JP Morgan M&A Presentation

JPMorgan

Amber, XI Fengbo

Nelly, FANG Li

George, CHEN Long

DECEMBER 15, 2008

2008 JPMorgan Asia Pacific IB Competition

Why should LVMH acquire Bulgari?

LVMH needs to get “HARDER”

“Polarization” leads the trend

If winter comes, can spring be far behind?

Valuation

External & Internal factors Analysis

Comparable transaction, comparable company & DCF method

Synergy

Execution considerations

Risk Analysis

Obstacles for the deal

Acquisition Means

Why JPMorgan

Agenda20

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Three “BIG” reasons

why LVMH should acquire Bulgari



If winter comes, can spring be far behind

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A positive bias for hard vs. soft luxury


Wealth concentration and aging society should support hard luxury

demand

Homogenization of the spending patterns of women and men

High-inflation & wealth store function of jewellery and watches

14%

15%

16%

17%

18%

19%

20%

21%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Hard Luxury Soft Luxury

(Hard luxury includes Bulgari, Richemont, Swatch; soft luxury includes LVMH, Tod’s, Hermes, Gucci, Burberry)

Hard & soft luxury margin, 1998-2008

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Hard/soft ratio is too low: 6.7%/93.3%

Only 5% of watches market share

The brands in the top of pyramid——jewellery and watches segments——

are not as strong as star brands of other segments

JewelleryWatches

Perfumes

& Cosmetics

Wines & Spirit

Fashion & Leather goods

Hard % in revenues, 2007 Pyramid-shaped segments of LVMH

0% 50% 100%

Burberry

Tod's

LVMH

Gucci

Hermes

Bulgari

Richemont

Swatch

Hard % Soft %

Mean 31.48%


LVMH needs to improve its hard/soft balance to have a diversified offer

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World’s third-largest jewellery brand

High-end position, deriving about 70% EBIT from high-end luxury segment

Clear exposure to strong growth countries for the hard luxury market

Hard % in revenues, 2007


Bulgari has a strong performance in hard market

Sales by region, H1 2008

0% 20% 40% 60% 80% 100%

Tod's

Burberry

LVMH

Gucci

Richemont

Swatch

Bulgari

Hermes

Asia Europe US Others

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0% 50% 100%

Burberry

Tod's

LVMH

Gucci

Hermes

Bulgari

Richemont

Swatch

Hard % Soft %

Mean 31.48%

Global GDP growth deceleration (estimated by World Bank) :

■ +4.7% in 2007

■ +2.5% in 2008

■ +0.9% in 2009

Luxury brands can defy gravity for a few months, but not through the

cycle

Global GDP growth, 01A-09E Sector EBIT margins, H1 04-H1 08


Global growth deceleration is not over

14%

15%

16%

17%

18%

19%

20%

H1 04 H1 05 H1 06 H1 07 H1 08

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0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

01A 02A 03A 04A 05A 06A 07A 08E 09E

World GDP%

Acquisition is the rare “survived” driver


Acquisitions make the whole luxury industry stable and orderly

■ Since 1998, LVMH’s acquisitions have frequently coincided with the

subsequent growth

■ Increases occur in the recent case of acquiring Feadship and Hublot

LVMH's operating margin and organic growth, 1998-2008E

10%

15%

20%

25%

30%

35%

1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008E

Operating Margin Organic Growth

Acquire Chaumet, TAG Heuer, Fendi (51%)

Acquire Emilio Pucci,

Fresh

Acquire Feadship,Hublot

Acquire Tod's (3.5%),Fendi (25.5%)

Groupe Lampe Berger (16%)

Acquire Stroili Oro (70%)

Acquire CalzaturificioMonique

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0 10000 20000 30000

Wolford

Kenneth Cole

Damiani S.p.A.

Escada

Antichi Pelletieri

Movado

Mariella Burani

Folli Follie

Hugo Boss

Tod's

Bulgari

Burberry

Tiffany

Coach

PPR

Harry Winston

Hermès

Christian Dior

Richemont

LVMH

Market cap. (€m)

Almost all the mid-cap mono-

brands were acquired by the

larger luxury conglomerates

The sector presents an ecological characteristics of

“Polarization”


Market cap. of peers, 2008 “Matthew effect” in luxury industry

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3000

2000

0 10000 20000 30000

Wolford

Kenneth Cole

Damiani S.p.A.

