onmay 11, 2006 - Christian Dior Finance

Transcription

COMBINED ORDINARY AND EXTRAORDINARY
SHAREHOLDERS’ MEETING
ON MAY 11, 2006
Chairman’s Message
2
Managing and Auditing Bodies
4
Simplified Organization Chart
5
Financial Highlights
6
Management Report of the Board of Directors
8
Report of the Chairman of the Board to the Shareholders’ Meeting
59
Consolidated Financial Statements
67
• Highlights
69
• Balance Sheet
70
• Income Statement
71
• Statement of Changes in Shareholders’ Equity
72
• Cash Flow Statement
73
• Notes to the Financial Statements
74
• Statutory Auditors’ Report
145
1
CHAIRMAN’S MESSAGE
I am particularly pleased to speak to you, our loyal shareholders, at a time when the
Christian Dior Group is breaking record after record. Year after year, you have
demonstrated your support for the Group’s development policy and your vision as well as
your patience are now being rewarded. The market price soared 50% in 2005 and is again
rising at the beginning of 2006, as I write these lines.
What is being recognized, I believe, is the quality of our business model, which delivers
steady growth in our results. In 2005, the Christian Dior Group recorded the highest
revenue and earnings in its history and we are projecting very substantial growth in
profitability again in 2006.
In 2005, the hundredth anniversary celebration of the birth of Christian Dior was an
extraordinary success, demonstrating the unique brilliance of the brand. Both its rich history
and tradition, combined with its dynamic appeal driven by the talents of our three designers,
are the forces driving this unparalleled interest.
Backed by its traditional values, which are only enhanced by its contemporary image, the
Christian Dior brand is attracting new customers and becoming a leader worldwide,
including the newest consumer countries like China and India. In mainland China, we have
developed a network of twenty-five boutiques and are present in the best locations in most of
the major cities. The company recorded a very significant percentage of its revenue in Asia,
in a context of rapid growth and profitable expansion. This success has deep roots and is
anchored in all our businesses, whether it is in the traditional segments like leather goods
and ready-to-wear, or the newest ventures like menswear or jewelry. We recently opened a
flagship boutique for men in Shanghai and the new jewelry collections, perceived as both
innovative and exquisite by customers, have been very successful. The new store opened
early in 2006 in New Delhi, India is another demonstration that Christian Dior never rests
on its laurels.
In addition to India, growth will continue in 2006 and will focus on regions with strong
potential.
The vitality of the brand can also be seen in all the product lines designed and developed by
our designers. Ready-to-wear, leather goods and women’s footwear continue to record rapid
2
growth. Menswear continues to confirm its initial success, backed by an expanded line of
new products and the opening of dedicated and specific points of sale, like the store opened
in Shanghai earlier this year. Finally, our jewelry has earned an unqualified success.
The creativity of our teams and the controlled expansion of our network drove the steady
growth in revenue for Christian Dior in 2005, particularly in Asia, the United States and
Europe.
The performance of LVMH in 2005 met our expectations. Our revenue rose in all
geographic regions. While the United States and Asia were the primary engines of that
growth, Europe also contributed, despite a sluggish economic environment. In addition, all
our business groups increased their profit from recurring operations, and the Group’s cash
flow improved again.
Last year was yet another demonstration of the power of our leading brands, which are
profit models and the foundation of our success and again gained market share because of
their exceptionally dynamic innovations.
2005 was also an illustration of our ability to gradually move the brands that carry our longterm ambitions toward the status of star brands. With the Group’s support, these brands are
following their road map, step by step, and continue to confirm their potential. Fendi, the
Italian star, is one of the companies that has made the most progress. Justifying our strong
hopes and the investments we have made, it is highly attractive today, its revenue is growing
rapidly and its results have improved significantly. All the elements are in place to accelerate
its growth.
In 2006, we will continue to reap the benefits of a number of developments last year and
pursue our strategy focused on the growth of our flagship brands. We will maintain our
efforts to develop the brands that represent our vectors for growth and we are accelerating
the development of the brands that show the greatest potential.
Despite the monetary uncertainties, the economic context is buoyant because of the growth
in the world’s major economies and rapid expansion in the emerging countries. We will
strengthen the presence of our brands in the major markets and continue to expand in new
territories: the Asian countries that hold significant growth potential for luxury products,
Russia, and the most advanced countries of Central and Eastern Europe with their
developing economies…
Innovation, the primary engine of our success, will continue to hold pride of place. Louis
Vuitton will launch new and innovative leather goods. Among other initiatives, Dior plans to
launch major skin care and make-up products, and Guerlain and Givenchy will introduce a
new women’s perfume. TAG Heuer and Zenith will accelerate their innovations, and Dior
Montres will capitalize on the huge success of its new Christal line, which will be expanded
with new models.
With confidence in our prospects, we have again in 2006 set an objective for very strong
growth in our results.
3
MANAGING AND AUDITING BODIES
BOARD OF DIRECTORS
PERFORMANCE
AUDIT COMMITTEE
Bernard ARNAULT
Chairman
Eric GUERLAIN
Chairman
Eric GUERLAIN (1)(2)
Vice-Chairman
Pierre GODE
Christian de LABRIFFE
Sidney TOLEDANO
Chief Executive Officer
Antoine BERNHEIM (1)(2)
Denis DALIBOT (2)
Alessandro VALLARINO GANCIA (3)
Pierre GODE
Christian de LABRIFFE (2)
Jaime de MARICHALAR y SÁENZ de
TEJADA (3)
Raymond WIBAUX (1)
NOMINATING AND
COMPENSATION COMMITTEE
Antoine BERNHEIM
Chairman
Pierre GODE
Eric GUERLAIN
Raymond WIBAUX
Board Members
EXECUTIVE MANAGEMENT
Sidney TOLEDANO
Chief Executive Officer
STATUTORY AUDITORS
ERNST & YOUNG AUDIT
represented by Christian MOUILLON
MAZARS & GUERARD
represented by Denis GRISON
(1)
(2)
(3)
Independent Board Member.
Reelection proposed at the General Meeting on May 11, 2006.
Election proposed at the General Meeting on May 11, 2006.
4
SIMPLIFIED ORGANIZATION CHART
O N D E C E M B E R 3 1, 2 0 0 5
* Listed company
5
FINANCIAL HIGHLIGHTS
Consolidated revenue
by business group
(in millions of euros)
5%
5%
Christian Dior Couture
663
17%
18%
Wines and Spirits
2644
Fashion and Leather
Goods
4812
33%
33%
Consolidated revenue by
geographical area of destination
16%
4%
15%
Perfumes and Cosmetics
2285
4%
Watches and Jewelry
573
16%
16%
Selective Retailing
3648
25%
25%
2004
2005
France
2282
Europe (excl. France)
2954
20%
20%
Other Activities
and Eliminations
(69)
United States
3805
26%
26%
15%
14%
16%
17%
7%
7%
2004
2005
Consolidated revenue
by currency
Euro
4355
32%
Asia (excl. Japan)
2412
30%
US dollar
4561
31%
31%
Yen
2152
15%
15%
4%
3%
5%
3%
15%
16%
Pound sterling
666
Hong Kong dollar
508
Other currencies
2314
2004
Japan
2111
2005
6
Other markets
992
FINANCIAL HIGHLIGHTS
2005
2004(1)
Revenue by business group
Wines and Spirits
Fashion and Leather Goods
Watches and Jewelry
Selective Retailing
Other activities and eliminations
663
2,644
4,812
2,285
573
3,648
(69)
Total
595
2,259
4,366
2,128
493
3,276
(57)
14,556
13,060
84%
84%
2,791
2,413
618
549
3.48
3.45
1.16
3.09
3.07
0.97
Total balance sheet
31,959
29,365
Average workforce
57,778
55,121
Percentage earned outside France
Profit from recurring operations(1)
Net income – Group share
(in euros)
Net income per share
Net income – Group share after dilution
Dividend per share(2)
(1) Following restatement under IFRS of data previously published under French GAAP.
(2) For financial year 2005, the amount proposed at the General Meeting on May 11, 2006.
7
MANAGEMENT REPORT
OF THE BOARD OF DIRECTORS
Ladies and Gentlemen,
This report summarizes the significant events affecting the life of the Christian Dior Group
in 2005.
We shall review in order the consolidated results, the situation by business group and your
Company’s performance.
I. CONSOLIDATED RESULTS
In 2005, the Christian Dior Group recorded the highest level of revenue and profits in its
history. All geographic areas in which the Group is present made progress, with a notable
acceleration of growth in the United States, Asia and Europe. In this context, net income
made strong progress and grew faster than revenue.
Net revenue reached 14,556 million euros, up 11%; changes in the scope of consolidation
and exchange rate variations had no impact on this growth.
The Group’s profit from recurring operations was 2,791 million euros, up 16% over 2004.
This growth, much higher than growth in revenue, was due to the increase in the gross
margin and control of operating costs. The ratio of profit from recurring operations to
revenue reached 19%, up one point over 2004.
After accounting for other operating income and expenses, operating income was
2,565 million euros, which represents growth of 16%. This includes expenses of 226 million
euros, including a provision of 179 million euros for “the La Samaritaine department store”,
which was closed to the public for security reasons.
Consolidated net income was 1,654 million euros, compared with 1,443 million euros in
2004, with Group share at 618 and 549 million euros respectively. This very positive growth
reflects the growth of the above-mentioned operating income and the decrease in financial
expenses, partially offset by an increase in tax expenses.
8
The main financial items were the following:
Revenue
Profit from recurring operations
Operating income
Net income
Group share
2005
2004
14,556
2,791
2,565
1,654
618
13,060
2,413
2,210
1,443
549
Each of these business groups recorded positive growth.
• Organic growth of Christian Dior Couture revenue was 11%, identical at constant
currency. This performance resulted from the upward trend of sources of growth, for
example Dior Homme, Shoes and Jewelry. All geographic regions contributed to this growth,
notably Asia.
• Organic growth in revenue of the Wines and Spirits group, on a constant structural and
exchange rate basis, was 11%, and 17% in published data due to 4% and 9% growth in
Champagne and Cognac volumes respectively. In 2005, the business group added
Glenmorangie. The strongest growth in revenue was seen in Japan for Champagne, and the
Asian countries, especially Continental China, for Cognac.
• Organic revenue growth of the Fashion and Leather Goods group was 12%, and 10% in
published data. Louis Vuitton recorded double-digit organic revenue growth. The year was
also marked by very strong growth in Fendi revenue. For all brands of this business group,
the most notable performances were recorded in Asia, Europe and the United States.
• Revenue of the Perfumes and Cosmetics group saw organic growth of 7%, the same as the
published rate. All brands of the business group have growing revenue, especially Christian
Dior Perfumes, due to the success of new perfumes Miss Dior Chérie and Dior Homme. All
brands of beauty and cosmetics product lines also made noticeable progress. The Asian
countries showed the most significant growth.
• Organic growth in revenue of the Watches and Jewelry group reached 17%, and 16% in
published data. The strongest growth was in the United States where TAG Heuer and
Zenith had the best performances, while all Group brands showed excellent performances in
Asia.
• The organic growth in revenue of Selective Distribution was 13%, and 12% in published
data. The closing, for security reasons, of “the La Samaritaine department store” in Paris had
a negative effect of 2 points on revenue growth, whereas the effect of currencies was up
1 point.
9
Net revenue
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other activities, eliminations and restatements
Total
2005
2004
663
2,644
4,812
2,285
573
3,648
(69)
595
2,259
4,366
2,128
493
3,276
(57)
14,556
13,060
Profit from recurring
operations
2005
2004
53
869
1,467
173
38
347
(156)
51
813
1,309
150
7
238
(155)
2,791
2,413
On first consolidation of LVMH in 1988, all brands then owned by LVMH were revalued in
the accounts of the Christian Dior Group.
In the Christian Dior consolidated financial statements, LVMH’s accounts are restated to
account for valuation differences in appraisal of brands recorded prior to 1988 in the
consolidated accounts of each of these companies.
Consequently, the net results of LVMH were consolidated for 1,670 million euros compared
with 1,668 million euros before restatement, and are included in the net income – Group
share of Christian Dior for 636 million euros (identical amount before restatement). It
should also be noted that, since the assets sold by LVMH have a consolidation value that is
greater in Christian Dior’s books than the value recorded at LVMH, the consolidated results
following their sale are written off by this difference.
Capital investment
The net balance of investment operations (acquisitions and disposals) resulted in a cash
outflow of 867 million euros. This includes, on the one hand, the operating investments
(acquisitions of tangible and intangible assets) for 755 million euros, and on the other hand,
non-recurring capital expenditures related to restructuring and acquisitions, including the
acquisition of Glenmorangie, and the purchase of minority interests of 30% in Millennium
thus bringing its holding to 100%.
Research and Development
Research and development costs recorded during the accounting period were 38 million
euros in 2005 (same amount in 2004). These amounts cover costs incurred in scientific
research and new product development.
Debt
At December 31, 2005, net consolidated debt was 5,706 million euros compared with
shareholders’ equity of 11,868 million. The net debt ratio decreased from 66% in 2004 to
48% in 2005, which is lower than the target ratio of 50%.
The improved financial structure explains, on the one hand, the increase in shareholders’
equity from 10,065 to 11,868 million euros and, on the other hand, the net debt decrease
from 6,646 to 5,706 million euros.
10
The increase of 1,803 million euros in shareholders’ equity (including minority interests)
primarily results from the net profit for the financial year of 1,654 million euros, less
dividends paid of 543 million euros and currency translation differences of 596 million euros.
The decrease in net financial debt by 940 million euros primarily reflects an operating cash
flow of 2,010 million euros, less net capital investment during the year of 867 million euros
and dividends paid of 543 million euros.
Due to its financial structure and the geographic spread of its activities, the Group is subject,
in particular, to the risk of interest rate increases and the decline of certain currencies in
relation to the euro. These risks are actively managed, on the one hand, by the establishment
of interest rate swaps and the purchase of caps to hedge the risk of interest rate hikes and,
on the other hand, by futures and options to hedge exchange risks.
The Group has signed covenants to meet certain financial ratios. These refer, for certain
contracts, to the coverage of debt by the portfolio of assets and, for other contracts, the
coverage of debt by the year’s financial flows. Nonetheless, the Group is more and more
frequently not required to make commitments on financial ratios.
Consolidated Cash Flow Statement
The consolidated cash flow statement, shown in the consolidated financial statements,
provides details on the main financial cash flows during 2005.
Cash flow from operations before changes in working capital increased to 3,185 million
euros compared with 2,789 million for the previous year, an increase of 14%.
Net cash from operations after interest and income tax amounted to 2,297 million euros
compared with 2,122 million euros in 2004, reflecting an increase of 8%.
Income tax paid was 620 million euros in 2005 compared with 401 million in 2004,
essentially due to a non-recurring advance payment of income tax on French companies at
the end of 2005.
The working capital requirement increased by 287 million euros. In particular, the change in
inventories generated cash requirements of 281 million euros, primarily as a result of
increased activity and the corresponding restocking. Changes in customer receivables during
the year generated requirements of 77 million euros, whereas changes in trade accounts
brought 18 million euros.
In total, net cash from operating activities was largely positive, at 2,010 million euros.
The net balance of investment and disposal operations, both operational and financial,
resulted in a cash outflow of 867 million euros.
The Group’s operating investments, net of disposals, resulted in a decrease in cash flows of
727 million euros. Their increase reflects the strong performance and growth of the Group
and its flagship brands such as Louis Vuitton, Christian Dior Couture, Christian Dior
Perfumes, Fendi and Sephora.
Non-current available for sale financial assets represented a net of 400 million euros inflow
over the year. Changes in the scope of consolidation came to 604 million euros. This amount
corresponds essentially to the impact of the acquisition of 100% of Glenmorangie and the
remaining 30% of Millennium, respectively for 438 and 92 million euros.
The change in cash flow from transactions relating to equity represents an expenditure of
510 million euros.
11
The dividends paid by Christian Dior S.A. in 2005, not including treasury shares, reached
172 million euros, of which 115 million were distributed in May as the final dividend for
2004 and 57 million paid in December as the interim dividend for 2005. In addition, the
minority shareholders of consolidated subsidiaries received dividends totaling 371 million
euros.
Surplus cash after all operating, investing, and capital activities thus climbed to 633 million
euros.
Some borrowings and financial debt were redeemed for an amount of 1,621 million euros,
significantly greater than new borrowings and financial debt.
Issues and subscriptions to borrowings and financial debt enabled 1,267 million euros to be
raised. In June 2005, the Group raised a nominal amount of 600 million euros through a
public bond issue, with a maturity of 7 years, and on acquisition of Glenmorangie, the Group
issued Loan Notes, of which 60 million euros remained outstanding at December 31, 2005.
Moreover, the Group continued its financing in Japan through private holdings made as
part of its Euro Medium Term Notes program. On November 21, 2005, Christian Dior S.A.
completed restructuring of a syndicated loan of 500 million euros. The maturity, initially set
for November 15, 2009, was extended to November 21, 2010, with optional renewal every
year, for the subsequent two years.
Net debt was decreased by reducing long term debt, by increasing cash and cash
equivalents, and by the reduction by 190 million euros from the Group’s commercial paper
program.
The net cash flow balance at the end of 2005 was 988 million euros.
Workforce
The Group’s workforce at December 31, 2005 had increased by 4%, mainly due to the
inclusion of newly acquired companies, but also due to organic growth in the most buoyant
business groups.
The dynamism of all the economic segments enabled the Group to create more jobs than it
lost through the disposal of entities.
The average workforce of the Christian Dior Group was as follows:
2005
2004
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other activities
2,595
5,134
18,071
13,628
1,844
21,544
867
2,304
4,697
18,326
13,488
1,777
20,045
877
Total
63,683
61,514
12
II. RESULTS BY BUSINESS GROUP
The results by business group shown below are those of Christian Dior Couture and those
published by LVMH, which are not therefore restated.
1. Christian Dior Couture
A – Highlights
2005 was marked by the following factors:
• Continued expansion of revenue and earnings
Christian Dior Couture’s revenue grew by 11% to 663 million euros, at current exchange
rates. This growth follows a strong upward trend in revenue in 2004 that was already at
14%.
Operating income increased by 6% and reached 8% of revenue.
• Growth balanced by different product lines
2005 confirmed the continued development of priority business activities for future growth
of the brand, especially Dior Homme that returned vigorous success over its entire product
range, and also Jewelry and Shoes that continue to record strong progress.
The end of the contract license and the assumption of direct management of the Bijoux
fantaisie activity, with the May addition of the production facility in Pforzheim (Germany)
were accompanied by the implementation of a development strategy that bore fruit in 2005.
Leather Goods (launching of Détective and Dior Flight lines) as well as the women’s
Ready-to-wear (success of the Veste Dior) also contributed to growth with the development of
top-of-the-range products that were very well received.
• Continued controlled growth of the network
The network had 194 points of sale at December 31, 2005, up from 184 in 2004, an increase
of 10 points of sale.
➤
Asia was a major axis of expansion with 3 new points of sale. Mainland China’s
contribution to the development of the area was major with a revenue growth of over
60%.
➤
Japan opened 3 new points of sale including a flagship boutique in Osaka.
➤
In the United States, the brand opened a new flagship boutique at Wynn Las
Vegas. The 8 Neiman Marcus points of sale, previously operated directly by the
brand, were converted to points of sale managed by the department store. Dior
enlarged its geographic presence on the American continent with an additional
2 openings in Canada, 2 in Mexico and 1 in Brazil.
➤
In Europe, a Dior Homme boutique was inaugurated in Berlin.
B – Consolidated Results of the Couture Business
Revenue from the Couture business, at 663 million euros, grew by 11% compared with
2004. At a constant exchange rate, revenue would be 662 million euros, or an 11% increase
compared with the previous year.
Operating income recorded a profit of 53.4 million euros, growth of 6% compared with the
previous year. This growth carried the impact of investments in the distribution network.
13
The financial result is an expense of 8.6 million euros, an increase of 48% over 2004. This
additional expense essentially represents the cost of financing the investments made to
enlarge the network.
The tax expense was 19.1 million euros, an increase of 18% over 2004, a year that benefited
from a reduction in the tax charge.
All the above factors contributed to net income – Group share of 23.3 million euros, up
from 25.4 million euros in 2004. The share attributable to third parties was 2.5 million euros.
C – Analysis of the development by business sector
% at
constant
rate
2005
2004
%
License royalties
Wholesale revenue
Retail revenue and other
21.0
126.6
515.6
21.4
116.1
457.7
(2)
9
13
(2)
9
12
Total
663.2
595.2
11
11
% at
constant
rate
LICENSES
Royalties from licenses by geographic region were as follows:
2005
2004
%
Europe
North America
Other
17.6
2.5
0.9
19.2
1.9
0.3
(8)
30
245
(8)
30
245
Total
21.0
21.4
(2)
(2)
Christian Dior Couture licenses were 2% lower compared with 2004 due to the termination
of the licensed concession for the Bijoux fantaisie business, which has been taken into direct
management. Excluding this activity, other licenses are up 15%.
Spectacles, in particular, represent a noteworthy area of expansion with the growth of Dior
Homme brand spectacles and because of the enlarged product line adapted to market
demand.
Watches also strongly contributed to the growth with the launch of the Christal watch.
WHOLESALE REVENUE
Wholesale revenue expanded by 9% in 2005. Shoes, Jewelry, Accessories and Homme
products, in particular, contributed to this growth.
14
RETAIL REVENUE
2005
2004
%
% at
constant
rate
Europe
North America
Asia Pacific
Other
211.6
92.0
207.3
4.7
201.4
81.3
172.2
2.8
5
13
20
71
5
13
20
47
Total
515.6
457.7
13
12
Dior Homme pursued its impressive growth with the opening of points of sale specific to the
Man, for example in China where all products have been quite successful. In addition, the
product line has been enlarged to include new accessories in leather goods, shoes and home
products.
The takeover of the Bijoux fantaisie license by Christian Dior Couture in May 2005 enabled a
new product development strategy and direct management of the distribution network
which will be continued in 2006.
Dior Jewelry continued to enlarge the brand’s network of existing boutiques in 2005,
benefiting from the accessibility and profile of Dior products in prestigious locations. It
offered a range of products balanced between quality manufactured jewelry and mass
commercial successes (for example, Gourmette and the “Oui” ring).
The other product lines also contributed to growth. Women’s Ready-to-wear continued
expanding, notably due to the success of the Veste Dior and the development of trench coats
and overcoats. Handbag sales were boosted this year by the launch of several successful
product lines: Dior Flowers, Dior Flight, Détective, Diorissimo, and the perennial lines such as
Lady Dior and Saddle.
In the retail network, all geographic regions contributed to growth, in particular, Asia and
the United States.
Major investments were made in Japan and the United States, especially with the opening
of key new boutiques (Osaka Shinsaibashi, Washington, Wynn Las Vegas, etc.).
D – Outlook
In 2006, growth in revenue is expected to continue at a steady rate.
Profitability should also improve significantly, from greater productivity in the revenue
network. Controlled expansion and disciplined management of margins and costs should
contribute to the upward trend of operational profitability.
The network should continue to extend to new markets. Dior is present in India where a
first boutique in its name should open its doors in the first quarter, and in the Middle East
where, following the success of the Dubai boutique, a new boutique will open in Abu Dhabi.
The network will continue to be developed in the main cities in Continental China.
15
2. Wines and Spirits
In 2005, the Wines and Spirits group recorded organic growth of 11% in revenue which
reached 2,644 million euros, and its profit from recurring operations rose to 869 million
euros, up 7% in an unfavorable monetary context.
Overall revenue of Champagne and Wines recorded organic growth of 10%.
Moët & Chandon confirmed its dynamism and further secured its rank as world leader. The
brand consolidated its positions in traditional markets in Western Europe and recorded
double-digit growth in new markets such as Eastern Europe and Asia. Growth was
especially remarkable in Japan and China which, for champagne, are booming new
territories. Lively revenue of Moët Rosé, which continued to grow significantly in all
markets, also boosted the performance of Moët & Chandon.
Veuve Clicquot performed very well and was especially dynamic in the United States where
the brand is in strong demand, as well as in the United Kingdom, Italy, Australia and Japan.
The runaway success of non-vintage Veuve Clicquot Rosé, a new champagne launched in
Japan in 2004, was confirmed in 2005. It will be launched worldwide in 2006 to benefit from
the growth of a market segment that is currently the most dynamic for champagne.
Hennessy cognac confirmed its dynamism with volumes trending upwards 9%. Organic
growth in revenue of cognac and spirits came to 13%.
In the United States, the leading market for the Hennessy House remains in first place in
volume and value in the cognac category. The brand has been boosted by three growth
vectors: the increase in consumption of V.S., the pursuit of double-digit growth for
V.S.O.P., and the implementation of quality procedures that have enabled the Prestige line
to be highly successful in luxury establishments.
In Asia, 2005 was marked by exceptional growth, especially in China, a country increasingly
positioned for significant growth and that is already the largest X.O. market for Hennessy.
In Japan, where the market for dark spirits is declining, Hennessy maintained its value
strategy focused on X.O. and the Prestige line that recorded double-digit growth in volume.
Within the European countries, Russia confirmed its potential. Hennessy benefited from a
strong power of attraction and high profitability. Hennessy V.S. maintained its outstanding
market share in Ireland.
Moët Hennessy completed the acquisition of Glenmorangie plc in early 2005. This company
has three international brands of high-quality Scotch malt whisky, Glenmorangie, Glen
Moray and Ardbeg. Moët Hennessy also assumed control of operations of the company
Millennium, which will enable the international growth of the Belvedere vodka brand to be
intensified.
Outlook for 2006
In 2006, the Wines and Spirits business group will pursue its value strategy. This strategy
will continue to focus on a constant employee training program, major advertising and
promotion investments, and a sustained price policy. The focus on innovation and
strengthening of brand image will be maintained in strategic markets.
The portfolio of brands, marketed by teams with proven track-records, will help reinforce
the leader position now enjoyed by LVMH in the world of luxury wines and spirits.
16
3. Fashion and Leather Goods
In 2005, the Fashion and Leather Goods group recorded organic growth of 12% in revenue
at 4,812 million euros, and an expansion of 12% in its profit from recurring operations which
rose to 1,467 million euros. Once again it reinforced its market shares.
In 2005, Louis Vuitton again recorded double-digit organic growth in revenue. With good
performance in North America, continuous sustained growth in Europe, acceleration of
revenue in Japan and the confirmed success of its brand in Asia, especially in China, the
flagship brand of the business group continued to gain market share.
Strong revenue growth continues to be accompanied by exceptional profitability due to the
unusual attractiveness of the brand, the great quality of its products, and the strong
responsiveness of the overall organization of the company.
Louis Vuitton enlarged the size of its distribution network to 345 boutiques by the end of
2005. There were five new openings and fifty noteworthy renovations. Throughout the year,
major inaugurations took place throughout the world: Hong Kong, Beijing, Las Vegas,
Okinawa, etc. Indisputably the most remarkable was Maison Louis Vuitton on the ChampsElysées in Paris, in October 2005, the most astounding luxury boutique in the world.
Fendi finished an excellent race in 2005, the year of its 80th birthday. The Italian brand
recorded double-digit revenue growth that, combined with the strengthening of its
organization and the growth of the productivity of its stores, led to significant improvement in
profitability.
Fendi pursued the improvement of its distribution network. This work resulted in the
redesign of twenty boutiques according to the new luminous, contemporary and luxurious
concept that was adopted to express the values of the Italian brand. The celebration of its
80th birthday was marked by the greatly publicized inauguration of the Palais Fendi in Rome,
and also of a flagship boutique in New York.
Donna Karan reaped the fruit of efforts intended to improve its creations. Revenue of
accessories, products holding strong potential for brand development, showed strong
growth. Donna Karan also benefited from increased selectivity of its distribution and the
progressive implementation of a new concept of exclusive boutique, of a size better adapted
to its product lines, bringing more productivity and value to its image.
In 2005, Donna Karan recorded improved profit from recurring operations, confirming the
pertinence of its new strategy and the quality of the background work performed by its
teams since its entry in the LVMH group.
Outlook for 2006
In 2006, the Fashion and Leather Goods group’s objective is to continue increasing its
market share through a strategy of continuous innovation and by extending its distribution
network.
At its ready-to-wear fashion shows, Louis Vuitton will unveil new high-impact leather
goods: Suède, Monogram Perforé, new colors for denim, etc. The brand will continue to grow
and improve its network of boutiques. It will reinforce its international presence by
establishing operations in four new countries.
Having established solid bases for its development, Fendi will focus on growth and further
improve its profitability in 2006.
The business group’s other brands will pursue efforts dedicated to improving different
components of their growth model.
17
4. Perfumes and Cosmetics
The Perfumes and Cosmetics group recorded 7% organic growth in revenue, greater than
the market average, to which all its brands contributed. This revenue rose to 2,285 million
euros. Profit from recurring operations came to 173 million euros to post an increase of 15%.
LVMH brands are benefiting from the strong dynamic of the Asian markets. In Europe, in a
less favorable economic environment and consumer context, our flagship brands gained
market share by focusing on their top-of-the-range position. In the United States, the brands
are pursuing selective redeployment of their distribution with the first positive results, a
measure of their future qualitative growth.
Young cosmetics companies, in the development phase, are maintaining their rapid pace of
growth.
With greater than average growth within its competitive universe, Parfums Christian Dior
continues to gain market share. The brand is focusing on progress in Asia. It posted
remarkable performance in Japan where it continues showing the strongest growth among
international brands, and it experienced spectacular success in the Chinese markets. In the
United States, where it is committed to building and sustaining a more qualitative and
attractive image, it recorded strong growth within the more elite distribution on which its
strategy is now focused. In spite of generally stagnant markets in 2005, Europe also
contributed to its growth. Due to the emphasis on its status as luxury brand in the world of
Couture, through creativity and the quality of its retail presence, Dior reinforced its
leadership in France and gained market share in several European countries.
In the domain of perfume, the year was particularly marked by the success of Miss Dior
Chérie and Dior Homme. In Asia, the launch of Dior Addict 2 was extremely well-received.
Guerlain showed remarkable dynamism in 2005, prolonging the boom observed in 2004.
This growth confirms the pertinence of its strategy of promoting its historical value as a
great perfume maker. The brand continues to gain market share in strategic countries,
especially in France and in Asia where its progress is one of the most remarkable in its
competitive universe. Its growth is especially high in mainland Asia (China, Korea, Taiwan)
and the Middle East.
Thanks to its performance and efforts to improve profitability, Guerlain recorded strong
growth in its profit from recurring operations.
Outlook for 2006
The Perfumes and Cosmetics group has good prospects for growth and strengthening of its
market share in 2006.
