 2,285 million euros. Profit from recurring operations came to 173 million euros to post an increase of 15%. LVMH brands are benefiting from the strong dynamic of the Asian markets. In Europe, in a less favorable economic environment and consumer context, our flagship brands gained market share by focusing on their top-of-the-range position. In the United States, the brands are pursuing selective redeployment of their distribution with the first positive results, a measure of their future qualitative growth. Young cosmetics companies, in the development phase, are maintaining their rapid pace of growth. With greater than average growth within its competitive universe, continues to gain market share. The brand is focusing on progress in Asia. It posted remarkable performance in Japan where it continues showing the strongest growth among international brands, and it experienced spectacular success in the Chinese markets. In the United States, where it is committed to building and sustaining a more qualitative and attractive image, it recorded strong growth within the more elite distribution on which its strategy is now focused. In spite of generally stagnant markets in 2005, Europe also contributed to its growth. Due to the emphasis on its status as luxury brand in the world of Couture, through creativity and the quality of its retail presence, Dior reinforced its leadership in France and gained market share in several European countries. In the domain of perfume, the year was particularly marked by the success of Miss Dior Chérie and Dior Homme. In Asia, the launch of Dior Addict 2 was extremely well-received. Guerlain showed remarkable dynamism in 2005, prolonging the boom observed in 2004. This growth confirms the pertinence of its strategy of promoting its historical value as a great perfume maker. The brand continues to gain market share in strategic countries, especially in France and in Asia where its progress is one of the most remarkable in its competitive universe. Its growth is especially high in mainland Asia (China, Korea, Taiwan) and the Middle East. Thanks to its performance and efforts to improve profitability, Guerlain recorded strong growth in its profit from recurring operations.

Outlook for 2006 The Perfumes and Cosmetics group has good prospects for growth and strengthening of its market share in 2006. Parfums Christian Dior will strive to accelerate the pace of its growth by capitalizing on initiatives that contribute to reinforcing its presence as a luxury brand. This strategy will be implemented in particular with the launch of key beauty and make-up products and by providing special support to its flagship lines: J’Adore, Poison, Miss Dior Chérie, Dior Homme and Fahrenheit. Guerlain will also seek to accelerate its growth. The launch of a leading new perfume for women and a major new beauty product, Orchidée Impériale, as well as the extension of the line KissKiss, will be the high points of the year. will launch a very original initiative in the first half – date-branded versions of its perfume lines Amarige, Organza and Very Irresistible – and in the second half, a new perfume for women.

18 Parfums will offer editions of FlowerbyKenzo, its flagship product line, interpreted by artists, and a new perfume for women will appear in the second half.

5. Watches and Jewelry Revenue of the Watches and Jewelry group totaled 573 million euros, recording strong organic growth of 17%, significantly above the market average both for watches and jewelry. The business group significantly improved its profit from recurring operations which rose to 38 million euros. Due to its strong innovative capacities and a targeted communication strategy, TAG Heuer continued to make headway and develop its competitive position. Zenith manufacturing made further breakthroughs in the fine watches segment and strongly developed its revenue. jewelry pursued very sustained growth in target countries, both in jewelry and watches. Launched in the second half, the watch Christal by Dior, designed in collaboration with John Galliano, creator of Dior couture, recorded a very promising start. New distribution agreements have been established in China, an important growth hub, for TAG Heuer, Zenith and Montres Dior. The first De Beers boutiques have opened in the United States. The energetic financial turnaround that began in 2004 continued in 2005. In accordance with its objectives, the Watches and Jewelry group recorded markedly higher organic revenue growth than its competitors. This performance allowed LVMH to gain market share both in watches and jewelry. The American continent, Asia and Japan were the areas of greatest growth in 2005. New distribution agreements have been concluded in China for TAG Heuer, Zenith and Dior, enabling acceleration of their expansion. Combined with growth in revenue, improvement in margins and cost control have enabled very significant progress in profitability with profit from recurring operations up five-fold.

Outlook for 2006 Organic growth and rigorous management are the priorities of each house and each market of the business group in 2006. Progress will be fueled by a large agenda of innovations that will focus primarily on the iconic product lines of each brand. TAG Heuer will use its technological know-how to dynamize its legendary Carrera (Calibre 360), Monaco (Monaco 69) and Aquaracer (Calibre S) lines. Zenith manufacturing will reinforce its Open line and present a sports line at the Basel exposition, as well as a very complex timepiece, the Traveller repetition minutes watch. Dior Montres will develop its Christal line and launch new versions of Chiffre Rouge and DdeDior. Chaumet will launch a new jewelry collection called Attrape-moi and reinforce its line of watches with Dandy. In terms of markets, the largest investments will be targeted for the United States, Continental China and Japan. New marketing methods have been implemented in India, the Middle East and Russia.

19 6. Selective Retailing Selective Retailing revenue rose to 3,648 million euros, recording organic growth of 13%, and profit from recurring operations shows strong improvement at 347 million euros. DFS, buoyed by performance improvements on a comparable boutiques basis and by a full year’s business activity for the Okinawa Galleria that opened at the end of 2004, recorded double-digit growth in revenue. Its profitability rose sharply due to these dynamics and the maintenance of rigorous cost control management. Miami Cruiseline continues to extend its revenue and profitability due to the better visibility of its boutiques on-board ships and an enhanced range of product offerings. Sephora completed a historic year, gained market share and exceeded its revenue and income goals both in Europe and the United States. The cash flow generated in each territory allowed it to finance the expansion underway in Asia. At December 31, 2005, Sephora had a worldwide network of 558 boutiques. 2005 was marked, from April onwards, by the successful establishment of Sephora in China with the opening of three stores in Shanghai. The trading website sephora.fr was launched in June 2005. Le Bon Marché recorded significant growth in revenue and profit from recurring operations in 2005. This progress was established on a solid basis, as confirmed by customer surveys showing strong support for the concept of a large luxury department store, the very foundation of Le Bon Marché’s identity

Outlook for 2006 DFS’s activity in 2006 will benefit from the renovation of the Galleria in Guam and the renovation of several airport concessions at major tourist destinations. Miami Cruiseline will maintain its marketing efforts and rigorous management, and will continue improving its performance. Sephora will focus on its strategy of innovation and exclusiveness with the objective of strong growth in revenue and income. Its expansion will be pursued vigorously both in the countries where it is already successfully established and in new markets with strong potential, particularly in Central Europe. Le Bon Marché will continue cultivating its unrivaled assets among Parisian department stores.

III. RESULTS OF CHRISTIAN DIOR S.A. Christian Dior S.A.’s income consists primarily of dividend income related to its stake in LVMH less the borrowing costs incurred to finance this investment. Net financial income totaled 154 million euros compared with 130 million euros in 2004. This includes, on the one hand, 180 million euros in dividends from subsidiaries and equity interests, and on the other, 26 million euros in net interest expense. The tax savings recorded under the fiscal consolidation program totaled 18 million euros.

20 Net income was 166 million euros compared with 138 million in 2004. Allocation of earnings (in euros)

• Net income 166,439,324.94 plus • Retained earnings before allocation 82,631,900.97 Total income available for distribution 249,071,225.91

We are proposing to allocate it as follows: • Dividend of 1.16 euros per share 210,803,375.68 • Retained earnings after allocation 38,267,850.23

Total 249,071,225.91

With an interim dividend of 0.32 euro paid on December 2, 2005, the balance of 0.84 euro will be paid on May 18, 2006. In accordance with Article 158 of the General Tax Code, this dividend entitles individuals resident for tax purposes in France to a 40% tax allowance. Since the shares held by the Company when this dividend is paid are not entitled to dividends, the amount corresponding to the unpaid dividend on these shares will be transferred to retained earnings.

Distribution of dividends We would like to remind you that the amount of the dividends paid in the previous three years and the corresponding tax credit were as follows:

(in euros) Net dividend Tax credit (*) Gross dividend (*)

2004 0.97 0.16 1.13 2003 0.87 0.435 1.305 2002 0.82 0.41 1.23

(*) for individuals.

IV. SHAREHOLDERS OF THE COMPANY In accordance with Article L.233-13 of the Commercial Code and the information received pursuant to Articles L.233-7 and L.233-12 of the Code, the following table identifies shareholders who, to the Company’s knowledge, hold over 5% of the capital stock or voting rights:

At December 31, 2005 At December 31, 2004 Number %of %of Number %of %of SHAREHOLDERS of shares capital voting rights of shares capital voting rights

Groupe Arnault SAS* 125,616,157 69.12 81.92 124,967,210 68.77 71.88 41, avenue Montaigne 75008 Paris

(*) Directly or indirectly.

21 At December 31, 2005, the company had capital stock of 363,454,096 euros, represented by 181,727,048 shares with a par value of 2 euros per share. 120,948,264 shares had double voting rights. In accordance with Articles L.255-208 and L.255-209, paragraph 1, of the Commercial Code, the Company also: • bought back 60,015 of its own shares at an average price of 75.23 euros during the past year. These share purchases were made for the purpose of allocating them to employees who exercise stock options granted by the Company. In addition, 493,000 shares initially acquired for the purpose of equalizing the share price were also allocated to these options. At the year-end, the number of shares held and allocated to stock option plans was 4,053,228, for a net value of 150,740,060.10 euros. The par value was 2 euros. These shares represented 2.23% of the capital stock. • held at the year-end, 19,532 of its own shares for a net value of 1,133,197.81 euros. These shares were purchased to even out the share price. Their par value is 2 euros. These shares represented 0.01% of the capital stock. By law, these shares do not carry voting rights.

Transactions on Christian Dior shares during the year by board members and associated persons as defined by Article R.621-43-1 of the Monetary and Financial Code

Type of Number of Average price Person concerned transaction shares (in euros)

Pierre Godé Purchase (1) 31,687 25.36 Sale 10,000 73.68 Sidney Toledano Purchase (1) 200 25.95 Companies associated with the family of Purchase 648,947 56.31 Mr B. Arnault

(1) Purchase or subscription under share option plans.

V. BOARD OF DIRECTORS Board Members At the Annual General Meeting, Antoine Bernheim, Denis Dalibot, Eric Guerlain and Christian de Labriffe, were proposed for re-election as Board Members, for the statutory period of three years. Jaime de Marichalar y Sáenz de Tejada and Alessandro Vallarino Gancia were proposed for nomination to become Board Members, for the same period of time.

Board Members’ fees We are asking the Annual General Meeting to set the annual amount of board members’ fees allocated to the Board of Directors at 104,830 euros until further notice.

22 VI. FINANCIAL AUTHORIZATIONS

Authorization to intervene in the Stock Market The Combined Ordinary and Extraordinary General Meeting on May 12, 2005 authorized the Board of Directors to acquire the Company’s stock up to a maximum of 0.5% of its capital stock, with a maximum purchase price of 90 euros per share. At this year’s Annual General Meeting, you are asked to renew this authority for a period of eighteen months. The stock purchases may only be made to stimulate the market within the framework of a liquidity contract concluded with a brokerage firm. The total number of shares bought back by the Company would be limited to 0.5% of capital. The maximum unit purchase price would be 110 euros per share.

Authorization to reduce the capital stock In accordance with the provisions of Article L.255-209 of the Commercial Code, the Combined Ordinary and Extraordinary General Meeting on May 12, 2005 authorized the Board of Directors, if it deems it to be in the shareholders’ interest, to reduce the capital of the Company by the cancellation of the shares acquired under the share buy-back program. We are asking the Annual General Meeting to renew this authorization for a period of eighteen months.

Authorization to grant options for new or existing shares The Combined Ordinary and Extraordinary General Meetings on May 14, 2001 authorized the allocation of Company stock options, on one or more occasions, to employees or officers of the Group. We are asking for this authorization to be renewed. This delegation for a period of thirty-eight months will enable the Board of Directors to grant new stock options; the total number of shares to which the new options give entitlement may not represent more than 3% of the capital stock. In the case of the allocation of stock options for new shares, your authorization includes the shareholders’ express waiver of their preferential right to shares issued as the options are exercised. The price of stock options shall be set within the limits authorized by regulations effective at the time the options are allocated, and shall not, for whatsoever reason, be less than 80% of the average value of rates quoted in the twenty trading sessions of the Stock Market preceding the start date. Moreover, for stock options for existing shares, the purchase price may not be less than 80% of the average purchase price of the shares that are allocated by their company for the exercise of such options. The period for exercising such options shall be in accordance with the regulations applicable at the time the options are granted and shall be no longer than 10 years. The Board of Directors has the authority to determine, within the limits set by law and by the General Meeting, the procedures of the options plan or plans. At future Ordinary General Meetings, the Board of Directors will keep you informed of the number, price, and beneficiaries of the options granted as well as of the number of new or existing shares purchased.

23 VII. AMENDMENTS TO THE BYLAWS FOR COMPLIANCE WITH NEW REGULATIONS We propose to amend the Company bylaws to harmonize them with new legal provisions. Such amendments will primarily cover the following: • change in capital stock (Article 7); • the procedures for convening the Board of Directors, the use of telecommunication facilities to hold meetings and the kind of decisions that may be made when telecommunication facilities are used (Article 12, points 1 and 2); • the age limit applicable to Board Members (Article 9), to the Chairman of the Board of Directors (Article 11), to the Chief Executive Officer (Article 15-II, point 1) and to the Chief Operating Officers (Article 15-III, point 3); • the quorum requirements for Ordinary General Meetings (Article 20) and Extraordinary General Meetings (Article 22, point 1).

VIII. INFORMATION ON COMPENSATION AND BENEFITS IN KIND TO COMPANY OFFICERS Pursuant to the provisions of Article L.225-102-1 of the Commercial Code, we are reporting to you the compensation and benefits in kind (2) paid for or covered by the Company and companies it controls.

Bernard ARNAULT, Chairman and Chief Executive Officer: • Fixed compensation: 860,754 euros • Variable compensation: 1,035,605 euros • Board Members’ fees: 117,949 euros • Benefits in kind: none

Eric GUERLAIN, Vice-Chairman and Board Member: • Compensation: none • Board Members’ fees: 9,528 euros • Benefits in kind: none

Antoine BERNHEIM, Board Member: • Compensation: none • Board Members’ fees: 249,528 euros • Benefits in kind: none

Denis DALIBOT, Board Member: • Fixed compensation: 171,382 euros • Variable compensation: 221,915 euros • Board Members’ fees: 39,328 euros • Benefits in kind: car

Christian de LABRIFFE, Board Member: • Compensation: none • Board Members’ fees: 9,528 euros • Benefits in kind: none

24 Pierre GODÉ, Board Member: • Fixed compensation: 79,220 euros • Variable compensation: 1,479,435 euros • Board Members’ fees: 131,036 euros • Benefits in kind: none Raymond WIBAUX, Board Member: • Compensation: none • Board Members’ fees: 9,528 euros • Benefits in kind: none Sidney TOLEDANO, Chief Executive Officer, non-Board Member: • Fixed compensation: 326,716 euros • Variable compensation: 246,572 euros • Board Members’ fees: none • Benefits in kind: car (1) Amount received after deduction of payroll tax, the CSG and the CRDS tax at the flat rate of 5% and income tax at the French marginal rate of 48.09%. Gross compensation represented approximately twice the amounts listed. (2) Benefits in kind: company car. (3) Details of the capital securities or securities giving access to capital allocated to the Members of the Board of Directors during the year is indicated in section XI.

When entering retirement, company officers who are also members of the Board of Directors are eligible to receive, as part of their employment agreement, additional retirement compensation, on condition that they are able to demonstrate at least six years service on the Board of Directors; at the same time they must claim their accrued retirement benefits in a legal pension plan. This additional compensation is proportional to the beneficiary’s salary and is limited to a maximum amount calculated by reference to that of social security.

IX. LIST OF POSITIONS OR OFFICES HELD IN ALL COMPANIES BY THE CORPORATE OFFICERS AND BOARD MEMBERS Pursuant to Article L.225-102-1 of the Commercial Code, below is a report on all positions and offices held in any company by each of the Company’s board members during the past financial year as well as for the board members whose re-election or election will be proposed at this General Meeting, and the list of offices and positions they have held over the five past years.

1. CURRENT POSITIONS

CHAIRMAN OF THE BOARD OF DIRECTORS Bernard ARNAULT Current duties and positions Chairman and Chief Executive Officer of LVMH Moët Hennessy – Louis Vuitton SA, France Chairman of Groupe Arnault SAS, France Chairman of the Board of Directors of Société Civile du Cheval Blanc, France Board Member of: • Christian Dior Couture SA, France • LVMH Moët Hennessy – Louis Vuitton (Japan) KK, Japan

25 Member of the Supervisory Board of: • Lagardère SCA, France • Métropole Télévision “M6” SA, France

CHIEF EXECUTIVE OFFICER AND BOARD MEMBER Sidney TOLEDANO Current duties and positions Chairman and Chief Executive Officer of: • Christian Dior Couture SA, France • John Galliano SA, France

Chairman of: • Fendi France SAS, France • Christian Dior Italia Srl, Italy • Bopel Srl, Italy • Mardi Spa, Italy • Lucilla Srl, Italy • Christian Dior Saipan Ltd, Saipan • Christian Dior Guam Ltd, Guam • Les Jardins d’Avron LLC, USA • Christian Dior Inc., USA • Christian Dior S. de RL de CV, Mexico

Chairman of the Board of Directors of Christian Dior S.A., France Chairman and Board Member A of Fendi International BV, Netherlands Board Member of: • John Galliano SA, France • Fendi Adele Srl, Italy • Fendi Immobili Industriali Srl, Italy • Fendi Italia Srl, Italy • Fendi Srl, Italy • Fendi Asian Pacific Limited, Hong Kong • Fendi North America Inc., USA • Fendi SA, Luxembourg • Christian Dior Inc., USA; • Christian Dior UK Ltd, United Kingdom • Christian Dior Far East Ltd, Hong Kong • Christian Dior Australia Pty Ltd, Australia • Christian Dior (Fashion) Malaysia Sdn, Malaysia • Christian Dior Hong Kong Ltd, Hong Kong • Christian Dior New Zealand Ltd, New Zealand

26 • Christian Dior Singapore Pte Ltd, Singapore • Christian Dior Couture Korea Ltd, Korea • Christian Dior Taiwan Ltd, Taiwan • Christian Dior Macau Ltd, Macau • Christian Dior Couture CZ, Czech Republic • Christian Dior Commercial (Shanghai) Co. Ltd, China Representative Board Member of Christian Dior KK, Japan

Permanent Representative of: • Christian Dior Couture, Chairman of Jardins d’Avron SAS, France • Christian Dior Couture, Board Member of Christian Dior Belgique, Belgium Manager of: • Christian Dior GmbH, Germany • Christian Dior Espanola, Spain • Christian Dior Puerto Banus, Spain • Christian Dior Couture Maroc, Morocco

BOARD MEMBER Pierre GODÉ Current duties and positions Chairman and Chief Executive Officer of: • Financière Agache SA, France • Raspail Investissements SA, France

Chief Executive Officer of Groupe Arnault SAS, France Chairman of Financière Jean Goujon SAS, France

Board Member of: • Christian Dior Couture, SA, France; • LVMH Moët Hennessy – Louis Vuitton SA, France • SA du Château d’Yquem, France • Société Civile du Cheval Blanc, France • LVMH Moët Hennessy – Louis Vuitton Inc., United States • LVMH Moët Hennessy – Louis Vuitton (Japan) KK, Japan. • Sofidiv UK Limited, United Kingdom Manager of PMG SARL, France Legal Representative of Financière Agache, Manager of Sevrilux SNC, France Member of the Executive Committee of Sofidiv SAS, France Member of the Supervisory Board of: • Sémyrhamis SAS, France • Sifanor SAS, France

27 BOARD MEMBER Raymond WIBAUX Current duties and positions Chairman of the Board of Directors of Financière Joire Pajot Martin SA, France Board Member of Participex, France Member of the Supervisory Board of SCA Foncière Massena, France Permanent Representative of: • Financière Joire Pajot Martin, Board Member of ETO, France • Stratefi, Board Member of Compagnie Textile et Financière SA, France

2. CANDIDATES FOR BOARD MEMBER POSITIONS 2.1 Reelections

VICE-CHAIRMAN AND BOARD MEMBER Eric GUERLAIN Current duties and positions Chairman of the Board of Directors of Société Hydroélectrique d’Energie SA, France Permanent Representative of LVMH Fashion Group, Board Member of Guerlain SA, France

Previous duties and positions none

BOARD MEMBER Antoine BERNHEIM Current duties and positions Chairman of Assicurazioni Generali Spa, Italy Chief Executive Officer of Société Française Générale Immobilière SA, France Vice-Chairman and Board Member of: • Bolloré Investissement SA, France • LVMH Moët Hennessy – Louis Vuitton SA, France • LVMH Fashion Group SA, France • LVMH Finance SA, France • Alleanza Assicurazioni, Italy Board Member of: • Bolloré SA, France • Christian Dior Couture SA, France • Ciments Français SA, France • Generali France SA, France

28 • Generali España Holding SA, Spain • AMB Generali Holding AG, Germany • Banca Intesa Spa, Italy • BSI, Switzerland • Generali Holding Vienna AG, Austria • Graafschap Holland, Netherlands • Mediobanca, Italy Vice-Chairman and Member of the Supervisory Board of Financière Jean Goujon SAS, France Member of the Supervisory Board of Eurazeo SA, France

Previous duties and positions Partner of Lazard LLC, United States Managing Partner of Partena, France Vice-Chairman and Board Member of Assicurazioni Generali Spa, Italy Vice-Chairman of Mediobanca, Italy Board Member of: • Aon France, France • Azeo, France • Eridania-Beghin-Say, France • Generali France Assurances (IARD) • La Concorde, France • Rue Impériale, France • Société Immobilière Marseillaise, France Member of the Supervisory Board of Axa, France Permanent Representative of Rue Impériale, Board Member of Eurazeo, France

BOARD MEMBER Denis DALIBOT Current duties and positions Chief Financial Officer of Christian Dior S.A., France Board Member – Chief Operating Officer of Financière Agache SA, France Chairman and Chief Executive Officer of: • Agache Développement SA, France • Europatweb SA, France Chairman of: • FA Investissements SAS, France • Montaigne Finance SAS, France • Sifanor SAS, France

29 Board Member of Christian Dior Couture SA, France Permanent Representative of: • Financière Agache, Board Member of Raspail Investissements SA, France • Le Bon Marché – Maison Aristide Boucicaut, Board Member of Franck & Fils SA, France • Louis Vuitton Malletier, Board Member of Belle Jardinière SA, France • Ufipar, Board Member of Le Jardin d’Acclimatation SA, France Manager of: • Kléber Participations SARL, France • Montaigne Investissements SCI, France • Montaigne Services SNC, France • Groupement Foncier Agricole Dalibot, France Member of the Executive Committee of Groupe Arnault SAS, France Member of the Supervisory Board of: • Financière Jean Goujon SAS, France • Sémyrhamis SAS, France • Publications Professionnelles SAS, France

Previous duties and positions Vice-Chairman of the Supervisory Board of Métropole 1850, France Chairman and Chief Executive Officer of Paris Provence Bâtiment, France Chairman of Agache Développement, France Member of the Supervisory Board of Sèvres Investissements, France Chief Executive Officer of Omnium Lyonnais d’Etudes, France Board Member of: • John Galliano SA, France • Bon Marché International SA, France • Publications Professionnelles Holding, Luxembourg Board Member-Chief Operating Officer of Financière Truffaut, France Board Member-Chief Executive Officer of Financière Agache SA, France Permanent Representative of: • Financière Agache, Board Member of FA Expansion, France, FA Participations, France, and CS Oblig Europe, France • Belle Jardinière, Board Member of Le Jardin d’Acclimatation, France • FA Expansion, Board Member of Raspail Investissements, France • Eurofinweb NV, Board Member of Europatweb SA, France • Zebank, Board Member of BM Développement, France Representative of Financière Agache • Chairman of Babylone Investissements, France • Member of the Supervisory Board of Zebank, France

30 • Manager of Lamourelle Paris, France • Chairman of Aristide Boucicaut SAS, France

BOARD MEMBER Christian de LABRIFFE Current duties and positions Chairman of Transaction R, SAS, France Managing Partner of Rothschild & Cie Banque, France Managing Partner of Rothschild & Cie, France Member of the Supervisory Board of: • Financière Rabelais, France • Groupe Beneteau, France Board Member of: • Christian Dior Couture, SA, France • Paris Orléans, France • Nexity, France

Previous duties and positions Board Member of: • Holding Financier Jean Goujon, France • Montaigne Rabelais, France • Rothschild Conseil International, France Chairman of the Board of Directors of Transaction R SAS, France Managing Partner of Rothschild & Compagnie Gestion, France

2.2 Elections Jaime de MARICHALAR y SÁENZ de TEJADA (Duc de Lugo) Current duties and positions Chief Executive Officer and Advisor of Crédit Suisse, Spain Advisor to the Chairman of Groupe LVMH for Spain Board Member of: • SA, Spain • Sociedad General Immobiliaria de España, SA, Spain • Portland Valderrivas, Spain • Winterthur Vida, Spain Member of the Supervisory Board of Art+Auction Editorial, (United States and United Kingdom).

31 Previous duties and positions Board Member of Crédit Suisse Hottinguer, France

Alessandro VALLARINO GANCIA Current duties and positions Manager of AAP SA, Switzerland

Previous duties and positions None

X. INFORMATION RELATING TO AUTHORIZATIONS GRANTED TO THE BOARD OF DIRECTORS TO INCREASE OR REDUCE CAPITAL STOCK This information appears in the section “General Information on Capital Stock”.

XI. STOCK OPTION PLANS • Options granted by the Christian Dior parent company Ten stock option plans were in effect at December 31, 2005. These plans have a term of ten years; under the plans, the options may be exercised after a period of three or five years after the opening date of the plans. In some circumstances, notably upon retirement from the company, this time requirement will be waived. Each of these plans stipulates that each option gives the right to purchase one share.

