Photos: Jean-Baptiste Huynh Jean-Baptiste Photos: 2006 - 2007 annual report WorldReginfo - 7d8ec102-a34f-4432-a9e8-dc8d08d756fa 2006-2007 ANNUAL REPORT This document was registered with the French financial market authorities (Autorité des Marchés Financiers or AMF) on June 28, 2007, in accordance with article 212-13 of its Draft Regulation. It can be used to document a financial transaction if accompanied by a memorandum registered with the AMF. In this document, the term "Group" refers to Laurent-Perrier and its consolidated subsidiaries, and "Laurent-Perrier" refers to the brand name under which Laurent-Perrier products are sold. Words marked with an asterisk (*) refer readers to the glossary at the end of this document. ISIN code for Laurent-Perrier: FR0006864484 WorldReginfo - 7d8ec102-a34f-4432-a9e8-dc8d08d756fa ContentsContents Business activities of the Laurent-Perrier Group page 4 1 1.1. Laurent-Perrier: the history of a group close to its roots 1.2. Group overview 1.3. The market 1.4. The Laurent-Perrier Group: recent changes, goals and strategy, outlook 1.5. Risk factors 1.6. Report on Social and labour relations 1.7. Report on Environmental data - Prevention 1.8. Exceptional events and litigation Persons responsible for this reference document and for auditing the accounts page 27 2 2.1. Person responsible for this reference document 2.2. Affidavit by the person responsible for the reference document 2.3. Auditors 2.4. Person responsible for investor information General information on Laurent-Perrier page 29 3 3.1. Statutory information and share buy-back programme 3.2. General information on Laurent-Perrier’s capital and shares 3.3. Property, plant and equipment 3.4. Simplified organisation chart of the Laurent-Perrier Group WorldReginfo - 7d8ec102-a34f-4432-a9e8-dc8d08d756fa Corporate governance and conflicts of interest: 4 administrative, management and supervisory bodies page 39 4.1. Senior management 4.2. Global amount of total remuneration and fringe benefits of all sorts paid out either directly or indirectly by Laurent-Perrier or other Group companies during the financial year 4.3. Stock options granted to Group officers and to the top 10 non-officer employees Assets, financial position and income statements page 46 5 5.1. Consolidated financial statements at March 31, 2006 and 2007 5.2. Notes to the consolidated financial statements for the period ended March 31, 2007 5.3. Parent company financial statements at March 31, 2005, 2006 and 2007 5.4. Notes to the parent company financial statements at March 31, 2007 5.5. Results of the past five financial years 5.6. Certification by the auditors of the parent company and consolidated financial statements at March 31, 2007 5.7. Special auditors’ report for the financial year ended March 31, 2007 5.8. Fees paid by the Group to the auditors and members of their networks at March 31, 2007 Joint Shareholders’ Meeting, July 5, 2007 page 88 6 6.1. Agenda 6.2. Shareholders’ resolutions Reports page 96 7 7.1. Report by the Chairman of the Supervisory Board on the conditions for the preparation and organisation of the work of the Supervisory Board and on the internal control procedures implemented by Laurent-Perrier (articles L 225-235 of the French Commercial Code) 7.2. Information published over the year 7.3. Special report on transactions undertaken for the share buy-back programme 7.4. Special report on directors’ shareholdings Annexes page 109 Annex 1: The making of Champagne Annex 2: Glossary Annex 3: Cross-references between the reference document and the report of the Management Board Annex 4: Cross references between the reference document and the principal headings of European Commission Regulation (EC) 809-2004 of April 29, 2004. WorldReginfo - 7d8ec102-a34f-4432-a9e8-dc8d08d756fa 4 2006-2007 annual report Business activities of the Laurent-Perrier Group 11.1. Laurent-Perrier: the history of a group close to its roots 1812: Alphonse Pierlot establishes the champagne house, subsequently renamed after his successors, Eugène Laurent and Mathilde-Émilie Perrier. 1939: Marie-Louise de Nonancourt acquires Laurent-Perrier. 1949: Her son, Bernard de Nonancourt, becomes Chairman of Laurent-Perrier. 1958: Cuvée Grand Siècle launched. 1968: Cuvée Rosé Brut launched. 1978: Distribution subsidiary set up in the United Kingdom. 1983: Acquisition of a 34% stake in Champagne de Castellane. 1988: Laurent-Perrier acquires a majority interest in the Salon champagne house. 1992: Distribution subsidiary set up in Switzerland. 1998: Buy-back of the minority shareholdings in Champagne Laurent-Perrier (22%) and Laurent-Perrier (3%) held by United Distillers and Vintners (UDV). 1998: Creation of a United States subsidiary and a distribution branch in Belgium. 1999: Buy-back of minority shareholdings in Champagne de Castellane. 1999: Company listed on the Euronext Paris Second Marché. 2002: New presentation and packaging for the Laurent-Perrier range. 2003: Creation of a distribution company in Japan (Jeroboam) in partnership with other French fine wine producers. 