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LVMH GROUP

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Notes to the condensed consolidated financial statement

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LVMH GROUP

The consolidated financial statements presented are condensed,which means that they only include notes that are significant orfacilitate understanding of changes in the Groups business activityand financial position during the year. They are extracted fromthe consolidated financial statements approved by the Board ofDirectors which include all of the notes to the financial statementsrequired under IFRS, as adopted in the European Union.

The consolidated financial statements for the year endedDecember 31, 2008 were established in accordance with internationalaccounting standards and interpretations (IAS/IFRS) adopted bythe European Union and applicable on December 31, 2008. Thesestandards and interpretations have been applied consistently tothe fiscal years presented. The financial statements were approvedfor publication by the Board of Directors on February 5, 2009.

The depth and duration of the current economic and financialcrisis, which left its mark on fiscal year 2008, are difficult to predictwith accuracy. The Groups consolidated financial statements forthe year ended December 31, 2008 were prepared taking intoconsideration this immediate context, particularly with respect tothe valuation of current and non-current available for sale financialassets and financial instruments, the expected level of inventoryturnover and the recoverability of trade receivables. Assets whosevalue is assessed with reference to longer term prospects, especiallyintangible or real estate assets, have been valued using assumptionstaking into account an economic and financial crisis whose durationwould be limited in time, particularly with respect to its impacton future cash flows from operating activities, with the financialindicators used in these valuations nevertheless being thoseprevailing at the balance sheet date.

The standards, amendments and interpretations applicable toLVMH have been implemented by the Group since January 1,2007 and do not have a significant impact on the consolidatedfinancial statements presented; they relate to: - IFRIC 13 Customer loyalty programmes was applied early as of

the 2007 consolidated financial statements.

The following standards, amendments and interpretationsapplicable to LVMH, whose mandatory application date is

January 1, 2009, were not applied early in 2008; they relate to:IFRS 8 Segment reporting;-amendments to IAS 1 Presentation of financial statements;-amendments to IAS 23 Borrowing costs;-amendments to IFRS 2 Share-based payment vesting conditions-and cancellations;

- IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset,Minimum Funding Requirements and their Interaction.

The application of these standards, amendments and interpretationsin 2009 is not expected to have a material impact on the Groupsconsolidated financial statements. In particular, the application of

IFRS 8 will alter neither the structure of published figures nor theamount of goodwill allocated to each business segment.

In addition, the Group has opted for early application, as of the 2009fiscal year, of the amendment to IAS 38 Intangible assets, relatingto the recognition of advertising and promotion expenses.

The first accounts prepared by the Group in accordance with IFRSwere the financial statements for the year ended December 31,2005, with a transition date of January 1, 2004. IFRS 1 allowed forexceptions to the retrospective application of IFRS at the transition

date. The procedures implemented by the Group with respect tothese exceptions are listed below:business combinations: the exemption from retrospective-application was not applied. The recognition of the merger ofMot Hennessy and Louis Vuitton in 1987 and all subsequentacquisitions were restated in accordance with IFRS 3; IAS 36Impairment of Assets and IAS 38 Intangible Assets were appliedretrospectively as of this date;measurement of property, plant and equipment and intangible-assets: the option to measure these assets at fair value at the dateof transition was not applied;employee benefits: actuarial gains and losses previously deferred-

under French GAAP at the date of transition were recognized;foreign currency translation of the financial statements of foreign-subsidiaries: translation reserves relating to the consolidationof subsidiaries that prepare their accounts in foreign currencywere reset to zero as of January 1, 2004 and offset against Otherreserves;share-based payment: IFRS 2 Share-Based Payment was applied-to all share subscription and share purchase option plans thatwere open at the date of transition, including those created beforeNovember 7, 2002, the date before which application is notmandatory.

Notes to the condensed consolidated financial statements

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LVMH GROUP

For the purpose of preparing the consolidated financial statements,measurement of certain balance sheet and income statementitems requires the use of hypotheses, estimates or other forms ofjudgment. This is particularly true of the valuation of intangible

assets, purchase commitments for minority interests and of thedetermination of the amount of provisions for contingencies andlosses or for impairment of inventories and, if applicable, deferredtax assets. Such hypotheses, estimates or other forms of judgmentwhich are undertaken on the basis of the information available, orsituations prevalent at the date of preparation of the accounts, mayprove different from the subsequent actual events.

The subsidiaries in which the Group holds a direct or indirect de facto or de jure controlling interest are fully consolidated.

Jointly controlled companies are consolidated on a proportionate basis.For distribution subsidiaries operating in accordance with thecontractual distribution arrangements with the Diageo Group,only the portion of assets and liabilities and results of operationsrelating to LVMH Group activities is included in the consolidatedfinancial statements (see Note 1.23).

Companies where the Group has significant influence but nocontrolling interest are accounted for using the equity method.

The consolidated financial statements are stated in euros; thefinancial statements of subsidiaries stated in a different functionalcurrency are translated into euros:

at the period-end exchange rates for balance sheet items;-at the average rates for the period for income statement items.-

Translation adjustments arising from the application of these ratesare recorded in equity under Cumulative translation adjustment.

Foreign currency transactions of consolidated companies aretranslated to their functional currencies at the exchange ratesprevailing at the transaction dates.

Accounts receivable, accounts payable and debts denominated inforeign currencies are translated at the applicable exchange ratesat the balance sheet date. Unrealized gains and losses resultingfrom this translation are recognized:

within cost of sales in the case of commercial transactions;-within net financial income/expense in the case of financial-transactions.

Foreign exchange gains and losses arising from the translationof inter-company transactions or receivables and payablesdenominated in foreign currencies, or from their elimination, arerecorded in the income statement unless they relate to long terminter-company financing transactions which can be consideredas transactions relating to equity. In the latter case, translationadjustments are recorded in equity under Cumulative translationadjustment.

Derivatives which are designated as hedges of commercial foreigncurrency transactions are recognized in the balance sheet at theirmarket value at the balance sheet date and any change in the marketvalue of such derivatives is recognized:

within cost of sales for the effective portion of hedges of-receivables and payables recognized in the balance sheet at theend of the period;within equity (as a revaluation reserve) for the effective portion of-hedges of future cash flows (this part is transferred to cost of sales

at the time of recognition of the hedged assets and liabilities);within net financial income/expense for the ineffective portion of-hedges; changes in the value of discount and premium associatedwith forward contracts, as well as the time value component ofoptions, are systematically considered as ineffective portions.

When derivatives are designated as hedges of subsidiariesequity in foreign currency (net investment hedge), any change inmarket value of the derivatives is recognized within equity underCumulative translation adjustment for the effective portion andwithin net financial income/expense for the ineffective portion.

Market value changes of derivatives not designated as hedges arerecorded within net financial income/expense.

Only acquired brands and trade names that are well known andindividually identifiable are recorded as assets at their valuescalculated on their dates of acquisition.

Costs incurred in creating a new brand or developing an existingbrand are expensed.

Brands, trade names and other intangible assets with finite usefullives are amortized over their useful lives. The classification of abrand or trade name as an asset of definite or indefinite useful life

is generally based on the following criteria:the brand or trade names positioning in its market expressed in-terms of volume of activity, international presence and notoriety;its expected long term profitability;-its degree of exposure to changes in the economic-environment;any major event within its business segment liable to compromise-its future development;its age.-


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LVMH GROUP

Amortizable lives of brands and trade names, depending on theirestimated longevity, range from 5 to 40 years.

Amortization and any impairment expense of brands and trade namesare recognized within Other operating income and expenses.

Impairment tests are carried out for brands, trade names and

other intangible assets using the methodology described inNote 1.12.

Research expenditure is not capitalized. New product developmentexpenditure is not capitalized unless the final decision to launchthe product has been taken.

Intangible assets other than brands and trade names are amortizedover the following periods:- leasehold rights: based on market conditions,

generally between 100% and 200% of the lease period- development expenditure 3 years at most- software 1 to 5 years

When the Group takes de jure or de facto control of an enterprise, itsassets, liabilities and contingent liabilities are estimated at theirfair value and the difference between the cost of taking control andthe Groups share of the fair value of those assets, liabilities andcontingent liabilities is recognized as goodwill.

The cost of taking control is the price paid by the Group inthe context of an acquisition, or an estimate of this price if thetransaction is carried out without any payment of cash.

Pending specific guidance from current standards, the differencebetween the cost and carrying amount of minority interestspurchased after control is acquired is recognized as goodwill.

Goodwill is accounted for in the functional currency of the acquiredentity.

Goodwill is not amortized but is subject to annual impairmenttesting using the methodology described in Note 1.12. Anyimpairment expense recognized is included within Otheroperating income and expenses.

The Group has granted put options to minority shareholders ofcertain fully consolidated subsidiaries.