Parfums Christian Dior will strive to accelerate the pace of its growth by capitalizing on
initiatives that contribute to reinforcing its presence as a luxury brand. This strategy will be
implemented in particular with the launch of key beauty and make-up products and by
providing special support to its flagship lines: J’Adore, Poison, Miss Dior Chérie, Dior Homme
and Fahrenheit.
Guerlain will also seek to accelerate its growth. The launch of a leading new perfume for
women and a major new beauty product, Orchidée Impériale, as well as the extension of the
line KissKiss, will be the high points of the year.
Parfums Givenchy will launch a very original initiative in the first half – date-branded
versions of its perfume lines Amarige, Organza and Very Irresistible – and in the second half, a
new perfume for women.
18
Parfums Kenzo will offer editions of FlowerbyKenzo, its flagship product line, interpreted by
artists, and a new perfume for women will appear in the second half.
5. Watches and Jewelry
Revenue of the Watches and Jewelry group totaled 573 million euros, recording strong
organic growth of 17%, significantly above the market average both for watches and jewelry.
The business group significantly improved its profit from recurring operations which rose to
38 million euros.
Due to its strong innovative capacities and a targeted communication strategy, TAG Heuer
continued to make headway and develop its competitive position.
Zenith manufacturing made further breakthroughs in the fine watches segment and strongly
developed its revenue.
Chaumet jewelry pursued very sustained growth in target countries, both in jewelry and
watches.
Launched in the second half, the watch Christal by Dior, designed in collaboration with
John Galliano, creator of Dior couture, recorded a very promising start.
New distribution agreements have been established in China, an important growth hub, for
TAG Heuer, Zenith and Montres Dior.
The first De Beers boutiques have opened in the United States.
The energetic financial turnaround that began in 2004 continued in 2005. In accordance
with its objectives, the Watches and Jewelry group recorded markedly higher organic
revenue growth than its competitors. This performance allowed LVMH to gain market share
both in watches and jewelry. The American continent, Asia and Japan were the areas of
greatest growth in 2005. New distribution agreements have been concluded in China for
TAG Heuer, Zenith and Dior, enabling acceleration of their expansion.
Combined with growth in revenue, improvement in margins and cost control have enabled
very significant progress in profitability with profit from recurring operations up five-fold.
Outlook for 2006
Organic growth and rigorous management are the priorities of each house and each market
of the business group in 2006. Progress will be fueled by a large agenda of innovations that
will focus primarily on the iconic product lines of each brand. TAG Heuer will use its
technological know-how to dynamize its legendary Carrera (Calibre 360), Monaco (Monaco
69) and Aquaracer (Calibre S) lines. Zenith manufacturing will reinforce its Open line and
present a sports line at the Basel exposition, as well as a very complex timepiece, the Traveller
repetition minutes watch. Dior Montres will develop its Christal line and launch new
versions of Chiffre Rouge and D de Dior. Chaumet will launch a new jewelry collection called
Attrape-moi and reinforce its line of watches with Dandy.
In terms of markets, the largest investments will be targeted for the United States,
Continental China and Japan. New marketing methods have been implemented in India, the
Middle East and Russia.
19
6. Selective Retailing
Selective Retailing revenue rose to 3,648 million euros, recording organic growth of 13%,
and profit from recurring operations shows strong improvement at 347 million euros.
DFS, buoyed by performance improvements on a comparable boutiques basis and by a full
year’s business activity for the Okinawa Galleria that opened at the end of 2004, recorded
double-digit growth in revenue. Its profitability rose sharply due to these dynamics and the
maintenance of rigorous cost control management.
Miami Cruiseline continues to extend its revenue and profitability due to the better
visibility of its boutiques on-board ships and an enhanced range of product offerings.
Sephora completed a historic year, gained market share and exceeded its revenue and
income goals both in Europe and the United States. The cash flow generated in each
territory allowed it to finance the expansion underway in Asia. At December 31, 2005,
Sephora had a worldwide network of 558 boutiques.
2005 was marked, from April onwards, by the successful establishment of Sephora in China
with the opening of three stores in Shanghai.
The trading website sephora.fr was launched in June 2005.
Le Bon Marché recorded significant growth in revenue and profit from recurring operations
in 2005. This progress was established on a solid basis, as confirmed by customer surveys
showing strong support for the concept of a large luxury department store, the very
foundation of Le Bon Marché’s identity
Outlook for 2006
DFS’s activity in 2006 will benefit from the renovation of the Galleria in Guam and the
renovation of several airport concessions at major tourist destinations.
Miami Cruiseline will maintain its marketing efforts and rigorous management, and will
continue improving its performance.
Sephora will focus on its strategy of innovation and exclusiveness with the objective of
strong growth in revenue and income. Its expansion will be pursued vigorously both in the
countries where it is already successfully established and in new markets with strong
potential, particularly in Central Europe.
Le Bon Marché will continue cultivating its unrivaled assets among Parisian department
stores.
III. RESULTS OF CHRISTIAN DIOR S.A.
Christian Dior S.A.’s income consists primarily of dividend income related to its stake in
LVMH less the borrowing costs incurred to finance this investment.
Net financial income totaled 154 million euros compared with 130 million euros in 2004.
This includes, on the one hand, 180 million euros in dividends from subsidiaries and equity
interests, and on the other, 26 million euros in net interest expense.
The tax savings recorded under the fiscal consolidation program totaled 18 million euros.
20
Net income was 166 million euros compared with 138 million in 2004.
Allocation of earnings
(in euros)
• Net income
plus
• Retained earnings before allocation
Total income available for distribution
166,439,324.94
82,631,900.97
249,071,225.91
We are proposing to allocate it as follows:
• Dividend of 1.16 euros per share
• Retained earnings after allocation
210,803,375.68
38,267,850.23
Total
249,071,225.91
With an interim dividend of 0.32 euro paid on December 2, 2005, the balance of 0.84 euro
will be paid on May 18, 2006.
In accordance with Article 158 of the General Tax Code, this dividend entitles individuals
resident for tax purposes in France to a 40% tax allowance.
Since the shares held by the Company when this dividend is paid are not entitled to
dividends, the amount corresponding to the unpaid dividend on these shares will be
transferred to retained earnings.
Distribution of dividends
We would like to remind you that the amount of the dividends paid in the previous three
years and the corresponding tax credit were as follows:
(in euros)
Net dividend
Tax credit (*)
Gross dividend (*)
0.97
0.87
0.82
0.16
0.435
0.41
1.13
1.305
1.23
2004
2003
2002
(*) for individuals.
IV. SHAREHOLDERS OF THE COMPANY
In accordance with Article L.233-13 of the Commercial Code and the information received
pursuant to Articles L.233-7 and L.233-12 of the Code, the following table identifies
shareholders who, to the Company’s knowledge, hold over 5% of the capital stock or voting
rights:
At December 31, 2005
SHAREHOLDERS
Number
% of
% of
of shares capital voting rights
Groupe Arnault SAS* 125,616,157 69.12
41, avenue Montaigne
75008 Paris
(*) Directly or indirectly.
21
Number
of shares
% of
capital
% of
voting rights
81.92 124,967,210
68.77
71.88
At December 31, 2005, the company had capital stock of 363,454,096 euros, represented by
181,727,048 shares with a par value of 2 euros per share. 120,948,264 shares had double
voting rights.
In accordance with Articles L.255-208 and L.255-209, paragraph 1, of the Commercial
Code, the Company also:
• bought back 60,015 of its own shares at an average price of 75.23 euros during the past
year.
These share purchases were made for the purpose of allocating them to employees who
exercise stock options granted by the Company.
In addition, 493,000 shares initially acquired for the purpose of equalizing the share price
were also allocated to these options.
At the year-end, the number of shares held and allocated to stock option plans was
4,053,228, for a net value of 150,740,060.10 euros. The par value was 2 euros. These shares
represented 2.23% of the capital stock.
• held at the year-end, 19,532 of its own shares for a net value of 1,133,197.81 euros.
These shares were purchased to even out the share price.
Their par value is 2 euros. These shares represented 0.01% of the capital stock.
By law, these shares do not carry voting rights.
Transactions on Christian Dior shares during the year by board members and associated
persons as defined by Article R.621-43-1 of the Monetary and Financial Code
Type of
transaction
Person concerned
Purchase (1)
Sale
Purchase (1)
Purchase
Pierre Godé
Sidney Toledano
Companies associated with the family of
Mr B. Arnault
Number of
shares
Average price
(in euros)
31,687
10,000
200
648,947
25.36
73.68
25.95
56.31
(1) Purchase or subscription under share option plans.
V. BOARD OF DIRECTORS
Board Members
At the Annual General Meeting, Antoine Bernheim, Denis Dalibot, Eric Guerlain and
Christian de Labriffe, were proposed for re-election as Board Members, for the statutory
period of three years. Jaime de Marichalar y Sáenz de Tejada and Alessandro Vallarino
Gancia were proposed for nomination to become Board Members, for the same period of
time.
Board Members’ fees
We are asking the Annual General Meeting to set the annual amount of board members’ fees
allocated to the Board of Directors at 104,830 euros until further notice.
22
VI. FINANCIAL AUTHORIZATIONS
Authorization to intervene in the Stock Market
The Combined Ordinary and Extraordinary General Meeting on May 12, 2005 authorized
the Board of Directors to acquire the Company’s stock up to a maximum of 0.5% of its
capital stock, with a maximum purchase price of 90 euros per share.
At this year’s Annual General Meeting, you are asked to renew this authority for a period of
eighteen months. The stock purchases may only be made to stimulate the market within the
framework of a liquidity contract concluded with a brokerage firm.
The total number of shares bought back by the Company would be limited to 0.5% of
capital. The maximum unit purchase price would be 110 euros per share.
Authorization to reduce the capital stock
In accordance with the provisions of Article L.255-209 of the Commercial Code, the
Combined Ordinary and Extraordinary General Meeting on May 12, 2005 authorized the
Board of Directors, if it deems it to be in the shareholders’ interest, to reduce the capital of
the Company by the cancellation of the shares acquired under the share buy-back program.
We are asking the Annual General Meeting to renew this authorization for a period of
eighteen months.
Authorization to grant options for new or existing shares
The Combined Ordinary and Extraordinary General Meetings on May 14, 2001 authorized
the allocation of Company stock options, on one or more occasions, to employees or officers
of the Group.
We are asking for this authorization to be renewed.
This delegation for a period of thirty-eight months will enable the Board of Directors to
grant new stock options; the total number of shares to which the new options give
entitlement may not represent more than 3% of the capital stock.
In the case of the allocation of stock options for new shares, your authorization includes the
shareholders’ express waiver of their preferential right to shares issued as the options are
exercised.
The price of stock options shall be set within the limits authorized by regulations effective at
the time the options are allocated, and shall not, for whatsoever reason, be less than 80% of
the average value of rates quoted in the twenty trading sessions of the Stock Market
preceding the start date.
Moreover, for stock options for existing shares, the purchase price may not be less than 80%
of the average purchase price of the shares that are allocated by their company for the
exercise of such options.
The period for exercising such options shall be in accordance with the regulations applicable
at the time the options are granted and shall be no longer than 10 years.
The Board of Directors has the authority to determine, within the limits set by law and by
the General Meeting, the procedures of the options plan or plans.
At future Ordinary General Meetings, the Board of Directors will keep you informed of the
number, price, and beneficiaries of the options granted as well as of the number of new or
existing shares purchased.
23
VII. AMENDMENTS TO THE BYLAWS FOR COMPLIANCE WITH NEW
REGULATIONS
We propose to amend the Company bylaws to harmonize them with new legal provisions.
Such amendments will primarily cover the following:
• change in capital stock (Article 7);
• the procedures for convening the Board of Directors, the use of telecommunication
facilities to hold meetings and the kind of decisions that may be made when
telecommunication facilities are used (Article 12, points 1 and 2);
• the age limit applicable to Board Members (Article 9), to the Chairman of the Board of
Directors (Article 11), to the Chief Executive Officer (Article 15-II, point 1) and to the
Chief Operating Officers (Article 15-III, point 3);
• the quorum requirements for Ordinary General Meetings (Article 20) and Extraordinary
General Meetings (Article 22, point 1).
VIII. INFORMATION ON COMPENSATION AND BENEFITS IN KIND
TO COMPANY OFFICERS
Pursuant to the provisions of Article L.225-102-1 of the Commercial Code, we are reporting
to you the compensation and benefits in kind (2) paid for or covered by the Company and
companies it controls.
Bernard ARNAULT, Chairman and Chief Executive Officer:
• Fixed compensation: 860,754 euros
• Variable compensation: 1,035,605 euros
• Board Members’ fees: 117,949 euros
• Benefits in kind: none
Eric GUERLAIN, Vice-Chairman and Board Member:
• Compensation: none
Antoine BERNHEIM, Board Member:
Denis DALIBOT, Board Member:
• Variable compensation: 221,915 euros
• Benefits in kind: car
Christian de LABRIFFE, Board Member:
24
Pierre GODÉ, Board Member:
• Variable compensation: 1,479,435 euros
Raymond WIBAUX, Board Member:
Sidney TOLEDANO, Chief Executive Officer, non-Board Member:
• Variable compensation: 246,572 euros
• Board Members’ fees: none
• Benefits in kind: car
(1) Amount received after deduction of payroll tax, the CSG and the CRDS tax at the flat rate of 5% and income
tax at the French marginal rate of 48.09%. Gross compensation represented approximately twice the amounts
listed.
(2) Benefits in kind: company car.
(3) Details of the capital securities or securities giving access to capital allocated to the Members of the Board of
Directors during the year is indicated in section XI.
When entering retirement, company officers who are also members of the Board of Directors
are eligible to receive, as part of their employment agreement, additional retirement
compensation, on condition that they are able to demonstrate at least six years service on the
Board of Directors; at the same time they must claim their accrued retirement benefits in a
legal pension plan. This additional compensation is proportional to the beneficiary’s salary and
is limited to a maximum amount calculated by reference to that of social security.
IX. LIST OF POSITIONS OR OFFICES HELD IN ALL COMPANIES BY
THE CORPORATE OFFICERS AND BOARD MEMBERS
Pursuant to Article L.225-102-1 of the Commercial Code, below is a report on all positions and
offices held in any company by each of the Company’s board members during the past
financial year as well as for the board members whose re-election or election will be proposed
at this General Meeting, and the list of offices and positions they have held over the five past
years.
1. CURRENT POSITIONS
CHAIRMAN OF THE BOARD OF DIRECTORS
Bernard ARNAULT
Current duties and positions
Chairman and Chief Executive Officer of LVMH Moët Hennessy – Louis Vuitton SA,
France
Chairman of Groupe Arnault SAS, France
Chairman of the Board of Directors of Société Civile du Cheval Blanc, France
Board Member of:
• Christian Dior Couture SA, France
• LVMH Moët Hennessy – Louis Vuitton (Japan) KK, Japan
25
Member of the Supervisory Board of:
• Lagardère SCA, France
• Métropole Télévision “M6” SA, France
CHIEF EXECUTIVE OFFICER AND BOARD MEMBER
Sidney TOLEDANO
Chairman and Chief Executive Officer of:
• John Galliano SA, France
Chairman of:
•
•
•
•
•
•
•
•
•
•
Fendi France SAS, France
Christian Dior Italia Srl, Italy
Bopel Srl, Italy
Mardi Spa, Italy
Lucilla Srl, Italy
Christian Dior Saipan Ltd, Saipan
Christian Dior Guam Ltd, Guam
Les Jardins d’Avron LLC, USA
Christian Dior Inc., USA
Christian Dior S. de RL de CV, Mexico
Chairman of the Board of Directors of Christian Dior S.A., France
Chairman and Board Member A of Fendi International BV, Netherlands
Board Member of:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
John Galliano SA, France
Fendi Adele Srl, Italy
Fendi Immobili Industriali Srl, Italy
Fendi Italia Srl, Italy
Fendi Srl, Italy
Fendi Asian Pacific Limited, Hong Kong
Fendi North America Inc., USA
Fendi SA, Luxembourg
Christian Dior Inc., USA;
Christian Dior UK Ltd, United Kingdom
Christian Dior Far East Ltd, Hong Kong
Christian Dior Australia Pty Ltd, Australia
Christian Dior (Fashion) Malaysia Sdn, Malaysia
Christian Dior Hong Kong Ltd, Hong Kong
Christian Dior New Zealand Ltd, New Zealand
26
•
•
•
•
•
•
Christian Dior Singapore Pte Ltd, Singapore
Christian Dior Couture Korea Ltd, Korea
Christian Dior Taiwan Ltd, Taiwan
Christian Dior Macau Ltd, Macau
Christian Dior Couture CZ, Czech Republic
Christian Dior Commercial (Shanghai) Co. Ltd, China
Representative Board Member of Christian Dior KK, Japan
Permanent Representative of:
• Christian Dior Couture, Chairman of Jardins d’Avron SAS, France
• Christian Dior Couture, Board Member of Christian Dior Belgique, Belgium
Manager of:
•
•
•
•
Christian Dior GmbH, Germany
Christian Dior Espanola, Spain
Christian Dior Puerto Banus, Spain
Christian Dior Couture Maroc, Morocco
BOARD MEMBER
Pierre GODÉ
• Financière Agache SA, France
• Raspail Investissements SA, France
Chief Executive Officer of Groupe Arnault SAS, France
Chairman of Financière Jean Goujon SAS, France
Board Member of:
• Christian Dior Couture, SA, France;
• LVMH Moët Hennessy – Louis Vuitton SA, France
• SA du Château d’Yquem, France
• Société Civile du Cheval Blanc, France
• LVMH Moët Hennessy – Louis Vuitton Inc., United States
• LVMH Moët Hennessy – Louis Vuitton (Japan) KK, Japan.
• Sofidiv UK Limited, United Kingdom
Manager of PMG SARL, France
Legal Representative of Financière Agache, Manager of Sevrilux SNC, France
Member of the Executive Committee of Sofidiv SAS, France
• Sémyrhamis SAS, France
• Sifanor SAS, France
27
BOARD MEMBER
Raymond WIBAUX
Chairman of the Board of Directors of Financière Joire Pajot Martin SA, France
Board Member of Participex, France
Member of the Supervisory Board of SCA Foncière Massena, France
• Financière Joire Pajot Martin, Board Member of ETO, France
• Stratefi, Board Member of Compagnie Textile et Financière SA, France
2. CANDIDATES FOR BOARD MEMBER POSITIONS
2.1 Reelections
VICE-CHAIRMAN AND BOARD MEMBER
Eric GUERLAIN
Chairman of the Board of Directors of Société Hydroélectrique d’Energie SA, France
Permanent Representative of LVMH Fashion Group, Board Member of Guerlain SA,
France
Previous duties and positions
none
BOARD MEMBER
Antoine BERNHEIM
Chairman of Assicurazioni Generali Spa, Italy
Chief Executive Officer of Société Française Générale Immobilière SA, France
Vice-Chairman and Board Member of:
• Bolloré Investissement SA, France
• LVMH Moët Hennessy – Louis Vuitton SA, France
• LVMH Fashion Group SA, France
• LVMH Finance SA, France
• Alleanza Assicurazioni, Italy
Board Member of:
• Bolloré SA, France
• Ciments Français SA, France
• Generali France SA, France
28
• Generali España Holding SA, Spain
•
•
•
•
•
AMB Generali Holding AG, Germany
Banca Intesa Spa, Italy
BSI, Switzerland
Generali Holding Vienna AG, Austria
Graafschap Holland, Netherlands
• Mediobanca, Italy
Vice-Chairman and Member of the Supervisory Board of Financière Jean Goujon SAS,
France
Member of the Supervisory Board of Eurazeo SA, France
Partner of Lazard LLC, United States
Managing Partner of Partena, France
Vice-Chairman and Board Member of Assicurazioni Generali Spa, Italy
Vice-Chairman of Mediobanca, Italy
Board Member of:
• Aon France, France
• Azeo, France
• Eridania-Beghin-Say, France
• Generali France Assurances (IARD)
• La Concorde, France
• Rue Impériale, France
• Société Immobilière Marseillaise, France
Member of the Supervisory Board of Axa, France
Permanent Representative of Rue Impériale, Board Member of Eurazeo, France
BOARD MEMBER
Denis DALIBOT
Chief Financial Officer of Christian Dior S.A., France
Board Member – Chief Operating Officer of Financière Agache SA, France
• Agache Développement SA, France
• Europatweb SA, France
Chairman of:
• FA Investissements SAS, France
• Montaigne Finance SAS, France
• Sifanor SAS, France
29
Board Member of Christian Dior Couture SA, France
• Financière Agache, Board Member of Raspail Investissements SA, France
• Le Bon Marché – Maison Aristide Boucicaut, Board Member of Franck & Fils SA,
France
• Louis Vuitton Malletier, Board Member of Belle Jardinière SA, France
• Ufipar, Board Member of Le Jardin d’Acclimatation SA, France
Manager of:
• Kléber Participations SARL, France
• Montaigne Investissements SCI, France
• Montaigne Services SNC, France
• Groupement Foncier Agricole Dalibot, France
Member of the Executive Committee of Groupe Arnault SAS, France
• Financière Jean Goujon SAS, France
• Sémyrhamis SAS, France
• Publications Professionnelles SAS, France
Vice-Chairman of the Supervisory Board of Métropole 1850, France
Chairman and Chief Executive Officer of Paris Provence Bâtiment, France
Chairman of Agache Développement, France
Member of the Supervisory Board of Sèvres Investissements, France
Chief Executive Officer of Omnium Lyonnais d’Etudes, France
Board Member of:
• John Galliano SA, France
• Bon Marché International SA, France
• Publications Professionnelles Holding, Luxembourg
Board Member-Chief Operating Officer of Financière Truffaut, France
Board Member-Chief Executive Officer of Financière Agache SA, France
• Financière Agache, Board Member of FA Expansion, France, FA Participations, France,
and CS Oblig Europe, France
• Belle Jardinière, Board Member of Le Jardin d’Acclimatation, France
• FA Expansion, Board Member of Raspail Investissements, France
• Eurofinweb NV, Board Member of Europatweb SA, France
• Zebank, Board Member of BM Développement, France
Representative of Financière Agache
• Chairman of Babylone Investissements, France
• Member of the Supervisory Board of Zebank, France
30
• Manager of Lamourelle Paris, France
• Chairman of Aristide Boucicaut SAS, France
BOARD MEMBER
Christian de LABRIFFE
Chairman of Transaction R, SAS, France
Managing Partner of Rothschild & Cie Banque, France
Managing Partner of Rothschild & Cie, France
• Financière Rabelais, France
• Groupe Beneteau, France
Board Member of:
• Christian Dior Couture, SA, France
• Paris Orléans, France
• Nexity, France
Board Member of:
• Holding Financier Jean Goujon, France
• Montaigne Rabelais, France
• Rothschild Conseil International, France
Chairman of the Board of Directors of Transaction R SAS, France
Managing Partner of Rothschild & Compagnie Gestion, France
2.2 Elections
Jaime de MARICHALAR y SÁENZ de TEJADA (Duc de Lugo)
Chief Executive Officer and Advisor of Crédit Suisse, Spain
Advisor to the Chairman of Groupe LVMH for Spain
Board Member of:
• Loewe SA, Spain
• Sociedad General Immobiliaria de España, SA, Spain
• Portland Valderrivas, Spain
• Winterthur Vida, Spain
Member of the Supervisory Board of Art+Auction Editorial, (United States and United
Kingdom).
31
Board Member of Crédit Suisse Hottinguer, France
Alessandro VALLARINO GANCIA
Manager of AAP SA, Switzerland
None
X. INFORMATION RELATING TO AUTHORIZATIONS GRANTED TO
THE BOARD OF DIRECTORS TO INCREASE OR REDUCE CAPITAL
STOCK
This information appears in the section “General Information on Capital Stock”.
XI. STOCK OPTION PLANS
• Options granted by the Christian Dior parent company
Ten stock option plans were in effect at December 31, 2005. These plans have a term of ten
years; under the plans, the options may be exercised after a period of three or five years after
the opening date of the plans. In some circumstances, notably upon retirement from the
company, this time requirement will be waived.
Each of these plans stipulates that each option gives the right to purchase one share.
32
Share purchase option plans
Authorized
by General
Meeting
05.30.1996
05.30.1996
05.30.1996
05.30.1996
05.30.1996
05.14.2001
05.14.2001
05.14.2001
05.14.2001
05.14.2001
Plan start
date
Number of
options
granted (1)
Number
of beneficiaries
Allocated
for board
members
Allocated
for
leading 10
employees
Exercise
price
(in euros)
(2) (3)
Number of
options
exercised
in 2005 (3)
Number of options
outstanding (3)
12.31.2005
01.31.2006
10.14.1996
05.29.1997
11.03.1998
01.26.1999
02.15.2000
02.21.2001
02.18.2002
02.18.2003
02.17.2004
05.12.2005
94,600
97,900
98,400
89,500
100,200
437,500
504,000
527,000
527,000
493,000
21
22
23
14
20
17
24
25
26
27
40,000
50,000
65,000
50,000
65,000
308,000
310,000
350,000
355,000
315,000
50,500
43,000
28,200
38,000
31,000
121,000
153,000
143,000
–
124,000
25.95
32.01
18.29
25.36
56.70
45.95
33.53
29.04
49.79
52.21
4,200
17,000
9,500
33,687
–
10,000
–
–
–
–
251,000
285,400
283,200
294,313
400,800
427,500
504,000
527,000
527,000
493,000
251,000
284,400
281,200
294,313
400,800
427,500
504,000
527,000
527,000
493,000
(1) Number of options at the plan start date, not restated for adjustments related to the four-for-one stock split of July 2000.
(2) Exercise prices prior to 1999 result from the conversion into euros of data originally denominated in francs.
(3) Adjusted to account for operations described in (1).
• Options granted by its subsidiary
LVMH’s share purchase option plans
Authorized
by General
Meeting
05.25.1992
06.08.1995
06.08.1995
06.08.1995
06.08.1995
06.08.1995
06.08.1995
06.08.1995
05.17.2000
05.17.2000
05.17.2000
05.17.2000
05.17.2000
05.17.2000
05.17.2000
05.17.2000
Plan start
date
Number of
options
granted (1)
Number
of beneficiaries
Allocated Exercise Number of
Allocated
for
price
options
for board leading 10 (in euros)
exercised
members employees
(2) in 2005 (3)
03.22.1995 (3) 256,903
395
96,000
05.30.1996
233,199
297 105,000
05.29.1997
233,040
319
97,500
01.29.1998
269,130
346
97,500
03.16.1998
15,800
4
–
01.20.1999
320,059
364
97,000
09.16.1999
44,000
9
5,000
01.19.2000
376,110
552 122,500
01.23.2001 2,649,075
786 987,500
03.06.2001
40,000
1
–
–
05.14.2001 1,105,877 (4) 44,669
05.14.2001
552,500
4 450,000
09.12.2001
50,000
1
–
01.22.2002 3,284,100
993 1,215,000
05.15.2002
8,560
2
–
01.22.2003 3,213,725
979 1,220,000
57,500
46,500
46,000
65,500
15,800
99,000
39,000
81,000
445,000
40,000
–
102,500
50,000
505,000
8,560
495,000
20.89
34.15
37.50
25.92
31.25
32.10
54.65
80.10
65.12
63.53
66.00
61.77
52.48
43.30 (5)
54.83
37.00 (6)
392,588
91,985
160,415
266,500
–
246,830
–
–
7,400
–
25
–
–
96,897
–
1,700
Number of options
outstanding (2)
12.31.2005
01.31.2006
–
537,500
626,390
576,360
70,400
1,305,045
210,000
1,796,650
2,477,675
40,000
513,919
552,500
50,000
3,042,353
8,560
3,120,425
–
528,505
613,420
557,420
66,000
1,281,000
210,000
1,796,650
2,452,975
40,000
512,944
552,500
50,000
2,782,203
8,560
3,084,175
(1) Number of options at the plan start date, not restated for adjustment related to the bonus allocation of June 1999 and to the five-forone stock split of July 2000.
(2) Adjusted to account for operations described in (1).
(3) Plan ended on March 21, 2005.
(4) 25 options were allocated for each beneficiary.
(5) The exercise price for Italian and American residents for the plan started on January 22, 2002 were 45.70 euros and 43.86 euros
respectively.
(6) The exercise price for Italian residents for the plan starting January 22, 2003 was 38.73 euros.
33
LVMH’s share subscription option plans
Authorized
by General
Meeting
05.15.2003
05.15.2003
Plan start
date
Number of
options
granted
01.21.2004 2,747,475
05.12.2005 1,924,400
Allocated
for
board
members
Allocated
for
leading 10
employees
906 972,500
495 862,500
457,500
342,375
Number of
beneficiaries
Number of
options
exercised
in 2005
Exercise
price
(in euros)
55.70 (1)
52.82 (1)
Number of options
outstanding
12.31.2005
01.31.2006
– 2,715,225 2,715,225
– 1,921,950 1,921,950
(1) The exercise price for Italian residents for the plans started on January 21, 2004 and May 12, 2005 were €58.90 and €55.83
respectively.
• Options granted to each board member by the Company or any Group company during the year
Beneficiaries
Companies
granting options
Plan start
date
Number of
options
Exercise
price
(in euros)
Plan end
date
B. Arnault
Christian Dior
05.12.2005
220,000
52.21
05.11.2015
LVMH
05.12.2005
450,000
52.82
05.11.2015
D. Dalibot
Christian Dior
05.12.2005
25,000
52.21
05.11.2015
P. Godé
Christian Dior
05.12.2005
20,000
52.21
05.11.2015
LVMH
05.12.2005
40,000
52.82
05.11.2015
Christian Dior
05.12.2005
50,000
52.21
05.11.2015
S. Toledano
• Options exercised by each board member during the year
Companies
granting options
Plan start
date
Number of
options
Exercise price
(in euros)
B. Arnault
LVMH
03.22.1995
330,000
20.89
B. Arnault
LVMH
01.29.1998
112,820
25.92
P. Godé
Christian Dior
01.26.1999
31,687
25.36
S. Toledano
Christian Dior
10.14.1996
200
25.95
Beneficiaries
• Options granted by the Company or any Group company during the financial year to the ten non-board
member employees holding the largest number of options
Companies
granting options
Plan start
date
Total number
of options
Average weighted
exercise price (in euros)
Christian Dior
05.12.2005
124,000
52.21
LVMH
05.12.2005
342,375
52.82
34
• Options exercised during the financial year by the ten non-board member employees
holding the largest number of options
Plan start date
Total number
of options
Average weighted
exercise price
(in euros)
LVMH
05.30.1996
58,750
34.15
LVMH
05.29.1997
80,975
37.50
LVMH
01.29.1998
106,250
25.92
LVMH
01.20.1999
172,400
32.10
LVMH
01.22.2002
8,000
43.30
LVMH
01.22.2002
9,500
43.86
Christian Dior
10.14.1996
4,000
25.95
Christian Dior
05.29.1997
16,000
32.01
Christian Dior
11.03.1998
9,500
18.29
Christian Dior
01.26.1999
2,000
25.36
Christian Dior
02.21.2001
10,000
45.95
Companies
granting options
XII. CONSEQUENCES OF THE ACTIVITY ON THE ENVIRONMENT
12.1. Scope of reporting of environmental indicators
The reporting of environmental indicators covered the following areas in 2005:
• the production sites and warehouses owned and/or run by companies in which the Group
has a holding of more than 50% or in which it exerts management control;
• the French boutiques of Sephora and Louis Vuitton, Le Bon Marché, and the main DFS
and Fendi boutiques;
• the main administrative sites located in France;
• the vehicle fleets owned by the Group in France and used for employee travel.
