TRANSLATION OF THE FRENCH DOCUMENT DE … of the french document de rÉfÉrence fiscal year ended december 31, ... marc jacobs make up for ever

TRANSLATION OF THE FRENCHDOCUMENT DE RFRENCE

FISCAL YEAR ENDED DECEMBER 31, 2016

0_VA_V4 21/03/2017 17:12 PageI

CONTENTS

HISTORY 1FINANCIAL HIGHLIGHTS 2EXECUTIVE AND SUPERVISORY BODIES; STATUTORY AUDITORS 5SIMPLIFIED ORGANIZATIONAL CHART OF THE GROUP AS OF DECEMBER 31, 2016 6

BUSINESS DESCRIPTION 9

WINES AND SPIRITS 10FASHION AND LEATHER GOODS 14PERFUMES AND COSMETICS 16WATCHES AND JEWELRY 18SELECTIVE RETAILING 20OTHER ACTIVITIES 21

MANAGEMENT REPORT OF THE BOARD OF DIRECTORS 23

LVMH GROUP 23PARENT COMPANY: LVMH MOT HENNESSY-LOUIS VUITTON 47HUMAN RESOURCES 73LVMH AND THE ENVIRONMENT 95

REPORT OF THE BOARD OF DIRECTORS ON THE COMPENSATION POLICY FOR SENIOR EXECUTIVE OFFICERS 111

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS 115

FINANCIAL STATEMENTS 131

CONSOLIDATED FINANCIAL STATEMENTS 131PARENT COMPANY FINANCIAL STATEMENTS: LVMH MOT HENNESSY-LOUIS VUITTON 201

OTHER INFORMATION 231

GOVERNANCE 231GENERAL INFORMATION REGARDING THE PARENT COMPANY AND ITS SHARE CAPITAL; STOCK MARKET INFORMATION 261

RESOLUTIONS FOR THE APPROVAL OF THE COMBINED SHAREHOLDERS MEETING OF APRIL13,2017 269

RESPONSIBLE COMPANY OFFICER; FINANCIAL INFORMATION 287

TABLES OF CONCORDANCE 291

This document is a free translation into English of the original French Document de rfrence, hereafter referred to as the Reference Document. It is not a binding document. In the event of a conflict in interpretation, reference should be made to the French version, which is the authentic text.

0_VA_V4 21/03/2017 17:12 PageII

14thcentury 1365 Domaine du Clos des Lambrays

16thcentury 1593 Chteau dYquem

18thcentury 1729 Ruinart1743 Mot&Chandon1765 Hennessy1772 Veuve Clicquot1780 Chaumet

19thcentury 1815 Ardbeg1817 Cova1828 Guerlain1832 Chteau Cheval Blanc1843 Krug

Glenmorangie1846 Loewe1849 Royal Van Lent1852 Le Bon March1854 Louis Vuitton1858 Mercier1860 TAG Heuer

Jardin dAcclimatation1865 Zenith1870 La Samaritaine1884 Bvlgari1895 Berluti

20thcentury 1908 Les Echos1916 Acqua di Parma1923 La Grande picerie de Paris1924 Loro Piana1925 Fendi1936 Dom Prignon

Fred

1944 Le Parisien-Aujourdhui en France1945 Cline1947 Parfums Christian Dior

Emilio Pucci1952 Givenchy

Connaissance des Arts1957 Parfums Givenchy1958 Starboard Cruise Services1959 Chandon1960 DFS1969 Sephora1970 Kenzo

Cape Mentelle1972 Parfums Loewe1974 Investir-Le Journal des Finances1975 Montres Dior

Ole Henriksen1976 Benefit Cosmetics1977 Newton1980 Hublot1983 Radio Classique1984 Thomas Pink

Marc JacobsMake Up For Ever

1985 Cloudy Bay1988 Kenzo Parfums1991 Fresh1993 Belvedere1998 Numanthia Termes1999 Terrazas de los Andes

Cheval des Andes

21stcentury 2001 De Beers Diamond Jewellers2004 Nicholas Kirkwood2005 Edun

HISTORY

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

From the 14thcentury to the present

12016 Reference Document

0_VA_V4 21/03/2017 17:12 Page1

FINANCIAL HIGHLIGHTS

Key consolidated data

(EURmillions and percentage) 2016 2015 2014

Revenue 37,600 35,664 30,638Profit from recurring operations 7,026 6,605 5,715Net profit 4,363 4,001 6,105(a)

Net profit, Group share 3,981 3,573 5,648(a)

Cash from operations before changes in working capital(b) 8,733 7,945 7,080Operating investments 2,265 1,955 1,775Free cash flow(c) 3,974 3,679 2,832Total equity(d) 27,903 25,799 23,003Net financial debt(e) 3,265 4,235 4,805Net financial debt / Total equity ratio 12% 16% 21%

(a) Of which 2,677million euros resulting from the distribution of Herms shares.(b) Before tax and interest paid.(c) Net cash from operating activities and operating investments.(d) Including minority interests.(e) Excluding purchase commitments for minority interests included in Other non-current liabilities.

Data per share

(eneuros) 2016 2015 2014

Earnings per share Basic Group share of earnings per share 7.92 7.11 11.27(a)

Diluted Group share of earnings per share 7.89 7.08 11.21(a)

Dividend per share Interim 1.40 1.35 1.25Final 2.60 2.20 1.95

Gross amount paid for fiscal year(b) (c) 4.00 3.55 3.20

(a) Of which 5.34 euros per share before dilution (5.31 euros per share after dilution) resulting from the distribution of Herms shares.(b) For fiscal year 2016, amount proposed at the Shareholders Meeting of April13, 2017.(c) Gross amount paid for fiscal year, excluding the impact of the tax regulations applicable to the recipient.

Information by business group

(EURmillions) 2016 2015(a) 2014(a)

Revenue by business group Wines and Spirits 4,835 4,603 3,973Fashion and Leather Goods 12,775 12,369 10,828Perfumes and Cosmetics 4,953 4,671 4,006Watches and Jewelry 3,468 3,308 2,782Selective Retailing 11,973 11,193 9,520Other activities and eliminations (404) (480) (471)

Total 37,600 35,664 30,638

Profit from recurring operations by business groupWines and Spirits 1,504 1,363 1,147Fashion and Leather Goods 3,873 3,505 3,189Perfumes and Cosmetics 551 524 413Watches and Jewelry 458 432 283Selective Retailing 919 940 884Other activities and eliminations (279) (159) (201)

Total 7,026 6,605 5,715

(a) See Note 23.1 Information by business group to the consolidated financial statements.

2 2016 Reference Document

0_VA_V4 21/03/2017 17:12 Page2

Information by geographic region

(as %) 2016 2015 2014

Revenue by geographic region of delivery France 10 10 10Europe (excluding France) 18 18 19United States 27 26 24Japan 7 7 7Asia (excluding Japon) 26 27 29Other markets 12 12 11

Total 100 100 100

Revenue by invoicing currency Euro 23 22 23US dollar 32 32 29Japanese yen 7 7 7Hong Kong dollar 6 7 8Other currencies 32 32 33

Total 100 100 100

Number of stores 2016 2015(a) 2014

France 492 482 467Europe (excluding France) 1,061 1,012 995United States 703 732 708Japan 387 407 412Asia (excluding Japon) 991 951 870Other markets 314 276 256

Total 3,948 3,860 3,708

(a) Including 68 stores for Donna Karan.