Pending guidance from IFRS on this subject, the Group recognizesthese commitments as follows at each period-end:

the contractual value of the commitment at this date appears in-Other non-current liabilities;

the corresponding minority interests are reclassified and included-in the above amount;the difference between the amount of the commitment and the-reclassified minority interests is recorded as goodwill.

This accounting policy has no effect on the presentation of minority

interests within the income statement.The accounting treatment described above nevertheless elicitsthe following observation: certain interpretations of these textslead to the recognition of the entire amount of goodwill as adeduction from equity; under other interpretations, goodwill ismaintained under assets but in an amount frozen at the acquisitiondate, with subsequent changes being taken directly to the incomestatement.

With the exception of vineyard land, the gross value of property,

plant and equipment is stated at acquisition cost. Any borrowingcosts incurred prior to use of assets are expensed.

Vineyard land is recognized at the market value at the balance sheetdate. This valuation is based on official published data for recenttransactions in the same region, or on independent appraisals. Anydifference compared to historical cost is recognized within equity inRevaluation reserves. If market value falls below acquisition costthe resulting impairment is charged to the income statement.

Vines for champagnes, cognacs and other wines produced by theGroup, are considered as biological assets as defined in IAS 41Agriculture. As their valuation at market value differs little fromthat recognized at historical cost, no revaluation is undertakenfor these assets.

Investment property is measured at cost.

Assets acquired under finance leases are capitalized on the basisof the lower of their market value and the present value of futurelease payments.

Property, plant and equipment is depreciated on a straight-linebasis over its estimated useful life:- buildings including investment property 20 to 50 years- machinery and equipment 3 to 25 years- store improvements 3 to 10 years

- producing vineyards 18 to 25 years

The depreciable amount of property, plant and equipmentcomprises its acquisition cost less any estimated residual value.

Expenses for maintenance and repairs are charged to the incomestatement as incurred.


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LVMH GROUP

Intangible and tangible fixed assets are subject to impairmenttesting whenever there is any indication that an asset may beimpaired, and in any event at least annually in the case of intangibleassets with indefinite useful lives (mainly brands, trade names and

goodwill). When the carrying amount of such assets is greater thanthe higher of their value in use or net selling price, the resultingimpairment loss is recognized within Other operating income andexpenses, allocated in priority to any existing goodwill.

Value in use is based on the present value of the cash flows expectedto be generated by these assets. Net selling price is estimated bycomparison with recent similar transactions or on the basis ofvaluations performed by independent experts.

Cash flows are forecast for each business segment defined as oneor several brands or trade names under the responsibility of aspecific management team. Smaller scale cash generating units,e.g. a group of stores, may be distinguished within a particularbusiness segment.Brands and goodwill are chiefly valued on the basis of the presentvalue of forecast cash flows, or of comparable transactions (i.e.using the revenue and net profit coefficients employed for recenttransactions involving similar brands), or of stock market multiplesobserved for related businesses. Other complementary methodsmay also be employed: the royalty method, involving equating abrands value with the present value of the royalties required to bepaid for its use; the margin differential method, applicable whena measurable difference can be identified between the amount ofrevenue generated by a branded product in comparison with anunbranded product; and finally the equivalent brand reconstitution

method involving, in particular, estimation of the amount ofadvertising required to generate a similar brand.

The forecast data required for the cash flow methods is basedon budgets and business plans prepared by management of therelated business segments. Detailed forecasts cover a five-yearperiod, a period which may be extended in the case of certainbrands undergoing strategic repositioning, or which have a longerproduction cycle. Moreover, a final value is also estimated, whichcorresponds to the capitalization in perpetuity of cash flows mostoften arising from the last year of the plan. When several forecastscenarios are developed, the probability of occurrence of eachscenario is assessed. Forecast cash flows are discounted on the basis

of the rate of return to be expected by an investor in the applicablebusiness and include assessment of the risk factor associated witheach business.

Available for sale financial assets are classified as current or non-current based on their nature and the estimated period for whichthey will be held.

Non-current available for sale financial assets mainly includeparticipating investments (strategic and non-strategic).

Current available for sale financial assets include temporaryinvestments in shares, shares of SICAV, FCP and othermutual funds, excluding investments made as part of the dailycash management, accounted for as cash and cash equivalents (seeNote 1.16).

Available for sale financial assets are measured at their listed valueat balance sheet date in the case of quoted investments, and at theirnet realizable value at that date in the case of unquoted investments.

Positive or negative changes in value are taken to equitywithin Revaluation reserves. If an impairment loss is judgedto be definitive, a provision for impairment is recognized andcharged to net financial income/expense; the impairment is onlyreversed through the income statement at the time of sale of thecorresponding available for sale financial assets.

Inventories other than wine produced by the Group are recorded atthe lower of cost (excluding interest expense) and net realizable value;cost comprises manufacturing cost (finished goods) or purchaseprice, plus incidental costs (raw materials, merchandise).

Wine produced by the Group, especially champagne, is measured

at the applicable harvest market value, as if the harvested grapeshad been purchased from third parties. Until the date of the harvest,the value of grapes is calculated pro rata temporis on the basis of theestimated yield and market value.

Inventories are valued using the weighted average cost or FIFOmethods.

Due to the length of the aging process required for champagne andcognac, the holding period for these inventories generally exceedsone year. However, in accordance with industry practices, theseinventories are nevertheless classified as current assets.

Provisions for impairment of inventories are chiefly recognized

for businesses other than Wines and Spirits. They are generallyrequired because of product obsolescence (date of expiry, end ofseason or collection, etc.) or lack of sales prospects.


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LVMH GROUP

Trade accounts receivable are recorded at their face value. Aprovision for impairment is recorded if their net realizable value,based on the probability of their collection, is less than theircarrying amount.

Cash and cash equivalents comprise cash on hand and demanddeposits as well as highly liquid monetary investments subject toan insignificant risk of changes in value.

Monetary investments are measured at their market value and atthe exchange rate prevailing at the balance sheet date, with anychanges in value recognized as part of net financial income/expense.

A provision is recognized whenever an obligation exists towardsa third party resulting in a probable disbursement for the Group,the amount of which may be reliably estimated.

When execution of its obligation is expected to be deferred by morethan one year, the provision amount is discounted, the effects ofwhich are generally recognized in net financial income/expense.

Borrowings are measured at amortized cost, i.e. nominal value netof premium and issue expenses, which are charged progressivelyto net financial income/expense using the effective interestmethod.

In the case of hedging against fluctuations in the capital amountof borrowings resulting from interest rate risk, both the hedgedamount of borrowings and the related hedges are measured attheir market value at the balance sheet date, with any changesin those values recognized within net financial income/expensefor the period. Market value of hedged borrowings is determinedusing similar methods as those described hereafter in Note 1.19Derivatives.

In the case of hedging of future interest payments, the relatedborrowings remain measured at their amortized cost whilst anychanges in value of the effective hedge portions are taken to equity

as part of revaluation reserves.Changes in value of non-hedge derivatives, and of the ineffectiveportions of hedges, are recognized within net financial income/expense.

Financial debt bearing embedded derivatives is measured at marketvalue; changes in market value are recognized within net financialincome/expense.

Net financial debt comprises short and long term borrowings, themarket value at the balance sheet date of interest rate derivatives,less the value of current available for sale financial assets, otherfinancial assets, in addition to the market value at the balancesheet date of related foreign exchange derivatives, and cash andcash equivalents at that date.

The Group enters into derivative transactions as part of its strategyfor hedging foreign exchange and interest rate risks.

IAS 39 subordinates the use of hedge accounting to demonstrationand documentation of the effectiveness of hedging relationshipswhen hedges are implemented and subsequently throughouttheir existence. A hedge is considered to be effective if the ratio ofchanges in the value of the derivative to changes in the value of thehedged underlying remains within a range of 80 to 125%.

Derivatives are recognized in the balance sheet at their marketvalue at the balance sheet date. Changes in their value are accountedfor as described in Note 1.7 in the case of foreign exchange hedges,and as described in Note 1.18 in the case of interest rate hedges.

Market value is based on market data and on commonly used valuationmodels, and may be confirmed in the case of complex instrumentsby reference to values quoted by independent financial institutions.

Derivatives with maturities in excess of twelve months are disclosedas non-current assets and liabilities.

LVMH shares and options to purchase LVMH shares that are heldby the Group are measured at their acquisition cost and recognizedas a deduction from consolidated equity, irrespective of the purposefor which they are held.

The cost of disposals of shares is determined by allocation category(see Note 14.2) using the FIFO method with the exception of sharesheld under stock option plans for which the calculation is performedfor each plan using the weighted average cost method. Gains andlosses on disposal, net of income taxes, are taken directly to equity.

When payments are made by the Group in respect of retirementbenefits, pensions, medical costs and other commitments to thirdparty organizations which assume the payment of benefits ormedical expense reimbursements, these contributions are expensedin the period in which they fall due with no liability recorded onthe balance sheet.


