RAPP GESTION 3-56 - Dior Finance60 C ONSOLIDATEDB ALANCE S HEET ATD ECEMBER 31 (in millions of...

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C O N S O L I D A T E D S T A T E M E N T S

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C O N S O L I D A T E D H I G H L I G H T S

millions of euros 1999 2000 2001 2002 2003

Net sales 8,758 11,867 12,567 13,168 12,466

Income from operations * 1,551 1,967 1,548 2,034 2,213

Income before income taxes * 1,415 1,652 597 1,264 1,622

Income from continuing operations, group share, before amortization of good will 295 320 75 287 428

Net income – Group share 264 251 (95) 178 303

euros

Income from continuing operations per sharebefore amortization of goodwill * 1.63 1.77 0.41 1.58 2.36

millions of euros

Balance sheet total 26,330 28,435 29,228 26,802 25,802

Shareholders’ equity 3,887 3,972 3,788 3,793 3,774

Cash flow * 922 1,140 884 1,528 1,961

* Adjusted retroactively to reflect reclassifications.

* Adjusted following the 1 for 4 split on July 3, 2000.

* Adjusted retroactively to reflect reclassifications.

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C O N S O L I D A T E D B A L A N C E S H E E T A T D E C E M B E R 3 1(in millions of euros)

ASSETS Notes 2003 2002 2001

Current assets Cash and cash equivalents 3 855 855 834

Marketable securities 3 232 61 623

Treasury shares 4 549 641 1,143

Trade receivables and related accounts 5 1,423 1,373 1,577

Net deferred taxes 455 558 503

Inventories and work in progress 6-27 3,517 3,522 3,727

Other receivables and prepaid expenses 7 1,235 1,315 1,534

Total current assets 8,266 8,325 9,941

Fixed assetsLong-term financial assets

Equity interests 8 52 71 81

Other long-term investments 9 1,252 1,233 1,705

Other financial assets 357 522 478

1,661 1,826 2,264

Tangible assets 10 6,653 6,855 7,120

Depreciation (2,678) (2,614) (2,489)

3,975 4,241 4,631

Goodwill 11 4,691 4,628 4,406

Amortization (1,496) (1,224) (1,115)

3,195 3,404 3,291

Brands and other intangible assets 12 9,223 9,368 9,392

Depreciation and amortization (518) (362) (291)

8,705 9,006 9,101

Total fixed assets 17,536 18,477 19,287

Total assets 27-28 25,802 26,802 29,228

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2003 2003 2002 2001after before after after

LIABILITIES Notes assignment assignment assignment assignment

Short-term liabilities

Financial liabilities, current portion 13 871 871 360 340

Short term financial liabilities 13 2,038 2,038 3,114 4,447

Bank overdrafts 13 429 429 504 603

3,338 3,338 3,978 5,390

Trade payables and related accounts 1,688 1,688 1,484 1,450

Other liabilities 14 2,541 2,436 2,746 2,763

4,229 4,124 4,230 4,213

Total short-term liabilities 7,567 7,462 8,208 9,603

Long-term deferred taxes 21 160 160 127 171

Medium and long-term liabilities

Repackaged notes 13 158 158 222 284

Financial debt, less current portion 13 4,307 4,307 4,555 5,402

Other medium and long-term liabilities and provisions 15 1,136 1,136 1,151 1,322

Total medium and long-term liabilities 5,601 5,601 5,928 7,008

Minority interests 16 8,700 8,700 8,746 8,658

Shareholders’ equity

Capital 363 363 363 363

Consolidated reserves 3,678 3,531 3,534 3,493

Cumulative translation adjustment (267) (267) (104) (68)

Income for the period 0 303 – –

Interim dividend paid 0 (51) – –

Shareholders’ equity, group share 16 3,774 3,879 3,793 3,788

Total shareholders’ equity 12,474 12,579 12,539 12,446

Total liabilities 28 25,802 25,802 26,802 29,228

The notes are an integral part of the consolidated financial statements.

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C O N S O L I D A T E D S T A T E M E N T O F I N C O M E(in millions of euros,

except for earnings per share expressed in euros)

Notes 2003 2002 2001

Net sales 19-27-28 12,466 13,168 12,567

Cost of sales (4,350) (4,712) (4,764)

Gross margin 8,116 8,456 7,803

Design expenses 0 (31) (25)

Marketing and selling expenses (4,647) (4,924) (4,743)

General and administrative expenses (1,256) (1,467) (1,487)

Income from operations 27-28 2,213 2,034 1,548

Financial income 19 (269) (333) (499)

Dividends from unconsolidated interests 18 8 16

Other income and expenses, net 20 (340) (445) (468)

Income before income taxes 1,622 1,264 597

Income taxes 21 (496) (356) (194)

Income (loss) from investments in equity companies 8 1 (18) (42)

Net income before amortization of goodwill and unusual items 1,127 890 361 (Group share: 2003: 428; 2002: 287; 2001: 75)

Amortization of goodwill 22 (290) (253) (159)

Net income before unusual items 837 637 202 (Group share: 2003: 303; 2002: 178; 2001: 5)

Unusual items 23 0 0 (199)

Net income 837 637 3

Minority interests (534) (459) (98)

Net income – Group share 303 178 (95)

Net pre-tax income per share 2.36 1.58 0.41 Net income per share 1.67 0.98 (0.52) Number of shares used for the calculation 181,727,048 181,727,048 181,721,048

Net pre-tax income per share after dilution 2.36 1.58 0.41Net income per share after dilution 1.67 0.98 (0.52) Number of shares used for the calculation 181,727,048 181,727,048 181,723,825

The notes are an integral part of the consolidated financial statements.

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S T A T E M E N T O F C O N S O L I D A T E D C A S H F L O W (in millions of euros)

2003 2002 2001

I - OPERATING ACTIVITIESNet income – group share 303 178 (95)Minority interests in net income 534 459 98 Elimination of income from companies accounted for by the equity method (1) 18 42Dividends received from equity companies 6 (1) 4 Amortization and net long-term and short-term provisions 1,056 700 1,672 Net gain (loss) on sale of fixed assets or treasury shares 63 174 (837)

Cash flow 1,961 1,528 884Change in current assets (230) 117 (403)Change in short-term liabilities 127 309 47

Change in working capital requirements (103) 426 (356)

Net cash from operating activities ➀ 1,858 1,954 528

II - INVESTING ACTIVITIES Acquisition of intangible assets (74) (88) (135)Acquisition of property, plant & equipment (565) (538) (949)Acquisition of equity interests (36) (51) (417)Change in debt on fixed-assets (148) (53) 244 Disposal of non-financial fixed assets 105 203 149 Reclassification of equity interests as marketable securities 0 0 (677)Disposal of unconsolidated equity interests 13 92 2,122 Change in other long-term financial assets 10 (185) (181)Impact of changes in consolidation scope (114) (160) (895)

Net cash from investing activities ➁ (809) (780) (739)

III - FINANCING ACTIVITIESProceeds from issuance of common stock 70 13 42 Issuance of bonds and other financial debt 1,843 661 2,337 Principal repayments on short-term borrowings and long-term debt (2,216) (2,404) (2,477)Change in current accounts (251) (84) 318 Change in listed securities (170) 182 880

Net cash from financing activities ➂ (724) (1,632) 1,100

IV - ACQUISITION AND DISPOSAL OF LVMH/ DIOR SHARES ➃ 183 500 (33)

V - DIVIDENDS PAID DURING THE PERIOD ➄ (437) (363) (508)

VI - IMPACT OF CURRENCY TRANSLATION ➅ 6 18 (12)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ➀ + ➁ + ➂ + ➃ + ➄ + ➅ 77 (303) 336

Cash at the beginning of the period 382 685 349 Cash at the end of the period 459 382 685

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 77 (303) 336

The statement of cash flows shows the change in cash (net of bank overdrafts) and cash equivalents consisting of short-terminvestments that can be readily converted into cash, excluding, since January 1, 2001, listed securities.

The reconciliation between cash at the close of the period, as shown in the statement of cash flows, and the cash items on thebalance sheet is presented in note 12.

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N O T E S T O T H E C O N S O L I D A T E DF I N A N C I A L S T A T E M E N T S

NOTE 1 - SIGNIFICANT EVENTS AND CHANGESIN THE GROUP CONSOLIDATION

In 2003:

Wines and Spirits

• In June and September 2003, LVMH sold the Hine cognac brand and the Canard-Duchênechampagnes for 15 and 40 million euros respectively, but Moët Hennessy kept a portion ofthe Canard-Duchêne inventory.

Fashion and Leather Goods

• During the year, LVMH increased its stake in Fendi from 67% to 84% for 191 million euros;this investment resulted in the recognition of additional goodwill in the amount of73 million euros.

• In February 2003, LVMH increased its interest in Rossimoda, the Italian manufacturer ofhigh-end shoes, from 45% to 97%; the total investment of 56 million euros was recognized asgoodwill in the amount of 43 million euros.

Perfumes and Cosmetics

• In December 2003, LVMH sold its Bliss skincare centers and cosmetics for 15.5 million euros,and the licenses held by LVMH for the Michael Kors, Marc Jacobs, and Kenneth Cole perfumebrands were sold during the year for a total amount of 59 million euros.

• LVMH raised its stake in the Laflachère group (La Brosse and Dupont) from 57% to 99%;the 42 million euro investment resulted in additional goodwill of 48 million euros.

• Finally, the stake in the Acqua di Parma group, which was 50%, was increased to 100%, a9 million euro investment.

Watches and Jewelry

• In December 2003, LVMH signed a memorandum of understanding for the sale of the Ebelbrand and the corresponding operating and industrial assets; the price stipulated by thismemorandum, which will become definitive early in 2004, is 40 million euros.

Other activities

• The auction house l’Etude Tajan was sold at the end of 2003 for a nominal amount.

• The joint venture formed with diamond merchant De Beers (see financial year 2001) wasconsolidated proportionately as of financial year 2003; prior to that period, it was accountedfor using the equity method.

The companies acquired or sold were consolidated or deconsolidated respectively on the dateof completion of the operation.

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In 2002:

Wines and Spirits

• In July 2002, LVMH purchased a 40% interest in Millennium Import LLC, a producer ofhigh end vodkas distributed under the Belvédère and Chopin brands, for USD 76 million.The interest in Millennium was consolidated by the equity method as of that date. Thistransaction was accounted for on the balance sheet as an intangible asset of USD 71 million,amortized over 15 years, representing the perpetual license Millennium holds for thedistribution of these brands in the United States.

• In May 2002, the Group sold the Pommery brand for 152 million euros. This sale alsoincluded the administrative and production sites, the wine cellars, the inventories and thedistribution contracts, excluding the vineyards. The Pommery activities have not beenconsolidated since that date.

Fashion and Leather Goods

• Donna Karan International Inc., “DKI,” purchased in December 2001 (see below: changes inconsolidation for the 2001 financial year) was fully consolidated as of January 1, 2002. The totalinvestment in Gabrielle Studio and DKI was allocated to the Donna Karan brand for 494 millioneuros; the consolidated goodwill of USD 224 million will be amortized over 20 years.

• During the financial year, LVMH strengthened its interest in the Fendi group, increasedfrom 51% to 67%. This investment for 196 million euros generated additional goodwill of75 million euros.

• The Emilio Pucci group, purchased in 2001 for 38 million euros, was fully consolidated asof January 1, 2002. The investment was allocated to the Pucci brand for 17 million euros.The consolidated goodwill will be amortized over 20 years.

• Finally, LVMH increased its interest in Thomas Pink from 70% to 100%, an investment of28 million euros.

Perfumes and Cosmetics

• In December 2002, the group sold the Hard Candy and Urban Decay brands for USD1 million, which could change over the next three years because of an indexing clause; the2002 results for these entities were included in the consolidated income until their sale.

Other activities

• Based on an agreement of May 2002, LVMH’s interest in Phillips was reduced from 75%to 27.5%, with LVMH transferring control to its former directors, Daniella Luxembourg andSimon de Pury. With this agreement, LVMH reestablished the financial situation of thePhillips group by discontinuing its financial aid, and in return received Phillips’ fixed assetsand inventory. Phillips was deconsolidated as of January 1, 2002, and the activity over thefirst months of the year was not significant.

In 2001:

Wines and Spirits

• At the end of 2000, the Group acquired 60% and 90% respectively of the Newton (NapaValley, California) and MountAdam (Eden Valley, South Australia) winegrowing estates for34.5 million euros. These interests were fully consolidated over the full year in 2001.

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Fashion and Leather Goods• In January 2001, pursuant to an agreement signed in December 2000, LVMH acquired allof the stock of American company Gabrielle Studio, owner of the Donna Karan New Yorkbrand, for USD 405 million.

Moreover, in March 2001, LVMH established with Donna Karan International Inc. (DKI),a company traded on the New York Stock Exchange, which holds the exclusive operatinglicense for the Donna Karan brand, a merger project in which LVMH would contribute toDKI its stake in Gabrielle Studio and an offer from LVMH to purchase almost all the capitalof DKI at a price of USD 10.75 per share, representing a total of USD 185 million.

This project was approved by DKI’s Shareholders’ Meeting of November 27, 2001.Following this operation, LVMH holds 100% of the preferred stock and 89.40% of thecommon stock of the new Donna Karan group.

Gabrielle Studio was fully consolidated for the entire fiscal year while the stake in DonnaKaran International was only as of 2002.

The USD 405 million investment in Gabrielle Studio was fully allocated to the value of theDonna Karan New York brand.• In December 2001, LVMH's 25.50% stake in Fendi was increased to 51%; LVMHacquired Prada's interest in the joint venture originally formed for this investment. Thisoperation represented an additional investment of 295 million euros, 255 million of which willbe paid over a 4-year period. Most of this amount, i.e. 404 million euros (206 million eurosattributable to the Group) was allocated to the value of the Fendi brand; 136 million euroswere recorded as goodwill to be amortized over 30 years.

The Fendi investment has been consolidated on a proportionate basis since July 2000; atDecember 31, 2001, Fendi’s balance sheet was fully consolidated.

Perfumes and Cosmetics• The Group’s 65% interest in American cosmetics company Fresh, acquired in September2000 for 18 million euros, has been fully consolidated since January 1, 2001.

Selective Retailing• In January 2001, LVMH acquired 55% of the Paris department store La Samaritaine for256 million euros, including 88 million euros through a reserved capital increase.

The amount of the investment primarily reflected real estate holdings estimated at471 million euros (182 million euros for the group share, after deferred taxes). The goodwillon this investment, including brand value, is 57 million euros, to be amortized over 20 years.La Samaritaine has been fully consolidated since January 1, 2001.

Watches and Jewelry• In January 2001, LVMH and the De Beers group signed an agreement to form a 50/50 jointventure. This agreement was approved by the European Commission in July. Starting in2002, this company had an exclusive license for the world-wide sale of diamond jewelry in anetwork of stores to be created under the “De Beers” name. Since July 2001, this jointventure has been accounted for using the equity method.

Other activities• In January 2001, Mrs. Daniella Luxembourg and Mr. Simon de Pury, the founders of theGeneva art gallery de Pury et Luxembourg Art, transferred their full interest in de Pury etLuxembourg Art to Phillips. This contribution was remunerated with a 25% interest inPhillips, and a payment of USD 10 million. Following this operation, Phillips becamePhillips, de Pury & Luxembourg (PPL).

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In November 2001, within the framework of a memorandum of understanding signed inJuly, PPL’s UK activities and the operations of British auction company Bonhams & Brooksmerged within a joint entity 49.9% held by PPL, with PPL retaining control of itsinternational activities.

The transfer of de Pury & Luxembourg Art to Phillips resulted in goodwill of 54 millioneuros, added to the initial goodwill of 95 million euros.

De Pury & Luxembourg Art has been fully consolidated in Phillips since January 1, 2001; asof November 2001, the stake in the joint venture with Bonhams & Brooks has beenaccounted for on the equity basis.

• In December 2001, the group’s 50% stake in the luxury product Internet site eLuxury wasincreased to 99.99%, through subscription to a capital increase. This operation resulted ingoodwill of 45 million euros, corresponding to the value of the customer base and prior sitedevelopment costs. This interest was accounted for by the equity method over 2001; it wasfully consolidated on December 31, 2001.

• In January 2001, the sub-group Télématique Victoire Multimédia was transferred to theJet Multimédia group in exchange for 479,125 shares in Jet Multimédia with a guaranteedprice. This disposal resulted in a gross capital gain of 25 million euros

** *

Pro forma data and impact on cash flow:

Pro forma simplified income statements are presented below for financial years 2002 and2003 on the basis of the following assumptions:

• 2002 disposals and acquisitions are considered to have been made at January 1, 2002;

• In cases of a disposal in 2003, a comparable number of months of operations is used in 2002and 2003;

• In cases where minority interests were acquired in 2003, these operations are deemed tohave been made in 2002.