0_VA_V4 21/03/2017 17:12 Page3


0_VA_V4 21/03/2017 17:12 Page4

Board of Directors(a)

Bernard ArnaultChairman and Chief Executive Officer

Pierre God (d) (e)

Vice-Chairman

Antonio Belloni (c)

Group Managing Director

Antoine Arnault

Delphine Arnault (c)

Nicolas Bazire (c)

Bernadette Chirac (b)

Charles de Croisset (b)

Diego Della Valle (b) (c)

Albert Frre (b) (d) (e)

Clara Gaymard (b)

Marie-Jose Kravis (b) (c)

Lord Powell of Bayswater

Marie-Laure Sauty de Chalon (b) (c)

Yves-Thibault de Silguy (b)

Natacha Valla (b)

Hubert Vdrine (b)

Advisory Board members

Paolo Bulgari (c)

Patrick Houl (d)

Felix G. Rohatyn (d)

Executive Committee

Bernard ArnaultChairman and Chief Executive Officer

Antonio BelloniGroup Managing Director

Nicolas BazireDevelopment and Acquisitions

Michael BurkeLouis Vuitton

Chantal GaemperleHuman Resources and Synergies

Jean-Jacques GuionyFinance

Christopher de LapuenteSephora and Beauty

Christophe NavarreWines and Spirits

Pierre-Yves RousselFashion Group

Philippe SchausDFS

Jean-Baptiste VoisinStrategy

General secretary

Marc-Antoine Jamet

Performance Audit Committee


Chairman

Antoine Arnault


Nominations and Compensation Committee


Chairman

Marie-Jose Kravis (b) (c)


Ethical and Sustainable Development Committee


Chairman

Delphine Arnault (c)

Marie-Laure Sauty de Chalon (b) (c)

Statutory Auditors

ERNST&YOUNG Auditrepresented by Jeanne Boillet and Benoit Schumacher

MAZARSrepresented by Simon Beillevaire and Loc Wallaert


(a) The list of Directors appointments can be found on pages 232 to 243 of Other Information Governance.(b) Independent Director.(c) Renewal proposed to the Shareholders Meeting of April13, 2017.(d) Until the Shareholders Meeting of April13, 2017.(e) Appointment as Advisory Board member at the Shareholders Meeting of April13, 2017.

EXECUTIVE AND SUPERVISORY BODIES; STATUTORY AUDITORS

0_VA_V4 21/03/2017 17:12 Page5

100%

100%

100%

100%

100%

100%

90%

100%

100%

100%

100%

99%

100%

50%

34%

66%

MOT HENNESSY

Diageo

100%

100% 100%

100%

100%

100% 100%

99%

100%

100%

100%

100%

LVMH

99.9%

LV GROUP

Chevaldes Andes (*)

Bvlgari

ParfumsChristian Dior

La Grandepiceriede Paris

Le BonMarch

LaSamaritaine

Sephora

Chaumet

FredKenzoParfums

Guerlain

ParfumsGivenchy

Make UpFor EverKenzo

Givenchy

Cline

Berluti

LouisVuitton

CapeMentelle

NewtonVineyards

CloudyBay

Mot & Chandon

Dom PrignonMercier

VeuveClicquot

Krug

Ruinart

DomaineChandonTerrazas

de los Andes

NumanthiaTermes

Hennessy

GlenmorangieArdbeg

Belvedere

SIMPLIFIED ORGANIZATIONAL CHART OF THE GROUP AS OF DECEMBER 31, 2016


0_VA_V4 21/03/2017 17:12 Page6

99%

80%

80%

100%

100%

95%

100%

61%

42%

80%

96%

100%

100% 100%

100%

61%

100%

80%

59%

100%

100%

100%

100%

52%

100%

100%

100%

Chteaud'Yquem

ThomasPink

ChteauCheval Blanc (*)

Loro PianaSIDEditions

Connaissancedes Arts

NicholasKirkwood

Cova

Repossi (*)

InvestirLe Journal

des Finances

100%Le Parisien-Aujourdhui en France

Les Echos

RadioClassique

SephoraUSA

DFSUSA

StarboardCruise

Services

OleHenriksen

Fresh

Benefit

MarcJacobs

100%

LVMH Inc.

100%

LVMH BV

RoyalVan Lent

Loewe

50%

50%

100%

De BeersDiamond

Jewellers (*)

Hublot

Pucci

TAG Heuer

Zenith

Acquadi Parma

Fendi

DFS Asia

100%

50%

LVMHHotel

Management

MontresDior (*)

Domainedu Clos desLambrays

100%

SOFIDIV

100%

OTHER HOLDING COMPANIES

PelhamMedia

Limited


The objective of this chart is to present the direct and/or indirect controlstructure of brands and trade names by the Groups main holdingcompanies. It does not provide a complete presentation of all Groupshareholdings.

n Holding companies n Brands and trade names

(*) Accounted for using the equity method.

0_VA_V4 21/03/2017 17:12 Page7


0_VA_V4 21/03/2017 17:12 Page8

BUSINESS DESCRIPTION

1. WINES AND SPIRITS 101.1. Champagne and Wines 101.2. Cognac and Spirits 121.3. Wines and Spirits distribution 14

2. FASHION AND LEATHER GOODS 142.1. The brands of the Fashion and Leather Goods business group 142.2. Design 152.3. Distribution 152.4. Supply sources and subcontracting 15

3. PERFUMES AND COSMETICS 163.1. The brands of the Perfumes and Cosmetics business group 163.2. Research in Perfumes and Cosmetics in 2016 173.3. Supply sources and subcontracting 18

4. WATCHES AND JEWELRY 184.1. The brands of the Watches and Jewelry business group 194.2. Distribution 194.3. Supply sources and subcontracting 19

5. SELECTIVE RETAILING 205.1. Travel retail 205.2. Selective retail 20

6. OTHER ACTIVITIES 21


1_VA_V4 21/03/2017 17:12 Page9

Champagne shipments, for the whole Champagne region, break down as follows:

(in millions of bottles and percentage) 2016 2015 2014

Volumes Market Volumes Market Volumes Market share share share Region LVMH (%) Region LVMH (%) Region LVMH (%)

France 157.9 9.8 6.2 161.9 9.7 6.0 162.3 9.0 5.5Export 148.1 52.7 35.6 150.7 53.0 35.2 144.9 51.6 35.7

Total 306.0 62.5 20.4 312.6 62.7 20.1 307.1 60.6 19.7

(Source: Comit Interprofessionnel des Vins de ChampagneCIVC).

In 2016, revenue for Champagne and Wines was 2,288millioneuros, representing 47% of the total revenue of the Wines andSpirits business group.

1.1.1. The Champagne and Wine brands

LVMH produces and sells a very broad range of high-qualitychampagne wines. In addition to the Champagne region, theGroup develops and distributes a range of high-end still andsparkling wines from countries on four continents: France, Spain,California, Argentina, Brazil, Australia, New Zealand, Indiaand China.

LVMH represents the leading portfolio of champagne brands,which hold complementary market positions. Dom Prignon isa prestigious vintage produced by Mot&Chandon since 1936.Mot&Chandon (founded in 1743), the leading wine growerand exporter in the Champagne region, and Veuve ClicquotPonsardin (founded in 1772), which ranks second in the industry,are two quality internationally-known brands. Mercier (foundedin 1858) is a brand designed for the French market. Ruinart(the oldest of the champagne houses, founded in 1729) has adevelopment strategy that is carefully targeted on a number ofpriority markets, which are currently mainly in Europe. Krug(founded in 1843 and acquired by LVMH in January1999) is aworld famous brand, specializing exclusively in high-end vintages.

The Chandon brand (created in 1959 in Argentina) includesthe Mot Hennessy wines developed in California, Argentina,Brazil, Australia, India and China by Chandon Estates.

The Group also owns a number of prestigious wines from theNew World: Cape Mentelle in Australia, Cloudy Bay in NewZealand, and Newton in California, as well as Terrazas de LosAndes and Cheval des Andes in Argentina. In 2016, after manyyears of research guided by its ambition to create one of Chinasgreat wines, the Group launched the first Ao Yun vintage.

Chteau dYquem, which joined LVMH in 1999, is the mostprestigious of the Sauternes. It owes its excellent internationalreputation to its 110-hectare vineyard located on a mosaic ofexceptional soils and to the extreme care taken in its preparationthroughout the year.

In 2008, LVMH acquired the Spanish wine company NumanthiaTermes, founded in 1998 and located at the heart of the Tororegion.