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LVMH GROUP

When retirement benefits, pensions, medical costs and othercommitments are to be borne by the Group, a provision is recordedin the balance sheet in the amount of the corresponding actuarialcommitment, and any changes in this commitment are expensedwithin profit from recurring operations over the period, includingeffects of discounting.

When this commitment is either partially or wholly funded bypayments made by the Group to external financial organizations,these payments are deducted from the actuarial commitmentrecorded in the balance sheet.

The actuarial commitment is calculated based on assessments thatare specifically designed for the country and the Group companyconcerned. In particular, these assessments include assumptionsregarding discount rates, salary increases, inflation, life expectancy,staff turnover and the return on plan assets.

Cumulative actuarial gains or losses are amortized if, at the year-end, they exceed 10% of the higher of the total commitment or

the market value of the funded plan assets. These gains or lossesare amortized in the period following their recognition over theaverage residual active life of the relevant employees.

Deferred tax is recognized in respect of temporary differencesarising between the amounts of assets and liabilities for purposesof consolidation and the amounts resulting from application oftax regulations.

Deferred tax is measured on the basis of the income tax rates enactedat the balance sheet date; the effect of changes in rates is recognized

during the periods in which changes are enacted.Future tax savings from tax losses carried forward are recordedas deferred tax assets on the balance sheet and impaired whereappropriate; only amounts for which future use is deemed probableare recognized.

Deferred tax assets and liabilities are not discounted.

Taxes payable in respect of the distribution of retained earnings ofsubsidiaries are provided for if distribution is deemed probable.

Revenue mainly comprises direct sales to customers and salesthrough distributors. Sales made in stores owned by third partiesare treated as retail transactions if the risks and rewards of ownershipof the inventories are retained by the Group.

Direct sales to customers are made through retail stores for Fashionand Leather Goods, certain Perfumes and Cosmetics, certainWatches and Jewelry brands and Selective Retailing. These salesare recognized at the time of purchase by retail customers.

Wholesale sales through distributors are made for Wines andSpirits, and certain Perfumes and Cosmetics and Watches and

Jewelry brands. The Group recognizes revenue when title transfersto third party customers, i.e. generally on shipment of productsfrom Group facilities.

Revenue includes shipment and transportation costs re-billed tocustomers only when these costs are included in products sellingprices as a lump sum.

Revenue is presented net of all forms of discount. In particular,payments made in order to have products referenced or, in accordancewith agreements, to participate in advertising campaigns with thedistributors, are deducted from revenue and the correspondingtrade accounts receivable.

Perfumes and Cosmetics and, to a lesser extent, Fashion andLeather Goods and Watches and Jewelry companies may accept

the return of unsold or outdated products from their customersand distributors.

Where this practice is applied, revenue and the corresponding tradereceivables are reduced by the estimated amount of such returns,and a corresponding entry is made to inventories. The estimatedrate of returns is based on statistics of historical returns.

A significant proportion of revenue for the Groups Wines andSpirits businesses are achieved within the framework of distributionagreements with Diageo generally taking the form of shared entitieswhich sell and deliver both groups brands to customers. On the

basis of the distribution agreements, which provide specific rulesfor allocating these entities net profit and assets and liabilitiesbetween LVMH and Diageo, LVMH only recognizes the portionof their revenue and expenses attributable to its own brands.

Advertising and promotion expenses include the costs of producingadvertising media, purchasing media space, manufacturing samplesand publishing catalogs, and in general, the cost of all activitiesdesigned to promote the Groups brands and products.

Advertising and promotion expenses are recognized as expensesfor the period in which they are incurred; the cost of mediacampaigns in particular is time-apportioned over the duration ofthese campaigns and the cost of samples and catalogs is recognizedwhen they are made available to customers.

Beginning with the 2009 fiscal year, in application of IAS 38 asamended, advertising and promotion expenses will be recordedupon receipt or production of goods or upon completion of servicesrendered.


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LVMH GROUP

Share purchase and subscription option plans give rise to recognitionof an expense based on the expected benefit granted to beneficiariescalculated, using the Black & Scholes method, at the date of theBoard Meeting that granted the options.

For bonus share plans, the expected benefit is calculated on thebasis of the closing share price on the day before the Board Meetingat which the decision to initiate the plan is made, and dividendsexpected to accrue during the vesting period.

For cash-settled LVMH share-based incentive plans, the gainover the vesting period is estimated based on the type of plan asdescribed above.

For all plans, the expense is apportioned on a straight-line basisover the vesting period, with a corresponding:

impact on reserves for share purchase and subscription option plans;-balance sheet impact for cash-settled plans.-

After the vesting period has expired, only cash-settled plans havean impact on the income statement, in the amount of the changein the LVMH share price.

The Groups main business is the management and developmentof its brands and trade names. Profit from recurring operations isderived from these activities, whether they are recurring or non-recurring, core or incidental transactions.

Other operating income and expenses comprises income statementitems which, due to their nature, amount or frequency, may not beconsidered as inherent to the Groups recurring operations. Thiscaption reflects in particular the impact of changes in the scope ofconsolidation and the impairment of brands and goodwill, as wellas any significant amount of gains or losses arising on the disposal

of fixed assets, restructuring costs, costs in respect of disputes, orany other non-recurring income or expense which may otherwisedistort the comparability of profit from recurring operations fromone period to the next.

Earnings per share are calculated based on the weighted averagenumber of shares outstanding during the period, excludingtreasury shares.

Diluted earnings per share are calculated based on the weightedaverage number of shares before dilution and adding the weighted

average number of shares that would result from the exercise ofall existing subscription options during the period or any otherdiluting instrument. It is assumed for the purposes of thiscalculation that the funds received from the exercise of options,supplemented by the expense to be recognized for stock option andsimilar plans (see Note 1.25), would be employed to re-purchaseLVMH shares at a price corresponding to their average tradingprice over the period.

In February 2008, the Group acquired 100 percent of the Spanishwinery Bodega Numanthia Termes, a producer of wines from theToro region, for total consideration of 27 million euros. Thisacquisition was consolidated with effect from March 2008.

In December 2008, the Group acquired 100 percent of theMontaudon champagne house, owner of its eponymous brand,

for total consideration of 29 million euros. This acquisition willbe consolidated with effect from January 1, 2009.

In April 2008, the Group acquired 100 percent of the Swisswatchmaker Hublot for total consideration of 306 million euros(486 million Swiss francs), including 2 million euros in acquisitioncosts. This acquisition price was paid in July 2008, upon fulfillmentof contractual conditions precedent. Hublot was fully consolidatedwith effect from May 2008. The price paid was allocated to thebrand in the amount of 219 million euros. The provisional goodwillamount of 109 million euros mainly represents the companysexpertise in designing and manufacturing timepieces, and thesynergies arising from the brands integration into the distributionnetwork of the Watches and Jewelry business group.


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LVMH GROUP

The equity stake in the Les Echos media group, acquired inDecember 2007 and recognized under non-current available forsale financial assets as of December 31, 2007, was fully consolidatedwith effect from January 1, 2008. The total consideration paid in

2007 for 100 percent of the share capital was 244 million euros,including 4 million euros in acquisition costs and excluding theassumption by LVMH of Pearsons financial debt with respectto the Les Echos group, which amounted to 107 million euros.An amount of 147 million euros was allocated to brands andother intangible assets, which essentially comprise the financialdaily Les Echos and subscriber databases. The amount recognizedfor goodwill, 161 million euros, mainly represents the humancapital formed by the editorial teams of the Les Echos group,which cannot be isolated on the balance sheet.

The amount recognized for goodwill mainly represents the humancapital formed by the editorial teams of the Les Echos group, whichcannot be isolated on the balance sheet.

The business of the financial daily La Tribune, sold inFebruary 2008, was deconsolidated with effect from this date.

In October 2008, the Group acquired a 90% equity stake in RoyalVan Lent, the Dutch designer and builder of luxury yachts soldunder the Feadship brand, with the remaining 10% of the sharecapital being subject to a purchase commitment. Royal Van Lent wasfully consolidated with effect from October 2008. The price paidgenerates a provisional goodwill amount of 331 million euros, whichrelates notably to the value of the brand; a valuation of tangible andintangible assets acquired was underway as of December 31, 2008.