These pro forma data do not necessarily represent the results that would have effectively beenrecorded in the consolidated statements if the operations described had taken place on thedate stated. Moreover, they cannot be used to forecast future trends in consolidated results.

2003 2002millions of euros pro forma pro forma

Net sales 12,466 13,114including - Christian Dior Couture 523 492

- Wines and Spirits 2,116 2,237- Fashion and Leather Goods 4,149 4,224- Perfumes and Cosmetics 2,181 2,285- Watches and Jewelry 502 552- Selective Retailing 3,039 3,337

Income from operations 2,213 2,046

Income before income taxes 1,607 1,440

Net income from continuing operations before amortization

of goodwill, group share 423 360

Net income before unusual items, group share 298 248

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The net decrease in balance sheet items resulting from changes in consolidation in the yearbreaks down as follows:

millions of euros

Brands and other intangible assets (7) Shareholders’ equity (27)

Goodwill 188 Minority interests (69)

Net tangible assets 8 Net financial debt 253

Net current assets (57) Other debts at more than one year 5

Other assets 14 Other debts at less than one year (16)

146 146

The impact of the changes in consolidation on the Group’s cash flow, as shown in theconsolidated statement of cash flows, net of the cash flow of the companies purchased or sold andnet of deferred payments on these acquisitions, was 209 million euros (160 million euros in 2002).

This figure in 2003 primarily represents the effects of the increase in LVMH's interests in Fendi(191 million euros), Rossimoda (57 million euros) and La Brosse & Dupont (42 million euros); italso represents the deferred payments for Fendi securities acquired previously, i.e. 86 million euros.

On the other hand, disposals contributed 160 million euros; this amount primarily reflects thesale of Hine and Canard-Duchêne, and the sale of the Michael Kors, Marc Jacobs, andKenneth Cole perfume licenses.

In 2002, this primarily included the investments in Fendi (196 million euros), Millennium(77 million euros), Thomas Pink (28 million euros), and the positive impact of the disposal ofcertain Pommery assets (152 million euros).

NOTE 2 - ACCOUNTING PRINCIPLES - RULES - METHODS

The consolidated financial statements of the Christian Dior group are prepared in accordancewith generally accepted accounting principles in France, defined by the law of January 3,1985 and Regulation 99-02 from the Accounting Regulatory Commission published on June22, 1999; these principles have been consistently applied over the last three financial years.

The basic accounting principles used to prepare these financial statements are described below.

2.1 - Principles of consolidation

The accounts of companies in which Christian Dior has direct or indirect exclusivecontrol are fully consolidated.

The accounts of companies in which Christian Dior has joint control are consolidatedusing the proportionate method.

For the companies owned jointly with the Diageo group, only those parts of the balancesheet and statement of income relating to LVMH group activity are included in theaccompanying financial statements (see note 2.15).

Investments in companies in which Christian Dior has a significant direct or indirectinfluence are accounted for using the equity method.

The Group does not exercise exclusive or joint control, or significant de facto influenceover entities or structures in which no legal stake is held (“ad hoc entities”).

The list of the companies included in the scope of consolidation is presented in note 29.

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2.2 - Foreign currency translation, hedging of exchange and interest rate risks

a - Currency translation

The accounts of foreign companies are converted as follows:

• at the exchange rate at year end for balance sheet items;

• at the average rates of the financial year for statement of income items.

Translation adjustments from the application of these rates have been recorded inshareholders’ equity under “Foreign currency translation.”

b - Currency transactions

Foreign currency transactions executed by the consolidated companies are converted intotheir functional currency at the currency rates on the date of the transactions.

Receivables and liabilities denominated in foreign currencies are converted at the currencyrates on December 31: unrealized currency gains and losses resulting from this conversionare recorded on the income statement, unless they result from the conversion of loans incurrencies or other instruments allocated to hedge long-term investments in the samecurrency: in this case, they are recorded under shareholders' equity as “currency translationadjustments.”

Exchange gains and losses resulting from the conversion of transactions or intra-groupreceivables and liabilities in foreign currencies, or their elimination, are recorded in theincome statement, unless they come from long-term intra-group financing operations that canbe classified as quasi-investment securities: in this case, they are recorded undershareholders' equity as “translation adjustments.”

c - Currency contracts and options Forward currency contracts, currency options and related contracts still active at closingare revalued at the prices at December 31. Unrealized gains and losses from this conversionare:

• Either recorded in the income statement as adjustments on unrealized gains or losses on thehedged assets or liabilities to which these instruments were allocated;• Or deferred, if they have been assigned to hedge operations in the following financial year;• Or booked as income if they have not been assigned.

Deferred unrealized gains and losses are included in “Other current assets” and “Otherliabilities.”

d - Hedging

Currency gains and losses arising from hedges on an underlying commercial asset are recordedas operating income or expenses, except for premiums and discounts of forward contracts, whichare recorded on a prorated basis as financial income or expenses. The impact of currency hedgeswith a financial underlying asset or non-allocated exchange instruments is recognized as financialincome or expense.

e - Interest rate hedging

Gains and losses from interest rate hedging contracts (swap contracts, CAP, forward rateagreements, collars, etc.) are accounted for on a prorated basis over the period of the relatedcontracts.

If interest rate “swaps” mature after the maturity of the operations hedged, where applicable, theunrealized losses at year end are recorded in the income statement. The unrealized gains are notrecorded.

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2.3 - Brands and other intangible assets

Intangible assets are recorded as assets at their purchase price plus goodwill, if any.

Only the acquired brands that are well-known and individually identifiable are recorded asassets, using their value at the time of purchase. This value is not amortized. The book valueand current value of brands are determined for each accounting period, using the proceduresdescribed in note 12. When the book value of a brand becomes permanently greater than itscurrent value, a set-aside for depreciation is made for the amount of the difference. Expensesincurred to create a new brand or to develop an existing one are recorded under expenses.

Other intangible assets are amortized over their estimated useful lives:• leasehold acquisition rights term of the lease• software 1 to 5 years

2.4 - Goodwill and related intangible assets

Goodwill is defined as the difference between the purchase price of the securities ofconsolidated companies and the Group’s share in their net assets on the purchase date. Thiscalculation is made after the net assets of the acquired company have been restated accordingto Group accounting principles and after revaluation to fair value, when fair value differsfrom net book value on the purchase date.

The value of certain intangible assets, such as brands, market share, or business goodwill arenot reported separately from goodwill.

Goodwill is recorded depending on whether it is positive or negative, under “Goodwill” onthe asset side or under “Contingencies” on the liabilities side.

For the changes in group consolidation since fiscal 2000, goodwill has been recorded in theoperating currency of the acquired company. It was previously recorded in euros.

Goodwill is amortized over periods ranging from 5 to 40 years, depending on their estimatedduration when first consolidated. This estimation refers to the purchased company in its ownmarket, in terms of positioning, age and geographic location.

Business goodwill acquired under French law is amortized over a period that may not exceed18 years.

The book value and current value of goodwill are determined using the procedures describedin note 12. When the book value of goodwill becomes permanently greater than its currentvalue, a set-aside equal to the difference is made for amortization.

2.5 - Tangible assets

Tangible assets are generally recorded in the consolidated balance sheet at their acquisitioncost. This includes goodwill, if any.

Assets acquired under financial lease agreements are recorded as fixed assets on the basis ofthe present value of future rents and the resulting financial liability is simultaneouslyrecorded in liabilities.

Tangible assets are depreciated principally according to the straight-line method at ratesbased on the estimated useful lives below:• Buildings 20 to 50 years• Plant and equipment 3 to 20 years• Retail improvements 3 to 10 years• Vineyards 18 to 25 years• Other assets 3 to 10 years

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Vineyard preparations and development costs are capitalized until the vineyards becomeproductive (generally three years) and are included in “Tangible assets in progress.”

2.6 - Financial assets

Unconsolidated investments are recorded at cost.

In case of a difference considered to be permanent between the utility value of such a Groupinvestment and its book value, a provision for depreciation in this amount is booked.

The utility value of investments is measured based on criteria such as the value of the Group’sshare in net assets, the stock price or the outlook for earnings and cash flow. These criteriaare weighted for the effects on the Group of holding the investments, in terms of strategy orsynergies with existing businesses.

2.7 - Inventories and work in progress

Inventories are recorded at the lower of cost or market value. Cost price is determined eitherusing the weighted average cost method or the first-in first-out (FIFO) method.

Considering the aging process for champagne and cognac, these inventories are often held formore than one year. However, in line with industry practice, they are classified as current assets.

Financial fees are not taken into account in the evaluation of inventories.

2.8 - Trade accounts receivable and other receivables

Receivables are recorded at their face value. An allowance for write-down is establishedwhen the inventory value is less than book value, based on the probability of recovery.

2.9 - Treasury shares

Treasury shares are recorded at acquisition cost.

Shares held under French market regulations governing stock price adjustments, shares heldfor employee stock option plans and shares held by subsidiaries on a short-term basis arerecorded as assets in the balance sheet.

Shares held on a long-term basis or for the purpose of future cancellation or exchange arededucted from shareholders’ equity, including the realized capital gains and losses.

When the market value of the shares, calculated as described in 2.10 below, becomes less than theacquisition price, a provision for depreciation equal to the amount of the difference is recorded.

For shares allocated to option plans, the calculation of depreciation is made on a per-planbasis when the corresponding options are assumed to be exercisable (market value of theshare greater than the option exercise price), and in relation to the average cost price for allplans in question when they are assumed to be non-exercisable (market value of the share lessthan the option exercise price).

Moreover, when the value of the shares allocated to option plans, net of depreciation, isgreater than the exercise price stipulated by each of the plans, a provision for charges isrecorded for the amount of the difference.

2.10 - Short-term investments

Short-term investments and equivalent receivables (investment fund units, money marketfunds, etc.) are stated at the acquisition cost. A write-down allowance is recorded when theacquisition value is higher than the market value.

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Shares of mutual funds, cash mutual funds and similar securities are valued at their publishednet asset value.

Market value for traded securities is determined by reference to the average price quoted onthe related stock exchange during the last month of the year, translated at the year-endexchange rate if applicable. Market value of non-traded securities is based on their estimatedrealizable value.

The calculation is made by line of securities, without offsetting between the gains and lossrecorded.

In case of partial sale of an investment, the FIFO or weighted average price methods are usedto determine the gain or loss to be recognized.

2.11 - Cash and cash equivalents

Cash and cash equivalents include cash in bank and short-term deposits with are immediatelyavailable, minus restricted cash.

2.12 - Bond issues

Bond issue costs and redemption premiums on convertible bonds are recorded as financialcosts over the life of the bond.

Provisions for redemption premiums are funded annually and recorded under “Financialdebt.”

Issue premiums on bonds issued above par are deducted from issuance costs.

The issuance costs of subordinated securities are amortized over 15 years.

2.13 - Design costs - Research and development costs

As of January 1, 2003, design costs are included in the “cost of sales” line.

Research and development costs, including packaging costs, are recorded as expensesin the year in which they are incurred.

2.14 - Income taxes, deferred taxes

Deferred income taxes arise out of timing differences between the net book assets ofconsolidated companies as reported in the consolidation and the amount resulting from theapplication of tax rules. These are recorded based on the known tax situation at the end ofthe year.

Tax savings from carried-over fiscal deficits are recorded as deferred taxes only when theirrecovery is deemed probable.

Taxes that would become payable in the event that retained earning of subsidiaries aredistributed are set aside if such a distribution is probable.

2.15 - Recognition of income

• Net sales revenues

The net sales revenues of the Group include both retail sales in the Group's stores and“wholesale” sales to distributors and agents.

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Retail sales come basically from Selective Retailing and the following lines: Fashion andLeather Goods , certain brands of Perfumes and Cosmetics, and Watches and Jewelry. Thesesales are recorded at the time of purchase by the customers.

“Wholesale” sales come from Wines and Spirits activities and from certain brands ofPerfumes and Cosmetics or Watches and Jewelry. These sales are recorded when ownershipis transferred, that is, upon shipping.

• Activities in partnership with Diageo

A significant part of the sales revenue from Wines and Spirits is earned through thedistribution agreements with Diageo, which most often consist of joint ventures. These jointventures ensure the delivery and sale of the brands of both groups. The distributionagreements govern the breakdown of the balance sheet and income statement of these entitiesbetween LVMH and Diageo. Because of these agreements, LVMH only consolidates the netsales and share of joint-venture expenses that applies to its own brands.

• Product repurchase agreements

Companies in the Perfumes and Cosmetics division, and to a lesser extent in Fashion andLeather Goods, repurchase unsold or outdated products from their customers or distributors.Reserves are funded on a percentage of realized sales revenue and margin to cover the costsof such repurchased or destroyed products.

• Re-invoiced shipping and transportation costs

Shipping and transportation costs re-billed to customers are included in net sales, because theassociated expenses were recorded under commercial expenses.

• Marketing cooperation agreements and product rights

It is common usage, especially in the marketing of Wines and Spirits, to pay for productreference rights or to participate in advertising agreements with the distributor. Theseexpenses are recorded as commercial costs and not as a reduction of net sales.

2.16 - Other income and expenses

The primary business of the Group is the management and development of its brands andstores. Operating income derives from these activities, whether they involve recurring ornon-recurring operations, main or incidental.

Other income and expenses reflects income statement items which may not be inherent to theGroup’s operating activity, because of their nature or frequency.

Significant amounts of other income and expenses are recorded as unusual items.

Income before taxes is equivalent to the notion of “Net income of consolidated companies.”

Net income is income net of taxes, excluding goodwill amortization expense and beforeunusual items.

2.17 - Earnings per share

Earnings per share are calculated based on the weighted average number of common sharesoutstanding during the year.

Fully diluted earnings per share are computed as described above, plus the weighted averagenumber of shares assuming the exercise of all outstanding options. This calculation takes intoaccount the corresponding reduction in interest expense and the tax effect.

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2.18 - Pensions, retiree medical costs and other commitments to current orretired employees

When retirement indemnities, pensions, medical costs and other commitments arecovered by contributions paid by the companies of the Group to outside organizationswhich assume the commitment for the payment of the allocations or the reimbursementof medical costs, these contributions are recognized as expenses for the year in whichthey are due; no liability is shown on the balance sheet.

When the consolidated companies pay pensions, medical costs and other liabilitiesdirectly, the related total actuarial commitment appears as a provision on the balancesheet. Changes to this commitment are recorded as expenses for the period.

When this commitment is covered, in whole or in part, by funds paid by the companiesof the group to financial agencies, the amount of these dedicated investments is deductedon the balance sheet from the actuarial commitment.

The actuarial commitment is calculated on the basis of valuations specific to each countryand to each company of the group; these valuations include assumptions for salaryincreases, inflation, life expectancies, employee turnover and return on dedicatedinvestments.

The cumulative effects of the actuarial differences are amortized when they exceed 10%of the total gross commitment of dedicated financial assets or of the market value of thededicated financial assets at year end. These differences are amortized beginning in theyear following their determination, over the residual average working life of theemployees concerned.

2.19 - Use of estimates

In the normal process of preparing the consolidated financial statements, the determinationof certain accounting balances on the balance sheet or the income statement requires the useof assumptions, estimates or assessments. This includes the valuation of the intangible assets,the determination of the amount of the provisions for risks and contingencies, or provisionsfor depreciation of inventories. These assumptions, estimates or assessments are prepared onthe basis of information or positions existing on the date the statements are prepared whichmay in some instances prove different from reality.

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NOTE 3 - MARKETABLE SECURITIES, CASH AND CASH EQUIVALENTS

A - Marketable securities

millions of euros 2003 2002 2001

Units of traded or non-traded SICAV and FCP 223 50 455

Traded marketable securities 24 28 202

Provision for depreciation (15) (17) (34)

Marketable securities 232 61 623

Portfolio market value 235 62 692

B - Cash and cash equivalents


Term deposits, greater than 3 months 51 76 9

Term deposits, less than 3 months 109 107 73

Ordinary bank accounts 695 672 752

Cash and cash equivalents 855 855 834

Including restricted accounts 6 4 5

As of December 31, 2003, net cash and cash equivalents at closing, as shown in the table of cashflows, totaled 459 million euros; the reconciliation of this amount with the data presented belowis as follows:

millions of euros 2003

Marketable securities (units of SICAV and FCP, net) 33

Cash and cash equivalents 855

Bank overdrafts (429)

Net cash and cash equivalents 459

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NOTE 4 - TREASURY SHARES

At December 31, 2003:

• LVMH held 11,973,630 shares, 11,828,630 of which were allocated to stock option plans andthe remainder, i.e., 145,000 shares, to stock price equalization.