In 2005, the reporting covered 405 sites (383 sites in 2004); 26 of the Group’s sites are
excluded this year; however, their impact on the environment is insignificant in relation to
the Group’s size. The changes compared with 2004 result from:
• the non-inclusion of the production and administrative sites of companies sold or in the
process of sale at December 31, 2005, or activities that have been moved;
• the closure of La Samaritaine;
• the addition of the Polish distillery Millennium at Polmos Zyrardow (1 site).
The 2005 reporting does not include:
• the environmental impact (water, energy, etc.) of the administrative buildings and stores
run directly or franchised by the Perfumes and Cosmetics and Fashion and Leather
Goods activities, apart from the brands mentioned above;
• the vehicle fleets owned by the Group in countries other than France, used for employee
travel;
35
• the energy consumption related to the transport of merchandise exclusively carried out by
outside service providers;
• the companies where the Group has a holding of less than 50% or in which it does not
exert management control.
Because of its recent addition to the Group, Glenmorangie will only be included in the
environmental data starting in 2006, following an audit. Due to the volume of its business,
Glenmorangie will have a noticeable impact on the Group’s environmental data.
In relation to the consolidation for financial reporting, the environmental scope for 2005
covers:
• 94% in number of the Group’s production sites, warehouses and administrative sites;
• 35% in area of the total of the Group’s revenue areas (the decrease from 2004 is due to the
closure of La Samaritaine).
Pursuant to Decree 2002-221 of February 20, 2002, the “New Economic Regulations Act –
NRE”, the following sections indicate only the nature and magnitude of the relevant
significant impacts of the business activities. Since fiscal year 2002, the annual
environmental report has been audited by the Group’s Statutory Auditors.
12.2. Consumption of water, raw materials and energy
12.2.1 Water consumption
Water consumption is analyzed for the following uses:
• “Process” needs: the use of water for cleaning operations (vats, products, machinery,
floors), air conditioning, employees, etc. The water used for these purposes generates
waste water.
• Agricultural needs: use of water for vineyard irrigation in countries outside France
(vineyard irrigation is not used in France); in this context, water used in irrigation is taken
directly from the natural environment. Water use from one year to another is closely allied
to climate differences.
(in m3)
Process needs
Agricultural needs (vine irrigation)
2005
2004
1,446,772
6,648,138
1,691,860
7,445,085
% change
(14)
(11)
Water consumption for “process” needs by the companies in the Group decreased by 14% in
absolute value between 2004 and 2005. This decrease was primarily due to the closure of La
Samaritaine (approximately 300,000 m3 in 2004). Consumption totaled approximately
1.45 million cubic meters. By comparison, for the industry sector in France, water
consumption represents around 3.8 billion m3 (IFEN data, 2005).
At Parfums Christian Dior, heating and cooling facilities represent the primary use of water,
at approximately 40%. The replacement of pumps on empty cooling equipment by electrovalve devices thus contributed to the reduction by approximately 7% of the overall level of
water consumption in 2005.
36
At Moët & Chandon, the use of water rich in carbon dioxide gas allowed a 20% to 30%
reduction of the amount water used to clean vats.
(in m3)
Process needs
in 2005
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding company
Process needs
in 2004
7,888
618,458
447,465
131,897
13,389
209,586 (a)
18,089
Total
1,446,772
% change
7,923
569,036
482,957
122,807
14,367
474,723
20,047
–
9
(7)
7
(7)
(56)
(10)
1,691,860
(14)
(a) The decrease in the process needs of Selective Retailing resulted from the consolidation changes.
The use of water for vineyard irrigation is absolutely necessary for the life of the vines in
California, Argentina, Australia and New Zealand for climate reasons. Irrigation is strictly
managed by the local authorities who issue authorizations. The Group has also adopted its
own measures to limit water use:
• Rainwater recovery at Domaine Chandon California, Domaine Chandon Australia, Bodegas
Chandon Argentina; re-use of treated waste water at Domaine Chandon Carneros,
California; and recovery of run-off through the creation of artificial lakes in Newton;
• Implementation of protocols to measure and specify water needs: analyses of soil and leaf
humidity, visual inspections of the vines, supply customization based on the needs of each
site (Domaine Chandon Australia);
• Widespread use of drip irrigation systems: between 73 and 100% of the vineyard areas are
now covered by this practice;
• Weather forecasting to ensure optimal use of irrigation (weather stations at Domaine
Chandon California);
• Periodic checks of the irrigation systems to prevent possible leaks;
• Use of “low-flow irrigation” which both limits water use and improves the quality of
grapes and the size of the vine, which concentrates bouquet and color.
12.2.2 Energy consumption
Energy consumption refers to the total primary energy sources used internally (combustion
at the Group’s sites: fuel oil, butane, propane, natural gas) and secondary energy sources
externally (transformed energy generated by combustion off-site).
In 2005, the subsidiaries included in the reporting scope used 368,006 MWh from the
following energy sources: 63% electricity, 28% natural gas, 4% fuel oil, and 5% other
sources (steam, heavy fuel oil, butane or propane). This consumption comes from (in
decreasing order) the activities of Wines and Spirits (30%), Selective Retailing (25%),
Perfumes and Cosmetics (22%), Fashion and Leather Goods (18%). The remaining 5% are
generated by Watches and Jewelry, and the administrative activity of the holding company
and Christian Dior Couture.
37
By comparison, for the industry sector in France, electricity consumption represents
approximately 128,000,000 MWh and natural gas consumption 158,000,000 MWh
(MINEFI data, 2004).
Energy consumption (in MWh)
2005
2004
% change
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding company
3,000
110,762
81,635
66,049
7,829
91,826
6,905
3,243
109,836
87,185
62,334
7,430
115,936
6,953
(7)
1
(6)
6
5
(21)
(1)
Total
368,006
392,917
(6)
For 2005, the breakdown of energy resources was as follows:
(in MWh)
Electricity
Natural gas
Fuel oil
Other
2,456
51,079
40,812
39,680
3,514
88,224
5,606
–
38,723
40,778
20,726
2,841
–
433
–
11,189
39
1,034
1,474
4
29
544
9,771
6
4,609
–
3,598
837
231,371
103,501
13,769
19,365
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding company
Total
12.2.3 Consumption of raw materials
The main relevant criteria used for the analysis of raw materials consumption is the quantity,
in tons, of the primary and secondary packaging released on the consumer market:
• Christian Dior Couture: boutique bags, pouches, boxes, etc.
• Wines and Spirits: bottles, cardboard boxes, capsules, etc.
• Perfumes and Cosmetics: flasks, cartons, etc.
• Fashion and Leather Goods: boutique bags, pouches, boxes, etc.
• Watches and Jewelry: boxes and cases, etc.
• Selective Retailing: boutique bags, envelopes, boxes, etc. For Sephora, the figures include
all packaging of Sephora brand products all over the world.
Packaging used in shipping has been excluded from this analysis.
38
The table below shows changes in packaging (by weight) placed on the market in 2004 and
2005:
Packaging placed on the market
(in tons)
2005
% Change
2004 % change in revenue
Wines and Spirits
Watches and Jewelry
Selective Retailing
162
117,735
16,678
2,269
213
1,502
182
113,607
19,673
2,576
228
1,451
(11)
4
(15)
(12)
(7)
4
11
11
7
12
17
13
Total
138,559
137,717
1
11
In 2005, the total packaging used by weight and type of material, was as follows:
Glass
Paper and
cardboard
Plastics
Metal
Other
packaging
materials
Wines and Spirits
Watches and Jewelry
Selective Retailing
–
104,332
9,576
–
1
34
144
10,837
3,374
2,161
173
1,241
16
498
3,253
3
16
225
–
892
282
–
9
1
2
1,175
193
105
15
–
Total
113,943
17,930
4,011
1,184
1,490
(in tons)
12.3. Land use: discharge into the air, water and ground
12.3.1 Land use
Soil pollution related to older industrial facilities (production of Cognac and Champagne,
trunk manufacturing) is not significant. The most recent production sites are generally
established on former agricultural land with no historical pollution. Other than for vine
cultivation, the production activities of the Group’s subsidiaries make little use of the soil.
The practice of integrated viticulture, a method that combines technological advances with
traditional methods, covers all stages in the life of a vineyard. In use for several years by the
Wines & Spirits business group, it was further expanded this year. In addition to its own
integrated vineyard land and producing vineyards, all under integrated viticulture, Veuve
Clicquot continued to partner its grape suppliers in this process: all suppliers can call on the
necessary technical support from an agricultural engineer, hired full-time to work between
the technical units making champagne and the grape growers working with Veuve Clicquot.
As was the case last year, this covered 80% of the vineyard land and producing vineyards.
Integrated viticulture practices have also been implemented by Moët & Chandon and the
Wine Estates Houses: development of cover planting, the use of alternative solutions to
replace certain insecticides, etc.
39
12.3.2 Greenhouse gas emissions
Considering the nature of the Group’s activities, the only emissions that could significantly
affect the environment are greenhouse gases.
Greenhouse gas emissions, estimated in equivalent CO2 (carbon dioxide) tons, originate
from energy consumption at the sites, defined in section 2. These include direct emissions
(combustion on site) and indirect emissions (from the production of electricity and steam
used by the sites). Their breakdown by business group is as follows:
(in equivalent tons of CO2)
CO2 emissions
in 2005
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding company
233
21,480
11,262
12,554
1,230
22,079
670
Total
69,508
% change
from 2004
Direct CO2
emissions
(23)
14
(7)
10
5
(25)(a)
3
(6)
Indirect CO2
emissions
–
13,276
8,242
5,425
983
1
96
233
8,204
3,020
7,129
247
22,078
574
28,023
41,485
(a) The decrease in emissions of Selective Retailing resulted from the consolidation changes. The DFS sites
were the major contributor to total greenhouse gas emissions because of their geographical location: at
equal electricity consumption, the CO2 emissions are proportionally higher in Australia, China and New
Zealand than in France, where all the other sites of the sector included in the 2005 consolidation are
located.
Hennessy continued to prioritize shipping its products by boat, a mode of transport that
emits 85 times less greenhouse gas than air transport: 90.9% in tons per kilometer of
Hennessy products were shipped by this transportation mode, 7.6% by road, 1.2% by rail
and 0.3% by air.
For Champagne, a logistics platform common to all Houses was used to optimize the
shipping phase and to systematically use maritime shipping as much as possible. Air freight
at Moët & Chandon and Veuve Clicquot is therefore limited to extreme emergency cases,
amounting to less than 0.5% of deliveries.
Following the carbon assessment that showed the major impact of air transport on
greenhouse gas, Louis Vuitton implemented a plan of action to develop the use of maritime
shipping. This plan of action is keeping to all its promises: 20% in 2003, 40% in 2004 and
50% in 2005 of deliveries of leather goods articles were made by boat; the objective is to
reach 60% in 2006. The issue of employee travel has also been considered. This impact is
non-negligible and represents 12% of Louis Vuitton’s energy consumption. This aspect has
been addressed at a global level: encouraging car-sharing, rationalizing Europe-Asia-United
States travel, and increased use of video-conferencing are just some of the actions
implemented to reduce energy consumption and associated greenhouse gas emissions.
Finally, a new system for producing light using metallic iodide technology has been
successfully implemented in all boutiques opened in 2005, starting with the one on the
Champs-Elysées in Paris. The initial objective to reduce by 30% electricity consumption
associated with lighting has been greatly exceeded with a real reduction of 60%. A major
side benefit is that the heat created by lighting has also decreased and the energy used for
air-conditioning has been reduced by 40%.
40
To illuminate the perfume factories in Texas, Sephora United States has selected Green
Mountain, as provider of electricity created from renewable resources such as solar,
hydraulic and wind-turbines. The CO2 emissions associated with this electricity are less than
those created by the combustion of fossil fuels (carbon, petroleum or natural gas).
12.3.3 Water emissions
The Group’s activities have little impact on water quality. The only emissions considered are
the waste from Wines and Spirits and Perfumes and Cosmetics activities containing
substances that contribute to eutrophication. Eutrophication is the excessive proliferation of
algae and aquatic plants caused by overload of nutritional compounds in water (particularly
phosphorus), resulting in reduced oxygenation of the water, which is harmful to the
environment. The measurement parameter is chemical oxygen demand (COD), which is
calculated after treatment of the effluents at company-owned stations or external stations
with which the sites have agreements. The following operations are considered as treatment:
community effluent disposal, private effluent disposal (aeration tank), and land application.
COD after treatment
in 2005
COD after treatment
in 2004
Wines and Spirits
Perfumes and
Cosmetics
143.3
6.2
74.0
19.5
Total
149.5
93.5
(in tons / year)
% change
94(a)
(68)(b)
(a) Change due to the addition of Polmos Zyrardow, Cloudy Bay and Cape Mentelle.
(b) Change due to the implementation of a high-performance water treatment facility at the Guerlain site in
Chartres.
12.3.4 Waste
The Group’s companies continued their efforts to sort and recover waste: on average, 86% of
waste has been recovered, 85% in 2004. The 2005 figure does not include the one-time
production of 15,000 tons of inactive, non-hazardous waste resulting from the demolition of
a site. After accounting for these 15,000 tons, the average rate of waste recovery was
lowered to 62%.
“Recovered waste products” are those whose final destination is one of the following:
• re-use, i.e. use of a waste product for the same purpose as that of the original product;
• material recovery, i.e. recycling (direct re-use of waste in the production cycle from which
it comes, in total or partial replacement of a new raw material), composting or controlled
land spreading of waste composed of organic matter for ground fertilization;
41
• energy recovery from incineration, to produce electricity or heat through combustion of
waste.
(in tons)
Special
waste in
2005 (a)
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding company
23
102
856(b)
33
11
6
–
Total
1,031
Waste
produced in
2005
Waste
produced in
2004
413
26,148
7,824
19,275
173
1,783
206
404
26,909
7,970
4,911
176
4,906
204
55,822
45,080
% Change
in waste
produced
2
(3)
(2)
293 (c)
(2)
(64)(d)
1
23
(a) Waste that requires separate sorting and treatment from so-called “household” waste (cardboard, plastics,
wood, paper, etc.).
(b) Some waste products from the production cycle are considered as hazardous and treated as “special waste” in
order to prevent counterfeiting.
(c) The increase is due to a one-time production of waste associated with the demolition of a site (15,000 tons).
(d) The decrease is the result of a consolidation change (closure of La Samaritaine).
(%)
Christian Dior
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding company
Total
Re-use
Material
recovery
Energy
recovery
Total
recovery
57
3
9
1
12
–
–
38
87
44
8
18
66
99
5
1
29
6(a)
51
9
–
100
91
82
15
81
75
99
3
52
7
62
(a) One-time waste generated by the demolition of a site (15,000 tons) were not recovered. These penalized
the Fashion and Leather Goods group in 2005.
Moët & Chandon has initiated a pilot program that aims to reduce waste at its source by
10% in 2 years, with the help of ADEME (organization for the environment and control of
energy). Each year, 7,000 tons of waste produced are associated with wine production; this
share cannot be further compressed. Efforts have thus focused on the remaining 1,000 tons
(essentially packaging waste). At the end of 2005, the assessment is encouraging: the
reduction was 2 to 3% in spite of a strong increase in business in December 2005. The initial
objective will be reached in 2006 due to the efforts undertaken: re-use of packaging for
shipping, reduction of their mass, increase in the portion recycled.
As the logical result of the actions undertaken over several years, Parfums Givenchy
significantly increased the recycled portion of its waste. Thus, at the Verdun factory (Aisne,
France), the mass of recycled cardboard increased by 11.6%, rising from 441 tons in 2004 to
492 in 2005, and the amount of recovered plastic increased by 164.9%, going from 37 tons in
2004 to 98 in 2005.
42
At Parfums Christian Dior, the optimization of waste sorting was pursued in 2005. 30 tons
of plastic waste, previously discarded, was collected and compacted in the nine first months
of the year, for eventual recycling.
12.4. Measures taken to limit damage to endangered plant and animal species
The Fashion and Leather Goods and Watches and Jewelry activities have established
procedures to reinforce compliance with the CITES international convention. Through a
system of import and export permits, this convention fights overexploitation resulting from
international trade in certain endangered animal and plant species.
In the Perfumes and Cosmetics branch, the laboratories question their partners about the
biodiversity and bioavailability of each new plant studied. In their operations, the companies
of the business group make every effort not to use protected, rare or endangered plants, but
plants commonly used or cultivated specifically for the needs of the activity.
Following the example of Parfums Christian Dior which publicly announced its decision in
1989, the various brands of the Perfumes and Cosmetics business group no longer conduct
animal testing to evaluate the safety of cosmetics. In addition, LVMH, in collaboration with
academic teams, has implemented for several years a research program designed to develop
new alternative methods, particularly for allergy testing. The Group’s toxicologists have also
participated in the validation group that achieved official recognition for several alternative
methods: phototoxicity, eye irritation, and skin penetration.
12.5. Organization of environmental protection within the Group
12.5.1 Organization
In 1992, the Group created its Environment Department and confirmed its initial
commitment in 2001 when it established an “Environmental Charter” signed by the
Chairman. This Charter asks each Brand of the Group to implement an effective
environmental management system, reflect collectively on the environmental challenges
related to its products, manage risks, and use best environmental practices. In 2003, Bernard
Arnault signed the United Nations Global Compact. The Group is committed to:
• applying a precautionary approach to deal with problems affecting the environment;
• undertaking initiatives to promote greater environmental responsibility;
• encouraging the development and distribution of environmentally friendly technologies.
The Group’s Environment Department, which reports directly to the Advisor to the
Chairman, was set up to:
• direct the environmental policy of the Group’s companies in compliance with the
LVMH Charter;
• ensure legal and technical supervision;
• create management tools;
• help the companies to prevent risks;
• train and raise employee awareness at every hierarchical level;
• define and consolidate the environmental indicators;
• work with the various stakeholders (associations, ratings agencies, public authorities,
etc.).
43
The Environment agents of the Group’s companies meet within the “LVMH Environment
Committee” led by the Group’s Environment Department. They hold quarterly meetings and
communicate via a Group Environment Intranet that is accessible to everyone.
The companies in almost all the Group’s divisions continued last year to train and raise
employee awareness of environmental issues. These programs represented a total of more
than 7,300 hours.
New managers receive information on the Group’s policy, the tools available and the
Group’s environment network at a “New Manager Orientation” seminar.
At Veuve Clicquot, approximately 1,200 persons received information on the environmental
approach during the 2005 harvest (grape pickers and seasonal workers).
At Louis Vuitton Malletier, 350 hours of training were offered at the Barbera (Spain)
workshop by specialized internal auditors.
Over and above these initiatives, the Group companies also circulate written information
about the environment:
• the in-house “LVMH Magazine” contains a section on “LVMH Environment” that
provides regular information about the environment within the Group;
• Parfums Christian Dior distributed to all 1,400 employees at the Saint Jean de Braye
production site a booklet that integrates safety and environmental rules (sorting waste,
energy savings, etc.);
• Parfums Givenchy and Moët & Chandon included environmental awareness modules in
the welcome booklets and training for new employees;
• Hennessy includes an education section devoted to the environment in each issue of its
in-house newsletter;
• Veuve Clicquot and Krug decided to conduct an information and awareness campaign for
office workers every two weeks via email to inform them about small gestures which, if
performed every day, can reduce environmental impacts.
A number of programs were conducted in 2005 to prevent risks.
At Veuve Clicquot and Krug, fermenting rooms have been placed within retention systems.
These retention capacities are designed to contain accidental leaks, effluents and fire-fighting
water in the event of a fire.
Kami installed a buried 100 m3 tank in order to recover effluents and fire-fighting water in
the event of a fire.
Parfums Givenchy continued its work to reduce chemical risks and establish traceability for
employee exposure to hazardous products.
12.5.2 Evaluation or certification approaches
Each company in the Group is responsible locally and, in accordance with the LVMH
Environment Charter, must develop and implement its environmental management system,
primarily by defining its own environmental policy and setting objectives. Each company has
the LVMH self-evaluation guide available and can, if it wishes, have its system ISO 14001
or EMAS certified. In 1998, Hennessy was the first company in the world to earn this
certification in the Wines and Spirits sectors; it was renewed and valid for all sites in 2001
and 2004. This company drafted its second environmental policy in 2004 (the first dated
from 1997).
44
All the Krug and Veuve Clicquot sites are ISO14001 certified. In this context, 14 Veuve
Clicquot internal audits were conducted in 2005.
The ISO 14001 process also continued at Louis Vuitton: after the certification of the
Barbera workshop in 2004, the process was initiated at the logistics warehouses in Cergy
(France): deployment of standards began in September 2005, with the goal of certification at
the end of 2006.
In 2004 a team of fifteen “environment auditors” was created in the Group’s subsidiaries, the
members of which are employees holding a legal, financial or technical position (general
services, quality, manufacturing, maintenance, environment,). As of this date, there are
eleven team members. At a company’s request, they are able to make a rapid assessment of
the environmental state of a site. They have taken a 3-day training course in environmental
auditing, followed by a one-day, on site audit within the Group. Two companies had their
sites audited in 2005.
12.5.3 Measures taken to ensure compliance of operations with legislative and
regulatory provisions
To ensure continuing regulatory compliance, the Group’s companies are regularly audited,
whether by outside third parties, insurers, or internal auditors, which allows them to monitor
their compliance. In 2005, 23 outside environmental audits and 18 internal environmental
audits were conducted on the sites. An audit is an inspection conducted on one or more sites of
the same company, on all environmental problems that may occur: waste management, water,
energy, environmental management; it results in a written report and recommendations.
This figure does not include the many compliance audits dealing with a specific regulatory or
environmental issue – waste sorting for example – conducted periodically by the Group
companies on their sites. Since 2003, these audits have been supplemented by a review of
environmental regulatory compliance by the insurance companies, which included an
environmental element during fire engineering inspections on the sites of Group companies;
about 30 inspections were conducted in 2005.
In 2005, the principal measures to ensure environmental legislative and regulatory
compliance were:
• at Veuve Clicquot, the installation of a pH neutralization system for effluents and a
reduction in noise from a cold production unit;
• at Parfums Christian Dior, the creation of an alcohol storage area equipped with a
retaining system.
12.5.4 Expenditure to prevent environmental damage by the business
Environmental expenditure items were recognized in accordance with the recommendations
of the opinion of the National Accounting Board (CNC). Operating expenses and
investments were reported for each of the following items:
• protection of the ambient air and climate;
• management of waste water;
• management of waste;
• protection and cleanup of the soil, underground water and surface water;
• reduction in noise and vibrations;
45
•
•
•
•
protection of biodiversity and the landscape;
protection against radiation;
research and development;
other environmental protection activities.
In 2005, expenditures to protect the environment were allocated as follows:
• operating expenses: 5.1 million euros;
• capital expenditures: 3.7 million euros.
12.5.5 Amount of provisions and guarantees for risks, and indemnities paid during
the year pursuant to a court judgment
No provision for environmental risks has been recorded for the 2005 financial year.
12.5.6. Objectives assigned by the Group to its international subsidiaries
No matter where it is located, each subsidiary is asked to apply the Group’s environmental
policy as defined by the Charter; the Charter provides for the establishment of
environmental objectives for each subsidiary.
12.5.7. Consumer safety
The goal of the Group is to ensure safety for humans by first selecting the ingredients used
in the manufacture of products and by determining appropriate alternative methods.
Cosmetics manufactured or sold in Europe are regulated by Council Directive 76/768/EEC.
Considered by experts to be one of the most stringent texts regulating cosmetics in the
world, this directive regulates all substances used by the cosmetics industry and requires a
risk evaluation for each product marketed. In addition, the European Commission’s
Scientific Committee on Consumer Products (SCCP) continually evaluates the harmfulness
of the substances used in cosmetics products.
The Group pays particular attention to compliance with regulations, opinions from scientific
committees and recommendations from professional associations; in addition to these texts,
the Group’s toxicologists who are responsible for consumer safety, based on scientific
advances, set the rules for the Group’s suppliers and development teams.
The Group’s experts regularly participate in working parties for national and European
authorities and are very active in professional organizations.
In the environmental area, changes in scientific knowledge and/or regulations can lead to the
replacement of certain ingredients. Thus, it was decided to cease using triclosan in products
because of its environmental risk, even though this product was positively evaluated by the
European scientific agencies (Executive Scientific Committee and the SCCP) in 2002 in
terms of consumer safety.
46
XIII. EMPLOYMENT DATA
13.1 Analysis of changes in the workforce
13.1.1. Breakdown of the workforce
The workforce at December 31, 2005 totaled 63,683 employees. This is divided between
56,068 persons working under an indefinite contract (CDI) and 7,615 under a fixed-term
contract (CDD). 8,873 employees work part time, representing 14% of the total workforce.
The average number of full-time equivalent employees for the Christian Dior Group in 2005
was 57,778 men and women, 67% of whom work outside France.
The following tables analyze the breakdown of employees by business group, geographic
region and professional category.
Breakdown by business group
Total number of employees at December 31
2005
%
2004
%
Wines and Spirits
Watches and Jewelry
Selective Retailing
Others
2,595
5,134
18,071
13,628
1,844
21,544
867
4
8
28
22
3
34
1
2,304
4,697
18,326
13,488
1,777
20,045
877
4
7
30
22
3
33
1
Total
63,683
100
61,514
100
Wines and Spirits
Watches and Jewelry
Selective Retailing
Others
2,422
5,144
17,182
12,771
1,767
17,540
952
4
9
30
22
3
30
2
2,129
4,807
17,026
12,561
1,890
15,749
959
4
9
31
23
3
28
2
Total
57,778
100
55,121
100
Average number of employees during the year (1)
(1) Full-time equivalent, indefinite and fixed-term contracts.
47
Breakdown by geographic region
2005
%
2004
%
France
United States
Japan
Asia (excl. Japan)
Other countries
19,818
13,172
13,479
4,961
10,578
1,675
31
21
21
8
16
3
20,264
12,050
12,699
5,160
9,673
1,668
33
20
20
8
16
3
Total
63,683
100
61,514
100
France
United States
Japan
Asia (excl. Japan)
Other countries
19,324
11,347
10,858
4,898
9,673
1,678
33
20
19
8
17
3
19,566
10,526
9,885
4,653
8,836
1,655
36
19
18
8
16
3
Total
57,778
100
55,121
100
2005
%
2004
%
Executives and management
Technicians and Supervisors
Office and clerical
Labor and production
10,117
6,230
38,157
9,179
16
10
60
14
9,555
5,905
37,022
9,032
16
10
60
14
Total
63,683
100
61,514
100
Office and clerical
9,932
5,999
32,689
9,158
17
10
57
16
9,448
5,878
30,732
9,063
17
11
56
16
Total
57,778
100
55,121
100
Breakdown by professional category
The principal changes are the result of organic growth and the acquisition of Glenmorangie.
In France, the change is primarily due to changes in the consolidated entity.
48
Average age and average seniority
In France, the average age is 38 and the average seniority is 11 years. The breakdowns by
professional category are as follows:
Age
< 18
18 – 24
25 – 34
35 – 44
45 – 54
55 – 59
60 +
Entire
population (%)
Seniority
–
6
33
30
23
7
1
< 5 years
5 – 9 years
10 – 14 years
15 – 19 years
20 – 24 years
25 – 29 years
30 + years
100
Entire
population (%)
35
21
11
12
7
6
7
100
13.1.2 Recruitment, transfers and departures
The hiring policy of the Group’s companies is based on professional qualifications and
depends on the positions to be filled, prior experience and knowledge of foreign languages.
In 2005, 14,319 persons were hired under indefinite employment contracts, including 1,773
in France. 4,369 persons under Fixed-Term Contracts were recruited in France. Two
important reasons for using fixed-term contracts are the seasonal revenue peak at Christmas
and the grape harvest season.
In 2005, 11,405 employees working under indefinite contracts left the Group, including
more than 39% in Selective Retailing, a business group traditionally characterized by a high
turnover rate. The principal reasons for the departures were resignation (72% of the total)
and individual dismissal (15% of the total number of departures).
49
Breakdown of transfers by business group and geographic region
By business group
Recruitments
2005
2004
Departures
2005
2004
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other activities
676
794
3,631
2,649
309
6,217
43
666
550
4,006
2,626
344
8,325
63
573
619
3,354
2,102
242
4,483
32
408
684
3,138
2,126
327
5,562
46
14,319
16,580
11,405
12,291
1,773
2,868
4,865
492
4,105
216
2,180
2,627
7,201
646
3,788
138
1,879
2,271
3,780
703
2,579
193
2,053
2,049
5,003
591
2,443
152
14,319
16,580
11,405
12,291
Total
By geographic region
France
United States
Japan
Asia (excl. Japan)
Other countries
Total
The Group encourages employee transfers, from one geographic region to another or from
one company to another. The diversity of Group companies, their identity and their business
expertise in a variety of sectors encourage these two types of mobility. Today, over half the
managerial positions are filled internally. In 2005, over 670 transfers were made to another
Group company.
The Group also encourages transfers from one professional category to another, which
encourages employees to acquire new skills through qualifying or educational training.
50
13.2 Work time
13.2.1 Structure of work time
In France, 14,800 employees in 2005 worked under one or more flexible work schedules,
including:
Employees concerned (%)
Employees with variable hours/flexi-time
Employees who received “comp” time
Part-time employees: less than 20 hours
Part-time employees: 20 to 30 hours
Part-time employees: over 30 hours
Employees on 2 x 8 shifts over the entire year
Employees on 2 x 8 shifts over a short period
Employees working at night
Beneficiaries of parental leave
Beneficiaries of end of career leave
42.5
12.0
3.5
7.2
1.2
4.7
3.2
0.3
1.6
0.4
13.2.2 Overtime
In France, the annual overtime worked per employee does not exceed fifty hours.