Escada

Antichi Pelletieri

Movado

Mariella Burani

Folli Follie

Hugo Boss

Tod's

Bulgari

Burberry

Tiffany

Coach

PPR

Harry Winston

Hermès

Christian Dior

Richemont

LVMH

Market cap. (€m)

There are only

Bulgari, Burberry and

Tiffany, according to market

cap between €2000 -3000m

Burberry is mainly a soft

player

Tiffany signed a long-term

strategic partnership with

Swatch

Market cap. of peers, 2008 The last available mono-brand

“Polarization” leads the trend20

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3000

2000

A dramatic price plunge with the S&P/MIB index of about 50% in sector

P/E ratio of Bulgari is below 10x at present, the lowest since 2003

It is the best moment to buy the big player at such a low cost

P/E & share price, 03-08


Lowest P/E since 2003

P/E among peers, Q3 08

8.5

9.1

9.64

10

10.5

11.8

12.9

34.7

0 10 20 30 40

Burberry

Richemont

Swatch

Bulgari

Tiffany

LVMH

Tod’s

Hermes

P/E

0

5

10

15

20

25

30

2003 2004 2005 2006 2007 2008P/E share price

5yr average 19.5x

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Asia contributes more than 40% of the sales of Bulgari, while US becomes

less significant

With the high geographic diversification, the return of Bulgari would be

steadier

Bulgari’s sales by region, 1998


Undervalued star in Asia

Bulgari’s sales by region, 2008

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14%

24%

27%

30%

5% Italy

US

Europe

Asia

M.East&Others

12%14%

27%

42%

5%

Still at an expansion stage

Vertical integration facilitates production

Bargaining power enhancement

Diversification to all price points in the jewellery segment, successful brand leverage to other segments

Bulgari’s stores, Q1 06-Q1 08


Upside potential for revenues

Rank of directly operated stores, 07

119 133 152

4241

4048

5357

0

50

100

150

200

250

300

Q1 2006 Q1 2007 Q1 2008

Travel retail and wholesale Franchisees Directly operated stores

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125

149

156

332

369

484

738

2,048

0 500 1000 1500 2000 2500

Tod's

Bulgari

Hemes

Swatch

Burberry

Gucci

Richemont

LVMH

Cost reduction potential

In H1 08, cost inflation (+12%) remained well above revenue growth

(+4%):

■ A&P, +12.5%

■ Personnel costs, +15%■ Amortization, +29%

By H2 09, Bulgari’s cost structure will have stabilized

Bulgari’s key fixed costs , 2005-H1 08


2005 2006 H1 07 H2 07 2007 H1 08

Amortization 35 38 19.7 23.5 43 25.4

Personnel 164 179 91.7 100 192 106.7

Rentals 44 56 29.9 33.8 64 36.1

Total 243 273 141.3 157.3 299 168.2

Yr to yr change 14% 12% 6% 13% 10% 19%

€ Million

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Valuation

Assumptions

External analysis

■ Sensitivity

■ Region performance

Internal analysis

Comparable transaction, comparable

company & DCF method

Assumptions

No dramatic deterioration of the world macroeconomic

environment, while Asia remains reasonable growth

Steady consumer confidence

Stable currency and commodity market

No heavy cash outflow or financial investments

No significant change in capital structure

Steady management strategy

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External analysis - Sensitivity

Sensitivity analysis Conclusion

Downturn in revenues while the

global economy is sustaining a

recession

Continuing depreciation of Euro

may alleviate reduction in

revenues

1% changes in:

Impact on

Bulgari's

net revenues

World GDP 0.83%

US$ to Euro -0.38%

JPY to Euro -1.09%

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External analysis - Europe

Organic sales growth, Q2 06-Q2 08 Sector-improve significantly

Q206 Q406 Q207 Q407 Q208

In Q2 2008 the sales growth

performance improved

significantly

0%

5%

10%

15%

20%

25%

Average Europe Bulgari Europe

Bulgari-weak in Italy

Disappointing revenue trends in

Italy

Forecasted growth rate in sales

of -8% in Italy and 12% in rest of

Europe

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External analysis - US

Q206 Q406 Q207 Q407 Q208

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Average US Bulgari US

Sector-deterioration

Performance in US starts to

deteriorate

Bulgari-continuing drop

Continuing drop in sales growth

since Q2 07


of -8%

Organic sales growth, Q2 06-Q2 08

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External analysis - Japan

Q206 Q406 Q207 Q407 Q208

-20%

-10%

0%

10%

20%

30%

40%

Average Japan Bulgari Japan

Sector-declination

Demand for luxury goods declines

for a decade

The sector underperformed in Q2

08

Bulgari-a slow growth

Significant organic sales growth

in Q2 08


of 4%


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External analysis – Asia ex-Japan and Others