In 2009, LVMH proceeded with the acquisition of a 50% stakein the prestigious winery Chteau Cheval Blanc, Premier Grand Cruclass A Saint-milion. Chteau Cheval Blanc owns a 37-hectaredomain within the Saint-milion appellation. The strictestrespect for the purest traditions of winemaking characterizing theBordeaux grand crus, a terroir of superior quality, and an atypicalblend of grape varietals give its wines an exceptional balanceand unique personality. Since January1, 2014, retrospectively asof January1, 2012, this business is accounted for under the equitymethod in accordance with IFRS 11 Joint Arrangements.

In 2014, LVMH acquired Domaine du Clos des Lambrays, oneof the oldest and most prestigious Burgundy vineyards, locatedin Morey-Saint-Denis. With a vineyard area of 8.66 contiguoushectares, Clos des Lambrays is the premier Grand Cru of theCte de Nuits. It also produces Morey-Saint-Denis Premier Crusand prestigious white wines under the name Puligny-MontrachetPremier Cru, such as Clos du Cailleret and Premier Cru LesFolatires.

1.1.2. Competitive position

In 2016, shipments of LVMH champagne brands were downslightly (0.3%) in volume, while shipments from the Champagneregion as a whole were down 2% (source: CIVC). LVMHsmarket share was 20.4% of the total shipments from the region,compared to 20.1% in 2015.

1.1. Champagne and Wines

The activities of LVMH in the Wines and Spirits sector aredivided between two branches: the Champagne and Winesbranch and the Cognac and Spirits branch. The Groups strategyis focused on the high-end segments of the global Wines andSpirits market.

In 2016, revenue for the Wines and Spirits business groupamounted to 4,835million euros, or 13% of the LVMH groupstotal revenue.

1. WINES AND SPIRITS

Wines and Spirits

2016 Reference Document10


1_VA_V4 21/03/2017 17:12 Page10

The geographic breakdown of LVMH champagne sales in 2016is as follows (as a percentage of total sales expressed in numberof bottles):

(as %) 2016 2015 2014

Germany 5 5 5United Kingdom 9 9 9United States 19 18 18Italy 4 4 4Japan 9 9 9Australia 5 5 5Other 34 34 35

Total export 85 84 85France 15 16 15

Total 100 100 100

1.1.3. The champagne production method

The name Champagne covers a defined geographic area classifiedA.O.C. (Appellation dOrigine Contrle), which covers the34,000 hectares that can be legally used for production. Thereare essentially three main types of grape varietals used in theproduction of champagne: chardonnay, pinot noir and pinotmeunier. The preparation method used for sparkling winesproduced outside this defined region, but using the winemakingtechniques used for champagne, is called the champenoisemethod.

In addition to its effervescence, the primary characteristic ofchampagne is that it is the result of blending wines from differentyears and / or different varieties and land plots. The best brandsare distinguished by their masterful blend and constant qualitywhich is achieved thanks to the talent of their wine experts.

Weather conditions significantly influence the grape harvestfrom one year to the next. The production of champagne alsorequires aging in cellars for two years or more for the premiumvintages, which are the vintages sold at more than 110% of theaverage sale price. To protect themselves against crop variationsand manage fluctuations in demand, but also to ensure constantquality over the years, the LVMH champagne houses constantlyadjust the quantities available for sale and keep reserve winesin stock. Since a lower harvest can impact sales for two or threeyears, or more, LVMH constantly maintains significant champagneinventories in its cellars. As of December31, 2016, the numberof bottles in LVMHs cellars in Champagne was 208million,the equivalent of 3.2 years of sales; this is in addition to winesstill in the storage tanks waiting to be drawn (equivalent of83million bottles), including the quality reserve withheld fromsale in accordance with applicable industry rules (equivalent of12million bottles).

1.1.4. Grape supply sources and subcontracting

The Group owns nearly 1,700 hectares under production, whichprovide slightly more than 20% of its annual needs. In addition,Group companies purchase grapes and wines from wine growersand cooperatives on the basis of multi-year agreements; thelargest supplier of grapes and wines represents less than 10% of total supplies for the Groups brands. Since 1996, industryagreements have been signed and renewed, with a view to limitingupward or downward fluctuations in grape prices. The mostrecent renewal of this agreement dates back to 2014, settingthe framework for negotiations relating to harvests from 2014to 2018 (CIVC decision no. 182). For about ten years, winegrowers and merchants have established a qualitative reservethat will allow them to cope with variable harvests. The surplusinventories stockpiled this way can be sold in years with a poorharvest. These wines stockpiled in the qualitative reserve providea certain level of security for future years with smaller harvests.

For the 2016 harvest, the Institut national de lorigine et de laqualit (INAO, the French organization responsible for regulatingcontrolled place names) set the marketable yield for theChampagne appellation at 9,700 kg / ha. This yield representsthe maximum harvest level that can be made into wine and soldunder the Champagne appellation. In 2006, the INAO redefinedthe legal framework for the abovementioned stockpiled reserves.Thus, it is possible to harvest grapes beyond the marketableyield within the limits of a ceiling referred to as the plafond limitede classement (PLC), the highest permitted yield per hectare.This ceiling is determined each year depending on the maximumtotal yield. It was set at 3,100 kg / ha for the 2016 harvest. Grapesharvested over and above the marketable yield are stockpiled inreserve, kept in vats and used to complement poorer harvests.The maximum level of this stockpiled reserve is set at 8,000 kg / hafor the reserve created from the 2011 harvest, and 9,500 kg / hafor the total of all quantities held in reserve.

The price paid for each kilogram of grapes in the 2016 harvestranged between 5.46 euros and 6.28 euros depending on thevineyard, an average increase of 1.4% compared to the 2015harvest.

Dry materials (bottles, corks, etc.) and all other elementsrepresenting containers or packaging are purchased from non-Group suppliers.

In 2016, the champagne houses used subcontractors for about25million euros of services, notably pressing, handling, andstocking bottles.


Wines and Spirits


1_VA_V4 21/03/2017 17:12 Page11

The geographic breakdown of LVMH cognac sales, as a percentageof total sales expressed in number of bottles, is as follows:

(as %) 2016 2015 2014

United States 53 51 48Japan 1 1 1Asia (excluding Japan) 25 27 29Europe (excluding France) 10 10 12Other 11 11 10

Total export 100 100 100France - - -

Total 100 100 100

1.2.3. The cognac production method

The Cognac region is located around the Charente basin. Thevineyard, which currently extends over about 75,000 hectares,consists almost exclusively of the white ugni varietal which yieldsa wine that produces the best eaux-de-vie.

This region is divided into six vineyards, each of which has itsown qualities: Grande Champagne, Petite Champagne, Borderies,Fins Bois, Bons Bois and Bois Ordinaires. Hennessy selects itseaux-de-vie essentially from the first four vineyards, where thequality of the wines is more suitable for the preparation of itscognacs.

The leading geographic markets for cognac, both for the industry and for LVMH, on the basis of shipments in number of bottles,excluding bulk, are as follows:

(in millions of bottles and percentage) 2016 2015 2014

Volumes Market Volumes Market Volumes Market share share share Region LVMH (%) Region LVMH (%) Region LVMH (%)

France 3.5 0.4 11.2 3.7 0.4 9.5 3.3 0.3 9.0Europe (excluding France) 33.1 8.2 24.8 34.5 8.0 23.3 33.8 8.3 24.5United States 73.9 48.0 65.0 65.1 41.1 63.1 57.3 35.0 61.1Asia 51.8 22.3 43.0 51.3 20.8 40.6 47.3 19.2 40.7Other markets 13.1 7.8 59.7 11.4 6.8 60.0 10.1 6.4 63.3

Total 175.5 86.7 49.4 166.0 77.1 46.5 151.8 69.2 45.6

1.2.1. Cognac and Spirits brands

LVMH holds the most powerful brand in the cognac sector withHennessy. The company was founded by Richard Hennessy in1765. Historically, the leading markets for the brand were Irelandand Great Britain, but Hennessy rapidly expanded its presencein Asia, which represented nearly 30% of its shipments as earlyas 1925. The brand became the world cognac leader in 1890.Hennessy created X.O (Extra Old) in 1870 and, since then, hasdeveloped a line of high-end cognac that has made its reputation.