13.2.3 Absenteeism
The absentee rate within the Group for both indefinite and fixed-term contracts was 4.0% in
2005 (4.2% in 2004).
13.3 Compensation
13.3.1 Average compensation
In France, the breakdown for the average monthly gross compensation in 2005 for
employees working under indefinite, full-time contracts who were present all year is as
follows:
(in euros)
Employees concerned (%)
less than 1,500
1,501 to 2,250
2,251 to 3,000
more than 3,000
23.7
30.9
19.2
26.2
Total
100.0
51
13.3.2 Personnel costs
2005
2004
Gross payroll – indefinite or fixed-term contracts
Employer’s payroll taxes
Temporary work
Personnel provided by outside service providers
2,019.5
491.1
97.5
63.3
1,763.7
459.3
81.5
52.4
Total
2,671.4
2,356.9
The weight of the costs for personnel provided by service providers and temporary
personnel represented worldwide 6% of the total payroll, including employer’s payroll tax.
13.3.3 Bonuses, profit-sharing and employee savings plans
All the French companies of the Group with at least 50 employees have a profit-sharing,
bonus or savings plan. These plans represented a total expense of 77.7 million euros in 2005.
Profit-sharing
Bonuses
Employer’s contribution to savings plans
46.5
27.0
4.2
Total
77.7
In 2001, the Group set up a global LVMH stock option plan and that year awarded 25
options at a price of 66 euros to each Group employee. The beneficiaries of this plan have
been able to exercise their options at any time since May 2005 until May 2009.
13.4 Training and professional relations
13.4.1 Professional equality
Women represent 71% of all Group employees working under indefinite employment
contracts.
52
This percentage can be broken down as follows:
Percentage of women
2005
2004
Breakdown by business group:
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other
75
32
74
80
55
77
53
75
32
73
80
55
76
55
Breakdown by socio-professional category:
Office and clerical
57
69
80
62
56
68
80
61
Breakdown by geographic region:
France
United States
Japan
Asia (excl. Japan)
Other countries
67
75
71
76
77
61
67
75
69
77
77
60
Total
71
71
A similar breakdown between men and women was also recorded in the recruitment of new
employees. Of the 14,319 workers recruited in 2005 under an indefinite contract, 76% were
women. The breakdown by socio-professional category is as follows:
Recruitment - % of women
2005
2004
Office and clerical
58
71
82
46
56
66
81
53
Total
76
74
In France, women represent 67% of participants in training sessions.
53
13.4.2 Summary of collective agreements
In France, the Group companies have Works Councils, Employee Delegates and
Committees for Health, Safety and Working Conditions. The Group Committee was
established in 1985.
In 2005, employee representatives attended nearly 1,400 meetings:
Types of meetings
Number
Works Council
Employee Delegate
Committee for Health, Safety and Working Conditions
Other
566
409
189
203
Total
1,367
These meetings resulted in the signature of 83 Enterprise Agreements (agreements signed as
part of annual wage and work time negotiations, bonus agreements, etc.).
13.4.3 Health and safety conditions
In 2005, there were 1,039 accidents in the workplace or traveling to and from work with
suspension of work, which resulted in 22,919 days of work lost.
In France, the breakdown of accidents with suspension of work, by business group, was as
follows:
Number of Frequency
accidents
rate
Severity
rate
Wines and Spirits
Selective retailing
Other
9
118
94
132
196
4
6.7
24.1
12.7
17.5
25.5
7.1
0.1
0.7
0.2
0.3
0.5
0.1
Total
553
18.8
0.4
Notes:
- the frequency rate is equal to the number of accidents with work suspension, multiplied by 1,000,000 and
divided by the total number of hours worked;
- the severity rating is equal to the number of days lost, multiplied by 1,000 and divided by the total number of
hours worked.
Nearly 19.5 million euros were invested in Health and Safety in 2005. This amount includes
expenditures for workplace medicine, items of protective equipment (gloves, goggles, etc.),
and programs to improve health and safety: compliance, signs, protective wear, etc…
These expenditures and investments represented 1% of the global gross payroll.
Nearly 13,200 persons received safety training in the Group companies throughout the
world.
54
13.4.4 Training
Jobs in the luxury products industry are characterized by the acquisition and development
of specific expertise that requires years of training. Managers must devote a large portion of
their time to training mid-level management in the management techniques specific to our
jobs. Thus, much of this training is provided every day in the workplace and is not recorded
in the indicators presented below.
Training investment (in millions of euros)
Percentage of payroll (%)
Average number of training days per employee
Average cost of training per employee (in euros)
Employees trained during the year (%)
2005
2004
46.6
2.3
3.4
740
71.5
48.6
2.8
2.9
777
70.1
The training investment made in 2005 by Group companies throughout the world
represented 46.6 million euros, representing 2.3% of payroll. The average training
investment per full-time equivalent person was 740 euros.
This amount resulted in the completion of 212,673 days of training. 71.5% of employees
received training in 2005 and the average number of training days per person was 3.4 days.
The orientation and/or induction sessions organized by the companies and/or the Group
welcomed more than 16,150 participants in 2005.
13.4.5 Hiring and employment of disabled workers
Christian Dior encourages the companies of the Group to develop programs to assist
persons facing employment difficulties. Several companies have developed partnerships with
“Assistance through Work” Centers in order to encourage the hiring of disabled workers. In
particular, Hennessy used these Centers in subcontracting repackaging operations. Parfums
Christian Dior created a specially equipped workshop designed for manufacturing personnel
who have serious medical restrictions; this workshop now has 26 workers. Others are
expected to be created in the near future.
In France, personnel with a disability represent 2.1% of the total workforce. The services
subcontracted in France to “Assistance through Work” Centers represented 2.2 million
euros in 2005.
13.4.6 Social projects and complementary services
In 2005 in France, the different companies of the Group devoted a budget of over
12.2 million euros, representing 1.9% of the payroll, to social and cultural projects through
their contributions to the Works Committees.
Canteen costs for employees represented a budget of 10.4 million euros.
13.5 Relations with third parties
13.5.1 Relations with suppliers
The majority of the Group’s production operations are located in France and most of its
subcontractors are in Europe, which ensures compliance with the provisions of the basic
conventions of the International Labor Organization.
55
Several Group companies have established supplier charters and codes of conduct. In
particular, Moët & Chandon signs a specification schedule with its subcontractors, which
includes provisions on protection of the environment and respect for fundamental labor
rights. Audits of suppliers are conducted.
Sephora includes respect for the rights of employees, a ban on child labor,
non-discrimination, respect for work time and the environment in its supplier specifications.
Louis Vuitton has established an ethical process of social pre-audits based on compliance
with local regulations and the standards defined by the SA 8000 standard, which is based on
the ILO conventions: no child labor, working conditions, health and safety, representation
and the right to collective bargaining, non-discrimination, disciplinary practices, work time
and compensation. In order to successfully and independently conduct a social pre-audit, the
Louis Vuitton buyers receive theoretical training in the approach and criteria as well as
practical training in the field under the supervision of a social auditor. Thus, in 2005, more
than 20 SA 8000 social pre-audits were completed, resulting in the qualification of 11 new
suppliers.
Donna Karan International has developed a “Vendor Code Of Conduct” that states the basic
principles of labor law and encourages the highest ethical standards. The company has also
established a “Vendor Compliance Agreement” which provides for independent supplier
audits to verify that commitments are met.
In the same way, TAG Heuer is asking all new foreign suppliers for a written commitment
that they will comply with the social responsibility commitments defined in the SA 8000
standard.
This procedure is also used by Parfums Christian Dior, Parfums Givenchy and Guerlain,
which have defined specifications that require compliance with the provisions of the
SA 8000 standard.
Finally, and in order to facilitate exchanges and the development of best practices within the
companies, the Group has set up a network of agents who work with suppliers. A meeting
was held in October 2005 during which executives from Louis Vuitton, Tag Heuer and
Donna Karan presented their procedures.
13.5.2 Territorial impact of the business on jobs and regional development
Dior practices a policy of maintaining and developing jobs. Thanks to the steady growth in
its brands, new revenue jobs are being created in all the countries in which we are present,
particularly because of the expansion of the network of owned stores. The opening of
Maison Louis Vuitton on the Champs Elysées in Paris also generated a large number of new
jobs, as well as an expansion of our international teams. In the same way, the opening of the
Galeria in Okinawa, Japan created nearly 600 new jobs. In France, La Samaritaine, which
was forced to close its doors in order to complete safety and compliance work, set up a
special mechanism until October 31, 2006, to assist in finding new jobs adapted to the
individual situation of each employee. This redeployment plan was approved in an enterprise
agreement signed by most of the union organizations on February 6, 2006.
There were no significant mass layoffs in France in 2005.
Many of the Group’s large companies are historically established in the French provinces
and are major players in the development of jobs in their respective regions: Parfums
Christian Dior in Saint Jean de Braye (near Orléans), Veuve Clicquot Ponsardin and
Moët & Chandon in Champagne, and Hennessy in Cognac, have all developed public
56
relations and communication policies to work with the local authorities, particularly in areas
of cultural and educational events and employment. Sephora, which is establishing stores
throughout France (61% of the work force works outside the Paris region), regularly
conducts programs to stimulate local employment.
13.5.3 Relations with educational institutions and social inclusion associations
The Group’s companies have developed a number of international partnerships with
management and engineering schools, as well as with design schools and institutions that
specialize in the skills specifically needed in our businesses. The leading companies
participate in presentations at these schools several times a year. Senior executives of the
Group are involved in teaching several programs.
The Group’s companies maintain a constant policy to hire unqualified workers whom they
train for several months in the processes and techniques to manufacture their products. The
acquisition and control of these specialist skills require years of training in most of our
businesses: particularly leather working, fashion, viticulture and wine production, and watch
making. Sponsorship programs have been initiated with schools, technical training institutes
and apprentice training centers in order to train the professionals of tomorrow. Each
company is developing its own initiatives.
Louis Vuitton has developed with Lycée Issoudun a post-high school training program
designed to train future leather workers for the prototype workshop, the repair shop and
special orders. This training lasts one year and consists of four periods of course work (one
month each) and four internship periods (one month each) in production, design and
methods. Hennessy has also developed a partnership with the Louis Delage technical school
in Cognac to train timer machinists and regularly welcomes cooper apprentices. TAG
Heuer’s recruitment of a highly qualified Watchmaker Trainer has allowed the brand to
identify and recruit employees without initial qualifications in watchmaking and train them
in the different trades in this sector.
On June 9, 2005, LVMH signed the Apprenticeship Charter. This Charter is intended to
promote the training and qualification of young workers by increasing the number of
apprentices and by promoting this route. Nearly 200 professional training and
apprenticeship contracts were signed in 2005. In addition, the Group’s recruitment policy
includes initiatives to assist persons who have difficulty finding work. Thus, Louis Vuitton
signed agreements to include persons with a long-term illness within its workshops and
Veuve Clicquot Ponsardin has established partnerships with ANPE (the French national
employment agency) to welcome young people on work experience.
13.6 Compliance with international agreements
In each decision, consideration for people, their freedom and dignity, as well as their
personal development and health, is a cornerstone of a doctrine of responsibility subscribed
to by all the companies of the Group.
All the Group companies have policies and practices to ensure equal opportunity and
treatment (gender, race, religion, politics, etc, …) as defined in the conventions of the
International Labor Organization. This culture and these practices also lead to respect for
freedom of association, respect for individuals, and the prohibition of child labor and forced
labor.
57
XIV. EXCEPTIONAL EVENTS AND LITIGATION
• In managing its current businesses, the Group is party to various proceedings relating to
trademark law, protection of intellectual property rights, protection of selective distribution
networks, licensing agreements, employee relations, audits of tax filings, and all other
matters inherent in its activities. The Group believes that the provisions recognized on its
balance sheet for these risks, litigation or disputes, both known or in progress on the closing
date, are sufficient to prevent any material negative impact on the consolidated financial
position if the outcome is unfavorable.
• In a summons filed on October 30, 2002, LVMH initiated an action against Morgan
Stanley in the Paris Commercial Court to obtain relief for the damages caused by false
notations and bias in the analyses and publications issued by this bank against LVMH.
In a judgment handed down on January 12, 2004, the Paris Commercial Court found that
these actions constituted gross negligence, and ordered Morgan Stanley to pay LVMH
30 million euros in damages and appointed Mr. Didier Kling as expert to identify and
calculate all elements related to certain items of the damages. Morgan Stanley has filed an
appeal against the lower court ruling; however, this ruling included provisional execution
and did not suspend the orders issued or interrupt the expert appraisal process.
The expert appraisal is currently in progress and LVMH has presented to the expert a
valuation of the portion of the financial damages subject to his assessment equal to
182.9 million euros. The appeals proceeding is continuing at the same time. LVMH has
asked the Court to uphold the judgment of the Paris Commercial Court, to order Morgan
Stanley to pay 30 million euros as non-financial damages and 18.5 million in financial
damages not subject to the expert’s appraisal. LVMH’s claims total 232 million euros. At the
end of the hearing on March 21, 2006, the Paris Court of Appeals announced that it would
hand down its ruling on June 30, 2006.
XV. SUBSEQUENT EVENTS
No significant event had occurred at the date on which the accounts were approved.
[Updated after the meeting of the Board of Directors approving the financial statements:
Following an investigation launched in 1998 on the competitive situation within the luxury
perfume sector in France, the Competition Council delivered a decision on March 14, 2006
condemning the leading manufacturers and distributors for facts relating to the years 1997 to
2000. The financial penalties imposed on the Group’s companies came to a total of
14.5 million euros. These companies are appealing against the decision.]
58
TO THE
REPORT OF THE CHAIRMAN
OF THE BOARD OF DIRECTORS
SHAREHOLDERS’ MEETING ON MAY 11, 2006
This report, prepared in accordance with the provisions of Article L.225-37 of the
Commercial Code, is intended to describe the conditions for the preparation and
organization of the work of the Board of Directors of the Company and the internal control
procedures established by the Company.
I. PREPARATION AND ORGANIZATION OF THE WORK OF THE
BOARD OF DIRECTORS
The Board of Directors has developed a Charter that specifies the membership, missions,
operation and responsibilities of the Board.
The Board of Directors has two committees, whose members, role and mission are defined
by internal rules.
A copy of the Board of Directors’ Charter and the bylaws of the Committees are sent to all
candidates for the post of board member and to the permanent representative of a legal
entity prior to taking up their post.
Board of Directors
As the strategic body of the Company, the priority objectives of the Board are to increase the
value of the Company, adopt the major strategic directions and monitor their
implementation, verify the reliability and fair presentation of the information about the
Company, and protect the corporate assets.
The Board of Directors of the Christian Dior Group guarantees respect for their rights to
each shareholder of the Company and ensures that they fulfill all their duties.
No board member performing management duties within the Company holds office in a
company in which an officer is a member of the Board of Directors of Christian Dior.
In 2005, the Board of Directors met three times on a written notice from the Chairman sent
to each of the board members at least one week before the date of the meeting. The
attendance rate of the board members at meetings was an average of 87%.
The Board of Directors was specifically required to close the annual and interim accounts,
approve the documents submitted for the approval of the shareholders at the Annual
Meeting, renew the mandates of the Chairman of the Board and the Chief Executive
Officer, issue bonds, and establish option plans. The documents and information required by
the Board to perform its mission were provided to the board members for each meeting.
The Board of Directors has not placed any limitation on the powers of the Chief Executive
Officer allowed by law.
Performance Audit Committee
The essential duties of the Performance Audit Committee are to ensure compliance of the
accounting principles followed by the Company with generally accepted accounting
principles and to review the parent company and consolidated accounts before they are
submitted to the Board of Directors.
59
The members and the Committee Chairman are appointed by the Board of Directors.
The Performance Audit Committee met twice in 2005, with at least two members present.
All meetings were held in the presence of the Statutory Auditors, the Chief Financial Officer
and the Accounting Director of the Company and the Accounting Director of the principal
subsidiary, LVMH.
The work of the Committee focused primarily on a review of the parent company and
consolidated accounts, and monitored the risks and coverage of the risks.
Nominating and Compensation Committee
The primary duties of the Nominating and Compensation Committee are to issue:
• recommendations for the distribution of the board members’ fees paid by the Company
and for the compensation, in-kind benefits and stock options for the Chairman of the
Board of Directors and the Chief Executive Officer of the Company;
• opinions on candidates for the positions of board member and advisor of the Company or
the executive positions of its principal subsidiaries, on the compensation and in-kind
benefits granted to board members and advisors of the Company or its subsidiaries, and
on the fixed or variable, immediate or deferred compensation and incentives for the
officers of the Group.
The members and the Committee Chairman are appointed by the Board of Directors.
The Committee met twice during 2005 with all members present. It issued recommendations
concerning compensation and the granting of stock options to the Chairman of the Board
and the Chief Executive Officer and issued opinions on the compensation awarded to certain
board members by the Company or its subsidiaries.
II. INTERNAL CONTROL PROCEDURES
The purpose of the internal control procedures in force at Christian Dior is:
• first, to ensure that management acts or operations as well as the behavior of the
personnel fall within the framework defined by the strategies adopted for the Company
by the corporate bodies, by the applicable laws and regulations, and by the values,
standards and rules within the Company;
• second, to verify that the accounting, financial and management information provided to
the Company’s corporate bodies fairly reflects the business and situation of the Company.
One of the objectives of the internal control system is to prevent and manage the risks
resulting from the Company’s activity and the risks of errors or fraud, particularly in the
accounting and financial areas. Like any system of control, it cannot, however, absolutely
guarantee the complete elimination of these risks.
Internal control at Christian Dior takes into account the specific structure of the Group.
Christian Dior is a holding company that holds two principal assets: a 42.4% interest in
LVMH and a 100% stake in Christian Dior Couture. LVMH is a publicly traded company,
the Chairman of which is also the Chairman of Christian Dior, and several board members
sit on the Board of both companies. Christian Dior Couture has a Board of Directors, the
membership of which is similar to the membership of the Christian Dior Board.
The section devoted to internal control will present the procedures for Christian Dior Couture
and for the holding company Christian Dior S.A.; the procedures in force at LVMH are
described in the report filed by that company, to be consulted in addition to this report.
60
Christian Dior Couture carries out a business for the design, production and international
distribution for all products of the brand. It also operates a distribution business in various
markets through its 35 subsidiaries.
In this double role, internal control is exercised directly over Christian Dior Couture SA,
and in a supervisory capacity over all the subsidiaries.
Internal procedures exist in each legal entity. These procedures govern, in particular,
signature powers, asset monitoring, expenditure commitments, expense accounts, the
opening of customer accounts, pricing, management of press collections, etc.
Contractual commitments are subject to prior control and authorization from the Legal
Department.
All the procedures related to points of sale have been reviewed and combined within a
special manual for boutique operations, which was implemented in 2004 and updated at the
end of 2005 at the time of the deployment of a new software application to manage points of
sale. Based on the deployment of this application, periodic updates will be completed and
sent to point of sale managers.
The Company has set up a self-evaluation system to assess the effectiveness of the internal
control in the subsidiaries.
Two questionnaires were sent to the subsidiaries:
• one questionnaire covered the monitoring of the procedures to be applied by the
subsidiaries in all key cycles (Purchasing, Inventory and Logistics, Capital expenditures,
Information Systems, Human Resources, Accounting and Finance);
• the other dealt with the key processes of the retail activity (revenue, cash flow, etc.).
The analysis of the responses led to recommendations to be followed by the subsidiaries, the
application of which is monitored by the internal audit unit.
Christian Dior S.A.
1. The internal control environment
As indicated previously, Christian Dior S.A. is a holding company whose assets are
essentially limited to two lines of equity interests in Christian Dior Couture and LVMH.
This activity within Christian Dior S.A. is primarily dedicated to:
• protecting legal ownership of these two lines of securities;
• exercising the rights and powers enjoyed by one majority shareholder, i.e.:
- representation on the boards and general meetings of the subsidiaries,
- collection of the dividends paid by the subsidiaries,
- control of the economic performance of the subsidiaries;
• and, since Christian Dior S.A. is a publicly traded company, providing full financial
information in compliance with current laws and regulations.
Given the limited number of tasks as described above and its consolidation within a Group
that has the expertise necessary for its administration, Christian Dior S.A. uses the
specialized services of the Group in the areas inherent to holding company activity, which
are the legal, financial and accounting areas. An assistance agreement has been established
with the Groupe Arnault.
61
With respect to services outside the Group, the General Meeting of Christian Dior S.A. has
appointed two leading firms as Auditors; one of these firms also performs the same functions
at Christian Dior Couture and LVMH.
2. Control of risks
Key elements of the internal control procedures
Given the Company’s business, the internal control systems are primarily intended to
prevent the risks of error or fraud in the financial and accounting areas. The following
principles guide our organization:
• very limited and specific delegations of power, known to counterparties; sub-delegations
are reduced to a minimum;
• legal control prior to the signature of contracts;
• separation of the scheduling of expenditures and payment;
• secure payments;
• procedural rules known by potential users;
• integrated databases (a single entry for all users);
• frequent controls (both internal and external).
Legal and operational control over the subsidiaries exercised by the parent company
➤
Control of holdings
The securities held in subsidiaries are the subject of a quarterly check between the
Accounting Department of the Company and the securities departments of the relevant
companies.
➤
Operational control
Christian Dior S.A.’s operational control over its subsidiaries is exercised through:
• legal departments, meetings of the Board of Directors, and General Meetings, at which the
Company is systematically represented;
• management information that allows the officers of Christian Dior S.A. to take part in the
process to define objectives and control execution:
- three-year plans and annual budgets,
- monthly reporting and reconciliation of actuals to budgets and an analysis of the
variances,
- quarterly meetings to analyze performance with the subsidiary’s management.
3. Internal control for the preparation of the parent company’s financial and accounting
information
The corporate and consolidated financial statements are covered by specific instructions and
an information feedback system to process full information within the appropriate deadlines.
The exhaustive controls performed at sub-consolidation levels (LVMH and Christian Dior
Couture) guarantee the integrity of the information.
The financial information intended for the financial markets (financial analysts, investors,
individual shareholders, market authorities) is provided under the control of the Finance
Division. This information is in strict compliance with the market rules in force, particularly
the principle of equal treatment of investors.
62
4. Implementation of the IFRS
The Christian Dior Group finalized the implementation of the IFRS at the time of
presentation of the 2004 financial statements. Those statements were closed in accordance
with French standards and presented under IFRS for information purposes. The 2005 halfyear and annual financial statements have been prepared in accordance with the new
standards.
5. The “LSF” project
In addition to the existing internal control mechanism and pursuant to the Financial Security
Act (“LSF” – Loi de Sécurité Financière), the Christian Dior Group continued the process
initiated in 2003 and 2004 to formalize and evaluate its internal control over time. This
process has been continued both at LVMH and at Christian Dior Couture.
63
REPORT OF THE AUDITORS
ESTABLISHED PURSUANT TO ARTICLE L.225-235
OF THE COMMERCIAL CODE, ON THE REPORT OF THE CHAIRMAN
OF THE BOARD OF DIRECTORS OF CHRISTIAN DIOR S.A.,
CONCERNING THE INTERNAL CONTROL
PROCEDURES RELATING TO THE PREPARATION AND
PROCESSING OF THE ACCOUNTING AND FINANCIAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2005
MAZARS & GUERARD
MAZARS
Le Vinci - 4, Allée de l’Arche
92075 Paris-La Défense Cedex
S.A. with capital of 8,320,000 euros
ERNST & YOUNG AUDIT
Faubourg de l’Arche
11, Allée de l’Arche
S.A.S. with variable capital
Statutory Auditor
Member of the Compagnie régionale
de Paris
Statutory Auditor
Member of the Compagnie régionale
de Versailles
To the Shareholders,
In our capacity as auditors of the Christian Dior company and pursuant to the provisions of
Article L.225-235 of the Commercial Code, we are presenting to you our report on the
report prepared by the Chairman of your Company in accordance with the provisions of
Article L.225-37 of the Commercial Code for the financial year ended December 31, 2005.
It is the responsibility of the Chairman to report on the conditions for the preparation and
organization of the work of the Board of Directors and the internal control procedures
established within the Company.
It is our responsibility to inform you of our comments on the information provided in the
Chairman’s report concerning the internal control procedures for the preparation and
statement of the accounting and financial information.
We have performed our audits in accordance with the professional auditing standards
generally accepted in France. Those standards require that we conduct our verification in
order to assess the fair presentation of the information provided in the Chairman’s report
concerning the internal control procedures for the preparation and statement of the
accounting and financial information. This task consisted of:
- Reviewing the objectives and the general organization of the internal control, as well as the
internal control procedures for the preparation and statement of the accounting and
financial information presented in the Chairman’s report;
- Reviewing the work underlying all information thus provided in the report.
64
On the basis of our work, we have no comment to make on the information provided
concerning the Company’s internal control procedures for the preparation and statement of the
accounting and financial information contained in the report of the Chairman of the Board of
Directors, established pursuant to the provisions of the final section of Article L.225-37 of the
Commercial Code.
Paris-La-Défense, April 10, 2006
The Auditors
MAZARS & GUERARD
Mazars
ERNST & YOUNG AUDIT
Denis Grison
Christian Mouillon
65
CONSOLIDATED FINANCIAL
STATEMENTS
67
CONSOLIDATED
HIGHLIGHTS
2005
2004 (1)
• Revenue
Net income—Group share
14,556
2,791
618
13,060
2,413
549
• Capital
Total shareholders’ equity
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net financial debt
Total assets
363
11,868
23,146
8,813
12,611
7,480
5,706
31,959
363
10,065
21,706
7,659
12,613
6,687
6,646
29,365
3,185
2,789
Earnings per share
Net income, Group share
Net income, Group share after dilution
3.48
3.45
3.09
3.07
Dividend per share
Interim dividend
Final
Total dividend (2)
0.32
0.84
1.16
0.32
0.65
0.97
Key consolidated data
• Cash flow from operations before changes in working capital
(in euros)
(2) For 2005, the amount proposed at the General Meeting on May 11, 2006.
69
CONSOLIDATED
BALANCE
ASSETS
SHEET
Notes
Brands and other intangible assets, net
Goodwill, net
Tangible assets, net
Investments in associates
Non-current available for sale financial assets
Other non-current assets
Deferred tax
3
4
6
7
8-12
26
Non-current assets
Inventories and work-in-progress
Trade receivables and related accounts
Corporate income tax
Other current assets
Cash and cash equivalents
9
10
11-12
13
Current assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes
Capital
Premiums
Dior treasury share
Revaluation reserves
Other reserves
Currency translation
2005
2004 (1)
11,186
5,058
5,258
131
451
701
361
10,495
4,634
4,798
117
718
666
278
23,146
21,706
4,270
1,437
317
1,279
1,510
3,723
1,419
115
1,336
1,066
8,813
7,659
31,959
29,365
2005
2004 (1)
363
2,205
(157)
292
1,021
126
618
363
2,205
(155)
245
626
(89)
549
Shareholders’ equity, Group share
Minority interests
14
16
4,468
7,400
3,744
6,321
Shareholders’ equity
Long-term financial debt
Provisions – over one year
Deferred tax
Other non-current liabilities
17
18
26
19
11,868
4,443
952
3,846
3,370
10,065
5,092
886
3,389
3 246
12,611
3,376
1,772
377
312
1,643
12,613
2,984
1,629
203
265
1,606
7,480
6,687
31,959
29,365
Non-current liabilities
Short-term financial debt
Trade accounts and related accounts
Corporate income tax
Provisions – under one year
Other current liabilities
17
18
20
Current liabilities
Total of liabilities and shareholders’ equity
70
CONSOLIDATED
INCOME
STATEMENT
(in millions of euros, except earnings per share)
Notes
Revenue
Cost of sales
22-23
2005
2004 (1)
14,556
13,060
(5,228)
(4,533)
9,328
8,527
(5,201)
(1,336)
(4,832)
(1,282)
2,791
2,413
(226)
(203)
Operating income
2,565
2,210
Cost of net financial debt
Dividends received
Other financial income and expenses
(234)
49
(6)
(265)
16
(15)
Gross margin
Marketing and selling expenses
General and administrative expenses
22-23
Other operating income and expenses
24
Financial income
25
(191)
(264)
Income taxes
Share of income from investments in associates
26
7
(728)
8
(488)
(15)
1,654
1,443
1,036
894
618
549
3.48
3.09
177,655,990
177,774,420
Net income
Minority interests
Net income - Group share
Net income, Group share, per share (in euros)
Number of shares used for the calculation
27
Net income, Group share, after dilution per share (in euros)
Number of shares used for the calculation
27
71
3.45
3.07
179,002,963
178,737,153
CONSOLIDATED STATEMENT OF CHANGES
SHAREHOLDERS’ EQUITY
IN
Total shareholders’ equity
At January 1, 2004 (1)
Note
Income
Number
Dior Revaluation and other Currency
of shares Capital Premiums shares
reserves reserves translation
14.1
14.2
14.4
14.5
181,727,048
363
2,205 (130)
Gains and losses recorded on shareholders’
equity
Net income
–
(89)
549
–
–
Expenses linked to stock option plans
Change in treasury shares
Dividends paid
Changes in consolidation scope
Impact of securities purchase commitments for
minority interests
–
26
–
181,727,048
363
2,205 (155)
549
(89)
27
(9)
(162)
9
(25)
Gains and losses recorded on shareholders’
equity
Net income
245
1,175
(89)
215
47
618
Total gains and losses for the period
–
Change in treasury shares
Dividends paid
Changes in consolidation scope
Impact of securities purchase commitments for
minority interests
761
26
Total gains and losses for the period
At December 31, 2004 (1)
219
–
–
47
363
2,205 (157)
215
17
1
(172)
(2)
181,727,048
618
292
1,639
Group
share
3,418
Total
6,031 9,449
(89)
26
(176) (265)
48
74
549
893 1,442
486
765 1,251
27
(34)
(162)
9
–
28
55
(75) (109)
(340) (502)
(19) (10)
(69) (69)
3,744
215
47
6,321 10,065
381
64
596
111
618
1,036 1,654
880
1,481 2,361
17
(1)
(172)
–
–
126
Minority
interests
16
4,468
15
32
27
26
(371) (543)
(74) (74)
1
1
7,400 11,868
Shareholders’ equity under IFRS presented at January 1, 2004 and December 31, 2004 rose by 233 million euros and
280 millions euros respectively from the data presented in the document “Implementation of the IFRS” part 2 of the 2004
Annual Report. This change is explained in Note 14.2 to the financial statements.