• Dior held 3,678,220 shares, 3,160,000 of which were allocated to stock option plans and theremainder, i.e., 518,220 shares, to stock price equalization.

LVMH and DIOR stock portfolios are allocated as follows

2003 2003 2002 2001

millions of euros Number Amount

Less than 1 year:• option plans 14,988,630 530 329 271

• marketable securities:- gross amount 663,220 27 449 1,217- provision for depreciation – (8) (137) (345)

15,651,850 549 641 1,143

- Provisions for risks and contingencies – (4) (4) (4)

Net portfolio value 15,651,850 545 637 1,139

In 2003, the following transactions were executed in Dior’s stock portfolio:

Stock price equalization stock optionor short-term investment plans

millions of euros Number Amount Number Amount

As of December 31, 2002 525,220 17 2,769,100 79

Purchases – – 514,800 16 Sales – – (130,900) (3)Reclassification (7,000) – 7,000 –Change in provisions – 2 – 11

As of December 31, 2003 518,220 19 3,160,000 103

The market value is based on the average quoted price of a DIOR share in December, whichwas 47.33 euros.

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NOTE 5 - TRADE RECEIVABLES & RELATED ACCOUNTS


Gross 1,517 1,507 1,680


Net value 1,423 1,373 1,577

NOTE 6 - INVENTORIES AND WORK-IN-PROGRESS


Aging wines and brandies 1,787 1,683 1,707

Other raw materials and products in process 398 464 462

2,185 2,147 2,169

Merchandise 616 842 921

Finished products 1,311 1,146 1,243

1,927 1,988 2,164

Total gross value 4,112 4,135 4,333


Total net value 3,517 3,522 3,727

See also note 27 – Information by business groups.

NOTE 7 - OTHER RECEIVABLES & PREPAID EXPENSES


Currency hedging operations 428 215 246

State - corporate income tax – – 47

- other taxes and duties 263 243 243

Trade accounts: advances and down payments 61 132 204

Prepaid expenses 217 212 229

Other receivables net 266 513 565

Net value 1,235 1,315 1,534

The balance of “currency hedging” consists primarily of unrealized gains from the revaluationof currency hedging contracts at year-end. In the case of an unrealized loss, it is the prepaidexpense resulting from the difference (see note 14).

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NOTE 8 - EQUITY INTERESTS

A - Value of equity investments millions of euros 2003 2002 2001

Bonhams & Brooks PS&N Ltd (United Kingdom) 37 37 41

De Beers LV Ltd (United Kingdom) (1) – 9 16

e-Luxury.com Inc (United States) (2) – – –

Millennium Import LLC (United States) 4 7 –

Other investments 11 18 24

Total 52 71 81

B - Income (loss) from investments in equity companies(included in the value of equity investments)


Bonhams & Brooks PS&N Ltd NS (4) –De Beers LV Ltd (1) – (9) (4)e-Luxury.com Inc (2) – – (31)Millennium Import LLC 4 2 – Other investments (3) (7) (7)

Total 1 (18) (42)

(1) Company consolidated on a proportionate basis as of 2003.(2) Company fully consolidated on December 31, 2001.

At December 31, 2003, the data on the principal equity investments were as follows:

millions of euros Net sales Net income Total assets Shareholders’ equity

Bonhams & Brooks PS&N Ltd (*) 60.2 (0.7) 114.8 58.0

Millennium Import LLC (*) 57.7 9.0 50.3 18.6

(*) provisional data

NOTE 9 - OTHER LONG-TERM INVESTMENTS


Gross value Provisions Net Net Net

• Bouygues SA (France) Securities 819 (314) 505 537 737

• LVMH treasury shares 455 (51) 404 362 318

• Other interests 466 (123) 343 334 650

Total 1,740 (488) 1,252 1,233 1,705

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interest book dends equity income value millions of euros % value collected (2)

Bouygues SA (France) 4.6 % 505 6 6,192 450 425

Tod's Spa (Italie) 3.5 % 47 – 402 26 37

Interests in various Internet funds ND 27 – ND ND –(USA) (1)

Project Sloane Ltd “Joseph” (UK) (1) 10 % 7 1 62 – –

Interparfums Inc. (USA) (1) 18 % 14 – 77 10 29

Other interests – 49 1 – – –

Investments less than 20% 649 8

Pechel Industries SAS (France) 40 % 33 10 103 31 –

L Capital FCPR (France) (1) 44 % 117 – 120 (5) –

SFMI Micromania SA (France) (1) 35 % 15 – 37 9 –

Sociedad Textil Lonia SA (Spain) (1) 25 % 9 – 17 2 –

Other interests – 1 – – – –

Investments between 20% and 50% 175 10

Other investments 24 –

Investments greater than 50% 24 –

LVMH treasury shares 404 –

TOTAL 1,252 18

(1) The accounting data shown are prior to December 31, 2003. The figures for year-end 2003 were not

available at the time of this report.

(2) Average of December 2003 market prices.

Interests of more than 20%, which appear in the table above, are not consolidated when theGroup does not exert a significant influence on these companies.

Investment in Bouygues

The LVMH group has an interest in Bouygues, managed as part of the Group’s portfolio. Inthat context, the prospects for a rise in the value of this investment must be assessed over themedium term. At December 31, 2000, this investment was included in the short-terminvestment portfolio. Therefore, it was reclassified on June 30, 2001 as a long-terminvestment, after deducting the block sold in July 2001 (2,650,000 shares).

A depreciation has been booked for value of the stake in Bouygues, which was calculatedbased on criteria that take into account the durable decline in valuation by the market of thestocks in the media and telecommunications sector.

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Gucci investment

Between 1999 and 2001, LVMH was involved in a dispute with the Pinault Printemps-Redoute (PPR) and Gucci groups. This dispute concerned the validity of two reservedcapital increases, on February 18 and March 19, 1999, which reduced LVMH’s stake inGucci from 34.4% to about 20%.

In September 2001, the PPR, Gucci and LVMH groups settled this dispute through atransactional agreement providing for the following:

- the purchased by PPR from LVMH in October 2001 of 8.6 million Gucci shares at USD94 per share, a total of USD 806 million (897 million euros) ;

- the distribution by Gucci in December 2001 of an exceptional dividend of USD 7 per share,which represented, based on the residual LVMH stake on this date, receipts of USD81 million (90 million euros);

- the launch by PPR in March 2004 of a tender offer for all the Gucci stock at a price of USD101.5 per share.

In December 2001, LVMH sold its residual interest of 11.6 million shares to Crédit Lyonnaisworth USD 1,037 million (about USD 89.60 per share), or 1,150 million euros. The sharesale contract contains an “earn-out” provision entitling LVMH to an additional payment untilMarch 2004 depending on the price of a Gucci share and dividends paid by Gucci during thisperiod.

LVMH’s total capital gains on the sale of 20.1 million Gucci shares totaled 774 million euros,and 864 million euros when the exceptional dividend is taken into account.

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NOTE 10 - TANGIBLE ASSETS


Gross Amorti- Net Net Net value zation value value value

Property 973 (9) 964 873 924

Vineyards 430 (54) 376 499 501

Buildings 1,681 (597) 1,084 1,368 1,547

Technical facilities, equipment and tools 2,749 (1,600) 1,149 448 581

Other tangible assets 820 (418) 402 1,053 1,078

Total 6,653 (2,678) 3,975 4,241 4,631

Including fixed assets financed by capital 298 (123) 175 216 249or long-term leases

The changes in tangible assets for financial year 2003 break down as follows:

millions of euros

Gross Amorti- Net value zation value

Balance at December 31, 2002 6,855 (2,614) 4,241

Acquisitions 560 – 560

Disposals, decommissioning (359) 163 (196)

Allocations to amortization – (415) (415)

Impact of changes in consolidation 5 10 15

Impact of currency fluctuations (408) 178 (230)


including acquisitions financed by capital 2or long-term leases

Acquisitions of Tangible Assets primarily represent investments in the retail networks ofLouis Vuitton, Sephora and DFS and renovation work on property held by La Samaritaine.

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NOTE 11 - GOODWILL


Currency Amortization Gross Depre- Net Net Netperiod value ciation value value value

Amor-tization

DFS 20 1,996 (769) 1,227 1,321 1,415

Sephora 5 to 20 589 (155) 434 471 504

Louis Vuitton 40 350 (58) 292 302 311

Fendi 20 424 (53) 371 323 218

La Brosse & Dupont 25 114 (47) 67 55 57

La Samaritaine 20 59 (9) 50 53 54

Rossimoda 10 43 (4) 39 – –

Other (< 40 million euros) 390 (197) 193 193 188

Goodwill in euros 3,965 (1,292) 2,673 2,718 2,747

Miami Cruiseline USD 20 251 (51) 200 270 340

Donna Karan USD 20 181 (18) 163 203 –

Millennium USD 15 57 (5) 52 66 –

e-Luxury USD 3 32 (21) 11 25 45

Other (< 30 million euros) Divers 130 (60) 70 86 129

Goodwill in foreign currencies 651 (155) 496 650 514

Goodwill 4,616 (1,447) 3,169 3,368 3,261

Business Goodwill 75 (49) 26 36 30

Total 4,691 (1,496) 3,195 3,404 3,291

The goodwill on Sephora includes the value of selective retailing brands in Perfumes andCosmetics: “Sephora”, present in several European countries, as well as “Carmen”, “Laguna”and “Boïdi” in Italy, and “Beauty Shop” (Marinopoulos Group) in Greece.

The goodwill on Louis Vuitton does not represent a price paid for acquiring the brand,because this was developed by the Group. It is the result of successive acquisitions ofminority interests in the various legal structures of the Louis Vuitton sub-group.

DFS Goodwill:

The successive global crises that have occurred since the takeover of DFS by LVMH—theeconomic crisis in Southeast Asia, the attacks on the World Trade Center—each hadsubstantial temporary impacts on the business and earnings of DFS.

In addition, the economic situation in Japan, the major changes in this country, and theyen/dollar parity in 2001 reduced the number of Japanese tourists, the leading customers ofDFS, and their purchasing power.

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In order to determine both the durable drop in business activity and profitability of DFS, andthe greatest income swings compared to what was expected when the Group acquired DFS,it was decided in 2001:

- To take an exceptional charge of 323 million euros, bringing the net book value ofgoodwill to a level that can be justified by discounted future cash flows;

- To reduce the total amortization period for goodwill from 40 years to 20 years. The netbook value on December 31, 2001 of 1,415 million euros will thus be amortized by 1/15th.

Valuation methods for goodwill are the same as those described in note 3 for brands.

The changes in the net balance of goodwill over the period break down as follows:

Gross Depreciation Netmillions of euros value Amortization value


Allocations to amortization and provisions – (293) (293)

Impact of changes in consolidation 184 4 188

Impact of currency fluctuations (120) 23 (97)

Other 3 – 3


See: note 1 “changes in consolidation.” note 22 “charges net of increases and decreases in goodwill.”

The effects of changes in consolidation are related to the increase during the year in LVMH'sstake in Fendi, Rossimoda and Laflachère.

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NOTE 12 - BRANDS AND OTHER INTANGIBLE ASSETS


Gross Depre- Net Net Net value ciation value value value

Amorti-zation

Brands (*) 8,681 (221) 8,460 8,771 8,861

Leasehold rights 212 (73) 139 137 141

Other 330 (224) 106 98 99

Total 9,223 (518) 8,705 9,006 9,101

(*) Brands break down as follows:


Currency Gross Depre- Net Net Net value ciation value value value

Amorti-zation

Louis Vuitton 2,058 – 2,058 2,058 2,058 Hennessy 1,067 – 1,067 1,067 1,067 Moët 732 – 732 732 732 Parfums Christian Dior 610 – 610 610 610 Guerlain 441 – 441 441 441 Fendi 809 (2) 807 807 809 Céline 351 (70) 281 281 351 Veuve Clicquot 244 – 244 244 244 Parfums Givenchy 152 – 152 152 152 Loewe 122 – 122 122 122 Château d'Yquem 108 – 108 108 108 Krug 100 – 100 100 100 Other (< 100 M€) 343 (25) 318 326 370

Total brands in euros 7,137 (97) 7,040 7,048 7,164

Tag Heuer CHF 796 – 796 854 837 Donna Karan New York USD 410 – 410 494 460 Ebel CHF 117 (117) – 125 123 Other (< 100 M€) 221 (7) 214 250 277

Total brands in currencies 1,544 (124) 1,420 1,723 1,697

TOTAL 8,681 (221) 8,460 8,771 8,861

The leasehold rights primarily represent the stores under the Louis Vuitton and Christian DiorCouture brands and the Sephora banner.

The “acquired” brands not detailed in the “other” item above are primarily:•Wines and Spirits: Newton Vineyards, MountAdam, Ruinart and Mercier;• Fashion and Leather Goods: Givenchy, Kenzo, Christian Lacroix, Berluti, Thomas Pink and Pucci;• Perfumes and Cosmetics: Parfums Kenzo, Bliss, Make Up For Ever, BeneFit Cosmeticsand Fresh;• Watches and Jewelry: Zenith, Fred, Chaumet and Omas;• Other activities: La Tribune and Investir newspapers.

85

The brands are primarily valued by the cash flows method, i.e. based on the provisional cashflows attributable to the brand. However, other methods are used to correct the valuationsresulting from projected cash flows: the royalties method, which gives the brand a value equalto the capitalization of the royalties which must be paid to use it; the margin differentialmethod, which applies only to cases where it is possible to measure the revenue generated bya brand compared to an unbranded product; the replacement cost method for an equivalentbrand, especially in terms of advertising expenses; finally, the comparison method, whichuses multiples of net sales and income from transactions involving similar brands or multiplemarkets applicable to the activities concerned.

The provisional data used in the cash flows method come from the budgets and plansestablished by the management of the company that uses the brand; the provisional cash-flows are discounted and, if necessary, weighted on the basis of the probability of theoccurrence of each of the scenarios used. The discount rate used integrates the rate of returnexpected by an investor in the business field concerned and the risk premium appropriate tothat business.

At the end of 2003, these calculations were made on the basis of the following parameters:

- The growth rate to infinity used in determining provisional cash flows was most often 2%;the brand positioning in its market, its maturity or growth potential in some cases justified apercentage a half point higher or lower.

- The discount rates used, differentiated on the basis of the business and the risk specific tothe brand, were as follows:

Wines and Spirits 6.0%

Other luxury brands 8.0% to 8.5%

Selective Retailing 7.0%

The same methods are used to value goodwill.

The change in the value of the brands on the balance sheet over the year breaks down as follows:

Gross Depreciation Netmillions of euros value Amortization value

Balance at December 31, 2002 8,862 (91) 8,771

Impact of changes in consolidation (2) – (2)

Change in depreciation and amortization – (133) (133)

Impact of exchange rate fluctuations (179) 3 (176)

Balance at December 31, 2003 8,681 (221) 8,460

The changes in depreciation and amortization include 117 million euros for depreciation ofthe Ebel brand (see note 1 - Changes in consolidation).

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NOTE 13 - BORROWINGS AND FINANCIAL DEBT

A - Analysis of the financial debt by type

The gross debt on the balance sheet totaled 7,803 million euros at December 31, 2003,down from 8,755 million at December 31, 2002 and breaks down as follows:

Long-term financial debt


Undated notes (TDI) 158 222 284

Bonds and EMTN 3,345 3,129 3,766 Capital and long-term leases 110 129 167 Borrowings from credit institutions 727 1,086 1,246 Draws on long-term lines of credit 125 211 223

Other long-term borrowings and financial debt 4,307 4,555 5,402

Long-term financial debt 4,465 4,777 5,686

Financial debt under one year


Bonds and EMTN 768 166 188Capital leases and long-term leases 14 16 11Other loans and lines of credit 89 178 141

Short-term portion of long-term debt 871 360 340

Bonds and EMTN 101 – –Treasury notes 445 1,447 2,837 Other borrowings and lines of credit 1,492 1,667 1,610 Bank overdrafts 429 504 603

Other financial debt 2,467 3,618 5,050

Debt under one year 3,338 3,978 5,390

Total financial debt 7,803 8,755 11,076

B - Undated notes (TDI)

millions of euros Nominal interest 2003 2002 2001

EUR 762,000,000; 1990 6-month Euribor + 0.45 % 98 147 195 EUR 222,000,000; 1992 9.70% 60 75 89

Total 158 222 284

The undated bonds cited above, issued in the form of undated subordinated notes (TSDI),were converted into undated notes (TDI) in 1996 by amendment to the original issueagreement.

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As an ordinary unsecured debt, the TDIs since that date are legally redeemable only in casesof court-ordered liquidation or the early dissolution of the LVMH company, except in casesof merger or split.

Although they are undated, the TDIs are recorded on the balance sheet for an amount thatwill be progressively reduced to nil value at the end of 15 years, because of agreements withthird parties.