Since 2007, LVMH has owned 100% of the luxury vodkaBelvedere(1). The brand was founded in 1993 in order to bringa luxury vodka for connoisseurs to the American market.Belvedere was introduced to this market in 1996, and in 1999the company decided to develop flavored vodkas. The PolmosZyrardow distillery in Poland, which makes Belvedere vodka,was founded in 1910.

LVMH acquired Glenmorangie in 2005. Glenmorangie notablyowns the single malt whisky brands Glenmorangie and Ardbeg.

In 2016, the Group sold the 55% of the share capital, acquiredin 2007, of Wen Jun Spirits and Wen Jun Spirits Sales, whichproduce and distribute baijiu (white liquor) in China.

1.2.2. Competitive position

In 2016, the volumes shipped from the Cognac region were up6% from 2015 (source: Bureau National Interprofessionnel duCognac BNIC), while the volumes of Hennessy shipped wereup 12%. The market share of Hennessy was 49.4%, comparedto 46.5% in 2015. The company is the world leader in cognac, with particularly strong positions in the United Statesand Asia.

1.2. Cognac and Spirits

In 2016, revenue for the Cognac and Spirits segment totaled 2,546million euros, or 53% of the total revenue for the Wines andSpirits business group.


Wines and Spirits


(1) There is no relationship between the Belvedere brand owned by LVMH and Belvdre, the French wines and spirits group now known as Marie Brizard Wine&Spirits.

1_VA_V4 21/03/2017 17:12 Page12

Charentaise distillation is unique because it takes place in twostages, a first distillation (premire chauffe) and a second distillation(seconde chauffe). The eaux-de-vie obtained are aged in oakbarrels. An eau-de-vie at full maturity is not necessarily a goodcognac. Cognac results from the gradual blending of eaux-de-vieselected on the basis of vintage, origin and age.

1.2.4. Supply sources for wines and cognac eaux-de-vieand subcontracting

Most of the cognac eaux-de-vie that Hennessy needs for itsproduction are purchased from a network of approximately1,600 independent producers, a collaboration which enablesthe company to ensure that exceptional quality is preserved aspart of an ambitious sustainable winegrowing policy. Hennessydirectly operates about 160 hectares, providing for less than1% of its eaux-de-vie needs.

Purchase prices for eaux-de-vie are agreed on between the companyand each producer based on supply and demand and thequality of the eaux-de-vie. In 2016, the price of eaux-de-vie fromthe harvest increased by 0.7% compared to the 2015 harvest.

With an optimized inventory of eaux-de-vie, the Group canmanage the impact of price changes by adjusting its purchasesfrom year to year under the contracts with its partners.

Hennessy continues to control its purchase commitments anddiversify its partnerships to prepare for its future growth acrossthe various quality grades.

Like the champagne and wine businesses, Hennessy obtains its drymaterials (bottles, corks and other packaging) from non-Groupsuppliers. The barrels and casks used to age the cognac are alsoobtained from non-Group suppliers.

Hennessy makes only very limited use of subcontractors for itscore business.

1.2.5. The vodka production method, supply sourcesand subcontracting

Vodka can be obtained from the distillation of various grains orpotatoes. Belvedere vodka is the result of the quadruple distillationof Polish rye. The distillery that prepares Belvedere performsthree of these distillations itself in Zyrardow, Poland. It useswater purified using a special process that yields a vodka with a unique taste.

Belvedere flavored vodkas are obtained by macerating fruits ina pure vodka prepared using the same process as the one used fornon-flavored vodka, and distillation takes place in a Charente -type still.

Overall, Belvederes top raw eaux-de-vie supplier represents lessthan one-third of the companys supplies.

1.2.6. The whisky production method

The legal definition of Scotch whisky states that the spirit mustbe produced at a distillery in Scotland from water and maltedbarley to which other cereals may be added, fermented by yeast,distilled and matured in Scotland in oak casks with a volumeof less than 700 liters for a minimum of three years. Single maltScotch whisky is the product of one single distillery. BlendedScotch whisky is made by mixing malt and grain whiskiestogether.

According to the rules for producing malt whisky, the malt isfirst ground, which produces a mixture of flour and husks calledgrist. This product is then mixed with hot water in large woodentubs called mash tuns in order to extract the sugars from themalted barley. The resulting sugary liquid, known as wort, istransferred to a fermentation vessel or washback and yeast isadded to allow fermentation to occur and alcohol to be created.This alcoholic liquid, known as wash, then undergoes a doubledistillation in copper pot stills, known as wash and spirit stills.Every distillerys stills are unique in shape and size and have ahuge impact on flavor. Glenmorangies stills are the tallest inScotland at 5.14 meters and allow only the lightest vapors toascend and condense. The spirit still at Ardbeg has a uniquespirit purifier.

This newly made spirit is sealed into oak ex-bourbon barrelsand matured in a distillery warehouse for at least three years.Maturation is a critical part of the production process, providingthe whiskies color and additional flavors. Glenmorangie andArdbeg are normally matured for a minimum of 10 years in veryhigh-quality casks.


Wines and Spirits


1_VA_V4 21/03/2017 17:12 Page13

In the luxury Fashion and Leather Goods sector, LVMH holds agroup of brands that are primarily French, but also includeSpanish, Italian, British and American companies.

Louis Vuitton (founded in 1854), the star brand of this businessgroup, first focused its development around the art of traveling,creating trunks, rigid or flexible luggage items, innovative,practical and elegant bags and accessories, before expanding itsterritory and its expertise in other areas of expression. For over150 years, its product line has continuously expanded with newtravel or city models and with new materials, shapes and colors.Famous for its originality and the high quality of its creations,today Louis Vuitton is the world leader in luxury goods and,since 1998, has offered its international customers a full range ofproducts: leather goods, ready-to-wear for men and women, shoesand accessories. Since 2002, the brand has also been present in thewatch segment; Louis Vuitton launched its first line of jewelryin 2004, its first eyewear collection in 2005, and a line of high-end leather goods in 2011. In 2016, it launched LouisVuitton perfumes, a collection of seven fragrances.

Fendi, founded in Rome in 1925, one of the flagship brands ofItalian fashion, has been part of the Group since 2000. Particularlywell-known for its skill and creativity in furs, the brand is alsopresent in leather goods, accessories and ready-to-wear.

Donna Karan was founded in New York in 1984 and joinedthe Group in 2001. Donna Karan was sold to G-III ApparelGroup in December2016.

Loewe, the Spanish company created in 1846 and acquired byLVMH in 1996, originally specialized in very high-quality leatherwork. Today it operates in leather goods and ready-to-wear.Loewe perfumes are included in the Perfumes and Cosmeticsbusiness group.

Marc Jacobs, created in New York in 1984, is named after itsfounder. Through its collections of mens and womens ready-to-wear, leather goods and shoes, it aims to be the symbol of anirreverent urban fashion movement that is culturally driven butalso socially engaged.

2.1. The brands of the Fashion and Leather Goods business group

The Fashion and Leather Goods business group includes LouisVuitton, the worlds leading luxury brand, Fendi, Loewe,Cline, Kenzo, Marc Jacobs, Givenchy, Thomas Pink, Pucci,Berluti, Rossimoda, Loro Piana and Nicholas Kirkwood. Thisexceptional group of brands, born in Europe and the UnitedStates, has 1,508 stores around the world. LVMH supports thegrowth of these brands by providing them with shared resources,

while at the same time respecting their identity and theircreative positioning.

In 2016, the Fashion and Leather Goods business group postedrevenue of 12,775million euros, representing 34% of the totalrevenue of LVMH.

2. FASHION AND LEATHER GOODS

LVMHs Wines and Spirits are distributed to the worlds majormarkets primarily through a network of international subsidiaries,some of which are joint ventures with the spirits group Diageoplc. In 2016, 24% of champagne and cognac sales were madethrough this channel.

Diageo also has a 34% stake in Mot Hennessy, which is theholding company of the LVMH groups Wines and Spiritsbusinesses.