(EUR millions) 2008 2007 2006

Gross Amortization andimpairment

Net Net Net

Brands 6,599 (355) 6,244 5,867 5,768

Trade names 3,218 (1,309) 1,909 1,819 2,003

License rights 107 (64) 43 46 234

Leasehold rights 254 (152) 102 101 83

Software 367 (257) 110 83 71

Other 257 (129) 128 83 68

Total 10,802 (2,266) 8,536 7,999 8,227

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

Movements during the year ended December 31, 2008 in the net amounts of brands, trade names and other intangible assets were as follows:

Gross value (EUR millions)

Brands Trade names Otherintangible

assets

Total

As of December 31, 2007 6,202 3,060 824 10,086Acquisitions - - 111 111

Disposals (3) - (20) (23)

Changes in the scope of consolidation 337 - 41 378

Translation adjustment 63 158 19 240Other movements - - 10 10

As of December 31, 2008 6,599 3,218 985 10,802

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Accumulated amortization and impairment(EUR millions)

Brands Trade names Otherintangible

assets

Total

As of December 31, 2007 (335) (1,241) (511) (2,087)Amortization expense (21) - (93) (114)

Impairment expense - - - -

Disposals - - 18 18

Changes in the scope of consolidation - - (6) (6)

Translation adjustment 1 (68) (10) (77)

Other movements - - - -

As of December 31, 2008 (355) (1,309) (602) (2,266)

Net carrying amount as of December 31, 2008 6,244 1,909 383 8,536

Changes in the scope of consolidation for the year ended December 31, 2008 are mainly attributable to the acquisition of Hublot in theamount of 219 million euros and the acquisition of the Les Echos media group for 147 million euros. See also Note 2.

The translation adjustment is mainly attributable to intangible assets recognized in US dollars and Swiss francs, following the changein the exchange rate of these currencies with respect to the euro during the fiscal year. The DFS trade name and the TAG Heuer brandwere particularly affected.

The gross value of amortized brands is 540 million euros as of December 31, 2008.

(EUR millions) 2008 2007 2006

Gross Impairment Net Net Net

Goodwill arising on consolidated investments 4,423 (1,085) 3,338 2,742 2,754

Goodwill arising on purchase commitmentsfor minority interests 1,082 (3) 1,079 2,076 1,783

Total 5,505 (1,088) 4,417 4,818 4,537

Please refer also to Note 19 for goodwill arising on purchase commitments for minority interests.

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

(EUR millions) 2008 2007 2006


As of January 1 5,845 (1,027) 4,818 4,537 4,479Changes in the scope of consolidation 637 2 639 69 11

Changes in purchase commitments for minority interests (1,061) (1,061) 272 220

Changes in impairment (31) (31) - (15)

Translation adjustment 84 (32) 52 (60) (158)

As of December 31 5,505 (1,088) 4,417 4,818 4,537

Changes in the scope of consolidation for the year ended December 31, 2008 are attributable to the impact of the consolidation of the LesEchos media group for 161 million euros, the Royal Van Lent acquisition in the amount of 331 million euros, and the Hublot acquisitionfor 109 million euros. See also Note 2.


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Brands, trade names, and other intangible assets with indefinite useful lives as well as the goodwill arising on acquisition have been subject toannual impairment testing. No significant impairment expense has been recognized in respect of these items during the course of fiscal year 2008.

(EUR millions) 2008 2007 2006

Gross Depreciation andimpairment

Net Net Net

Land 724 - 724 690 706

Vineyard land and producing vineyards 1,690 (77) 1,613 1,426 1,348

Buildings 1,674 (656) 1,018 992 989

Investment property 343 (52) 291 286 297

Machinery and equipment 4,149 (2,511) 1,638 1,430 1,369

Other tangible fixed assets (including assets in progress) 1,226 (422) 804 595 464Total 9,806 (3,718) 6,088 5,419 5,173

o/w: assets held under finance leases historical cost of vineyard land and producing vineyards

261557

(114)(77)

147480

161464

182462

Movements in property, plant and equipment during 2008 break down as follows:

Gross value(EUR millions)

Vineyard landand producing

vineyards

Land andbuildings

Investmentproperty

Machinery andequipment

Other tangiblefixed assets

(including assetsin progress)

Total

As of December 31, 2007 1,499 2,313 333 3,725 983 8,853Acquisitions 24 46 - 425 462 957

Change in the market value of vineyard land 173 - - - - 173Disposals and retirements (5) (59) (1) (238) (48) (351)

Changes in the scope of consolidation 1 13 - 16 1 31

Translation adjustment (6) 74 7 71 11 157

Other movements, including reclassifications 4 11 4 150 (183) (14)

As of December 31, 2008 1,690 2,398 343 4,149 1,226 9,806


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LVMH GROUP

Accumulated depreciation and impairment(EUR millions)

Vineyard landand producing

vineyards

Land andbuildings

Investmentproperty

Machinery andequipment

Other tangiblefixed assets

(including assetsin progress)

Total

As of December 31, 2007 (73) (631) (47) (2,295) (388) (3,434)Depreciation expense (6) (47) (5) (388) (68) (514)

Impairment expense - - - - - -

Disposals and retirements 2 27 1 222 35 287

Changes in the scope of consolidation - - - (10) - (10)

Translation adjustment - (5) (1) (40) (1) (47)

Other movements - - - - - -

As of December 31, 2008 (77) (656) (52) (2,511) (422) (3,718)

Net carrying amount as of December 31, 2008 1,613 1,742 291 1638 804 6,088

Property, plant and equipment acquisitions consisted mainly of investments by Louis Vuitton, Sephora and DFS in their retail networksin addition to investments by Hennessy and Mot & Chandon in their production equipment.

(EUR millions) 2008 2007 2006


Share of net assets of associates as of January 1 129 - 129 126 128

Share of net profit (loss) for the period 7 7 7 8

Dividends paid (7) (7) (4) (7)

Changes in the scope of consolidation 84 84 - (2)

Translation adjustment 3 - 3 - (1)Share of net assets of associates as of December 31 216 - 216 129 126

As of December 31, 2008, investments in associates consistedprimarily of:

- a 40% equity stake in Mongoual SA, a real estate company whichowns a property held for rental in Paris (France), which is the headoffice of LVMH Mot Hennessy-Louis Vuitton SA;

- a 45% equity stake in the group owning Ile de Beaut stores,one of the leading perfume and cosmetics retail chains in Russia,acquired in October 2008.

Total rents invoiced by Mongoual SA to the Group amounted to15 million euros in 2008 (15 million euros in 2007 and 14 millioneuros in 2006).

Sales by the Perfumes and Cosmetics business group to Ile de Beautfrom October to December 2008 amounted to 11 million euros.

The 23.1% equity stake in Micromania was sold in 2008.


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LVMH GROUP

(EUR millions) 2008 2007 2006


Total 433 (58) 375 823 504

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

(EUR millions) 2008 2007 2006

As of January 1 823 504 451

Acquisitions 62 374 85

Disposals at net realized value (114) (33) (162)

Changes in market value (14) (8) 132

Reclassifications as consolidated investments (352) - -

Changes in impairment (34) - 5

Changes in the scope of consolidation - - -

Translation adjustment 4 (14) (7)As of December 31 375 823 504

Acquisitions in 2008 include the Montaudon champagne house in the amount of 29 million euros; this acquisition will be consolidatedin fiscal year 2009. The change in cash flow relating to this acquisition is classified in the consolidated cash flow statement under theheading Impact of purchase and sale of consolidated investments. See Note 2 Changes in the scope of consolidation.

Acquisitions in fiscal year 2007 mainly comprised Les Echos group in the amount of 350 million euros. This acquisition has beenconsolidated in fiscal year 2008.

(EUR millions) 2008 2007 2006

Wines and distilled alcohol in the process of aging 2,928 2,683 2,406

Other raw materials and work in progress 708 460 421

3,636 3,143 2,827

Goods purchased for resale 579 476 456

Finished products 2,126 1,739 1,621

2,705 2,215 2,077

Gross amount 6,341 5,358 4,904

Impairment (574) (546) (521)

Net amount 5,767 4,812 4,383


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LVMH GROUP

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

(EUR millions) 2008 2007 2006


As of January 1 5,358 (546) 4,812 4,383 4,134Change in gross inventories 826 826 565 346

Fair value adjustment for the harvest of the period 24 24 35 23

Change in provision for impairment (62) (62) (48) 21

Changes in the scope of consolidation 86 (2) 84 25 -

Translation adjustment 115 (26) 89 (148) (141)

Reclassifications (68) 62 (6) - -As of December 31 6,341 (574) 5,767 4,812 4,383

The effects on Wines and Spiritscost of sales of marking harvests to market are as follows:

(EUR millions) 2008 2007 2006

Fair value adjustment for the harvest of the period 53 50 41

Adjustment for inventory consumed (29) (15) (18)Net effect on cost of sales of the period 24 35 23

(EUR millions) 2008 2007 2006

Trade accounts receivable - nominal amount 1,843 1,780 1,650Provision for impairment (58) (53) (54)

Provision for product returns (135) (132) (135)

Net amount 1,650 1,595 1,461

Trade accounts receivable relating to the Groups wholesale activities represent payment terms that are generally less than three months.

The amount of the impairment expense in 2008 is 12 million euros (compared to 9 million euros in 2007 and 7 million euros in 2006).