32 Share purchase option plans Allocated Exercise Number of Number of options Authorized Number of Number Allocated for price options outstanding (3) by General Plan start options of bene- for board leading 10 (in euros) exercised Meeting date granted (1) ficiaries members employees (2) (3) in 2005 (3) 12.31.2005 01.31.2006 05.30.1996 10.14.1996 94,600 21 40,000 50,500 25.95 4,200 251,000 251,000 05.30.1996 05.29.1997 97,900 22 50,000 43,000 32.01 17,000 285,400 284,400 05.30.1996 11.03.1998 98,400 23 65,000 28,200 18.29 9,500 283,200 281,200 05.30.1996 01.26.1999 89,500 14 50,000 38,000 25.36 33,687 294,313 294,313 05.30.1996 02.15.2000 100,200 20 65,000 31,000 56.70 – 400,800 400,800 05.14.2001 02.21.2001 437,500 17 308,000 121,000 45.95 10,000 427,500 427,500 05.14.2001 02.18.2002 504,000 24 310,000 153,000 33.53 – 504,000 504,000 05.14.2001 02.18.2003 527,000 25 350,000 143,000 29.04 – 527,000 527,000 05.14.2001 02.17.2004 527,000 26 355,000 – 49.79 – 527,000 527,000 05.14.2001 05.12.2005 493,000 27 315,000 124,000 52.21 – 493,000 493,000

(1) Number of options at the plan start date, not restated for adjustments related to the four-for-one stock split of July 2000. (2) Exercise prices prior to 1999 result from the conversion into euros of data originally denominated in francs. (3) Adjusted to account for operations described in (1). • Options granted by its subsidiary

LVMH’s share purchase option plans Allocated Exercise Number of Number of options Authorized Number of Number Allocated for price options outstanding (2) by General Plan start options of bene- for board leading 10 (in euros) exercised Meeting date granted (1) ficiaries members employees (2) in 2005 (3) 12.31.2005 01.31.2006

05.25.1992 03.22.1995 (3) 256,903 395 96,000 57,500 20.89 392,588 – – 06.08.1995 05.30.1996 233,199 297 105,000 46,500 34.15 91,985 537,500 528,505 06.08.1995 05.29.1997 233,040 319 97,500 46,000 37.50 160,415 626,390 613,420 06.08.1995 01.29.1998 269,130 346 97,500 65,500 25.92 266,500 576,360 557,420 06.08.1995 03.16.1998 15,800 4 – 15,800 31.25 – 70,400 66,000 06.08.1995 01.20.1999 320,059 364 97,000 99,000 32.10 246,830 1,305,045 1,281,000 06.08.1995 09.16.1999 44,000 9 5,000 39,000 54.65 – 210,000 210,000 06.08.1995 01.19.2000 376,110 552 122,500 81,000 80.10 – 1,796,650 1,796,650 05.17.2000 01.23.2001 2,649,075 786 987,500 445,000 65.12 7,400 2,477,675 2,452,975 05.17.2000 03.06.2001 40,000 1 – 40,000 63.53 – 40,000 40,000 05.17.2000 05.14.2001 1,105,877 (4) 44,669 – – 66.00 25 513,919 512,944 05.17.2000 05.14.2001 552,500 4 450,000 102,500 61.77 – 552,500 552,500 05.17.2000 09.12.2001 50,000 1 – 50,000 52.48 – 50,000 50,000 05.17.2000 01.22.2002 3,284,100 993 1,215,000 505,000 43.30 (5) 96,897 3,042,353 2,782,203 05.17.2000 05.15.2002 8,560 2 – 8,560 54.83 – 8,560 8,560 05.17.2000 01.22.2003 3,213,725 979 1,220,000 495,000 37.00 (6) 1,700 3,120,425 3,084,175

(1) Number of options at the plan start date, not restated for adjustment related to the bonus allocation of June 1999 and to the five-for- one stock split of July 2000. (2) Adjusted to account for operations described in (1). (3) Plan ended on March 21, 2005. (4) 25 options were allocated for each beneficiary. (5) The exercise price for Italian and American residents for the plan started on January 22, 2002 were 45.70 euros and 43.86 euros respectively. (6) The exercise price for Italian residents for the plan starting January 22, 2003 was 38.73 euros.

33 LVMH’s share subscription option plans Allocated Allocated Number of Number of options Authorized Number of Number of for for Exercise options outstanding by General Plan start options bene- board leading 10 price exercised Meeting date granted ficiaries members employees (in euros) in 2005 12.31.2005 01.31.2006

05.15.2003 01.21.2004 2,747,475 906 972,500 457,500 55.70 (1) – 2,715,225 2,715,225 05.15.2003 05.12.2005 1,924,400 495 862,500 342,375 52.82 (1) – 1,921,950 1,921,950

(1) The exercise price for Italian residents for the plans started on January 21, 2004 and May 12, 2005 were €58.90 and €55.83 respectively.

• Options granted to each board member by the Company or any Group company during the year Exercise Companies Plan start Number of price Plan end Beneficiaries granting options date options (in euros) date

B. Arnault Christian Dior 05.12.2005 220,000 52.21 05.11.2015

LVMH 05.12.2005 450,000 52.82 05.11.2015

D. Dalibot Christian Dior 05.12.2005 25,000 52.21 05.11.2015

P. Godé Christian Dior 05.12.2005 20,000 52.21 05.11.2015

LVMH 05.12.2005 40,000 52.82 05.11.2015

S. Toledano Christian Dior 05.12.2005 50,000 52.21 05.11.2015

• Options exercised by each board member during the year

Companies Plan start Number of Exercise price Beneficiaries granting options date options (in euros)

B. Arnault LVMH 03.22.1995 330,000 20.89

B. Arnault LVMH 01.29.1998 112,820 25.92

P. Godé Christian Dior 01.26.1999 31,687 25.36

S. Toledano Christian Dior 10.14.1996 200 25.95

• Options granted by the Company or any Group company during the financial year to the ten non-board member employees holding the largest number of options Companies Plan start Total number Average weighted granting options date of options exercise price (in euros)

Christian Dior 05.12.2005 124,000 52.21

LVMH 05.12.2005 342,375 52.82

34 • Options exercised during the financial year by the ten non-board member employees holding the largest number of options Average weighted Companies Total number exercise price granting options Plan start date of options (in euros)

LVMH 05.30.1996 58,750 34.15

LVMH 05.29.1997 80,975 37.50

LVMH 01.29.1998 106,250 25.92

LVMH 01.20.1999 172,400 32.10

LVMH 01.22.2002 8,000 43.30

LVMH 01.22.2002 9,500 43.86

Christian Dior 10.14.1996 4,000 25.95

Christian Dior 05.29.1997 16,000 32.01

Christian Dior 11.03.1998 9,500 18.29

Christian Dior 01.26.1999 2,000 25.36

Christian Dior 02.21.2001 10,000 45.95

XII. CONSEQUENCES OF THE ACTIVITY ON THE ENVIRONMENT

12.1. Scope of reporting of environmental indicators The reporting of environmental indicators covered the following areas in 2005: • the production sites and warehouses owned and/or run by companies in which the Group has a holding of more than 50% or in which it exerts management control; • the French boutiques of Sephora and Louis Vuitton, Le Bon Marché, and the main DFS and Fendi boutiques; • the main administrative sites located in France; • the vehicle fleets owned by the Group in France and used for employee travel. In 2005, the reporting covered 405 sites (383 sites in 2004); 26 of the Group’s sites are excluded this year; however, their impact on the environment is insignificant in relation to the Group’s size. The changes compared with 2004 result from: • the non-inclusion of the production and administrative sites of companies sold or in the process of sale at December 31, 2005, or activities that have been moved; • the closure of La Samaritaine; • the addition of the Polish distillery Millennium at Polmos Zyrardow (1 site). The 2005 reporting does not include: • the environmental impact (water, energy, etc.) of the administrative buildings and stores run directly or franchised by the Perfumes and Cosmetics and Fashion and Leather Goods activities, apart from the brands mentioned above; • the vehicle fleets owned by the Group in countries other than France, used for employee travel;

35 • the energy consumption related to the transport of merchandise exclusively carried out by outside service providers; • the companies where the Group has a holding of less than 50% or in which it does not exert management control. Because of its recent addition to the Group, Glenmorangie will only be included in the environmental data starting in 2006, following an audit. Due to the volume of its business, Glenmorangie will have a noticeable impact on the Group’s environmental data. In relation to the consolidation for financial reporting, the environmental scope for 2005 covers: • 94% in number of the Group’s production sites, warehouses and administrative sites; • 35% in area of the total of the Group’s revenue areas (the decrease from 2004 is due to the closure of La Samaritaine). Pursuant to Decree 2002-221 of February 20, 2002, the “New Economic Regulations Act – NRE”, the following sections indicate only the nature and magnitude of the relevant significant impacts of the business activities. Since fiscal year 2002, the annual environmental report has been audited by the Group’s Statutory Auditors.

12.2. Consumption of water, raw materials and energy 12.2.1 Water consumption Water consumption is analyzed for the following uses: • “Process” needs: the use of water for cleaning operations (vats, products, machinery, floors), air conditioning, employees, etc. The water used for these purposes generates waste water. • Agricultural needs: use of water for vineyard irrigation in countries outside France (vineyard irrigation is not used in France); in this context, water used in irrigation is taken directly from the natural environment. Water use from one year to another is closely allied to climate differences.

(in m3) 2005 2004 % change

Process needs 1,446,772 1,691,860 (14) Agricultural needs (vine irrigation) 6,648,138 7,445,085 (11)

Water consumption for “process” needs by the companies in the Group decreased by 14% in absolute value between 2004 and 2005. This decrease was primarily due to the closure of La Samaritaine (approximately 300,000 m3 in 2004). Consumption totaled approximately 1.45 million cubic meters. By comparison, for the industry sector in France, water consumption represents around 3.8 billion m3 (IFEN data, 2005). At Parfums Christian Dior, heating and cooling facilities represent the primary use of water, at approximately 40%. The replacement of pumps on empty cooling equipment by electro- valve devices thus contributed to the reduction by approximately 7% of the overall level of water consumption in 2005.

36 At Moët & Chandon, the use of water rich in carbon dioxide gas allowed a 20% to 30% reduction of the amount water used to clean vats.

Process needs Process needs (in m3) in 2005 in 2004 % change

Christian Dior Couture 7,888 7,923 – Wines and Spirits 618,458 569,036 9 Perfumes and Cosmetics 447,465 482,957 (7) Fashion and Leather Goods 131,897 122,807 7 Watches and Jewelry 13,389 14,367 (7) Selective Retailing 209,586 (a) 474,723 (56) Holding company 18,089 20,047 (10)

Total 1,446,772 1,691,860 (14)

(a) The decrease in the process needs of Selective Retailing resulted from the consolidation changes.

The use of water for vineyard irrigation is absolutely necessary for the life of the vines in California, Argentina, Australia and New Zealand for climate reasons. Irrigation is strictly managed by the local authorities who issue authorizations. The Group has also adopted its own measures to limit water use: • Rainwater recovery at Domaine Chandon California, Domaine Chandon Australia, Bodegas Chandon Argentina; re-use of treated waste water at Domaine Chandon Carneros, California; and recovery of run-off through the creation of artificial lakes in Newton; • Implementation of protocols to measure and specify water needs: analyses of soil and leaf humidity, visual inspections of the vines, supply customization based on the needs of each site (Domaine Chandon Australia); • Widespread use of drip irrigation systems: between 73 and 100% of the vineyard areas are now covered by this practice; • Weather forecasting to ensure optimal use of irrigation (weather stations at Domaine Chandon California); • Periodic checks of the irrigation systems to prevent possible leaks; • Use of “low-flow irrigation” which both limits water use and improves the quality of grapes and the size of the vine, which concentrates bouquet and color.

12.2.2 Energy consumption Energy consumption refers to the total primary energy sources used internally (combustion at the Group’s sites: fuel oil, butane, propane, natural gas) and secondary energy sources externally (transformed energy generated by combustion off-site). In 2005, the subsidiaries included in the reporting scope used 368,006 MWh from the following energy sources: 63% electricity, 28% natural gas, 4% fuel oil, and 5% other sources (steam, heavy fuel oil, butane or propane). This consumption comes from (in decreasing order) the activities of Wines and Spirits (30%), Selective Retailing (25%), Perfumes and Cosmetics (22%), Fashion and Leather Goods (18%). The remaining 5% are generated by Watches and Jewelry, and the administrative activity of the holding company and Christian Dior Couture.

37 By comparison, for the industry sector in France, electricity consumption represents approximately 128,000,000 MWh and natural gas consumption 158,000,000 MWh (MINEFI data, 2004). Energy consumption (in MWh) 2005 2004 % change

Christian Dior Couture 3,000 3,243 (7) Wines and Spirits 110,762 109,836 1 Perfumes and Cosmetics 81,635 87,185 (6) Fashion and Leather Goods 66,049 62,334 6 Watches and Jewelry 7,829 7,430 5 Selective Retailing 91,826 115,936 (21) Holding company 6,905 6,953 (1)

Total 368,006 392,917 (6)

For 2005, the breakdown of energy resources was as follows:

(in MWh) Electricity Natural gas Fuel oil Other

Christian Dior Couture 2,456 – – 544 Wines and Spirits 51,079 38,723 11,189 9,771 Perfumes and Cosmetics 40,812 40,778 39 6 Fashion and Leather Goods 39,680 20,726 1,034 4,609 Watches and Jewelry 3,514 2,841 1,474 – Selective Retailing 88,224 – 4 3,598 Holding company 5,606 433 29 837

Total 231,371 103,501 13,769 19,365

12.2.3 Consumption of raw materials The main relevant criteria used for the analysis of raw materials consumption is the quantity, in tons, of the primary and secondary packaging released on the consumer market: • Christian Dior Couture: boutique bags, pouches, boxes, etc. • Wines and Spirits: bottles, cardboard boxes, capsules, etc. • Perfumes and Cosmetics: flasks, cartons, etc. • Fashion and Leather Goods: boutique bags, pouches, boxes, etc. • Watches and Jewelry: boxes and cases, etc. • Selective Retailing: boutique bags, envelopes, boxes, etc. For Sephora, the figures include all packaging of Sephora brand products all over the world. Packaging used in shipping has been excluded from this analysis.

38 The table below shows changes in packaging (by weight) placed on the market in 2004 and 2005:

Packaging placed on the market % Change (in tons) 2005 2004 % change in revenue Christian Dior Couture 162 182 (11) 11 Wines and Spirits 117,735 113,607 4 11 Perfumes and Cosmetics 16,678 19,673 (15) 7 Fashion and Leather Goods 2,269 2,576 (12) 12 Watches and Jewelry 213 228 (7) 17 Selective Retailing 1,502 1,451 4 13

Total 138,559 137,717 1 11

In 2005, the total packaging used by weight and type of material, was as follows: Other Paper and packaging (in tons) Glass cardboard Plastics Metal materials

Christian Dior Couture – 144 16 – 2 Wines and Spirits 104,332 10,837 498 892 1,175 Perfumes and Cosmetics 9,576 3,374 3,253 282 193 Fashion and Leather Goods – 2,161 3 – 105 Watches and Jewelry 1 173 16 9 15 Selective Retailing 34 1,241 225 1 –

Total 113,943 17,930 4,011 1,184 1,490

12.3. Land use: discharge into the air, water and ground 12.3.1 Land use Soil pollution related to older industrial facilities (production of Cognac and Champagne, trunk manufacturing) is not significant. The most recent production sites are generally established on former agricultural land with no historical pollution. Other than for vine cultivation, the production activities of the Group’s subsidiaries make little use of the soil. The practice of integrated viticulture, a method that combines technological advances with traditional methods, covers all stages in the life of a vineyard. In use for several years by the Wines & Spirits business group, it was further expanded this year. In addition to its own integrated vineyard land and producing vineyards, all under integrated viticulture, Veuve Clicquot continued to partner its grape suppliers in this process: all suppliers can call on the necessary technical support from an agricultural engineer, hired full-time to work between the technical units making champagne and the grape growers working with Veuve Clicquot. As was the case last year, this covered 80% of the vineyard land and producing vineyards. Integrated viticulture practices have also been implemented by Moët & Chandon and the Wine Estates Houses: development of cover planting, the use of alternative solutions to replace certain insecticides, etc.

39 12.3.2 Greenhouse gas emissions Considering the nature of the Group’s activities, the only emissions that could significantly affect the environment are greenhouse gases.

Greenhouse gas emissions, estimated in equivalent CO2 (carbon dioxide) tons, originate from energy consumption at the sites, defined in section 2. These include direct emissions (combustion on site) and indirect emissions (from the production of electricity and steam used by the sites). Their breakdown by business group is as follows:

CO2 emissions % change Direct CO2 Indirect CO2 (in equivalent tons of CO2) in 2005 from 2004 emissions emissions Christian Dior Couture 233 (23) – 233 Wines and Spirits 21,480 14 13,276 8,204 Perfumes and Cosmetics 11,262 (7) 8,242 3,020 Fashion and Leather Goods 12,554 10 5,425 7,129 Watches and Jewelry 1,230 5 983 247 Selective Retailing 22,079 (25)(a) 1 22,078 Holding company 670 3 96 574

Total 69,508 (6) 28,023 41,485

(a) The decrease in emissions of Selective Retailing resulted from the consolidation changes. The DFS sites were the major contributor to total greenhouse gas emissions because of their geographical location: at equal electricity consumption, the CO2 emissions are proportionally higher in Australia, China and New Zealand than in France, where all the other sites of the sector included in the 2005 consolidation are located. Hennessy continued to prioritize shipping its products by boat, a mode of transport that emits 85 times less greenhouse gas than air transport: 90.9% in tons per kilometer of Hennessy products were shipped by this transportation mode, 7.6% by road, 1.2% by rail and 0.3% by air. For Champagne, a logistics platform common to all Houses was used to optimize the shipping phase and to systematically use maritime shipping as much as possible. Air freight at Moët & Chandon and Veuve Clicquot is therefore limited to extreme emergency cases, amounting to less than 0.5% of deliveries. Following the carbon assessment that showed the major impact of air transport on greenhouse gas, Louis Vuitton implemented a plan of action to develop the use of maritime shipping. This plan of action is keeping to all its promises: 20% in 2003, 40% in 2004 and 50% in 2005 of deliveries of leather goods articles were made by boat; the objective is to reach 60% in 2006. The issue of employee travel has also been considered. This impact is non-negligible and represents 12% of Louis Vuitton’s energy consumption. This aspect has been addressed at a global level: encouraging car-sharing, rationalizing Europe-Asia-United States travel, and increased use of video-conferencing are just some of the actions implemented to reduce energy consumption and associated greenhouse gas emissions. Finally, a new system for producing light using metallic iodide technology has been successfully implemented in all boutiques opened in 2005, starting with the one on the Champs-Elysées in Paris. The initial objective to reduce by 30% electricity consumption associated with lighting has been greatly exceeded with a real reduction of 60%. A major side benefit is that the heat created by lighting has also decreased and the energy used for air-conditioning has been reduced by 40%.

40 To illuminate the perfume factories in Texas, Sephora United States has selected Green Mountain, as provider of electricity created from renewable resources such as solar, hydraulic and wind-turbines. The CO2 emissions associated with this electricity are less than those created by the combustion of fossil fuels (carbon, petroleum or natural gas).

12.3.3 Water emissions The Group’s activities have little impact on water quality. The only emissions considered are the waste from Wines and Spirits and Perfumes and Cosmetics activities containing substances that contribute to eutrophication. Eutrophication is the excessive proliferation of algae and aquatic plants caused by overload of nutritional compounds in water (particularly phosphorus), resulting in reduced oxygenation of the water, which is harmful to the environment. The measurement parameter is chemical oxygen demand (COD), which is calculated after treatment of the effluents at company-owned stations or external stations with which the sites have agreements. The following operations are considered as treatment: community effluent disposal, private effluent disposal (aeration tank), and land application. COD after treatment COD after treatment (in tons / year) in 2005 in 2004 % change

Wines and Spirits 143.3 74.0 94(a) Perfumes and 6.2 19.5 (68)(b) Cosmetics

Total 149.5 93.5

(a) Change due to the addition of Polmos Zyrardow, Cloudy Bay and Cape Mentelle. (b) Change due to the implementation of a high-performance water treatment facility at the Guerlain site in Chartres.

12.3.4 Waste The Group’s companies continued their efforts to sort and recover waste: on average, 86% of waste has been recovered, 85% in 2004. The 2005 figure does not include the one-time production of 15,000 tons of inactive, non-hazardous waste resulting from the demolition of a site. After accounting for these 15,000 tons, the average rate of waste recovery was lowered to 62%. “Recovered waste products” are those whose final destination is one of the following: • re-use, i.e. use of a waste product for the same purpose as that of the original product; • material recovery, i.e. recycling (direct re-use of waste in the production cycle from which it comes, in total or partial replacement of a new raw material), composting or controlled land spreading of waste composed of organic matter for ground fertilization;

41 • energy recovery from incineration, to produce electricity or heat through combustion of waste.

Special Waste Waste % Change waste in produced in produced in in waste (in tons) 2005 (a) 2005 2004 produced

Christian Dior Couture 23 413 404 2 Wines and Spirits 102 26,148 26,909 (3) Perfumes and Cosmetics 856(b) 7,824 7,970 (2) Fashion and Leather Goods 33 19,275 4,911 293 (c) Watches and Jewelry 11 173 176 (2) Selective Retailing 6 1,783 4,906 (64)(d) Holding company – 206 204 1

Total 1,031 55,822 45,080 23

(a) Waste that requires separate sorting and treatment from so-called “household” waste (cardboard, plastics, wood, paper, etc.). (b) Some waste products from the production cycle are considered as hazardous and treated as “special waste” in order to prevent counterfeiting. (c) The increase is due to a one-time production of waste associated with the demolition of a site (15,000 tons). (d) The decrease is the result of a consolidation change (closure of La Samaritaine).

Material Energy Total (%) Re-use recovery recovery recovery

Christian Dior 57 38 5 100 Wines and Spirits 3 87 1 91 Perfumes and Cosmetics 9 44 29 82 Fashion and Leather Goods 1 8 6(a) 15 Watches and Jewelry 12 18 51 81 Selective Retailing – 66 9 75 Holding company – 99 – 99

Total 3 52 7 62

(a) One-time waste generated by the demolition of a site (15,000 tons) were not recovered. These penalized the Fashion and Leather Goods group in 2005. Moët & Chandon has initiated a pilot program that aims to reduce waste at its source by 10% in 2 years, with the help of ADEME (organization for the environment and control of energy). Each year, 7,000 tons of waste produced are associated with wine production; this share cannot be further compressed. Efforts have thus focused on the remaining 1,000 tons (essentially packaging waste). At the end of 2005, the assessment is encouraging: the reduction was 2 to 3% in spite of a strong increase in business in December 2005. The initial objective will be reached in 2006 due to the efforts undertaken: re-use of packaging for shipping, reduction of their mass, increase in the portion recycled. As the logical result of the actions undertaken over several years, Parfums Givenchy significantly increased the recycled portion of its waste. Thus, at the Verdun factory (Aisne, France), the mass of recycled cardboard increased by 11.6%, rising from 441 tons in 2004 to 492 in 2005, and the amount of recovered plastic increased by 164.9%, going from 37 tons in 2004 to 98 in 2005.

42 At Parfums Christian Dior, the optimization of waste sorting was pursued in 2005. 30 tons of plastic waste, previously discarded, was collected and compacted in the nine first months of the year, for eventual recycling.

12.4. Measures taken to limit damage to endangered plant and animal species The Fashion and Leather Goods and Watches and Jewelry activities have established procedures to reinforce compliance with the CITES international convention. Through a system of import and export permits, this convention fights overexploitation resulting from international trade in certain endangered animal and plant species. In the Perfumes and Cosmetics branch, the laboratories question their partners about the biodiversity and bioavailability of each new plant studied. In their operations, the companies of the business group make every effort not to use protected, rare or endangered plants, but plants commonly used or cultivated specifically for the needs of the activity. Following the example of Parfums Christian Dior which publicly announced its decision in 1989, the various brands of the Perfumes and Cosmetics business group no longer conduct animal testing to evaluate the safety of cosmetics. In addition, LVMH, in collaboration with academic teams, has implemented for several years a research program designed to develop new alternative methods, particularly for allergy testing. The Group’s toxicologists have also participated in the validation group that achieved official recognition for several alternative methods: phototoxicity, eye irritation, and skin penetration.

12.5. Organization of environmental protection within the Group 12.5.1 Organization In 1992, the Group created its Environment Department and confirmed its initial commitment in 2001 when it established an “Environmental Charter” signed by the Chairman. This Charter asks each Brand of the Group to implement an effective environmental management system, reflect collectively on the environmental challenges related to its products, manage risks, and use best environmental practices. In 2003, Bernard Arnault signed the United Nations Global Compact. The Group is committed to: • applying a precautionary approach to deal with problems affecting the environment; • undertaking initiatives to promote greater environmental responsibility; • encouraging the development and distribution of environmentally friendly technologies. The Group’s Environment Department, which reports directly to the Advisor to the Chairman, was set up to: • direct the environmental policy of the Group’s companies in compliance with the LVMH Charter; • ensure legal and technical supervision; • create management tools; • help the companies to prevent risks; • train and raise employee awareness at every hierarchical level; • define and consolidate the environmental indicators; • work with the various stakeholders (associations, ratings agencies, public authorities, etc.).

43 The Environment agents of the Group’s companies meet within the “LVMH Environment Committee” led by the Group’s Environment Department. They hold quarterly meetings and communicate via a Group Environment Intranet that is accessible to everyone. The companies in almost all the Group’s divisions continued last year to train and raise employee awareness of environmental issues. These programs represented a total of more than 7,300 hours. New managers receive information on the Group’s policy, the tools available and the Group’s environment network at a “New Manager Orientation” seminar. At Veuve Clicquot, approximately 1,200 persons received information on the environmental approach during the 2005 harvest (grape pickers and seasonal workers). At Louis Vuitton Malletier, 350 hours of training were offered at the Barbera (Spain) workshop by specialized internal auditors. Over and above these initiatives, the Group companies also circulate written information about the environment: • the in-house “LVMH Magazine” contains a section on “LVMH Environment” that provides regular information about the environment within the Group; • Parfums Christian Dior distributed to all 1,400 employees at the Saint Jean de Braye production site a booklet that integrates safety and environmental rules (sorting waste, energy savings, etc.); • Parfums Givenchy and Moët & Chandon included environmental awareness modules in the welcome booklets and training for new employees; • Hennessy includes an education section devoted to the environment in each issue of its in-house newsletter; • Veuve Clicquot and Krug decided to conduct an information and awareness campaign for office workers every two weeks via email to inform them about small gestures which, if performed every day, can reduce environmental impacts. A number of programs were conducted in 2005 to prevent risks. At Veuve Clicquot and Krug, fermenting rooms have been placed within retention systems. These retention capacities are designed to contain accidental leaks, effluents and fire-fighting water in the event of a fire. Kami installed a buried 100 m3 tank in order to recover effluents and fire-fighting water in the event of a fire. Parfums Givenchy continued its work to reduce chemical risks and establish traceability for employee exposure to hazardous products.

12.5.2 Evaluation or certification approaches Each company in the Group is responsible locally and, in accordance with the LVMH Environment Charter, must develop and implement its environmental management system, primarily by defining its own environmental policy and setting objectives. Each company has the LVMH self-evaluation guide available and can, if it wishes, have its system ISO 14001 or EMAS certified. In 1998, Hennessy was the first company in the world to earn this certification in the Wines and Spirits sectors; it was renewed and valid for all sites in 2001 and 2004. This company drafted its second environmental policy in 2004 (the first dated from 1997).