2004: Acquisition of Château Malakoff. 2005: Global launch for Laurent-Perrier and Grand Siècle new visual identity. 2006: Brut Millésimé 1997 launched. 2007: The Group terminates its agreement with Jeroboam and signs a new Japanese distribution contract with Suntory. 1.2. Group overview 1.2.1. Introduction Under Bernard de Nonancourt’s energetic chairmanship, Laurent-Perrier Group has become a leading champagne house, selling 14.3 million bottles of flagship champagne brands in 2006-2007. It has an estimated worldwide volume market share of 4.4%. Its volume market share among champagne houses is 6.5% (source: Laurent-Perrier and CIVC*). The Group’s products are sold under four main brands: Laurent-Perrier, Salon, Delamotte, and Champagne de Castellane, which are positioned across a price spectrum ranging from the upper-middle WorldReginfo - 7d8ec102-a34f-4432-a9e8-dc8d08d756fa 5 category to the premium and ultra-premium categories. According to the December 2005 issue of Revue de Champagne magazine, the Laurent-Perrier Group ranks 4th worldwide by volume after the LVMH, Boizel Chanoine Champagne, and Vranken groups. By value, the Laurent-Perrier brand ranks third. Laurent-Perrier also considers that it has gained a leading position in high value-added products such as rosé champagne, prestige cuvées and unsweetened Brut Nature. The Group is controlled by the de Nonancourt family, which holds 56.16% of its capital and 69.96% of the voting rights. It is organised under three different types of legal entities: - champagne houses, including in addition to Champagne Laurent-Perrier, Champagne de Castellane (Champagne de Castellane brand), the A.S. company (Salon and Delamotte brands), Champagne Lemoine and Château Malakoff (Jeanmaire, Oudinot and Beaumet brands); - distribution subsidiaries or branches in France and several foreign markets: Belgium, the United States, Switzerland and the United Kingdom; - vineyards, held either directly by Grands Vignobles de Champagne and Château Malakoff or through real-estate compagnies (sociétés civiles immobilières), some of which have wine-growers as partners. Two Economic Interest Groups (EIGs) whose members are companies belonging to the Group have been set up to maximize the Group’s distribution and production capabilities. These EIGs are not consolidated because their earnings are integrated directly into the accounts of the EIG partner companies and they have no material assets. The Group exports 61.2% of its production to over 120 countries, including the United Kingdom, Belgium, Switzerland, Italy, the United States and Japan. In most of its export markets, Laurent-Perrier’s products are mainly sold through the specialised distribution channels of cafés, hotels and restaurants, wine merchants and direct sales, with the notable exception of Belgium, where the Group has a strong foothold in major retail chains. In France, 75% of the volumes sold under the Laurent-Perrier brand name go through specialised and direct distribution network channels, with the remaining 25% being distributed through retail chains (medium and large-sized supermarkets). 1.2.2. Key figures for the last three financial years 31.03.2005 31.03.2006 31.03.2007 (IFRS) (IFRS) (IFRS) Sales (million euros) 191.0 208.1 236.7 Export sales as % of total sales 62.9% 63.9% 64.9% Percentage of Laurent-Perrier brand premium products 35.3% 36.2% 36.52% Percentage of Laurent-Perrier brand sales (by volume) through specialised channels in France 77.0% 77.0% 75 % Gross margin 46.4% 48.6% 51% Operating income (million euros) 34.2 41.3 56.6 Return on capital invested (ROCI) 8.5% 9.6% 12.5% Gearing (net debt/attributable shareholders' equity) 153.0% 146.0% 114% Book value of inventory/net debt 131.0% 132.0% 149 % Consolidated net attributable income (millions euros) 16.3 22.48 30.2 Net debt: “Borrowing and long-term liabilities” — “Marketable securities” — “Cash and cash equivalents” Return on capital invested: (“Operating profit” / Capital invested) Capital invested: "Goodwill on acquisitions" + "Trademarks and other intangible and tangible assets" + "Inventories and work in progress" + "Trade receivables" + "Other receivables and adjustments" – "Trade payables" – "Other payables and adjustments". WorldReginfo - 7d8ec102-a34f-4432-a9e8-dc8d08d756fa 6 2006-2007 annual report 1.3. The market Champagne is one of the few French wine regions that is not in deep crisis. 1.3.1. A highly regulated industry In accordance with the 1927 French law on Appellations d’Origine Contrôlée (AOC*), wine permitted to carry the name "champagne" is produced in an area covering a total of 35,000 hectares. The AOC area has steadily increased from 20-25,000 hectares in the late 1970s to 30,000 hectares by the end of the 1990s, and to about 35,000 hectares today. Champagne is the northernmost wine-producing region in France and, with a few exceptions, in the world. It is a small area of land, representing only 5.6% of AOC-registered land and only 3.5% of French land used for wine growing (Source: CIVC*, Bank of France).