Q206 Q406 Q207 Q407 Q208

-40%

-20%

0%

20%

40%

60%

80%

100%

Average RoW Bulgari RoW

Sector-strong trends

It shows a continuation of strong

trends, esp. China

Middle East has a rapid increase

of gross sales of luxury goods

Bulgari-large profit space

Strong brand image in China

Forecasted growth rate in sales of

16% in Middle East and 19% in rest

of Asia ex-Japan, and 16% in

others


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Internal analysis - Sales

Sales growth at constant currency, Q2 06-Q2 08

Solid Jewellery sales

Watches' sales growth

has consistently

underperformed

Highlights

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Jewellery Watches

Q206 Q406 Q207 Q407 Q208

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Sales in product, 2008

42%

27%

20%

8% 3% Jewellery

Watches

Perfume

Accessory

Other

Internal analysis – Costs

A & P expenses (€m), Q2 02-Q2 08

Store network

expansion caused a

sharp increase in fixed

costs

Consistent advertising

and promotion effort

Highlights

Q206 Q406 Q207 Q407 Q20810

15

20

25

30

35

40

45

50

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Comparable transaction valuation : €m [3187, 3208]

Comparable transactions

Valuation

Financial Summary (€m) Sales EBITDA

Bulgari S.p.A. 1141.5 219.8

Estimated Firm Value (€m) by FV/Sales FV/EBITDA

Bulgari S.p.A. 3207.6 3187.1

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Multiples FV/Sales (x) FV/EBITDA (x)

Mean for luxury positioning 2.81 14.5

Comparable company valuation: €m [1813, 2358]

Comparable company multiples

Valuation

Comparable companies FV/Sales (x) FV/EBITDA (x) P/E (x)

Tiffany & Co. 1.91 8.6 16.2

Swatch Group AG 2.27 8.9 13.8

Burberry Group PLC 2.04 8.3 14.2

Tod's S.p.A. 1.66 7.2 12.9

Average 1.97 8.3 14.3

Financial Summary (€m) Sales EBITDA Net income

Bulgari S.p.A. 1141.5 219.8 165.2

Estimated Firm Value (€m) by FV/Sales FV/EBITDA P/E

Bulgari S.p.A. 2248.8 1813.4 2358.2

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DCF valuation

Three-stage valuation assumption

Stages Start End Growth

1 2008 2012 Detailed analysis

2 2013 2016 5%

3 2017 ∞ 2%

Free cash flow estimation

€m 2007 2008E 2009E 2010E 2011E 2012E

Operating cash flow 135.5 125.9 284.7 322.1 278.1 288.7

Dep./Amort. 43.2 49.7 57.2 65.7 75.6 86.9

Changes in net working Capital -52 -93.9 48.5 53.8 -20.1 -45.1

Investing cash flow -105.6 -37.2 -38.8 -95.4 -70.2 -85.3

Free cash flow 29.9 88.7 245.9 226.7 207.9 203.4

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DCF valuation: € 9.01 per share

Sensitivity analysis

DCF

valuationTerminal growth

WACC 1% 1.50% 2% 2.50% 3%

7.10% 11.37 11.99 12.73 13.6314.76

8.10% 9.67 10.08 10.56 11.13 11.8

9.10% 8.4 8.69 9.01 9.39 9.82

10.10% 7.41 7.62 7.85 8.11 8.41

11.10% 6.63 6.78 6.95 7.13 7.35

DCF valuation

WACC 9.10%

Mid-term Growth assumed 5.00%

Long Term Growth assumed 2.00%

Net Present Value of forecast

Cash Flows (€m)1219.5

Net Present Value of Terminal

Value (€m) 1486.5

Firm Value (€m) 2706

Number of Shares (m) 300.3

Share Valuation (€) 9.01

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Benefits and limitations

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Methods Benefits Limitations

Comparable

transaction

Reflect supply and demand for

assets Rarely directly comparable

Acquisitions trends become

clear

Appropriate multiples change

over time

Comparable

company

Reflect current market trends Truly comparable companies are

rare

Eliminate influence of inflationMay not reflect fundamental

value

DCF

The most sound method of

valuation

Sensitive to valuation

assumptions

Less influenced by some

conditions

Need a long-period financial

statements

Synergy

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Synergy

Family hold to public hold

Global strategic insight

Enhanced management efficiency

Sales by sector, 2007 (€m)