44 All the Krug and Veuve Clicquot sites are ISO14001 certified. In this context, 14 Veuve Clicquot internal audits were conducted in 2005. The ISO 14001 process also continued at Louis Vuitton: after the certification of the Barbera workshop in 2004, the process was initiated at the logistics warehouses in Cergy (France): deployment of standards began in September 2005, with the goal of certification at the end of 2006. In 2004 a team of fifteen “environment auditors” was created in the Group’s subsidiaries, the members of which are employees holding a legal, financial or technical position (general services, quality, manufacturing, maintenance, environment,). As of this date, there are eleven team members. At a company’s request, they are able to make a rapid assessment of the environmental state of a site. They have taken a 3-day training course in environmental auditing, followed by a one-day, on site audit within the Group. Two companies had their sites audited in 2005.

12.5.3 Measures taken to ensure compliance of operations with legislative and regulatory provisions To ensure continuing regulatory compliance, the Group’s companies are regularly audited, whether by outside third parties, insurers, or internal auditors, which allows them to monitor their compliance. In 2005, 23 outside environmental audits and 18 internal environmental audits were conducted on the sites. An audit is an inspection conducted on one or more sites of the same company, on all environmental problems that may occur: waste management, water, energy, environmental management; it results in a written report and recommendations. This figure does not include the many compliance audits dealing with a specific regulatory or environmental issue – waste sorting for example – conducted periodically by the Group companies on their sites. Since 2003, these audits have been supplemented by a review of environmental regulatory compliance by the insurance companies, which included an environmental element during fire engineering inspections on the sites of Group companies; about 30 inspections were conducted in 2005. In 2005, the principal measures to ensure environmental legislative and regulatory compliance were: • at Veuve Clicquot, the installation of a pH neutralization system for effluents and a reduction in noise from a cold production unit; • at Parfums Christian Dior, the creation of an alcohol storage area equipped with a retaining system.

12.5.4 Expenditure to prevent environmental damage by the business Environmental expenditure items were recognized in accordance with the recommendations of the opinion of the National Accounting Board (CNC). Operating expenses and investments were reported for each of the following items: • protection of the ambient air and climate; • management of waste water; • management of waste; • protection and cleanup of the soil, underground water and surface water; • reduction in noise and vibrations;

45 • protection of biodiversity and the landscape; • protection against radiation; • research and development; • other environmental protection activities. In 2005, expenditures to protect the environment were allocated as follows: • operating expenses: 5.1 million euros; • capital expenditures: 3.7 million euros.

12.5.5 Amount of provisions and guarantees for risks, and indemnities paid during the year pursuant to a court judgment No provision for environmental risks has been recorded for the 2005 financial year.

12.5.6. Objectives assigned by the Group to its international subsidiaries No matter where it is located, each subsidiary is asked to apply the Group’s environmental policy as defined by the Charter; the Charter provides for the establishment of environmental objectives for each subsidiary.

12.5.7. Consumer safety The goal of the Group is to ensure safety for humans by first selecting the ingredients used in the manufacture of products and by determining appropriate alternative methods. Cosmetics manufactured or sold in Europe are regulated by Council Directive 76/768/EEC. Considered by experts to be one of the most stringent texts regulating cosmetics in the world, this directive regulates all substances used by the cosmetics industry and requires a risk evaluation for each product marketed. In addition, the European Commission’s Scientific Committee on Consumer Products (SCCP) continually evaluates the harmfulness of the substances used in cosmetics products. The Group pays particular attention to compliance with regulations, opinions from scientific committees and recommendations from professional associations; in addition to these texts, the Group’s toxicologists who are responsible for consumer safety, based on scientific advances, set the rules for the Group’s suppliers and development teams. The Group’s experts regularly participate in working parties for national and European authorities and are very active in professional organizations. In the environmental area, changes in scientific knowledge and/or regulations can lead to the replacement of certain ingredients. Thus, it was decided to cease using triclosan in products because of its environmental risk, even though this product was positively evaluated by the European scientific agencies (Executive Scientific Committee and the SCCP) in 2002 in terms of consumer safety.

46 XIII. EMPLOYMENT DATA 13.1 Analysis of changes in the workforce 13.1.1. Breakdown of the workforce The workforce at December 31, 2005 totaled 63,683 employees. This is divided between 56,068 persons working under an indefinite contract (CDI) and 7,615 under a fixed-term contract (CDD). 8,873 employees work part time, representing 14% of the total workforce. The average number of full-time equivalent employees for the Christian Dior Group in 2005 was 57,778 men and women, 67% of whom work outside France. The following tables analyze the breakdown of employees by business group, geographic region and professional category.

Breakdown by business group Total number of employees at December 31 2005 % 2004 % Christian Dior Couture 2,595 4 2,304 4 Wines and Spirits 5,134 8 4,697 7 Fashion and Leather Goods 18,071 28 18,326 30 Perfumes and Cosmetics 13,628 22 13,488 22 Watches and Jewelry 1,844 3 1,777 3 Selective Retailing 21,544 34 20,045 33 Others 867 1 877 1 Total 63,683 100 61,514 100

Average number of employees during the year (1) Christian Dior Couture 2,422 4 2,129 4 Wines and Spirits 5,144 9 4,807 9 Fashion and Leather Goods 17,182 30 17,026 31 Perfumes and Cosmetics 12,771 22 12,561 23 Watches and Jewelry 1,767 3 1,890 3 Selective Retailing 17,540 30 15,749 28 Others 952 2 959 2 Total 57,778 100 55,121 100

(1) Full-time equivalent, indefinite and fixed-term contracts.

47 Breakdown by geographic region Total number of employees at December 31 2005 % 2004 % France 19,818 31 20,264 33 Europe (excl. France) 13,172 21 12,050 20 United States 13,479 21 12,699 20 Japan 4,961 8 5,160 8 Asia (excl. Japan) 10,578 16 9,673 16 Other countries 1,675 3 1,668 3 Total 63,683 100 61,514 100

Average number of employees during the year (1) France 19,324 33 19,566 36 Europe (excl. France) 11,347 20 10,526 19 United States 10,858 19 9,885 18 Japan 4,898 8 4,653 8 Asia (excl. Japan) 9,673 17 8,836 16 Other countries 1,678 3 1,655 3 Total 57,778 100 55,121 100

(1) Full-time equivalent, indefinite and fixed-term contracts.

Breakdown by professional category

Total number of employees at December 31 2005 % 2004 %

Executives and management 10,117 16 9,555 16 Technicians and Supervisors 6,230 10 5,905 10 Office and clerical 38,157 60 37,022 60 Labor and production 9,179 14 9,032 14

Total 63,683 100 61,514 100

Average number of employees during the year (1)

Executives and management 9,932 17 9,448 17 Technicians and Supervisors 5,999 10 5,878 11 Office and clerical 32,689 57 30,732 56 Labor and production 9,158 16 9,063 16

Total 57,778 100 55,121 100

(1) Full-time equivalent, indefinite and fixed-term contracts. The principal changes are the result of organic growth and the acquisition of Glenmorangie. In France, the change is primarily due to changes in the consolidated entity.

48 Average age and average seniority In France, the average age is 38 and the average seniority is 11 years. The breakdowns by professional category are as follows: Entire Entire Age population (%) Seniority population (%)

<18 – <5years 35 18–24 6 5–9years 21 25 – 34 33 10 – 14 years 11 35 – 44 30 15 – 19 years 12 45 – 54 23 20 – 24 years 7 55 – 59 7 25 – 29 years 6 60 + 1 30 + years 7

100 100

13.1.2 Recruitment, transfers and departures The hiring policy of the Group’s companies is based on professional qualifications and depends on the positions to be filled, prior experience and knowledge of foreign languages. In 2005, 14,319 persons were hired under indefinite employment contracts, including 1,773 in France. 4,369 persons under Fixed-Term Contracts were recruited in France. Two important reasons for using fixed-term contracts are the seasonal revenue peak at Christmas and the grape harvest season. In 2005, 11,405 employees working under indefinite contracts left the Group, including more than 39% in Selective Retailing, a business group traditionally characterized by a high turnover rate. The principal reasons for the departures were resignation (72% of the total) and individual dismissal (15% of the total number of departures).

49 Breakdown of transfers by business group and geographic region

Recruitments Departures By business group 2005 2004 2005 2004

Christian Dior Couture 676 666 573 408 Wines and Spirits 794 550 619 684 Fashion and Leather Goods 3,631 4,006 3,354 3,138 Perfumes and Cosmetics 2,649 2,626 2,102 2,126 Watches and Jewelry 309 344 242 327 Selective Retailing 6,217 8,325 4,483 5,562 Other activities 43 63 32 46

Total 14,319 16,580 11,405 12,291

By geographic region

France 1,773 2,180 1,879 2,053 Europe (excl. France) 2,868 2,627 2,271 2,049 United States 4,865 7,201 3,780 5,003 Japan 492 646 703 591 Asia (excl. Japan) 4,105 3,788 2,579 2,443 Other countries 216 138 193 152

Total 14,319 16,580 11,405 12,291

The Group encourages employee transfers, from one geographic region to another or from one company to another. The diversity of Group companies, their identity and their business expertise in a variety of sectors encourage these two types of mobility. Today, over half the managerial positions are filled internally. In 2005, over 670 transfers were made to another Group company. The Group also encourages transfers from one professional category to another, which encourages employees to acquire new skills through qualifying or educational training.

50 13.2 Work time 13.2.1 Structure of work time In France, 14,800 employees in 2005 worked under one or more flexible work schedules, including: Employees concerned (%)

Employees with variable hours/flexi-time 42.5 Employees who received “comp” time 12.0 Part-time employees: less than 20 hours 3.5 Part-time employees: 20 to 30 hours 7.2 Part-time employees: over 30 hours 1.2 Employees on 2 x 8 shifts over the entire year 4.7 Employees on 2 x 8 shifts over a short period 3.2 Employees working at night 0.3 Beneficiaries of parental leave 1.6 Beneficiaries of end of career leave 0.4

13.2.2 Overtime In France, the annual overtime worked per employee does not exceed fifty hours.

13.2.3 Absenteeism The absentee rate within the Group for both indefinite and fixed-term contracts was 4.0% in 2005 (4.2% in 2004).

13.3 Compensation 13.3.1 Average compensation In France, the breakdown for the average monthly gross compensation in 2005 for employees working under indefinite, full-time contracts who were present all year is as follows:

(in euros) Employees concerned (%) less than 1,500 23.7 1,501 to 2,250 30.9 2,251 to 3,000 19.2 more than 3,000 26.2

Total 100.0

51 13.3.2 Personnel costs

(in millions of euros) 2005 2004

Gross payroll – indefinite or fixed-term contracts 2,019.5 1,763.7 Employer’s payroll taxes 491.1 459.3 Temporary work 97.5 81.5 Personnel provided by outside service providers 63.3 52.4

Total 2,671.4 2,356.9

The weight of the costs for personnel provided by service providers and temporary personnel represented worldwide 6% of the total payroll, including employer’s payroll tax.

13.3.3 Bonuses, profit-sharing and employee savings plans All the French companies of the Group with at least 50 employees have a profit-sharing, bonus or savings plan. These plans represented a total expense of 77.7 million euros in 2005.

(in millions of euros)

Profit-sharing 46.5 Bonuses 27.0 Employer’s contribution to savings plans 4.2

Total 77.7

In 2001, the Group set up a global LVMH stock option plan and that year awarded 25 options at a price of 66 euros to each Group employee. The beneficiaries of this plan have been able to exercise their options at any time since May 2005 until May 2009.

13.4 Training and professional relations 13.4.1 Professional equality Women represent 71% of all Group employees working under indefinite employment contracts.

52 This percentage can be broken down as follows: Percentage of women 2005 2004

Breakdown by business group: Christian Dior Couture 75 75 Wines and Spirits 32 32 Fashion and Leather Goods 74 73 Perfumes and Cosmetics 80 80 Watches and Jewelry 55 55 Selective Retailing 77 76 Other 53 55

Breakdown by socio-professional category: Executives and management 57 56 Technicians and Supervisors 69 68 Office and clerical 80 80 Labor and production 62 61

Breakdown by geographic region: France 67 67 Europe (excl. France) 75 75 United States 71 69 Japan 76 77 Asia (excl. Japan) 77 77 Other countries 61 60

Total 71 71

A similar breakdown between men and women was also recorded in the recruitment of new employees. Of the 14,319 workers recruited in 2005 under an indefinite contract, 76% were women. The breakdown by socio-professional category is as follows: Recruitment - % of women 2005 2004

Executives and management 58 56 Technicians and Supervisors 71 66 Office and clerical 82 81 Labor and production 46 53

Total 76 74

In France, women represent 67% of participants in training sessions.

53 13.4.2 Summary of collective agreements In France, the Group companies have Works Councils, Employee Delegates and Committees for Health, Safety and Working Conditions. The Group Committee was established in 1985. In 2005, employee representatives attended nearly 1,400 meetings: Types of meetings Number

Works Council 566 Employee Delegate 409 Committee for Health, Safety and Working Conditions 189 Other 203

Total 1,367

These meetings resulted in the signature of 83 Enterprise Agreements (agreements signed as part of annual wage and work time negotiations, bonus agreements, etc.).

13.4.3 Health and safety conditions In 2005, there were 1,039 accidents in the workplace or traveling to and from work with suspension of work, which resulted in 22,919 days of work lost. In France, the breakdown of accidents with suspension of work, by business group, was as follows: Number of Frequency Severity accidents rate rate

Christian Dior Couture 9 6.7 0.1 Wines and Spirits 118 24.1 0.7 Fashion and Leather Goods 94 12.7 0.2 Perfumes and Cosmetics 132 17.5 0.3 Selective retailing 196 25.5 0.5 Other 4 7.1 0.1

Total 553 18.8 0.4

Notes: - the frequency rate is equal to the number of accidents with work suspension, multiplied by 1,000,000 and divided by the total number of hours worked; - the severity rating is equal to the number of days lost, multiplied by 1,000 and divided by the total number of hours worked. Nearly 19.5 million euros were invested in Health and Safety in 2005. This amount includes expenditures for workplace medicine, items of protective equipment (gloves, goggles, etc.), and programs to improve health and safety: compliance, signs, protective wear, etc… These expenditures and investments represented 1% of the global gross payroll. Nearly 13,200 persons received safety training in the Group companies throughout the world.

54 13.4.4 Training Jobs in the luxury products industry are characterized by the acquisition and development of specific expertise that requires years of training. Managers must devote a large portion of their time to training mid-level management in the management techniques specific to our jobs. Thus, much of this training is provided every day in the workplace and is not recorded in the indicators presented below. 2005 2004

Training investment (in millions of euros) 46.6 48.6 Percentage of payroll (%) 2.3 2.8 Average number of training days per employee 3.4 2.9 Average cost of training per employee (in euros) 740 777 Employees trained during the year (%) 71.5 70.1

The training investment made in 2005 by Group companies throughout the world represented 46.6 million euros, representing 2.3% of payroll. The average training investment per full-time equivalent person was 740 euros. This amount resulted in the completion of 212,673 days of training. 71.5% of employees received training in 2005 and the average number of training days per person was 3.4 days. The orientation and/or induction sessions organized by the companies and/or the Group welcomed more than 16,150 participants in 2005.

13.4.5 Hiring and employment of disabled workers Christian Dior encourages the companies of the Group to develop programs to assist persons facing employment difficulties. Several companies have developed partnerships with “Assistance through Work” Centers in order to encourage the hiring of disabled workers. In particular, Hennessy used these Centers in subcontracting repackaging operations. Parfums Christian Dior created a specially equipped workshop designed for manufacturing personnel who have serious medical restrictions; this workshop now has 26 workers. Others are expected to be created in the near future. In France, personnel with a disability represent 2.1% of the total workforce. The services subcontracted in France to “Assistance through Work” Centers represented 2.2 million euros in 2005.

13.4.6 Social projects and complementary services In 2005 in France, the different companies of the Group devoted a budget of over 12.2 million euros, representing 1.9% of the payroll, to social and cultural projects through their contributions to the Works Committees. Canteen costs for employees represented a budget of 10.4 million euros.

13.5 Relations with third parties 13.5.1 Relations with suppliers The majority of the Group’s production operations are located in France and most of its subcontractors are in Europe, which ensures compliance with the provisions of the basic conventions of the International Labor Organization.

55 Several Group companies have established supplier charters and codes of conduct. In particular, Moët & Chandon signs a specification schedule with its subcontractors, which includes provisions on protection of the environment and respect for fundamental labor rights. Audits of suppliers are conducted. Sephora includes respect for the rights of employees, a ban on child labor, non-discrimination, respect for work time and the environment in its supplier specifications. Louis Vuitton has established an ethical process of social pre-audits based on compliance with local regulations and the standards defined by the SA 8000 standard, which is based on the ILO conventions: no child labor, working conditions, health and safety, representation and the right to collective bargaining, non-discrimination, disciplinary practices, work time and compensation. In order to successfully and independently conduct a social pre-audit, the Louis Vuitton buyers receive theoretical training in the approach and criteria as well as practical training in the field under the supervision of a social auditor. Thus, in 2005, more than 20 SA 8000 social pre-audits were completed, resulting in the qualification of 11 new suppliers. Donna Karan International has developed a “Vendor Code Of Conduct” that states the basic principles of labor law and encourages the highest ethical standards. The company has also established a “Vendor Compliance Agreement” which provides for independent supplier audits to verify that commitments are met. In the same way, TAG Heuer is asking all new foreign suppliers for a written commitment that they will comply with the social responsibility commitments defined in the SA 8000 standard. This procedure is also used by Parfums Christian Dior, Parfums Givenchy and Guerlain, which have defined specifications that require compliance with the provisions of the SA 8000 standard. Finally, and in order to facilitate exchanges and the development of best practices within the companies, the Group has set up a network of agents who work with suppliers. A meeting was held in October 2005 during which executives from Louis Vuitton, Tag Heuer and Donna Karan presented their procedures.

13.5.2 Territorial impact of the business on jobs and regional development Dior practices a policy of maintaining and developing jobs. Thanks to the steady growth in its brands, new revenue jobs are being created in all the countries in which we are present, particularly because of the expansion of the network of owned stores. The opening of Maison Louis Vuitton on the Champs Elysées in Paris also generated a large number of new jobs, as well as an expansion of our international teams. In the same way, the opening of the Galeria in Okinawa, Japan created nearly 600 new jobs. In France, La Samaritaine, which was forced to close its doors in order to complete safety and compliance work, set up a special mechanism until October 31, 2006, to assist in finding new jobs adapted to the individual situation of each employee. This redeployment plan was approved in an enterprise agreement signed by most of the union organizations on February 6, 2006. There were no significant mass layoffs in France in 2005. Many of the Group’s large companies are historically established in the French provinces and are major players in the development of jobs in their respective regions: Parfums Christian Dior in Saint Jean de Braye (near Orléans), Veuve Clicquot Ponsardin and Moët & Chandon in Champagne, and Hennessy in Cognac, have all developed public

56 relations and communication policies to work with the local authorities, particularly in areas of cultural and educational events and employment. Sephora, which is establishing stores throughout France (61% of the work force works outside the Paris region), regularly conducts programs to stimulate local employment.

13.5.3 Relations with educational institutions and social inclusion associations The Group’s companies have developed a number of international partnerships with management and engineering schools, as well as with design schools and institutions that specialize in the skills specifically needed in our businesses. The leading companies participate in presentations at these schools several times a year. Senior executives of the Group are involved in teaching several programs. The Group’s companies maintain a constant policy to hire unqualified workers whom they train for several months in the processes and techniques to manufacture their products. The acquisition and control of these specialist skills require years of training in most of our businesses: particularly leather working, fashion, viticulture and wine production, and watch making. Sponsorship programs have been initiated with schools, technical training institutes and apprentice training centers in order to train the professionals of tomorrow. Each company is developing its own initiatives. Louis Vuitton has developed with Lycée Issoudun a post-high school training program designed to train future leather workers for the prototype workshop, the repair shop and special orders. This training lasts one year and consists of four periods of course work (one month each) and four internship periods (one month each) in production, design and methods. Hennessy has also developed a partnership with the Louis Delage technical school in Cognac to train timer machinists and regularly welcomes cooper apprentices. TAG Heuer’s recruitment of a highly qualified Watchmaker Trainer has allowed the brand to identify and recruit employees without initial qualifications in watchmaking and train them in the different trades in this sector. On June 9, 2005, LVMH signed the Apprenticeship Charter. This Charter is intended to promote the training and qualification of young workers by increasing the number of apprentices and by promoting this route. Nearly 200 professional training and apprenticeship contracts were signed in 2005. In addition, the Group’s recruitment policy includes initiatives to assist persons who have difficulty finding work. Thus, Louis Vuitton signed agreements to include persons with a long-term illness within its workshops and Veuve Clicquot Ponsardin has established partnerships with ANPE (the French national employment agency) to welcome young people on work experience.

13.6 Compliance with international agreements In each decision, consideration for people, their freedom and dignity, as well as their personal development and health, is a cornerstone of a doctrine of responsibility subscribed to by all the companies of the Group. All the Group companies have policies and practices to ensure equal opportunity and treatment (gender, race, religion, politics, etc, …) as defined in the conventions of the International Labor Organization. This culture and these practices also lead to respect for freedom of association, respect for individuals, and the prohibition of child labor and forced labor.

57 XIV. EXCEPTIONAL EVENTS AND LITIGATION • In managing its current businesses, the Group is party to various proceedings relating to trademark law, protection of intellectual property rights, protection of selective distribution networks, licensing agreements, employee relations, audits of tax filings, and all other matters inherent in its activities. The Group believes that the provisions recognized on its balance sheet for these risks, litigation or disputes, both known or in progress on the closing date, are sufficient to prevent any material negative impact on the consolidated financial position if the outcome is unfavorable. • In a summons filed on October 30, 2002, LVMH initiated an action against Morgan Stanley in the Paris Commercial Court to obtain relief for the damages caused by false notations and bias in the analyses and publications issued by this bank against LVMH. In a judgment handed down on January 12, 2004, the Paris Commercial Court found that these actions constituted gross negligence, and ordered Morgan Stanley to pay LVMH 30 million euros in damages and appointed Mr. Didier Kling as expert to identify and calculate all elements related to certain items of the damages. Morgan Stanley has filed an appeal against the lower court ruling; however, this ruling included provisional execution and did not suspend the orders issued or interrupt the expert appraisal process. The expert appraisal is currently in progress and LVMH has presented to the expert a valuation of the portion of the financial damages subject to his assessment equal to 182.9 million euros. The appeals proceeding is continuing at the same time. LVMH has asked the Court to uphold the judgment of the Paris Commercial Court, to order Morgan Stanley to pay 30 million euros as non-financial damages and 18.5 million in financial damages not subject to the expert’s appraisal. LVMH’s claims total 232 million euros. At the end of the hearing on March 21, 2006, the Paris Court of Appeals announced that it would hand down its ruling on June 30, 2006.

XV. SUBSEQUENT EVENTS No significant event had occurred at the date on which the accounts were approved. [Updated after the meeting of the Board of Directors approving the financial statements: Following an investigation launched in 1998 on the competitive situation within the luxury perfume sector in France, the Competition Council delivered a decision on March 14, 2006 condemning the leading manufacturers and distributors for facts relating to the years 1997 to 2000. The financial penalties imposed on the Group’s companies came to a total of 14.5 million euros. These companies are appealing against the decision.]

58 R EPORTOFTHEC HAIRMAN OF THE B OARD OF D IRECTORS TO THE S HAREHOLDERS’MEETING ON M AY 11, 2006

This report, prepared in accordance with the provisions of Article L.225-37 of the Commercial Code, is intended to describe the conditions for the preparation and organization of the work of the Board of Directors of the Company and the internal control procedures established by the Company.

I. PREPARATION AND ORGANIZATION OF THE WORK OF THE BOARD OF DIRECTORS

The Board of Directors has developed a Charter that specifies the membership, missions, operation and responsibilities of the Board. The Board of Directors has two committees, whose members, role and mission are defined by internal rules. A copy of the Board of Directors’ Charter and the bylaws of the Committees are sent to all candidates for the post of board member and to the permanent representative of a legal entity prior to taking up their post.

Board of Directors As the strategic body of the Company, the priority objectives of the Board are to increase the value of the Company, adopt the major strategic directions and monitor their implementation, verify the reliability and fair presentation of the information about the Company, and protect the corporate assets. The Board of Directors of the Christian Dior Group guarantees respect for their rights to each shareholder of the Company and ensures that they fulfill all their duties. No board member performing management duties within the Company holds office in a company in which an officer is a member of the Board of Directors of Christian Dior. In 2005, the Board of Directors met three times on a written notice from the Chairman sent to each of the board members at least one week before the date of the meeting. The attendance rate of the board members at meetings was an average of 87%. The Board of Directors was specifically required to close the annual and interim accounts, approve the documents submitted for the approval of the shareholders at the Annual Meeting, renew the mandates of the Chairman of the Board and the Chief Executive Officer, issue bonds, and establish option plans. The documents and information required by the Board to perform its mission were provided to the board members for each meeting. The Board of Directors has not placed any limitation on the powers of the Chief Executive Officer allowed by law.

Performance Audit Committee The essential duties of the Performance Audit Committee are to ensure compliance of the accounting principles followed by the Company with generally accepted accounting principles and to review the parent company and consolidated accounts before they are submitted to the Board of Directors.

59 The members and the Committee Chairman are appointed by the Board of Directors. The Performance Audit Committee met twice in 2005, with at least two members present. All meetings were held in the presence of the Statutory Auditors, the Chief Financial Officer and the Accounting Director of the Company and the Accounting Director of the principal subsidiary, LVMH. The work of the Committee focused primarily on a review of the parent company and consolidated accounts, and monitored the risks and coverage of the risks.

Nominating and Compensation Committee The primary duties of the Nominating and Compensation Committee are to issue: • recommendations for the distribution of the board members’ fees paid by the Company and for the compensation, in-kind benefits and stock options for the Chairman of the Board of Directors and the Chief Executive Officer of the Company; • opinions on candidates for the positions of board member and advisor of the Company or the executive positions of its principal subsidiaries, on the compensation and in-kind benefits granted to board members and advisors of the Company or its subsidiaries, and on the fixed or variable, immediate or deferred compensation and incentives for the officers of the Group. The members and the Committee Chairman are appointed by the Board of Directors. The Committee met twice during 2005 with all members present. It issued recommendations concerning compensation and the granting of stock options to the Chairman of the Board and the Chief Executive Officer and issued opinions on the compensation awarded to certain board members by the Company or its subsidiaries.

II. INTERNAL CONTROL PROCEDURES The purpose of the internal control procedures in force at Christian Dior is: • first, to ensure that management acts or operations as well as the behavior of the personnel fall within the framework defined by the strategies adopted for the Company by the corporate bodies, by the applicable laws and regulations, and by the values, standards and rules within the Company; • second, to verify that the accounting, financial and management information provided to the Company’s corporate bodies fairly reflects the business and situation of the Company. One of the objectives of the internal control system is to prevent and manage the risks resulting from the Company’s activity and the risks of errors or fraud, particularly in the accounting and financial areas. Like any system of control, it cannot, however, absolutely guarantee the complete elimination of these risks. Internal control at Christian Dior takes into account the specific structure of the Group. Christian Dior is a holding company that holds two principal assets: a 42.4% interest in LVMH and a 100% stake in Christian Dior Couture. LVMH is a publicly traded company, the Chairman of which is also the Chairman of Christian Dior, and several board members sit on the Board of both companies. Christian Dior Couture has a Board of Directors, the membership of which is similar to the membership of the Christian Dior Board. The section devoted to internal control will present the procedures for Christian Dior Couture and for the holding company Christian Dior S.A.; the procedures in force at LVMH are described in the report filed by that company, to be consulted in addition to this report.