In accordance with these agreements, and in return for an initial lump sum payment byLVMH, the third-party companies have promised to hold or to repurchase the notes fromnote holders after a 15-year period, and have agreed to relinquish any rights to interest onthese notes after that time.

Under these arrangements:

- The TDIs have been recorded in the balance sheet at nominal value at the time of issue, afterdeducting the aforementioned payments; these notes are amortized every year by the amount ofincome generated by the investments the third-party companies make with these payments;

- the consolidated income from each year funds the interest expense paid on the nominalvalue, after deducting the amortization.

C - Bonds and EMTN

millions of euros Maturity Nominal interest 2003 2002 2001

EUR 750,000,000; 2003 2010 5.00% 750 – –EUR 500,000,000; 2001 2008 6.125% 500 500 500 EUR 850,000,000; 2001 2004 5.375% 708 850 850 EUR 600,000,000; 2000 2005 5.75% 600 600 600 EUR 800,000,000; 1999 2006 5.00% 800 800 800 FRF 1,300,000,761; 1998 indexed 2005 1.00% 33 71 198 FRF 1,500,000,000; 1996 2002 5.25% – – 229 EUR 100,000,000; 2003 2008 4.61% 100 – –

Public issues 3,491 2,821 3,177

in euros 433 312 770 in foreign currencies 290 162 207

Private placements EMTN 723 474 977

Total bonds and EMTN 4,214 3,295 4,154

In 2003, Christian Dior completed a public bond issue in the amount of 100 million euros, witha maturity of 5 years and a 4.61% coupon; this issue was converted at the time of the issue by aswap into a variable rate issue.

In 2003, LVMH completed a bond issue in the amount of 750 million euros, with a maturity of7 years and a 5% coupon; this issue was converted at the time of the issue by a swap into avariable rate issue.

The private placements and public bond issues completed since May 2000 were performed aspart of the EMTN (Euro Medium Term Notes) issue program with a ceiling of 5 billion euros.

As of December 31, 2003, the outstanding amount of the issue completed under this programtotaled 2,745 million euros.

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D - Breakdown of debt by maturity

The breakdown of the debt by maturity was as follows at December 31, 2003:

millions of euros 31/12/2003

Years 2004 3,338

2005 1,136

2006 1,264

2007 174

2008 973

After 918

Total 7,803

At December 31, 2003, the irrevocable lines of credit not used totaled 3.8 billion euros. Inparticular, the long-term lines totaled 1.7 billion euros.

Because of these commitments, a fraction of the current portion of long-term debt was maintainedunder long-term debt, representing 178 million euros.

Moreover, because of the existence of renewal authorizations, a portion of the short-term debt wasreclassified as long-term borrowings and financial debt, representing 125 million euros atDecember 31, 2003 (573 and 579 million euros at December 31, 2002 and 2001 respectively).

E - Breakdown of debt by currency

At December 31, 2003, the breakdown of the debt by issue currency, after taking intoaccount the hedging instruments issued simultaneously or after the issue, break down asfollows as of December 31, 2003:

millions of euros After taking into At issue account the hedging

Currency instruments

Euro 6,717 5,852

US dollar 247 285

Swiss franc 5 951

Yen 576 497

Hong Kong dollar 54 33

Singapore dollar 67 6

Other currencies 137 179

Total 7,803 7,803

Generally, the currency structure of the debt is intended to cover net assets in currenciescoming from the acquisitions of companies outside the euro zone.

All the bonds in foreign currencies (see note 13 - C) resulted in the signing of swaps transformingthem into borrowings in euros.

See note 19 for the details of the debt hedging instruments at December 31, 2003.

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F - Breakdown of debt by rate

The breakdown of the debt by rate as of December 31, 2003 is as follows:

millions of euros Before impact After impactof hedging of hedging

Currency instruments instruments

Variable rate 3,153 3,908

Capped variable rate - 1,680

Fixed rate 4,650 2,215

Total debt 7,803 7,803

G - Average cost of the debt

The average cost of the debt, after taking into consideration the hedging instruments, was3.6% for financial year 2003 (3.8% for 2002).

H - Liquidity risksIn addition to local liquidity risks, which are generally not significant, the Group's exposureto liquidity risk may be assessed through the amount of its short-term net financial debt,which is 2.3 billion euros, or the outstanding amount of its treasury note program, which is0.4 billion euros. With respect to the possible non-renewal of these loans, the Group hasundrawn, confirmed lines of credit in the amount of 3.8 billion euros.

Thus, the Group's liquidity is based on the size of its investments, on the magnitude of itslong-term financing, on the diversity of its investor base (bonds and short-term paper), andon the quality of its bank relations, whether or not these are reflected in confirmed lines ofcredit.

CovenantsIn line with the general practice for syndicated loans, the Group has signed covenants to meetcertain financial ratios. Historically based on the net debt to equity ratio, these commitmentsnow involve the coverage of net debt by financial flows for the year.

Confirmed lines of credit not drawnAt December 31, 2003, the total outstanding amount of undrawn confirmed lines of creditwas 3.8 billion euros.

Guarantees and real suretiesAt December 31, 2003, the amount of the financial debt secured by real sureties was notsignificant.

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NOTE 14 - OTHER LIABILITIES


Foreign currency hedging – deferred gains and losses 322 247 276

Personnel charges 413 377 358

State and local authorities: income and other taxes 284 245 196

Customers: advances and installments paid 93 119 116

Deferred payments on tangible assets or long-term investments 148 156 235

Provisions for restructuring 134 108 171

Other provisions for risks and contingencies 228 286 202

Provisions for returned stock 81 97 116

Prepaid income 133 45 20

Other liabilities 705 1,066 1,073

Total 2,541 2,746 2,763

The balance of “currency hedging” primarily consists of unrealized losses from therevaluation of currency hedging contracts at year end. In the case of an unrealized gain, it isthe prepaid income resulting from the difference (see note 7).

In 2003, the provisions for restructuring and for risks and contingencies changed as follows:

OtherChanges in (including

Dec. 31, consoli- translation Dec. 31,2002 Increases Used Reversed dation differences) 2003

Provisions for restructuring 108 74 (33) (2) – (13) 134

Provisions for risks and contingencies 286 80 (73) (30) 2 (37) 228

Provisions forreturned products 97 48 (54) (8) – (2) 81

Total 491 202 (160) (40) 2 (52) 443

including the impact on:

• Income from operations – 85 – (31) – – –

• Net financial income – 20 – – – – –

• other – 97 – (9) – – –

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NOTE 15 - OTHER MEDIUM AND LONG-TERM LIABILITIESAND PROVISIONS


Provisions for retirement plans, medical expenses and similar liabilities (1) 202 179 258

Provisions for risks and contingencies 555 480 548

Reorganization allowance 66 80 160

Provisions for employee profit-sharing (2) 56 51 50

Deferred payments for equity investments 146 182 114

Other liabilities 111 179 192

Total 1,136 1,151 1,322

(1) Since January 1, 2002, the dedicated placements to cover commitments no longer appear under assets onthe balance sheet, but are deducted from the amounts of the provisions funded; at December 31, 2001, dedicatedplacements shown under assets on the balance sheet were 81 million euros.

(2) French companies only, pursuant to legal requirements.

- Provisions for pensions, medical costs and related commitments are discussed in note 26.

- The provisions for risks and contingencies represent the estimate of the effects on holdingsfrom risks, litigation, and disputes that exist or are probable, which result from the Group'sactivities: these risks are international in a regulatory framework that is often imprecise,which varies according to the country and over time, and applies to areas as varied as thecontents of products or calculation of taxes.

In 2003, provisions for risks and contingencies and for restructuring changed as follows:

OtherChanges in (including

Dec. 31, consoli- translation Dec. 31,2002 Increases Used Reversed dation differences) 2003

Provisions for risks and contingencie 480 99 (32) (29) 5 32 555

Provisions forrestructuring 80 14 (16) - - (12) 66

Total 560 113 (48) (29) 5 20 621

including:

• Income from operations – 12 – (5) – – – • other – 101 – (24) – – –

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NOTE 16 - CAPITAL STOCK - CHANGES IN SHAREHOLDERS’EQUITY AND MINORITY INTERESTS

A - Capital Stock

On December 31, 2003, capital stock consisted of 181,727,048 shares (including 13,045,837shares with double voting rights).

No shares were created in 2003.

In 2001, 2002 and 2003, Christian Dior respectively acquired 461,664, 490,200 and 514,800of its own shares and sold 88,000 in 2001, 26,164 in 2002 and 130,900 in 2003. The Board ofDirectors granted the following stock options for a total of 3,390,900 shares:• At its meeting of October 14, 1996: 378,400 shares at a unit price of 25.95 euros per share,to be exercised between December 1, 1999 and November 30, 2006 to the company’sexecutives and executives of subsidiaries and sub-subsidiaries;• At its meeting of May 29, 1997: 391,600 shares at a unit price of 32.01 euros per share, tobe exercised between May 30, 2002 and May 29, 2007 to the company’s executives andexecutives of subsidiaries and sub-subsidiaries;• At its meeting of November 3, 1998: 393,600 shares at a unit price of 18.29 euros per share,to be exercised between November 4, 2003 and November 3, 2008 to the company’sexecutives and executives of subsidiaries and sub-subsidiaries;• At its meeting of January 26, 1999: 358,000 shares at a unit price of 25.36 euros per share,to be exercised between January 25, 2004 and January 24, 2009 to the company’s executivesand executives of subsidiaries and sub-subsidiaries;• At its meeting of February 15, 2000: 400,800 shares at a unit price of 56.70 euros per share,to be exercised between February 15, 2005 and February 14, 2010 to the company’sexecutives and executives of subsidiaries and sub-subsidiaries;• At its meeting of February 21, 2001: 437,500 shares at a unit price of 45.95 euros per share,to be exercised between February 21, 2004 and February 20, 2011 to the company’sexecutives and executives of subsidiaries and sub-subsidiaries;• At its meeting of February 18, 2002: 504,000 shares at a unit price of 33.53 euros per share,to be exercised between February 18, 2005 and February 17, 2012 to the company’sexecutives and executives of subsidiaries and sub-subsidiaries.• At its meeting of February 18, 2003: 527,000 shares at a unit price of 29.04 euros per share,to be exercised between February 18, 2006 and February 17, 2013 to the company’sexecutives and executives of subsidiaries and sub-subsidiaries;

93

B - Change in shareholders’ equity and minority interests


Group Minority Group Minority Group Minority

At January 1 3,793 8,746 3,788 8,658 3,972 8,374

Result for the year 303 534 178 459 (95) 97

Dividends and interim dividends distributed (51) (291) (51) (222) (51) (369)

Change in currency translation adjustments of the financial statementsof the foreign companies (166) (258) (36) (86) (4) 5

Impact of capital increases – – – – 4 –

Changes in consolidation – (43) – (96) – 393

Change in LVMH treasury shares 3 12 9 33 51 158

Other (3) – 1 – – –

At December 31 before appropriation 3,879 8,700 3,889 8,746 3,877 8,658

Balance of Christian Dior SA dividend (paid in June) (105) – (96) – (89) –

At December 31 after appropriation 3,774 8,700 3,793 8,746 3,788 8,658

C - Foreign exchange differences

The currency translation differences recorded in shareholders' equity at December 31, 2003,and the change over the year, net of the effects of hedging of net assets in currencies, breakdown as follows:

millions of euros At December 31, 2003 Change

US Dollar (290) (143)

Hong Kong Dollar (30) –

Yen (21) (2)

Argentine Peso (18) –

Swiss Franc 71 (11)

Euro 39 –

Other (18) (10)

Total (267) (166)

The amount in euros recorded in the table above corresponds to the conversion adjustment on theconsolidated reserves of the European subsidiaries at the time of the definitive conversions of theseaccounts into euros on January 1, 1999.

94

NOTE 17 - STOCK OPTION PLANS

Start No. No. Purchase No. Number of Meeting date of options of price of options options not date of the plan (1) bene- (in euros) exercised exercised at

ficiaries (2) (3) in 2003 (2) December 31, 2003 (2)

LVMHMay 25, 1992 Mar 17, 1993 49,681 548 15.40 56,017 –May 25, 1992 Mar 16, 1994 139,031 364 17.84 17,845 1,576,835 May 25, 1992 June 17, 1994 1,250 1 17.68 7,565 –May 25, 1992 Mar 22, 1995 256,903 395 20.89 14,350 417,520 June 8, 1995 May 30, 1996 233,199 297 34.15 46,785 714,935 June 8, 1995 May 29, 1997 233,040 319 37.50 40,480 1,028,740 June 8, 1995 Jan 29, 1998 269,130 346 25.92 251,530 1,014,315 June 8, 1995 Mar 16, 1998 15,800 4 31.25 16,500 70,400 June 8, 1995 Jan 20, 1999 320,059 364 32.10 26,275 1,657,760 June 8, 1995 Sept 16, 1999 44,000 9 54.65 – 220,000 June 8, 1995 Jan 19, 2000 376,110 552 80.10 – 1,879,550 May 17, 2000 Jan 23, 2001 2,649,075 786 65.12 – 2,606,075 May 17, 2000 Mar 6, 2001 40,000 1 63.53 – 40,000 May 17, 2000 May 14, 2001 1,105,877 44,669 66.00 – 1,105,877 May 17, 2000 May 14, 2001 552,500 4 61.77 – 552,500 May 17, 2000 Sep 12, 2001 50,000 1 52.48 – 50,000 May 17, 2000 Jan 22, 2002 3,256,700 968 43.30 – 3,249,100 May 17, 2000 Jan 22, 2002 27,400 25 45.70 27,400 May 17, 2000 May 15, 2002 8,560 2 54.83 – 8,560 17, 2000 Jan 22, 2002 3,155,225 941 37.00 – 3,155,225

May 17, 2000 Jan 22, 2002 58,500 38 38.73 – 58,500

Sous Total LVMH 477,347 19,433,292

Christian DiorMay 30, 1996 Oct 14, 1996 94,600 21 25.95 17,200 265,200 May 30, 1996 May 29, 1997 97,900 22 32.01 17,200 372,400 May 30, 1996 Nov 3, 1998 98,400 23 18.29 96,500 295,100 May 30, 1996 Jan 26, 1999 89,500 14 25.36 – 358,000 May 17, 2000 Feb 15, 2000 100,200 20 56.70 – 400,800 May 14, 2001 Feb 21, 2001 437,500 17 45.95 – 437,500 May 14, 2001 Feb 18, 2002 504,000 24 33.53 – 504,000 May 14, 2001 Feb 18, 2003 527,000 25 29.04 – 527,000

Sous Total Christian Dior 130,900 3,160,000

Total 608,247 22,593,292

(1) Number of options at the issuance of the plan, not restated to reflect the subsequent adjustments resultingfrom the one-for-ten bonus share allotments in July 1994 and June 1999, the five-for-one splits in March1994 and July 2000, for LVMH, and the four-for-one split in July 2000 for Dior.

(2) Adjusted to reflect the transactions referred to in (1) above. (3) Figures prior to 1999 were converted into euro from data originally recorded in francs.

95

Number of options 2003 2002 2001

Options outstanding at January 1 19,471,509 15,993,732 12,148,265

Options granted 3,735,525 3,801,860 4,834,952

Options exercised (608,247) (268,923) (985,410)

Options that have become void (5,495) (55,160) (4,075)

Outstanding options at December 31 22,593,292 (1) 19,471,509 (2) 15,993,732 (3)

(1) incl. 19,433,292 LVMH shares 3,160,000 Christian Dior shares

(2) incl. 16,702,409 LVMH shares 2,763,900 Christian Dior shares granted to current plans and 5,200 Christian Diorshares allocated to future plans

(3) incl. 13,725,832 LVMH shares 2,267,900 Christian Dior shares

96

NOTE 18 - RESEARCH AND DEVELOPMENT COSTS

Research and development costs amounted to 38 million euros in 2003 (36 million in 2002;27 million in 2001). These amounts cover costs incurred in scientific research and newproduct development.

Research and development costs extended to “packaging” and “design” amounted to41 million euros in 2003 (47 million euros in 2002; 37 million euros in 2001).

NOTE 19 - FINANCIAL INCOME


Financial expenses (329) (526) (728)

Financial income 49 194 222

Income from sale of short-term securities (1) 9 (33)

Depreciation allowance for short-term securities – (3) 17

Foreign exchange income 12 (7) 23

Total (269) (333) (499)

including financial expenses paid during the period (306) (535) (702)

A - Exposure to market risks and hedging the currency risk

1 - In the Group’s French companies, foreign currency risks relate mainly to commercialtransactions (net sales in foreign currency) and, to a lesser extent, to financial operations(investments, foreign currency financing).

Commercial operations: some Group subsidiaries realize a considerable portion of theircommercial transactions in foreign currency.