0

500

1000

1500

2000

2500

3000

3500

Perfumes and

Cosmetics

Watches and

Jewelry

LVMH

Bulgari

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Strategic improvement

Profitability enhancement of

Bulgari

More balanced product mix sales

Stronger distribution networks

More effective promotion

Revenue enhancement

Synergy

Cost reduction

SG&A reduction

Distribution channels sharing

Labor expense cut

Management expense per store

down 10.7%

Vertical integration

Enhanced bargaining power

Technology coordination

■ Bulgari has acquired many Swiss

watchmakers to support its

business

Others

Reduced capital input

Tax gains

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0%

20%

40%

60%

80%

100%

Bulgari LVMH

license

wholesale

retail

Distribution channels, 2008

Execution considerations

Risk analysis

■ Macro

■ Liquidity

■ Derivatives


Acquisition means

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Japan

Deteriorating macro environment

Risk analysis - Macro

Consumer confidence index, 00 -08

Plunging consumer confidence in US and Japan

Pessimistic economic growth in Italy, with Debt/GDP=104%

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-15

-10

-5

0

5

10

15

20

2004 2005 2006 2007 2008H1

Italy Total

Sales growth (%), 04-H1 08

0%

20%

40%

60%

80%

100%

120%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

US

Inventory level, 2008

Risk analysis - Liquidity

Highlights

Surging inventory

■ Highest inventory level in luxury

■ Quick ratio halved from 1 to 0.54

Rising financial debt would be big

pressure in recent years

Drying up cash: only 7.9 M on

hand after Q3, 30% of total

current bank debt

Cash, 04-Q3 08 (€,000) Current bank debt, 04-08 (€,000)

-

50,000

100,000

150,000

200,000

250,000

300,000

2004 2005 2006 2007 2008H1 2008Q3

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2004 2005 2006 2007 2008H12008Q3

0% 50% 100%

LV

Hermes

Richemont

Burberry

Tod's

Swatch

Tiffany

Bulgari

Inventory Other assets

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Mean 26.8%

Gold price ($), 08 Fair value of derivatives (€), 07-08

Gold hedge derivatives Foreign exchange derivatives

Risk analysis - Derivatives

-10,000

-5,000

0

5,000

10,000

15,000

20,000

07A 08Q1 08Q2 08Q3

Foreign Exchange Commodities

Accounting retreatment change of

gold hedging in Q1 2008

Doubted earnings quality in 2008

Huge foreign exchange loss

■ 20 Million loss on foreign exchange

derivatives in Q3

Sensitivity analysis

■ 10% unfavorable change causing

€12,869,000 fair value decrease

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700

750

800

850

900

950

1000

1050Ja

n

Apr

July

Oct

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2001 2002 2003 2004 2005 2006 2007

M&A CAC40


M&A relation with market (€m) Highlights

Large shareholding in Bulgari’s

family (51.35%)

Less deals in a bear market

Heavy investment - no willingness

to sell

Integration of businesses

Legal restrictions

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Acquisition means

Alternative ways The way JP Morgan suggests

Increase investments in its own

brands of hard luxury sector, such

as TAG Heuer

■ Pros:

· Self-owned

· Low risk

■ Cons:

· Low marginal return

Put more proportion in emerging

countries, such as “BRIC”

■ Pros:

· Large profit space

■ Cons:

· Fierce competition

· Large initial investments

All cash offer

Funding by bank loan

Funding by debt or equity

issuance

■ Pros:

· More attractive for Bulgari

· Usual acquisition mean

■ Cons:

· Raising fund in a bear market

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Why JPMorgan?

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“ First class business in the first class way ”

M & A expert

■ Advised on 268 transactions globally

■ Advised on over $623 billion of M&A transactions

■ Consistent top advisor globally in both number of deals and overall

volume

■ Advised on 5 of the top 10 deals announced globally

■ Geographic presence in over 20 countries

Full service

■ A leader in investment banking, commercial banking, financial

transaction processing, asset management and private equity.