60 Christian Dior Couture Christian Dior Couture carries out a business for the design, production and international distribution for all products of the brand. It also operates a distribution business in various markets through its 35 subsidiaries. In this double role, internal control is exercised directly over Christian Dior Couture SA, and in a supervisory capacity over all the subsidiaries. Internal procedures exist in each legal entity. These procedures govern, in particular, signature powers, asset monitoring, expenditure commitments, expense accounts, the opening of customer accounts, pricing, management of press collections, etc. Contractual commitments are subject to prior control and authorization from the Legal Department. All the procedures related to points of sale have been reviewed and combined within a special manual for boutique operations, which was implemented in 2004 and updated at the end of 2005 at the time of the deployment of a new software application to manage points of sale. Based on the deployment of this application, periodic updates will be completed and sent to point of sale managers. The Company has set up a self-evaluation system to assess the effectiveness of the internal control in the subsidiaries. Two questionnaires were sent to the subsidiaries: • one questionnaire covered the monitoring of the procedures to be applied by the subsidiaries in all key cycles (Purchasing, Inventory and Logistics, Capital expenditures, Information Systems, Human Resources, Accounting and Finance); • the other dealt with the key processes of the retail activity (revenue, cash flow, etc.). The analysis of the responses led to recommendations to be followed by the subsidiaries, the application of which is monitored by the internal audit unit.

Christian Dior S.A. 1. The internal control environment As indicated previously, Christian Dior S.A. is a holding company whose assets are essentially limited to two lines of equity interests in Christian Dior Couture and LVMH. This activity within Christian Dior S.A. is primarily dedicated to: • protecting legal ownership of these two lines of securities; • exercising the rights and powers enjoyed by one majority shareholder, i.e.: - representation on the boards and general meetings of the subsidiaries, - collection of the dividends paid by the subsidiaries, - control of the economic performance of the subsidiaries; • and, since Christian Dior S.A. is a publicly traded company, providing full financial information in compliance with current laws and regulations. Given the limited number of tasks as described above and its consolidation within a Group that has the expertise necessary for its administration, Christian Dior S.A. uses the specialized services of the Group in the areas inherent to holding company activity, which are the legal, financial and accounting areas. An assistance agreement has been established with the Groupe Arnault.

61 With respect to services outside the Group, the General Meeting of Christian Dior S.A. has appointed two leading firms as Auditors; one of these firms also performs the same functions at Christian Dior Couture and LVMH.

2. Control of risks Key elements of the internal control procedures Given the Company’s business, the internal control systems are primarily intended to prevent the risks of error or fraud in the financial and accounting areas. The following principles guide our organization: • very limited and specific delegations of power, known to counterparties; sub-delegations are reduced to a minimum; • legal control prior to the signature of contracts; • separation of the scheduling of expenditures and payment; • secure payments; • procedural rules known by potential users; • integrated databases (a single entry for all users); • frequent controls (both internal and external).

Legal and operational control over the subsidiaries exercised by the parent company ➤ Control of holdings The securities held in subsidiaries are the subject of a quarterly check between the Accounting Department of the Company and the securities departments of the relevant companies. ➤ Operational control Christian Dior S.A.’s operational control over its subsidiaries is exercised through: • legal departments, meetings of the Board of Directors, and General Meetings, at which the Company is systematically represented; • management information that allows the officers of Christian Dior S.A. to take part in the process to define objectives and control execution: - three-year plans and annual budgets, - monthly reporting and reconciliation of actuals to budgets and an analysis of the variances, - quarterly meetings to analyze performance with the subsidiary’s management.

3. Internal control for the preparation of the parent company’s financial and accounting information The corporate and consolidated financial statements are covered by specific instructions and an information feedback system to process full information within the appropriate deadlines. The exhaustive controls performed at sub-consolidation levels (LVMH and Christian Dior Couture) guarantee the integrity of the information. The financial information intended for the financial markets (financial analysts, investors, individual shareholders, market authorities) is provided under the control of the Finance Division. This information is in strict compliance with the market rules in force, particularly the principle of equal treatment of investors.

62 4. Implementation of the IFRS The Christian Dior Group finalized the implementation of the IFRS at the time of presentation of the 2004 financial statements. Those statements were closed in accordance with French standards and presented under IFRS for information purposes. The 2005 half- year and annual financial statements have been prepared in accordance with the new standards.

5. The “LSF” project In addition to the existing internal control mechanism and pursuant to the Financial Security Act (“LSF” – Loi de Sécurité Financière), the Christian Dior Group continued the process initiated in 2003 and 2004 to formalize and evaluate its internal control over time. This process has been continued both at LVMH and at Christian Dior Couture.

63 REPORT OF THE AUDITORS ESTABLISHED PURSUANT TO ARTICLE L.225-235 OF THE COMMERCIAL CODE, ON THE REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS OF CHRISTIAN DIOR S.A., CONCERNING THE INTERNAL CONTROL PROCEDURES RELATING TO THE PREPARATION AND PROCESSING OF THE ACCOUNTING AND FINANCIAL INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2005

MAZARS & GUERARD ERNST & YOUNG AUDIT MAZARS Faubourg de l’Arche Le Vinci - 4, Allée de l’Arche 11, Allée de l’Arche 92075 Paris-La Défense Cedex 92037 Paris-La Défense Cedex S.A. with capital of 8,320,000 euros S.A.S. with variable capital Statutory Auditor Statutory Auditor Member of the Compagnie régionale Member of the Compagnie régionale de Paris de Versailles

To the Shareholders, In our capacity as auditors of the Christian Dior company and pursuant to the provisions of Article L.225-235 of the Commercial Code, we are presenting to you our report on the report prepared by the Chairman of your Company in accordance with the provisions of Article L.225-37 of the Commercial Code for the financial year ended December 31, 2005. It is the responsibility of the Chairman to report on the conditions for the preparation and organization of the work of the Board of Directors and the internal control procedures established within the Company. It is our responsibility to inform you of our comments on the information provided in the Chairman’s report concerning the internal control procedures for the preparation and statement of the accounting and financial information. We have performed our audits in accordance with the professional auditing standards generally accepted in France. Those standards require that we conduct our verification in order to assess the fair presentation of the information provided in the Chairman’s report concerning the internal control procedures for the preparation and statement of the accounting and financial information. This task consisted of: - Reviewing the objectives and the general organization of the internal control, as well as the internal control procedures for the preparation and statement of the accounting and financial information presented in the Chairman’s report; - Reviewing the work underlying all information thus provided in the report.

64 On the basis of our work, we have no comment to make on the information provided concerning the Company’s internal control procedures for the preparation and statement of the accounting and financial information contained in the report of the Chairman of the Board of Directors, established pursuant to the provisions of the final section of Article L.225-37 of the Commercial Code.

Paris-La-Défense, April 10, 2006

The Auditors

MAZARS & GUERARD ERNST & YOUNG AUDIT Mazars

Denis Grison Christian Mouillon

65

CONSOLIDATED FINANCIAL STATEMENTS

67

C ONSOLIDATED H IGHLIGHTS

(in millions of euros) 2005 2004 (1)

Key consolidated data

• Revenue 14,556 13,060 Profit from recurring operations 2,791 2,413 Net income—Group share 618 549

• Capital 363 363 Total shareholders’ equity 11,868 10,065 Non-current assets 23,146 21,706 Current assets 8,813 7,659 Non-current liabilities 12,611 12,613 Current liabilities 7,480 6,687 Net financial debt 5,706 6,646 Total assets 31,959 29,365

• Cash flow from operations before changes in working capital 3,185 2,789

(in euros)

Earnings per share Net income, Group share 3.48 3.09 Net income, Group share after dilution 3.45 3.07

Dividend per share Interim dividend 0.32 0.32 Final 0.84 0.65 Total dividend (2) 1.16 0.97

(1) Following restatement under IFRS of data previously published under French GAAP. (2) For 2005, the amount proposed at the General Meeting on May 11, 2006.

69 C ONSOLIDATED B ALANCE S HEET

ASSETS (in millions of euros) Notes 2005 2004 (1)

Brands and other intangible assets, net 3 11,186 10,495 Goodwill, net 4 5,058 4,634 Tangible assets, net 6 5,258 4,798 Investments in associates 7 131 117 Non-current available for sale financial assets 8-12 451 718 Other non-current assets 701 666 Deferred tax 26 361 278 Non-current assets 23,146 21,706 Inventories and work-in-progress 9 4,270 3,723 Trade receivables and related accounts 10 1,437 1,419 Corporate income tax 317 115 Other current assets 11-12 1,279 1,336 Cash and cash equivalents 13 1,510 1,066 Current assets 8,813 7,659 Total assets 31,959 29,365

LIABILITIES AND SHAREHOLDERS’ EQUITY (in millions of euros) Notes 2005 2004 (1)

Capital 363 363 Premiums 2,205 2,205 Dior treasury share (157) (155) Revaluation reserves 292 245 Other reserves 1,021 626 Currency translation 126 (89) Net income – Group share 618 549 Shareholders’ equity, Group share 14 4,468 3,744 Minority interests 16 7,400 6,321 Shareholders’ equity 11,868 10,065 Long-term financial debt 17 4,443 5,092 Provisions – over one year 18 952 886 Deferred tax 26 3,846 3,389 Other non-current liabilities 19 3,370 3 246 Non-current liabilities 12,611 12,613 Short-term financial debt 17 3,376 2,984 Trade accounts and related accounts 1,772 1,629 Corporate income tax 377 203 Provisions – under one year 18 312 265 Other current liabilities 20 1,643 1,606 Current liabilities 7,480 6,687 Total of liabilities and shareholders’ equity 31,959 29,365

(1) Following restatement under IFRS of data previously published under French GAAP.

70 C ONSOLIDATED I NCOME S TATEMENT

(in millions of euros, except earnings per share) Notes 2005 2004 (1)

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

Gross margin 9,328 8,527

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

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

Other operating income and expenses 24 (226) (203)

Operating income 2,565 2,210

Cost of net financial debt (234) (265) Dividends received 49 16 Other financial income and expenses (6) (15)

Financial income 25 (191) (264)

Income taxes 26 (728) (488) Share of income from investments in associates 7 8 (15)

Net income 1,654 1,443 Minority interests 1,036 894

Net income - Group share 618 549

Net income, Group share, per share (in euros) 27 3.48 3.09 Number of shares used for the calculation 177,655,990 177,774,420

Net income, Group share, after dilution per share (in euros) 27 3.45 3.07 Number of shares used for the calculation 179,002,963 178,737,153

(1) Following restatement under IFRS of data previously published under French GAAP.

71 C ONSOLIDATED S TATEMENT OF C HANGES IN S HAREHOLDERS’EQUITY

Total shareholders’ equity Income Number Dior Revaluation and other Currency Group Minority of shares Capital Premiums shares reserves reserves translation share interests Total (in millions of euros) Note 14.1 14.2 14.4 14.5 16

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

Currency translation (89) (89) (176) (265) Gains and losses recorded on shareholders’ 26 26 48 74 equity Net income 549 549 893 1,442

Total gains and losses for the period – – – 26 549 (89) 486 765 1,251

Expenses linked to stock option plans 27 27 28 55 Change in treasury shares (25) (9) (34) (75) (109) Dividends paid (162) (162) (340) (502) Changes in consolidation scope – 9 9 (19) (10) Impact of securities purchase commitments for – (69) (69) minority interests

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

Currency translation 215 215 381 596 Gains and losses recorded on shareholders’ 47 47 64 111 equity Net income 618 618 1,036 1,654

Total gains and losses for the period – – – 47 618 215 880 1,481 2,361

Expenses linked to stock option plans 17 17 15 32 Change in treasury shares (2) 1 (1) 27 26 Dividends paid (172) (172) (371) (543) Changes in consolidation scope – (74) (74) Impact of securities purchase commitments for –11 minority interests

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

(1) Following restatement under IFRS of data previously published under French GAAP. Shareholders’ equity under IFRS presented at January 1, 2004 and December 31, 2004 rose by 233 million euros and 280 millions euros respectively from the data presented in the document “Implementation of the IFRS” part 2 of the 2004 Annual Report. This change is explained in Note 14.2 to the financial statements.

72 C ONSOLIDATED C ASH F LOW S TATEMENT

(in millions of euros) Notes 2005 2004 (1) I - OPERATING ACTIVITIES Operating income 2,565 2,210 Net depreciation, amortization and provisions, excluding fiscal and financial items 671 562 Other expenses calculated, excluding financial items (92) (21) Dividends received 52 26 Other restatements (11) 12

Cash flow from operations before changes in working capital 3,185 2,789 Cost of net financial debt: interest paid (268) (266) Income taxes paid (620) (401)

Cash flow after financial interest and taxes 2,297 2,122 Change in inventories and work in progress (281) (276) Change in trade receivables and related accounts (77) 21 Change in trade accounts payable and related accounts 18 (88) Change in other receivables and liabilities 53 110

Change in working capital requirement (287) (233)

Change in cash flow from operating activities 2,010 1,889

II - INVESTING ACTIVITIES Acquisitions of intangible and tangible assets (755) (711) Disposals of intangible and tangible assets 21 63 Guarantee deposits paid and other operational investing flows 7 (13)

Operating investments (727) (661) Acquisitions of non-current available for sale financial assets (69) (57) Disposals of non-current available for sale financial assets 8 469 95 Effects of acquisitions and disposals of consolidated investments 2.4.2 (604) (401) Other flows from financial investing activities 64 –

Financial investments (140) (363)

Change in cash from investing activities (867) (1,024)

III - TRANSACTIONS RELATED TO EQUITY Capital increase of subsidiaries subscribed by minority interests 3 1 Acquisitions and revenue of Christian Dior and LVMH treasury shares 30 (156) Dividends (including dividend withholding) and interim dividends paid during the year by Christian Dior (172) (162) Dividends and interim dividends paid during the year to the minority interests of consolidated subsidiaries (371) (340)

Change in cash flow from transactions relating to equity (510) (657)

IV - FINANCING ACTIVITIES Issues or subscriptions to borrowings and financial debt 1,267 1,662 Repayment of borrowings and financial debt (1,621) (1,717) Acquisitions and revenue of financial investments (40) 11

Change in cash flow from financing activities (394) (44)

V - IMPACT OF CURRENCY TRANSLATION 34 2

NET CHANGE IN CASH AND CASH EQUIVALENTS (I+II+III+IV+V) 273 166

NET CASH AT BEGINNING OF YEAR 13 715 549 NET CASH AT YEAR-END 13 988 715

Transactions included in the table above, without impact of the change in cash flow: - finance lease investments 9 56 (1) Following restatement under IFRS of data previously published under French GAAP.

73 N OTES TO THE C ONSOLIDATED F INANCIAL S TATEMENTS

Page

1 ACCOUNTING PRINCIPLES 75 2 CHANGES IN THE SCOPE OF CONSOLIDATION 84 3 BRANDS, TRADE NAMES AND OTHER INTANGIBLE ASSETS 87 4 GOODWILL 89 5 VALUATION OF INTANGIBLE ASSETS OF INDEFINITE LIFE 90 6 TANGIBLE ASSETS 90 7 INVESTMENTS IN ASSOCIATES 92 8 NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS 92 9 INVENTORIES AND WORK-IN-PROGRESS 93 10 ACCOUNTS RECEIVABLE 94 11 OTHER CURRENT ASSETS 95 12 FINANCIAL INVESTMENTS 95 13 CASH AND CASH EQUIVALENTS 95 14 SHAREHOLDERS’ EQUITY 96 15 STOCK OPTION PLANS AND RELATED 99 16 MINORITY INTERESTS 104 17 BORROWINGS AND FINANCIAL DEBT 104 18 PROVISIONS 108 19 OTHER NON-CURRENT LIABILITIES 109 20 OTHER CURRENT LIABILITIES 110 21 FINANCIAL INSTRUMENTS 110 22 SEGMENT INFORMATION 115 23 INCOME AND EXPENSES 117 24 OTHER OPERATING INCOME AND EXPENSES 119 25 NET FINANCIAL INCOME 120 26 INCOME TAXES 120 27 EARNINGS PER SHARE 123 28 PENSION COMMITMENTS, MEDICAL COSTS AND RELATED 123 BENEFITS 29 OFF-BALANCE SHEET COMMITMENTS 126 30 RELATED PARTIES 128 31 SUBSEQUENT EVENTS 129

74 N OTES TO THE C ONSOLIDATED F INANCIAL S TATEMENTS

NOTE 1 - ACCOUNTING PRINCIPLES

1.1 General framework Pursuant to European regulation 1606/2002 of July 19, 2002, the consolidated financial statements for 2005 were established in accordance with the International Accounting Standards (IAS/IFRS) adopted by the European Union and applicable on the date the accounts were closed on March 1, 2006. These standards have been consistently applied over the years presented. The standards IAS 32, IAS 39 and IFRS 5 were applied by the Group as of January 1, 2004, including the amendment to IAS 39 concerning the hedging of future intra-Group cash flows. The standards, amendments and interpretations issued by the IASB in August 2005 have not been applied in the attached financial statements. These texts are IFRS 7, Financial instruments – Information to be provided, and the amendment to IAS 1, Presentation of financial statements for capital information, which must be applied as of 2007 or early in 2006, and the amendments to IAS 39 and IFRS 4 on financial guarantees, applicable in 2006. These texts will not have a significant impact on the Group’s financial statements. The following texts issued by the IASB are not applicable to the Group: the amendments to IFRS 1 and IFRS 6 of June 2005, IFRIC 6, Liabilities arising from participating in a specific market – Waste electrical and electronic equipment of September 2005, and IFRIC 7, Interpretation concerning financial reporting in hyper-inflationary economies of November 2005.

1.2 First adoption of IFRS The consolidated financial statements for 2005 are the first financial statements established in compliance with IFRS. The Group’s implementation of IFRS, described in part 2 of the 2004 Annual Report, consists of the following items: • a note on the Group’s first application of the IFRS accounting principles, in particular the methods of application of IFRS 1, First adoption of IFRS, and the presentation formats chosen for the balance sheet and income statement; • a note summarizing the impact of IFRS on the accounting principles followed by the Group; • reconciliation tables between French standards and IFRS for the following statements: - shareholders’ equity at January 1, 2004, the transition date, and at December 31, 2004; - balance sheets at January 1 and December 31, 2004; - income statement for 2004; as well as a note with comments on these tables.

75 IFRS 1 provides for exceptions to the retrospective application of IFRS to the transition date; the exceptions used by the Group are as follows: • business combinations: the exemption for retrospective application was not used. The Christian Dior Group has retrospectively restated the acquisitions made since 1988, the date of the first consolidation of LVMH; the standards IAS 36, Impairment of assets, and IAS 38, Intangible Assets, have been applied retrospectively since that date; • valuation of tangible and intangible assets: the option of valuing these assets at their fair value on the transition date was not used except for all buildings held by Christian Dior Couture; • employment benefits: deferred actuarial differences under French standards at the transition date have been booked; • conversion of foreign subsidiary accounts: the conversion reserves related to the consolidation of subsidiaries in foreign currencies were eliminated at January 1, 2004 as per contra to “Other reserves”; • share-based payment: IFRS 2 on share-based payment is applied to all stock option plans open on the transition date, including the plans set up before November 7, 2002, the date before which application is optional.

1.3 Use of estimates In the process of preparing the consolidated financial statements, the valuation of certain balances on the balance sheet or income statement requires the use of assumptions, estimates or assessments. This covers the valuation of intangible assets, commitments to purchase the shares of minority interests, the determination of the amount of the provisions for liabilities and charges or provisions for inventory impairment and, if applicable, deferred tax. These assumptions, estimate or assessments established on the basis of existing information or situations on the date the statements are prepared may differ from reality in the future.

1.4 Consolidation methods The subsidiaries in which the Group has direct or indirect exclusive control, by law or in fact, are fully consolidated. Companies under joint control are consolidated on a proportionate basis. The retail subsidiaries jointly held with the Diageo group are consolidated at the percentage of their balance sheets and income statements that corresponds to the Group’s activities only (see Note 1.22). The companies in which the Group exercises a significant influence are consolidated using the equity method.

1.5 Conversion of the financial statements of foreign subsidiaries The currency of the consolidated accounts is the euro: subsidiaries’ accounts that use a different operational currency are converted into euros: • at the closing price for balance sheet items; • at the average price for the period for the items on the income statement. Translation adjustments resulting from the application of these prices are recorded in shareholders’ equity as “currency translation”.

76 1.6 Currency transactions and exchange hedges Foreign currency transactions carried out by the consolidated companies are converted into their operational currency at the exchange rate on the date of the transaction. Receivables and payables expressed in foreign currencies are converted at the rate of these currencies on the closing date. Unrealized gains and losses resulting from this conversion are booked as: • gross margin for commercial transactions; • financial income for financial transactions. The currency gains and losses resulting from the conversion of intra-Group transactions or receivables and payables in foreign currencies, or from their elimination, are recognized in the income statement, unless they come from long-term intra-Group financing operations that can be considered as capital operations: in this case, they are recognized under shareholders’ equity as “Currency translation”. When derivatives are assigned to hedge commercial operations in currencies, they are recognized on the balance sheet at their market value on the closing date; the change in market value of these derivatives is booked as follows: • as gross margin for the effective portion of the hedge of receivables and payables booked on the balance sheet on the closing date; • under shareholders’ equity, as revaluation reserve, for the effective portion of the hedge on future cash flows; this amount is transferred to gross margin when the receivables and payables covered by the hedge are booked; • as financial income for the ineffective portion of the hedge; the changes in value related to the forward points of the forward contracts and the time value under option contracts are systematically considered to be the ineffective portion. When derivatives are assigned to hedge net currency positions of consolidated subsidiaries, the change in market value is recognized in shareholders’ equity as “Currency translation”, for the amount of the effective portion and as financial income for the effective portion.

1.7 Brands, trade names and other intangible assets Only the brands and trade names acquired, which can be individualized and have a recognized name, are recorded as assets, at the value determined at the time of acquisition. Expenses incurred to create a new brand or to develop an existing one are recorded under expenses. Brands and other intangible assets with a definite life are amortized over their useful life. Brands and other intangible assets with an indefinite life are not amortized, but are subject to an annual valuation test. The classification of a brand or trade name as an asset with a definite or indefinite life is the result of the application of the following criteria: • the global positioning of the brand or trade name on its market in terms of volume of activity, international presence, and reputation; • prospects for long-term profitability; • the degree of exposure to circumstantial risks; • a major event occurring in the business group that might affect the future of the brand or trade name; • the age of the brand or trade name.

77 The period of amortization of the brands, which is based on the estimate of their permanence, is between 5 and 40 years. The brand and trade name amortization charge and, if applicable, the amount of their impairment are booked in “Other operating income and expenses”. Research expenses are not capitalized. The costs to develop a new product are capitalized only if the decision to launch the product is effectively made. Intangible assets, other than brands and trade names, are amortized over the following periods:

• Leasehold acquisition rights: based on market conditions, most often 1 to 2 times the term of the lease • set-up costs: maximum 3 years • software: 1 to 5 years

1.8 Goodwill When exclusive control of a company is obtained, the assets, liabilities and contingent liabilities of the company acquired are valued at fair value; the difference between the cost of the takeover and the Group’s share of the fair value of these assets, liabilities and contingent liabilities is recognized as “Goodwill”. The cost of the takeover is the price that was or would be paid by the Group in the context of an acquisition. In the absence of specific provisions in the current standards, the difference between the acquisition cost and the book value of the minority interests acquired is recognized as “Goodwill”. Goodwill is booked in the operational currency of the entity acquired. Goodwill is not amortized, but is subject to an annual valuation test. The impairment expense, if any, is included in “Other operating income and expenses”.

1.9 Commitments to purchase minority interests The minority shareholders of certain fully consolidated subsidiaries benefit from commitments to buy their shares granted by the Group. Pending clarification on IAS 32, the Christian Dior Group has recorded these commitments as follows: • the commitment, in the amount on the closing date, appears as “Other non-current liabilities”; • the corresponding minority interests are reclassified in the above amount; • the difference between the amount of the commitment and the reclassified minority interests is recognized as “Goodwill”. This accounting method has no impact on the presentation of minority interests in the income statement. However, the accounting treatment described above calls for the following comment: some interpretations of the texts result in accounting for goodwill in full as a deduction from shareholders’ equity; under other interpretations, goodwill is maintained under assets but at an amount fixed at the time of the takeover, with subsequent variations recorded in results.

78 1.10 Tangible assets The gross value of tangible assets, with the exception of the vineyard land and producing vineyards and all buildings held by Christian Dior Couture, is the acquisition cost. The financial costs incurred during the period preceding operation are not capitalized. Vines for the , cognac and other wines produced by the Group are biological assets as defined by IAS 41 Agriculture. As the valuation of these items at market value is only slightly different from the valuation at historic cost, no revaluation was made. Vineyard land and producing vineyards are recorded at market value on the closing date. This valuation results from official data published on recent transactions in the same region or on independent appraisals. The difference between the historic acquisition cost and the market value is recognized as shareholders’ equity in “Revaluation reserves”. If the market value falls below the acquisition cost, an impairment is booked in the income statement for the amount of the difference. Rental properties are not revalued at their market value. The assets financed by finance lease are capitalized on the basis of the present value of future rents or on the basis of their market value if that value is lower. Tangible assets are amortized using the straight line method over the estimated duration of their useful life:

• buildings, investment property: 20 to 50 years • plant and equipment: 3 to 25 years • retail fittings: 3 to 10 years • vineyard land and producing vineyards: 18 to 25 years The amortizable basis for the tangible assets consists of the acquisition cost, minus the estimated residual value, if any. Maintenance and repair costs are recorded as expenses when the transactions are completed.