Since 1987, LVMH and Guinness (prior to the creation of Diageo)have signed agreements leading to the creation of joint venturesfor the distribution of their top brands in major countries,including MHD in France and Schieffelin&Somerset in theUnited States. This joint network strengthens the positions ofthe two groups, improves distribution control, enhances customerservice, and increases profitability by sharing distribution costs.

In the United States, Mot Hennessy products have been soldby Mot Hennessy USA since 2005 following the winding upof the Schieffelin&Somerset joint venture, but Mot Hennessyand Diageo products continue to be sold through joint distributors.

In 2010, LVMH and Diageo reorganized their product distributionchannels in Japan. Mot Hennessy refocused on the distributionof its own brands of champagnes and spirits together with someof Diageos ultra-premium spirits brands, while the distributionof Diageos other premium brands was transferred to a jointventure between Kirin and Diageo.

Since 2011, as a result of the buyout by LVMH of Whitehallsstake in the joint venture, a subsidiary wholly owned by MotHennessy has been responsible for distribution in Russia.

1.3. Wines and Spirits distribution


Wines and Spirits. Fashion and Leather Goods


1_VA_V4 21/03/2017 17:12 Page14

Louis Vuittons eighteen leather goods workshopstwelve inFrance, three in Spain, two in the United States and one in Italymanufacture most of its leather goods products. All developmentand manufacturing processes for the entire footwear line are handled at Louis Vuittons workshops in Fiesso dArtico,Italy, whilst production of accessories (textiles, jewelry, belts,eyewear, etc.) is concentrated in the Louis Vuitton workshopsat Barbera (Catalonia) and Gallarate (Lombardy). Louis Vuittonuses external manufacturers only to supplement its manufacturingand achieve production flexibility in terms of volumes.

Louis Vuitton purchases its materials from suppliers locatedaround the world, with whom it has established partnershiprelationships. The supplier strategy implemented over the lastfew years has enabled volume, quality and innovationrequirements to be met thanks to a policy of concentration andsupporting the best suppliers while limiting Louis Vuittonsdependence on them. For this reason, the leading leathersupplier accounts for only around 20% of Louis Vuittons totalleather supplies.

2.4. Supply sources and subcontracting

Controlling the distribution of its products is a core strategicpriority for LVMH, particularly in luxury Fashion and LeatherGoods. This control allows the Group to benefit from distributionmargins, and guarantees strict control of the brand image, salesreception and environment that the brands require. It also givesthe Group closer contacts with its customers so that it canbetter anticipate their expectations.

In order to meet these objectives, LVMH created the first inter -national network of exclusive boutiques under the banner of itsFashion and Leather Goods brands. This network included1,508 stores as of December31, 2016.

2.3. Distribution

Whether they belong to the world of Haute Couture or luxuryfashion, the LVMH brands have founded their success first and foremost on the quality, authenticity and originality oftheir designs that must be renewed with each season and eachcollection. Thus, a strategic priority is to strengthen the designteams, ensure the collaboration of the best designers, and adapttheir talent to the spirit of each brand.

LVMH believes that one of its essential assets is its ability to attracta large number of internationally recognized designers to itscompanies. In 2013, Nicolas Ghesquire succeeded Marc Jacobs,who had designed the Louis Vuitton womens ready-to-wearcollections since 1998. Karl Lagerfeld is in charge of the creationof Fendis ready-to-wear line for women, while Silvia Fendi isin charge of accessories and mens ready-to-wear collections.

Phoebe Philo has been Clines Creative Director since 2008.The fashion designer Riccardo Tisci, who has been the CreativeDirector of Givenchys Haute Couture, ready-to-wear andaccessories lines for women since 2005, was given responsibilityfor the brands ready-to-wear line for men in 2008 as well.Since 2013, Jonathan Anderson has been Creative Director ofLoewe. In 2011, Humberto Leon and Carol Lim were appointedas Creative Directors for all of the Kenzo collections. OlgaBerluti, the heiress of the expertise built up by her predecessors,is perpetuating the unique style and quality of Berluti shoes. In September 2016, Haider Ackermann was appointed as thebrands new Creative Director replacing Alessandro Sartori.Marc Jacobs is in charge of design at his eponymous brand.Massimo Giorgetti was named Creative Director of Pucci in 2015.

2.2. Design

Cline, founded in 1945 and owned by LVMH since 1996,offers ready-to-wear items, leather goods, shoes and accessories.

Kenzo, formed in 1970, joined the Group in 1993. Today, thecompany operates in the areas of ready-to-wear for men andwomen, fashion accessories, leather goods and home furnishings.Its perfume business is part of the Perfumes and Cosmeticsbusiness group.

Givenchy, founded in 1952 by Hubert de Givenchy and partof the Group since 1988, a company rooted in a tradition ofexcellence in Haute Couture, is also known for its collections of men and womens ready-to-wear and its fashion accessories.Givenchy perfumes are included in the Perfumes and Cosmeticsbusiness group.

Thomas Pink, a brand formed in 1984, is a recognized specialistin high-end shirts in the United Kingdom.

Emilio Pucci, an Italian brand founded in 1947, is a symbol ofcasual fashion in luxury ready-to-wear, a synonym of escape andrefined leisure. Emilio Pucci joined LVMH in 2000.

Berluti, an artisan bootmaker established in 1895 and held byLVMH since 1993, designs and markets very high-quality mensshoes, as well as a line of leather goods, now enriched with aline of ready-to-wear items for men.

Loro Piana, an Italian company founded in 1924 in which LVMHacquired an 80% stake in December2013, creates luxury fabricsand products, particularly from cashmere, of which it is theworlds foremost processor. The brand is famous for its dedicationto quality and the noblest raw materials, its unrivalled standardsin design and its expert craftsmanship.

Nicholas Kirkwood, the British luxury footwear company bornin 2004 and named after its founder, in which LVMH acquireda 52% stake in 2013, is famous throughout the world for itsunique, innovative approach to footwear design.


Fashion and Leather Goods


1_VA_V4 21/03/2017 17:12 Page15

Parfums Christian Dior was born in 1947, the same year asthe Christian Dior fashion house, with the introduction of theMiss Dior perfume. While developing its lines of fragrances formen and women over the years, Parfums Christian Dior expandedits activity to the makeup sector in 1955, and to skincareproducts in 1973. Franois Demachy, perfumer and CreativeDirector, and Peter Philips, Creative Director for makeup, both build on Christian Diors rich heritage and legacy. Today,Parfums Christian Dior allocates 1.2% of its revenue to researchand is on the cutting edge of innovation.

Guerlain, founded in 1828 by Pierre Franois Pascal Guerlain,has created more than 700 perfumes since its inception. Thebrand has developed an exceptional image in the perfume universeand many of its creations have enjoyed remarkable longevity.Guerlains iconic perfumes include Shalimar, LInstant de Guerlainand La Petite Robe Noire. Today it is also known for its makeupand skincare lines notably Orchide Impriale and Abeille Royale.

3.1. The brands of the Perfumes and Cosmetics business group

The LVMH group is present in the perfume and cosmeticssector through its major French houses: Parfums Christian Dior,Guerlain, Givenchy and Kenzo. In addition to these world-renowned brands, this business group also includes BenefitCosmetics and Fresh, two young, high-growth American cosmeticscompanies; the prestigious Italian brand Acqua di Parma;Parfums Loewe, a Spanish brand with strong positions in itsdomestic market; and Make Up For Ever, a French companyinitially specializing in professional makeup products.

The presence of a broad spectrum of brands within the businessgroup generates synergies and represents a market force. Thevolume effect means that advertising space can be purchased atbetter prices and better locations can be negotiated in departmentstores. In research and development, the Groups brands havepooled their resources since 1997 with a joint center in Saint-

Jean de Braye (France), at the industrial site of Parfums ChristianDior. The use of shared services by subsidiaries increases theeffectiveness of support functions for worldwide distribution andfacilitates the expansion of the newest brands. These economiesof scale permit larger investments in design and advertising,two key factors for success in Perfumes and Cosmetics.