Sufficient capital

■ A leading global financial services firm with assets of $2.3 trillion

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Q&A


Appendix


42

Pre - Acquisition Acquisition Post - Acquisition

LVMH

First round bid

Second round bid

Negotiate stake purchase contract

Obtain authority approval

Sign up the contract

Sign up stake contract and

gain the stake-holding right

Company harmonization

JP

Morgan

Strategic assessment &

identification of

synergies

Valuation of target

Risk analysis

Determine the acquisition mean

Analyzing the other

potential bidders

Analyzing taxation and

legal procedures

Place preliminary indication of interest

Due diligence

Place binding bid

Submit marked-up contract

Reach definitive agreement

Develop strategy for communication to investors

Make public announcement

Close transaction

Post-closing adjustments

Secure financing and cash payment or new share

issuance

Assess the strategic goal of this deal

Review descriptive

memorandum

Appendix 1 - Work Scope

Players Watches Jewellery RTW Shoes Perfume Leather Other

Bulgari 27.00% 42.20% 0.00% 0.00% 20.30% 7.70% 2.70%

Richemont 26.00% 50.10% 0.00% 0.00% 0.00% 5.80% 18.10%

Swatch 71.80% 7.10% 0.00% 0.00% 0.00% 0.00% 21.10%

Burberry 0.00% 0.00% 59.90% 0.00% 0.00% 28.90% 11.30%

Hermes 6.40% 5.30% 19.40% 0.00% 7.30% 41.50% 20.00%

LVMH 4.80% 1.90% 4.10% 4.80% 16.60% 22.20% 44.90%

Gucci 4.40% 4.80% 13.50% 12.10% 16.70% 42.40% 6.10%

Tod's 0.00% 0.00% 14.00% 65.00% 0.00% 21.00% 0.00%

43

Appendix 2 - Sales Breakdown by Product in 2007

Source: advisors’ analysis, Company data

Asia Europe US Others

Tod's 15% 75% 10% 0%

Burberry 23% 54% 23% 0%

LVMH 30% 37% 25% 8%

Gucci 33% 47% 19% 1%

Richemont 38% 43% 19% 0%

Swatch 39% 48% 11% 2%

Bulgari 39% 39% 16% 5%

Hermes 41% 41% 15% 3%

44

Appendix 3 - Sales Breakdown by Region in 2007

Source: advisors’ analysis, Company data

Regions 2007 2008E 2009E 2010E 2011E 2012E

Italy 141.4 130.7 129.4 132.0 134.6 138.7

% 12% 11% 11% 10% 10% 9%

g -8%- -1% 2% 2% 3%

Rest of Europe 285.9 320.8 336.6 350.3 371.3.7 397.3

% 27% 30% 28% 27% 27% 26%

g 12% 4% 5% 6% 7%

Americas 176.4 155.2 156.8 162.0 172.8 186.6

% 16% 12% 13% 13% 12% 12%

g -12% 1% 4% 6% 8%

Asia 429.3 467.6 509.7 565.7 633.6 722.3

% 39% 41% 42% 44% 45% 47%

g 9% 9% 11% 12% 14%

Japan 231.7 240.9 252.9 265.6 278.9 295.6

% 21% 21% 21% 21% 20% 19%

g 4% 5% 5% 5% 6%

Rest of Asia 197.6 235.3 265.9 303.1 348.6 407.8

% 18% 20% 22% 23% 25% 26%

g 19% 13% 14% 15% 17%

M. East 40.4 46.8 50.5 55.6 61.7 69.7

% 4% 4% 4% 4% 4% 5%

g 16% 8% 10% 11% 13%

Others 17.6 20.4 21.8 23.6 25.7 28.3

% 2% 2% 2% 2% 2% 2%

g 16% 7% 8% 9% 10%

Bulgari 1091 1141.5 1201.8 1290.2 1399.8 1543.0

g 4.6% 5.3% 7.4% 8.5% 10.2%

Appendix 4 - Sales of Bulgari by Region

Source: advisors’ estimates, Company data

€ Million

ASSETS 2007 2008E 2009E 2010E 2011E 2012E

Property, plant and equip. 160,983 172,272 183,423 199,738 215,893 246,684

Intangible assets 118,049 120,000 126,000 132,300 138,915 145,861

Investments and other noncurrent financial activities

40,236 40,000 40,000 40,000 40,000 40,000

Deferred tax assets 22,750 25,000 25,000 25,000 25,000 25,000

Other non-cur. assets 10,000 10,000 10,000 10,000 10,000 10,000

Non-cur. Financial receiv. 1,368 1,500 1,500 1,500 1,500 1,500

Total non-cur. assets 353,386 368,772 385,923 408,538 431,308 469,045

Inventory 596,116 765,288 713,419 664,888 685,914 734,477

Trade receivables 202,186 206,239 225,411 229,651 249,649 268,779

Other current assets 59,264 68,154 78,377 90,133 103,653 119,201

Current financial assets 12,804 15,000 15,000 15,000 15,000 15,000

Cash and cash equivalent 21,681 20,721 25,087 30,103 36,164 43,594

Total current assets 892,051 1,012,607 1,047,633 1,096,623 1,175,983 1,274,721

Total assets 1,245,437 1,381,379 1,433,556 1,505,161 1,607,292 1,743,766

LIABILITIES

Total non-cur lia. 104,708 107,853 113,991 121,193 127,320 138,599

of which:

Non-current. Financial payable to banks 55,444 50,000 50,000 50,000 50,000 50,000

Total cur.lia 362,267 457,406 448,068 481,829 509,738 556,283

of which:

Trade payables 187,941 201,217 214,782 221,463 239,317 258,427

Current financial payable to banks 116,499 193,391 166,767 191,525 196,169 217,601