1.11 Valuation tests of fixed assets Valuation tests are performed for tangible and intangible fixed assets once an indication of a potential loss of value exists, and at least once a year for intangible assets with an indefinite life, primarily, brands, trade names and goodwill. When the net book value of these assets becomes greater than the highest amount of their useful or market value, an impairment is booked for the amount of the difference; impairment, charged first against goodwill, if any, is booked as “Other operating income and expenses”. Useful value is based on the discounted future cash flows that will be generated by these assets. The sale price for the assets is determined by reference to recent similar transactions or valuations conducted by independent experts for a potential sale. Provisional cash flows are established at Group level by business group; a business group corresponds to one or more brands or trade names and a specific management team. Within the business group, cash-generating units may be determined at a smaller level, such as a group of stores. The valuation of brands and goodwill is primarily made on the basis of discounted provisional cash flows or using the comparable transaction method, a method based on the multiples of revenues and earnings used during recent transactions concerning similar brands, or on market multiples applicable to the activities in question. Other methods are

79 used as a complement: the royalty method, which gives a brand a value equivalent to the capitalization of the royalties that would have to be paid for use; the margin differential method, applicable only to cases where it is possible to measure the difference in revenue generated by a brand compared with an unbranded product; the method using the cost of reconstitution of an equivalent brand, particularly in terms of advertising costs. The data used in the discounted provisional cash flow method comes from annual budgets and multi-year plans established by the management of the relevant business groups. The plans resulting in five-year forecasts, with the exception of some brands undergoing strategic repositioning for which a longer period is used; in addition, a terminal value is taken into consideration. When several scenarios are used, a probability of occurrence is assigned to each one. The discount rate for the provisional cash flows integrates the rate of return expected by an investor in the business concerned and the risk premium for this activity.

1.12 Available for sale financial assets Financial assets are presented as current or non-current based on the type and estimate period of holding. Non-current available for sale financial assets primarily include strategic and non-strategic equity investments. Current available for sale financial assets include temporary investments in stocks, shares of SICAVs and Mutual Funds (FCP), excluding investments related to daily cash management, which are booked as “Cash and cash equivalents” (See Note 1.15). These assets are booked at the closing price if they are traded investments and on the basis of an estimate of their realization value if they are non-traded assets. The positive or negative changes in value are recorded in shareholders’ equity as “Revaluation reserves”. In the event of a loss of value deemed definitive, a provision for impairment of this amount is recognized as net financial income; for long-term investments and marketable stocks, the provisions for impairment is restated in the income statement only at the time of the sale.

1.13 Inventories and work-in-progress With the exception of the wines produced by the Group, inventories are recognized at their cost price, excluding financial fees. The costs price is the cost of production (finished products) or the purchase price plus related costs (raw materials, merchandise); it may not exceed the net realization value. The inventories of wines produced by the Group, particularly the wines from Champagne, are valued at market value for the harvest in question, as if the grapes harvested had been acquired from third parties. Until the harvest date, the grapes are valued prorata temporis on the basis of an estimated yield and market value. Changes in inventories are recognized, depending on the business, at the weighted average costs or using the First In – First Out method (FIFO). Considering the aging process for champagne and cognac, these inventories are often held for more than one year. These inventories remain classified as current assets in line with industry practice. Impairments on inventories are recognized primarily in the businesses other than Wines and Spirits. They are established most often because of obsolete products (approaching expiration, season or collection ended) or on the basis of the possibility of sale.

80 1.14 Trade receivables Trade receivables, which are most often less than two months, are booked at face value. Impairment is booked when the inventory value, based on the probability of collection, is less than the booked value.

1.15 Cash and cash equivalents The item “Cash and cash equivalents” includes liquid assets and money market investments immediately available for which the value is not subject to changes in stock market prices. Money market investments are valued at market value on the closing date; the changes in value are recorded as financial income.

1.16 Provisions A provision is booked once there is an obligation to a third party which will result for the Group in a probable disbursement, the amount of which can be reliability valued. When the execution date of this obligation is over one year, the amount of the provision is calculated and discounted, the impact of which is generally recognized as financial income.

1.17 Financial debt Financial debt is recorded at nominal value, net of premiums and related issue costs, which are progressively recorded as financial income until maturity, using the effective interest rate method. If the fluctuation of the value of the debt is hedged as an interest-rate risk, the amount of the debt hedged, and the associated hedging instruments, appear on the balance sheet at their market value on the closing date; the effects of revaluation are recorded in financial income for the period. If the future interest rate is hedged, the financial debt for which flows are hedged continues to be booked at the amortized costs and the change in value of the effective portion of the hedge instrument is recorded under shareholders’ equity as revaluation reserve. In the absence of a hedging relationship, or for the ineffective portion of hedges, fluctuations in value of the derivative instruments are recorded in financial income. When a derivative instrument is included in the financial debt, the option to book this debt at market value is used. Net financial debt is composed of short and long-term financial debt and the market value on the closing date for interest rate derivatives, minus the value of the marketable securities and other financial assets and cash and cash equivalents on this date.

1.18 Derivatives The Group trades derivative instruments as part of its strategy to hedge currency and rate risks. Hedging accounting requires, according to IAS 39, demonstrating and documenting the effectiveness of the hedging relation when it is placed and throughout its life. Effectiveness of the hedge in accounting terms is verified by the ratio of variations in the value of the derivative and the underlying hedged item; this ratio should lie in a range between 80 and 125%.

81 Derivatives are booked on the balance sheet at their market value on the closing date. Changes in the value of derivatives are recorded in accordance with the procedures specified in Note 1.6 for the exchange risk hedges and in Note 1.17 for interest rate hedges. Market value is established by reference to market data and using the valuation models commonly used; this value is confirmed in the case of complex instrument by listings from third party financial institutions. Derivatives with maturity greater than twelve months are presented as non-current assets and liabilities.

1.19 Christian Dior and LVMH treasury shares • Christian Dior treasury shares The Christian Dior shares held by the Group, for whatever reason, are deducted from consolidated shareholders’ equity in the amount of the acquisition costs. If they are sold, the cost price of the shares sold is established by category of allocation (see Note 14.2) using the First In – First Out method (FIFO), with the exception of the shares held for option plans, in which case the price is calculated by plan, using the Weighted Average Price method. Sale results are recorded directly as shareholders’ equity for the amount net of tax. • LVMH treasury shares LVMH’s purchases/sales of its own shares, which are the source of the changes in the interest held by the Christian Dior Group in LVMH, are recorded in the consolidated accounts of the Christian Dior Group as acquisitions and disposals of minority interests.

1.20 Retirement plans, medical expenses and other related benefit When pensions, retirement indemnities, medical expenses and other related benefit are covered by contributions paid by the Group to outside organizations, which assume the commitment corresponding to the payment of the allocations or repayment of medical costs; these contributions are booked as expenses for the year in which they are due, no liability is booked on the balance sheet. When the pensions, retirement indemnities, medical costs and other commitments are paid directly by the Group, the amount of the corresponding actuarial commitment results in a provision on the balance sheet; the change in this commitment is booked under profit from recurring operations for the year, including the financial discounting effect. When this commitment is covered, in whole or in part, by funds paid by the Group to financial organizations, the amount of these dedicated investments is deducted from the actuarial commitment on the balance sheet. The actuarial commitment is calculated on the basis of valuations specific to each country and to each Group company; these valuations include assumptions for salary increases, inflation, life expectancies, employee turnover and return on dedicated investments. The cumulative effects of the actuarial differences are amortized once they exceed at year-end 10% of the amount of the commitment or the market value of the investments to cover them. These differences are amortized beginning in the year following their determination, over the residual average working life of the employees concerned.

82 1.21 Current and deferred tax Timing differences between the consolidated values of assets and liabilities and the values resulting from the application of fiscal regulations results in the recognition of deferred tax. The tax rate used to calculate deferred taxes is the rate known on the closing date; the impacts of rate changes are recorded over the period in which this change is decided. Tax savings resulting from fiscal deficits carried forward are recorded as deferred tax assets and depreciated, as applicable; only the amounts that will probably be used are maintained as assets on the balance sheet. Deferred tax assets and liabilities are not discounted. Taxes owed on distributable reserves of the subsidiaries are provisioned in the amount of the distributions planned.

1.22 Recognition of revenue • Definition of revenue Revenue primarily includes retail sales in the Group’s stores and wholesale sales to distributors and agents. Retail sales comes from Fashion and Leather Goods, some brands of Perfumes and Cosmetics and Watches and Jewelry, and from Selective Retailing. These sales are recorded at the time of purchase by customers. Wholesale sales comes from the Wines and Spirits business groups and certain brands of the Perfumes and Cosmetics and Watches and Jewelry business groups. This revenue is recorded when ownership is transferred, that is, most often upon shipping. Shipping and transport costs reinvoiced to customers are included in revenue only when they are included as a flat rate in the price of the products. Revenue is presented net of any kind of rebate and discount. In particular, the amounts for referencing the products or corresponding to shared advertising agreements with the distributor are deducted from revenue and the corresponding trade receivables. • Provision for returned products Group companies in Perfumes and Cosmetics and, to a lesser extent, in Fashion and Leather Goods and Watches and Jewelry, may take back unsold or out-of-date products from their customers and distributors. When this practice is established, the revenue recorded is reduced by the amount corresponding to an estimate of these returns, in consideration for a reduction in trade receivables and registration in inventory. The return rate used to establish these estimates is calculated on a statistical basis. • Activities in partnership with Diageo A significant portion of the revenue of the Wines and Spirits business group is recorded under distribution agreements with Diageo, which most often consist of joint ventures. These joint ventures ensure deliveries and revenue to the customers of the LVMH and Diageo brands; the division of the income and balance sheet of these entities between the two groups is governed by the distribution agreements. Because of these agreements, LVMH consolidates only the revenue and share of expenses in the joint ventures that apply to its own brands.

83 1.23 Stock option plans Stock option plans result in the recording of a charge composed of the expected gain for the beneficiaries of these plans; the expected gain is calculated on the date of the Board of Directors’ meeting that established the plans, using the Black and Scholes method. This charge is distributed using the straight line method over the period of acquisition of the rights (2 to 4 years) as per contra to an increase in reserves. For free share allocation plans, the expected gain is calculated on the basis of the closing price for the share the day before the Board of Directors’ meeting that decides the plan, and on the dividends expected during the rights vesting period. Compensation plans tied to the price of the LVMH share are unwound in cash and not in shares; the corresponding annual expense is booked as a contra entry to liabilities on the balance sheet. In 2004 and 2005, all plans for which the rights vesting period was open on January 1, 2004, the date of the transition to IFRS, are included.

1.24 Profit from recurring operations and other operating income and expenses The primary business of the Group is the management and development of its brands and trade names. Profit from recurring operations comes from these activities, including recurring and non-recurring operations and main or secondary operations. Other operating income and expenses include items composing income which, because of the type, amount or frequency, cannot be considered part of the current activities and income of the Group. This includes, in particular, the effects of changes in consolidation and impairment on brands and goodwill. This also includes, if they are significant, gains or losses on disposals of fixed assets, restructuring costs, costs for litigation, or any other non-current income or expense that affects the comparability of profit from recurring operations from one period to another.

1.25 Earnings per share Earnings per share are calculated based on the weighted average number of shares outstanding during the year, minus the average number of shares of treasury shares. Earnings per share after dilution are established on the basis of the weighted average number of shares before dilution, plus the weighted average number of shares that would result from the exercise, during the period, of existing stock options for new shares or any other diluting instrument. The funds collected for the exercise of these options are assumed to be assigned, in this calculation, to buying back Christian Dior shares at a price equal to their average market price over the period.

NOTE 2 - CHANGES IN THE SCOPE OF CONSOLIDATION

2.1 Wines and spirits: acquisition of Glenmorangie Further to the amicable takeover bid completed at the end of December 2004, the Group acquired a 99% interest in January 2005 in the capital of Glenmorangie plc, a British company listed in London (United Kingdom), and the remaining capital in February and March 2005 in connection with a withdrawal procedure.

84 The cost of this acquisition came to 459 million euros (316 million pounds), including 8 million euros in acquisition costs. Under the terms of the bid, 51 million pounds of this price was paid in the form of Loan Notes, bearing interest at 0.80% under the LIBOR GBP rate. These Loan Notes may be redeemed at par as of December 15, 2005, as required by holders, at the time of interest payments on June 15 and December 15 each year and by the latest on December 15, 2012. At December 31, 2005, the balance of Loan Notes was 41 million pounds. The interest in Glenmorangie has been fully consolidated since January 1, 2005. The following table summarizes the conditions for allocating the price paid, based on Glenmorangie’s balance sheet at December 31, 2004: Value retained Book (in millions of euros) by the Group value Intangible fixed assets 290 1 Tangible assets 54 58 Inventories 130 123 Other current assets and liabilities, net (22) (10) Cash 21 21 Financial debt (66) (66) Staff benefit commitments (12) – Deferred taxes and provisions (95) (7) Goodwill 159 – Total acquisition cost 459

Intangible fixed assets include 289 million euros relative to the Glenmorangie, Ardbeg and Glen Moray brands, with 234 million euros for the Glenmorangie brand. Goodwill reflects the synergies expected from the integration of Glenmorangie into the Moët Hennessy distribution network.

2.2 Wines and Spirits: acquisition of minority interests in Millennium In April 2005, the Group acquired the 30% stake held by the minority shareholder in Millennium for 120 million US dollars, taking its holding up to 100%. This investment represents an additional Group share of 67 million euros in the distribution license held by Millennium.

2.3 Other changes in the Group consolidation in 2005 Christian Lacroix (Fashion and Leather Goods) and MountAdam (Wines and Spirits) were sold in January and July 2005 respectively. The 49.9% interest in Bonhams Brooks PS&N Ltd, an associated entity, was sold in July 2005. Les Ateliers Bijoux has been fully consolidated into the Christian Dior Couture Group as of June 30, 2005. Up until April 2005, this activity was covered by a licensing agreement.

85 2.4 Impacts of changes in the scope of consolidation

2.4.1 On the income statement The overall impact of changes in consolidation in 2004 and 2005 on the Group’s income statements is as follows:

2004 2004 (in millions of euros) 2005 pro forma published

Revenue 14,556 13,089 13,060 Profit from recurring operations 2,791 2,442 2,413 Financial income (191) (280) (264) Net income 1,654 1,307 1,443 Of which, minority interests 1,036 793 894 Of which, Group share 618 514 549

The condensed pro forma income statement presented above for 2004 has been drawn up based on a comparable scope to that for 2005. More specifically: • The acquisitions and disposals carried out in 2005 are retained in the income statement for 2004 for an identical number of months to that for 2005; in addition, although not representing a change in consolidation, the stopping of operations at the large Parisian Samaritaine store in July 2005 (see Note 24 - Other operating income and expenses) has also been taken into account, with a comparable number of months business to that for 2005 and identical reorganization costs retained in 2004; • The acquisitions and disposals for 2004 are considered to have been made at January 1, 2004.

2.4.2 On cash and cash equivalents (in millions of euros) 2005 2004

Amount paid for the acquisition of consolidated investments (623) (455) Cash and cash equivalents / (bank overdrafts) for companies acquired (6) 5 Amount received for the disposal of consolidated investments 34 49 Cash and cash equivalents / (bank overdrafts) for companies sold (9) –

Impacts of changes in consolidation on cash and cash equivalents (604) (401)

The overall impact of changes in consolidation on the Group’s cash flows represents a reduction of 604 million euros. This amount stems primarily from the acquisition of a controlling interest in Glenmorangie, for 438 million euros, and the acquisition of minority interests in Millennium, for 92 million euros. In 2004, the impacts of changes in consolidation on the Group’s cash flows primarily reflect the acquisition and staggered payments for minority interests in Fendi, for 197 million euros, the acquisition of a 30% interest in Millennium, for 82 million euros, and the acquisition of a 9% stake in Donna Karan and 10% in , for 56 million euros.

86 NOTE 3 - BRANDS, TRADE NAMES AND OTHER INTANGIBLE ASSETS 2005 2004 Amortization (in millions of euros) Gross and impairment Net Net

Brands 8,843 (344) 8,499 8,146 Trade names 3,740 (1,536) 2,204 1,983 Distribution licenses 251 (25) 226 122 Leasehold acquisition rights 268 (148) 120 136 Software 231 (172) 59 44 Other 169 (91) 78 64

Total 13,502 (2,316) 11,186 10,495

Of which, fixed assets held under financing leases 14 (13) 1 1

3.1 Changes over the year Changes in the net balance for brands, trade names and other intangible assets can be broken down as follows: Other Gross value intangible (in millions of euros) Brands Trade names assets Total

Balance at December 31, 2004 8,486 3,281 750 12,517 Acquisitions 3 – 70 73 Disposals – – (15) (15) Impact of changes in consolidation over the 279 – – 279 year Impact of previous changes in consolidation – – 62 62 Impact of currency fluctuations 75 459 44 578 Other – – 8 8

Balance at December 31, 2005 8,843 3,740 919 13,502

Other Amortization and impairment Trade intangible (in millions of euros) Brands names assets Total

Balance at December 31, 2004 (340) (1,299) (383) (2,022) Amortization (6) (1) (71) (78) Impairment – (24) – (24) Disposals – – 10 10 Impact of changes in consolidation over the 11 – 3 14 year Impact of previous changes in the scope of consolidation – – 13 13 Impact of currency fluctuations (9) (199) (10) (218) Other – (13) 2 (11)

Balance at December 31, 2005 (344) (1,536) (436) (2,316)

Net value at December 31, 2005 8,499 2,204 483 11,186

87 The impact of changes in consolidation over the year and previous changes concern the acquisition of Glenmorangie for 290 million euros and the definitive recording of the acquisition of Millennium in the accounts for 62 million euros (gross) respectively. The impact of currency fluctuations primarily stems from intangible values booked in US dollars, notably the Donna Karan New York brand and the DFS trade name, factoring in changes in the US dollar-euro exchange rate over the year.

3.2 Brands and trade names Brands and trade names can be broken down by each business group as follows: 2005 2004 Gross Amortization Net Net (in millions of euros) value and impairment value value Christian Dior Couture 25 – 25 25 Wines and Spirits 2,621 (9) 2,612 2,310 Fashion and Leather Goods 3,956 (302) 3,654 3,603 Perfumes and Cosmetics 1,295 (21) 1,274 1,267 Watches and Jewelry 899 (12) 887 894 Selective Retailing 3,740 (1,536) 2,204 1,983 Other activities 47 – 47 47 Brands and trade names 12,583 (1,880) 10,703 10,129

The brands and trade names recorded are those acquired by the Group. They primarily include: • Wines and Spirits: Hennessy, Moët, Veuve Clicquot, Krug, Château Yquem, Newton Vineyards and Glenmorangie; • Fashion and Leather Goods: Louis Vuitton, Fendi, Céline, Loewe, Donna Karan New York, Givenchy, Kenzo, , and Pucci; • Perfumes and Cosmetics: Parfums Christian Dior, Guerlain, Parfums Givenchy, Kenzo, , BeneFit Cosmetics, Fresh and ; • Watches and Jewelry: Tag Heuer, Zenith, Fred, Chaumet and Omas pens; • Selective Retailing: DFS, Sephora, Le Bon Marché; • Other activities: La Tribune and newspapers. These brands and trade names are recorded on the balance sheet at the value determined at the time of their acquisition by the Group, which may be significantly lower than their utility or sale value on the date the accounts are drawn up; this is notably the case, without this list being considered to be exhaustive, for the Louis Vuitton and Christian Dior Couture brands and for the Sephora trade name.

3.3 Distribution licenses Distribution licenses notably include marketing rights for Belvedere and Chopin vodkas. Also refer to Note 5 for the valuation of brands, trade names and other intangible assets with an indefinite life.

88 NOTE 4 - GOODWILL 2005 2004 Impairment (in millions of euros) Gross expense Net Net

Goodwill on consolidated securities 4,363 (1,147) 3,216 2,886 Goodwill on LVMH treasury share (1) 273 – 273 280 Goodwill on commitments to purchase 1,588 (19) 1,569 1,468 minority interests

Total 6,224 (1,166) 5,058 4,634

(1) See Notes 1.19 and 14.2 Also see Note 19 for goodwill on commitments to purchase minority interests. Changes in the net balance of goodwill over 2005 can be broken down as follows: (in millions of euros) Gross Impairment Net

Balance at December 31, 2004 5,689 (1,055) 4,634 Change in impairment – (24) (24) Impact of changes in consolidation over the year 163 2 165 Impact of previous changes in consolidation (7) – (7) Change in commitments to purchase minority interests 127 – 127 Change in goodwill on LVMH treasury share (7) – (7) Impact of currency fluctuations 259 (89) 170

Balance at December 31, 2005 6,224 (1,166) 5,058

The impact of changes in consolidation over the year primarily concerns the acquisition of Glenmorangie, for 159 million euros. The impact of currency fluctuations primarily reflects goodwill booked in US dollars, notably relating to Millennium, Miami Cruiseline and Donna Karan New York, factoring in changes in the US dollar-euro exchange rate over the year. Also see Note 5 for the valuation of goodwill.

89 NOTE 5 - VALUATION OF INTANGIBLE ASSETS OF INDEFINITE LIFE Valuation tests are carried out each year on brands, trade names and other intangible assets of indefinite life as well as goodwill. As described in Note 1.11, in the majority of cases, these assets are valued based on the provisional discounted cash flows expected from these assets, determined in connection with multiyear plans. The main parameters retained in 2005 for determining these provisional flows, similar to those applied in 2004, are as follows: Growth rate Pre-tax discount after the duration of Business group Duration of plans rate plans

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%

(*) The duration of the plans – 5 years – may be increased to 8 years for brands that are currently being strategically repositioned. The growth rates retained for the period after the duration of the plans are usually those retained by the market for the activities concerned. A 1-point change in the pre-tax discount rate or the growth rate to infinity, applied to the global provisional data retained for each business group, would not result in any impairment of the intangible assets concerned: brands, trade names or goodwill.

NOTE 6 - TANGIBLE ASSETS 6.1 Analysis by type 2005 2004 Amortization and (in millions of euros) Gross impairment Net Net

Land 730 – 730 707 Vineyard land and producing vineyards 1,280 (63) 1,217 1,162 Buildings 1,790 (644) 1,146 1,081 Rental properties 354 (42) 312 289 Plant and equipment 3,420 (2,057) 1,363 1,076 Other tangible assets and work-in-progress 938 (448) 490 483

Total 8,512 (3,254) 5,258 4,798

Of which: fixed assets held under financing 365 (151) 214 213 leases historical cost of vineyard land and 308 – 308 287 producing vineyards

90 6.2 Analysis of changes Changes in tangible assets over 2005 can be broken down as follows: Vineyard land and Other tangible Gross value producing Land and Rental Plant and assets and (in millions of euros) vineyards buildings properties equipment work-in-progress Total

Balance at 1,221 2,344 341 2,849 883 7,638 December 31, 2004 Acquisitions 7 50 3 360 270 690 Change in market 43––– –43 value of vineyard land and producing vineyards Disposals, (1) (15) (4) (161) (55) (236) decommissioning Impact of changes in (1) 32 – 47 (1) 77 consolidation Impact of currency 10 83 12 132 63 300 fluctuations Other 1 26 2 193 (222) –

Balance at 1,280 2,520 354 3,420 938 8,512 December 31, 2005

Vineyard Amortization and land and Other tangible impairment producing Land and Rental Plant and assets and (in millions of euros) vineyards buildings properties equipment work-in-progress Total

Balance at (59) (556) (52) (1,773) (400) (2,840) December 31, 2004 Amortization (4) (55) (5) (304) (73) (441) Impairment – (2) – (22) – (24) Disposals, 1–114855205 decommissioning Impact of changes in – (14) – (24) 2 (36) consolidation Impact of currency (1) (18) (2) (82) (32) (135) fluctuations Other – 1 16 – – 17

Balance at (63) (644) (42) (2,057) (448) (3,254) December 31, 2005

Net value at 1,217 1,876 312 1,363 490 5,258 December 31, 2005

Acquisitions of tangible assets reflect the investments by Louis Vuitton, DFS and Sephora in their retail networks.

91 NOTE 7 - INVESTMENTS IN ASSOCIATES 2005 2004 (in millions of euros) Gross Impairment Net Net

Share in net assets of investments in 138 (21) 117 105 associates at January 1 Share in earnings for the year 8 – 8 (15) Dividends paid (3) – (3) (4) Impact of changes in consolidation (6) 16 10 32 Impact of currency fluctuations (1) – (1) (1)

Share in net assets of investments in 136 (5) 131 117 associates at December 31

In 2005, shares in investments in associates primarily concerned: • A 40% interest in Mongoual SA, a real estate company owning a building in Paris (France), which is also the registered office of LVMH Moët Hennessy Louis Vuitton SA; • A 25.5% interest in Micromania, the French market leader in the retail of videogames and consoles. In 2005, rent billed to the Group by Mongoual totaled 14 million euros (14 million euros in 2004). In 2004, shares in investments in associates also included a 49.9% interest in the auction firm Bonhams Brooks PS&N Ltd (UK), which was sold off in July 2005.

NOTE 8 - NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS 2005 2004 (in millions of euros) Gross Impairment Net Net

Interest in Bouygues SA (France) – – – 401 Other interests 544 (93) 451 317

Total 544 (93) 451 718

The remaining interest in Bouygues SA, intended to be sold off in 2006, has been reclassified under financial investments at December 31, 2005 (see Note 12). In 2005, the Group received an exceptional 65 million euro dividend from Bouygues.

92 Changes in equity investments in 2005 can be broken down as follows: (in millions of euros)

December 31, 2004 718 Acquisitions 107 Disposals (sale value) (469) Impact of market value changes 229 Reclassifications under shares in investments in associates or financial investments (144) Impact of currency fluctuations 10

December 31, 2005 451

The main disposals concerned the interest in Bouygues, with 99 millions euros generated in capital gains. Other interests held by the Group are as follows: Net value of Dividends Shareholders’ Net (in millions of euros) Stake securities received equity income

L Capital FCPR (France) (2)(3) 46.1% 219 – 169 (4) Tod’s Spa (Italy) (1)(3) 3.5% 60 – 421 31 Other interests NA 172 49 –

451 49

(1) Valuation at closing share price at December 31, 2005. (2) Estimated realizable value. (3) The accounting data provided are prior to December 31, 2005, since the figures at year-end 2005 were unavailable at the time of drawing up the financial statements. L Capital FCPR is an investment fund whose bylaws and operating principles do not allow the Group to exercise exclusive or joint control or any significant influence over the interests held.

NOTE 9 - INVENTORIES AND WORK-IN-PROGRESS (in millions of euros) 2005 2004

Ageing wines and brandies 2,161 1,883 Other raw materials and work-in-progress 396 376

2,557 2,259 Merchandise 625 499 Finished products 1,689 1,535

2,314 2,034 Gross value 4,871 4,293 Provision for impairment (601) (570)

Net value 4,270 3,723

93 Changes in net inventories over the year can be broken down as follows: Provisions for (in millions of euros) Gross impairment Net

Balance at December 31, 2004 4,293 (570) 3,723 Change in gross inventories 281 – 281 Impact of market valuation of grape harvests 19 – 19 Change in provision for impairment – (41) (41) Impact of changes in consolidation 109 16 125 Impact of currency fluctuations 169 (6) 163

Balance at December 31, 2005 4,871 (601) 4,270

The changes in consolidation concern the acquisition of Glenmorangie, for 130 million euros. The cost of sales for Wines and Spirits business lines include the impacts of the market valuation of grape harvests, which can be analyzed as follows: (in millions of euros) 2005 2004

Market valuation of harvests for the year 34 46 Impact of inventory withdrawals (15) (21)

Net impact on the cost of sales over the period 19 25

The market value of harvests for 2005 came to 91 million euros (87 million euros in 2004).