For example, 2003 sales revenues were earned in the following currencies:

millions of euros Valeur %

Euros 4,157 33

US dollars 3,747 30

Yens 2,007 16

Hong Kong dollars 452 4

Pounds Sterling 537 4

Other currencies 1,566 13

Net sales 12,466 100

Excluding the hedging effect, a 1% fluctuation in the major currencies (USD, JPY, HKD,GBP) would have caused a change in net income of 44 million euros.

Financial operations: certain financial operations, such as loans, may be in foreign currenciesbased on anticipated future revenues in foreign currency or changes in exchange rates.

97

Various financial instruments are used to hedge against exchange rate risk, such as foreigncurrency swaps, futures contracts and currency options. In accordance with the currencytranslation methods stated in the accounting principles (note 2-2), the hedging instrumentsused are assigned either to trade receivables or liabilities, or to estimated transactions for thefollowing year.

The unrealized gains or losses from translation revalued at the December 31 exchange rate are:

• Recorded in the income statement when they concern hedging instruments assigned toreceivables or liabilities;

• Deferred if they are designated as hedges for transactions for the following period.

The nominal amounts of the hedges outstanding at December 31, 2003, classified by year ofallocation and by type of hedging instrument and valued at the market value on the basis ofthe currency rates at December 31, 2003, are as follows:

millions of euros

Nominal amounts of the contractsMarket

Contracts hedging commercial risks 2003 2004 2005 and 2006 Total value (1)

Forward currency contracts (2)USD 269 57 53 379 27JPY 32 (2) – 30 –Other 41 99 12 152 2

342 154 65 561 29Exchange swaps (2)

USD 54 – – 54 6JPY (114) 17 – (97) (1)CHF 1,013 – – 1,013 –Other 65 – – 65 5

1,018 17 – 1,035 10Currency swaps (2)

USD – – (19) (19) (3)JPY – (19) (40) (59) (11)Other – – (86) (86) (5)

– (19) (145) (164) (19)Options purchased

Put USD 1 838 24 863 86Put JPY – 235 – 235 23Other – (6) – (6) –

1 1,067 24 1,092 109Tunnels

Seller USD 54 277 132 463 88Seller JPY 113 228 – 341 26Other – 75 23 98 9

167 580 155 902 123Accruals

inc. USD 10 64 – 74 41inc. JPY 6 75 – 81 30

16 139 – 155 71

(1) Income/(expense)(2) Sale/(purchase)

98

2 - The portion of consolidated net income excluding unusual items representing results ofsubsidiaries that prepare their accounts in pounds sterling, yen, US dollars and currenciespegged to the dollar totaled 176 million euros. A 10% fluctuation in the exchange rate of thesecurrencies would have an impact of 75 million euros on the consolidated operating incomeand 18 million euros on consolidated net income.

B - Hedging the rate risk

The Group manages the rate risk related to the global net financial debt. The objective of themanagement policy conducted is to protect earnings from a rapid and significant increase ininterest rates.

In this context, the Group uses firm rate derivatives (swaps) or options (caps and floors).

The notional amount of the hedges outstanding at December 31, 2003, classified by type andmaturity, and their market value on that date, break down as follows:

millions of euros

Notional amounts of the contracts Maturity Market

< 1 year 1 to 5 years > 5 years Total value (1)

Rate swaps - fixed payerEUR – 1,394 – 1,394 (70)USD 119 79 – 198 –Other – – – – –

119 1,473 – 1,592 (70)

Rate swaps - variable payerEUR 915 2,326 811 4,052 188Other – – – – –

915 2,326 811 4,052 188

Rate swaps - variable/variableEUR 600 1,050 – 1,650 (27)USD 59 653 – 712 (19)CHF 94 – – 94 6Other – – – – –

753 1,703 – 2,456 (40)

Caps boughtEUR 350 1,695 – 2,045 6USD 534 59 – 593 –CHF 94 – – 94 –Other – – – – –

978 1,754 – 2,732 6

Tunnels (caps bought and floors sold)EUR 300 2,125 – 2,425 3Other – – – – –

300 2,125 – 2,425 3

Floors soldEUR 50 365 – 415 (6)Other – – – – –

50 365 – 415 (6)

(1) Income/(expense)

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C - Hedging the equity risk

As the investment policy of the Group is to acquire interests over time, the portfolio ofunconsolidated equity interests is not hedged.

D - Summary table of market values

2003 2002Book Fair Book Fair

millions of euros value value value value

TDI 158 115 222 154Bonds and EMTN 4,214 4,457 3,295 3,577Other financial debt 3,002 3,002 4,734 4,734Current bank loans 429 429 504 504

Equity interests 9 9 13 13Short-term investments 232 232 61 61Cash and cash equivalents 855 855 855 855

Currency derivatives 101 323 62 280Interest rate derivatives 52 81 40 23

The fair value of the financial debt is determined line by line, on the basis of an estimate offuture cash flows, discounted at a rate reflecting the Group's credit risk at December 31, 2003for similar liabilities, or on the basis of the market price for the Group's bond issues with aninsufficiently liquid market.

The fair value of the current bank accounts, taking into account the remuneration, is not farfrom their book value.

The market value of currency and rate derivatives is based on a discounted valuation of thefuture cash flow differential, or on prices obtained from financial institutions. In both cases,the market value of the instruments is based on market data and recognized valuationmethods.

NOTE 20 - OTHER INCOME AND EXPENSES

In 2003:

• Other income and expenses represent restructuring expenses of 127 million euros, losses ondisposals completed or in progress totaling 139 million euros, and 77 million euros inexceptional depreciation of assets; other income and expenses also include net proceeds of55 million euros from the sale of LVMH shares and changes in provisions on these securities,as well as an additional depreciation of 33 million euros on the Bouygues stake.

The restructurings involve the various businesses of the Group: including the streamlining ofthe distribution networks of Wines and Spirits, primarily in Europe; in Perfumes andCosmetics, an increased selectivity of points of sale, primarily in the United States; the closingor resizing of industrial units in Italy and Switzerland by the Watches and Jewelry branch; and,finally, the transfer from San Francisco to Singapore and Hong Kong of the administrativeoperations and management of DFS.

100

The brands and operations sold are described in Note 1 – Changes in consolidation; thelosses from disposals result primarily from the provision funded for the sale of the Ebelbrand and assets which is currently in progress.

The depreciation of assets affects primarily the assets acquired under long-term leases, forwhich the lease payment have become greater than the market value.

In 2002:

• Other income and expenses include the following: a net capital gain of 55 million euros fromthe sales of the Pommery, Hard Candy and Urban Decay brands, various real estate assetsand the investments in Fininfo and Grand Marnier; a supplemental provision of 200 millioneuros for the Bouygues securities; a non-recurring write-down of assets for 116 million euros,including 41 million euros for inventories and 55 million euros for intangible assets. Otherincome and expenses also include net income of 17 million euros from the sales of LVMHshares and changes to the reserves for these securities, and a total of 161 million eurosprimarily related to provisions for the costs of restructuring the distribution network of MoëtHennessy in certain countries, to the complete divesting of Phillips capital and to the closingof some shops.

In 2001:

• Other income and expenses include the profits from the LVMH stock portfolio: 39 millioneuros in capital gains from sales, and 343 million euros from a write-down reserve forsecurities held at year end. This items also includes accelerated depreciation of inventories ofPOS promotional articles in the Perfumes and Cosmetics branch, and the write-down ofvarious assets, especially shares of unconsolidated investments.

NOTE 21 - INCOME TAXES


Current taxes (377) (502) (456)

Deferred taxes (119) 146 262

Total (496) (356) (194)

In 2000, French companies were subject to a current tax surcharge of 13%, which wasreduced to 9.3% in 2001 and to 6.3% in 2002 and 2003. This surtax resulted in 2003 in anadditional charge of 23 million euros (10 million euros in 2002; 8 million euros in 2001).

At December 31, 2003, deficit carry forwards not yet used, which did not result indeferred tax assets, totaled 1,785 million euros (1,926 million euros in 2002 and 1,903million euros in 2001), including a deficit of 309 million euros originating during the year(685 million euros in 2002 and 693 million euros in 2001).

Tax sharing agreements allow certain French companies of the Group to combine theirtaxable results to determine the overall tax expense for which only the parent company isfully liable.

The adoption of this procedure allowed the Christian Dior group to record a tax savingsof 304 million euros at December 31, 2003 (325 million euros in 2002; 313 million eurosin 2001).

101

Main components of deferred taxes:

• On the statement of income


Deferred foreign exchange gains and losses – (2) (21)

Intra-group margin included in the inventories 9 4 2

Valuation changes (1) 16 7

Provisions for risks and contingencies and depreciationof assets 34 5 (20)

Consolidation restatements and other temporary differences (1) 9 12 31

Unrealized capital gains and losses 52 8 27

Deficits carried forward/(used) (222) 103 246

Impact of tax rate changes – – (10)

Deferred tax (expense)/income (119) 146 262

• On the balance sheet


Intra-group margin included in the inventories 151 144 153

Valuation changes (284) (280) (271)

Provisions for risks and contingencies and depreciationof assets 133 93 95

Consolidation restatements and other temporarydifferences (1) 30 34 26

Unrealized capital gains and losses 110 58 48

Losses carried forward 153 376 248

Other 2 6 33

Net deferred income taxes 295 431 332

including: short-term deferred tax credit 455 558 503

long-term deferred tax liability (160) (127) (171)

(1) Primarily regulated reserves, supplementary amortization for tax purposes and finance lease.

102

Taxes deferred for more than one year are not discounted because of the random nature ofthe repayment.

Analysis of the difference between the effective tax rate and the French statutory tax rate:

The reconciliation between the French statutory tax rate applied to French companies andthe effective tax rate recorded in the consolidated financial statements breaks down asfollows:

(as % of income before tax ) 2003 2002 2001

French statutory tax rate 33.3 33.3 33.3• Temporary tax surcharge applicable

to French companies 1.0 0.8 3.3 • Effect of differences between foreign

and French tax rates (0.3) (1.1) (5.1)• Deficits of subsidiaries or from fiscal

consolidations (3.5) (4.4) (2.1)• Effect of differences between consolidated

taxable results and results taxableat a reduced rate (0.3) (1.2) 2.1

• Impact of withholding 0.4 0.8 1.0

Effective tax rate 30.6 28.2 32.5

NOTE 22 - AMORTIZATION OF GOODWILL


Companies consolidated by:

• Full consolidation (240) (251) (151)

• Equity method (4) (2) (8)

Current amortization (244) (253) (159)

Unusual amortization (46) – –

Total (290) (253) (159)

Unusual amortization in 2003 refers primarily to the partial depreciation of goodwill onLaflachère for 30 million euros and on Acqua di Parma for 12 million euros.

See also note 23 “Unusual items” for the unusual write-offs recorded in this account.

103

NOTE 23 - UNUSUAL ITEMS

In 2001, unusual items included income of 864 million euros from Gucci, including a capitalgain of 774 million euros from the sale of these Gucci shares and an exceptional dividend of90 million euros recorded during the fourth quarter of the year (see note 9 - Interest inGucci). Negative unusual items included a restructuring provision of 446 million euros,including 385 million euros for selective retailing. Exceptional asset depreciation oramortization expenses of 480 million euros were also recorded: they included 323 millioneuros for DFS goodwill, 82 million euros for the Bouygues investment, and 60 million eurosfor media and telecommunications investments. The accounts reflected an expense of 141million euros related to the sale of Phillips, de Pury & Luxembourg to its currentmanagement. This expense mainly corresponds to the full amortization of the goodwill.

NOTE 24 - COMMITMENTS AND CURRENT LITIGATION

A - Purchase commitments


Grapes, wines and distilled alcohol 456 429 413

Industrial or commercial assets 81 104 80

Equity interests 470 (1) 756 975

(1) After taking into account post-closing events: see note 25.

In the Wines and Spirits business group, some companies have contractual agreements withvarious local growers to supply a portion of their future requirements for grapes, light wineand distilled alcohol. Depending on the business, these commitments are based oncontractual terms or the latest known prices and anticipated yields. They primarily cover theyears 2004 and 2005.

The commitments to purchase investment shares represent contract commitments enteredinto by the Group to purchase minority interests in consolidated subsidiaries or additionalinterest in unconsolidated subsidiaries, or additional payments of the price of realizedtransactions.

These amounts do not include the effects of the Memorandum of Understanding of January20, 1994 between LVMH and Diageo, under which LVMH agreed to purchase at Diageo'srequest its 34% of Moët Hennessy, with 6-months notice, for an amount equal to 80% of itsvalue on the date of this request. On the date of the Memorandum, the Diageo investment inMoët Hennessy was assessed at more than 1.2 billion euros.

B - Securitization of trade receivables


Receivables from the Dailly 260 260 266incl.: risk of non-collection retained by LVMH (112) (100) (108)

Net financing mobilized 148 160 158

104

C - Deposits, pledges and other guarantees


Deposits and pledges 33 43 66

Mortgages and sureties 5 95 278

Other guarantees 38 49 155

Guarantees given 76 187 499

Guarantees received 11 12 15

In addition to 5 million euros in mortgages and sureties, 6,700,000 LVMH shares are pledged withCrédit Lyonnais.

D - Lease and similar commitments

At December 31, 2003, the number of stores operated by the Group worldwide, particularlyfor the Fashion and Leather Goods and Selective Retailing groups, was 1,751 (1,670 in 2002;1,617 in 2001).

In many countries, the leases on these stores carry minimum amounts, particularly when theleases contains an indexing clause based on revenues; this is the case for royalties paid underairport concessions. In addition, the leases may also include nonadjustable minimum terms.

The Group also finances part of its equipment through simple, long-term operating leases.

Lastly, some capital assets or manufacturing equipment were acquired or refinanced throughfinance-lease or lease-back agreements.

At December 31, 2003, future non-cancelable commitments arising from these contractsbroke down as follows:


Simples leases 2,429 2,387 2,092

Concession royalties 617 916 1,041

Off-balance sheet leasing commitments 3,046 3,303 3,133

Royalties on capital and long-term leases 429 531 192

Interest included in the royalties fromcapital and long-term leases (305) (387) (14)

Liabilities from capital and long-termleases on the balance sheet 124 144 178

Current value of lease commitments 3,170 3,447 3,311

The rents incurred during the period for the leasing agreements (net of sub-leases) were asfollows:


Minimum rents 368 334 509

105

E - Commitment schedule at December 31, 2003

Total less than 2 to 4 to beyondmillions of euros 1 year 3 years 5 years 5 years

Commitments to purchase materials 456 244 106 56 50

Commitments to purchase assets 81 69 7 5 –

Commitments to purchase securities (*) 470 158 120 52 140

Receivables from Dailly sale 148 148 – – –

Lease and similar commitments:- Simple leases 2,429 387 654 552 836 - Concession fees 617 171 240 81 125 - Capital lease fees

(incl. 305 representing interests) 429 14 29 22 364

Deposits, pledges and other guarantees given 76 38 24 2 5

(*) When the maturity of a commitment is conditional, it is considered to mature beyond 5 years.

F - Other commitmentsTo the knowledge of the Group, there are no off-balance sheet commitments other than thosedescribed above.

G - Possible liabilities and current disputesIn the ordinary course of its business, the Group is a party from time to time to legalproceedings and claims involving trademarks and intellectual property, selective retailingagreements, licensing, employee relations, tax audits and other matters incidental to itsbusiness. The Group estimates that the provisions included in the balance sheets related tolitigation and disputes known or in-process at the closing date are sufficient to cover anyunfavorable outcome, so that the Group financial position would not be significantly affected.

NOTE 25 - EVENTS AFTER CLOSING

In February 2004, the sale of Ebel was finalized.

In March 2004:

- LVMH increased its interest in Donna Karan from 89% to 98% for the amount ofUSD 43.8 million;

- Finally, Moët Hennessy's stake in Millennium was increased by 40% to 70%, inconsideration for a payment of USD 107 million.

106

NOTE 26 - EMPLOYEE INFORMATION

Payroll charges totaled 2,261 million euros (2,336 million in 2002; 2,310 million in 2001).

The average number of employees in 2003 was 56,815 (55,314 in 2002; 54,463 in 2001).