72
CONSOLIDATED
CASH
FLOW
STATEMENT
Notes
2005
2004 (1)
I - OPERATING ACTIVITIES
Operating income
Net depreciation, amortization and provisions, excluding fiscal and financial items
Other expenses calculated, excluding financial items
Dividends received
Other restatements
2,565
671
(92)
52
(11)
2,210
562
(21)
26
12
Cash flow from operations before changes in working capital
Cost of net financial debt: interest paid
Income taxes paid
3,185
(268)
(620)
2,789
(266)
(401)
Cash flow after financial interest and taxes
Change in inventories and work in progress
Change in trade receivables and related accounts
Change in trade accounts payable and related accounts
Change in other receivables and liabilities
2,297
(281)
(77)
18
53
2,122
(276)
21
(88)
110
(287)
(233)
Change in working capital requirement
Change in cash flow from operating activities
2,010
1,889
II - INVESTING ACTIVITIES
Acquisitions of intangible and tangible assets
Disposals of intangible and tangible assets
Guarantee deposits paid and other operational investing flows
(755)
21
7
(711)
63
(13)
Operating investments
Acquisitions of non-current available for sale financial assets
Disposals of non-current available for sale financial assets
Effects of acquisitions and disposals of consolidated investments
Other flows from financial investing activities
(727)
(69)
469
(604)
64
(661)
(57)
95
(401)
–
Financial investments
(140)
(363)
Change in cash from investing activities
(867)
(1,024)
III - TRANSACTIONS RELATED TO EQUITY
Capital increase of subsidiaries subscribed by minority interests
Acquisitions and revenue of Christian Dior and LVMH treasury shares
Dividends (including dividend withholding) and interim dividends paid during the year by Christian Dior
Dividends and interim dividends paid during the year to the minority interests of consolidated subsidiaries
3
30
(172)
(371)
1
(156)
(162)
(340)
Change in cash flow from transactions relating to equity
(510)
(657)
1,267
(1,621)
(40)
1,662
(1,717)
11
(394)
(44)
34
2
273
166
715
988
549
715
9
56
8
2.4.2
IV - FINANCING ACTIVITIES
Issues or subscriptions to borrowings and financial debt
Repayment of borrowings and financial debt
Acquisitions and revenue of financial investments
Change in cash flow from financing activities
V - IMPACT OF CURRENCY TRANSLATION
NET CHANGE IN CASH AND CASH EQUIVALENTS (I+II+III+IV+V)
NET CASH AT BEGINNING OF YEAR
NET CASH AT YEAR-END
13
13
Transactions included in the table above, without impact of the change in cash flow:
- finance lease investments
73
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Page
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
ACCOUNTING PRINCIPLES
CHANGES IN THE SCOPE OF CONSOLIDATION
BRANDS, TRADE NAMES AND OTHER INTANGIBLE ASSETS
GOODWILL
VALUATION OF INTANGIBLE ASSETS OF INDEFINITE LIFE
TANGIBLE ASSETS
INVESTMENTS IN ASSOCIATES
NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS
INVENTORIES AND WORK-IN-PROGRESS
ACCOUNTS RECEIVABLE
OTHER CURRENT ASSETS
FINANCIAL INVESTMENTS
CASH AND CASH EQUIVALENTS
SHAREHOLDERS’ EQUITY
STOCK OPTION PLANS AND RELATED
MINORITY INTERESTS
BORROWINGS AND FINANCIAL DEBT
PROVISIONS
OTHER NON-CURRENT LIABILITIES
OTHER CURRENT LIABILITIES
FINANCIAL INSTRUMENTS
SEGMENT INFORMATION
INCOME AND EXPENSES
OTHER OPERATING INCOME AND EXPENSES
NET FINANCIAL INCOME
INCOME TAXES
EARNINGS PER SHARE
PENSION COMMITMENTS, MEDICAL COSTS AND RELATED
BENEFITS
OFF-BALANCE SHEET COMMITMENTS
RELATED PARTIES
SUBSEQUENT EVENTS
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING PRINCIPLES
1.1 General framework
Pursuant to European regulation 1606/2002 of July 19, 2002, the consolidated financial
statements for 2005 were established in accordance with the International Accounting
Standards (IAS/IFRS) adopted by the European Union and applicable on the date the
accounts were closed on March 1, 2006. These standards have been consistently applied
over the years presented.
The standards IAS 32, IAS 39 and IFRS 5 were applied by the Group as of January 1,
2004, including the amendment to IAS 39 concerning the hedging of future intra-Group
cash flows.
The standards, amendments and interpretations issued by the IASB in August 2005 have not
been applied in the attached financial statements. These texts are IFRS 7, Financial
instruments – Information to be provided, and the amendment to IAS 1, Presentation of
financial statements for capital information, which must be applied as of 2007 or early in
2006, and the amendments to IAS 39 and IFRS 4 on financial guarantees, applicable in
2006. These texts will not have a significant impact on the Group’s financial statements.
The following texts issued by the IASB are not applicable to the Group: the amendments to
IFRS 1 and IFRS 6 of June 2005, IFRIC 6, Liabilities arising from participating in a specific
market – Waste electrical and electronic equipment of September 2005, and IFRIC 7,
Interpretation concerning financial reporting in hyper-inflationary economies of November
2005.
1.2 First adoption of IFRS
The consolidated financial statements for 2005 are the first financial statements established
in compliance with IFRS. The Group’s implementation of IFRS, described in part 2 of the
2004 Annual Report, consists of the following items:
• a note on the Group’s first application of the IFRS accounting principles, in particular the
methods of application of IFRS 1, First adoption of IFRS, and the presentation formats
chosen for the balance sheet and income statement;
• a note summarizing the impact of IFRS on the accounting principles followed by the
Group;
• reconciliation tables between French standards and IFRS for the following statements:
- shareholders’ equity at January 1, 2004, the transition date, and at
December 31, 2004;
- balance sheets at January 1 and December 31, 2004;
- income statement for 2004;
as well as a note with comments on these tables.
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IFRS 1 provides for exceptions to the retrospective application of IFRS to the transition
date; the exceptions used by the Group are as follows:
• business combinations: the exemption for retrospective application was not used. The
Christian Dior Group has retrospectively restated the acquisitions made since 1988, the
date of the first consolidation of LVMH; the standards IAS 36, Impairment of assets, and
IAS 38, Intangible Assets, have been applied retrospectively since that date;
• valuation of tangible and intangible assets: the option of valuing these assets at their fair
value on the transition date was not used except for all buildings held by Christian Dior
Couture;
• employment benefits: deferred actuarial differences under French standards at the
transition date have been booked;
• conversion of foreign subsidiary accounts: the conversion reserves related to the
consolidation of subsidiaries in foreign currencies were eliminated at January 1, 2004 as
per contra to “Other reserves”;
• share-based payment: IFRS 2 on share-based payment is applied to all stock option plans
open on the transition date, including the plans set up before November 7, 2002, the date
before which application is optional.
1.3 Use of estimates
In the process of preparing the consolidated financial statements, the valuation of certain
balances on the balance sheet or income statement requires the use of assumptions, estimates
or assessments. This covers the valuation of intangible assets, commitments to purchase the
shares of minority interests, the determination of the amount of the provisions for liabilities
and charges or provisions for inventory impairment and, if applicable, deferred tax. These
assumptions, estimate or assessments established on the basis of existing information or
situations on the date the statements are prepared may differ from reality in the future.
1.4 Consolidation methods
The subsidiaries in which the Group has direct or indirect exclusive control, by law or in
fact, are fully consolidated.
Companies under joint control are consolidated on a proportionate basis.
The retail subsidiaries jointly held with the Diageo group are consolidated at the percentage
of their balance sheets and income statements that corresponds to the Group’s activities only
(see Note 1.22).
The companies in which the Group exercises a significant influence are consolidated using
the equity method.
1.5 Conversion of the financial statements of foreign subsidiaries
The currency of the consolidated accounts is the euro: subsidiaries’ accounts that use a
different operational currency are converted into euros:
• at the closing price for balance sheet items;
• at the average price for the period for the items on the income statement.
Translation adjustments resulting from the application of these prices are recorded in
shareholders’ equity as “currency translation”.
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1.6 Currency transactions and exchange hedges
Foreign currency transactions carried out by the consolidated companies are converted into
their operational currency at the exchange rate on the date of the transaction.
Receivables and payables expressed in foreign currencies are converted at the rate of these
currencies on the closing date. Unrealized gains and losses resulting from this conversion are
booked as:
• gross margin for commercial transactions;
• financial income for financial transactions.
The currency gains and losses resulting from the conversion of intra-Group transactions or
receivables and payables in foreign currencies, or from their elimination, are recognized in
the income statement, unless they come from long-term intra-Group financing operations
that can be considered as capital operations: in this case, they are recognized under
shareholders’ equity as “Currency translation”.
When derivatives are assigned to hedge commercial operations in currencies, they are
recognized on the balance sheet at their market value on the closing date; the change in
market value of these derivatives is booked as follows:
• as gross margin for the effective portion of the hedge of receivables and payables booked
on the balance sheet on the closing date;
• under shareholders’ equity, as revaluation reserve, for the effective portion of the hedge on
future cash flows; this amount is transferred to gross margin when the receivables and
payables covered by the hedge are booked;
• as financial income for the ineffective portion of the hedge; the changes in value related to
the forward points of the forward contracts and the time value under option contracts are
systematically considered to be the ineffective portion.
When derivatives are assigned to hedge net currency positions of consolidated subsidiaries,
the change in market value is recognized in shareholders’ equity as “Currency translation”,
for the amount of the effective portion and as financial income for the effective portion.
1.7 Brands, trade names and other intangible assets
Only the brands and trade names acquired, which can be individualized and have a
recognized name, are recorded as assets, at the value determined at the time of acquisition.
Expenses incurred to create a new brand or to develop an existing one are recorded under
expenses.
Brands and other intangible assets with a definite life are amortized over their useful life.
Brands and other intangible assets with an indefinite life are not amortized, but are subject
to an annual valuation test.
The classification of a brand or trade name as an asset with a definite or indefinite life is the
result of the application of the following criteria:
• the global positioning of the brand or trade name on its market in terms of volume of
activity, international presence, and reputation;
• prospects for long-term profitability;
• the degree of exposure to circumstantial risks;
• a major event occurring in the business group that might affect the future of the brand or
trade name;
• the age of the brand or trade name.
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The period of amortization of the brands, which is based on the estimate of their
permanence, is between 5 and 40 years.
The brand and trade name amortization charge and, if applicable, the amount of their
impairment are booked in “Other operating income and expenses”.
Research expenses are not capitalized. The costs to develop a new product are capitalized
only if the decision to launch the product is effectively made.
Intangible assets, other than brands and trade names, are amortized over the following
periods:
• Leasehold acquisition rights:
• set-up costs:
• software:
based on market conditions, most often 1 to 2 times the
term of the lease
maximum 3 years
1 to 5 years
1.8 Goodwill
When exclusive control of a company is obtained, the assets, liabilities and contingent
liabilities of the company acquired are valued at fair value; the difference between the cost of
the takeover and the Group’s share of the fair value of these assets, liabilities and contingent
liabilities is recognized as “Goodwill”.
The cost of the takeover is the price that was or would be paid by the Group in the context
of an acquisition.
In the absence of specific provisions in the current standards, the difference between the
acquisition cost and the book value of the minority interests acquired is recognized as
“Goodwill”.
Goodwill is booked in the operational currency of the entity acquired.
Goodwill is not amortized, but is subject to an annual valuation test. The impairment
expense, if any, is included in “Other operating income and expenses”.
1.9 Commitments to purchase minority interests
The minority shareholders of certain fully consolidated subsidiaries benefit from
commitments to buy their shares granted by the Group.
Pending clarification on IAS 32, the Christian Dior Group has recorded these commitments
as follows:
• the commitment, in the amount on the closing date, appears as “Other non-current
liabilities”;
• the corresponding minority interests are reclassified in the above amount;
• the difference between the amount of the commitment and the reclassified minority
interests is recognized as “Goodwill”.
This accounting method has no impact on the presentation of minority interests in the
income statement.
However, the accounting treatment described above calls for the following comment: some
interpretations of the texts result in accounting for goodwill in full as a deduction from
shareholders’ equity; under other interpretations, goodwill is maintained under assets but at
an amount fixed at the time of the takeover, with subsequent variations recorded in results.
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1.10 Tangible assets
The gross value of tangible assets, with the exception of the vineyard land and producing
vineyards and all buildings held by Christian Dior Couture, is the acquisition cost. The
financial costs incurred during the period preceding operation are not capitalized.
Vines for the champagnes, cognac and other wines produced by the Group are biological
assets as defined by IAS 41 Agriculture. As the valuation of these items at market value is
only slightly different from the valuation at historic cost, no revaluation was made.
Vineyard land and producing vineyards are recorded at market value on the closing date.
This valuation results from official data published on recent transactions in the same region
or on independent appraisals. The difference between the historic acquisition cost and the
market value is recognized as shareholders’ equity in “Revaluation reserves”. If the market
value falls below the acquisition cost, an impairment is booked in the income statement for
the amount of the difference.
Rental properties are not revalued at their market value.
The assets financed by finance lease are capitalized on the basis of the present value of
future rents or on the basis of their market value if that value is lower.
Tangible assets are amortized using the straight line method over the estimated duration of
their useful life:
•
•
•
•
buildings, investment property:
plant and equipment:
retail fittings:
vineyard land and producing vineyards:
20 to 50 years
3 to 25 years
3 to 10 years
18 to 25 years
The amortizable basis for the tangible assets consists of the acquisition cost, minus the
estimated residual value, if any.
Maintenance and repair costs are recorded as expenses when the transactions are completed.
1.11 Valuation tests of fixed assets
Valuation tests are performed for tangible and intangible fixed assets once an indication of a
potential loss of value exists, and at least once a year for intangible assets with an indefinite
life, primarily, brands, trade names and goodwill. When the net book value of these assets
becomes greater than the highest amount of their useful or market value, an impairment is
booked for the amount of the difference; impairment, charged first against goodwill, if any, is
booked as “Other operating income and expenses”.
Useful value is based on the discounted future cash flows that will be generated by these
assets. The sale price for the assets is determined by reference to recent similar transactions
or valuations conducted by independent experts for a potential sale.
Provisional cash flows are established at Group level by business group; a business group
corresponds to one or more brands or trade names and a specific management team. Within
the business group, cash-generating units may be determined at a smaller level, such as a
group of stores.
The valuation of brands and goodwill is primarily made on the basis of discounted
provisional cash flows or using the comparable transaction method, a method based on the
multiples of revenues and earnings used during recent transactions concerning similar
brands, or on market multiples applicable to the activities in question. Other methods are
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used as a complement: the royalty method, which gives a brand a value equivalent to the
capitalization of the royalties that would have to be paid for use; the margin differential
method, applicable only to cases where it is possible to measure the difference in revenue
generated by a brand compared with an unbranded product; the method using the cost of
reconstitution of an equivalent brand, particularly in terms of advertising costs.
The data used in the discounted provisional cash flow method comes from annual budgets
and multi-year plans established by the management of the relevant business groups. The
plans resulting in five-year forecasts, with the exception of some brands undergoing strategic
repositioning for which a longer period is used; in addition, a terminal value is taken into
consideration. When several scenarios are used, a probability of occurrence is assigned to
each one. The discount rate for the provisional cash flows integrates the rate of return
expected by an investor in the business concerned and the risk premium for this activity.
1.12 Available for sale financial assets
Financial assets are presented as current or non-current based on the type and estimate
period of holding.
Non-current available for sale financial assets primarily include strategic and non-strategic
equity investments.
Current available for sale financial assets include temporary investments in stocks, shares of
SICAVs and Mutual Funds (FCP), excluding investments related to daily cash
management, which are booked as “Cash and cash equivalents” (See Note 1.15).
These assets are booked at the closing price if they are traded investments and on the basis
of an estimate of their realization value if they are non-traded assets.
The positive or negative changes in value are recorded in shareholders’ equity as
“Revaluation reserves”.
In the event of a loss of value deemed definitive, a provision for impairment of this amount is
recognized as net financial income; for long-term investments and marketable stocks, the
provisions for impairment is restated in the income statement only at the time of the sale.
1.13 Inventories and work-in-progress
With the exception of the wines produced by the Group, inventories are recognized at their
cost price, excluding financial fees. The costs price is the cost of production (finished
products) or the purchase price plus related costs (raw materials, merchandise); it may not
exceed the net realization value.
The inventories of wines produced by the Group, particularly the wines from Champagne,
are valued at market value for the harvest in question, as if the grapes harvested had been
acquired from third parties. Until the harvest date, the grapes are valued prorata temporis on
the basis of an estimated yield and market value.
Changes in inventories are recognized, depending on the business, at the weighted average
costs or using the First In – First Out method (FIFO).
Considering the aging process for champagne and cognac, these inventories are often held
for more than one year. These inventories remain classified as current assets in line with
industry practice.
Impairments on inventories are recognized primarily in the businesses other than Wines and
Spirits. They are established most often because of obsolete products (approaching
expiration, season or collection ended) or on the basis of the possibility of sale.
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1.14 Trade receivables
Trade receivables, which are most often less than two months, are booked at face value.
Impairment is booked when the inventory value, based on the probability of collection, is
less than the booked value.
1.15 Cash and cash equivalents
The item “Cash and cash equivalents” includes liquid assets and money market investments
immediately available for which the value is not subject to changes in stock market prices.
Money market investments are valued at market value on the closing date; the changes in
value are recorded as financial income.
1.16 Provisions
A provision is booked once there is an obligation to a third party which will result for the
Group in a probable disbursement, the amount of which can be reliability valued.
When the execution date of this obligation is over one year, the amount of the provision is
calculated and discounted, the impact of which is generally recognized as financial income.
1.17 Financial debt
Financial debt is recorded at nominal value, net of premiums and related issue costs, which
are progressively recorded as financial income until maturity, using the effective interest rate
method.
If the fluctuation of the value of the debt is hedged as an interest-rate risk, the amount of the
debt hedged, and the associated hedging instruments, appear on the balance sheet at their
market value on the closing date; the effects of revaluation are recorded in financial income
for the period.
If the future interest rate is hedged, the financial debt for which flows are hedged continues
to be booked at the amortized costs and the change in value of the effective portion of the
hedge instrument is recorded under shareholders’ equity as revaluation reserve.
In the absence of a hedging relationship, or for the ineffective portion of hedges, fluctuations
in value of the derivative instruments are recorded in financial income.
When a derivative instrument is included in the financial debt, the option to book this debt
at market value is used.
Net financial debt is composed of short and long-term financial debt and the market value on
the closing date for interest rate derivatives, minus the value of the marketable securities and
other financial assets and cash and cash equivalents on this date.
1.18 Derivatives
The Group trades derivative instruments as part of its strategy to hedge currency and rate
risks. Hedging accounting requires, according to IAS 39, demonstrating and documenting
the effectiveness of the hedging relation when it is placed and throughout its life.
Effectiveness of the hedge in accounting terms is verified by the ratio of variations in the
value of the derivative and the underlying hedged item; this ratio should lie in a range
between 80 and 125%.
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Derivatives are booked on the balance sheet at their market value on the closing date.
Changes in the value of derivatives are recorded in accordance with the procedures specified
in Note 1.6 for the exchange risk hedges and in Note 1.17 for interest rate hedges.
Market value is established by reference to market data and using the valuation models
commonly used; this value is confirmed in the case of complex instrument by listings from
third party financial institutions.
Derivatives with maturity greater than twelve months are presented as non-current assets
and liabilities.
1.19 Christian Dior and LVMH treasury shares
• Christian Dior treasury shares
The Christian Dior shares held by the Group, for whatever reason, are deducted from
consolidated shareholders’ equity in the amount of the acquisition costs.
If they are sold, the cost price of the shares sold is established by category of allocation (see
Note 14.2) using the First In – First Out method (FIFO), with the exception of the shares
held for option plans, in which case the price is calculated by plan, using the Weighted
Average Price method. Sale results are recorded directly as shareholders’ equity for the
amount net of tax.
• LVMH treasury shares
LVMH’s purchases/sales of its own shares, which are the source of the changes in the
interest held by the Christian Dior Group in LVMH, are recorded in the consolidated
accounts of the Christian Dior Group as acquisitions and disposals of minority interests.
1.20 Retirement plans, medical expenses and other related benefit
When pensions, retirement indemnities, medical expenses and other related benefit are
covered by contributions paid by the Group to outside organizations, which assume the
commitment corresponding to the payment of the allocations or repayment of medical costs;
these contributions are booked as expenses for the year in which they are due, no liability is
booked on the balance sheet.
When the pensions, retirement indemnities, medical costs and other commitments are paid
directly by the Group, the amount of the corresponding actuarial commitment results in a
provision on the balance sheet; the change in this commitment is booked under profit from
recurring operations for the year, including the financial discounting effect.
When this commitment is covered, in whole or in part, by funds paid by the Group to
financial organizations, the amount of these dedicated investments is deducted from the
actuarial commitment on the balance sheet.
The actuarial commitment is calculated on the basis of valuations specific to each country
and to each Group company; these valuations include assumptions for salary increases,
inflation, life expectancies, employee turnover and return on dedicated investments.
The cumulative effects of the actuarial differences are amortized once they exceed at
year-end 10% of the amount of the commitment or the market value of the investments to
cover them. These differences are amortized beginning in the year following their
determination, over the residual average working life of the employees concerned.
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1.21 Current and deferred tax
Timing differences between the consolidated values of assets and liabilities and the values
resulting from the application of fiscal regulations results in the recognition of deferred tax.
The tax rate used to calculate deferred taxes is the rate known on the closing date; the
impacts of rate changes are recorded over the period in which this change is decided.
Tax savings resulting from fiscal deficits carried forward are recorded as deferred tax assets
and depreciated, as applicable; only the amounts that will probably be used are maintained
as assets on the balance sheet.
Deferred tax assets and liabilities are not discounted.
Taxes owed on distributable reserves of the subsidiaries are provisioned in the amount of the
distributions planned.
1.22 Recognition of revenue
• Definition of revenue
Revenue primarily includes retail sales in the Group’s stores and wholesale sales to
distributors and agents.
Retail sales comes from Fashion and Leather Goods, some brands of Perfumes and
Cosmetics and Watches and Jewelry, and from Selective Retailing. These sales are recorded
at the time of purchase by customers.
Wholesale sales comes from the Wines and Spirits business groups and certain brands of the
Perfumes and Cosmetics and Watches and Jewelry business groups. This revenue is
recorded when ownership is transferred, that is, most often upon shipping.
Shipping and transport costs reinvoiced to customers are included in revenue only when
they are included as a flat rate in the price of the products.
Revenue is presented net of any kind of rebate and discount. In particular, the amounts for
referencing the products or corresponding to shared advertising agreements with the
distributor are deducted from revenue and the corresponding trade receivables.
• Provision for returned products
Group companies in Perfumes and Cosmetics and, to a lesser extent, in Fashion and Leather
Goods and Watches and Jewelry, may take back unsold or out-of-date products from their
customers and distributors.
When this practice is established, the revenue recorded is reduced by the amount
corresponding to an estimate of these returns, in consideration for a reduction in trade
receivables and registration in inventory. The return rate used to establish these estimates is
calculated on a statistical basis.
• Activities in partnership with Diageo
A significant portion of the revenue of the Wines and Spirits business group is recorded
under distribution agreements with Diageo, which most often consist of joint ventures.
These joint ventures ensure deliveries and revenue to the customers of the LVMH and
Diageo brands; the division of the income and balance sheet of these entities between the
two groups is governed by the distribution agreements. Because of these agreements,
LVMH consolidates only the revenue and share of expenses in the joint ventures that apply
to its own brands.
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1.23 Stock option plans
Stock option plans result in the recording of a charge composed of the expected gain for the
beneficiaries of these plans; the expected gain is calculated on the date of the Board of
Directors’ meeting that established the plans, using the Black and Scholes method. This
charge is distributed using the straight line method over the period of acquisition of the
rights (2 to 4 years) as per contra to an increase in reserves.
For free share allocation plans, the expected gain is calculated on the basis of the closing
price for the share the day before the Board of Directors’ meeting that decides the plan, and
on the dividends expected during the rights vesting period.
Compensation plans tied to the price of the LVMH share are unwound in cash and not in
shares; the corresponding annual expense is booked as a contra entry to liabilities on the
balance sheet.
In 2004 and 2005, all plans for which the rights vesting period was open on January 1, 2004,
the date of the transition to IFRS, are included.
1.24 Profit from recurring operations and other operating income and expenses
The primary business of the Group is the management and development of its brands and
trade names. Profit from recurring operations comes from these activities, including
recurring and non-recurring operations and main or secondary operations.
Other operating income and expenses include items composing income which, because of
the type, amount or frequency, cannot be considered part of the current activities and
income of the Group.
This includes, in particular, the effects of changes in consolidation and impairment on
brands and goodwill. This also includes, if they are significant, gains or losses on disposals of
fixed assets, restructuring costs, costs for litigation, or any other non-current income or
expense that affects the comparability of profit from recurring operations from one period to
another.
1.25 Earnings per share
Earnings per share are calculated based on the weighted average number of shares
outstanding during the year, minus the average number of shares of treasury shares.
Earnings per share after dilution are established on the basis of the weighted average
number of shares before dilution, plus the weighted average number of shares that would
result from the exercise, during the period, of existing stock options for new shares or any
other diluting instrument. The funds collected for the exercise of these options are assumed
to be assigned, in this calculation, to buying back Christian Dior shares at a price equal to
their average market price over the period.
NOTE 2 - CHANGES IN THE SCOPE OF CONSOLIDATION
2.1 Wines and spirits: acquisition of Glenmorangie
Further to the amicable takeover bid completed at the end of December 2004, the Group
acquired a 99% interest in January 2005 in the capital of Glenmorangie plc, a British
company listed in London (United Kingdom), and the remaining capital in February and
March 2005 in connection with a withdrawal procedure.
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The cost of this acquisition came to 459 million euros (316 million pounds), including
8 million euros in acquisition costs. Under the terms of the bid, 51 million pounds of this
price was paid in the form of Loan Notes, bearing interest at 0.80% under the LIBOR GBP
rate. These Loan Notes may be redeemed at par as of December 15, 2005, as required by
holders, at the time of interest payments on June 15 and December 15 each year and by the
latest on December 15, 2012. At December 31, 2005, the balance of Loan Notes was
41 million pounds.
The interest in Glenmorangie has been fully consolidated since January 1, 2005. The
following table summarizes the conditions for allocating the price paid, based on
Glenmorangie’s balance sheet at December 31, 2004:
Value
retained
by the Group
Intangible fixed assets
Tangible assets
Inventories
Other current assets and liabilities, net
Cash
Financial debt
Staff benefit commitments
Deferred taxes and provisions
Goodwill
290
54
130
(22)
21
(66)
(12)
(95)
159
Total acquisition cost
459
Book
value
1
58
123
(10)
21
(66)
–
(7)
–
Intangible fixed assets include 289 million euros relative to the Glenmorangie, Ardbeg and
Glen Moray brands, with 234 million euros for the Glenmorangie brand.
Goodwill reflects the synergies expected from the integration of Glenmorangie into the Moët
Hennessy distribution network.
2.2 Wines and Spirits: acquisition of minority interests in Millennium
In April 2005, the Group acquired the 30% stake held by the minority shareholder in
Millennium for 120 million US dollars, taking its holding up to 100%.
This investment represents an additional Group share of 67 million euros in the distribution
license held by Millennium.
2.3 Other changes in the Group consolidation in 2005
Christian Lacroix (Fashion and Leather Goods) and MountAdam (Wines and Spirits) were
sold in January and July 2005 respectively. The 49.9% interest in Bonhams Brooks
PS&N Ltd, an associated entity, was sold in July 2005.
Les Ateliers Bijoux has been fully consolidated into the Christian Dior Couture Group as of
June 30, 2005. Up until April 2005, this activity was covered by a licensing agreement.
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2.4 Impacts of changes in the scope of consolidation
2.4.1 On the income statement
The overall impact of changes in consolidation in 2004 and 2005 on the Group’s income
statements is as follows:
2005
Revenue
Financial income
Net income
Of which, minority interests
Of which, Group share
14,556
2,791
(191)
1,654
1,036
618
2004
pro forma
2004
published
13,089
2,442
(280)
1,307
793
514
13,060
2,413
(264)
1,443
894
549
The condensed pro forma income statement presented above for 2004 has been drawn up
based on a comparable scope to that for 2005. More specifically:
• The acquisitions and disposals carried out in 2005 are retained in the income statement for
2004 for an identical number of months to that for 2005; in addition, although not
representing a change in consolidation, the stopping of operations at the large Parisian
Samaritaine store in July 2005 (see Note 24 - Other operating income and expenses) has
also been taken into account, with a comparable number of months business to that for
2005 and identical reorganization costs retained in 2004;
• The acquisitions and disposals for 2004 are considered to have been made at January 1,
2004.
2.4.2 On cash and cash equivalents
2005
2004
Amount paid for the acquisition of consolidated investments
Cash and cash equivalents / (bank overdrafts) for companies acquired
Amount received for the disposal of consolidated investments
Cash and cash equivalents / (bank overdrafts) for companies sold
(623)
(6)
34
(9)
(455)
5
49
–
Impacts of changes in consolidation on cash and cash equivalents
(604)
(401)
The overall impact of changes in consolidation on the Group’s cash flows represents a
reduction of 604 million euros. This amount stems primarily from the acquisition of a
controlling interest in Glenmorangie, for 438 million euros, and the acquisition of minority
interests in Millennium, for 92 million euros.
In 2004, the impacts of changes in consolidation on the Group’s cash flows primarily reflect
the acquisition and staggered payments for minority interests in Fendi, for 197 million euros,
the acquisition of a 30% interest in Millennium, for 82 million euros, and the acquisition of a
9% stake in Donna Karan and 10% in BeneFit Cosmetics, for 56 million euros.