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

(EUR millions) 2008 2007 2006

Current available for sale financial assets 590 879 607

Derivatives 265 311 242Tax accounts receivable, excluding income taxes 284 249 231

Advances and payments on account to vendors 141 109 100

Prepaid expenses 302 233 225

Other receivables, net 233 220 182

Total 1,815 2,001 1,587


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LVMH GROUP

Prepaid expenses include samples and advertising materials, particularly for Perfumes and Cosmetics, in the amount of 125 million eurosas of December 31, 2008 (94 million euros as of December 31, 2007, 88 million euros as of December 31, 2006).

There is no difference between the market value of other current assets and their carrying amount.

Please also refer to Note 12 Current available for sale financial assets and Note 21 Financial instruments and market risk management.

(EUR millions) 2008 2007 2006

Unlisted securities, shares in non money market SICAV and mutual funds 471 601 462Listed securities 119 278 145Total 590 879 607

Of which: historical cost of current available for sale financial assets 679 741 506

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

(EUR millions) 2008 2007 2006

As of January 1 879 607 421

Acquisitions 107 370 336

Disposals at net realized value (115) (92) (156)

Changes in market value (233) 58 42

Changes in impairment (92) - -

Changes in the scope of consolidation 1 - -

Translation adjustment 43 (64) (36)

As of December 31 590 879 607

(EUR millions) 2008 2007 2006

Fixed term deposits (less than 3 months) 64 426 126

SICAV and FCP money market funds 72 48 49

Ordinary bank accounts 877 1,085 1,047

Cash and cash equivalents per balance sheet 1,013 1,559 1,222

As of December 31, 2007, cash and cash equivalents included an amount of 28 million euros, which guaranteed borrowings of sameamount (50 million euros as of December 31, 2006).The reconciliation between cash and cash equivalents as shown in the balance sheet and net cash and cash equivalents appearing in the

cash flow statement is as follows:

(EUR millions) 2008 2007 2006

Cash and cash equivalents 1,013 1,559 1,222

Bank overdrafts (295) (472) (457)

Net cash and cash equivalents per cash flow statement 718 1,087 765


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LVMH GROUP

As of December 31, 2008, issued and fully paid-up shares totaled489,937,410 (489,937,410 shares as of December 31, 2007 and 2006),with a par value of 0.30 euro per share, including 226,413,842 shares

with double voting rights. Double voting rights are granted toregistered shares held for at least three years (225,670,036 as ofDecember 31, 2007, 219,487,441 as of December 31, 2006).

Until fiscal year 2006, LVMH shares to be delivered under sharepurchase option plans were held by the Group and allocated tothese plans as from the launch date of the plans. In the first half

of 2006, this method of hedging was replaced for certain existingplans by the purchase of LVMH share purchase options (LVMHshare-based calls). The LVMH shares that were replaced by theLVMH share-based calls were reallocated to cover plans other thanshare purchase option plans.

Other plans mainly comprise share subscription option plans.

The market value of LVMH shares held under the liquidity contractas of December 31, 2008 is the same as their carrying amount, i.e.16 million euros.

The portfolio movements in 2008 were as follows:

LVMH shares

(EUR millions) Numberof shares

Value Effecton cash

As of December 31, 2007 15,423,024 791

Share purchases, incl. throughexercise of call options 5,333,529 337 (327)

Exercise of sharepurchase options (278,226) (26) 10

Bonus shares definitivelyallocated (154,090) (9) -

Cancellation of shares (92,600) (4) -Proceeds from disposalat net realized value (3,355,446) (220) 220

Gain (loss) on disposal - (8) -

As of December 31, 2008 16,876,191 861 (97)

LVMH share-based calls

(EUR millions) Numberof calls

Value Effecton cash

As of December 31, 2007 2,014,000 86

Calls purchased 1,159,200 46 (46)Calls exercised (203,000) (10) -

As of December 31, 2008 2,970,200 122 (46)

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

(EUR millions) 2008 2007 2006

Number Value Value Value

Share purchase option plans 4,892,048 279 340 592

Bonus share plans 311,459 23 22 15

Other plans 10,497,384 487 418 301

Shares held for stock option and similar plans 15,700,891 789 780 908Liquidity contract 355,300 16 11 17

Retirement of shares 820,000 56 - -

LVMH treasury shares 16,876,191 861 791 925

LVMH share-based calls (1) 2,970,200 122 86 94

LVMH treasury shares and derivatives settled in LVMH shares 19,846,391 983 877 1,019(1) Number of shares which could be purchased if all of the calls outstanding at the balance sheet date were exercised and the related premium paid on subscription.


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LVMH GROUP

In accordance with French regulations, dividends are deducted from the profit for the year and reserves available for distribution of theparent company, after deducting applicable withholding tax and the value of treasury shares. As of December 31, 2008, the amountavailable for distribution was 4,931 million euros; after taking into account the proposed dividend distribution in respect of the 2008fiscal year, the amount available for distribution is 4,319 million euros.

(EUR millions, except for data per share) 2008 2007 2006

Interim dividend for the current year (2008: 0.35 euro; 2007: 0.35 euro; 2006: 0.30 euro) 171 171 147Impact of treasury shares (5) (5) (5)

166 166 142

Final dividend for the previous year (2007: 1.25 euro; 2006: 1.10 euro; 2005: 0.90 euro) 612 539 441

Impact of treasury shares (20) (19) (17)

592 520 424

Total gross amount disbursed during the period (1) 758 686 566

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

The final dividend for 2008, as proposed to the Shareholders Meeting of May 14, 2009 1.25 euro per share, representing a total disbursementof 612 million euros excluding the effects of treasury shares.

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

These reserves changed as follows during the year:

(EUR millions) Available forsale financial

assets

Hedges of futureforeign currency

cash flows

Vineyardland

TotalGroup share

As of December 31, 2007 367 76 533 976

Change in value (186) 123 137 74

Transfer to profit for the year (66) (180) - (246)

Tax impact 21 40 (47) 14

Gains and losses recognized in equity (231) (17) 90 (158)

As of December 31, 2008 136 59 623 818

(EUR millions) Hedges of futureforeign currency

cash flows

Vineyardland

Total shareof minority

interests

As of December 31, 2007 15 103 118

Change in value 15 35 50

Transfer to profit for the year (26) - (26)

Tax impact 3 (12) (9)

Gains and losses recognized in equity (8) 23 15

As of December 31, 2008 7 126 133


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LVMH GROUP

The change in the translation adjustment recognized under equity and the closing balance, net of hedging effects of net assets denominatedin foreign currency, breaks down as follows by currency:

(EUR millions) 2008 Change 2007

US dollar (344) 201 (545)Japanese yen 70 99 (29)

Hong Kong dollar 5 66 (61)

Pound sterling (109) (102) (7)

Other currencies 38 45 (7)

Hedges of foreign currency net assets (1) (31) (72) 41

Total (371) 237 (608)

(1) See Note 17.3 Analysis of gross borrowings by currency after hedging.

The Shareholders Meeting of May 11, 2006 authorized theBoard of Directors, for a period of thirty-eight months expiringin July 2009, to grant share subscription or purchase options toGroup company employees or directors, on one or more occasions,in an amount not to exceed 3% of the companys share capital.

Each plan is valid for 10 years. The options may be exercisedafter a three or a four-year period, based on whether the planswere issued before or after 2004, with the exception of the sharepurchase option plan dated May 14, 2001 initially concerning1,105,877 options, which is valid for eight years and for whichthe options may be exercised after a period of four years.

In certain circumstances, in particular in the event of retirement,the period of three or four years before options may be exercisedis not applicable.

For all plans, one option entitles the holder to purchase oneLVMH share.

The Shareholders Meeting of May 15, 2008 authorized the Boardof Directors, for a period of thirty-eight months expiring in

July 2011, to grant bonus shares to Group company employees ordirectors, on one or more occasions, in an amount not to exceed 1%of the companys share capital on the date of this authorization.

The allocation of bonus shares to their beneficiaries becomesdefinitive after a two-year vesting period, which is followed by atwo-year lockup period during which the beneficiaries may notsell their shares.

In addition to share option and bonus share plans, the Group issuesplans which are equivalent in terms of gains as for the beneficiaries ofshare purchase option plans and bonus share plans, but are settled incash rather than shares. These plans have a four-year vesting period.


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LVMH GROUP

2008 2007 2006

Number Weightedaverage exercise

price

(EUR)


price

(EUR)


price

(EUR) Share subscription optionsoutstanding as of January 1 8,015,393 66.60 6,426,534 61.39 4,637,175 54.57

Options granted during the period 1,698,320 72.51 1,679,988 86.12 1,789,359 79.07

Expired options (51,453) 66.52 (91,129) 58.76 - -

Options exercised during the period (92,600) 55.71 - - - -Share subscription optionsoutstanding as of December 31 9,569,660 67.76 8,015,393 66.60 6,426,534 61.39

Options granted relate to the share subscription option plan set up on May 15, 2008 with an average unit exercise price of 72.51 euros.