At December 31, the staffing of fully consolidated companies was as follows:

By business group 2003 2002 2001

Christian Dior Couture 2,004 1,728 1,383

Wines and Spirits 4,757 4,801 5,089

Fashion and Leather Goods 17,177 16,323 13,402

Perfumes and Cosmetics 13,082 13,006 13,087

Watches and Jewelry 2,255 2,366 2,233

Selective Retailing 18,091 18,243 18,542

Other activities 880 1,074 1,443

Total 58,246 57,541 55,179

By geographic region 2003 2002 2001

France 20,201 20,990 20,399

Europe (excluding France) 11,646 10,871 10,194

U.S.A. 13,106 13,050 12,235

Japan 4,402 4,043 3,591

Asia Pacific 8,891 8,587 8,760

Total 58 246 57,541 55,179

By category 2003 2002 2001

Laborers 9,156 9,084 9,116

Wage earners 33,899 32,710 31,730

Supervisors 5,870 5,735 5,066

Managers 9,321 10,012 9,267

Total 58,246 57,541 55,179

Compensation

Compensation paid to Christian Dior directors and officers for their duties in consolidatedcompanies totaled 9,231 thousand euros.

107

Expenses and provisions for retirements, medical costs and similar liabilities

• Expenses for the year


Cost of the services rendered 40 34 24

Impact of the discounting 18 15 15

Expected return on dedicated placements (7) (6) (7)

Amortization of actuarial differences 1 3 4

Plan changes 16 – 7

Expense for the year 68 46 43

• Analysis of the commitment


Discounted value of the rights 433 373 301

Market value of dedicated placements (192) (149) (113)

Items not recognized (34) (38) (4)

Net commitment 207 186 184incl.:

Other long-term liabilities 202 179 177

Other liabilities less than one-year 8 7 7

Long-term financial assets (3) – –

Total 207 186 184

• The changes in the commitments break down as follows:

Discounted Market Items Net value values of the not commit-

millions of euros of entitlements placement recognized ments

Balance at December 31, 2002 373 (149) (38) 186

Expense for the year 58 (7) 17 68

Benefits paid to beneficiaries (19) 8 – (11)

Increase in dedicated placements – (25) – (25)

Impact of exchange rate changes (21) 5 – (16)

Impact of changes in consolidation – – – –

Transfers (1) 29 (24) – 5

Other (including actuarial differences and changes in treatment) 13 – (13) –

Balance at December 31, 2003 433 (192) (34) 207

(1) See "Other short-term liabilities."

108

The actuarial assumptions used to estimate the commitments in the principal countrieswhere the commitments are located, are as follows:

Discount rate 2.50% in Japan, 4.50% in France,6.00% in the United States

Expected long-term rate of return on investments 4.00% in Japan, 4.50% in France, 8.75% in the United States

Rate of increase of salaries 2.00% to 4.00%

NOTE 27 - INFORMATION SPECIFIC TO BUSINESS GROUPS

1. Net salesmillions of euros 2003 2002 2001

Christian Dior Couture 523 492 350




Watches and Jewelry 502 552 548


Other activities, eliminations and restatements (44) (22) 101

Total 12,466 13,168 12,567

2. Income from operationsmillions of euros 2003 2002 2001

Christian Dior Couture 40 33 (5)

Wines and Spirits 796 750 676


Perfumes and Cosmetics 178 161 149

Watches and Jewelry (48) (13) 27

Selective Retailing 106 20 (213)

Other activities, eliminations and restatements (170) (197) (360)

Total 2,213 2,034 1,548

3. Balance Sheet Assets millions of euros 2003 2002 2001





Watches and Jewelry 1,444 1,657 1,662


Other activities, eliminations and restatements 5,738 6,404 8,678

Total 25,802 26,802 29,228

109

4. Inventories millions of euros 2003 2002 2001



Fashion and Leather Goods 468 462 395

Perfumes and Cosmetics 228 225 282

Watches and Jewelry 188 196 194

Selective Retailing 483 524 590 Other activities, eliminations and restatements 38 100 173

Total 3,517 3,522 3,727

The eliminations correspond to the cancellation of the amount resulting from intra-groupoperations.

As the activities of the Internet site e-Luxury.com were reclassified from the “Otherbusinesses" group to the “Fashion and Leather Goods” group in 2003, and the activities ofSephora.com were reclassified in 2002 from the “Other businesses” group to “SelectiveRetailing”, the earlier data have been restated to make them comparable.

NOTE 28 - INFORMATION BY GEOGRAPHIC REGION


Group and non-Group export salesof French companies 3,752 3,851 3,742

Exports as a percentage of the salesof French companies 65% 65% 65%

Percentage of consolidated net salesearned outside France 82% 83% 83%

The items below correspond to the geographic regions in which the companies of the groupare located and not the regions to which they market:

1. Net salesmillions of euros 2003 2002 2001

France 5,767 5,938 5,770

Europe (excluding France) 2,641 2,551 2,426

U.S.A. 2,882 3,737 3,228

Japan 1,893 1,890 1,825

Asia (excluding Japan) 1,203 1,988 2,101

Other countries 1,455 489 569

Total 15,841 16,593 15,919 Eliminations (3,375) (3,425) (3,352)

Total 12,466 13,168 12,567

110

2. Income from operationsmillions of euros 2003 2002 2001

France 1,237 1,210 1,238Europe (excluding France) 49 78 31 U.S.A. 198 8 (369)Japan 395 392 334Asia (excluding Japan) 301 313 289Other countries 33 33 25

Total 2,213 2,034 1,548

3. Balance sheet assets millions of euros 2003 2002 2001

France 15,351 15,549 17,206 Europe (outside France) 4,458 4,256 4,262 U.S.A. 3,142 3,989 4,436 Japan 844 773 675 Asia (excluding Japan) 1,529 1,810 2,056 Other countries 478 425 593

Total 25,802 26,802 29,228

4. Balance sheet liabilities (excluding shareholders' equity and minority interests)millions of euros 2003 2002 2001

France 9,583 9,929 12,096 Europe (outside France) 1,067 1,167 1,314 U.S.A. 923 1,206 1,425Japan 743 696 572 Asia (excluding Japan) 803 1,076 1,209 Other countries 104 93 77

Total before appropriation 13,223 14,167 16,693

Dividends paid 105 96 89

Total after appropriation 13,328 14,263 16,782

111

NOTE 29 - LIST OF CONSOLIDATED COMPANIES IN 2003

All the companies below are fully consolidated except for those indicated by the number (2),which are consolidated under the equity method and those indicated by (1), which areconsolidated on a proportionate basis.

PERCENTAGECOMPANIES HEAD OFFICE Control Interest

Christian Dior CoutureChristian Dior Couture SA Paris, France 100% 100%S.A.M. Christian Dior Monaco 100% 100%Christian Dior GmbH Munich, Germany 100% 100%Christian Dior, Inc. New York, U.S.A. 100% 100%Christian Dior Retail - UK Ltd London, United Kingdom 100% 100%Christian Dior (Suisse) SA Geneva, Switzerland 100% 100%Les Jardins d’Avron Paris, France 100% 100%Mardi SpA Badia e Settimo, Italy 50% 50%Ateliers AS (2) Pierre Bénite, France 25% 25%Christian Dior Far East Hong Kong 100% 100%Christian Dior Fashion Malaysia Kuala-Lumpur, Malaysia 100% 100%Christian Dior Malaysia Ltd Kuala-Lumpur, Malaysia 100% 100%Christian Dior Hong Kong Hong Kong 100% 100%Christian Dior Taiwan Taipei, Taiwan 90% 90%Christian Dior Singapore Singapore 100% 100%Christian Dior Saipan Saipan, NMI 100% 100%Christian Dior Australia Sydney, Australia 100% 100%Christian Dior New Zealand Auckland, New Zealand 100% 100%Christian Dior (Thailand) Bangkok, Thailand 100% 100%Christian Dior KK Tokyo, Japan 100% 100%Christian Dior Couture Korea Ltd Seoul, South Korea 100% 100%Christian Dior Guam Ltd Agana, Guam 100% 100%Montaigne Española Barcelona, Spain 100% 100%CD do Brazil Sao Paulo, Brazil 100% 100%CD Italia Milan, Italy 100% 100%Christian Dior Belgique Brussels, Belgium 100% 100%Bopel Spa Milan, Italy 70% 70%Christian Dior Indonesia Jakarta, Indonesia 80% 80%CD Puerto Banus Puerto Banus, Spain 75% 75%JA LLC New York, United States 100% 100%Jean Rose II Saint Tropez, France 100% 100%Lucilla Sieci, Italy 51% 51%CD Ceska Prague, Czech Republic 100% 100%

Wines and SpiritsChampagne Moët & Chandon SCS Epernay, France 42% 28%Champagne Ruinart SA Rheims, France 42% 28%

(2) Company consolidated under the equity method

112

Ruinart UK Ltd. London, United Kingdom 42% 28%France Champagne SA Epernay, France 42% 28%Moët Hennessy UK Ltd. London, United Kingdom 42% 28%Chandon SA (Spain) Barcelona, Spain 42% 28%LVMH Wines & Spirits (Suisse) SA Geneva, Switzerland 42% 28%Champagne Des Moutiers SA Epernay, France 42% 28%Schieffelin Partner Inc. New York, U.S.A. 42% 28%Moët Hennessy Mexico Mexico City, Mexico 42% 28%Chamfipar SA Ay, France 42% 28%Société Viticole de Reims SA Ay, France 42% 28%Cie Française du Champagne etdu Luxe SA Ay, France 42% 28%Moët Hennessy Australia Rosebury, Australia 42% 28%Moët Hennessy Belux Brussels, Belgium 42% 28%Champagne de Mansin SAS Gye sur Seine, France 42% 28%IDCC SAS Gye sur Seine, France 42% 28%Domaine Chandon Inc. Yountville (California), U.S.A. 42% 28%LVMH Vinhos E Destilados Brasil Ltda Sao Paulo, Brazil 42% 28%Bodegas Chandon Argentina SA Buenos Aires, Argentina 42% 28%Domaine Chandon Australia, Pty Ltd. Coldstream Victoria, Australia 42% 28%Opéra Vineyards SA (1) Buenos Aires, Argentina 21% 14%LVMH Wines & Spirits DeutschlandGmbH Munich, Germany 42% 28%Moët Hennessy Italia SpA Milan, Italy 42% 28%Schieffelin & Somerset Co. New York, U.S.A. 42% 28%Schieffelin & Co New York, U.S.A. 42% 28%MH UDV France SA Paris la Défense, France 42% 28%Deux Rivières General Partnership (2) Yountville (California), U.S.A. 42% 6%Veuve Clicquot Ponsardin SCS Rheims, France 42% 28%Société Civile des Crus de Champagne SA Rheims, France 42% 28%Neggma SA Rheims, France 42% 14%Veuve Clicquot U.K. Ltd. London, United Kingdom 42% 28%Clicquot Inc. New York, U.S.A. 42% 28%Cape Mentelle Vineyards Ltd. Margaret River, Australia 42% 28%Veuve Clicquot Properties, Pty Ltd. Sydney, Australia 42% 28%Cloudy Bay Vineyards Ltd. Blenheim, New Zealand 42% 28%Marques Champagne Spiritueux GIE (2) Brussels, Belgium 42% 28%Paragon Vintners Ltd. London, United Kingdom 42% 28%


Wines and Spirits (continued)

(1) Company consolidated by proportionate consolidation (2) Company consolidated using the equity method

113

Krug SA Rheims, France 42% 28%Veuve Clicquot Japan KK Tokyo, Japan 42% 28%Mountadam Vineyards Pty Ltd Adelaide, Australia 42% 28%Newton Vineyards LLC St. Helena (California), U.S.A. 42% 17%Château d’Yquem SA Sauternes, France 42% 28%Château d’Yquem SC Sauternes, France 42% 27%Jas Hennessy & Co SCS Cognac, France 42% 28%DMJ Holdings BV (3) Amsterdam, Netherlands 42% 28%UD Moët Hennessy BV (3) The Hague, Netherlands 42% 28%Hennessy Dublin Ltd. Dublin, Ireland 42% 28%Edward Dillon & Co Ltd. (2) Dublin, Ireland 14% 9%Hennessy Far East Ltd. Hong Kong, China 42% 28%Riche Monde Orient Limited (3) Hong Kong, China 42% 28%Riche Monde Ltd. (3) Hong Kong, China 42% 28%Riche Monde (China) Ltd. Shanghai, China 42% 28%Moët Hennessy UDG (Far East) Ltd. (3) Hong Kong, China 42% 28%Riche Monde Singapore Pte Ltd. (3) Singapore 42% 28%Riche Monde Malaysia Inc. (3) Petaling Jaya, Malaysia 42% 14%Riche Monde Taipei Ltd. (3) Taipei, Taiwan 42% 28%Riche Monde Bangkok Ltd. (3) Bangkok, Thailand 42% 28%Moët Hennessy Korea Ltd. Seoul, South Korea 42% 28%Moët Hennessy Shanghai Ltd. Shanghai, China 42% 28%Moët Hennessy India pvt. Ltd. New Delhi, India 42% 28%Moët Hennessy Taiwan Ltd. Taipei, Taiwan 42% 28%RML DF Greater China Shanghai, China 42% 28%Riche Monde Shanghai Consulting Ltd. Shanghai, China 42% 28%Moët Hennessy Netherland BV Naarden, Netherlands 42% 28%Jardine Wines & Spirits KK. (3) Tokyo, Japan 42% 28%Moët Hennessy Asia Pte Ltd. Singapore 42% 28%Millennium Import LLC Wilmington (Delaware), U.S.A. 17% 11%

Fashion and Leather GoodsLouis Vuitton Malletier SA Paris, France 42% 42%Société des Ateliers Louis Vuitton SNC Paris, France 42% 42%Société Louis Vuitton Services SNC Paris, France 42% 42%Sté des Magasins Louis VuittonFrance SNC Paris, France 42% 42%Louis Vuitton Monaco SA Monte Carlo, Monaco 42% 42%LVMH Fashion Group UK Ltd. London, United Kingdom 42% 42%Louis Vuitton Deutschland GmbH Düsseldorf, Germany 42% 42%Louis Vuitton España SA Madrid, Spain 42% 42%


Wines and Spirits (continued)

(2) Company consolidated using the equity method (3) Joint venture with Diageo: only the Moët Hennessy activity is consolidated

114

Catalana Talleres ArtesanosLouis Vuitton SA Barbera del Valles, Spain 42% 42%Louis Vuitton BV Amsterdam, Netherlands 42% 42%LVMH Fashion Group Belgium SA Brussels, Belgium 42% 42%LVMH FG Italia.SPA Milan, Italy 42% 42%Louis Vuitton Hellas SA Athens, Greece 42% 42%Louis Vuitton Portugal, Maleiro, Lda. Lisbon, Portugal 42% 42%Louis Vuitton Ltd Tel Aviv, Israel 42% 42%Louis Vuitton Danmark A/S Copenhagen, Denmark 42% 42%Louis Vuitton Aktiebolag (Suède) SA Stockholm, Sweden 42% 42%LVMH FG Switzerland SA Geneva, Switzerland 42% 42%Louis Vuitton Ceska SRO. Prague, Czech Republic 42% 42%Louis Vuitton Osterreich GmbH Vienna, Austria 42% 42%Louis Vuitton Cantacilik Ticaret Istanbul, Turkey 42% 42%LV US Manufacturing, Inc. New York, U.S.A. 42% 42%LVMH Fashion Group Hawaii Inc. Honolulu, Hawaii 42% 42%Atlantic Luggage Company, Ltd Hamilton, Bermuda 42% 17%Louis Vuitton Guam, Inc. Guam 42% 42%Louis Vuitton Saipan, Inc. Saipan 42% 42%San Dimas Luggage Company New York, U.S.A. 42% 42%Louis Vuitton Distribuçao Ltda Sao Paulo, Brazil 42% 42%Louis Vuitton Mexico Mexico City, Mexico 42% 42%Blinfar SA Montevideo, Uruguay 42% 42%LV Chile Ltda. Santiago del Chile, Chile 42% 42%LVMH Fashion Group Ltd. Hong Kong, China 42% 42%Louis Vuitton Hong Kong Ltd. Hong Kong, China 42% 42%Louis Vuitton (Singapore) Pte Ltd. Singapore, Singapore 42% 42%Louis Vuitton (Malaysia) SDN Bhd. Kuala Lumpur, Malaysia 42% 42%Louis Vuitton Taiwan Ltd. Taipei, Taiwan 42% 38%LV Comete Services Ltd. Taipei, Taiwan 42% 38%Louis Vuitton Australia, PTY Limited Sydney, Australia 42% 42%LV New Zealand Ltd. Auckland, New Zealand 42% 42%LV Cup New Zealand Ltd. Auckland, New Zealand 42% 42%Louis Vuitton Kuweit CSP Safat, Kuwait 42% 25%LV Emirats Arabes Unis Dubai, United Arab Emirates 42% 28%LV Arabie Saoudite LLC Jeddah, Saudi Arabia 42% 28%Louis Vuitton Korea, Ltd. Seoul, South Korea 42% 42%LV Argentina SA Buenos Aires, Argentina 42% 42%Louis Vuitton Vostok LLC Moscow, Russia 42% 42%LV Colombia Corp. Santafe de Bogotá, Colombia 42% 42%Louis Vuitton Maroc Sarl Casablanca, Morocco 42% 42%LV Venezuela SA Caracas, Venezuela 42% 42%