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NOTE 3 - BRANDS, TRADE NAMES AND OTHER INTANGIBLE ASSETS
2005
Gross
Brands
Trade names
Distribution licenses
Leasehold acquisition rights
Software
Other
8,843
3,740
251
268
231
169
Total
Amortization
and impairment
Net
Net
8,499
2,204
226
120
59
78
8,146
1,983
122
136
44
64
(2,316) 11,186
10,495
(344)
(1,536)
(25)
(148)
(172)
(91)
13,502
Of which, fixed assets held under financing leases
2004
14
(13)
1
1
3.1 Changes over the year
Changes in the net balance for brands, trade names and other intangible assets can be
broken down as follows:
Gross value
Brands Trade names
Other
intangible
assets
Balance at December 31, 2004
Acquisitions
Disposals
Impact of changes in consolidation over the
year
Impact of previous changes in consolidation
Impact of currency fluctuations
Other
8,486
3
–
279
3,281
–
–
–
–
75
–
–
459
–
62
44
8
62
578
8
8,843
3,740
919
13,502
Brands
Trade
names
Other
intangible
assets
Total
Amortization and impairment
750
70
(15)
–
Total
12,517
73
(15)
279
Amortization
Impairment
Disposals
Impact of changes in consolidation over the
year
Impact of previous changes in the scope of
consolidation
Other
(340)
(6)
–
–
11
(1,299)
(1)
(24)
–
–
(383)
(71)
–
10
3
(2,022)
(78)
(24)
10
14
–
(9)
–
–
(199)
(13)
13
(10)
2
13
(218)
(11)
(344)
(1,536)
(436)
(2,316)
2,204
483
11,186
Net value at December 31, 2005
8,499
87
The impact of changes in consolidation over the year and previous changes concern the
acquisition of Glenmorangie for 290 million euros and the definitive recording of the
acquisition of Millennium in the accounts for 62 million euros (gross) respectively.
The impact of currency fluctuations primarily stems from intangible values booked in US
dollars, notably the Donna Karan New York brand and the DFS trade name, factoring in
changes in the US dollar-euro exchange rate over the year.
3.2 Brands and trade names
Brands and trade names can be broken down by each business group as follows:
2005
2004
Gross
Amortization
value and impairment
Net
value
Net
value
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other activities
25
2,621
3,956
1,295
899
3,740
47
25
2,612
3,654
1,274
887
2,204
47
25
2,310
3,603
1,267
894
1,983
47
Brands and trade names
12,583
–
(9)
(302)
(21)
(12)
(1,536)
–
(1,880) 10,703 10,129
The brands and trade names recorded are those acquired by the Group. They primarily
include:
• Wines and Spirits: Hennessy, Moët, Veuve Clicquot, Krug, Château Yquem, Newton
Vineyards and Glenmorangie;
• Fashion and Leather Goods: Louis Vuitton, Fendi, Céline, Loewe, Donna Karan New
York, Givenchy, Kenzo, Berluti, Thomas Pink and Pucci;
• Perfumes and Cosmetics: Parfums Christian Dior, Guerlain, Parfums Givenchy, Kenzo,
Make Up for Ever, BeneFit Cosmetics, Fresh and Acqua di Parma;
• Watches and Jewelry: Tag Heuer, Zenith, Fred, Chaumet and Omas pens;
• Selective Retailing: DFS, Sephora, Le Bon Marché;
• Other activities: La Tribune and Investir newspapers.
These brands and trade names are recorded on the balance sheet at the value determined at
the time of their acquisition by the Group, which may be significantly lower than their utility
or sale value on the date the accounts are drawn up; this is notably the case, without this list
being considered to be exhaustive, for the Louis Vuitton and Christian Dior Couture brands
and for the Sephora trade name.
3.3 Distribution licenses
Distribution licenses notably include marketing rights for Belvedere and Chopin vodkas.
Also refer to Note 5 for the valuation of brands, trade names and other intangible assets with
an indefinite life.
88
NOTE 4 - GOODWILL
2005
Gross
Goodwill on consolidated securities
Goodwill on LVMH treasury share (1)
Goodwill on commitments to purchase
minority interests
4,363
273
1,588
Total
6,224
2004
Impairment
expense
Net
Net
(1,147)
–
(19)
3,216
273
1,569
2,886
280
1,468
(1,166)
5,058
4,634
(1) See Notes 1.19 and 14.2
Also see Note 19 for goodwill on commitments to purchase minority interests.
Changes in the net balance of goodwill over 2005 can be broken down as follows:
Gross
Impairment
Net
Change in impairment
Impact of changes in consolidation over the year
Impact of previous changes in consolidation
Change in commitments to purchase minority interests
Change in goodwill on LVMH treasury share
5,689
–
163
(7)
127
(7)
259
(1,055)
(24)
2
–
–
–
(89)
4,634
(24)
165
(7)
127
(7)
170
6,224
(1,166)
5,058
The impact of changes in consolidation over the year primarily concerns the acquisition of
Glenmorangie, for 159 million euros.
The impact of currency fluctuations primarily reflects goodwill booked in US dollars,
notably relating to Millennium, Miami Cruiseline and Donna Karan New York, factoring in
changes in the US dollar-euro exchange rate over the year.
Also see Note 5 for the valuation of goodwill.
89
NOTE 5 - VALUATION OF INTANGIBLE ASSETS OF INDEFINITE LIFE
Valuation tests are carried out each year on brands, trade names and other intangible assets
of indefinite life as well as goodwill. As described in Note 1.11, in the majority of cases, these
assets are valued based on the provisional discounted cash flows expected from these assets,
determined in connection with multiyear plans. The main parameters retained in 2005 for
determining these provisional flows, similar to those applied in 2004, are as follows:
Business group
Duration of plans
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other
Pre-tax discount
rate
Growth rate
after the duration of
plans
8.5 to 9.5%
11 to 12%
10.5 to 11.5%
11 to 13%
9 to 10%
9.5 to 10.5%
2%
2%
2 to 2.5%
2%
2%
2%
5 years
5 years
5 years
5 years(*)
5 years
5 years
(*) The duration of the plans – 5 years – may be increased to 8 years for brands that are currently being
strategically repositioned.
The growth rates retained for the period after the duration of the plans are usually those
retained by the market for the activities concerned.
A 1-point change in the pre-tax discount rate or the growth rate to infinity, applied to the
global provisional data retained for each business group, would not result in any impairment
of the intangible assets concerned: brands, trade names or goodwill.
NOTE 6 - TANGIBLE ASSETS
6.1 Analysis by type
2005
Gross
Land
Vineyard land and producing vineyards
Buildings
Rental properties
Plant and equipment
Other tangible assets and work-in-progress
730
1,280
1,790
354
3,420
938
Total
Of which: fixed assets held under financing
leases
historical cost of vineyard land and
producing vineyards
90
2004
Amortization and
impairment
Net
Net
–
(63)
(644)
(42)
(2,057)
(448)
730
1,217
1,146
312
1,363
490
707
1,162
1,081
289
1,076
483
8,512
(3,254)
5,258
4,798
365
(151)
214
213
308
287
308
–
6.2 Analysis of changes
Changes in tangible assets over 2005 can be broken down as follows:
Gross value
Balance at
December 31, 2004
Acquisitions
Vineyard
land and
producing
vineyards
Land and
buildings
Rental
properties
Plant and
equipment
Other tangible
assets and
work-in-progress
Total
1,221
2,344
341
2,849
883
7,638
7
50
3
360
270
690
Change in market
value of vineyard land
and producing
vineyards
43
–
–
–
–
43
Disposals,
decommissioning
(1)
(15)
(4)
(161)
(55)
(236)
Impact of changes in
consolidation
(1)
32
–
47
(1)
77
Impact of currency
fluctuations
10
83
12
132
63
300
1
26
2
193
(222)
1,280
2,520
354
3,420
938
8,512
Vineyard
land and
producing
vineyards
Land and
buildings
Rental
properties
Plant and
equipment
Other tangible
assets and
work-in-progress
Total
Other
Balance at
December 31, 2005
Amortization and
impairment
Balance at
December 31, 2004
–
(59)
(556)
(52)
(1,773)
(400)
(2,840)
Amortization
(4)
(55)
(5)
(304)
(73)
(441)
Impairment
–
(2)
–
(22)
–
(24)
Disposals,
decommissioning
1
–
1
148
55
205
consolidation
–
(14)
–
(24)
2
(36)
(1)
(18)
(2)
(82)
(32)
(135)
–
1
16
–
–
17
Impact of currency
fluctuations
Other
Balance at
December 31, 2005
Net value at
December 31, 2005
(63)
1,217
(644)
1,876
(42)
(2,057)
(448)
(3,254)
312
1,363
490
5,258
Acquisitions of tangible assets reflect the investments by Louis Vuitton, DFS and Sephora in
their retail networks.
91
NOTE 7 - INVESTMENTS IN ASSOCIATES
2005
Gross
Share in net assets of investments in
associates at January 1
Share in earnings for the year
Dividends paid
Impact of changes in consolidation
138
Share in net assets of investments in
associates at December 31
136
2004
Impairment
(21)
8
(3)
(6)
(1)
–
–
16
–
(5)
Net
Net
117
105
8
(3)
10
(1)
131
(15)
(4)
32
(1)
117
In 2005, shares in investments in associates primarily concerned:
• A 40% interest in Mongoual SA, a real estate company owning a building in Paris
(France), which is also the registered office of LVMH Moët Hennessy Louis Vuitton SA;
• A 25.5% interest in Micromania, the French market leader in the retail of videogames and
consoles.
In 2005, rent billed to the Group by Mongoual totaled 14 million euros (14 million euros in
2004).
In 2004, shares in investments in associates also included a 49.9% interest in the auction firm
Bonhams Brooks PS&N Ltd (UK), which was sold off in July 2005.
NOTE 8 - NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS
2005
Gross
2004
Impairment
Net
Net
Interest in Bouygues SA (France)
Other interests
–
544
–
(93)
–
451
401
317
Total
544
(93)
451
718
The remaining interest in Bouygues SA, intended to be sold off in 2006, has been reclassified
under financial investments at December 31, 2005 (see Note 12).
In 2005, the Group received an exceptional 65 million euro dividend from Bouygues.
92
Changes in equity investments in 2005 can be broken down as follows:
December 31, 2004
Acquisitions
Disposals (sale value)
Impact of market value changes
Reclassifications under shares in investments in associates or financial investments
December 31, 2005
718
107
(469)
229
(144)
10
451
The main disposals concerned the interest in Bouygues, with 99 millions euros generated in
capital gains.
Other interests held by the Group are as follows:
Stake
L Capital FCPR (France) (2)(3)
Tod’s Spa (Italy) (1)(3)
Other interests
46.1%
3.5%
NA
Net value of Dividends Shareholders’
Net
securities received
equity income
219
60
172
–
–
49
451
49
169
421
–
(4)
31
(1) Valuation at closing share price at December 31, 2005.
(2) Estimated realizable value.
(3) The accounting data provided are prior to December 31, 2005, since the figures at year-end 2005 were
unavailable at the time of drawing up the financial statements.
L Capital FCPR is an investment fund whose bylaws and operating principles do not allow
the Group to exercise exclusive or joint control or any significant influence over the interests
held.
NOTE 9 - INVENTORIES AND WORK-IN-PROGRESS
2005
2004
Ageing wines and brandies
Other raw materials and work-in-progress
2,161
396
1,883
376
Merchandise
Finished products
2,557
625
1,689
2,259
499
1,535
Gross value
Provision for impairment
2,314
4,871
(601)
2,034
4,293
(570)
Net value
4,270
3,723
93
Changes in net inventories over the year can be broken down as follows:
Provisions for
impairment
Gross
Net
Change in gross inventories
Impact of market valuation of grape harvests
Change in provision for impairment
Impact of changes in consolidation
4,293
281
19
–
109
169
(570) 3,723
–
281
–
19
(41)
(41)
16
125
(6) 163
4,871
(601) 4,270
The changes in consolidation concern the acquisition of Glenmorangie, for 130 million euros.
The cost of sales for Wines and Spirits business lines include the impacts of the market
valuation of grape harvests, which can be analyzed as follows:
2005
Market valuation of harvests for the year
Impact of inventory withdrawals
Net impact on the cost of sales over the period
2004
34
(15)
46
(21)
19
25
The market value of harvests for 2005 came to 91 million euros (87 million euros in 2004).
NOTE 10 - ACCOUNTS RECEIVABLE
2005
2004
Receivables (nominal value)
Provision for impairment
Provision for product returns
1,650
(72)
(141)
1,621
(83)
(119)
Net amount
1,437
1,419
–
268
Of which, receivables covered by the French Dailly law
At December 31, 2004 and 2005, the fair value of accounts receivable was the same as their
book value.
94
NOTE 11 - OTHER CURRENT ASSETS
Financial investments
Market value of derivatives
Tax receivables (excluding corporate income tax)
Trade receivables: advances and deposits
Pre-booked expenses
Other receivables net
Total
2005
2004
422
151
194
86
219
207
201
396
214
57
205
263
1,279
1,336
Pre-booked expenses include 72 million euros at December 31, 2005 (74 million euros at
December 31, 2004) for advertising materials and samples, primarily relating to Perfumes
and Cosmetics.
At December 31, 2004 and 2005, the market value of other current financial assets was the
same as their book value.
Also refer to Notes 12 “Financial investments” and 21 “Financial instruments”.
NOTE 12 - FINANCIAL INVESTMENTS
2005
2004
Unlisted marketable securities, shares in non-money market (SICAV
and FCP mutual funds)
Listed marketable securities
281
191
141
10
Total
422
201
Of which, historical cost of financial investments
318
190
At December 31, 2005, marketable securities included 3.06 million Bouygues shares for a
total of 126 million euros (see Note 8 – Equity investments); 2.71 million securities were sold
in January 2006.
NOTE 13 - CASH AND CASH EQUIVALENTS
2005
2004
Term deposits under three months
Shares in money market (SICAV and FCP mutual funds)
Bank accounts (1)
94
34
1,382
89
19
958
Cash and cash equivalents in the balance sheet
1,510
1,066
(1) Of which 60 million euros in blocked outstandings at December 31, 2005 (none at December 31, 2004).
95
The reconciliation between the amount of cash and cash equivalents given on the balance
sheet and the amount of the net cash position included in the cash-flow statement is as
follows:
2005
2004
Bank overdrafts
1,510
(522)
1,066
(351)
988
715
Net cash position from the cash-flow statement
NOTE 14 - SHAREHOLDERS’ EQUITY
14.1 Capital
At December 31, 2005, the capital comprised 181,727,048 issued and fully paid-up shares
(181,727,048 in 2004), with a par value of 2 euros. 120,948,264 shares are entitled to double
voting rights, granted to shares held on a registered basis for more than three years.
At December 31, 2005, the authorized capital was 410,255,718 euros (407,347,907 euros at
December 31, 2004).
14.2 Treasury shares
The allocation of the Christian Dior and LVMH share portfolio can be analyzed as follows:
• Christian Dior treasury shares
2005
Number
2004
Value Value
Stock option plans
Other
4,053,228
19,532
156
1
136
19
Total
4,072,760
157
155
In 2005, changes in the Christian Dior share portfolio can be broken down as follows:
Number
Value
Purchases
Options exercised
Disposals (sale value)
Gross capital gains (losses) on disposals
4,087,132
553,015
(74,387)
(493,000)
–
155
22
(2)
(18)
0
4,072,760
157
At December 31, 2005, the stock market value of other Christian Dior shares held came to
1.5 million euros.
96
• LVMH treasury shares
2005
2004
Number Value Value
Stock option plans (1)
Free share allocation schemes
Hedging for other plans (2)
Liquidity contract
14,927,777
97,817
4,205,353
63,000
729
6
232
5
824
–
–
182
Total
19,293,947
972
1,006
429
446
Christian Dior Group share
(1) Including shares held in connection with options that have become null and expired and have temporarily
not been reallocated to other plans.
(2) Other plans include the warrant schemes and the compensation plans indexed against changes in the
LVMH share price.
When preparing and presenting information for the changeover in part 2 of the 2004 Annual
Report, the cancellation of LVMH treasury shares was reflected, according to a provisional
analysis, in a reduction in shareholders equity in the reconciliation tables under IFRS. The
treatment retained, based on additional elements from the analysis of the various texts
applicable, led to an increase in shareholders’ equity at January 1, 2004 and December 31,
2004. The increase in shareholders’ equity reflects the recording of goodwill, linked to the
new percentage interest retained with IFRS, under assets in the accounts.
Indeed, according to the principles applied for preparing the financial statements under
French GAAP, LVMH treasury shares are booked as assets and any capital gains or losses
recorded on disposals are recognized on the income statement. Under IFRS, LVMH
treasury shares are deducted against shareholders’ equity and affect the percentage interest,
in the same way as acquisitions and disposals of minority interests. In accordance with the
approach retained for changes in minority interests, goodwill is recorded in the event of an
increase in the percentage interest and a capital gain or loss on disposal is generated in the
event of a reduction in the percentage.
97
14.3 Dividends paid out by Christian Dior S.A.
Under French regulations, dividends are deducted against Christian Dior S.A.’s earnings for
the year and its reserves eligible for distribution, representing 2,323 million euros at
December 31, 2005, after deducting the proposed amount of dividends for 2005, submitted
at the general meeting on May 11, 2006. This amount is payable without any tax deductions.
2005
2004
Balance for previous year (2004: 0.65 euro; 2003: 0.59 euro)
Impact of treasury shares
118
(3)
107
(2)
Interim dividend for the current year (0.32 euro for 2004 and 2005)
Impact of treasury shares
115
58
(1)
105
58
(1)
57
57
172
162
Total paid out over the year
The dividend balance for 2005, proposed at the annual shareholders’ meeting on May 11,
2006, comes out at 0.84 euro per share, representing a total payment of 153 million euros
before the impact of treasury shares.
14.4 Revaluation reserves
Revaluation reserves factor in unrealized gains and losses relative to equity investments,
financial investments, future cash-flow hedging instruments in various currencies, as well as
vineyard land and producing vineyards, primarily in the Champagne region. These reserves
saw the following changes over the periods presented:
Equity
Vineyard
investments and
Hedging of
land and
financial future cash flow
producing Total Group
investments
in currencies
vineyards
share
January 1, 2004
Change in value
Transfer over to earnings
for the period
Tax impact
(7)
29
3
71
72
(88)
(15)
5
(7)
(17)
Gains and losses recorded
on shareholders’ equity
17
(11)
20
26
December 31, 2004
Change in value
Transfer over to earnings
for the period
Tax impact
10
167
(57)
60
(63)
(31)
175
17
–
245
121
(88)
(11)
31
(6)
14
Gains and losses recorded
on shareholders’ equity
99
(63)
11
47
109
(3)
186
292
December 31, 2005
98
155
27
–
219
128
(85)
14.5 Currency translation
Changes in currency translation figures recorded in shareholders’ equity at December 31,
2005, net of net asset hedging effects in currencies, can be broken down by currency as
follows:
2005
US dollar
Hong Kong dollar
Pound sterling
Other currencies
Net asset hedging in currencies
Total
Variation
2004
85
9
7
22
3
174
16
6
21
(2)
(89)
(7)
1
1
5
126
215
(89)
NOTE 15 - STOCK OPTION PLANS AND RELATED
• Options granted by Christian Dior S.A.
At the general meeting on May 30, 1996, shareholders voted to authorize the Board of
Directors, on one or more occasions, to grant stock options for up to 3% of the company’s
capital to members of staff or executives from Group companies. This authorization was
renewed at the general meeting on May 14, 2001 for a five-year period.
At December 31, 2005, no warrant schemes had been put in place by Christian Dior S.A.
Each plan runs for a ten-year period and options may be exercised after three or five years.
Under certain conditions, notably in the event of retirement, the three or five-year periods
for acquiring rights do not apply.
For all plans, the parity is one share for one option allocated.
• Options granted by LVMH S.A.
At the general meeting on May 25, 1992, shareholders voted to authorize the Board of
Directors, on one or more occasions, to grant stock options or warrants for up to 1.5% of the
company’s capital to members of staff or executives from Group companies. The Annual
General Meeting on June 8, 1995 raised this authorization to 3% of the capital. This
authorization was renewed by the general meeting on May 17, 2000, then by the general
meeting on May 15, 2003 for a period of 38 months running through to July 2006.
Each plan runs for a ten-year period and options may be exercised after three or four years,
depending on whether the schemes were issued before or after 2004, with the exception of
the stock option scheme dated May 14, 2001, which concerns 1,105,877 options and an
eight-year period, with options eligible for exercising after four years.
Under certain conditions, notably in the event of retirement, the three or four-year periods
for acquiring rights do not apply.
For all plans, the parity was one share for one option allocated.
99
• LVMH’s share subscription plans
Plan start date
Number
Number
Number
Right of options of outstanding
of options Exercise price acquisition exercised
options at
allocated
(in euros)
period
in 2005 Dec 31, 2005
January 21, 2004
”
May 12, 2005
”
2,720,425
27,050
1,852,150
72,250
55.70
58.90
52.82
55.83
4 years
”
”
”
2005
–
–
–
–
2,689,175
26,050
1,849,700
72,250
–
4,637,175
2004
Average weighted
exercise price
Number
(in euros)
Average weighted
exercise price
Number
(in euros)
Outstanding options at
January 1
Allocations over the period
Expired options
Options exercised over the
period
2,747,475
55.73
–
–
1,924,400
(34,700)
–
52.93 2,747,475
55.59
–
–
–
55.73
–
–
Outstanding options at
December 31
4,637,175
54.57
55.73
100
2,747,475
• Share purchase plans
Plan start date
Number of
options
allocated (1)
Exercise price
(in euros)
(2)(3)
Right
acquisition
period
Number of
options
exercised in
2005 (3)
Number of
options
outstanding at
Dec 31, 2005 (3)
LVMH
March 22, 1995
May 30, 1996
May 29, 1997
January 29, 1998
March 16, 1998
January 20, 1999
September 16, 1999
January 19, 2000
January 23, 2001
March 6, 2001
May 14, 2001
May 14, 2001
September 12, 2001
January 22, 2002
January 22, 2002
May 15, 2002
January 22, 2003
January 22, 2003
256,903
233,199
233,040
269,130
15,800
320,059
44,000
376,110
2,649,075
40,000
1,105,877
552,500
50,000
3,256,700
27,400
8,560
3,155,225
58,500
20.89
34.15
37.50
25.92
31.25
32.10
54.65
80.10
65.12
63.53
66.00
61.77
52.48
43.30
45.70
54.83
37.00
38.73
3 years
”
”
”
”
”
”
”
”
”
4 years
3 years
”
”
”
”
”
”
392,588
91,985
160,415
266,500
–
246,830
–
–
7,400
–
25
–
–
95,397
1,500
–
1,700
–
–
537,500
626,390
576,360
70,400
1,305,045
210,000
1,796,650
2,477,675
40,000
513,919
552,500
50,000
3,019,403
22,950
8,560
3,062,425
58,000
1,264,340
14,927,777
4,200
17,000
9,500
33,687
–
10,000
–
–
–
–
74,387
–
251,000
285,400
283,200
294,313
400,800
427,500
504,000
527,000
527,000
493,000
3,993,213
60,015
74,387
4,053,228
Total for LVMH
Christian Dior
October 14, 1996
May 29, 1997
November 3, 1998
January 26, 1999
February 15, 2000
February 21, 2001
February 18, 2002
February 18, 2003
February 17, 2004
May 12, 2005
Subtotal
2006 (to come)
94,600
97,900
98,400
89,500
100,200
437,500
504,000
527,000
527,000
493,000
25.95
32.01
18.29
25.36
56.70
45.95
33.53
29.04
49.79
52.21
3 years
5 years
5 years
5 years
5 years
3 years
3 years
3 years
3 years
3 years
60,015
–
–
Total for Christian Dior
(1) Number of options at the start of the plan, not restated to factor in adjustments linked to free share allocations
(one for ten) in June 1999, and the five-for-one stock split in July 2000 at LVMH, and not restated to factor in
adjustments linked to the four-for-one stock-split in July 2000 at Dior.
(2) Figures prior to 1999 result from the conversion to euros of sums originally recorded in French francs.
(3) Adjusted to reflect the transactions referred to in (1) above.
101
2005
2004
Average
weighted
exercise price
Number
(in euros)
Average
weighted
exercise price
Number
(in euros)
LVMH
Outstanding options at January 1
17,148,615
Expired options
–
48.66
–
19,433,292
–
45.67
–
(956,498)
61.61
(106,225)
46.01
Options exercised over the period
(1,264,340)
29.21
(2,178,252)
22.10
Outstanding options at December 31
14,927,777
49.48
17,148,815
48.66
3,574,600
36.72
3,160,000
34.28
493,000
52.21
527,000
49.79
–
–
–
–
Christian Dior
Outstanding options at January 1
Expired options
Options exercised over the period
Outstanding options at December 31
(74,387)
3,993,213
28.78
38.78
(112,400)
3,574,600
29.40
36.72
• Other plans at LVMH
A free share allocation plan, concerning a total of 97,817 shares, was put in place by the
Board of Directors on May 12, 2005; the shares in question will be granted to beneficiaries
after a two-year period and must be held for a further two years.
There are also a number of cash-based compensation schemes taking changes in the LVMH
share price into account. These plans run for a four-year period and were put in place on
January 21, 2004 and May 12, 2005, concerning 206,750 and 187,300 shares respectively.
• Calculating the expense for the year
The expense for the year is determined for each option plan based on the Black and Scholes
method, as described in Note 1.23. The parameters and assumptions retained for this
valuation are as follows:
At LVMH:
LVMH share price on the allocation date (in euros)
Exercise price (in euros)
LVMH share price volatility (%)
Dividend distribution rate (%)
Risk-free investment rate (%)
Duration of the period for acquiring rights
102
2005 plans
2004 plans
57.05
52.82
21.7
1.65
3.06
4 years
62.75
55.70
25.0
1.35
3.78
4 years
The volatility of LVMH’s share price is determined based on the implied volatility seen.
Over 2005, LVMH’s average share price was 63.12 euros.
• Share purchase, subscription and free share allocation plans:
– Based on the abovementioned assumptions and parameters, the unit value comes out at
14.29 euros for options granted in 2005 and 20.05 euros for options granted in 2004;
– The unit value for free shares allocated in 2005 was 54.98 euros;
– The total expense recorded for plans in 2005 came to 25 million euros (50 million euros
in 2004).
• Compensation plans linked to the LVMH share price:
The expense recorded corresponds to the amount of the expected gain, estimated at each
close of accounts in line with the same methods as for stock option and warrant plans. The
amount recorded in this respect for 2005 was 5 million euros (1 million euros in 2004).
At Christian Dior:
Christian Dior share price on the allocation date (in euros)
Exercise price (in euros)
Christian Dior share price volatility (%)
Dividend distribution rate (%)
Risk-free investment rate (%)
Duration of the period for acquiring rights
2005 plans
2004 plans
56.85
52.21
21.7
1.65
3.06
4 years
52.70
49.79
25.0
1.35
3.78
4 years
The volatility of Christian Dior’s share price is determined based on the implied volatility
seen.
Over 2005, Christian Dior’s average share price was 61.92 euros.
• Stock option plans
Based on the abovementioned assumptions and parameters, the unit value comes out at
15.83 euros for options granted in 2005 and 18.89 euros for options granted in 2004.
The total charge recorded for plans in 2005 came to 7 million euros (5 million euros in 2004).
103
NOTE 16 - MINORITY INTERESTS
2005
2004
At January 1
Dividends paid to minority interests
Share of minority interests in net income
Impact of changes in scope of consolidation:
Impact of LVMH treasury shares
Consolidation of Millennium
Acquisition of minority interests in Millennium
Acquisition of minority interests in Fendi
Acquisition of minority interests in Donna Karan
Other changes in scope of consolidation
Total impacts
Share of minority interests in the following changes:
Commitments to purchase minority interests
Revaluation reserves
6,321
(371)
1,036
6,031
(340)
893
27
–
(76)
–
–
2
(47)
(75)
82
–
(43)
(23)
(35)
(94)
1
64
381
15
(69)
48
(176)
28
At December 31
7,400
6,321
2005
2004
4,443
3,376
5,092
2,984
Gross financial debt
Interest rate risk derivatives
7,819
(151)
8,076
(121)
7,668
(422)
(30)
(1,510)
7,955
(201)
(42)
(1,066)
5,706
6,646
NOTE 17 - BORROWINGS AND FINANCIAL DEBT
17.1 Net financial debt
Financial debt net of interest rate risk derivatives
Current available for sale investments
Other financial assets
Net financial debt
The impacts of interest rate risk derivatives are detailed in Note 21.
104
17.2 Analysis of gross financial debt by type
2005
2004
Repackaged notes
Bonds and EMTN
Capital leases and long-term leases
Loans from credit institutions
32
3,133
157
1,121
49
3,496
151
1,396
4,443
5,092
Bonds and EMTN
Capital leases and long-term leases
Loans from credit institutions
Treasury notes
Other loans and credit lines
Repackaged notes
Bank overdrafts
Accrued interest
1,195
22
625
323
589
0
522
100
968
21
369
513
626
20
351
116
3,376
2,984
Total gross financial debt
7,819
8,076
Market value of gross financial debt
7,885
8,162
Nominal interest
2005
2004
6-month Euribor + 0.45%
9.70%
–
32
20
49
32
69
17.3 Repackaged notes
FRF 5,000,000,000; 1990
FRF 1,505,000,000; 1992
Total
The aforementioned undated bonds, issued in the form of undated subordinated notes
(TSDI), were converted into repackaged notes in 1996 by way of an amendment to the
original issue agreement for the 1990 TSDI.
As ordinary unsecured debt, since then repackaged notes may be legally redeemed only in
the event of court-ordered liquidation or the early dissolution of LVMH, except for in the
event of mergers or splits.
Although undated, repackaged notes are recorded on the consolidated balance sheet for an
amount that will be progressively reduced to zero value at the end of 15 years, in line with
the agreements concluded with third parties.
In accordance with these agreements, and in return for a definitive payment by LVMH at
the time of issue, the third-party companies in question have undertaken to hold or to
repurchase the notes from note-holders after a 15-year period, and have agreed to relinquish
any rights to interest on these notes after that time.
105
Under these arrangements:
• The repackaged notes were recorded on the balance sheet at their par value at the time of
issue, after deducting the aforementioned payments; these notes are amortized every year
by the amount of income generated by the investments made by the third-party companies
with these payments;
• The consolidated income from each year covers interest paid on the par value, after
deducting the depreciation as outlined above.
In light of the above, the book balance of the TDI 1990 issue was brought down to zero in
2005.
17.4 Bonds and EMTN
EUR 600,000,000; 2005
EUR 600,000,000; 2004
EUR 750,000,000; 2003
EUR 500,000,000; 2001
EUR 800,000,000; 1999
EUR 600,000,000; 2000
FRF 1,300,000,761; 1998 indexed
Maturity
Initial effective
rate (1)
(%)
2005
2004
2012
2011
2010
2008
2006
2005
2005
3.43
4.74
5.05
6.27
5.24
–
–
598
625
773
525
808
–
–
–
623
777
536
824
588
42
3,329
641
358
3,390
632
442
999
1,074
4,328
4,464
Public issues
in euros
in foreign currencies
Private EMTN placements
Total bonds and EMTN
(1) Before the impact of rate hedging instruments put in place at the time of or after the issue.