NOTE 10 - ACCOUNTS RECEIVABLE (in millions of euros) 2005 2004

Receivables (nominal value) 1,650 1,621 Provision for impairment (72) (83) Provision for product returns (141) (119)

Net amount 1,437 1,419

Of which, receivables covered by the French Dailly law – 268

At December 31, 2004 and 2005, the fair value of accounts receivable was the same as their book value.

94 NOTE 11 - OTHER CURRENT ASSETS (in millions of euros) 2005 2004

Financial investments 422 201 Market value of derivatives 151 396 Tax receivables (excluding corporate income tax) 194 214 Trade receivables: advances and deposits 86 57 Pre-booked expenses 219 205 Other receivables net 207 263

Total 1,279 1,336

Pre-booked expenses include 72 million euros at December 31, 2005 (74 million euros at December 31, 2004) for advertising materials and samples, primarily relating to Perfumes and Cosmetics. At December 31, 2004 and 2005, the market value of other current financial assets was the same as their book value. Also refer to Notes 12 “Financial investments” and 21 “Financial instruments”.

NOTE 12 - FINANCIAL INVESTMENTS (in millions of euros) 2005 2004

Unlisted marketable securities, shares in non-money market (SICAV 281 191 and FCP mutual funds) Listed marketable securities 141 10

Total 422 201

Of which, historical cost of financial investments 318 190

At December 31, 2005, marketable securities included 3.06 million Bouygues shares for a total of 126 million euros (see Note 8 – Equity investments); 2.71 million securities were sold in January 2006.

NOTE 13 - CASH AND CASH EQUIVALENTS (in millions of euros) 2005 2004

Term deposits under three months 94 89 Shares in money market (SICAV and FCP mutual funds) 34 19 Bank accounts (1) 1,382 958

Cash and cash equivalents in the balance sheet 1,510 1,066

(1) Of which 60 million euros in blocked outstandings at December 31, 2005 (none at December 31, 2004).

95 The reconciliation between the amount of cash and cash equivalents given on the balance sheet and the amount of the net cash position included in the cash-flow statement is as follows: (in millions of euros) 2005 2004

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

Net cash position from the cash-flow statement 988 715

NOTE 14 - SHAREHOLDERS’ EQUITY

14.1 Capital At December 31, 2005, the capital comprised 181,727,048 issued and fully paid-up shares (181,727,048 in 2004), with a par value of 2 euros. 120,948,264 shares are entitled to double voting rights, granted to shares held on a registered basis for more than three years. At December 31, 2005, the authorized capital was 410,255,718 euros (407,347,907 euros at December 31, 2004).

14.2 Treasury shares The allocation of the Christian Dior and LVMH share portfolio can be analyzed as follows: • Christian Dior treasury shares 2005 2004 (in millions of euros) Number Value Value

Stock option plans 4,053,228 156 136 Other 19,532 1 19

Total 4,072,760 157 155

In 2005, changes in the Christian Dior share portfolio can be broken down as follows: (in millions of euros) Number Value

At December 31, 2004 4,087,132 155 Purchases 553,015 22 Options exercised (74,387) (2) Disposals (sale value) (493,000) (18) Gross capital gains (losses) on disposals – 0

At December 31, 2005 4,072,760 157

At December 31, 2005, the stock market value of other Christian Dior shares held came to 1.5 million euros.

96 • LVMH treasury shares 2005 2004 (in millions of euros) Number Value Value

Stock option plans (1) 14,927,777 729 824 Free share allocation schemes 97,817 6 – Hedging for other plans (2) 4,205,353 232 – Liquidity contract 63,000 5 182

Total 19,293,947 972 1,006

Christian Dior Group share 429 446 (1) Including shares held in connection with options that have become null and expired and have temporarily not been reallocated to other plans. (2) Other plans include the warrant schemes and the compensation plans indexed against changes in the LVMH share price. When preparing and presenting information for the changeover in part 2 of the 2004 Annual Report, the cancellation of LVMH treasury shares was reflected, according to a provisional analysis, in a reduction in shareholders equity in the reconciliation tables under IFRS. The treatment retained, based on additional elements from the analysis of the various texts applicable, led to an increase in shareholders’ equity at January 1, 2004 and December 31, 2004. The increase in shareholders’ equity reflects the recording of goodwill, linked to the new percentage interest retained with IFRS, under assets in the accounts. Indeed, according to the principles applied for preparing the financial statements under French GAAP, LVMH treasury shares are booked as assets and any capital gains or losses recorded on disposals are recognized on the income statement. Under IFRS, LVMH treasury shares are deducted against shareholders’ equity and affect the percentage interest, in the same way as acquisitions and disposals of minority interests. In accordance with the approach retained for changes in minority interests, goodwill is recorded in the event of an increase in the percentage interest and a capital gain or loss on disposal is generated in the event of a reduction in the percentage.

97 14.3 Dividends paid out by Christian Dior S.A. Under French regulations, dividends are deducted against Christian Dior S.A.’s earnings for the year and its reserves eligible for distribution, representing 2,323 million euros at December 31, 2005, after deducting the proposed amount of dividends for 2005, submitted at the general meeting on May 11, 2006. This amount is payable without any tax deductions. (in millions of euros) 2005 2004 Balance for previous year (2004: 0.65 euro; 2003: 0.59 euro) 118 107 Impact of treasury shares (3) (2) 115 105 Interim dividend for the current year (0.32 euro for 2004 and 2005) 58 58 Impact of treasury shares (1) (1) 57 57 Total paid out over the year 172 162

The dividend balance for 2005, proposed at the annual shareholders’ meeting on May 11, 2006, comes out at 0.84 euro per share, representing a total payment of 153 million euros before the impact of treasury shares.

14.4 Revaluation reserves Revaluation reserves factor in unrealized gains and losses relative to equity investments, financial investments, future cash-flow hedging instruments in various currencies, as well as vineyard land and producing vineyards, primarily in the Champagne region. These reserves saw the following changes over the periods presented: Equity Vineyard investments and Hedging of land and financial future cash flow producing Total Group (in millions of euros) investments in currencies vineyards share January 1, 2004 (7) 71 155 219 Change in value 29 72 27 128 Transfer over to earnings 3 (88) – (85) for the period Tax impact (15) 5 (7) (17) Gains and losses recorded 17 (11) 20 26 on shareholders’ equity

December 31, 2004 10 60 175 245 Change in value 167 (63) 17 121 Transfer over to earnings (57) (31) – (88) for the period Tax impact (11) 31 (6) 14 Gains and losses recorded 99 (63) 11 47 on shareholders’ equity December 31, 2005 109 (3) 186 292

98 14.5 Currency translation Changes in currency translation figures recorded in shareholders’ equity at December 31, 2005, net of net asset hedging effects in currencies, can be broken down by currency as follows: (in millions of euros) 2005 Variation 2004

US dollar 85 174 (89) Hong Kong dollar 9 16 (7) Pound sterling 7 61 Other currencies 22 21 1 Net asset hedging in currencies 3 (2) 5

Total 126 215 (89)

NOTE 15 - STOCK OPTION PLANS AND RELATED • Options granted by Christian Dior S.A. At the general meeting on May 30, 1996, shareholders voted to authorize the Board of Directors, on one or more occasions, to grant stock options for up to 3% of the company’s capital to members of staff or executives from Group companies. This authorization was renewed at the general meeting on May 14, 2001 for a five-year period. At December 31, 2005, no warrant schemes had been put in place by Christian Dior S.A. Each plan runs for a ten-year period and options may be exercised after three or five years. Under certain conditions, notably in the event of retirement, the three or five-year periods for acquiring rights do not apply. For all plans, the parity is one share for one option allocated.

• Options granted by LVMH S.A. At the general meeting on May 25, 1992, shareholders voted to authorize the Board of Directors, on one or more occasions, to grant stock options or warrants for up to 1.5% of the company’s capital to members of staff or executives from Group companies. The Annual General Meeting on June 8, 1995 raised this authorization to 3% of the capital. This authorization was renewed by the general meeting on May 17, 2000, then by the general meeting on May 15, 2003 for a period of 38 months running through to July 2006. Each plan runs for a ten-year period and options may be exercised after three or four years, depending on whether the schemes were issued before or after 2004, with the exception of the stock option scheme dated May 14, 2001, which concerns 1,105,877 options and an eight-year period, with options eligible for exercising after four years. Under certain conditions, notably in the event of retirement, the three or four-year periods for acquiring rights do not apply. For all plans, the parity was one share for one option allocated.

99 • LVMH’s share subscription plans Number Number Number Right of options of outstanding of options Exercise price acquisition exercised options at Plan start date allocated (in euros) period in 2005 Dec 31, 2005

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

– 4,637,175

2005 2004 Average weighted Average weighted exercise price exercise price Number (in euros) Number (in euros)

Outstanding options at 2,747,475 55.73 – – January 1 Allocations over the period 1,924,400 52.93 2,747,475 55.73 Expired options (34,700) 55.59 – – Options exercised over the –––– period

Outstanding options at 4,637,175 54.57 2,747,475 55.73 December 31

100 • Share purchase plans Number of Number of Number of Exercise price Right options options options (in euros) acquisition exercised in outstanding at Plan start date allocated (1) (2)(3) period 2005 (3) Dec 31, 2005 (3)

LVMH March 22, 1995 256,903 20.89 3 years 392,588 – May 30, 1996 233,199 34.15 ” 91,985 537,500 May 29, 1997 233,040 37.50 ” 160,415 626,390 January 29, 1998 269,130 25.92 ” 266,500 576,360 March 16, 1998 15,800 31.25 ” – 70,400 January 20, 1999 320,059 32.10 ” 246,830 1,305,045 September 16, 1999 44,000 54.65 ” – 210,000 January 19, 2000 376,110 80.10 ” – 1,796,650 January 23, 2001 2,649,075 65.12 ” 7,400 2,477,675 March 6, 2001 40,000 63.53 ” – 40,000 May 14, 2001 1,105,877 66.00 4 years 25 513,919 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 ” 95,397 3,019,403 January 22, 2002 27,400 45.70 ” 1,500 22,950 May 15, 2002 8,560 54.83 ” – 8,560 January 22, 2003 3,155,225 37.00 ” 1,700 3,062,425 January 22, 2003 58,500 38.73 ” – 58,000

Total for LVMH 1,264,340 14,927,777

Christian Dior October 14, 1996 94,600 25.95 3 years 4,200 251,000 May 29, 1997 97,900 32.01 5 years 17,000 285,400 November 3, 1998 98,400 18.29 5 years 9,500 283,200 January 26, 1999 89,500 25.36 5 years 33,687 294,313 February 15, 2000 100,200 56.70 5 years – 400,800 February 21, 2001 437,500 45.95 3 years 10,000 427,500 February 18, 2002 504,000 33.53 3 years – 504,000 February 18, 2003 527,000 29.04 3 years – 527,000 February 17, 2004 527,000 49.79 3 years – 527,000 May 12, 2005 493,000 52.21 3 years – 493,000 Subtotal 74,387 3,993,213 2006 (to come) 60,015 – – – 60,015

Total for Christian Dior 74,387 4,053,228

(1) Number of options at the start of the plan, not restated to factor in adjustments linked to free share allocations (one for ten) in June 1999, and the five-for-one stock split in July 2000 at LVMH, and not restated to factor in adjustments linked to the four-for-one stock-split in July 2000 at Dior. (2) Figures prior to 1999 result from the conversion to euros of sums originally recorded in French francs. (3) Adjusted to reflect the transactions referred to in (1) above.

101 2005 2004 Average Average weighted weighted exercise price exercise price Number (in euros) Number (in euros)

LVMH Outstanding options at January 1 17,148,615 48.66 19,433,292 45.67 Allocations over the period –––– Expired options (956,498) 61.61 (106,225) 46.01 Options exercised over the period (1,264,340) 29.21 (2,178,252) 22.10

Outstanding options at December 31 14,927,777 49.48 17,148,815 48.66

Christian Dior Outstanding options at January 1 3,574,600 36.72 3,160,000 34.28 Allocations over the period 493,000 52.21 527,000 49.79 Expired options –––– Options exercised over the period (74,387) 28.78 (112,400) 29.40

Outstanding options at December 31 3,993,213 38.78 3,574,600 36.72

• Other plans at LVMH A free share allocation plan, concerning a total of 97,817 shares, was put in place by the Board of Directors on May 12, 2005; the shares in question will be granted to beneficiaries after a two-year period and must be held for a further two years. There are also a number of cash-based compensation schemes taking changes in the LVMH share price into account. These plans run for a four-year period and were put in place on January 21, 2004 and May 12, 2005, concerning 206,750 and 187,300 shares respectively. • Calculating the expense for the year The expense for the year is determined for each option plan based on the Black and Scholes method, as described in Note 1.23. The parameters and assumptions retained for this valuation are as follows:

At LVMH: 2005 plans 2004 plans

LVMH share price on the allocation date (in euros) 57.05 62.75 Exercise price (in euros) 52.82 55.70 LVMH share price volatility (%) 21.7 25.0 Dividend distribution rate (%) 1.65 1.35 Risk-free investment rate (%) 3.06 3.78 Duration of the period for acquiring rights 4 years 4 years

102 The volatility of LVMH’s share price is determined based on the implied volatility seen. Over 2005, LVMH’s average share price was 63.12 euros. • Share purchase, subscription and free share allocation plans: – Based on the abovementioned assumptions and parameters, the unit value comes out at 14.29 euros for options granted in 2005 and 20.05 euros for options granted in 2004; – The unit value for free shares allocated in 2005 was 54.98 euros; – The total expense recorded for plans in 2005 came to 25 million euros (50 million euros in 2004). • Compensation plans linked to the LVMH share price: The expense recorded corresponds to the amount of the expected gain, estimated at each close of accounts in line with the same methods as for stock option and warrant plans. The amount recorded in this respect for 2005 was 5 million euros (1 million euros in 2004).

At Christian Dior: 2005 plans 2004 plans

Christian Dior share price on the allocation date (in euros) 56.85 52.70 Exercise price (in euros) 52.21 49.79 Christian Dior share price volatility (%) 21.7 25.0 Dividend distribution rate (%) 1.65 1.35 Risk-free investment rate (%) 3.06 3.78 Duration of the period for acquiring rights 4 years 4 years

The volatility of Christian Dior’s share price is determined based on the implied volatility seen. Over 2005, Christian Dior’s average share price was 61.92 euros. • Stock option plans Based on the abovementioned assumptions and parameters, the unit value comes out at 15.83 euros for options granted in 2005 and 18.89 euros for options granted in 2004. The total charge recorded for plans in 2005 came to 7 million euros (5 million euros in 2004).

103 NOTE 16 - MINORITY INTERESTS (in millions of euros) 2005 2004 At January 1 6,321 6,031 Dividends paid to minority interests (371) (340) Share of minority interests in net income 1,036 893 Impact of changes in scope of consolidation: Impact of LVMH treasury shares 27 (75) Consolidation of Millennium – 82 Acquisition of minority interests in Millennium (76) – Acquisition of minority interests in Fendi – (43) Acquisition of minority interests in Donna Karan – (23) Other changes in scope of consolidation 2 (35) Total impacts (47) (94) Share of minority interests in the following changes: Commitments to purchase minority interests 1 (69) Revaluation reserves 64 48 Currency translation 381 (176) Expenses linked to stock option plans 15 28 At December 31 7,400 6,321

NOTE 17 - BORROWINGS AND FINANCIAL DEBT

17.1 Net financial debt

(in millions of euros) 2005 2004 Long-term financial debt 4,443 5,092 Short-term financial debt 3,376 2,984 Gross financial debt 7,819 8,076 Interest rate risk derivatives (151) (121) Financial debt net of interest rate risk derivatives 7,668 7,955 Current available for sale investments (422) (201) Other financial assets (30) (42) Cash and cash equivalents (1,510) (1,066) Net financial debt 5,706 6,646

The impacts of interest rate risk derivatives are detailed in Note 21.

104 17.2 Analysis of gross financial debt by type (in millions of euros) 2005 2004

Repackaged notes 32 49 Bonds and EMTN 3,133 3,496 Capital leases and long-term leases 157 151 Loans from credit institutions 1,121 1,396

Long-term financial debt 4,443 5,092

Bonds and EMTN 1,195 968 Capital leases and long-term leases 22 21 Loans from credit institutions 625 369 Treasury notes 323 513 Other loans and credit lines 589 626 Repackaged notes 0 20 Bank overdrafts 522 351 Accrued interest 100 116

Short-term financial debt 3,376 2,984

Total gross financial debt 7,819 8,076

Market value of gross financial debt 7,885 8,162

17.3 Repackaged notes (in millions of euros) Nominal interest 2005 2004

FRF 5,000,000,000; 1990 6-month Euribor + 0.45% – 20 FRF 1,505,000,000; 1992 9.70% 32 49

Total 32 69

The aforementioned undated bonds, issued in the form of undated subordinated notes (TSDI), were converted into repackaged notes in 1996 by way of an amendment to the original issue agreement for the 1990 TSDI. As ordinary unsecured debt, since then repackaged notes may be legally redeemed only in the event of court-ordered liquidation or the early dissolution of LVMH, except for in the event of mergers or splits. Although undated, repackaged notes are recorded on the consolidated balance sheet for an amount that will be progressively reduced to zero value at the end of 15 years, in line with the agreements concluded with third parties. In accordance with these agreements, and in return for a definitive payment by LVMH at the time of issue, the third-party companies in question have undertaken to hold or to repurchase the notes from note-holders after a 15-year period, and have agreed to relinquish any rights to interest on these notes after that time.

105 Under these arrangements: • The repackaged notes were recorded on the balance sheet at their par value at the time of issue, after deducting the aforementioned payments; these notes are amortized every year by the amount of income generated by the investments made by the third-party companies with these payments; • The consolidated income from each year covers interest paid on the par value, after deducting the depreciation as outlined above. In light of the above, the book balance of the TDI 1990 issue was brought down to zero in 2005.

17.4 Bonds and EMTN Initial effective rate (1) (in millions of euros) Maturity (%) 2005 2004

EUR 600,000,000; 2005 2012 3.43 598 – EUR 600,000,000; 2004 2011 4.74 625 623 EUR 750,000,000; 2003 2010 5.05 773 777 EUR 500,000,000; 2001 2008 6.27 525 536 EUR 800,000,000; 1999 2006 5.24 808 824 EUR 600,000,000; 2000 2005 – – 588 FRF 1,300,000,761; 1998 indexed 2005 – – 42

Public issues 3,329 3,390 in euros 641 632 in foreign currencies 358 442

Private EMTN placements 999 1,074

Total bonds and EMTN 4,328 4,464

(1) Before the impact of rate hedging instruments put in place at the time of or after the issue. The changes in bonds over 2005 primarily reflect: • Repayment on maturity in the first half of 2005, for an amount of 587 million euros, of the bond issue of a nominal amount of 600 million euros made in 2000, and for an amount of 32 million euros, of the bond issue of a nominal amount of 198 million euros (1,300 million French francs) made in 1998. • The June 2005 600 million euros nominal bond issue, maturing in seven years. Issued at 99.828% of the nominal value and redeemable at par, this bond issue includes a 3.375% fixed coupon payable yearly.

106 17.5 Analysis of gross financial debt by maturity before hedging (in millions of euros) 2005

Maturing 2006 3,376 2007 639 2008 1,123 2009 529 2010 805 Subsequently 1,347

Total 7,819

On November 21, 2005, Christian Dior S.A. restructured a 500 million euros syndicated credit line. The due date, initially set for November 15, 2009, was extended until November 21, 2010, with an optional renewal each year, for the following two years.

17.6 Analysis of gross financial debt by currency after hedging (in millions of euros) 2005 2004

Euro 5,378 5,885 US dollar 476 380 Swiss franc 881 881 Yen 512 588 Other currencies 421 221

Total 7,668 7,955

In general, debt in currencies is intended to hedge net assets in such currencies, notably resulting from the acquisition of companies outside of the eurozone.

17.7 Analysis of gross financial debt by rate type after hedging (in millions of euros) 2005 2004

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

Total 7,668 7,955

17.8 Sensitivity In light of the debt structure for each currency at December 31, 2005, an immediate 1% increase on the rate curves for currencies in which the Group has debt would result in a (22) million euros change in financial income for the year. An immediate 1% reduction on these curves would result in a 49 million euros increase in the market value of gross financial debt after hedging.

107 17.9 Liquidity risk In addition to local liquidity risks, which tend to be relatively insignificant, the Group’s liquidity risk exposure may be assessed through the amount of its short-term net financial debt before the impact of derivatives, which comes out at 1.4 billion euros, or the outstanding amount of its treasury note program, which comes to 0.3 billion euros. With regard to the possible non-renewal of these loans, the Group has undrawn confirmed credit lines totaling 4.2 billion euros. In this way, the Group’s liquidity is based on the size of its investments, the magnitude of its long-term financing, the diversity of its investor base (short-term securities and bonds), and the quality of its bank relations, whether or not these are reflected in confirmed credit lines.

17.10 Covenants The Christian Dior Group, in line with standard industry practice on syndicated credit lines, has agreed to various undertakings to hold a percentage interest and voting rights in some of its subsidiaries and to comply with a standard financial ratio in this respect. On certain long-term credit lines in the past, the Group undertook to comply with a ratio for the coverage of net financial debt by financial flows for the year. The current level of this ratio is some way away from the critical threshold, such that the Group has a high level of financial flexibility in relation to these commitments.

17.11 Confirmed credit lines not drawn At December 31, 2005, the total outstanding amount of undrawn confirmed credit lines was 4.2 billion euros.

17.12 Guarantees and real sureties At December 31, 2005, the amount of financial debt secured by real sureties came to less than 460 million euros.

NOTE 18 - PROVISIONS (in millions of euros) 2005 2004

Provisions for retirement plans, medical expenses and similar liabilities 267 261 Provisions for liabilities and charges 631 581 Provisions for restructuring 54 44

Long-term provisions 952 886 Provisions for retirement plans, medical expenses and similar liabilities 5 4 Provisions for liabilities and charges 159 194 Provisions for restructuring 148 67

Short-term provisions 312 265

Total 1,264 1,151

108 Over 2005, provisions for liabilities and charges saw the following changes: Other (including December 31, Changes in currency December 31, (in millions of euros) 2004 Allocations Used Write-backs consolidation translation) 2005

Provisions for retirement 265 33 (32) (24) 13 17 272 plans, medical expenses and similar liabilities Provisions for liabilities and 775 97 (93) (28) 2 37 790 charges Provisions for restructuring 111 121 (31) (8) (5) 14 202

Total 1,151 251 (156) (60) 10 68 1,264

Of which, profit from 121 (112) (56) recurring operations financial income – (7) – other 130 (37) (4)

Provisions for retirement plans, medical expenses and similar liabilities are analyzed in Note 28. Provisions for liabilities and charges correspond to the estimated impacts on assets and liabilities of actual or likely risks, litigation and disputes resulting from the Group’s activities: indeed, these activities are carried out within an international regulatory framework that is often vague and varies depending on the country and the time in question, and applies to such a wide range of fields as the composition of its products or the calculation of its taxes. Also see Note 24 “Other operating income and expenses” regarding the temporary closure of “the La Samaritaine department store” for restructuring provisions.

NOTE 19 - OTHER NON-CURRENT LIABILITIES (in millions of euros) 2005 2004

Commitments to purchase minority shares 3,151 3,013 Market value of derivatives 28 34 Employee profit-sharing (1) 63 55 Other liabilities 128 144

Total 3,370 3,246

(1) Solely for French companies, in accordance with the legal provisions in force. At December 31, 2004 and 2005, commitments to purchase minority interests primarily concerned the commitment in relation to Diageo to buy out its 34% interest in Moët Hennessy, subject to six months notice, for an amount equal to 80% of its market value. When calculating this commitment, its market value was determined based on stock market multiples for comparable companies, applied to Moët Hennessy’s operational data.

109 In addition, commitments to purchase minority interests include commitments relative to the minority shareholders in Fendi, Donna Karan and BeneFit, calculated in line with various formulae that may include a minimum amount.

NOTE 20 - OTHER CURRENT LIABILITIES (in millions of euros) 2005 2004

Market value of derivatives 132 188 Personnel charges 508 468 Employee profit-sharing 44 13 State and local authorities: taxes (excluding corporate income taxes) 217 210 Clients: advances and down payments 107 95 Deferred payments on tangible assets or long-term investments 192 200 Pre-booked income 46 59 Other liabilities 397 373

Total 1,643 1,606

At December 31, 2004 and 2005, the market value of other current financial liabilities was the same as their book value. Derivatives are analyzed in Note 21.

NOTE 21 – FINANCIAL INSTRUMENTS The financial instruments used by the Group are intended to hedge risks linked to its activity and its asset base. These instruments, most of which are traded on organized or assimilated markets, are primarily managed on a centralized basis. Counterparties are selected according to their international rating, with a focus on diversification. 21.1 Financial instruments linked to foreign currency risk management A significant percentage of Group companies’ revenue, both to their clients and their own distribution subsidiaries, as well as some of their purchases, are carried out in foreign currencies. All of these flows in currencies are primarily represented by intra-Group flows. The hedging instruments used are intended to reduce foreign currency risks resulting from changes in the exchange rates on these currencies in relation to the functional currency of such companies, and are booked against either commercial receivables or debt for the year, or, under certain conditions, against provisional transactions for following years. Future currency flows are subject to detailed forecasts in line with the budgetary process and are progressively hedged, for up to one year, only if justified by the likelihood of occurrence. Within this framework, and in light of market changes, the currency risks identified are progressively hedged based on futures or options. The Group may hedge the net positions of its subsidiaries located abroad using appropriate instruments in order to limit the impact of changes in the exchange rates for the currencies concerned against the euro on its consolidated shareholders’ equity.

110 The nominal amounts of financial instruments outstanding at December 31, 2005, broken down by type of instrument and their accounting allocation and valued at their market value on the basis of the currency rates in force on this date, are as follows:

Market value of contracts (1) Future Net investment Nominal cash-flow hedging in Fair value Not (in millions of euros) amounts hedging currencies hedging allocated Total

Options purchased USD put 393 – 1 – – 1 JPY put 471 17 – – – 17 864 17 1 – – 18 Tunnels USD seller 2,055 (18) – – – (18) JPY seller 115 3 1 – – 4 Other 96 (1) – – – (1) 2,266 (16) 1 – – (15) Forward currency contracts (2) USD 449 (9) – (8) (8) (25) JPY 130 9 1 – – 10 GBP 194 (1) – – (1) (2) Other 186 (8) (1) (2) (11) 959 (9) – (8) (11) (28) Exchange swaps (2) CHF 887 – – – 6 6 USD 82 – – – (1) (1) GBP 80 – – – – – JPY (19) – 1 – 1 2 Other 30 – – – – – 1,060 – 1 – 6 7

Call revenue 170 –––(10) (10)

Total (8) 3 (8) (15) (28)

(1) Gain / (Loss) (2) Sale / (Purchase)

111 Derivatives outstanding relating to the foreign currency risk at December 31, 2005 can be broken down as follows by the year of allocation: Nominal (in millions of euros) amounts 2005 2006 Subsequently

Options purchased USD put 393 393 JPY put 471 431 40 864 – 824 40 Tunnels USD seller 2,055 9 1,570 476 JPY seller 115 19 95 1 Other 96 96 2,266 28 1,761 477 Forward currency contracts (1) USD 449 314 75 60 JPY 130 67 40 23 GBP 194 73 121 Other 186 53 115 18 959 507 351 101 Exchange swaps (1) CHF 887 887 USD 82 82 GBP 80 80 JPY (19) (19) Other 30 30 1,060 1,060 – – Call revenue 170 – 77 93

(1) Sale / (Purchase)

21.2 Financial instruments linked to interest rate risk management The Group manages the rate risk in relation to the global net financial debt. The objective of the management policy implemented is to protect earnings against a rapid and significant increase in interest rates. In this context, the Group uses interest rate swaps and options (caps and floors).