Fashion and Leather Goods (continued)

115

Louis Vuitton Macao Company Limited Macao 42% 42%LVJ Group KK Tokyo, Japan 42% 42%LVMH Fashion Group Americas Inc. New York, U.S.A.(*) 42% 42%LV Canada Inc. Toronto, Canada 42% 42%LV Saint Barthélémy SNC Saint Barthélémy,

French Antilles 42% 42%Marc Jacobs International LLC Wilmington (Delaware), U.S.A. 42% 41%Marc Jacobs Trademark LLC Wilmington (Delaware), U.S.A. 42% 14%Loewe SA Madrid, Spain 42% 42%Loewe Hermanos SA Madrid, Spain 42% 42%Loewe Textil SA Madrid, Spain 42% 42%Manufacturas Loewe SA Madrid, Spain 42% 42%LVMH Fashion Group France SNC Paris, France 42% 42%Loewe Hermanos (UK) Ltd. London, United Kingdom 42% 42%Loewe Saipan Inc. Saipan, Marianas 42% 42%Loewe Guam, Inc. Guam 42% 42%Loewe Hong Kong Ltd. Quarry Bay, Hong Kong 42% 42%Loewe Japan KK Tokyo, Japan 42% 39%Loewe Fashion Pte Ltd. Singapore 42% 42%Loewe Fashion Sdn bhd Kuala Lumpur, Malaysia 42% 42%Loewe Taiwan Ltd. Taipei, Taiwan 42% 38%Loewe Australia, Pty Ltd. Sydney, Australia 42% 42%Serrano Inc. New York, U.S.A. 42% 42%Berluti SA Paris, France 42% 42%Société de Distribution Robert EtienneSNC Paris, France 42% 42%Manifattura Ferrarese SRL Milan, Italy 42% 42%LVMH Fashion Group Services SAS Paris, France 42% 42%Belle Jardinière SA Paris, France 42% 42%Belle Jardinière Immo SAS Paris, France 42% 42%LVMH Fashion (Shanghai)Trading Co Ltd. Hong Kong, China 42% 42%Montaigne KK Tokyo, Japan 42% 42%LVNA Finances Corp. Texas, U.S.A. 42% 42%Incisa Srl Milan, Italy 42% 42%Celux Inc Tokyo, Japan 42% 42%LVMH Fashion Group Industria Srl Milan, Italy 42% 42%Rossimoda S.p.A Vigonza, Italy 42% 41%Somarest SARL Sibiu, Romania 42% 42%Céline SA Paris, France 42% 42%Avenue M International SCA Paris, France 42% 42%Enilec Gestion SARL Paris, France 42% 42%Céline Montaigne SAS Paris, France 42% 42%



116



Céline Monte-Carlo SA Monte Carlo, Monaco 42% 42%Céline Italia Srl Milan, Italy 42% 42%Céline Production Srl Florence, Greve in Chianti, Italy 42% 42%Céline Suisse SA Geneva, Switzerland 42% 42%Céline U.K. Ltd. London, United Kingdom 42% 42%Céline Inc. New York, U.S.A.(*) 42% 42%Céline (Hong Kong) Ltd. Hong Kong, China 42% 42%Céline (Singapore) Pte Ltd. Singapore 42% 42%Céline Guam Inc. Tamning, Guam 42% 42%Céline Hawaii Inc. Hawaii, U.S.A. 42% 42%Céline Korea Ltd. Seoul, South Korea 42% 42%Céline Boutiques Taïwan Ltd. Taipei, Taiwan 42% 40%Kami SA Montbazon, France 42% 42%Kenzo SA Paris, France 42% 42%Kenzo Homme SA Paris, France 42% 25%Modulo SA Paris, France 42% 42%Kenzo Deutschland GmbH Düsseldorf, Germany 42% 42%Kenzo Belgique SA Brussels, Belgium 42% 42%Kenzo UK Ltd. London, United Kingdom 42% 42%Kenzo NA Inc. New York, U.S.A.(*) 42% 42%Kenzo Fashion Iberica, SA Madrid, Spain 42% 42%Kenzo Homme UK Ltd. London, United Kingdom 42% 25%Kenzo Japan KK Tokyo, Japan 42% 42%Modulo BV Amstelveen, Netherlands 42% 42%Givenchy SA Paris, France 42% 42%Givenchy Corporation New York, U.S.A. 42% 42%Givenchy Co Ltd. Tokyo, Japan 42% 42%Gentleman Givenchy Far East Ltd. Hong Kong, China 42% 42%Givenchy China Co Ltd. Hong Kong, China 42% 22%Christian Lacroix SNC Paris, France 42% 42%Gabrielle Studio Inc. New York, U.S.A. 42% 38%Donna Karan International Inc. New York, U.S.A.(*) 42% 38%The Donna Karan Company LLC New York, U.S.A. 42% 38%Donna Karan Services Company BV Oldenzaal, Netherlands 42% 38%Donna Karan Studio LLC New York, U.S.A. 42% 38%The Donna Karan Company Store LLC New York, U.S.A. 42% 38%Donna Karan Company Store UKHoldings Ltd. London, United Kingdom 42% 38%Donna Karan Management CompanyUK Ltd. London, United Kingdom 42% 38%Donna Karan Company StoresUK Retail Ltd. London, United Kingdom 42% 38%

117

Donna Karan Company Store (UK) Ltd London, United Kingdom 42% 38%Donna Karan H. K. Ltd Hong Kong, China 42% 38%Donna Karan (Italy) S.r.l. Milan, Italy 42% 38%Donna Karan (Italy) ProductionServices S.r.l. Milan, Italy 42% 38%Fendi International BV Amsterdam, Netherlands 42% 36%Fendi International SA Paris, France 42% 36%Fendi S.A. Luxembourg, Luxembourg 42% 36%Fendi Srl Rome, Italy 42% 36%Fendi Adele Srl Rome, Italy 42% 36%Fendi Industria Srl Florence, Italy 42% 36%Fendi Italia Srl Rome, Italy 42% 42%Fendi U.K. Ltd London, United Kingdom 42% 42%Fendi France SA Paris, France 42% 42%Fendi Japan KK Inc Tokyo, Japan 42% 42%Fendi Hawaii, Inc. Wilmington (Delaware), U.S.A. 42% 42%Fendi North America, Inc New York, U.S.A.(*) 42% 36%Fendi Australia Pty Ltd Sydney, Australia 42% 42%Fendi Guam Inc Tumon, Guam 42% 42%Fendi Asia Pacific Ltd Hong Kong, China 42% 42%Fendi Korea Ltd Seoul, South Korea 42% 42%Fendi Taiwan Ltd Taipei, Taiwan 42% 32%Fendi Hong Kong Ltd Hong Kong, China 42% 30%Fendi China Boutiques Ltd Hong Kong, China 42% 30%Fendi (Singapore) Pte Ltd Singapore 42% 42%Fendi Fashion (Malaysia) Snd. Bhd. Kuala Lumpur, Malaysia 42% 42%Emilio Pucci Srl Florence, Italy 42% 41%Emilio Pucci International BV Naarden, Netherlands 42% 28%Emilio Pucci Ltd New York, U.S.A. 42% 41%Thomas Pink Holdings Ltd London, United Kingdom 42% 42%Thomas Pink Ltd London, United Kingdom 42% 42%Thomas Pink BV Rotterdam, Netherlands 42% 42%Thomas Pink Inc. New York, U.S.A.(*) 42% 42%Thomas Pink Ireland Ltd Dublin, Ireland 42% 42%Thomas Pink Belgium SA Brussels, Belgium 42% 42%Thomas Pink France SAS Paris, France 42% 42%e-Luxury.com Inc. San Francisco (California), U.S.A. 42% 42%

Perfumes and CosmeticsParfums Christian Dior SA Paris, France 42% 42%LVMH P&C Thailand Co Ltd Bangkok, Thailand 42% 21%LVMH P&C do Brasil Ltda Sao Paulo, Brazil 42% 42%



118

FAC SA (Argentina) Buenos Aires, Argentina 42% 42%LVMH P&C Shanghai Co Ltd. Shanghai, China 42% 42%Parfums Christian Dior Finland Oy Helsinki, Finland 42% 42%LVMH P&C Inc. New York, U.S.A. 42% 42%SNC du 33 avenue Hoche Paris, France 42% 42%Parfums Christian Dior UK Ltd. London, United Kingdom 42% 42%Parfums Christian Dior BV Netherlands Rotterdam, Netherlands 42% 42%Iparkos BV Rotterdam, Netherlands 42% 42%LVMH Perfumes y Cosmeticos Iberica SA Madrid, Spain 42% 42%Parfums Christian Dior SAB (Belgium) Brussels, Belgium 42% 42%Parfums Christian Dior Italie SpA Pisa, Italy 42% 42%Parfums Christian Dior Ireland Ltd. Dublin, Ireland 42% 42%Parfums Christian Dior Hellas S.A. Athens, Greece 42% 42%Parfums Christian Dior AG (Switzerland) Zurich, Switzerland 42% 42%Christian Dior Perfumes LLC New York, U.S.A. 42% 42%Parfums Christian Dior Canada Inc. Montreal, Canada 42% 42%LVMH P&C de Mexico, SA de CV Mexico City, Mexico 42% 42%Parfums Christian Dior KK (Japan) Tokyo, Japan 42% 42%Parfums Christian Dior Singapore Pte Ltd. Singapore 42% 42%Inalux SA Luxembourg, Luxembourg 42% 42%LVMH P&C Asia Pacific Ltd. Hong Kong, China 42% 42%Fa Hua Frag & Cosmetics Ltd. Taipei, Taiwan 42% 42%LVMH P&C Shanghai Co Ltd. Shanghai, China 42% 42%LVMH P&C Korea Ltd. Seoul, South Korea 42% 32%Parfums Christian Dior Hong Kong Ltd. Hong Kong, China 42% 42%LVMH P&C Malaysia Sdn berhad Inc. Kuala-Lumpur, Malaysia 42% 42%Fa Hua Hong Kong Co, Ltd. Hong Kong, China 42% 42%Pardior de Mexico SA de CV Mexico City, Mexico 42% 42%Parfums Christian Dior A/S k Copenhagen, Denmark 42% 42%LVMH P&C Pty Ltd. Sydney, Australia 42% 42%Parfums Christian Dior AS Ltd. Hoevik, Norway 42% 42%Parfums Christian Dior AB Sweden Stockholm, Sweden 42% 42%Parfums Christian Dior New Zealand Ltd Auckland, New Zealand 42% 42%Parfums Christian Dior GMBH (Austria) Vienna, Austria 42% 42%INA Services Ltd. Dublin, Ireland 42% 42%Cosmetic of France Inc. Miami, U.S.A. 42% 42%Beauté SA Athens, Greece 42% 42%GIE LVMH P&C Recherche Paris, France 42% 42%GIE Parfums et CosmétiquesInformation Services - PCIS Levallois Perret, France 42% 42%Perfumes Loewe SA Madrid, Spain 42% 42%


Perfumes and Cosmetics (continued)

119

Acqua Di Parma Srl Milan, Italy 42% 42%Guerlain SA Paris, France 42% 42%LVMH Parfums & KosmetikDeutschland GmbH Wiesbaden, Germany 42% 42%Guerlain GesmbH Vienna, Austria 42% 42%Cofra GesmbH Vienna, Austria 42% 42%Guerlain SA (Belgium) Fleurus, Belgium 42% 42%Oy Guerlain AB Helsinki, Finland 42% 42%Guerlain SpA Milan, Italy 42% 42%Guerlain Ltd. Perivale, United Kingdom 42% 42%Guerlain de Portugal Lda. Lisbon, Portugal 42% 42%Guerlain SA (Switzerland) Geneva, Switzerland 42% 42%Guerlain Inc. New York, U.S.A. 42% 42%Guerlain Canada Ltd. Montreal, Canada 42% 42%Guerlain De Mexico SA Satelite, Mexico 42% 42%Guerlain Puerto Rico Inc. San Juan, Puerto Rico 42% 42%Guerlain Asia Pacific Ltd. (Hong Kong) Hong Kong, China 42% 42%Guerlain KK Tokyo, Japan 42% 42%Guerlain Taiwan Co Ltd. Taipei, Taiwan 42% 42%Guerlain Oceania Australia Pty Ltd. Melbourne, Australia 42% 42%LVMH Fragrances & Cosmetics Pte Ltd. Singapore 42% 42%Guerlain Malaysia SDN Berhad Inc. Kuala-Lumpur, Malaysia 42% 42%American Designer Fragances LLC New York, U.S.A.(*) 42% 42%Make Up For Ever SA Paris, France 42% 31%Make Up For Ever UK Ltd. London, United Kingdom 42% 31%Make Up For Ever LLC New York, U.S.A.(*) 42% 42%Make Up For Ever KK Tokyo, Japan 42% 42%Make Up For Ever Italy SRL Milan, Italy 42% 31%Parfums Givenchy SA Levallois, France 42% 42%Parfums Givenchy Ltd. Hersham, United Kingdom 42% 42%Parfums Givenchy GmbH Düsseldorf, Germany 42% 42%Parfums Givenchy Canada Ltd. Toronto, Canada 42% 42%Parfums Givenchy KK Tokyo, Japan 42% 42%Parfums Givenchy Srl Milan, Italy 42% 42%Parfums Givenchy Asia Pacific Pte Ltd. Singapore 42% 42%Parfums Givenchy LLC New York, U.S.A.(*) 42% 42%Parfums Givenchy WHD, Inc. Miami (Florida), U.S.A.(*) 42% 42%Kenzo Parfums France SA Paris, France 42% 42%Kenzo Parfums Italia Srl Milan, Italy 42% 42%Kenzo Parfums NA LLC New York, U.S.A.(*) 42% 42%Laflachère SAS Saint Vérand, France 42% 42%La Brosse et Dupont (LBD) SAS Villepinte, France 42% 42%



120

Lardenois SAS Hermes, France 42% 42%La Brosse et Dupont Portugal SA San Domingos de Rana, Portugal 42% 42%Mitsie SAS Tarare, France 42% 42%LBD IBERICA SA Barcelona, Spain 42% 42%Etablissements Arielux SA Le Peyrat, France 42% 42%Etablissements Ladoë SAS Tourcoing, France 42% 42%LBD Ménage SAS Beauvais, France 42% 42%LBD Belux SA Brussels, Belgium 42% 42%SCI Masurel Tourcoing, France 42% 42%SCI Sageda Orange, France 42% 42%LBD Asia Ltd Hong Kong, China 42% 42%La Niçoise SAS Carros, France 42% 42%LBD ITALIA Srl Stezzano, Italy 42% 42%Institut Qualité Laflachère EURL (2) Saint Vérand, France 42% 42%Etablissements Mancret Père & Fils SA Grenoble, France 42% 42%Inter-Vion Spolka Akeyjna SA Warsaw, Poland 42% 22%Europa Distribution, SAS Saint Etienne, France 42% 42%LBD Industries SAS Beauvais, France 42% 42%Bliss World LLC New York, U.S.A. 42% 30%Bliss World Limited London, United Kingdom 42% 30%Benefit Cosmetics LLC San Francisco (California), U.S.A. 42% 30%Benefit Cosmetics UK Ltd London, United Kingdom 42% 30%Fresh Inc. Boston (Massachussetts), U.S.A. 42% 28%LVMH New Cosmetic KK Tokyo, Japan 42% 42%LVMH Perfumes and Cosmetics Services LLC Edison (New Jersey), U.S.A. (*) 42% 42%LVMH Cosmetics Services KK Tokyo, Japan 42% 42%

Watches and JewelryTAG Heuer International SA Luxembourg, Luxembourg 42% 42%TAG Heuer SA Marin, Switzerland 42% 42%LVMH Relojeria & Joyeria España SA Madrid, Spain 42% 42%LVMH Montres & Joaillerie France SA Paris, France 42% 42%LVMH Watch & Jewelry ItalyHolding SpA Milan, Italy 42% 42%TAG Heuer Central Europe GmbH Bad Homburg, Germany 42% 42%Timecrown Ltd Manchester, United Kingdom 42% 42%LVMH Watch & Jewelry UK Ltd Manchester, United Kingdom 42% 42%Ebel Ltd Manchester, United Kingdom 42% 42%Tag Heuer Ltd Manchester, United Kingdom 42% 42%LVMH Watch & Jewelry USA (Inc) Springfield, (New Jersey), U.S.A. 42% 42%