The changes in bonds over 2005 primarily reflect:
• Repayment on maturity in the first half of 2005, for an amount of 587 million euros, of the
bond issue of a nominal amount of 600 million euros made in 2000, and for an amount of
32 million euros, of the bond issue of a nominal amount of 198 million euros (1,300 million
French francs) made in 1998.
• The June 2005 600 million euros nominal bond issue, maturing in seven years. Issued at
99.828% of the nominal value and redeemable at par, this bond issue includes a 3.375%
fixed coupon payable yearly.
106
17.5 Analysis of gross financial debt by maturity before hedging
2005
Maturing
3,376
639
1,123
529
805
1,347
2006
2007
2008
2009
2010
Subsequently
Total
7,819
On November 21, 2005, Christian Dior S.A. restructured a 500 million euros syndicated
credit line. The due date, initially set for November 15, 2009, was extended until
November 21, 2010, with an optional renewal each year, for the following two years.
17.6 Analysis of gross financial debt by currency after hedging
2005
2004
Euro
US dollar
Swiss franc
Yen
Other currencies
5,378
476
881
512
421
5,885
380
881
588
221
Total
7,668
7,955
In general, debt in currencies is intended to hedge net assets in such currencies, notably
resulting from the acquisition of companies outside of the eurozone.
17.7 Analysis of gross financial debt by rate type after hedging
2005
2004
Floating rate
Capped floating rate
Fixed rate
1,514
2,606
3,548
1,847
3,178
2,930
Total
7,668
7,955
17.8 Sensitivity
In light of the debt structure for each currency at December 31, 2005, an immediate 1%
increase on the rate curves for currencies in which the Group has debt would result in a
(22) million euros change in financial income for the year.
An immediate 1% reduction on these curves would result in a 49 million euros increase in
the market value of gross financial debt after hedging.
107
17.9 Liquidity risk
In addition to local liquidity risks, which tend to be relatively insignificant, the Group’s
liquidity risk exposure may be assessed through the amount of its short-term net financial
debt before the impact of derivatives, which comes out at 1.4 billion euros, or the
outstanding amount of its treasury note program, which comes to 0.3 billion euros.
With regard to the possible non-renewal of these loans, the Group has undrawn confirmed
credit lines totaling 4.2 billion euros.
In this way, the Group’s liquidity is based on the size of its investments, the magnitude of its
long-term financing, the diversity of its investor base (short-term securities and bonds), and
the quality of its bank relations, whether or not these are reflected in confirmed credit lines.
17.10 Covenants
The Christian Dior Group, in line with standard industry practice on syndicated credit lines,
has agreed to various undertakings to hold a percentage interest and voting rights in some of
its subsidiaries and to comply with a standard financial ratio in this respect.
On certain long-term credit lines in the past, the Group undertook to comply with a ratio for
the coverage of net financial debt by financial flows for the year.
The current level of this ratio is some way away from the critical threshold, such that the
Group has a high level of financial flexibility in relation to these commitments.
17.11 Confirmed credit lines not drawn
At December 31, 2005, the total outstanding amount of undrawn confirmed credit lines was
4.2 billion euros.
17.12 Guarantees and real sureties
At December 31, 2005, the amount of financial debt secured by real sureties came to less
than 460 million euros.
NOTE 18 - PROVISIONS
2005
2004
Provisions for retirement plans, medical expenses and similar liabilities
Provisions for liabilities and charges
Provisions for restructuring
267
631
54
261
581
44
Long-term provisions
952
886
Provisions for retirement plans, medical expenses and similar liabilities
Provisions for liabilities and charges
5
159
148
4
194
67
Short-term provisions
312
265
1,264
1,151
Total
108
Over 2005, provisions for liabilities and charges saw the following changes:
Other
(including
December 31,
Changes in currency December 31,
2004 Allocations Used Write-backs consolidation translation)
2005
Provisions for retirement
plans, medical expenses and
similar liabilities
265
33
(32)
(24)
13
17
272
Provisions for liabilities and
charges
775
97
(93)
(28)
2
37
790
111
121
(31)
(8)
(5)
14
202
251 (156)
(60)
10
68
1,264
121 (112)
(56)
Total
1,151
Of which, profit from
recurring operations
financial income
other
–
(7)
–
130
(37)
(4)
Provisions for retirement plans, medical expenses and similar liabilities are analyzed in
Note 28.
Provisions for liabilities and charges correspond to the estimated impacts on assets and
liabilities of actual or likely risks, litigation and disputes resulting from the Group’s activities:
indeed, these activities are carried out within an international regulatory framework that is
often vague and varies depending on the country and the time in question, and applies to
such a wide range of fields as the composition of its products or the calculation of its taxes.
Also see Note 24 “Other operating income and expenses” regarding the temporary closure of
“the La Samaritaine department store” for restructuring provisions.
NOTE 19 - OTHER NON-CURRENT LIABILITIES
2005
2004
Commitments to purchase minority shares
Employee profit-sharing (1)
Other liabilities
3,151
28
63
128
3,013
34
55
144
Total
3,370
3,246
(1) Solely for French companies, in accordance with the legal provisions in force.
At December 31, 2004 and 2005, commitments to purchase minority interests primarily
concerned the commitment in relation to Diageo to buy out its 34% interest in Moët
Hennessy, subject to six months notice, for an amount equal to 80% of its market value.
When calculating this commitment, its market value was determined based on stock market
multiples for comparable companies, applied to Moët Hennessy’s operational data.
109
In addition, commitments to purchase minority interests include commitments relative to the
minority shareholders in Fendi, Donna Karan and BeneFit, calculated in line with various
formulae that may include a minimum amount.
NOTE 20 - OTHER CURRENT LIABILITIES
Personnel charges
Employee profit-sharing
State and local authorities: taxes (excluding corporate income taxes)
Clients: advances and down payments
Deferred payments on tangible assets or long-term investments
Pre-booked income
Other liabilities
Total
2005
2004
132
508
44
217
107
192
46
397
188
468
13
210
95
200
59
373
1,643 1,606
At December 31, 2004 and 2005, the market value of other current financial liabilities was
the same as their book value.
Derivatives are analyzed in Note 21.
NOTE 21 – FINANCIAL INSTRUMENTS
The financial instruments used by the Group are intended to hedge risks linked to its activity
and its asset base. These instruments, most of which are traded on organized or assimilated
markets, are primarily managed on a centralized basis. Counterparties are selected according
to their international rating, with a focus on diversification.
21.1 Financial instruments linked to foreign currency risk management
A significant percentage of Group companies’ revenue, both to their clients and their own
distribution subsidiaries, as well as some of their purchases, are carried out in foreign
currencies. All of these flows in currencies are primarily represented by intra-Group flows.
The hedging instruments used are intended to reduce foreign currency risks resulting from
changes in the exchange rates on these currencies in relation to the functional currency of
such companies, and are booked against either commercial receivables or debt for the year,
or, under certain conditions, against provisional transactions for following years.
Future currency flows are subject to detailed forecasts in line with the budgetary process
and are progressively hedged, for up to one year, only if justified by the likelihood of
occurrence. Within this framework, and in light of market changes, the currency risks
identified are progressively hedged based on futures or options.
The Group may hedge the net positions of its subsidiaries located abroad using appropriate
instruments in order to limit the impact of changes in the exchange rates for the currencies
concerned against the euro on its consolidated shareholders’ equity.
110
The nominal amounts of financial instruments outstanding at December 31, 2005, broken
down by type of instrument and their accounting allocation and valued at their market value
on the basis of the currency rates in force on this date, are as follows:
Market value of contracts (1)
Options purchased
USD put
JPY put
Tunnels
USD seller
JPY seller
Other
Forward currency
contracts (2)
USD
JPY
GBP
Other
Exchange swaps
CHF
USD
GBP
JPY
Other
Nominal
amounts
Future
cash-flow
hedging
Net investment
hedging in
currencies
Fair value
hedging
Not
allocated
Total
393
471
864
–
17
17
1
–
1
–
–
–
–
–
–
1
17
18
2,055
115
96
2,266
(18)
3
(1)
(16)
–
1
–
1
–
–
–
–
–
–
–
–
(18)
4
(1)
(15)
449
130
194
186
959
(9)
9
(1)
(8)
(9)
–
1
–
(1)
–
(8)
–
–
(8)
(8)
–
(1)
(2)
(11)
(25)
10
(2)
(11)
(28)
887
82
80
(19)
30
1,060
–
–
–
–
–
–
–
–
–
1
–
1
–
–
–
–
–
–
6
(1)
–
1
–
6
6
(1)
–
2
–
7
170
–
–
–
(10)
(10)
(8)
3
(8)
(15)
(28)
(2)
Call revenue
Total
(1) Gain / (Loss)
(2) Sale / (Purchase)
111
Derivatives outstanding relating to the foreign currency risk at December 31, 2005 can be
broken down as follows by the year of allocation:
Nominal
amounts
Options purchased
USD put
JPY put
Tunnels
USD seller
JPY seller
Other
393
471
864
2006
Subsequently
–
393
431
824
40
40
2,055
115
96
2,266
28
1,570
95
96
1,761
449
130
194
186
959
314
67
73
53
507
75
40
121
115
351
18
101
887
82
80
(19)
30
1,060
887
82
80
(19)
30
1,060
–
–
77
93
Forward currency contracts (1)
USD
JPY
GBP
Other
Exchange swaps (1)
CHF
USD
GBP
JPY
Other
2005
Call revenue
170
9
19
–
476
1
477
60
23
(1) Sale / (Purchase)
21.2 Financial instruments linked to interest rate risk management
The Group manages the rate risk in relation to the global net financial debt. The objective of
the management policy implemented is to protect earnings against a rapid and significant
increase in interest rates.
In this context, the Group uses interest rate swaps and options (caps and floors).
112
The notional amounts of financial instruments outstanding at December 31, 2005, broken
down by type of instrument and their accounting allocation and valued at the market value
in force on this date, are as follows:
Market value of contracts (1)
Fair value
Not
hedging allocated Total
Nominal
amounts
Fixed payer rate swaps (euros)
Floating payer rate swaps (euros)
Floating/floating rate swaps (euros)
Caps purchased (euros)
Tunnels (cap purchases and floor revenue)
(euros)
Currency swaps
1,995
3,495
823
1,700
(1)
151
–
–
2
9
(14)
8
1
160
(14)
8
(1)
2
2
(7)
1
(5)
1,725
(145)
Total
151
–
151
(1) Gain / (Loss)
Rate risk derivatives outstanding at December 31, 2005 can be broken down by maturity as
follows:
Fixed payer rate swaps (euros)
Floating payer rate swaps (euros)
Floating/floating rate swaps (euros)
Caps purchased (euros)
Tunnels (cap purchases and floor
revenue) (euros)
Currency swaps
Nominal
amounts
1,995
3,495
823
1,700
1,725
(145)
Under 1
Between
year 1 and 5 years
850
826
473
350
1,650
(118)
1,145
2,069
350
1,350
75
(27)
Over
5 years
–
600
–
–
–
–
21.3 Financial instruments linked to equity risk management
As the Group’s investment policy is to acquire interests over time, the portfolio of equity and
financial investments is not hedged in relation to the equity risk.
113
21.4 Synopsis of financial instruments
Financial instruments are recorded on the balance sheet under the following categories and
in the following amounts:
Note
Foreign currency risk
Assets:
non-current
current
Liabilities: non-current
current
21.1
Rate risk
Assets:
non-current
current
current
21.2
Total outstanding
Assets:
non-current
current
current
11
19
20
114
2005
2004
36
30
(11)
(83)
62
216
–
(9)
(28)
269
96
121
(17)
(49)
154
180
(34)
(179)
151
121
132
151
(28)
(132)
216
396
(34)
(188)
123
390
NOTE 22 - SEGMENT INFORMATION
22.1 Information by business group
2005
Non-Group revenue
Revenue between business
groups
Total revenue
Christian Wines
Dior
and
Couture Spirits
Fashion
and Perfumes Watches
Other
Leather
and
and Selective
and
Goods Cosmetics Jewelry Retailing Holdings
Eliminations (1)
2005
–
14,556
663
2,639
4,781
2,161
563
3,637
112
–
5
31
124
10
11
23
(204)
–
135
(204)
14,556
663
2,644
4,812
2,285
573
3,648
operations
53
869
1,467
173
38
347
(159)
3
2,791
Operational investments (2)
48
100
302
115
18
135
44
–
762
Amortization charges
36
59
187
91
18
112
30
–
533
Impairment charges
–
–
–
–
–
72
11
–
83
Christian Wines
Dior
and
Couture Spirits
Not
Other allocated
activities
(4) (5)
December 31,
2005
Brands, trade names, licenses
and goodwill (3)
Fashion
Leather
and
and Selective
Goods Cosmetics Jewelry Retailing
25
4,847
5,101
1,657
1,042
2,861
454
–
15,987
Other operational assets
576
4,412
2,333
896
385
2,076
912
4,382
15,972
Total assets
601
9,259
7,434
2,553
1,427
4,937
1,366
4,382
31,959
–
–
–
–
–
–
–
11,868
11,868
Operational liabilities
130
932
960
666
133
1,043
215
16,012
20,091
Total liabilities and
shareholders’ equity
130
932
960
666
133
1,043
215
27,880
31,959
(1) Eliminations correspond to revenue between business groups; in most cases, this concerns revenue from business groups
excluding Selective Retailing to Selective Retailing. The prices for revenue between the various business groups correspond
to the prices normally used for wholesale or revenue to non-Group retailers.
(2) Operational investments correspond to the amounts capitalized over the year, and not to disbursements carried out over the
year in connection with these investments.
(3) Brands, trade names, licenses and goodwill comprise the net amounts given in Notes 3 and 4.
(4) Assets that have not been allocated include securities consolidated on an equity basis, equity investments and financial
investments, other financial assets and corporate income tax receivables.
(5) Liabilities that have not been allocated include financial debt and current and deferred tax liabilities.
115
2004
Non-Group revenue
Revenue between business
groups
Total revenue
Christian Wines
Dior
and
Couture Spirits
Fashion
Leather
and
and Selective
Goods Cosmetics Jewelry Retailing
Other and
Holdings
Eliminations (1)
2004
–
13,060
595
2,255
4,339
2,017
483
3,266
105
–
4
27
111
10
10
21
(183)
–
493
3,276
126
(183)
13,060
595
2,259
4,366
2,128
operations
51
813
1,309
150
7
238
(163)
8
Operational investments (2)
69
69
253
86
19
181
64
–
741
Amortization charges
31
48
173
89
16
109
29
–
495
Impairment charges
–
3
12
20
24
25
17
–
101
Christian Wines
Dior
and
Couture Spirits
Fashion
Not
Leather
and
and Selective
Other allocated
Goods Cosmetics Jewelry Retailing Businesses
(4) (5)
December 31,
2004
2,413
Brands, trade names,
licenses and goodwill (3)
25
4,083
4,993
1,643
1,049
2,618
474
–
14,885
Other operational assets
532
3,828
2,188
852
363
1,917
1,028
3,772
14,480
Total assets
557
7,911
7,181
2,495
1,412
4,535
1,502
3,772
29,365
–
–
–
–
–
–
10,065
10,065
Operational liabilities
137
767
894
606
106
882
712
15,196
19,300
Total liabilities and
shareholders’ equity
137
767
894
606
106
882
712
25,261
29,365
(1) Eliminations correspond to revenue between business groups; in most cases, this concerns revenue from business groups
excluding Selective Retailing to Selective Retailing. The prices for revenue between the various business groups correspond
to the prices normally used for wholesale or revenue to non-Group retailers.
(2) Operational investments correspond to the amounts capitalized over the year, and not to disbursements carried out over the
year in connection with these investments.
(3) Brands, trade names, licenses and goodwill comprise the net amounts given in Notes 3 and 4.
(4) Assets that have not been allocated include securities consolidated on an equity basis, equity investments and financial
investments, other financial assets and corporate income tax receivables.
(5) Liabilities that have not been allocated include financial debt and current and deferred tax liabilities.
116
22.2 Information by region
Revenue can be broken down by their destination region as follows:
2005
2004
France
United States
Japan
Asia (excl. Japan)
Other countries
2,282
2,954
3,805
2,111
2,412
992
2,108
2,678
3,438
1,928
2,038
870
Revenue
14,556 13,060
Operational investments can be broken down by region as follows:
2005
2004
France
United States
Japan
Asia (excl. Japan)
Other countries
323
135
138
29
81
56
257
96
108
112
40
128
Operational investments
762
741
Operational investments correspond to the amounts capitalized over the year, and not to
disbursements carried out over the year in connection with these investments.
NOTE 23 - INCOME AND EXPENSES
23.1 Analysis of revenue
Revenue comprise the following elements:
2005
2004
Revenue carried out by brands and trade names
License royalties and income
Income from rental properties
Other
14,339
126
33
58
12,900
123
23
14
Total
14,556
13,060
117
23.2 Charges by type
Profit from recurring operations factors in the following expenses in particular:
2005
2004
Research and development costs
Advertising and promotional costs
Commercial rent
Payroll charges
38
1,463
819
2,567
38
1,332
757
2,356
Research and development costs comprise pure research costs in addition to costs incurred
for developing new products.
Advertising and promotional costs primarily include the costs of media campaigns and costs
for advertising at points of sale.
At December 31, 2005, the Group operated a total of 1,917 stores (1,877 in 2004) around the
world, primarily linked to the Fashion and Leather Goods and Selective Retailing business
groups.
In certain countries, store leases are associated with minimum amounts, notably when leases
include a clause for indexing rent against revenue. Rental charges for stores can be broken
down as follows:
2005
2004
Fixed or minimum rents
Variable portion of indexed rents
Airport concession royalties
352
38
429
327
25
405
Commercial rent
819
757
• Payroll charges can be broken down as follows:
2005
2004
Salaries and payroll charges
Retirement plans, medical expenses and other related benefits
Expenses linked to option plans and related
2,508
29
30
2,231
74
51
Total
2,567
2,356
118
NOTE 24 - OTHER OPERATING INCOME AND EXPENSES
2005
2004
Amortization of brands
Impairment of brands and goodwill
Impairment of tangible assets
Income (loss) from disposals
Restructuring
Impacts of the IFRS changeover on the exchange result
Other
(7)
(49)
(34)
–
(132)
(3)
(1)
Other operating income and expenses
(226) (203)
(9)
(54)
(47)
(14)
(27)
(36)
(16)
• In 2005
Other operating income and expenses for 2005 include 179 million euros in non-recurring
expenses linked to the need to close “the La Samaritaine department store” to the public in
order to allow major work to be carried out to bring the site into line with security
standards.
This amount includes an initial valuation of the job preservation plan, which was approved
by the work’s council on February 6, 2006 and was backed by a majority of the trade unions
on the same day. The provision recorded in this respect is for 55 million euros. Intangible
fixed assets and store fixtures and fittings were subject to an exceptional amortization charge
for the amount of their net values on the balance sheet, representing 38 and 23 million euros
respectively. 47 million euros in charges or provisions were booked for all losses on
inventories of goods in addition to the expenses incurred further to the cancellation of
various contracts with commercial partners. Lastly, the costs incurred to immediately secure
the store and the various site management costs represented a charge of 6 million euros.
The other operating income and expense items primarily concern business restructurings for
21 million euros and the amortization and impairment of intangible assets for 17 million
euros.
• In 2004
Other operating income and expenses concern the impairment of non-strategic brands and
brands with low unit values, the impairment of all properties located outside of France with
insufficient levels of operational profitability, income or losses recorded on disposals, in
particular regarding Christian Lacroix. They also factor in restructuring costs concerning
various Group brands and trade names, in connection with the closure of markets or the
phasing out of secondary and non-profitable activities.
119
NOTE 25 - NET FINANCIAL INCOME
2005
2004
Cost of gross financial debt, excluding repackaged notes (TDI)
Income from cash and financial investments
Impact of market valuations of financial debt and hedging instruments,
excluding repackaged notes (TDI)
Impact of repackaged notes (TDI)
(245)
15
(253)
26
1
(5)
(13)
(16)
Cost of net financial debt
(234)
(256)
Ineffective portion of currency hedging
(105)
(10)
Dividends received on financial investments
Other, net
49
99
16
(14)
Other financial income and expenses
43
(8)
Financial income
(191)
(264)
Other net financial income is based on 99 million euros in capital gains on the disposal of
Bouygues securities.
NOTE 26 - INCOME TAXES
26.1 Analysis of the tax expense
2005
2004
Current taxes for the period
Current taxes relating to previous periods
(599)
10
(530)
42
Current taxes
Change in deferred tax
Impact of changes in tax rates on deferred tax
(589)
(135)
(4)
(488)
(67)
67
Deferred tax
(139)
Total tax expense
(728)
(488)
23
(42)
Tax on items recorded under shareholders’ equity
–
The effective tax rates can be broken down as follows:
2005
2004
Income before tax
Total tax expense
Effective tax rate
2,374
(728)
31%
1,946
(488)
25%
120
26.2 Sources of deferred tax
On the income statement
2005
Market valuation of brands
Market valuation of vineyard land and producing vineyards
Other revaluation gains
Gains and losses on equity and financial investments
Gains and losses on future cash flow hedging in currencies
Provisions for liabilities and charges and impairment of assets (1)
Intra-Group margin included in inventories
Other consolidation restatements
Losses carried forward
Total
2004
(19)
1
–
(86)
8
(2)
15
(51)
(5)
73
1
11
(23)
10
1
24
(51)
(46)
(139)
–
Under shareholders’ equity
2005
2004
(13)
(26)
62
(16)
(35)
9
23
(42)
2005
2004
Total
On the balance sheet
Market valuation of brands
Other revaluation gains
Provisions for liabilities and charges and impairment of assets (1)
Intra-Group margin included in inventories
Other consolidation restatements
Losses carried forward
(3,201) (3,004)
(350) (248)
(315) (314)
(27)
76
23
(52)
45
38
174
161
(6)
68
172
164
Total
(3,485) (3,111)
(1) Primarily regulated provisions, supplementary depreciations for tax purposes and finance leases.
121
Net deferred tax on the balance sheet can be broken down as follows:
2005
2004
Deferred tax assets
Deferred tax liabilities
361
278
(3,846) (3,389)
Net deferred tax on the balance sheet
(3,485) (3,111)
26.3 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 and
the effective tax rate recorded in the consolidated financial statements can be broken down
as follows:
(% of income before tax)
2005
2004
French statutory tax rate
- Impact of changes in tax rates on deferred tax
- Impact of differences between foreign and French tax rates
- Impact of profits and losses carried forward
- Impact of differences between consolidated and taxable income, and
reduced-rate taxable income
- Impact of withholdings
34.9 35.4
0.2 (3.4)
(2.7) (3.7)
(3.0) (6.3)
0.5
0.8
2.6
0.5
Effective tax rate
30.7
25.1
Since 2000, French companies have been subject to additional income tax, which was 6.3%
for 2004, and was reduced to 4.8% for 2005. It will be cut to 3.3% for 2006. In this way, the
French statutory tax rate was 34.9% in 2005 and 35.4% in 2004.
The impact of differences between consolidated and taxable income in 2005 reflected in
particular an amendment to the tax system for repackaged notes (TDI) introduced by the
2006 finance bill (Loi de Finances).
26.4 Losses carried forward
At December 31, 2005, for LVMH S.A., the impact of losses carried forward and tax credits
not yet used and not resulting in the recording of deferred tax assets, came out at 763 million
euros (844 million euros in 2004).
At December 31, 2005, for Christian Dior S.A., ordinary losses carried forward totaled
87 million euros (107 million euros in 2004). Their recovery being deemed probable, they
resulted in deferred tax assets of 29 million euros (37 million euros in 2004).
26.5 Tax consolidation
• French tax sharing agreements allow certain French companies of the Group to combine
their taxable results to determine the overall tax expense for which the parent company is
fully liable.
122
The adoption of this system, which primarily concerns the parent company Christian
Dior S.A., made it possible to record a tax saving of 150 million euros in 2005 (290 million
euros in 2004).
• The other tax consolidation systems in force in other countries, notably Italy and the US,
generated an additional tax saving of 74 million euros in 2005 (40 million euros in 2004).
NOTE 27 - EARNINGS PER SHARE
2005
2004
Net income, Group share (in millions of euros)
Average number of shares outstanding over the year
Average number of Christian Dior shares held as treasury
shares over the year
618
549
181,727,048 181,727,048
(4,071,058) (3,952,628)
Average number of shares taken into account for the
calculation before dilution
Earnings per share (in euros)
177,655,990
177,774,420
3.48
3.09
Average number of shares outstanding taken into account
above
Impact of dilution for option plans
177,655,990
1,346,973
177,774,420
962,733
Average number of shares outstanding after dilution
179,002,963
178,737,153
3.45
3.07
Diluted earnings per share (in euros)
NOTE 28 - PENSION COMMITMENTS, MEDICAL COSTS AND
RELATED BENEFITS
28.1 Expense for the period
2005
Cost of services rendered
Impact of discounting
Expected return on dedicated financial assets
Cost of past services
Changes in treatment
2004
40
20
(13)
2
(20)
38
21
(9)
Expense for the period under the benefit systems defined
29
74
Effective return /(cost) on assets for dedicated financial
systems
22
14
123
24
28.2 Net commitment recorded
2005
2004
470
140
398
159
610
(343)
8
(12)
557
(287)
6
(14)
Items not recognized
Net commitment recorded
(4)
263
(8)
262
Of which:
Long-term provisions
Short-term provisions
Long-term financial assets
267
5
(9)
261
3
(2)
Total
263
262
Entitlements covered by financial assets
Entitlements not covered by financial assets
Discounted value of entitlements
Market value of financial assets
Actuarial differences not recorded on the balance sheet
Cost of past services not yet recorded in the accounts
28.3 Analysis of changes in commitments
Expense for the period
Discounted Market value
value of
of financial
entitlements
assets
Net
Items not commitments
recognized
recorded
557
(287)
(8)
262
60
(13)
(18)
29
(52)
40
–
(12)
–
(42)
–
(42)
Impact of currency changes
19
(5)
(1)
13
consolidation
39
(26)
–
13
Changes in treatment
(20)
(2)
22
–
Actuarial differences
7
(8)
1
–
610
(343)
Beneficiary benefits
Increase in dedicated financial
assets
124
(4)
263
The actuarial assumptions used to estimate commitments at December 31, 2005, in the main
countries where the commitments are located, are as follows:
Discount rate
2.00% in Japan, 4.00% in France,
5.75% in the US
8.00% in the US
2.00% to 4.50%
reduction from 9% to 6% between 2006
and 2010, then 5% in the US
Expected long-term rate of return on
investments
Future rate of increase of salaries
Rate of increase of medical costs
At December 31, 2004, the actuarial assumptions retained were as follows:
Discount rate
5.75% in the US
Expected long-term rate of return on
investments
8.00% in the US
Future rate of increase of salaries
2.00% to 4.00%
Rate of increase of medical costs
reduction from 9% to 5% between 2005
and 2009, then 5% in the US
28.4 Analysis of entitlements
The discounted value of entitlements can be broken down by type of plan as follows:
2005
2004
Retirement indemnities and related provisions
Medical costs for retired staff
Long-service awards
Additional retirement payments
Pre-retirement payments
Other
88
53
12
430
17
10
78
57
10
362
41
9
610
557
The discounted value of entitlements can be broken down by region as follows:
2005
2004
France
America
Japan
Asia Pacific
264
169
115
54
8
284
108
98
60
7
610
557
125
The main systems reflected in the commitment at December 31, 2005 are as follows:
• in France: this primarily concerns long-service awards and end-of-career compensation,
payment of which is provided for under French law and the national wage bargaining
agreements applicable, respectively after staff have built up a certain level of seniority or
when they retire;
• in Europe (excluding France), the main commitments concern systems for the
reimbursement of medical costs for retired staff, put in place by certain Group companies in
the UK, as well as the TFR (Trattamento di Fine Rapporto) benefit in Italy, which is to be
paid at the time of employees leaving the company, whatever the reason;
• in the US, the commitment stems from pensions systems with defined benefits or the
reimbursement of medical costs for retired staff, in line with agreements put in place by
certain Group companies.
28.5 Analysis of dedicated financial assets
The market values of the assets in which funds paid into schemes are invested can be broken
down as follows:
(%)
Equities
Bonds
– private issuers
– public issuers
Real estate, cash and other assets
Market value of dedicated financial assets
2005
2004
46
37
25
22
7
29
24
10
100
100
Plan assets do not include any real estate assets operated by the Group or any LVMH
shares.
NOTE 29 - OFF-BALANCE SHEET COMMITMENTS
29.1 Purchase commitments
Grapes, wines and distilled alcohol
Industrial or commercial assets
Equity interests and investments
2005
2004
809
58
59
775
77
76
In the Wines and Spirits business group, a percentage of future grape, light wine and
distilled alcohol supplies are governed by purchase commitments with various local
producers. Depending on the business, these commitments are valued based on contractual
terms or the last known prices and estimated yields at the close of accounts. They primarily
cover 2006 and 2007.
At December 31, 2005, negotiations were underway to finalize various agreements intended
to supplement purchase commitments for grapes, wine and distilled alcohol as mentioned
above.
126
29.2 Leasing commitments
In addition to the leasing of its stores, the Group also finances part of its equipment based on
long-term operating leases. Furthermore, certain capitalized assets or industrial pieces of
equipment have been acquired or refinanced under financial leasing agreements.
• Operating leases and concession fees
At December 31, 2005, future non-cancelable commitments arising from operating leases
and concession fees can be broken down as follows:
2005
2004
Under one year
From one to five years
Over five years
583
1,606
895
570
1,474
932
Commitments given under operating leases and concession fees
3,084
2,976
Under one year
Over five years
18
44
8
20
47
15
Commitments received under sub-leases
70
82
• Financial leases
At December 31, 2005, future non-cancelable commitments arising from financial leases can
be broken down as follows:
2005
2004
Minimum
Minimum
future Fair value of
future Fair value of
payments
payments payments
payments
Under one year
Over five years
Total future minimum payments
Percentage representing financial
interests
Fair value of future minimum
payments
32
85
464
29
67
81
581
(404)
177
16
79
424
14
66
78
519
(361)
177
158
158
29.3 Possible liabilities and current disputes
In the ordinary course of its business, the Group is involved in legal proceedings and claims
relating to trademarks, the protection of intellectual property rights, establishing selective
retailing agreements, licensing, employee relations, tax audits and other matters inherent in
its business. The Group believes that the provisions recorded relative to these risks, litigation
and disputes, known or underway at the closing date, are sufficient to cover any unfavorable
outcome, such that the consolidated financial position would not be significantly affected.
127
29.4 Deposits, pledges and other guarantees
2005
2004
Deposits and pledges
Other guarantees
37
54
29
48
Guarantees given
91
77
Guarantees received
19
8
29.5 Other commitments
To the best of the Group’s knowledge, there are no other significant off-balance sheet
commitments than those indicated above.