112 The notional amounts of financial instruments outstanding at December 31, 2005, broken down by type of instrument and their accounting allocation and valued at the market value in force on this date, are as follows: Market value of contracts (1) Nominal Fair value Not (in millions of euros) amounts hedging allocated Total

Fixed payer rate swaps (euros) 1,995 (1) 2 1 Floating payer rate swaps (euros) 3,495 151 9 160 Floating/floating rate swaps (euros) 823 – (14) (14) Caps purchased (euros) 1,700 – 8 8 Tunnels (cap purchases and floor revenue) (euros) 1,725 (1) 2 1 Currency swaps (145) 2 (7) (5)

Total 151 – 151

(1) Gain / (Loss) Rate risk derivatives outstanding at December 31, 2005 can be broken down by maturity as follows: Nominal Under 1 Between Over (in millions of euros) amounts year 1 and 5 years 5 years

Fixed payer rate swaps (euros) 1,995 850 1,145 – Floating payer rate swaps (euros) 3,495 826 2,069 600 Floating/floating rate swaps (euros) 823 473 350 – Caps purchased (euros) 1,700 350 1,350 – Tunnels (cap purchases and floor 1,725 1,650 75 – revenue) (euros) Currency swaps (145) (118) (27) –

21.3 Financial instruments linked to equity risk management As the Group’s investment policy is to acquire interests over time, the portfolio of equity and financial investments is not hedged in relation to the equity risk.

113 21.4 Synopsis of financial instruments Financial instruments are recorded on the balance sheet under the following categories and in the following amounts: (in millions of euros) Note 2005 2004

Foreign currency risk Assets: non-current 36 62 current 30 216 Liabilities: non-current (11) – current (83) (9)

21.1 (28) 269 Rate risk Assets: non-current 96 154 current 121 180 Liabilities: non-current (17) (34) current (49) (179)

21.2 151 121

Total outstanding Assets: non-current 132 216 current 11 151 396 Liabilities: non-current 19 (28) (34) current 20 (132) (188)

123 390

114 NOTE 22 - SEGMENT INFORMATION

22.1 Information by business group

2005 Fashion Christian Wines and Perfumes Watches Other Dior and Leather and and Selective and Elimina- (in millions of euros) Couture Spirits Goods Cosmetics Jewelry Retailing Holdings tions (1) 2005

Non-Group revenue 663 2,639 4,781 2,161 563 3,637 112 – 14,556 Revenue between business – 5 31 124 10 11 23 (204) – groups

Total revenue 663 2,644 4,812 2,285 573 3,648 135 (204) 14,556 Profit from recurring 53 869 1,467 173 38 347 (159) 3 2,791 operations Operational investments (2) 48 100 302 115 18 135 44 – 762 Amortization charges 36 59 187 91 18 112 30 – 533 Impairment charges – – – – – 72 11 – 83

Fashion Christian Wines and Perfumes Watches Not Dior and Leather and and Selective Other allocated December 31, (in millions of euros) Couture Spirits Goods Cosmetics Jewelry Retailing activities (4) (5) 2005

Brands, trade names, licenses 25 4,847 5,101 1,657 1,042 2,861 454 – 15,987 and goodwill (3) Other operational assets 576 4,412 2,333 896 385 2,076 912 4,382 15,972

Total assets 601 9,259 7,434 2,553 1,427 4,937 1,366 4,382 31,959 Shareholders’ equity – – – – – – – 11,868 11,868 Operational liabilities 130 932 960 666 133 1,043 215 16,012 20,091

Total liabilities and 130 932 960 666 133 1,043 215 27,880 31,959 shareholders’ equity

(1) Eliminations correspond to revenue between business groups; in most cases, this concerns revenue from business groups excluding Selective Retailing to Selective Retailing. The prices for revenue between the various business groups correspond to the prices normally used for wholesale or revenue to non-Group retailers. (2) Operational investments correspond to the amounts capitalized over the year, and not to disbursements carried out over the year in connection with these investments. (3) Brands, trade names, licenses and goodwill comprise the net amounts given in Notes 3 and 4. (4) Assets that have not been allocated include securities consolidated on an equity basis, equity investments and financial investments, other financial assets and corporate income tax receivables. (5) Liabilities that have not been allocated include financial debt and current and deferred tax liabilities.

115 2004 Fashion Christian Wines and Perfumes Watches Dior and Leather and and Selective Other and Elimina- (in millions of euros) Couture Spirits Goods Cosmetics Jewelry Retailing Holdings tions (1) 2004

Non-Group revenue 595 2,255 4,339 2,017 483 3,266 105 – 13,060 Revenue between business groups – 4 27 111 10 10 21 (183) –

Total revenue 595 2,259 4,366 2,128 493 3,276 126 (183) 13,060 Profit from recurring operations 51 813 1,309 150 7 238 (163) 8 2,413 Operational investments (2) 69 69 253 86 19 181 64 – 741 Amortization charges 31 48 173 89 16 109 29 – 495 Impairment charges – 3 12 20 24 25 17 – 101

Fashion Christian Wines and Perfumes Watches Not Dior and Leather and and Selective Other allocated December 31, (in millions of euros) Couture Spirits Goods Cosmetics Jewelry Retailing Businesses (4) (5) 2004

Brands, trade names, 25 4,083 4,993 1,643 1,049 2,618 474 – 14,885 licenses and goodwill (3) Other operational assets 532 3,828 2,188 852 363 1,917 1,028 3,772 14,480

Total assets 557 7,911 7,181 2,495 1,412 4,535 1,502 3,772 29,365 Shareholders’ equity – – – – – – 10,065 10,065 Operational liabilities 137 767 894 606 106 882 712 15,196 19,300

Total liabilities and 137 767 894 606 106 882 712 25,261 29,365 shareholders’ equity

(1) Eliminations correspond to revenue between business groups; in most cases, this concerns revenue from business groups excluding Selective Retailing to Selective Retailing. The prices for revenue between the various business groups correspond to the prices normally used for wholesale or revenue to non-Group retailers. (2) Operational investments correspond to the amounts capitalized over the year, and not to disbursements carried out over the year in connection with these investments. (3) Brands, trade names, licenses and goodwill comprise the net amounts given in Notes 3 and 4. (4) Assets that have not been allocated include securities consolidated on an equity basis, equity investments and financial investments, other financial assets and corporate income tax receivables. (5) Liabilities that have not been allocated include financial debt and current and deferred tax liabilities.

116 22.2 Information by region Revenue can be broken down by their destination region as follows: (in millions of euros) 2005 2004

France 2,282 2,108 Europe (excl. France) 2,954 2,678 United States 3,805 3,438 Japan 2,111 1,928 Asia (excl. Japan) 2,412 2,038 Other countries 992 870

Revenue 14,556 13,060

Operational investments can be broken down by region as follows: (in millions of euros) 2005 2004

France 323 257 Europe (excl. France) 135 96 United States 138 108 Japan 29 112 Asia (excl. Japan) 81 40 Other countries 56 128

Operational investments 762 741

Operational investments correspond to the amounts capitalized over the year, and not to disbursements carried out over the year in connection with these investments.

NOTE 23 - INCOME AND EXPENSES

23.1 Analysis of revenue Revenue comprise the following elements: (in millions of euros) 2005 2004

Revenue carried out by brands and trade names 14,339 12,900 License royalties and income 126 123 Income from rental properties 33 23 Other 58 14

Total 14,556 13,060

117 23.2 Charges by type Profit from recurring operations factors in the following expenses in particular: (in millions of euros) 2005 2004

Research and development costs 38 38 Advertising and promotional costs 1,463 1,332 Commercial rent 819 757 Payroll charges 2,567 2,356

Research and development costs comprise pure research costs in addition to costs incurred for developing new products. Advertising and promotional costs primarily include the costs of media campaigns and costs for advertising at points of sale. At December 31, 2005, the Group operated a total of 1,917 stores (1,877 in 2004) around the world, primarily linked to the Fashion and Leather Goods and Selective Retailing business groups. In certain countries, store leases are associated with minimum amounts, notably when leases include a clause for indexing rent against revenue. Rental charges for stores can be broken down as follows: (in millions of euros) 2005 2004

Fixed or minimum rents 352 327 Variable portion of indexed rents 38 25 Airport concession royalties 429 405

Commercial rent 819 757

• Payroll charges can be broken down as follows: (in millions of euros) 2005 2004

Salaries and payroll charges 2,508 2,231 Retirement plans, medical expenses and other related benefits 29 74 Expenses linked to option plans and related 30 51

Total 2,567 2,356

118 NOTE 24 - OTHER OPERATING INCOME AND EXPENSES (in millions of euros) 2005 2004

Amortization of brands (7) (9) Impairment of brands and goodwill (49) (54) Impairment of tangible assets (34) (47) Income (loss) from disposals – (14) Restructuring (132) (27) Impacts of the IFRS changeover on the exchange result (3) (36) Other (1) (16)

Other operating income and expenses (226) (203)

• In 2005 Other operating income and expenses for 2005 include 179 million euros in non-recurring expenses linked to the need to close “the La Samaritaine department store” to the public in order to allow major work to be carried out to bring the site into line with security standards. This amount includes an initial valuation of the job preservation plan, which was approved by the work’s council on February 6, 2006 and was backed by a majority of the trade unions on the same day. The provision recorded in this respect is for 55 million euros. Intangible fixed assets and store fixtures and fittings were subject to an exceptional amortization charge for the amount of their net values on the balance sheet, representing 38 and 23 million euros respectively. 47 million euros in charges or provisions were booked for all losses on inventories of goods in addition to the expenses incurred further to the cancellation of various contracts with commercial partners. Lastly, the costs incurred to immediately secure the store and the various site management costs represented a charge of 6 million euros. The other operating income and expense items primarily concern business restructurings for 21 million euros and the amortization and impairment of intangible assets for 17 million euros. • In 2004 Other operating income and expenses concern the impairment of non-strategic brands and brands with low unit values, the impairment of all properties located outside of France with insufficient levels of operational profitability, income or losses recorded on disposals, in particular regarding Christian Lacroix. They also factor in restructuring costs concerning various Group brands and trade names, in connection with the closure of markets or the phasing out of secondary and non-profitable activities.

119 NOTE 25 - NET FINANCIAL INCOME

(in millions of euros) 2005 2004

Cost of gross financial debt, excluding repackaged notes (TDI) (245) (253) Income from cash and financial investments 15 26 Impact of market valuations of financial debt and hedging instruments, excluding repackaged notes (TDI) 1 (13) Impact of repackaged notes (TDI) (5) (16)

Cost of net financial debt (234) (256) Ineffective portion of currency hedging (105) (10) Dividends received on financial investments 49 16 Other, net 99 (14)

Other financial income and expenses 43 (8)

Financial income (191) (264)

Other net financial income is based on 99 million euros in capital gains on the disposal of Bouygues securities.

NOTE 26 - INCOME TAXES

26.1 Analysis of the tax expense

(in millions of euros) 2005 2004

Current taxes for the period (599) (530) Current taxes relating to previous periods 10 42

Current taxes (589) (488) Change in deferred tax (135) (67) Impact of changes in tax rates on deferred tax (4) 67

Deferred tax (139) –

Total tax expense (728) (488)

Tax on items recorded under shareholders’ equity 23 (42)

The effective tax rates can be broken down as follows: (in millions of euros) 2005 2004

Income before tax 2,374 1,946 Total tax expense (728) (488) Effective tax rate 31% 25%

120 26.2 Sources of deferred tax (in millions of euros) On the income statement 2005 2004

Market valuation of brands (19) 73 Market valuation of vineyard land and producing vineyards 1 1 Other revaluation gains – 11 Gains and losses on equity and financial investments (86) (23) Gains and losses on future cash flow hedging in currencies 8 10 Provisions for liabilities and charges and impairment of assets (1) (2) 1 Intra-Group margin included in inventories 15 24 Other consolidation restatements (51) (51) Losses carried forward (5) (46)

Total (139) –

(in millions of euros) Under shareholders’ equity 2005 2004

Market valuation of vineyard land and producing vineyards (13) (16) Gains and losses on equity and financial investments (26) (35) Gains and losses on future cash flow hedging in currencies 62 9

Total 23 (42)

(in millions of euros)

On the balance sheet 2005 2004

Market valuation of brands (3,201) (3,004) Market valuation of vineyard land and producing vineyards (350) (248) Other revaluation gains (315) (314) Gains and losses on equity and financial investments (27) 76 Gains and losses on future cash flow hedging in currencies 23 (52) Provisions for liabilities and charges and impairment of assets (1) 45 38 Intra-Group margin included in inventories 174 161 Other consolidation restatements (6) 68 Losses carried forward 172 164

Total (3,485) (3,111)

(1) Primarily regulated provisions, supplementary depreciations for tax purposes and finance leases.

121 Net deferred tax on the balance sheet can be broken down as follows: (in millions of euros) 2005 2004

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

Net deferred tax on the balance sheet (3,485) (3,111)

26.3 Analysis of the difference between the effective tax rate and the French statutory tax rate The reconciliation between the French statutory tax rate applied to French companies and the effective tax rate recorded in the consolidated financial statements can be broken down as follows: (% of income before tax) 2005 2004

French statutory tax rate 34.9 35.4 - Impact of changes in tax rates on deferred tax 0.2 (3.4) - Impact of differences between foreign and French tax rates (2.7) (3.7) - Impact of profits and losses carried forward (3.0) (6.3) - Impact of differences between consolidated and taxable income, and reduced-rate taxable income 0.5 2.6 - Impact of withholdings 0.8 0.5

Effective tax rate 30.7 25.1

Since 2000, French companies have been subject to additional income tax, which was 6.3% for 2004, and was reduced to 4.8% for 2005. It will be cut to 3.3% for 2006. In this way, the French statutory tax rate was 34.9% in 2005 and 35.4% in 2004. The impact of differences between consolidated and taxable income in 2005 reflected in particular an amendment to the tax system for repackaged notes (TDI) introduced by the 2006 finance bill (Loi de Finances).

26.4 Losses carried forward At December 31, 2005, for LVMH S.A., the impact of losses carried forward and tax credits not yet used and not resulting in the recording of deferred tax assets, came out at 763 million euros (844 million euros in 2004). At December 31, 2005, for Christian Dior S.A., ordinary losses carried forward totaled 87 million euros (107 million euros in 2004). Their recovery being deemed probable, they resulted in deferred tax assets of 29 million euros (37 million euros in 2004).

26.5 Tax consolidation • French tax sharing agreements allow certain French companies of the Group to combine their taxable results to determine the overall tax expense for which the parent company is fully liable.

122 The adoption of this system, which primarily concerns the parent company Christian Dior S.A., made it possible to record a tax saving of 150 million euros in 2005 (290 million euros in 2004). • The other tax consolidation systems in force in other countries, notably Italy and the US, generated an additional tax saving of 74 million euros in 2005 (40 million euros in 2004).

NOTE 27 - EARNINGS PER SHARE 2005 2004

Net income, Group share (in millions of euros) 618 549 Average number of shares outstanding over the year 181,727,048 181,727,048 Average number of Christian Dior shares held as treasury (4,071,058) (3,952,628) shares over the year

Average number of shares taken into account for the 177,655,990 177,774,420 calculation before dilution Earnings per share (in euros) 3.48 3.09

Average number of shares outstanding taken into account above 177,655,990 177,774,420 Impact of dilution for option plans 1,346,973 962,733

Average number of shares outstanding after dilution 179,002,963 178,737,153

Diluted earnings per share (in euros) 3.45 3.07

NOTE 28 - PENSION COMMITMENTS, MEDICAL COSTS AND RELATED BENEFITS 28.1 Expense for the period (in millions of euros) 2005 2004

Cost of services rendered 40 38 Impact of discounting 20 21 Expected return on dedicated financial assets (13) (9) Cost of past services 2 Changes in treatment (20) 24

Expense for the period under the benefit systems defined 29 74

Effective return /(cost) on assets for dedicated financial 22 14 systems

123 28.2 Net commitment recorded (in millions of euros) 2005 2004

Entitlements covered by financial assets 470 398 Entitlements not covered by financial assets 140 159

Discounted value of entitlements 610 557 Market value of financial assets (343) (287) Actuarial differences not recorded on the balance sheet 8 6 Cost of past services not yet recorded in the accounts (12) (14)

Items not recognized (4) (8) Net commitment recorded 263 262

Of which: Long-term provisions 267 261 Short-term provisions 5 3 Long-term financial assets (9) (2)

Total 263 262

28.3 Analysis of changes in commitments Discounted Market value Net value of of financial Items not commitments (in millions of euros) entitlements assets recognized recorded

Balance at December 31, 2004 557 (287) (8) 262 Expense for the period 60 (13) (18) 29 Beneficiary benefits (52) 40 – (12) Increase in dedicated financial – (42) – (42) assets Impact of currency changes 19 (5) (1) 13 Impact of changes in 39 (26) – 13 consolidation Changes in treatment (20) (2) 22 – Actuarial differences 7 (8) 1 –

Balance at December 31, 2005 610 (343) (4) 263

124 The actuarial assumptions used to estimate commitments at December 31, 2005, in the main countries where the commitments are located, are as follows:

Discount rate 2.00% in Japan, 4.00% in France, 5.75% in the US Expected long-term rate of return on 4.00% in Japan, 4.00% in France, investments 8.00% in the US Future rate of increase of salaries 2.00% to 4.50% Rate of increase of medical costs reduction from 9% to 6% between 2006 and 2010, then 5% in the US At December 31, 2004, the actuarial assumptions retained were as follows: Discount rate 2.00% in Japan, 4.75% in France, 5.75% in the US Expected long-term rate of return on 4.00% in Japan, 4.75% in France, investments 8.00% in the US Future rate of increase of salaries 2.00% to 4.00% Rate of increase of medical costs reduction from 9% to 5% between 2005 and 2009, then 5% in the US

28.4 Analysis of entitlements

The discounted value of entitlements can be broken down by type of plan as follows:

(in millions of euros) 2005 2004

Retirement indemnities and related provisions 88 78 Medical costs for retired staff 53 57 Long-service awards 12 10 Additional retirement payments 430 362 Pre-retirement payments 17 41 Other 10 9

Discounted value of entitlements 610 557

The discounted value of entitlements can be broken down by region as follows:

(in millions of euros) 2005 2004

France 264 284 Europe (excl. France) 169 108 America 115 98 Japan 54 60 Asia Pacific 8 7

Discounted value of entitlements 610 557

125 The main systems reflected in the commitment at December 31, 2005 are as follows: • in France: this primarily concerns long-service awards and end-of-career compensation, payment of which is provided for under French law and the national wage bargaining agreements applicable, respectively after staff have built up a certain level of seniority or when they retire; • in Europe (excluding France), the main commitments concern systems for the reimbursement of medical costs for retired staff, put in place by certain Group companies in the UK, as well as the TFR (Trattamento di Fine Rapporto) benefit in Italy, which is to be paid at the time of employees leaving the company, whatever the reason; • in the US, the commitment stems from pensions systems with defined benefits or the reimbursement of medical costs for retired staff, in line with agreements put in place by certain Group companies.

28.5 Analysis of dedicated financial assets The market values of the assets in which funds paid into schemes are invested can be broken down as follows: (%) 2005 2004

Equities 46 37 Bonds – private issuers 25 29 – public issuers 22 24 Real estate, cash and other assets 7 10

Market value of dedicated financial assets 100 100

Plan assets 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 (in millions of euros) 2005 2004

Grapes, wines and distilled alcohol 809 775 Industrial or commercial assets 58 77 Equity interests and investments 59 76

In the Wines and Spirits business group, a percentage of future grape, light wine and distilled alcohol supplies are governed by purchase commitments with various local producers. Depending on the business, these commitments are valued based on contractual terms or the last known prices and estimated yields at the close of accounts. They primarily cover 2006 and 2007. At December 31, 2005, negotiations were underway to finalize various agreements intended to supplement purchase commitments for grapes, wine and distilled alcohol as mentioned above.

126 29.2 Leasing commitments In addition to the leasing of its stores, the Group also finances part of its equipment based on long-term operating leases. Furthermore, certain capitalized assets or industrial pieces of equipment have been acquired or refinanced under financial leasing agreements.

• Operating leases and concession fees At December 31, 2005, future non-cancelable commitments arising from operating leases and concession fees can be broken down as follows: (in millions of euros) 2005 2004

Under one year 583 570 From one to five years 1,606 1,474 Over five years 895 932

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

Under one year 18 20 From one to five years 44 47 Over five years 8 15

Commitments received under sub-leases 70 82

• Financial leases At December 31, 2005, future non-cancelable commitments arising from financial leases can be broken down as follows: (in millions of euros) 2005 2004 Minimum Minimum future Fair value of future Fair value of payments payments payments payments

Under one year 32 29 16 14 From one to five years 85 67 79 66 Over five years 464 81 424 78

Total future minimum payments 581 519 Percentage representing financial (404) (361) interests

Fair value of future minimum 177 177 158 158 payments

29.3 Possible liabilities and current disputes In the ordinary course of its business, the Group is involved in legal proceedings and claims relating to trademarks, the protection of intellectual property rights, establishing selective retailing agreements, licensing, employee relations, tax audits and other matters inherent in its business. The Group believes that the provisions recorded relative to these risks, litigation and disputes, known or underway at the closing date, are sufficient to cover any unfavorable outcome, such that the consolidated financial position would not be significantly affected.

127 29.4 Deposits, pledges and other guarantees (in millions of euros) 2005 2004

Deposits and pledges 37 29 Other guarantees 54 48

Guarantees given 91 77

Guarantees received 19 8

29.5 Other commitments To the best of the Group’s knowledge, there are no other significant off-balance sheet commitments than those indicated above.

NOTE 30 - RELATED PARTIES 30.1 Relations of Christian Dior Group with the Groupe Arnault and the Financière Agache Group The Christian Dior Group is consolidated in the statements of Financière Agache S.A, controlled by Groupe Arnault SAS. • Relations of the Christian Dior Group with Groupe Arnault Groupe Arnault provides assistance services to the Christian Dior Group for development, engineering, business and real-estate law and support staff; moreover, Groupe Arnault leases commercial premises to LVMH. The Christian Dior Group leases premises used for offices and also provides various administrative services to the holding companies. The transactions between the Christian Dior Group and Groupe Arnault may be summarized as follows: (in millions of euros) 2005 2004

· Invoices from Groupe Arnault to the Christian Dior Group (10) (10) Trade account balances at December 31 (2) (3) · Invoices from the Christian Dior Group to Groupe Arnault 2 2 Trade account receivables at December 31 – –

• Relations of the Christian Dior Group with the Financière Agache Group The Financière Agache Group, through its subsidiary John Galliano SA, provides artistic management services to Christian Dior Couture. Moreover, some companies of the Christian Dior Group optimize their cash flow by belonging to a cash pool managed by Financière Agache. This latter thus centralizes all or part of their short-term cash surpluses; covers all or part of their short-term funding needs; places the invests net surpluses and covers net requirements.

128 The transactions between the Christian Dior Group and the Financière Agache Group may be summarized as follows: (in millions of euros) 2005 2004

· Invoices from the Financière Agache Group to the Christian Dior Group (8) (8) Trade account balances at December 31 (3) (5) · Financial interest invoiced to the Christian Dior Group (4) (3) Current accounts balance at December 31 (108) (92) · Invoices from the Christian Dior Group to the Financière Agache Group – – Trade account receivables at December 31 – –

30.2 Relations of the Christian Dior Group with Diageo Moët Hennessy is the holding company for the Wine and Spirits activities of the Group, except for Château d’Yquem and certain Champagne vineyard land and producing vineyards. Since 1994, the Diageo Group holds a 34% share in Moët Hennessy. On this date, an agreement was concluded between Diageo and Moët Hennessy for the allocation of holding fees between Moët Hennessy and other holdings of the LVMH Group. Under the terms of the agreement, Moët Hennessy assumed 23% of common fees in 2005 (24% in 2004), with Moët Hennessy’s total administrative fees at 44 million euros in 2005 (34 million euros in 2004).

30.3 Managing bodies The overall compensation to the 8 Members of the Board of Directors, for their duties within the Group, can be broken down as follows:

(in millions of euros) 2005 2004

Gross compensation and benefits in kind 11 10 Post-employment benefits 1 1 Cost of stock option plans and related 14 12

Total 26 23

NOTE 31 - SUBSEQUENT EVENTS At the date of closing, no significant event occurred.

129 LIST OF CONSOLIDATED COMPANIES IN 2005 All the companies below are fully consolidated except for those indicated by the number (1), which are consolidated on a proportional basis and those indicated by (2), which are consolidated using the equity method.