Total liability 466,975 565,258 562,059 603,022 637,058 694,883

EQUITY 778,462 715,288 663,419 614,888 635,914 684,477

Appendix 5 - Balance Sheet of Bulgari


€ Thousands

2006 2007 2007H1 2008H1 2008E 2009E 2010E 2011E 2012E

Profit margin 14.2% 15.0% 13.1% 12.4% 15.6% 13.4% 14.1% 14.3% 14.4%

Asset turnover 96.8% 99.9% 44.6% 40.7% 91.7% 87.0% 90.0% 93.0% 96.0%

Return on asset 13.8% 15.0% 5.8% 5.0% 14.3% 11.7% 12.7% 13.3% 13.8%

Net debt to equity 5.3% 1.9% 12.2% 33.1% 21.2% 16.3% 17.9% 16.5% 16.6%

Current ratio 274.9% 301.8% 246.2% 196.5% 221.4% 233.8% 227.6% 230.7% 229.1%

Quick ratio 95.4% 104.2% 81.7% 54.3% 54.1% 74.6% 89.6% 96.1% 97.1%

Debt to asset 34.2% 32.0% 37.5% 44.3% 40.9% 39.2% 40.1% 39.6% 39.8%

Equity to asset 65.8% 68.0% 62.5% 55.7% 59.1% 60.8% 59.9% 60.4% 60.2%

Current asset/all 74.2% 74.0% 71.6% 73.4% 73.3% 73.1% 72.9% 73.2% 73.1%

Cash ratio 2.6% 3.6% 1.7% 1.2% 1.5% 1.8% 2.0% 2.3% 2.5%

Current receivable ratio 22.1% 23.1% 22.7% 18.1% 20.4% 21.5% 20.9% 21.2% 21.1%

Current financial ratio 22.4% 20.2% 32.2% 52.4% 42.3% 37.2% 39.7% 38.5% 39.1%

Trade payables 59.8% 59.7% 51.9% 36.1% 44.0% 47.9% 46.0% 46.9% 46.5%

Debt to equity 51.9% 47.0% 60.0% 79.7% 69.3% 64.5% 66.8% 65.7% 66.2%

Appendix 6 – Financial Ratios of Bulgari


47

2007 2008E 2009E 2010E 2011E 2012E

Total net revenue 1,090,981 1,141,500 1,201,800 1,290,200 1,399,800 1,543,000

Cost of sales (391,865) (410,900) (432,648) (458,021) (494,129) (544,679)

Total contribution margin 699,116 730,600 769,152 832,179 905,671 998,321

Total contribution margin % 64.10% 64.00% 64.00% 64.50% 64.70% 64.70%

Net operating expenses 534,595 560,477 590,084 629,618 683,102 751,441

Operating profit 164,521 170,123 179,068 202,561 222,569 246,880

Operating profit % 15.10% 14.90% 14.90% 15.70% 15.90% 16.00%

PBT 165,134 177,143 179,068 202,561 222,569 246,880

PBT % 15.10% 15.52% 14.90% 15.70% 15.90% 16.00%

PAT 151,156 159,429 161,161 182,305 200,312 222,192

PAT % 13.90% 13.97% 13.41% 14.13% 14.31% 14.40%

Minority interest 238 200 200 200 200 200

Net profit 150,918 159,629 161,361 182,505 200,512 222,392

Net profit % 13.83% 13.98% 13.43% 14.15% 14.32% 14.41%


48

Appendix 7 - Income Statement of Bulgari


€ Thousands

2007 2008E 2009E 2010E 2011E 2012E

Cash flows from operating activities


Depreciation, amortization and impairment 43,216 49,698 57,153 65,726 75,585 86,923

Cash flows from operating activities 194,134 219,821 236,221 268,287 298,154 333,803

Cash flows from changes in net working capital -51,954 -93,929 48,504 53,774 -20,051 -45,132

(a) Cash flows from operating activities 135,533 125,893 284,725 322,062 278,103 288,671

Cash flows from investing activities

Purchase of companies (excluding cash/debt acquired)

-7,894 -10,000 -10,000 -20,000 -20,000 -10,000

Purchases of property, plant and equipment (net of disposals)

-86,445 -29,264 -28,812 -75,087 -49,597 -74,343

Purchase of intangible assets -29,107 -1,951 -6,000 -6,300 -6,615 -6,946

(b) Cash flows from investing activities -105,618 -37,215 -38,812 -95,387 -70,212 -85,288