2008 2007 2006


price (EUR)


price (EUR)


price (EUR)

Share purchase options outstandingas of January 1 8,253,029 56.74 12,635,926 51.36 14,927,777 49.48

Options granted during the period - - - - - -

Expired options (112,555) 41.35 (544,795) 56.24 (48,893) 63.59

Options exercised during the period (278,226) 35.20 (3,838,102) 39.06 (2,242,958) 39.83Share purchase options outstandingas of December 31 7,862,248 57.73 8,253,029 56.74 12,635,926 51.36

A plan for allocation of bonus shares covering 162,972 shares was instituted on May 15, 2008.

A plan equivalent to the award of 52,923 bonus shares was set up on May 15, 2008.

The plans in force as of December 31, by type and number of equivalent share-based plans, together with the provision recognized in theyear-end balance sheet, break down as follows:

2008 2007 2006

Type of plan (in equivalent number of shares) Share purchase option plan 322,945 334,220 376,808

Bonus share plan 147,511 96,818 49,170

Provision as of December 31 (EUR millions) 4 11 7


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LVMH GROUP

(EUR millions) 2008 2007 2006

Share subscription and purchase option plans, bonus share plans 44 43 34Cash-settled share-based compensation plans index-linkedto the change in the LVMH share price (6) 3 1

Expense for the year 38 46 35

In 2006, 2007 and 2008 all plans which had not yet vested as of January 1, 2004, the date of transition to IFRS, are taken into account.

In the calculation presented above, the unit value of each option plan is determined on the basis of the Black & Scholes method, as describedin Note 1.25. The assumptions and criteria retained for this calculation are as follows:

Plans 2008 Plans 2007 Plans 2006

LVMH share price on the grant date (EUR) 75.01 86.67 84.05

Average exercise pric e (EUR) 72.51 86.12 79.07

Volatility of LVMH shares 27.5% 24.0% 24.5%

Dividend distribution rate 2.4% 2.0% 1.4%

Risk-free investment rate 4.1% 4.4% 4.1% Vesting period 4 years 4 years 4 years

The volatility of LVMHs shares is determined on the basis of their implicit volatility.

The unit values of share subscription options and bonus shares allocated in 2008 are 20.44 euros and 71.66 euros, respectively.

(EUR millions) 2008 2007 2006

As of January 1 938 991 1,025

Minority interests share of net profit 292 306 281

Dividends paid to minority interests (188) (156) (120)

Changes in scope of consolidation:

acquisition of minority interests in Fendi - (27) (2)

acquisition of minority interests in Donna Karan - - (4)

consolidation of Wen Jun - 9 -

consolidation of Royal Van Lent 14 - -

other changes in scope of consolidation 6 3 -

Total changes in scope of consolidation 20 (15) (6)

Capital increases subscribed by minority interests 4 1 6

Minority interests share in the following changes:

revaluation reserves 15 19 29translation adjustment 45 (86) (90)

stock option plan expenses 3 4 3

Effects of purchase commitments for minority interests (139) (126) (137)

As of December 31 990 938 991

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


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LVMH GROUP

(EUR millions) 2008 2007 2006

Long term borrowings 3,738 2,477 3,235

Short term borrowings 1,847 3,138 2,100

Gross amount of borrowings 5,585 5,615 5,335

Interest rate risk derivatives (70) (51) (74)

Other derivatives (4) - -

Borrowings net of derivatives 5,511 5,564 5,261

Current available for sale financial assets (590) (879) (607)

Other financial assets (39) (32) (32)

Cash and cash equivalents (1,013) (1,559) (1,222)

Net financial debt 3,869 3,094 3,400

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

The impact of interest rate derivatives is detailed in Note 21.


(EUR millions) 2008

Payment date: 2009 1,847

2010 1,225

2011 934

2012 758

2013 486

Thereafter 335Total 5,585

(EUR millions) 2008 2007 2006

Euro 3,984 4,110 3,348

US dollar 145 217 431

Swiss franc 806 666 814

Yen 383 296 253

Other currencies 193 275 415

Total 5,511 5,564 5,261

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

(EUR millions) 2008 2007 2006

Floating rate 2,294 2,963 1,756

Capped floating rate - - 1,400

Fixed rate 3,217 2,601 2,105

Total 5,511 5,564 5,261

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LVMH GROUP

(EUR millions) 2008 2007 2006

Bonds and EMTNs 2,735 2,169 2,777

Bank borrowings and finance leases 1,003 308 458

Long term borrowings 3,738 2,477 3,235

Bonds and EMTNs 127 791 219

Commercial paper 717 1,086 516

Bank overdrafts 295 472 457

Other short term borrowings 708 789 908

Short term borrowings 1,847 3,138 2,100

Total borrowings 5,585 5,615 5,335

(EUR millions) 2008 2007 2006

Provisions for pensions, medical costs and similar commitments 230 237 260

Provisions for contingencies and losses 707 712 685

Provisions for reorganization 34 27 38

Non-current provisions 971 976 983

Provisions for pensions, medical costs and similar commitments 6 5 4Provisions for contingencies and losses 229 228 142Provisions for reorganization 71 63 109Current provisions 306 296 255

Total 1,277 1,272 1,238

In 2008, the changes in provisions were as follows:

(EUR millions) Dec. 31,2007

Increases Amountsused

Amountsreleased

Changesin scope of

consolidation

Other items(including

translationadjustment)

Dec. 31,2008

Provisions for pensions, medical costs andsimilar commitments 242 38 (41) (6) 2 1 236

Provisions for contingencies and losses 940 167 (119) (62) 14 (4) 936

Provisions for reorganization 90 46 (39) (4) 12 - 105

Total 1,272 251 (199) (72) 28 (3) 1,277

Of which: profit from recurring operations 121 (125) (53)net financial income (expense) - - -

other 130 (74) (19)

Provisions for contingencies and losses correspond to the estimateof the impact on assets and liabilities of risks, disputes, or actualor probable litigation arising from the Groups activities; suchactivities are carried out worldwide, within what is often an

imprecise regulatory framework that is different for each country,changes over time, and applies to areas ranging from productcomposition to the tax computation.


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LVMH GROUP

(EUR millions) 2008 2007 2006

Purchase commitments for minority interests 2 ,963 3,862 3,490

Derivatives 27 20 17

Employee profit-sharing (1) 88 109 100

Other liabilities 175 156 148

Total 3,253 4,147 3,755(1) French companies only, pursuant to legal provisions.

As of December 31, 2006, 2007 and 2008 purchase commitmentsfor minority interests mainly include the put option granted toDiageo plc for its 34% share in Mot Hennessy SNC, with six-months advance notice and for 80% of its market value at theexercise date of the commitment.

With regard to this commitment valuation, the market value wasdetermined by applying the share price multiples of comparablefirms to Mot Hennessys consolidated operating results.

Purchase commitments for minority interests also includecommitments relating to minority shareholders in BeneFit (20%)and in Sephora in various countries.

The market value of the other non-current liabilities is identicalto their carrying amount.

(EUR millions) 2008 2007 2006

Derivatives 166 27 30

Employees and social institutions 562 514 488

Employee profit-sharing (1) 66 39 29

Taxes other than income taxes 245 234 239

Advances and payments on account from customers 203 77 68

Deferred payment for tangible and financial non-current assets 170 271 168

Deferred income 69 49 47

Other 385 341 341

Total 1,866 1,552 1,410

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

The market value of the other current liabilities is identical to their carrying amount.

Derivatives are analyzed in Note 21.


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LVMH GROUP

Financial instruments are mainly used by the Group to hedge risks arising from Group activity and protect its assets. Theseinstruments are centralized. Counterparties are selected based on a minimum rating level and in accordance with the Groups riskdiversification strategy.

Derivatives are recorded in the balance sheet for the amounts and in the captions detailed as follows:

(EUR millions) Note 2008 2007 2006

Interest rate riskAssets: non-current 36 18 29

current 80 73 89Liabilities: non-current (25) (20) (17)

current (21) (20) (27)21.2 70 51 74

Foreign exchange riskAssets: non-current 17 6 2current 185 238 153

Liabilities: non-current (2) - -current (70) (7) (3)

21.3 130 237 152Other risksAssets: non-current 140 - -

current - - -Liabilities: non-current - - -

current (75) - -65 - -

TotalAssets: non-current 193 24 31

current 11 265 311 242Liabilities: non-current 19 (27) (20) (17)

current 20 (166) (27) (30)265 288 226


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LVMH GROUP

The Group manages its interest rate exposure on the basis of total net financial debt. The objective of its management policy is to protectnet profit against a sharp rise in interest rates.

As such, the Group uses interest rate swaps and options (caps and floors).