The Groups Perfumes and Cosmetics brands are sold mainlythrough selective retailing channels (as opposed to mass-marketretailers and drugstores), although certain brands also sell theirproducts in their own stores. There were a total of 248 pointsof sale of this type for the business group as of December31, 2016.

In 2016, the Perfumes and Cosmetics business group postedrevenue of 4,953million euros, representing 13% of LVMHstotal revenue.

3. PERFUMES AND COSMETICS

Fendi and Loewe have leather workshops in their countries oforigin, and in Italy for Cline and Berluti, which cover only aportion of their production needs. Generally, the subcontractingused by the business group is diversified in terms of the numberof subcontractors and is located primarily in the brandscountry of origin, France, Italy and Spain.

Loro Piana manages all stages of production, from the sourcingof natural fibers to the delivery of finished products to stores.Loro Piana procures its unique materials (baby cashmere fromnorthern China and Mongolia, vicua from the Andes, and extra-fine Merino wool from Australia and New Zealand) throughexclusive partnerships with suppliers all over the world. Itsexquisite textiles and products are then manufactured in Italy.

Moreover, in order to safeguard and develop the Fashion andLeather Goods companies access to the high-quality rawmaterials and know-how they need, the LVMH Mtier dArts

business segment created in 2015 invests in, and provideslong-term support to, its best suppliers. In leather, for example,LVMH teamed up with the Koh brothers in 2011 to developthe business of the Heng Long tannery in Singapore. Foundedin 1950, it is now a leading crocodile leather tannery. In 2012,LVMH acquired Tanneries Roux, founded in 1803 and one ofthe last French tanneries specializing in calfskin.

Overall, the use of subcontractors for Fashion and Leather Goodsoperations represented about 31% of the cost of sales in 2016.

Finally, for the different Group companies, the fabric suppliersare often Italian, but on a non-exclusive basis.

The designers and style departments of each Group companyensure that manufacturing does not generally depend onpatents or exclusive expertise owned by third parties.

16

Fashion and Leather Goods. Perfumes and Cosmetics



1_VA_V4 21/03/2017 17:12 Page16

The Hlios center, at the heart of Cosmetic Valley, is home tothe Groups Perfumes and Cosmetics research teams. Driven by their passion for innovation, the 350 LVMH Recherche staffcombine their expertise on a daily basis to create exceptionalproducts that reflect each Group companys expertise.

The cosmetics market is characterized by its dynamism and fiercercompetition as a result of innovation cycles that are faster thanever. Against this backdrop, LVMH Recherches strategy needsto be based on flexibility, creativity and the performance of itsproducts.

Digital technology plays a decisive role in driving growth and istransforming the relationship between brands and customers.Millennials are at the forefront of this revolution. Propelled bythe selfie generation, makeup has become a fast-growingcategory, as demonstrated by the success of lip colors. Rouge Dioris available in two versionssatin and matteoffering 16 hoursof comfort thanks to a combination of two Wear-Lock polymersthat set the texture and pigments in place while giving flexibility.At Guerlain, ultra-fine film technology for its La Petite RobeNoire lipstick offers buildable coverage and shine to go from themost natural to the most sophisticated look. The Rouge InterditVinyl range is a testament to Givenchys signature style with arange of colors including Noir Rvlateur, which on applicationchanges shade to purple or prune, creating a unique effect forevery user.

In foundation, Forever Fluid offers a new solution to the search fora product that is comfortable to wear and suits every skin typewith this hybrid product offering skincare effects.

In makeup for the body, Benefits Hoola Body is a DHA-free,long-lasting, transfer-resistant bronzing gel that comes with aninnovative sponge applicator for easy application.

Thanks to a new hybrid brush technology and new mascaraarchitecture, Make Up For Evers Excessive Lash pushes the limitsof easy application and uniform volume from root to tip.

Remaining loyal to its desire to protect the environment, LVMHRecherche is continuing with its efforts to focus on naturalproducts. Dior La Cure Prestige is a highly concentrated blend ofexclusive active ingredients extracted from the Granville rose,intended for delicate skins that have lost their natural balance.Drawing on the latest inflammaging discoveries, this cure limitsthe micro-inflammatory components of the skin and sensationsof discomfort, helping to beat inflammation and regenerate theskin, making it more resilient.

Active ingredients of plant origin are also central to Freshsphilosophy. For example, its Black Tea Serum instantly firms theskin thanks to the combination of Idealift peptide and naturalacacia gum, while the Crme Ancienne Supreme Face Serum is madefrom nine natural root and botanical extracts. A gourmand blendof vitamins and skincare ingredients, Freshs Vitamin NectarVibrancy-Boosting Face Mask has a distinctive jelly-like texture.Made of 50% citrus fruit concentrate from crushed oranges,lemons and clementines grown on the banks of the Mediterranean,it naturally refines the skin to make it brighter, softer andsmoother.

3.2. Research in Perfumes and Cosmetics in 2016

Parfums Givenchy, founded in 1957, complements Givenchysfashion lines with a range of fragrances for women and men,including Amarige, Organza, Very Irrsistible Givenchy, Ange ou Dmon,Play for Her and Dahlia Noir, in addition to Givenchy pour Homme,Very Irrsistible pour Homme, Play, and Gentlemen Only, and is alsodeveloping its business in cosmetics, offering skincare productsas well as the makeup line Givenchy Le Makeup.

Parfums Kenzo appeared in 1988, and developed with thesuccess of FlowerbyKenzo, launched in 2000. The brand diversifiedits activities in the well-being segment by launching theKenzoKi line in 2001. The following years saw the launches ofthe womens fragrance KenzoAmour and the mens fragranceKenzoPower, the creation of KenzoHomme eau de toilette boise, andthe launches of Eau de Parfum Madly Kenzo, KenzoHomme Sport,Flower in the Air and, in 2016, Kenzo World.

Benefit Cosmetics, created in 1976 in San Francisco and acquiredby LVMH at the end of 1999, owes its rapid success to the highquality of its beauty and makeup products, which convey atrue sense of pleasure and are enhanced by the playful aspect ofthe product names and packaging. In addition to sales throughits 68 exclusive boutiques around the world (United States,Asia, Europe, Australia), the brand currently retails at around4,500 points of sale in 46 countries worldwide.

Fresh, created in 1991, joined LVMH in September2000. Thebrand initially built its reputation by creating body care productsinspired by ancestral beauty recipes and entirely natural andhigh-quality fragrances, before expanding its concept to makeupand haircare products.

Parfums Loewe introduced its first perfume in 1972. A majorplayer in Spain, the brand is also developing its internationalbusiness, primarily in Russia, the Middle East and Latin America.

Make Up For Ever, created in 1984, joined LVMH in 1999.The brand specializes in professional makeup and its applicationsfor consumers. Its products are sold through exclusive boutiquesin Paris, New York, Los Angeles and Dallas, and through anumber of selective retailing circuits, particularly in France,Europe and the United States (markets developed in partnershipwith Sephora), as well as in China, South Korea and the Middle East.

Acqua di Parma, founded in 1916 in Parma and acquired byLVMH in 2001, is a luxury perfume brand and a symbol of Italianhigh fashion. The brand specializes in perfumes and skincareand has diversified its product line to include home scents andlinens. Now based in Milan, Acqua di Parma relies on an exclusiveretailing network, including a brand store in Milan and Paris.


Perfumes and Cosmetics


1_VA_V4 21/03/2017 17:12 Page17

The Watches and Jewelry business group holds a portfolio oftop-quality watch and jewelry brands with highly complementarymarket positions: TAG Heuer, the worlds leading maker ofluxury sports watches and chronographs; Hublot, a high-endwatchmaker; the luxury watchmaker Zenith, which has its ownmanufacture; Montres Dior, which offers collections inspiredby the designs of the fashion house; Bvlgari, the pace-setter forItalian fine jewelry since 1884; Chaumet, the prestigious historicjeweler on Place Vendme in Paris; Fred, a designer of contemporaryjewelry pieces; and De Beers Diamond Jewellers, a joint-ventureformed in July2001, which has continued to solidify its positionas diamond jeweler.