Free cash flow = (a)+(b) 29,915 88,678 245,913 226,674 207,891 203,383

Appendix 8- Cash Flow Statement (partial) of Bulgari


€ Thousands

49

2007 2008E 2009E 2010E 2011E 2012E

Base g 8.0% 4.4% 5.1% 6.9% 10.9% 10.2%

EBIT Margin 15.10% 14.90% 14.90% 15.70% 15.90% 16.00%

EBIT 165 170.1 179.1 202.6 222.6 246.9

Optimistic g 8% 7.4% 8.1% 9.9% 13.9% 13.2%

EBIT Margin 15.1% 15.9% 15.9% 16.7% 16.9% 17.0%

EBIT 165 181.5 191.1 215.5 236.6 262.3

Recession g 8% 2.4% 3.1% 4.9% 8.9% 8.2%

EBIT Margin 15.1% 13.9% 13.9% 14.7% 14.9% 15.0%

EBIT 165 158.7 167.1 189.7 208.6 231.5

50

Appendix 9 – Scenario Analysis for Bulgari


€ Million

51

Appendix 10 – Comparable Transactions


Date Target Activity AcquirorPositioni

ngFirm value FV/Revenue FV/EBITDA

Jun-07 Valentino Fashion Group Fashion house Permira Luxury 4,653.80 2.18 13.9

Feb-07 Jimmy Choo Accessories TowerBrook Capital Luxury 277.4 2.85 N/A

Dec-05 Calvin Klein Jeans Int’l Apparel Warnaco Luxury 240 1.18 N/M

Nov-04 Jimmy Choo Accessories Lion Capital Luxury 143.9 7.38 15.1

Dec-02 Calvin Klein Fashion house PVH Luxury 581.9 3.34 N/A

Mar-02 Gianfranco Ferrè Fashion house IT Holding Luxury 157.5 3.52 N/M

Mar-02 Valentino FashionGroup Fashion house Marzotto Luxury 240.9 1.81 N/A

Nov-01 Donna Karan andGabrielle

Studio

Fashion house LVMH Luxury 733.8 0.96 9.5

Nov-01 Fendi Fashion house LVMH Luxury 980.7 3.72 N/A

Sep-01 Increased stake inGucci to

53.2%

Fashion house Pinault-Printemps-

Redoute

Luxury 9,420.60 2.63 12.9

Aug-01 Bruno Magli Footwear and

leathergoods

Opera Partecipations Luxury 206.6 2 N/A

Jun-01 Genny Group Apparel and

accessories

Prada Luxury 120.6 2.73 N/M

Feb-01 Bottega Veneta Luxury goods Gucci Luxury 151.2 3.16 N/A

Oct-00 Cerruti Fashion house Finpart Luxury 104.7 2.21 N/A

Nov-99 Sergio Rossi Footwear Gucci Luxury 133.1 2.28 17.1

Nov-99 Yves Saint Laurent Groupe Fashion house

and perfumes

Gucci Luxury 935.3 1.44 N/A

Nov-99 40% capital increase of Gucci Luxury goods Pinault-Printemps-

Redoute

Luxury 3.970.7 4.2 15.9

Oct-99 Fendi Fashion house LVMH-Prada Luxury 1,003.70 3.87 N/A

Aug-99 Jil Sander Apparel Prada Holding Luxury 207.2 1.89 17

Mean 1,127.38 2.81 14.5

52

Appendix 11 – Comparable Companies


Market

FV/Sales (x) FV/EBITDA (x) P/E (x)cap.

(€mm)