Derivatives used to manage interest rate risk outstanding as of December 31, 2008 break down as follows:(EUR millions) Nominal amounts by maturity Market value(1)

2009 2010to 2014

Total Fair valuehedges

Unallocatedamounts

Total

Interest rate swaps in euros:

- fixed rate payer 200 963 1,163 (6) (6) (12)

- floating rate payer 818 1,502 2,320 50 - 50

Foreign currency swaps 103 148 251 - 32 32

Total 44 26 70

(1) Gain/(loss).

A significant part of both Group companies sales to customers andtheir own retail subsidiaries and certain purchases are denominatedin currencies other than their functional currency; the majority ofthese foreign currency-denominated cash flows are inter-companycash flows. Hedging instruments are used to reduce the risks arisingfrom foreign currency fluctuations against the various companiesown currencies and are allocated to either accounts receivable oraccounts payable for the fiscal year, or, under certain conditions,to transactions anticipated for future periods.

Future foreign currency-denominated cash flows are brokendown as part of the budget preparation process and are hedgedprogressively over a period not exceeding one year unless a longerperiod is justified by probable commitments. As such, andaccording to market trends, identified foreign exchange risks arehedged progressively using forward contracts or options.

The Group may also use appropriate financial instruments to hedgethe net worth of foreign subsidiaries, in order to limit the impact offoreign currency fluctuations against the euro on consolidated equity.


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LVMH GROUP

Derivatives used to manage foreign exchange risk outstanding as of December 31, 2008 break down as follows:

(EUR millions) Nominal amounts by fiscal year of allocation Market value(1)

2008 2009 Thereafter Total Future cashflow hedges

Fair valuehedges

Net assethedges

Notallocated

Total

Options purchased

Put USD 9 649 - 658 26 - - 2 28

Put JPY 30 368 - 398 1 - - 2 3

Others 2 101 - 103 26 - - 1 27

41 1,118 - 1,159 53 - - 5 58

Ranges

Written USD (72) 569 - 497 15 (1) - 1 15

Written JPY 32 383 99 514 (25) - - (3) (28)

Others - - - - - - - - -(40) 952 99 1,011 (10) (1) - (2) (13)

Forward exchange contracts (2)

USD 486 830 (1) 1,315 66 18 13 7 104

JPY 49 311 - 360 5 1 - (12) (6)GBP 23 (15) - 8 (2) - - 2 -

Others 49 14 - 63 6 - - 1 7

607 1,140 (1) 1,746 75 19 13 (2) 105Foreign exchange swaps (2)

CHF 237 - - 237 - - - (7) (7)

USD 445 - - 445 - - 15 (36) (21)

GBP 52 - - 52 - - - (1) (1)

JPY 59 - - 59 - - (1) 3 2

Others 50 - - 50 - - - 7 7

843 - - 843 - - 14 (34) (20)

Total 118 18 27 (33) 130(1) Gain/(loss).(2) Sale/(purchase).

The Groups investment policy is designed to take advantage of along term investment horizon. Occasionally, the Group may investin equity-based financial instruments with the aim of enhancingthe dynamic management of its investment portfolio.

The Group is exposed to risks of share price changes either directly,as a result of its holding of equity investments and current availablefor sale financial assets, or indirectly, as a result of its holding offunds which are themselves partially invested in shares.

The Group may also use equity-based derivatives to createsynthetically an economic exposure to certain assets, or to hedgecash-settled compensation plans index-linked to the LVMH share

price. The carrying amount of these unlisted financial instrumentscorresponds to the estimate, provided by the counterparty, of thevaluation at the balance sheet date. The valuation of financialinstruments thus takes into consideration market parameters suchas interest rates, share prices, and volatility. Considering nominalvalues of 1.1 billion euros for those derivatives, a uniform variationof 1% in their underlying assets share prices as of December 31,

2008 would impact net profit for an amount of 9 million euros.Derivatives used to manage equity risk outstanding as of December31, 2008 had a positive fair value of 65 million euros. Most of theseinstruments mature in 2010 and 2011.


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LVMH GROUP

(EUR millions) Winesand

Spirits

Fashionand Leather

Goods

Perfumesand

Cosmetics

Watchesand

Jewelry

SelectiveRetailing

Other andholding

companies

Eliminations(1) (4) (5)

Total

Sales outside the Group 3,117 5,976 2,665 863 4,361 211 - 17,193

Sales between business groups 9 34 203 16 15 17 (294) -

Total revenue 3,126 6,010 2,868 879 4,376 228 (294) 17,193

Profit from recurring operations 1,060 1,927 290 118 388 (136) (19) 3,628Other operating incomeand expenses 13 (61) (28) (1) (28) (38) - (143)

Operating investments (2) 157 338 146 39 228 160 - 1,068

Depreciation and amortization 75 236 111 23 148 35 - 628Impairment - 20 - - - 11 - 31

Brands, trade names, licensesand goodwill (3) 2,065 4,651 930 1,434 2,630 903 - 12,613

Inventories 3,408 850 293 400 776 109 (69) 5,767

Other operating assets 2,578 1,947 805 318 1,390 2,431 3,728 13,197

Total assets 8,051 7,448 2,028 2,152 4,796 3,443 3,659 31,577

Equity - - - - - - 13,887 13,887

Operating liabilities 1,069 1,141 883 189 1,111 690 12,607 17,690

Total liabilities and equity 1,069 1,141 883 189 1,111 690 26,494 31,577

Since the Samaritaine department store was reclassified in 2008 from Selective Retailing to Other activities and holding companies, 2007

and 2006 data was restated in order to facilitate comparison with 2008 data.


Spirits

Fashionand Leather

Goods

Perfumesand

Cosmetics

Watchesand

Jewelry

SelectiveRetailing

Other andholding

companies


Total


Sales between business groups 6 37 168 15 12 6 (244) -

Total revenue 3,226 5,628 2,731 833 4,164 143 (244) 16,481

Profit from recurring operations 1,058 1,829 256 141 426 (141) (14) 3,555Other operating incomeand expenses (4) (18) (17) (3) (12) (72) - (126)

Operating investments (2) 199 241 116 28 242 174 - 1,000

Depreciation and amortization 71 210 103 21 122 27 - 554Impairment - - - 1 - 10 - 11

Brands, trade names, licensesand goodwill (3) 3,187 4,887 927 979 2,525 45 - 12,550

Inventories 3,036 622 263 268 626 45 (48) 4,812

Other operating assets (6) 2,429 1,739 709 266 1,329 2,038 4,512 13,022

Total assets 8,652 7,248 1,899 1,513 4,480 2,128 4,464 30,384

Equity - - - - - - 12,528 12,528

Operating liabilities (6) 1,064 977 833 155 1,010 501 13,316 17,856

Total liabilities and equity 1,064 977 833 155 1,010 501 25,844 30,384


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Spirits

Fashionand Leather

Goods

Perfumesand

Cosmetics

Watchesand

Jewelry

SelectiveRetailing

Other andholding

companies


Total


Sales between business groups 5 32 140 13 12 6 (208) -Total revenue 2,994 5,222 2,519 737 3,877 165 (208) 15,306

Profit from recurring operations 962 1,633 222 80 387 (124) 12 3,172Other operating incomeand expenses (12) (44) (30) (9) (16) (9) - (120)

Operating investments (2) 107 308 99 25 185 51 - 775

Depreciation and amortization 61 208 98 21 117 16 - 521Impairment - 5 - - 3 14 - 22

Brands, trade names, licensesand goodwill (3) 2,936 4,978 920 1,009 2,643 56 - 12,542

Inventories 2,730 603 244 235 558 50 (37) 4,383

Other operating assets (6) 2,220 1,752 648 229 1,153 1,970 3,474 11,446

Total assets 7,886 7,333 1,812 1,473 4,354 2,076 3,437 28,371

Equity - - - - - - 11,594 11,594

Operating liabilities (6) 1,025 935 736 156 932 506 12,487 16,777

Total liabilities and equity 1,025 935 736 156 932 506 24,081 28,371

(1) Eliminations correspond to sales between business groups; these generally consist of sales from business groups other than Selective Retailing to Selective Retailing. Selling prices betwthe different business groups correspond to the prices applied in the normal course of business for transactions involving wholesalers or distributors outside the Group.

(2) Operating investments correspond to amounts capitalized during the fiscal year rather than payments made during the fiscal year with respect to these investments.(3) Brands, trade names, licenses, and goodwill correspond to the net carrying amounts shown under Notes 3 and 4.(4) Assets not allocated include investments in associates, available for sale financial assets, other financial assets, and income tax receivables.(5) Liabilities not allocated include borrowings and both current and deferred tax liabilities.(6) As of December 31, 2008, the figure shown for the Groups income tax liability with respect to the French tax consolidation structure was offset by advance payments made.