The business group has already deployed internationally, streng -thened the coordination and pooling of administrative resources,expanded its sales and marketing teams, and progressively

began to establish a network of after-sale multi-brand servicesworldwide to improve customer satisfaction. LVMH Watches andJewelry has a territorial organization that covers all Europeanmarkets, the American continent, northern Asia, Japan, andthe Asia-Pacific region.

In watchmaking, manufacturing has been coordinated throughthe use of shared resources, such as prototype design capacities,and by sharing the best methods for preparing investment plans,improving productivity and negotiating purchasing terms withsuppliers. In Jewelry, centralized checking has been introducedfor diamonds, alongside technical cooperation between brandsfor the development of new products.

In 2016, the Watches and Jewelry business group postedrevenue of 3,468million euros, which represented 9% of totalLVMH revenue.

4. WATCHES AND JEWELRY

The five French production centers of Guerlain, Parfums ChristianDior and LVMH Fragrance Brands meet almost all the manu -facturing needs of the four major French brands, includingKenzo Parfums, in fragrances as well as makeup and beautyproducts. Make Up For Ever also has manufacturing capacitiesin France. Benefit, Parfums Loewe and Fresh have some of theirproducts manufactured by the Groups other brands, with theremainder subcontracted externally.

In 2016, manufacturing subcontracting represented overallabout 6% of the cost of sales for this activity, plus approximately9million euros for logistics subcontracting.

Dry materials, such as bottles, stoppers and any other items thatform the containers or packaging, are acquired from suppliersoutside the Group, as are the raw materials used to create thefinished products. In certain cases, these materials are availableonly from a limited number of French or foreign suppliers.

The product formulas are developed primarily in the Saint-Jeande Braye (France) laboratories, but the Group can also acquireor develop formulas from specialized companies, particularlyfor perfume essences.


For a luminous complexion, Kenzos Serum in a Mask effectivelycombats free radicals thanks to White Lotus plant essence,made more effective by the bio cellulose mask.

After more than 15 years of research, Guerlain has launched its Orchide Impriale Black Cream. This ultra-premium skincareproduct is a masterpiece of sensoriality and effectiveness enrichedwith Blackimmune technology, which reinforces the skinscapacities for self-defense. At the heart of this technology, thepower of Black Orchid acts on almost all of the cells involvedin the skins defense system.

Also in the anti-aging segment, Givenchys LIntemporel DivineRich Cream is a truly innovative formula that breaks withtraditional cosmetics manufacturing techniques. During theproduction process, the formula is hot-poured and then cooleddown suddenly in order to create a thermal shock that sets the

texture and preserves the active ingredients. This helps to preservethe properties of all of the ingredients and trap all of the essentialnutrients in the cream so that they are released only whenapplied to the skin.

Innovation, performance and sensoriality are the guidingprinciples for LVMH Recherche, an alchemist of Art andScience. Connected to the world, by strengthening its researchteams in Asia in particular (Japan, China and South Korea) it hasbeen able to obtain key economic and technological informationfrom these markets in real time. A number of products are theresult of international collaborations with universities andbusinesses of various sizes, including startups. Numerous scientificcommunications at specialist conventions provide the opportunityto continuously enhance its network of researchers and pave the way for new partnerships.

Perfumes and Cosmetics. Watches and Jewelry



1_VA_V4 21/03/2017 17:12 Page18

At its Swiss workshops and manufacturing centers, located inLe Locle, La Chaux-de-Fonds, Neuchtel, Cornol, Tramelan, LeSentier, Chevenez and Nyon, the Group assembles most of thewatches and chronographs sold under the TAG Heuer, Hublot,Zenith, Bvlgari, Montres Dior, Chaumet and Fred brands; it alsodesigns and manufactures mechanical movements such as El Primero and Elite by Zenith, Calibre 1887 by TAG Heuer,UNICO by Hublot and Hautes Complications by Bvlgari; and itmanufactures some critical components such as dials, cases andstraps. Zeniths manufacture in Le Locle underwent a major

renovation in 2012. In 2013, TAG Heuer inaugurated a newmovement manufacturing facility in Chevenez, and in 2015Hublot opened a second one at its Nyon site.

In this business, subcontracting represented 13% of the cost ofsales in 2016.

Even though the Group can, in certain cases, use third partiesto design its models, they are most often designed in its ownstudios.


The Watches and Jewelry brands store network comprised397 stores as of December 31, 2016. The jewelry brandsproducts are thus showcased in prestigious positions, located in

some of the largest cities in the world. TAG Heuer and Hublotare developing their store networks, including those that aredirectly operated and those operating under franchise.

4.2. Distribution

TAG Heuer, founded in 1860 in the Swiss Jura town of Saint-Imier and acquired by LVMH in November1999, has forgedstrong ties over the years with the world of competitive sports,reflected in the brands core performance values. TAG Heuer isrecognized for the quality and precision of its timepieces, combinedwith cutting-edge design aesthetics. Its most coveted professionalsport watches are the Aquaracer, Link and Formula 1 lines. Fortraditional watches and chronographs, the Carrera and Monacomodels enjoy strong followings. In 2010, TAG Heuer launchedthe first automatic movement developed and built in-house,followed, in 2015, by the launch of a smartwatch.

Hublot, founded in 1980 and part of the LVMH group since2008, has always been an innovative brand, creating the firstwatch in the industrys history fitted with a natural black rubberstrap. Relying on a team of top-flight watchmakers, the brandis widely renowned for its original concept combining noblematerials with state-of-the-art technology and for its iconic Big Bang model launched in 2005. Along with the manyversions of this model, Hublot has relaunched its long-establishedClassic Fusion line.

Zenith (founded in 1865 and established in Le Locle near the Swiss Jura region) joined LVMH in November 1999.Zenith belongs to the very select group of watch movementmanufactures. In the watchmaking sector, the term manufacturedesignates a company that provides the entire design andmanufacturing of mechanical movements. The two mastermovements of Zenith, the chronograph El Primero and the extra-flat movement Elite, absolute benchmarks for Swiss watchmaking,are provided on the watches sold under this brand.

Bvlgari, founded in 1884, stands for creativity and excellenceworldwide and is universally recognized as one of the majorplayers in its sector. The long-celebrated Italian brand occupies

a strong leadership position in jewelry, with an outstandingreputation for its expertise in combining colored gemstones andwatches, while also playing an important role in the fragranceand accessories segments. Iconic lines include Serpenti, B.zero1and Diva.

Chaumet, a jeweler established in 1780, has maintained itsprestigious expertise for over two centuries, which is reflected inall its designs, whether high-end jewelry pieces, jewelry or watchcollections. The LVMH group acquired Chaumet in 1999.

Montres Dior has been managed since 2008 in the form of ajoint-venture between the Watches and Jewelry business groupand the company Christian Dior Couture. The collections ofMontres Dior are designed in complete harmony with thecreative impetus of the fashion house.

De Beers is a jewelry brand, created in July2001 and jointlymanaged by the LVMH and De Beers groups, through De BeersDiamond Jewellers Ltd. The company is based in London(United Kingdom), and is progressively rolling out a globalnetwork of boutiques offering jewelry under the De Beers brandname. De Beers sets itself apart thanks to its unique expertisein diamonds.

Since January1, 2014, Montres Dior and De Beers are accountedfor under the equity method in accordance with IFRS 11 JointArrangements.

Fred, founded in 1936 and part of the LVMH group since 1995,is present in high-end jewelry, jewelry and watchmaking. Sincejoining the Group, Fred has completely revamped its design,image and distribution. This revival can be seen in the boldcontemporary style of its creations, exemplified by the brandsiconic Force 10 line.

4.1. The brands of the Watches and Jewelry business group


Watches and Jewelry


1_VA_V4 21/03/2017 17:12 Page19

Sephora

Sephora, founded in 1969, has developed over time a perfumeand beauty format that combines direct access and customerassistance. This concept led to a new generation of stores with asober and luxurious architecture, designed in three spacesdedicated to perfumes, makeup and skincare respectively. Basedon the quality of this concept, Sephora has gained the confidenceof selective perfume and cosmetics brands. In addition, Sephorahas offered products sold under its own brand name since 1995and has developed a line of exclusive products thanks to itsclose ties with brands selected for their bold ideas and creativity.