(2) Company consolidated using the equity method

121

Pro Time Service Inc. Springfield, (New Jersey), U.S.A. 42% 42%LVMH Watch & Jewelry Canada Ltd Toronto, Canada 42% 42%LVMH Watch & Jewelry Far East Ltd Hong Kong, China 42% 42%LVMH Watch & Jewelry SingaporePte Ltd Singapore 42% 42%LVMH Watch & Jewelry MalaysiaSdn Bhd Kuala Lumpur, Malaysia 42% 42%TAG Heuer Asia Ltd Labuan, Malaysia 42% 42%LVMH Watch & Jewelry Capital Pte Ltd Singapore 42% 42%LVMH Watch & JewelryJapan K.K. Tokyo, Japan 42% 42%LVMH Watch & Jewelry Australia Pty Ltd Melbourne, Australia 42% 42%LVMH Watch & JewelryHong Kong Ltd Hong Kong, China 42% 42%LVMH Watch & JewelryTaiwan Ltd Taipei, Taiwan 42% 42%Cortech SA Cornol, Switzerland 42% 42%ArteCad SA Tramelan, Switzerland 42% 42%LVMH Watches and JewelryCaribbean & Latin America Inc Coral Gables (Florida), U.S.A. 42% 42%ArteLink Srl Fratte di S. Giustina in Colle, Italy 42% 42%LVMH Watch & Jewelry IndiaPvt Ltd New Delhi, India 42% 42%Ebel SA La Chaux-de-Fonds, Switzerland 42% 42%Swisswave Europe SA Villiers-Le-Lac, France 42% 42%Glasnost Edition SA La Chaux-de-Fonds, Switzerland 42% 42%Ebel boutique Crans SA Crans-sur-Sierre, Switzerland 42% 42%SI de l’immeuble rue de la Paix 101 La Chaux-de-Fonds, Switzerland 42% 42%LVMH W&J Germany GmbH Munich, Germany 42% 42%Chaumet International SA Paris, France 42% 42%Chaumet London Ltd. London, United Kingdom 42% 42%Chaumet Horlogerie SA Bienne, Switzerland 42% 42%Chaumet Monte-Carlo SAM Monte Carlo, Monaco 42% 42%Chaumet Korea Chusik Hoesa Seoul, South Korea 42% 22%Zenith International SA Le Locle, Switzerland 42% 42%Zenith Time Co Ltd. Manchester, United Kingdom 42% 42%LVMH W&J Italy SpA Milan, Italy 42% 42%Omas Srl Bologna, Italy 42% 42%Delano SA La Chaux-de-Fonds, Switzerland 42% 42%MMO Instruments de Précision SA Meyrin, Switzerland 42% 42%


Watches and Jewelry (continued)

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PLD Private Label Development SA La Chaux-de-Fonds, Switzerland 42% 42%Fred Paris SA Paris, France 42% 42%SAM Joaillerie de Monaco Monte Carlo, Monaco 42% 42%Fred Genève SA Geneva, Switzerland 42% 42%Fred Joaillier, Inc. Beverly Hills (California), U.S.A.(*) 42% 42%Fred Londres Ltd. London, United Kingdom 42% 42%Benedom France SARL Paris, France 42% 42%

Selective RetailingSephora SA Boulogne Billancourt, France 42% 42%Sephora France SA Saran, France 42% 42%Plus Beau Moins Cher SARL Levallois Perret, France 42% 32%Sephora Luxembourg SARL Luxembourg, Luxembourg 42% 42%Sephora España Perfumerias SL Madrid, Spain 42% 42%Sephora Italia SpA Milan, Italy 42% 42%Sephora Portugal Perfumeria Lda Lisbon, Portugal 42% 42%Sephora Pologne S.p.z.o.o. Warsaw, Poland 42% 32%Sephora Deutschland GmbH Bad Homburg, Germany 42% 42%Sephora UK London, United Kingdom 42% 42%Clab Srl Milan, Italy 42% 42%Sephora Marinopoulos SA Athens, Greece 42% 21%Beauty Shop Romania SA Bucharest, Romania 42% 21%Spring Time Cosmetics SA Athens, Greece 42% 11%Sephora Tchéquie SRO Prague, Czech Republic 42% 42%Kanel SA Athens, Greece 42% 21%Sephora Monaco SAM Monaco 42% 42%Sephora US LLC Delaware, U.S.A. 42% 42%LVMH Selective Distribution Group LLC San Francisco (California), U.S.A. 42% 42%Magasins de la Samaritaine SA Paris, France 42% 24%DFS Holdings Limited Hamilton, Bermuda, U.S.A. 42% 26%DFS Australia Pty. Limited Sydney, Australia 42% 26%DFS Australia Superannuation Pty Ltd. Sydney, Australia 42% 26%DFS New Caledonia Sarl Nouméa, New Caledonia 42% 26%DFS Group Limited Hamilton, Bermuda, U.S.A. 42% 26%DFS European Logistics Limited Hamilton, Bermuda, U.S.A. 42% 26%DFS Saipan Limited Saipan, Marianas Islands 42% 26%Kinkaï Saipan L.P. Saipan, Marianas Islands 42% 26%Commonwealth Investment Company, Inc. Saipan, Marianas Islands 41% 25%Duty Free Shoppers Hong Kong Limited Kowloon, Hong Kong, China 42% 26%DFS China Partners Limited Kowloon, Hong Kong, China 42% 26%


Watches and Jewelry (continued)


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DFS New Zealand Limited Auckland, New Zealand 42% 26%Gateshire Marketing Sdn Bhd. Kuala Lumpur, Malaysia 42% 26%DFS Merchandising Limited Netherlands Antilles 42% 26%DFS Korea Limited Seoul, South Korea 42% 26%DFS Seoul Limited Seoul, South Korea 42% 26%DFS Okinawa KK Okinawa, Japan 42% 26%DFS Palau Limited Koror, Palau 42% 26%DFS Singapore (Pte) Limited Singapore 42% 26%DFS Trading Singapore (Pte) Limited Singapore 42% 26%DFS Venture Singapore (Pte) Limited Singapore 42% 26%DFS Taiwan Limited Taipei, Taiwan 42% 26%DFS Galleria Taiwan Limited Taipei, Taiwan 42% 26%Tou You Duty Free Shop Co. Ltd. Taipei, Taiwan 42% 26%Duty Free Shoppers Macao Limited Hong Kong, China 19% 12%DFS Macau Limited Hong Kong, China 21% 13%Hong Kong International BoutiquePartners Hong Kong, China 21% 13%DFS Sdn. Bhd. Malaysia 42% 26%Singapore International BoutiquePartners Singapore 21% 13%JAL/DFS Duty Free Shoppers KK Chiba, Japan 17% 11%TRS New Zealand Limited Auckland, New Zealand 19% 12%Travel Retail Shops Pty Limited Australia 19% 12%DFS Group L.P. San Francisco (California), U.S.A. 42% 26%JFK Terminal 4 Joint Venture 2001 New York, U.S.A. 34% 21%LAX Duty Free Joint Venture 2000 Los Angeles (California), U.S.A. 33% 20%Royal Hawaiian Insurance Company Ltd Hawaii, U.S.A. 42% 26%DFS Waters. Dallas (Texas), U.S.A. 29% 18%Hawaii International Boutique Partners Honolulu, Hawaii, U.S.A. 21% 13%TRS Hawaii LLC Honolulu, Hawaii, U.S.A. 19% 12%TRS Saipan Garapan, Saipan MP 19% 12%TRS Guam Tumon, Guam 19% 12%DFS Guam LP Guam NA 26%DFS Liquor Retailing Limited Delaware, U.S.A. NA 26%Twenty Seven - Twenty Eight Corp. Delaware, U.S.A. NA 26%Le Bon Marché SA Paris, France 42% 42%SEGEP SNC Paris, France 42% 42%Franck & Fils SA Paris, France 42% 42%Balthazar SNC Paris, France 42% 42%Tumon Entertainment LLC Tamuring, Guam 42% 42%Comete Guam Inc. Tamuring, Guam 42% 42%Tumon Games LLC Tamuring, Guam 42% 42%


Selective Retailing (continued)

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Tumon Aquarium LLC Tamuring, Guam 42% 42%Comete Saipan Inc. Saipan NMI 42% 42%Cruise Line Holdings Co Delaware, U.S.A. 42% 42%International Cruise Shop Cayman Islands 42% 42%Starboard Holdings Ltd Delaware, U.S.A. 42% 42%Cruise Management International Inc. Miami (Florida), U.S.A. 42% 42%On-Board Media Inc. Miami (Florida), U.S.A. 42% 42%Starboard Cruise Services Inc. Miami (Florida), U.S.A. 42% 42%Fort Lauderdale Partnership Ft Lauderdale, U.S.A. 32% 32%Miami Airport Duty-Free Joint Venture Miami (Florida), U.S.A. 28% 28%Sephora.com Inc. San Francisco (California), U.S.A. 42% 42%

Other activitiesDI Group SA Paris, France 42% 42%DI Services SAS Paris, France 42% 42%Imprimerie Desfossés SARL Paris, France 42% 42%Tribune Desfossés SAS Paris, France 42% 42%Radio Classique SAS Paris, France 42% 42%Les Editions Classiques Affaires SARL Paris, France 42% 42%System TV SA Boulogne Billancourt, France 42% 42%DI SAS Paris, France 42% 42%SFPA SARL (Connaissance des Arts) Paris, France 42% 42%D2I SAS Paris, France 42% 42%Investir Publications SAS Paris, France 42% 42%Investir Formation SARL Paris, France 42% 42%Compo Finance SARL Paris, France 42% 42%SID Presse SARL Paris, France 42% 42%SID Développement SAS Paris, France 42% 42%SID Editions SAS Paris, France 42% 42%SID Magazine SA Paris, France 42% 42%SOFPA SA Lausanne, Switzerland 42% 42%Bonhams Brooks PS & N Limited London, United Kingdom 21% 21%De Beers LV Ltd (2) London, United Kingdom 21% 21%SCI du 30 de l’avenue Hoche Boulogne Billancourt, France 42% 41%Société Civile Jacques Gaillard Boulogne Billancourt, France 42% 42%Ufipar SAS Boulogne Billancourt, France 42% 42%L Capital Management SAS Boulogne Billancourt, France 42% 42%Sofidiv SAS Boulogne Billancourt, France 42% 42%GIE LVMH Services Boulogne Billancourt, France 42% 36%Moët Hennessy SNC Boulogne Billancourt, France 42% 28%LVMH Fashion Group SA Paris, France 42% 42%


Selective Retailing (continued)


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Moët Hennessy International SA Boulogne Billancourt, France 42% 28%Creare SA Luxembourg, Luxembourg 42% 36%Delphine SAS Boulogne Billancourt, France 42% 42%LVMH Finance SA Boulogne Billancourt, France 42% 42%Primae SA Boulogne Billancourt, France 42% 42%Eutrope SAS Boulogne Billancourt, France 42% 42%Flavius Investissements SA Boulogne Billancourt, France 42% 42%LVMH Art & Auction Group SA Boulogne Billancourt, France 42% 42%Cie Financière Laflachère SA Boulogne Billancourt, France 42% 42%LV Capital SA Boulogne Billancourt, France 42% 42%Moët Hennessy Inc. New York, U.S.A.(*) 42% 28%One East 57th Street LLC New York, U.S.A. (*) 42% 42%LVMH Moët Hennessy Louis Vuitton Inc. New York, U.S.A. (*) 42% 42%598 Madison Leasing Corp. New York, U.S.A. (*) 42% 42%1896 Corp. New York, U.S.A. (*) 42% 42%LVMH Participations BV Naarden, Netherlands 42% 42%LVMH BV Naarden, Netherlands 42% 42%Louis Vuitton Prada BV Amsterdam, Netherlands 42% 42%Sofidiv UK Ltd London, United Kingdom 42% 42%LVMH KK Tokyo, Japan 42% 42%Osaka Fudosan Company Limited Tokyo, Japan 42% 42%LVMH Asia Pacific Ltd Hong Kong, China 42% 42%LVMH Moët Hennessy Louis Vuitton SA Paris, France 42% 42%

(*) The address listed is the administrative office of the companies; corporate registration for the company isin the State of Delaware.


Other activities (continued)

REPORT OF THE STATUTORY AUDITORS FOR THE YEARENDED DECEMBER 31, 2003

MAZARS & GUERARD ERNST & YOUNG AUDITLe Vinci Faubourg de l'Arche

4, allée de l’Arche 11, Allée de l'Arche92075 Paris La Défense 92400 Courbevoie

Statutory Auditors

Member of Compagnie Régionale Member of Compagnie Régionalede Paris de Paris

To the shareholders of the Christian Dior Company,

Ladies and Gentlemen:

In carrying out the audit assigned to us by your general shareholders’ meeting, we reviewedthe consolidated financial statements of the Christian Dior Company for the fiscal year endedDecember 31, 2003, as they appear in this report.

The consolidated financial statements were drawn up by the Board of Directors. Our respon-sibility is to express an opinion on these financial statements based on our audits.

I. Opinion on the consolidated financial statements

We conducted our audits in accordance with auditing standards generally accepted in France.Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includesexamining, by sampling, evidence supporting the amounts and disclosures in the financial sta-tements. It also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the assets, the financial position and the results of all the companies conso-lidated into Christian Dior.

II - Justification of our assessments

Pursuant to the provisions of Article L. 225-235 of the French Commercial Code governingthe justification of our assessment, as introduced by the Financial Security Act of August1, 2003 and applicable for the first time to that financial year, we provide you with the fol-lowing information:

Brands and goodwill are valued using the method described in note 3 to the financial sta-tements. We assessed the legitimacy of the methodology used, which was based on a set ofestimates, and reviewed the data and assumptions used by the Group and its advisors t makethese valuations. We assessed the reasonableness of these estimates on these bases.

The assessments we made are part of our audit of the consolidated financial statements intheir entirety and, therefore, contributed to the formation of our opinion without reserva-tion as expressed in the first part of this report.

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III. Specific verification

Furthermore, we have also verified the information relating to the Group provided in the mana-gement report, in accordance with accounting principles generally accepted in France.

We have no observation to make as to their sincerity or consistency with the consolidated finan-cial statements.

Paris, April 20, 2004

The Statutory Auditors

MAZARS & GUERARD ERNST & YOUNG AUDITDenis Grison Christian Mouillon

128

REPORT OF THE AUDITORS PREPARED PURSUANT TO THE LAST SECTIONOF ARTICLE L. 225-235 OF THE FRENCH COMMERCIAL CODE CONCERNING

THE REPORT OF THE CHAIRMAN OF THE BOARD OF CHRISTIAN DIORCONCERNING THE INTERNAL CONTROL PROCEDURES IMPLEMENTED

FOR THE PREPARATION AND TREATMENT OF ACCOUNTING AND FINANCIAL INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2003

MAZARS & GUERARD ERNST & YOUNG AUDITLe Vinci Faubourg de l'Arche

4, allée de l’Arche 11, Allée de l'Arche92075 Paris La Défense 92400 Courbevoie

Statutory Auditors

Member of Compagnie Régionale Member of Compagnie Régionale de Paris de Paris

To the shareholders of the Christian Dior Company,

Ladies and Gentlemen,

In our capacity as auditors of the Christian Dior company, and pursuant to the provisions ofthe last section of Article L. 225-235 of the French Commercial Code, we are presenting ourreport on the report prepared by the Chairman of your Company pursuant to the provisionsof Article L. 225-37 of the Commercial Code for the year ended December 31, 2003.

Under the responsibility of the Board of Directors, it is the responsibility of Management todefine and implement adequate and effective internal control procedures. It is the responsibilityof the Chairman to report, primarily, on the conditions for the preparation and organizationof the work of the Board of Directors and the internal control procedures established withinthe Company.

It is our responsibility to inform you of our comments concerning the information provided inthe Chairman's report concerning the internal control procedures for the preparation andstatement of the accounting and financial information.

We have performed our work in accordance with generally accepted professional standardsin France. Those standards require that we conduct our verification in order to assess the fairpresentation of the information provided in the Chairman's report concerning the internalcontrol procedures for the preparation and statement of the accounting and financialinformation.

Those efforts consisted in:

- Reviewing the objectives and the general organization of the internal control, as well asthe internal control procedures for the preparation and statement of the accounting andfinancial information presented in the Chairman's report;

- Review the work underlying all information as provided in the report.

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On the basis of this work, we have no comment to make on the information providedconcerning the procedures for the preparation and statement of the accounting and financialinformation contained in the report of the Chairman of the Board, prepared pursuant to theprovisions of the final section of Article L. 225-37 of the Commercial Code.

Paris, April 20, 2004

The Statutory Auditors

MAZARS & GUERARD ERNST & YOUNG AUDITDenis Grison Christian Mouillon

RAPP GESTION 3-56 - Dior Finance60 C ONSOLIDATEDB ALANCE S HEET ATD ECEMBER 31 (in millions of...

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