Other operating assets and liabilities as of December 31, 2007 and December 31, 2006 were restated to facilitate comparison with 2008 information


Revenue by geographic region of delivery breaks down as follows:

(EUR millions) 2008 2007 2006

France 2,464 2,348 2,197

Europe (excluding France) 4,095 3,790 3,332

United States 3,925 4,124 4,009

Japan 1,779 1,856 1,985

Asia (excluding Japan) 3,404 3,044 2,651

Other 1,526 1,319 1,132

Revenue 17,193 16,481 15,306

Operating investments by geographic region are as follows:

(EUR millions) 2008 2007 2006

France 499 399 295

Europe (excluding France) 187 231 119

United States 164 199 138

Japan 18 32 91

Asia (excluding Japan) 141 94 78

Other 59 45 54

Operating investments 1,068 1,000 775

Operating investments correspond to the amounts capitalized during the fiscal year.

No geographic breakdown of segment assets is provided since a significant portion of these assets consists of brands and goodwill, whichmust be analyzed on the basis of the revenue generated by these assets in each region, and not in relation to the region of their legalownership.

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Quarterly sales by business group during 2008 break down as follows:


Spirits

Fashionand Leather

Goods

Perfumesand

Cosmetics

Watchesand

Jewelry

SelectiveRetailing

Other andholding

companies

Eliminations 2008

First quarter 640 1,445 717 211 1,011 56 (78) 4,002

Second quarter 652 1,323 645 206 979 54 (62) 3,797

Third quarter 746 1,471 719 239 1,015 43 (73) 4,160

Fourth quarter 1,088 1,771 787 223 1,371 75 (81) 5,234

Total revenue 3,126 6,010 2,868 879 4,376 228 (294) 17,193

Profit from recurring operations includes the following expenses:

(EUR millions) 2008 2007 2006Advertising and promotion expenses 2,031 1,953 1,783

Commercial lease expenses 964 978 932

Personnel costs 2,900 2,716 2,569

Research and development expenses 43 46 43

Advertising and promotion expenses mainly consist of the cost of media campaigns and point-of-sale advertising, and also includepersonnel costs dedicated to this function.

As of December 31, 2008, a total of 2,314 stores were operated by the Group worldwide (2,048 in 2007, 1,859 in 2006), particularly byFashion and Leather Goods and Selective Retailing.

In certain countries, leases for stores are contingent on the payment of minimum amounts in addition to a variable amount, especially for

stores with lease payments indexed to revenue. The total lease expense for the Groups stores breaks down as follows:(EUR millions) 2008 2007 2006

Fixed or minimum lease payments 405 402 356

Variable portion of indexed leases 175 176 173

Airport concession fees - fixed portion or minimum amount 221 204 209

Airport concession fees - variable portion 163 196 194

Commercial lease expenses for the period 964 978 932

Personnel costs consist of the following elements:

(EUR millions) 2008 2007 2006

Salaries and social charges 2,831 2,628 2,471

Pensions, medical costs and similar expenses in respect of defined benefit plans 31 42 63

Stock option plan and related expenses 38 46 35

Total 2,900 2,716 2,569


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(EUR millions) 2008 2007 2006

Net gains (losses) on disposal of fixed assets 14 (81) -

Restructuring costs (83) (25) (63)

Amortization or impairment of brands, trade names, goodwill and other property (57) (16) (28)

Other, net (17) (4) (29)

Other operating income and expenses (143) (126) (120)

In 2008, other operating income and expenses comprised capitalgains realized on the sale of various assets in the amount of 14million euros and costs for the restructuring of industrial andcommercial processes in the amount of 83 million euros. Theseamounts related to the discontinuation of certain product lines,the closure of retail stores considered as insufficiently profitableand the reorganization of the operations of Glenmorangie. Thelatter notably included the gradual withdrawal from activitiesperformed on behalf of third parties and the disposal of certain

assets, notably the industrial facility in Broxburn (UnitedKingdom) as well as the Glen Moray brand and distillery.

In 2007, other operating income and expenses mainly comprisedthe net loss on the sale of La Tribune group, the logistics companyKami (Fashion and Leather Goods) and Omas writing instruments.

In 2006, restructuring costs, which were of a commercial orindustrial nature, mainly relate to the Fashion and Leather Goodsand the Perfumes and Cosmetics business groups.

(EUR millions) 2008 2007 2006

Borrowing costs, excluding perpetual bonds (255) (241) (201)

Interest and income from current available for sale financial assets 15 30 23

Fair value adjustment of borrowings and hedges, excluding perpetual bonds (17) 2 7

Net cost of perpetual bonds - 2 (2)

Cost of net financial debt (257) (207) (173)

Dividends received from non-current available for sale financial assets 11 29 21

Ineffective portion of foreign currency hedges (64) (97) (45)

Net gain/(loss) related to available for sale financial assets and other financial instruments 53 44 164

Other items net (24) (21) (20)

Other financial income and expenses (24) (45) 120

Net financial income/(expense) (281) (252) (53)

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

(EUR millions) 2008 2007 2006

Income from cash and cash equivalents 3 20 17

Interest from financial receivables 12 10 6Interest and income from current available for sale financial assets 15 30 23


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(EUR millions) 2008 2007 2006

Current income taxes for the period (911) (984) (986)

Current income taxes relating to previous periods 5 7 4Current income taxes (906) (977) (982)

Change in deferred income taxes 13 77 135Impact of changes in tax rates on deferred taxes - 47 -

Deferred income taxes 13 124 135

Total tax expense per income statement (893) (853) (847)

Tax on items recognized in equity 5 (41) (87)

The effective tax rate is as follows:

(EUR millions) 2008 2007 2006

Profit before tax 3,204 3,177 2,999

Total income tax expense (893) (853) (847)

Effective tax rate 27.9% 26.8% 28.2%

The effective tax rate for fiscal year 2008 takes into consideration the capitalization of deferred tax assets, excluding losses carried forward,for an amount equivalent to 1.4% of profit before tax.

2008 2007 2006Group share of net profit (EUR millions) 2,026 2,025 1,879

Average number of shares in circulation during the period 489,958,810 489,937,410 489,937,410

Average number of treasury shares owned during the period (16,403,997) (15,609,467) (18,035,590)

Average number of shares on which the calculation before dilution is based 473,554,813 474,327,943 471,901,820

Basic Group share of earnings per share (EUR) 4.28 4.27 3.98

Average number of shares on which the above calculation is based 473,554,813 474,327,943 471,901,820

Dilution effect of stock option plans 2,055,859 5,563,770 5,570,135

Other dilution effects - - -

Average number of shares in circulation after dilution 475,610,672 479,891,713 477,471,955

Diluted Group share of earnings per share (EUR) 4.26 4.22 3.94


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The expense recorded in relation to pension, medical costs and similar commitments during the periods presented breaks down as follows:

(EUR millions) 2008 2007 2006

Current service cost 37 38 48Impact of discounting 23 22 22

Expected return on plan assets (18) (18) (14)

Amortization of actuarial gains and losses (11) (2) 1

Past service cost 2 2 2

Changes in regime (2) 0 4

Total expense for the period for defined benefit plans 31 42 63

Effective return on/(cost of) plan assets (77) 17 25

(EUR millions) 2008 2007 2006

Grapes, wines and distilled alcohol 1,671 1,690 1,547

Other purchase commitments for raw materials 64 24 41

Industrial and commercial fixed assets 180 105 151

Investments in joint venture shares and non-current available for sale financial assets 63 55 84

Some Wines and Spirits companies have contractual purchasearrangements with various local producers for the future supply

of grapes, still wines and distilled alcohol. These commitments

are valued, depending on the nature of the purchases, based onthe contractual terms or known year-end prices and estimated

production yields.

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

The fixed or minimum portion of commitments in respect of operating lease or concession contracts over the irrevocable period of thecontracts were as follows as of December 31, 2008:

(EUR millions) 2008 2007 2006

Less than one year 760 687 609

One to five years 1,957 1,831 1,359

More than five years 986 935 778

Commitments given for operating leases and concession fees 3,703 3,453 2,746

Less than one year 24 21 20

One to five years 50 42 46

More than five years 8 4 2

Commitments received for sub-leases 82 67 68


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The amount of the Groups irrevocable commitments under finance lease agreements as of December 31, 2008 breaks down as follows:

(EUR millions) 2008 2007 2006

Minimumfuture

payments

Presentvalue of

payments

Minimumfuture

payments

Presentvalue of

payments

Minimumfuture

payments

Presentvalue of

payments

Less than one year 40 41 22 21 27 27

One to five years 80 60 68 44 76 50

More than five years 364 66 344 70 395 76

Total future minimum payments 484 434 498

Of which: financial interest (317) (299) (345)

Present value of minimum future payments 167 167 135 135 153 153

As part of its day-to-day management, the Group is party tovarious legal proceedings concerning brand rights, the protectionof intellectual property rights, the set-up of selective retailingnetworks, licensing agreements, employee relations, tax auditsand other areas relating to its business.

The Group believes that the provisions recorded in the balancesheet in respect of these risks, litigation or disputes, known oroutstanding at year-end, are sufficient to avoid its consolidatedfinancial net worth being materia

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