2007 2008E 2009E 2007 2008E 2009E 2007 2008E 2009E

Tiffany 3,721 2.13 1.91 1.74 9.5 8.6 7.8 19.8 16.2 14.1

Riche

mont 22,013 2.23 2.10 1.96 9.7 8.9 8.1 14.3 13.5 12.5

LVMH 34,747 2.68 2.56 2.37 10.5 10.1 9.2 16.5 15.3 13.5

Bulgari

S.p.A.2,047 2.05 1.93 1.79 10.8 9.8 8.8 13.7 13.0 12.0

Swatch 9,564 2.48 2.27 2.11 9.7 8.9 8.1 14.8 13.8 12.4

Burber

ry 2,736 2.34 2.04 1.84 9.7 8.3 7.3 16.7 14.2 12.4

Tod's 1,115 1.8 1.66 1.54 7.7 7.2 6.5 14.4 12.9 11.5

Mean 2.24 2.07 1.91 9.7 8.8 8.0 15.7 14.1 12.6

Median 2.23 2.04 1.84 9.7 8.9 8.1 14.8 13.8 12.4

2007 2008E 2009E 2010E 2011E 2012E

Revenue 16,481 17,656 18,831 20,006 21,181 22,356

Cost of Sales 5,786 6,091 6,396 6,701 7,006 7,311

Marketing and Selling Expense 5,752 6,190 6,645 7,108 7,626 8,130

G&A Expenses 1,388 1,587 1,819 2,068 2,327 2,593

EBIT(excluding depreciation) 3,555 3,788 3,971 4,129 4,222 4,322

Tax 915 980 1,045 1,110 1,176 1,241

Investments 129 132 135 138 141 148

Changes in NWC -474 -128 -264 -317 -261 -205

Free Cash Flow 2,985 2,804 3,055 3,198 3,166 3,138

PV of CF (at Dec,31,2008) 12,022.01 WACC 8.60%

PV of TF (at Dec,31,2008) 41,493.76 Terminal growth 3.00%

Firm value (at Dec,31,2008) 53,515.77 Tax Rate 5.60%

53

Appendix 12 - DCF Model of LVMH Valuation


€ Million

LVMH Bulgari New Firm Synergy

Revenues

PV of CF 77871 5036 82977

PV of TV 295613 4618 304527

NPV 373484 9654 387504 4365

Expense

PV of CF 61896 4257 63430

PV of TV 238464 3879 244865

NPV 300359 8136 308295 200

Taxes

PV of CF 4322 79 4336

PV of TV 16410 75 16489

NPV 20732 154 20825 60

Capital Requirements

PV of CF -401 -335 -769

PV of TV -754 -269 -1943

NPV -1155 -604 -2712 953

Total 53548 1969 61096 5578

Appendix 13 - Synergy Estimates


€ Million

Announcement

DateTarget Deal Value $ (m)

Final Price

Offered Per

Share ($)

Initial Price

Offered per

Share ($)

Premium Pre

Bid at

Announcement,

1 Day (%)

Premium Pre

Bid at

Announcement,

1 Month (%)

28-Dec-98 La Brosse et Dupont SA 165.40 115.27 4.167

12-Jan-99 Gucci Group NV (9.5%) 397.90 70.500 70.50 16.433 69.239

16-Jan-99 Gucci Group NV (19%) 504.38 37.311 37.31 19.763 73.227

21-Jan-99

Remy Cointreau SA (Krug Champagne

House) 176.52

18-Mar-99 Blissworld LLC (Majority%)

6-Apr-99 Michael Kors LLC (33%)

12-May-99 Hard Candy

5-Aug-99 Inter Parfums, Inc. (6.3% Partial Interest)

13-Sep-99 TAG Heuer International SA 825.77 138.777 138.78 8.586 38.042

25-Sep-99 Thomas Pink Holdings Ltd (70%) 49.30

11-Oct-99 Le Tanneur et Cie (33.3%) 3.46

12-Oct-99 Fendi S.r.l (51%) 425.00

20-Oct-99 Chaumet

4-Nov-99 Make Up For Ever (Majority%)

17-Feb-00 Emilio Pucci Srl (67%)

25-Feb-00 Urban Decay LLC

17-May-00

Yves Saint Laurent Groupe SA (Christan

Lacroix Distribution Unit)

28-Sep-00 Mountadam Vineyards (Majority%)

3-Nov-00 Micromania (35%)

14-Nov-00 Tod's SpA (3.5%)

12-Dec-00 Rossimoda SpA (Stake%)

18-Dec-00 Donna Karan International Inc 241.12 10.750 8.50 74.359 51.111

18-Dec-00 De Pury & Luxembourg

18-Dec-00 Gabrielle Studio 400.00

Appendix 14 – LVMH’s Acquisition (Partial)

55

Announcement

DateTarget

Deal Value $

(m)

Final Price

Offered Per

Share ($)

Initial Price

Offered per

Share ($)

Premium Pre

Bid at

Announcement

, 1 Day (%)

Premium Pre

Bid at

Announcement

, 1 Month (%)

31-Jan-01 Asprey & Garrard Ltd (10%)

2-Apr-01 De Rigo SpA (5%)

3-Sep-01 Morellato SpA (metal bracelet division) 9.40

13-Sep-01 Acqua di Parma S.r.l (50%)

26-Nov-01 Fendi S.r.l (25.5%) 258.95

25-Jun-02 Imaginarium (40%)

9-Jul-02 Fendi Srl (15.9%) 99.05

2-Dec-02 Groupe Lampe Berger (16%) 149.16

18-Apr-03 Calzaturificio Sergio Rossi SpA (52%)

13-May-03 Fendi Srl (17%)

29-Apr-04 Stroili Oro SpA (70%)

20-Oct-04 Glenmorangie plc 572.26 31.22 12.475 14.050

21-Apr-05

LVMH Moet Hennessy Louis Vuitton SA

(0.92%) 416.67 92.037 130.55 80.995 75.901

17-Jun-05 Mariella Burani Fashion Group SpA (7%)

29-Sep-05 Mariella Burani Fashion Group SpA (Stake%) 26.87 14.093 14.09 -2.784 6.781

28-Apr-06 LV Trading (51%) 0.33

2-May-06 Calzaturificio Monique Srl

13-Jun-06 Fun Fashion Ltd (51%) 5.76

13-Feb-07 Calligaris Holding SpA

17-Mar-07 Hidesign India (Stake%)

16-May-07 Wenjun Liquor Co Ltd (55%)

14-Feb-08 Bodega Numanthia Termes SL 36.43

24-Apr-08 Hublot SA

Appendix 14 - LVMH’s Acquisition (Partial)(con.)

56

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