COMPANIES REGISTERED OFFICES PERCENTAGE Control Interest

Christian Dior S.A. 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 SA 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 Suisse SA Geneva, Switzerland 100% 100% Les Jardins d’Avron SAS Paris, France 100% 100% Mardi SpA Badia a 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 Española S.L. , Spain 100% 100% Christian Dior do Brasil Ltda Sao Paulo, Brazil 100% 100% Christian Dior Italia Srl Milan, Italy 100% 100% Christian Dior Belgique SA Brussels, Belgium 100% 100% Bopel Srl Lugagnano Val d’Arda, Italy 70% 70% P.T. Christian Dior Indonesia Jakarta, Indonesia 80% 80%

130 Christian Dior Puerto Banus S.L. Puerto Banus, Spain 75% 75% Les Jardins d’Avron LLC New York, United States 100% 100% Lucilla Srl Sieci, Italy 51% 51% Christian Dior Couture CZ Prague, Czech Republic 100% 100% Christian Dior Couture Morocco Marrakech, Morocco 100% 100% Christian Dior Couture FZE Dubai, United Arab Emirates 100% 100% Christian Dior Macau Company Macao, Macao 96% 96% Limited Les Ateliers Bijoux Germany 100% 100% Christian Dior S. de R.L. de C.V. Lomas, Mexico 100% 100% Christian Dior Commercial Shanghai Shanghai, China 100% 100% Co. Ltd

WINES AND SPIRITS Champagne Moët & Chandon SCS Epernay, France 60% 29% Moët Hennessy UK Ltd London, United Kingdom 60% 29% Moët Hennessy España SA Barcelona, Spain 60% 29% Moët Hennessy (Suisse) 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, Mexico City, Mexico 60% 29% S.A. de C.V. Chamfipar SA Ay, France 60% 29% Société Viticole de Reims SA Ay, France 60% 29% Cie Française du Champagne et du Ay, France 60% 29% Luxe SA Moët Hennessy Belux SA Brussels, Belgium 60% 29% Champagne de Mansin SAS Gye sur Seine, France 60% 29% Moët Hennessy Osterreich GmbH Vienna, Austria 60% 26% Schieffelin & Somerset New York, U.S.A. 60% 29% Moët Hennessy (Nederland) BV Naarden, Netherlands 60% 29% Schieffelin & Co New York, U.S.A. 60% 29% MHD Moët Hennessy Diageo SAS Courbevoie, France 60% 29% 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 Ltd. Sydney, Australia 60% 29% Moët Hennessy do Brasil— Sao Paulo, Brazil 60% 29% Vinhos E Destilados Ltda Cloudy Bay Vineyards Ltd Blenheim, New Zealand 60% 29% Bodegas Chandon Argentina SA Buenos Aires, Argentina 60% 29% Domaine Chandon Australia Pty Ltd. Coldstream Victoria, Australia 60% 29% Newton Vineyards LLC St. Helena (California), U.S.A. 60% 23%

131 Veuve Clicquot Ponsardin SCS Reims, France 60% 29% Société Civile des Crus de Reims, France 60% 29% Champagne SA Neggma SA Reims, France 60% 15% Veuve Clicquot U.K. 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, 60% 29% Moët Hennessy Norge AS Hoevik, Norway 60% 29% Moët Hennessy Danmark A/S Copenhagen, Denmark 60% 29% Moët Hennessy Deutschland GmbH Munich, Germany 60% 29% 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 SL Madrid, Spain 60% 29% Château d’Yquem SA Sauternes, France 60% 29% Château d’Yquem SC Sauternes, France 60% 28% Jas Hennessy & Co SCS Cognac, France 60% 29% Diageo Moët Hennessy BV LLC Amsterdam, Netherlands (3) 60% 29% Hennessy 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 Limited Hong Kong, China (3) 60% 29% Riche Monde Ltd. Hong Kong, China (3) 60% 29% Riche Monde (China) Ltd Shanghai, China 60% 29% M.H.—U.D.G. (Far East) Ltd. Hong Kong, China (3) 60% 29% Riche Monde Pte Ltd. Singapore (3) 60% 29% Riche Monde Malaisie Inc. Petaling Jaya, Malaysia (3) 30% 15% Riche Monde Taïpei Ltd. Taipei, Taiwan (3) 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% RML DF Greater China Shanghai, China 60% 29% MHD Chine Co Ltd Shanghai, China 60% 29% 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% Millennuim Brands Ltd Dublin, Ireland 60% 29%

132 Polmos Zyrardow Zyrardow, Poland 60% 29% The Glenmorangie Company Ltd Edinburgh, United Kingdom 60% 29% Mac Donald & Muir Ltd Edinburgh, United Kingdom 60% 29% Glenair Ltd Edinburgh, United Kingdom 30% 15% The Scotch Malt Whisky Edinburgh, United Kingdom 60% 29%

FASHION AND LEATHER GOODS Louis Vuitton Malletier SA Paris, France 60% 44% Manufacture de souliers Louis Vuitton Fiesso d’Artico, Italy 60% 44% SRL Louis Vuitton Saint Barthélémy SNC Saint Barthélémy, French Antilles 60% 44% Société des Ateliers Louis Vuitton SNC Paris, France 60% 44% Société Louis Vuitton Services SNC Paris, France 60% 44% Société des Magasins Louis Vuitton Paris, France 60% 44% 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, Switzerland 60% 43% Vuitton SA Louis Vuitton Monaco SA Monte Carlo, Monaco 60% 44% ELV SARL Paris, France 60% 44% LVMH Fashion Group UK Ltd. London, United Kingdom 60% 44% Louis Vuitton Deutschland GmbH Düsseldorf, Germany 60% 44% Louis Vuitton España SA Madrid, Spain 60% 44% Sociedad Catalana Talleres Artesanos Barcelona, Spain 60% 44% Louis Vuitton SA Louis Vuitton BV Amsterdam, Netherlands 60% 44% LVMH Fashion Group Belgium SA Brussels, Belgium 60% 44% Louis Vuitton Hellas SA Athens, Greece 60% 44% Louis Vuitton Portugal Maleiro, Ltda. Lisbon, Portugal 60% 44% 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 Switzerland SA Geneva, Switzerland 60% 44% Louis Vuitton Ceska s.r.o. Prague, Czech Republic 60% 44% Louis Vuitton Osterreich GmbH Vienna, Austria 60% 44% Louis Vuitton Cantacilik Ticaret Istanbul, Turkey 60% 44% Anonim Sirketi LV US Manufacturing, Inc. New York, U.S.A. 60% 44% Somarest SARL Sibiu, Romania 60% 44% LVMH Fashion Group Hawaii Inc. Honolulu, (Hawaii), USA 60% 44% LVNA Finance Corp. New York, U.S.A. 60% 44% Atlantic Luggage Company Ltd Hamilton, Bermuda 60% 18%

133 Louis Vuitton Guam, Inc. Guam 60% 44% Louis Vuitton Saipan, Inc. Saipan 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 CV Mexico City, Mexico 60% 44% Blinfar SA Montevideo, Uruguay 60% 44% Louis Vuitton Chile Ltda Santiago del Chile, Chile 60% 44% LVMH Fashion Group Pacific Ltd 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 Ltd Singapore 60% 44% PT Louis Vuitton Indonesia Jakarta, Indonesia 60% 44% Louis Vuitton (Malaysia) SDN BHD Kuala Lumpur, Malaysia 60% 44% Louis Vuitton (Thailand) SA Bangkok, Thailand 60% 44% Louis Vuitton Taïwan Ltd Taipei, Taiwan 60% 42% 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 60% 26% Louis Vuitton EAU LLC Dubai, United Arab Emirates 60% 29% LV Arabie Saoudite LLC Jeddah, Saudi Arabia 60% 29% Louis Vuitton Korea Ltd Seoul, South Korea 60% 44% LVMH Fashion Group Trading Korea Seoul, South Korea 60% 44% Ltd 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 Maroc Sarl Casablanca, Morocco 60% 44% Louis Vuitton Venezuela SA Caracas, Venezuela 60% 44% Louis Vuitton South Africa (Pty) Ltd Johannesburg, South Africa 60% 44% Louis Vuitton Macau Company Ltd Macao, Macao 60% 44% LVMH Fashion Group (Shanghai) Shanghai, China 60% 44% Trading Co Ltd LV Cup España S.L. Valencia, Spain LVJ Group KK Tokyo, Japan 60% 44% LVMH Fashion Group Americas Inc. New York, U.S.A. (*) 60% 44% Louis Vuitton Canada, Inc. Toronto, Canada 60% 44% LVMH Fashion Group Services SAS Paris, France 60% 44% International LLC New York, U.S.A. (*) 60% 42% Marc Jacobs Trademark LLC New York, U.S.A. (*) 60% 15% Loewe SA Madrid, Spain 60% 44% Loewe Hermanos SA Madrid, Spain 60% 44% Loewe Textil SA Madrid, Spain 60% 44%

134 Manufacturas Loewe SL Madrid, Spain 60% 44% LVMH Fashion Group France SNC Paris, France 60% 44% Loewe Hermanos UK Ltd London, United Kingdom 60% 44% Loewe Saïpan Inc. Saipan, Marianna Islands 60% 44% Loewe Guam Inc. Guam 60% 44% Loewe Hong Kong Ltd Quarry Bay, Hong Kong 60% 44% Loewe Fashion Pte Ltd Singapore 60% 44% Loewe Fashion (M) SDN BHD Kuala Lumpur, Malaysia 60% 44% Loewe Taïwan Ltd Taipei, Taiwan 60% 42% Loewe Australia Pty Ltd Sydney, Australia 60% 44% Berluti SA Paris, France 60% 44% Société Distribution Robert Estienne Paris, France 60% 44% SNC Manifattura Ferrarese S.r.l Milan, Italy 60% 44% Caltunificio Rossi Moda SPA Vigonza, Italy 60% 43% Rossi Moda Inc New York, U.S.A. 60% 43% Rossimoda France SARL Paris, France 60% 43% Brenta Suole S.r.l Vigonza, Italy 60% 28% Montaigne KK Tokyo, Japan 60% 44% Modulo Italia S.r.l Milan, Italy 60% 44% Céline SA Paris, France 60% 44% Avenue M International SCA Paris, France 60% 44% Enilec Gestion SARL Paris, France 60% 44% Céline Montaigne SA Paris, France 60% 44% Céline Monte-Carlo SA Monte Carlo, Monaco 60% 44% Céline Production Srl Greve in Chianti, Florence, Italy 60% 44% Céline Suisse SA Geneva, Switzerland 60% 44% Céline UK Ltd London, United Kingdom 60% 44% Céline Inc. New York, U.S.A. (*) 60% 44% Céline Hong Kong Ltd Hong Kong, China 60% 44% Céline (Singapore) Pte Ltd Singapore 60% 44% Céline Guam Inc. Tumon, Guam 60% 44% Céline Korea Ltd Seoul, South Korea 60% 44% Céline Taïwan Ltd Taipei, Taiwan 60% 43% CPC International Ltd Hong Kong, China 60% 44% Kami SA Montbazon, France 60% 44% Kenzo SA Paris, France 60% 44% Kenzo Homme SA Paris, France 60% 44% Modulo 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%

135 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% 43% Donna Karan International Inc. New York, U.S.A. (*) 60% 43% The Donna Karan Company LLC New York, U.S.A. 60% 43% Donna Karan Service Company BV Oldenzaal, Netherlands 60% 43% Donna Karan Studio LLC New York, U.S.A. 60% 43% The Donna Karan Company Store LLC New York, U.S.A. 60% 43% Donna Karan Company Store UK London, United Kingdom 60% 43% Holdings Ltd Donna Karan Management Company London, United Kingdom 60% 43% UK Ltd Donna Karan Company Stores UK London, United Kingdom 60% 43% Retail Ltd Donna Karan Company Store London, United Kingdom 60% 43% (UK) Ltd Donna Karan H. K. Ltd Hong Kong, China 60% 43% Donna Karan (Italy) Srl Milan, Italy 60% 43% Donna Karan (Italy) Production Milan, Italy 60% 43% Services Srl Fendi International BV Amsterdam, Netherlands 60% 42% Fendi France SA Paris, France 60% 44% Fun Fashion Emirates LLC Dubai, UAE 60% 26% Fendi SA Luxembourg 60% 42% Fendi S.r.l Rome, Italy 60% 42% Fendi Adele S.r.l Rome, Italy 60% 42% Fendi Immobili Industriali Srl Florence, Italy 60% 42% 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% 33% Fendi Hong Kong Ltd Hong Kong, China 60% 31% Fendi China Boutiques Ltd Hong Kong, China 60% 31% Fendi (Singapore) Pte Ltd Singapore 60% 44% Fendi Fashion (Malaysia) Snd. Bhd. Kuala Lumpur, Malaysia 60% 44%

136 Fun Fashion FZCO LLC Dubai, UAE 60% 26% Fendi Marianas Inc. Tumon, Guam 60% 44% S.r.l Florence, Italy 60% 42% Emilio Pucci International BV Naarden, Netherlands 60% 30% Emilio Pucci, Ltd New York, U.S.A. 60% 42% 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), U.S.A. 60% 44%

PERFUMES AND COSMETICS Parfums Christian Dior S.A. Paris, France 60% 44% LVMH P&C Thailand Co Ltd Bangkok, Thailand 60% 22% LVMH Parfums & Cosmétiques do Sao Paulo, Brazil 60% 44% 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 Oy Helsinki, Finland 60% 44% 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 PCD Orient FZ Co Dubai, UAE 60% 26% Parfums Christian Dior (UK) Ltd London, United Kingdom 60% 44% Parfums Christian Dior BV Rotterdam, Netherlands 60% 44% Iparkos BV Rotterdam, Netherlands 60% 44% LVMH Perfumes y Cosmeticos Iberica Madrid, Spain 60% 44% SA Parfums Christian Dior S.A.B. Brussels, Belgium 60% 44% LVMH P&C Holding SPA Milan, Italy 60% 44% Parfums Christian Dior (Ireland) Ltd Dublin, Ireland 60% 44% Parfums Christian Dior Hellas S.A. Athens, Greece 60% 44% Parfums Christian Dior A.G. Zurich, Switzerland 60% 44% Christian Dior Perfumes LLC New York, U.S.A. 60% 44% Parfums Christian Dior Canada Inc. Montréal, Canada 60% 44% LVMH P&C de Mexico SA de CV Mexico City, Mexico 60% 44% Parfums Christian Dior Japan K.K. Tokyo, Japan 60% 44% Parfums Christian Dior (Singapore) Singapore 60% 44% Pte Ltd

137 Inalux SA Luxembourg, Luxembourg 60% 44% LVMH P&C Asia Pacific Ltd Hong Kong, China 60% 44% Fa Hua Fragrance & Cosmetic Co Ltd Hong Kong, China 60% 44% LVMH P&C Shanghai Co, Ltd Shanghai, China 60% 44% LVMH P&C Korea Ltd Seoul, South Korea 60% 44% Parfums Christian Dior Hong Kong Ltd Hong Kong, China 60% 44% LVMH P&C Malaysia Sdn berhad Inc. Kuala Lumpur, Malaysia 60% 44% Fa Hua Hong Kong Co, Ltd Hong Kong, China 60% 44% Pardior SA de CV Mexico City, Mexico 60% 44% Parfums Christian Dior A/S Ltd Copenhagen, Denmark 60% 44% LVMH Perfums & Cosmetics Group Sydney, Australia 60% 44% 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 Austria Vienna, Austria 60% 44% 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% 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% Guerlain Ltd London, United Kingdom 60% 44% LVMH Perfumeria e Cosmetica Lda Lisbon, Portugal 60% 44% Guerlain SA (Suisse) Geneva, Switzerland 60% 44% Guerlain Inc. New York, U.S.A. 60% 44% Guerlain Canada Ltd Montréal, Canada 60% 44% Guerlain De Mexico SA Mexico City, Mexico 60% 44% Guerlain Puerto Rico, Inc. San Juan, Puerto Rico 60% 44% Guerlain Asia Pacific Ltd (Hong Kong) Hong Kong, China 60% 44% Guerlain KK Tokyo, Japan 60% 44% Guerlain Taïwan Co Ltd Taipei, Taiwan 60% 44% Guerlain Oceania Australia Pty Ltd Melbourne, Australia 60% 44% Guerlain Malaysie SDN Berhad Inc. Kuala Lumpur, Malaysia 60% 44% Make Up For Ever SA Paris, France 60% 44%

138 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 Italie S.r.l Milan, Italy 60% 44% Parfums Givenchy SA Levallois, 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% Laflachère SA Beauvais, France 60% 44% La Brosse et Dupont SAS Villepinte, France 60% 44% La Brosse et Dupont Portugal SA San Domingos de Rana, Portugal 60% 44% Mitsie SAS Tarare, France 60% 44% LBD Iberica SA Barcelona, Spain 60% 44% Etablissements Ladoë SAS Tourcoing, France 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% La Niçoise SAS Carros, France 60% 44% LBD Italia S.r.l Stezzano, Italy 60% 44% Etablissements Mancret Père & Fils SA Grenoble, France 60% 44% Inter-Vion Spolka Akcyjna SA Warsaw, Poland 60% 23% 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), U.S.A. 60% 35% Benefit Cosmetics UK Ltd London, United Kingdom 60% 35% Benefit Cosmetics Korea Seoul, South Korea 60% 35% Benefit Cosmetics SAS France 60% 35% Benefit Cosmetics Hong Kong Hong Kong, China 60% 35% Fresh Inc. Boston (Massachusetts), U.S.A. 60% 29% LVMH Perfumes and Cosmetics Edison (New Jersey), U.S.A. (*) 60% 44% Services LLC LVMH Cosmetics Services KK Tokyo, Japan 60% 44%

WATCHES AND JEWELRY TAG Heuer International SA Luxembourg, Luxembourg 60% 44% TAG Heuer SA Marin, Switzerland 60% 44% LVMH Relojeria & Joyeria España SA Madrid, Spain 60% 44%

139 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 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 (Inc.) Springfield, (New Jersey), U.S.A. 60% 44% LVMH Watch & Jewelry Canada Ltd Toronto, Canada 60% 44% LVMH Watch & Jewelry Far East Ltd Hong Kong, China 60% 44% LVMH Watch & Jewelry Singapore Singapore 60% 44% Pte Ltd LVMH Watch Jewelry Malaysia Sdn Kuala Lumpur, Malaysia 60% 44% Bhd LVMH Watch & Jewelry Capital Singapore 60% 44% Pte Ltd LVMH Watch & Jewelry Japan K.K. Tokyo, Japan 60% 44% LVMH Watch & Jewelry Australia Melbourne, Australia 60% 44% Pty Ltd LVMH Watch & Jewelry Hong Kong Hong Kong 60% 44% Ltd LVMH Watch & Jewelry Taiwan Ltd Taipei, Taiwan 60% 44% Cortech SA Cornol, Switzerland 60% 44% LVMH Watch et Jewelry Carribean & Coral Gables (Florida), U.S.A. 60% 44% Latin America Inc. ArteLink S.r.l Fratte di S. Giustina in Colle, Italy 60% 44% LVMH Watch & Jewelry India Pvt Ltd New Delhi, India 60% 44% 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 60% 23% Zenith International SA Le Locle, Switzerland 60% 44% Zenith Time Co Ltd Manchester, United Kingdom 60% 44% LVMH Watch et Jewelry Italy SpA Milan, Italy 60% 44% Omas S.r.l. Bologna, Italy 60% 44% Delano SA La Chaux-de-Fonds, Switzerland 60% 44% MMO Instruments de Précision SA Meyrin, Switzerland 60% 44% Glasnost Edition SA La Chaux-de-Fonds, Switzerland 60% 44% MMO Crans SA Crans-sur-Sierre, Switzerland 60% 44% Les Ateliers Horlogers LVMH SA La Chaux-de-Fonds, Switzerland 60% 44%

140 Fred Paris SA Paris, France 60% 44% Joaillerie de Monaco SA Monte Carlo, Monaco 60% 44% Fred Inc. Beverly Hills (California), U.S.A. (*) 60% 44% Fred Londres 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 Pologne Spzoo Warsaw, Poland 60% 34% Sephora Deutschland GmbH Bad Homburg, Germany 60% 44% Clab Srl Milan, Italy 60% 44% Sephora Marinopoulos SA Athens, Greece (1) 60% 22% Beauty Shop Romania SA Bucharest, Romania (1) 60% 22% Spring Time Cosmetics SA Athens, Greece (1) 60% 12% Sephora Tchéquie SRO Prague, Czech Republic 60% 44% Sephora Monaco SAM Monaco 60% 44% Sephora Patras Alimos, Greece (1) 30% 11% Sephora Cosmeticos España Madrid, Spain (1) 30% 22% Sephora China Shanghai, China 60% 36% Sephora Holding Asia Shanghai, China 60% 44% Sephora USA, Inc San Francisco (California), U.S.A. (*) 60% 44% Sephora Beauty Canada Inc San Francisco (California), U.S.A. 60% 44% Magasins de la Samaritaine SA Paris, France 550% 25% DFS Holdings Ltd Hamilton, Bermuda 60% 27% DFS Australia Pty Ltd Sydney, Australia 60% 27% DFS Australia Superannuation Pty Ltd Sydney, Australia 60% 27% Travel Retail Shops Pty Ltd Sydney, Australia (2) 27% 12% Bloomburg Ltd Hamilton, Bermuda 60% 27% DFS European Logistics Ltd Hamilton, Bermuda 60% 27% DFS Group Ltd Delaware, USA 60% 27% DFS China Partners Ltd Hong Kong, China 60% 27% DFS Macau Ltd Hong Kong, China 60% 27% Duty Free Shoppers Hong Kong Ltd Hong Kong, China 60% 27% Hong Kong International Boutique Hong Kong, China 30% 14% Partners TRS Duty Free Shoppers Hong Kong Hong Kong, China (2) 27% 12% Ltd DFS Okinawa KK Okinawa, Japan 60% 27% TRS Okinawa Okinawa, Japan (2) 27% 12%

141 JAL/DFS Duty Free Shoppers KK Chiba, Japan (2) 24% 11% DFS Korea Ltd Seoul, South Korea 60% 27% DFS Seoul Ltd Seoul, South Korea 60% 27% DFS Sdn. Bhd. Kuala Lumpur, Malaysia 60% 27% Gateshire Marketing Sdn Bhd. Kuala Lumpur, Malaysia 60% 27% DFS Merchandising Ltd Dutch Antilles 60% 27% DFS New Caledonia Sarl Nouméa, New Caledonia 60% 27% DFS New Zealand Ltd Auckland, New Zealand 60% 27% TRS New Zealand Ltd Auckland, New Zealand (2) 27% 12% Commonwealth Investment Saipan, Marianna Islands 60% 26% Company, Inc DFS Saipan Ltd Saipan, Marianna Islands 60% 27% Kinkaï Saipan L.P. Saipan, Marianna Islands 60% 27% Singapore International Boutique Saipan, Marianna Islands 60% 14% Partners DFS Palau Ltd Koror, Palau 60% 27% 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 60% 14% Partners DFS Group L.P. Delaware, U.S.A. 60% 27% LAX Duty Free Joint Venture 2000 Los Angeles (California), U.S.A 60% 21% Royal Hawaian Insurance Honolulu, (Hawaii), U.S.A. 60% 27% Company Ltd Hawaï International Boutique Partners Honolulu, (Hawaii), U.S.A. 60% 14% JFK Terminal 4 Joint Venture 2001 New York, U.S.A. 60% 22% DFS/Waters Dallas (Texas), U.S.A. 60% 19% DFS Guam L.P. Tamuring, Guam 60% 27% Guam International Boutique Partners Tamuring, Guam 60% 14% DFS Liquor Retailing Ltd Delaware, U.S.A. 60% 27% Twenty Seven—Twenty Eight Corp. Delaware, U.S.A. 60% 27% TRS Hawaii LLC Honolulu, (Hawaii), U.S.A. (2) 45% 12% TRS Saipan Garapan, Saipan, Marianna 45% 12% Islands (2) TRS Guam Tumon, Guam (2) 45% 12% Le Bon Marché SA Paris, France 60% 44% SEGEP SNC Paris, France 60% 44% Franck & Fils SA Paris, France 60% 44%

142 Balthazar SNC Paris, France 60% 44% Tumon Entertainment LLC Tamuning, Guam 60% 44% Comete Guam Inc. Tamuning, Guam 60% 44% Tumon Games LLC Tamuning, Guam 60% 44% 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 Cayman Islands 60% 44% South Florida Custom Brokers, Inc. Miami (Florida), U.S.A. 60% 44% Miami Airport Duty-Free Joint Miami (Florida), U.S.A. 60% 29% Venture Fort Lauderdale Partnership Ft Lauderdale (Florida) U.S.A. 60% 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 SARL Paris, France 60% 44% 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% De Beers LV Ltd London, United Kingdom (2) 30% 22% 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% 38% Moët Hennessy SNC Boulogne Billancourt, France 60% 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%

143 Moët Hennessy International SA Boulogne Billancourt, France 60% 29% Creare SA Luxembourg, Luxembourg 60% 38% Creare Pte Ltd Singapore 60% 38% Jean Goujon SAS Boulogne Billancourt, France 60% 44% 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% Cie Financière Laflachère SA Boulogne Billancourt, France 60% 44% LV Capital SA Paris, France 60% 44% Micromania S.A.S Nice, France (2) 15% 11% SFMI SA Nice, France (2) 15% 11% LC Oméga Holdings SA Boulogne Billancourt, France (2) 15% 11% 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 Naarden, Netherlands 60% 44% LVMH Moët Hennessy Louis Naarden, 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 Vuitton Paris, France 60% 44% SA (*) The address listed is the administrative office of the companies; corporate registration for the company is in the State of Delaware. (1) Company consolidated on a proportional basis. (2) Company consolidated using the equity method. (3) Joint venture with Diageo: only Moët Hennessy activity added.

144 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005

MAZARS & GUERARD ERNST & YOUNG AUDIT MAZARS Faubourg de l’Arche Le Vinci - 4, allée de l’Arche 11, allée de l’Arche 92075 Paris-La Défense Cedex 92037 Paris-La Défense Cedex S.A. with capital of 8,320,000 euros S.A.S. with variable capital Statutory Auditor Statutory Auditor Member of Compagnie Régionale Member of Compagnie Régionale de Paris de Versailles

To the Shareholders, In performing the mission that has been assigned to us by your Annual General Meeting, we have reviewed the consolidated financial statements of the Christian Dior company for the year ended December 31, 2005, as they appear in this report. The consolidated financial statements were drawn up by the Board of Directors. It is our task, based on our audit, to express an opinion on these statements. These statements were prepared for the first time in conformity with the IFRS standards as adopted in the European Union. They include comparative data for the 2004 financial year restated in accordance with the same rules.

I. OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS We have conducted our audit in accordance with auditing standards generally accepted in France. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, by sampling, evidence supporting the amounts and disclosures contained in the financial statements. It also includes assessing the accounting principles used and significant estimates made by management to prepare the accounts, as well as evaluating the overall financial statement presentation. We believe that our controls provide a reasonable basis for the opinion expressed below. We certify that, according to IFRS accounting standards as adopted in the European Union, the consolidated financial statements faithfully and fairly present, in all material respects, the assets, the financial position and the results of all the companies included in the consolidation.

II. JUSTIFICATION OF OUR ASSESSMENT Pursuant to the provisions of Article L.823-9 of the French Commercial Code governing the justification of our assessment, we provide you with the following information: • We believe that note 1.9 to the financial statement provides adequate information in regard to the accounting treatment of purchasing commitments of minority interests, which is not precisely specified in the IFRS standards as adopted in the European Union. • The valuation of brands and goodwill has been tested using the method described in note 1.11 to the financial statements. We have assessed the legitimacy of the methodology used, which was based on a set of estimates and examined the amounts and assumptions used by the company to make these valuations.

145 The assessments we made are part of our audit of the consolidated financial statements in their entirety and, therefore, have contributed to the formation of our opinion as expressed in the first part of this report.

III. SPECIFIC VERIFICATION Furthermore, we have also performed verifications of information contained in the management report of the Group, in accordance with accounting principles generally accepted in France. We have no comments to make on their accuracy and consistency with the consolidated financial statements.

Paris-La Défense, April 10, 2006

The Auditors

MAZARS & GUERARD ERNST & YOUNG AUDIT MAZARS

Denis Grison Christian Mouillon

146