Since it was acquired by LVMH in July1997, Sephora has recordedrapid growth in Europe by opening new stores and acquiringcompanies that operated perfume retail chains. Sephora ispresent in 15 European countries. The Sephora concept alsocrossed the Atlantic in 1998, with a strong presence in the United

States, an Internet site sephora.com, and a stores network inCanada. Sephora entered the Chinese market in 2005. Havingentered the Middle East in 2007, the brand has stores in fivecountries at the end of 2015. After entering the South Americanmarket in 2010 with its acquisition of Sacks, the leading onlineretailer of selective perfumes and cosmetics in Brazil, Sephorahas reinforced its presence in this country and in Mexico. Sephorahas also reaffirmed its presence in Russia, raising its stake in Ile de Beaut, a perfume and cosmetics retail chain, to 100%.Starting in 2008, Sephora has also developed its presence inSoutheast Asia, opening its first stores in Singapore and then inMalaysia, India and Thailand. In 2014, the brand continuedexpanding in the region and marked its debut in Australia andIndonesia. In 2015, geographic expansion continued with theacquisition of the e-commerce site Luxola, which is present ineight countries in Southeast Asia.

5.2. Selective retail

DFS

Duty Free Shoppers (DFS) joined LVMH in 1997.

DFS is the pioneer and the world leader in the sale of luxuryproducts to international travelers. Its activity is closely linkedto tourism cycles.

Since it was formed in 1960 as a duty-free concession in theKai Tak airport in Hong Kong, DFS has acquired an in-depthknowledge of the needs of traveling customers, built solidpartnerships with Japanese and international tour operators,and has significantly expanded its business, particularly in thetourist destinations in the Asia-Pacific region.

The strategy of the DFS group is focused on the developmentand promotion of its city-center Galleria stores, which currentlyaccount for nearly half of its revenue.

With an area of around 6,000 to 12,000 square meters, theGallerias are located in the urban centers of major airlinedestinations in Asia-Pacific, the United States and Japan. Eachspace combines in one site, close to the hotels where travelers are

lodged, two different, but complementary sales spaces: a generalluxury product offering (including perfumes and cosmetics,fashion and accessories) and a gallery of prestigious boutiquesbelonging or not to the LVMH group (such as Louis Vuitton,Herms, Bvlgari, Tiffany, Christian Dior, Chanel, Prada, Fendi,Cline, etc.).

While focusing on the development of its Gallerias, which areits main source of growth, DFS maintains its strategic interestin the airport concessions if these can be obtained or renewedunder good financial terms. DFS is currently present at sometwenty international airport sites in the Asia-Pacific, the UnitedStates, Japan, Hong Kong and Abu Dhabi.

Starboard Cruise Services

Starboard Cruise Services, acquired by LVMH in 2000, is anAmerican company founded in 1958, the world leader in thesale of duty-free luxury items on board cruise ships. It providesservices to nearly 100 ships representing several cruise lines. It also publishes tourist reviews, catalogs and advertising sheetsavailable on board.

5.1. Travel retail

The Selective Retailing businesses are organized to promote anenvironment that is appropriate to the image and status of theluxury brands. These companies are expanding in Europe,North America, Asia, the Middle East and Latin America, andoperate in two segments: travel retail (the sale of luxury productsto international travelers), the business of DFS and Starboard

Cruise Services, and the selective retail concepts represented bySephora and the Paris department store Le Bon March.

In 2016, the Selective Retailing business group posted revenueof 11,973million euros, or 32% of the total revenue of LVMH.

5. SELECTIVE RETAILING


Selective Retailing


1_VA_V4 21/03/2017 17:12 Page20

The Other activities segment includes the media divisionmanaged by the Les Echos group, La Samaritaine, the Dutchluxury yacht maker Royal Van Lent, Cheval Blanc hotel operationsand the Cova patisserie business, based in Milan (Italy).

Les Echos group

LVMH acquired the Les Echos group in 2007. The Les Echosgroup includes Les Echos, Frances leading financial newspaper,LesEchos.fr, the top business and financial website in France, thebusiness magazine Enjeux-Les Echos, as well as other specializedbusiness services. Les Echos group also holds several otherfinancial and cultural media titles that were previously ownedby LVMH: Investir Le Journal des finances, resulting from the2011 merger of two financial weeklies; Connaissance des Arts;and the French radio station Radio Classique. Les Echos groupalso publishes trade journals, with titles produced by SID Presse,and is active in the business-to-business segment, with theorganizations Les Echos Formation and Les Echos Confrences, thetrade show Le Salon des Entrepreneurs, and Eurostaf market studies.Since late 2015, the media division has also encompassed theLe Parisien daily newspaper and its Aujourdhui en France magazine.

La Samaritaine

La Samaritaine is a real estate complex located at the heart ofParis, beside the Seine river. It comprised a department store

in addition to leased office and retail space until 2005 when thedepartment store was closed for safety reasons. La Samaritaineis undergoing a large-scale renovation project which adheres toan innovative environmental approach. Several activities will begrouped together in its buildings on the two blocks betweenthe Quai du Louvre and the Rue de Rivoli: a department store,a 72-room Cheval Blanc luxury hotel, 96 social housing units, adaycare center and offices. The building permit granted at the endof 2012 was definitively validated by order of Frances supremeAdministrative Court (Conseil dtat) on June19, 2015.

Royal Van Lent

Founded in 1849, Royal Van Lent designs and builds luxuryyachts according to customers specifications and markets themunder the Feadship brand, one of the most prestigious in theworld for yachts over 50 meters.

LVMH Hotel Management

LVMH Hotel Management is the spearhead of the Groupsbusiness development in hotels, under the Cheval Blanc brand.The Cheval Blanc approach, based on the founding values ofcraftsmanship, exclusivity, creativity and hospitality, is appliedat all of its hotels, whether proprietary or independentlymanaged. Cheval Blanc has locations in Courchevel (France),Saint-Barthlemy (French Antilles) and the Maldives.

6. OTHER ACTIVITIES

Le Bon March

Established in 1852, Le Bon March Rive Gauche was a pioneerof modern marketing in the 19thcentury. The sole departmentstore located on the left bank in Paris, it was acquired by LVMHin 1998.

Le Bon March Rive Gauche has a food store, La Grande piceriede Paris. Since 1994, it has also owned Franck et Fils, locatedon rue de Passy in the sixteenth district of Paris. This building

is now being transformed in order to house, from 2017, the secondLa Grande picerie in Paris. In recent years, a fundamentaloverhaul that included the renovation and remodeling of itssales spaces, together with moving to a more upscale productoffer, strengthened the identity of Le Bon March. Famous forits product offerings and service policy, which sets the bar veryhigh, Le Bon March Rive Gauche is now the most exclusiveand creative department store in Paris.


Other activities


1_VA_V4 21/03/2017 17:12 Page21


1_VA_V4 21/03/2017 17:12 Page22


MANAGEMENT REPORT OF THE BOARD OF DIRECTORSLVMH group

1. BUSINESS AND FINANCIAL REVIEW 241.1. Comments on the consolidated income statement 241.2. Wines and Spirits 281.3. Fashion and Leather Goods 291.4. Perfumes and Cosmetics 301.5. Watches and Jewelry 311.6. Selective Retailing 321.7. Comments on the consolidated balance sheet 331.8. Comments on the consolidated cash flow statement 34

2. BUSINESS RISK FACTORS AND INSURANCE POLICY 352.1. Strategic and operational risks 352.2. Insurance policy 392.3. Financial risks 40

3. FINANCIAL POLICY 41

4. OPERATING INVESTMENTS 424.1. Communi

Documents

TRANSLATION OF THE FRENCH DOCUMENT DE … of the french document de rÉfÉrence fiscal year ended december 31, ... marc jacobs make up for ever