NOTE 30 - RELATED PARTIES
30.1 Relations of Christian Dior Group with the Groupe Arnault and the
Financière Agache Group
The Christian Dior Group is consolidated in the statements of Financière Agache S.A,
controlled by Groupe Arnault SAS.
• Relations of the Christian Dior Group with Groupe Arnault
Groupe Arnault provides assistance services to the Christian Dior Group for development,
engineering, business and real-estate law and support staff; moreover, Groupe Arnault leases
commercial premises to LVMH.
The Christian Dior Group leases premises used for offices and also provides various
administrative services to the holding companies.
The transactions between the Christian Dior Group and Groupe Arnault may be
summarized as follows:
2005
· Invoices from Groupe Arnault to the Christian Dior Group
Trade account balances at December 31
· Invoices from the Christian Dior Group to Groupe Arnault
Trade account receivables at December 31
(10)
(2)
2
–
2004
(10)
(3)
2
–
• Relations of the Christian Dior Group with the Financière Agache Group
The Financière Agache Group, through its subsidiary John Galliano SA, provides artistic
management services to Christian Dior Couture.
Moreover, some companies of the Christian Dior Group optimize their cash flow by
belonging to a cash pool managed by Financière Agache. This latter thus centralizes all or
part of their short-term cash surpluses; covers all or part of their short-term funding needs;
places the invests net surpluses and covers net requirements.
128
The transactions between the Christian Dior Group and the Financière Agache Group may
be summarized as follows:
2005
2004
· Invoices from the Financière Agache Group to the Christian Dior Group
Trade account balances at December 31
· Financial interest invoiced to the Christian Dior Group
Current accounts balance at December 31
· Invoices from the Christian Dior Group to the Financière Agache Group
Trade account receivables at December 31
(8) (8)
(3) (5)
(4) (3)
(108) (92)
–
–
–
–
30.2 Relations of the Christian Dior Group with Diageo
Moët Hennessy is the holding company for the Wine and Spirits activities of the Group,
except for Château d’Yquem and certain Champagne vineyard land and producing
vineyards. Since 1994, the Diageo Group holds a 34% share in Moët Hennessy. On this
date, an agreement was concluded between Diageo and Moët Hennessy for the allocation of
holding fees between Moët Hennessy and other holdings of the LVMH Group.
Under the terms of the agreement, Moët Hennessy assumed 23% of common fees in 2005
(24% in 2004), with Moët Hennessy’s total administrative fees at 44 million euros in 2005
(34 million euros in 2004).
30.3 Managing bodies
The overall compensation to the 8 Members of the Board of Directors, for their duties
within the Group, can be broken down as follows:
2005
2004
Gross compensation and benefits in kind
Post-employment benefits
Cost of stock option plans and related
11
1
14
10
1
12
Total
26
23
NOTE 31 - SUBSEQUENT EVENTS
At the date of closing, no significant event occurred.
129
LIST OF CONSOLIDATED COMPANIES IN 2005
All the companies below are fully consolidated except for those indicated by the number
(1), which are consolidated on a proportional basis and those indicated by (2), which are
consolidated using the equity method.
COMPANIES
REGISTERED OFFICES
Christian Dior S.A.
Financière J. Goujon
Sadifa
Lakenbleker
Paris, France
Paris, France
Paris, France
Amsterdam, Netherlands
CHRISTIAN DIOR COUTURE
Christian Dior Couture SA
Christian Dior Fourrure M.C.
S.A.M.
Christian Dior GmbH
Christian Dior Inc.
Christian Dior UK Ltd
Christian Dior Suisse SA
Les Jardins d’Avron SAS
Mardi SpA
Ateliers AS
Christian Dior Far East Ltd
Christian Dior (Fashion) Malaysia
Sdn Bhd.
Christian Dior Hong Kong Ltd
Christian Dior Taiwan Limited
Christian Dior Singapore PTE Ltd
Christian Dior Saipan Ltd
Christian Dior Australia PTY Ltd
Christian Dior New Zealand Ltd
Christian Dior (Thailand) Co. Ltd
Christian Dior K.K. (Kabushiki
Kaisha)
Christian Dior Couture Korea Ltd
Christian Dior Guam Ltd
Christian Dior Española S.L.
Christian Dior do Brasil Ltda
Christian Dior Italia Srl
Christian Dior Belgique SA
Bopel Srl
P.T. Christian Dior Indonesia
PERCENTAGE
Control Interest
Parent company
100%
100%
100%
100%
100%
100%
Paris, France
Monaco
100%
100%
100%
100%
Munich, Germany
New York, U.S.A.
London, United Kingdom
Geneva, Switzerland
Paris, France
Badia a Settimo, Italy
Pierre Bénite, France (2)
Hong Kong
Kuala Lumpur, Malaysia
100%
100%
100%
100%
100%
50%
25%
100%
100%
100%
100%
100%
100%
100%
50%
25%
100%
100%
Hong Kong
Taipei, Taiwan
Singapore
Saipan, NMI
Sydney, Australia
Auckland, New Zealand
Bangkok, Thailand
Tokyo, Japan
100%
90%
100%
100%
100%
100%
49%
100%
100%
90%
100%
100%
100%
100%
49%
100%
Seoul, South Korea
Agana, Guam
Madrid, Spain
Sao Paulo, Brazil
Milan, Italy
Brussels, Belgium
Lugagnano Val d’Arda, Italy
Jakarta, Indonesia
100%
100%
100%
100%
100%
100%
70%
80%
100%
100%
100%
100%
100%
100%
70%
80%
130
Christian Dior Puerto Banus S.L.
Les Jardins d’Avron LLC
Lucilla Srl
Christian Dior Couture CZ
Christian Dior Couture Morocco
Christian Dior Couture FZE
Christian Dior Macau Company
Limited
Les Ateliers Bijoux
Christian Dior S. de R.L. de C.V.
Christian Dior Commercial Shanghai
Co. Ltd
WINES AND SPIRITS
Champagne Moët & Chandon SCS
Moët Hennessy UK Ltd
Moët Hennessy España SA
Moët Hennessy (Suisse) SA
Champagne Des Moutiers SA
Schieffelin Partner Inc.
Moët Hennessy de Mexico,
S.A. de C.V.
Chamfipar SA
Société Viticole de Reims SA
Cie Française du Champagne et du
Luxe SA
Moët Hennessy Belux SA
Champagne de Mansin SAS
Moët Hennessy Osterreich GmbH
Schieffelin & Somerset
Moët Hennessy (Nederland) BV
Schieffelin & Co
MHD Moët Hennessy Diageo SAS
Opera Vineyards SA
France Champagne SA
Domaine Chandon, Inc.
Cape Mentelle Vineyards Ltd.
Veuve Clicquot Properties, Pty Ltd.
Moët Hennessy do Brasil—
Vinhos E Destilados Ltda
Cloudy Bay Vineyards Ltd
Bodegas Chandon Argentina SA
Domaine Chandon Australia Pty Ltd.
Newton Vineyards LLC
Puerto Banus, Spain
New York, United States
Sieci, Italy
Prague, Czech Republic
Marrakech, Morocco
Dubai, United Arab Emirates
Macao, Macao
75%
100%
51%
100%
100%
100%
96%
75%
100%
51%
100%
100%
100%
96%
Germany
Lomas, Mexico
Shanghai, China
100% 100%
100% 100%
100% 100%
Epernay, France
Barcelona, Spain
Geneva, Switzerland
Epernay, France
New York, U.S.A.
Mexico City, Mexico
60%
60%
60%
60%
60%
60%
60%
29%
29%
29%
29%
29%
29%
29%
Ay, France
Ay, France
Ay, France
60%
60%
60%
29%
29%
29%
Brussels, Belgium
Gye sur Seine, France
Vienna, Austria
New York, U.S.A.
Naarden, Netherlands
New York, U.S.A.
Courbevoie, France
Buenos Aires, Argentina (1)
Epernay, France
Yountville (California), U.S.A.
Margaret River, Australia
Sydney, Australia
Sao Paulo, Brazil
60%
60%
60%
60%
60%
60%
60%
30%
60%
60%
60%
60%
60%
29%
29%
26%
29%
29%
29%
29%
15%
29%
29%
29%
29%
29%
Blenheim, New Zealand
Buenos Aires, Argentina
Coldstream Victoria, Australia
St. Helena (California), U.S.A.
60%
60%
60%
60%
29%
29%
29%
23%
131
Veuve Clicquot Ponsardin SCS
Société Civile des Crus de
Champagne SA
Neggma SA
Veuve Clicquot U.K.
Clicquot, Inc
Veuve Clicquot Japan KK
Moët Hennessy Suomi OY
Moët Hennessy Sverige AB
Moët Hennessy Norge AS
Moët Hennessy Danmark A/S
Moët Hennessy Deutschland GmbH
Moët Hennessy Italia S.p.a.
Krug SA
Champagne Ruinart SA
Ruinart UK Ltd
Ruinart Japan KK
Ruinart España SL
Château d’Yquem SA
Château d’Yquem SC
Jas Hennessy & Co SCS
Diageo Moët Hennessy BV LLC
Hennessy Dublin Ltd.
Edward Dillon & Co Ltd.
Hennessy Far East Ltd.
Riche Monde Orient Limited
Riche Monde Ltd.
Riche Monde (China) Ltd
M.H.—U.D.G. (Far East) Ltd.
Riche Monde Pte Ltd.
Riche Monde Malaisie Inc.
Riche Monde Taïpei Ltd.
Riche Monde Bangkok Ltd.
Moët Hennessy Korea Ltd.
Moët Hennessy Shanghai Ltd
Moët Hennessy India pvt. Ltd
Moët Hennessy Taiwan Ltd
RML DF Greater China
MHD Chine Co Ltd
Moët Hennessy Diageo KK
Moët Hennessy Asia Pte Ltd.
Moët Hennessy Australia Ltd
Millennium Import LLC
Millennuim Brands Ltd
Reims, France
Reims, France
60% 29%
60% 29%
Reims, France
New York, U.S.A. (*)
Tokyo, Japan
Helsinki, Finland
Stockholm, Sweden
Hoevik, Norway
Copenhagen, Denmark
Munich, Germany
Milan, Italy
Reims, France
Reims, France
Tokyo, Japan
Madrid, Spain
Sauternes, France
Sauternes, France
Cognac, France
Amsterdam, Netherlands (3)
Dublin, Ireland
Dublin, Ireland (2)
Hong Kong, China
Hong Kong, China (3)
Shanghai, China
Singapore (3)
Petaling Jaya, Malaysia (3)
Taipei, Taiwan (3)
Bangkok, Thailand (3)
Seoul, South Korea
Shanghai, China
New Delhi, India
Taipei, Taiwan
Shanghai, China
Shanghai, China
Tokyo, Japan (3)
Singapore
Rosebury, Australia
Minneapolis, MN, USA
Dublin, Ireland
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
24%
60%
60%
60%
60%
60%
60%
30%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
132
15%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
28%
29%
29%
29%
11%
29%
29%
29%
29%
29%
29%
15%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
Polmos Zyrardow
The Glenmorangie Company Ltd
Mac Donald & Muir Ltd
Glenair Ltd
The Scotch Malt Whisky
FASHION AND LEATHER GOODS
Louis Vuitton Malletier SA
Manufacture de souliers Louis Vuitton
SRL
Louis Vuitton Saint Barthélémy SNC
Société des Ateliers Louis Vuitton SNC
Société Louis Vuitton Services SNC
Société des Magasins Louis Vuitton
France SNC
Belle Jardinière SA
Belle Jardinière Immo SAS
Sedivem SNC
Les Ateliers Horlogers Louis
Vuitton SA
Louis Vuitton Monaco SA
ELV SARL
LVMH Fashion Group UK Ltd.
Louis Vuitton Deutschland GmbH
Louis Vuitton España SA
Sociedad Catalana Talleres Artesanos
Louis Vuitton SA
Louis Vuitton BV
LVMH Fashion Group Belgium SA
Louis Vuitton Hellas SA
Louis Vuitton Portugal Maleiro, Ltda.
Louis Vuitton Ltd
Louis Vuitton Danmark A/S
Louis Vuitton Aktiebolag SA
LVMH Fashion Group Switzerland SA
Louis Vuitton Ceska s.r.o.
Louis Vuitton Osterreich GmbH
Louis Vuitton Cantacilik Ticaret
Anonim Sirketi
LV US Manufacturing, Inc.
Somarest SARL
LVMH Fashion Group Hawaii Inc.
LVNA Finance Corp.
Atlantic Luggage Company Ltd
Zyrardow, Poland
Edinburgh, United Kingdom
60%
60%
60%
30%
60%
Paris, France
Fiesso d’Artico, Italy
60% 44%
60% 44%
Saint Barthélémy, French Antilles
Paris, France
Paris, France
Paris, France
60%
60%
60%
60%
44%
44%
44%
44%
Paris, France
Paris, France
Paris, France
La Chaux-de-Fonds, Switzerland
60%
60%
60%
60%
44%
44%
44%
43%
Monte Carlo, Monaco
Paris, France
Düsseldorf, Germany
Madrid, Spain
Barcelona, Spain
60%
60%
60%
60%
60%
60%
44%
44%
44%
44%
44%
44%
Brussels, Belgium
Athens, Greece
Lisbon, Portugal
Tel Aviv, Israel
Copenhagen, Denmark
Stockholm, Sweden
Geneva, Switzerland
Vienna, Austria
Istanbul, Turkey
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
New York, U.S.A.
Sibiu, Romania
Honolulu, (Hawaii), USA
New York, U.S.A.
Hamilton, Bermuda
60%
60%
60%
60%
60%
44%
44%
44%
44%
18%
133
29%
29%
29%
15%
29%
Louis Vuitton Guam, Inc.
Louis Vuitton Saipan, Inc.
San Dimas Luggage Company
LVMH FG Brasil Ltda
Louis Vuitton Mexico S de RL de CV
Blinfar SA
Louis Vuitton Chile Ltda
LVMH Fashion Group Pacific Ltd
Louis Vuitton Hong Kong Ltd.
Louis Vuitton (Philippines), Inc
LVMH Fashion (Singapore) Pte Ltd
PT Louis Vuitton Indonesia
Louis Vuitton (Malaysia) SDN BHD
Louis Vuitton (Thailand) SA
Louis Vuitton Taïwan Ltd
Louis Vuitton Australia, PTY Ltd
Louis Vuitton (China) Co Ltd
LV New Zealand Limited
Louis Vuitton Kuweit CSP
Louis Vuitton EAU LLC
LV Arabie Saoudite LLC
Louis Vuitton Korea Ltd
LVMH Fashion Group Trading Korea
Ltd
Louis Vuitton Argentina SA
Louis Vuitton Vostock LLC
LV Colombia SA
Louis Vuitton Maroc Sarl
Louis Vuitton Venezuela SA
Louis Vuitton South Africa (Pty) Ltd
Louis Vuitton Macau Company Ltd
LVMH Fashion Group (Shanghai)
Trading Co Ltd
LV Cup España S.L.
LVJ Group KK
LVMH Fashion Group Americas Inc.
Louis Vuitton Canada, Inc.
LVMH Fashion Group Services SAS
Marc Jacobs International LLC
Marc Jacobs Trademark LLC
Loewe SA
Loewe Hermanos SA
Loewe Textil SA
Guam
Saipan
New York, U.S.A.
Sao Paulo, Brazil
Mexico City, Mexico
Montevideo, Uruguay
Santiago del Chile, Chile
Hong Kong, China
Hong Kong, China
Makati, Hong Kong, China
Singapore
Jakarta, Indonesia
Bangkok, Thailand
Taipei, Taiwan
Sydney, Australia
Shanghai, China
Safat, Kuwait
Dubai, United Arab Emirates
Jeddah, Saudi Arabia
Seoul, South Korea
Seoul, South Korea
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
42%
44%
44%
44%
26%
29%
29%
44%
44%
Moscow, Russia
Santafe de Bogota, Colombia
Casablanca, Morocco
Caracas, Venezuela
Johannesburg, South Africa
Macao, Macao
Shanghai, China
60%
60%
60%
60%
60%
60%
60%
60%
44%
44%
44%
44%
44%
44%
44%
44%
Valencia, Spain
Tokyo, Japan
Toronto, Canada
Paris, France
Madrid, Spain
Madrid, Spain
Madrid, Spain
60%
60%
60%
60%
60%
60%
60%
60%
60%
44%
44%
44%
44%
42%
15%
44%
44%
44%
134
Manufacturas Loewe SL
LVMH Fashion Group France SNC
Loewe Hermanos UK Ltd
Loewe Saïpan Inc.
Loewe Guam Inc.
Loewe Hong Kong Ltd
Loewe Fashion Pte Ltd
Loewe Fashion (M) SDN BHD
Loewe Taïwan Ltd
Loewe Australia Pty Ltd
Berluti SA
Société Distribution Robert Estienne
SNC
Manifattura Ferrarese S.r.l
Caltunificio Rossi Moda SPA
Rossi Moda Inc
Rossimoda France SARL
Brenta Suole S.r.l
Montaigne KK
Modulo Italia S.r.l
Céline SA
Avenue M International SCA
Enilec Gestion SARL
Céline Montaigne SA
Céline Monte-Carlo SA
Céline Production Srl
Céline Suisse SA
Céline UK Ltd
Céline Inc.
Céline Hong Kong Ltd
Céline (Singapore) Pte Ltd
Céline Guam Inc.
Céline Korea Ltd
Céline Taïwan Ltd
CPC International Ltd
Kami SA
Kenzo SA
Kenzo Homme SA
Modulo SA
Kenzo Belgique SA
Kenzo UK Ltd
Kenzo Homme UK Ltd
Kenzo Japan KK
Madrid, Spain
Paris, France
Saipan, Marianna Islands
Guam
Quarry Bay, Hong Kong
Singapore
Taipei, Taiwan
Sydney, Australia
Paris, France
Paris, France
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
44%
44%
44%
44%
44%
44%
44%
44%
42%
44%
44%
44%
Milan, Italy
Vigonza, Italy
New York, U.S.A.
Paris, France
Vigonza, Italy
Tokyo, Japan
Milan, Italy
Paris, France
Paris, France
Paris, France
Paris, France
Monte Carlo, Monaco
Greve in Chianti, Florence, Italy
Geneva, Switzerland
Hong Kong, China
Singapore
Tumon, Guam
Seoul, South Korea
Taipei, Taiwan
Hong Kong, China
Montbazon, France
Paris, France
Paris, France
Paris, France
Brussels, Belgium
Tokyo, Japan
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
44%
43%
43%
43%
28%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
43%
44%
44%
44%
44%
44%
44%
44%
44%
44%
135
Givenchy SA
Givenchy Corporation
Givenchy Co Ltd
Gentleman Givenchy Far East Ltd
Givenchy China Co Ltd
Gabrielle Studio, Inc.
Donna Karan International Inc.
The Donna Karan Company LLC
Donna Karan Service Company BV
Donna Karan Studio LLC
The Donna Karan Company Store LLC
Donna Karan Company Store UK
Holdings Ltd
Donna Karan Management Company
UK Ltd
Donna Karan Company Stores UK
Retail Ltd
Donna Karan Company Store
(UK) Ltd
Donna Karan H. K. Ltd
Donna Karan (Italy) Srl
Donna Karan (Italy) Production
Services Srl
Fendi International BV
Fendi France SA
Fun Fashion Emirates LLC
Fendi SA
Fendi S.r.l
Fendi Adele S.r.l
Fendi Immobili Industriali Srl
Fendi Italia S.r.l
Fendi UK Ltd
Fendi France SAS
Fendi North America, Inc.
Fendi Australia Pty Ltd
Fendi Guam Inc.
Fendi (Thailand) Co. Ltd
Fendi Asia Pacific Ltd
Fendi Korea Ltd
Fendi Taiwan Ltd
Fendi Hong Kong Ltd
Fendi China Boutiques Ltd
Fendi (Singapore) Pte Ltd
Fendi Fashion (Malaysia) Snd. Bhd.
Paris, France
New York, U.S.A.
Tokyo, Japan
Hong Kong, China
Hong Kong, China
New York, U.S.A.
New York, U.S.A.
Oldenzaal, Netherlands
New York, U.S.A.
New York, U.S.A.
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60% 43%
60% 43%
60% 43%
Hong Kong, China
Milan, Italy
Milan, Italy
60% 43%
60% 43%
60% 43%
Paris, France
Dubai, UAE
Luxembourg
Rome, Italy
Rome, Italy
Florence, Italy
Rome, Italy
Paris, France
Sydney, Australia
Tumon, Guam
Bangkok, Thailand
Hong Kong, China
Seoul, South Korea
Taipei, Taiwan
Hong Kong, China
Hong Kong, China
Singapore
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
136
44%
44%
44%
44%
44%
43%
43%
43%
43%
43%
43%
43%
42%
44%
26%
42%
42%
42%
42%
44%
44%
44%
44%
44%
44%
44%
44%
44%
33%
31%
31%
44%
44%
Fun Fashion FZCO LLC
Fendi Marianas Inc.
Emilio Pucci S.r.l
Emilio Pucci International BV
Emilio Pucci, Ltd
Thomas Pink Holdings Ltd
Thomas Pink Ltd
Thomas Pink BV
Thomas Pink Inc.
Thomas Pink Ireland Ltd
Thomas Pink Belgium SA
Thomas Pink France SAS
e-Luxury.com Inc.
PERFUMES AND COSMETICS
Parfums Christian Dior S.A.
LVMH P&C Thailand Co Ltd
LVMH Parfums & Cosmétiques do
Brasil Ltda
France Argentine Cosmetics SA
LVMH P&C Shanghai Co Ltd
Parfums Christian Dior Finland Oy
LVMH P&C Inc.
SNC du 33 avenue Hoche
Beauté SA
LVMH Fragrances & Cosmetics
(Singapore) Pte Ltd
PCD Orient FZ Co
Parfums Christian Dior (UK) Ltd
Parfums Christian Dior BV
Iparkos BV
LVMH Perfumes y Cosmeticos Iberica
SA
Parfums Christian Dior S.A.B.
LVMH P&C Holding SPA
Parfums Christian Dior (Ireland) Ltd
Parfums Christian Dior Hellas S.A.
Parfums Christian Dior A.G.
Christian Dior Perfumes LLC
Parfums Christian Dior Canada Inc.
LVMH P&C de Mexico SA de CV
Parfums Christian Dior Japan K.K.
Parfums Christian Dior (Singapore)
Pte Ltd
Dubai, UAE
Tumon, Guam
Florence, Italy
New York, U.S.A.
Rotterdam, Netherlands
Dublin, Ireland
Brussels, Belgium
Paris, France
San Francisco (California), U.S.A.
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
Paris, France
Bangkok, Thailand
Sao Paulo, Brazil
60% 44%
60% 22%
60% 44%
Shanghai, China
Helsinki, Finland
New York, U.S.A.
Paris, France
Athens, Greece
Singapore
60%
60%
60%
60%
60%
60%
60%
44%
44%
44%
44%
44%
44%
44%
Dubai, UAE
Madrid, Spain
60%
60%
60%
60%
60%
26%
44%
44%
44%
44%
Brussels, Belgium
Milan, Italy
Dublin, Ireland
Athens, Greece
Zurich, Switzerland
New York, U.S.A.
Montréal, Canada
Mexico City, Mexico
Tokyo, Japan
Singapore
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
137
26%
44%
42%
30%
42%
44%
44%
44%
44%
44%
44%
44%
44%
Inalux SA
LVMH P&C Asia Pacific Ltd
Fa Hua Fragrance & Cosmetic Co Ltd
LVMH P&C Shanghai Co, Ltd
LVMH P&C Korea Ltd
Parfums Christian Dior Hong Kong Ltd
LVMH P&C Malaysia Sdn berhad Inc.
Fa Hua Hong Kong Co, Ltd
Pardior SA de CV
Parfums Christian Dior A/S Ltd
LVMH Perfums & Cosmetics Group
Pty Ltd
Parfums Christian Dior AS Ltd
Parfums Christian Dior AB
Parfums Christian Dior (New
Zealand) Ltd
Parfums Christian Dior GmbH Austria
Cosmetic of France Inc.
GIE LVMH P&C Recherche
GIE Parfums et Cosmétiques
Information— services— PCIS
Perfumes Loewe SA
Acqua Di Parma S.r.l
Guerlain SA
LVMH Parfums & Kosmetik
Deutschland GmbH
Guerlain GesmbH
Cofra GesmbH
Guerlain SA (Belgium)
Oy Guerlain AB
Guerlain Ltd
LVMH Perfumeria e Cosmetica Lda
Guerlain SA (Suisse)
Guerlain Inc.
Guerlain Canada Ltd
Guerlain De Mexico SA
Guerlain Puerto Rico, Inc.
Guerlain Asia Pacific Ltd (Hong Kong)
Guerlain KK
Guerlain Taïwan Co Ltd
Guerlain Oceania Australia Pty Ltd
Guerlain Malaysie SDN Berhad Inc.
Make Up For Ever SA
Luxembourg, Luxembourg
Hong Kong, China
Hong Kong, China
Shanghai, China
Seoul, South Korea
Hong Kong, China
Hong Kong, China
Mexico City, Mexico
Copenhagen, Denmark
Sydney, Australia
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
Hoevik, Norway
Stockholm, Sweden
60% 44%
60% 44%
60% 44%
Vienna, Austria
Miami (Florida), U.S.A.
Paris, France
Levallois Perret, France
60%
60%
60%
60%
44%
44%
44%
44%
Madrid, Spain
Milan, Italy
Paris, France
Wiesbaden, Germany
60%
60%
60%
60%
44%
44%
44%
44%
Vienna, Austria
Vienna, Austria
Fleurus, Belgium
Helsinki, Finland
Lisbon, Portugal
Geneva, Switzerland
New York, U.S.A.
Montréal, Canada
Mexico City, Mexico
San Juan, Puerto Rico
Hong Kong, China
Tokyo, Japan
Taipei, Taiwan
Melbourne, Australia
Paris, France
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
138
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
Make Up For Ever UK Ltd
Make Up For Ever LLC
Make Up For Ever Italie S.r.l
Parfums Givenchy SA
Parfums Givenchy Ltd
Parfums Givenchy GmbH
Parfums Givenchy LLC
Parfums Givenchy Canada Ltd
Parfums Givenchy KK
Parfums Givenchy WHD, Inc.
Kenzo Parfums France SA
Kenzo Parfums NA LLC
Laflachère SA
La Brosse et Dupont SAS
La Brosse et Dupont Portugal SA
Mitsie SAS
LBD Iberica SA
Etablissements Ladoë SAS
LBD Ménage SAS
LBD Belux SA
SCI Masurel
SCI Sageda
La Niçoise SAS
LBD Italia S.r.l
Etablissements Mancret Père & Fils SA
Inter-Vion Spolka Akcyjna SA
Europa Distribution SAS
LBD Hong Kong
LBD Antilles SAS
Benefit Cosmetics LLC
Benefit Cosmetics UK Ltd
Benefit Cosmetics Korea
Benefit Cosmetics SAS
Benefit Cosmetics Hong Kong
Fresh Inc.
LVMH Perfumes and Cosmetics
Services LLC
LVMH Cosmetics Services KK
WATCHES AND JEWELRY
TAG Heuer International SA
TAG Heuer SA
LVMH Relojeria & Joyeria España SA
Milan, Italy
Levallois, France
Düsseldorf, Germany
Toronto, Canada
Tokyo, Japan
Paris, France
Beauvais, France
Villepinte, France
San Domingos de Rana, Portugal
Tarare, France
Barcelona, Spain
Tourcoing, France
Beauvais, France
Brussels, Belgium
Tourcoing, France
Orange, France
Carros, France
Stezzano, Italy
Grenoble, France
Warsaw, Poland
Saint Etienne, France
Hong Kong, China
Ducos, Martinique, France
Seoul, South Korea
France
Hong Kong, China
Boston (Massachusetts), U.S.A.
Edison (New Jersey), U.S.A. (*)
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
Tokyo, Japan
60% 44%
Marin, Switzerland
Madrid, Spain
60% 44%
60% 44%
60% 44%
139
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
23%
44%
44%
44%
35%
35%
35%
35%
35%
29%
44%
LVMH Montres & Joaillerie
France SA
LVMH Watch & Jewelry Italy
Holding SpA
LVMH Watch & Jewelry Central
Europe
Timecrown Ltd
LVMH Watch & Jewelry UK Ltd
Tag Heuer Ltd
LVMH Watch & Jewelry USA (Inc.)
LVMH Watch & Jewelry Canada Ltd
LVMH Watch & Jewelry Far East Ltd
LVMH Watch & Jewelry Singapore
Pte Ltd
LVMH Watch Jewelry Malaysia Sdn
Bhd
LVMH Watch & Jewelry Capital
Pte Ltd
LVMH Watch & Jewelry Japan K.K.
LVMH Watch & Jewelry Australia
Pty Ltd
LVMH Watch & Jewelry Hong Kong
Ltd
LVMH Watch & Jewelry Taiwan Ltd
Cortech SA
LVMH Watch et Jewelry Carribean &
Latin America Inc.
ArteLink S.r.l
LVMH Watch & Jewelry India Pvt Ltd
LVMH Watch & Jewelry China
Chaumet International SA
Chaumet London Ltd
Chaumet Horlogerie SA
Chaumet Monte-Carlo SAM
Chaumet Korea Chusik Hoesa
Zenith International SA
Zenith Time Co Ltd
LVMH Watch et Jewelry Italy SpA
Omas S.r.l.
Delano SA
MMO Instruments de Précision SA
Glasnost Edition SA
MMO Crans SA
Les Ateliers Horlogers LVMH SA
Paris, France
60% 44%
Milan, Italy
60% 44%
Bad Homburg, Germany
60% 44%
Manchester, United Kingdom
Springfield, (New Jersey), U.S.A.
Toronto, Canada
Hong Kong, China
Singapore
60%
60%
60%
60%
60%
60%
60%
60% 44%
Singapore
60% 44%
Tokyo, Japan
Melbourne, Australia
60% 44%
60% 44%
Hong Kong
60% 44%
Taipei, Taiwan
Cornol, Switzerland
Coral Gables (Florida), U.S.A.
60% 44%
60% 44%
60% 44%
Fratte di S. Giustina in Colle, Italy
New Delhi, India
Shanghai, China
Paris, France
Bienne, Switzerland
Monte Carlo, Monaco
Seoul, South Korea
Le Locle, Switzerland
Milan, Italy
Bologna, Italy
Meyrin, Switzerland
Crans-sur-Sierre, Switzerland
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
140
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
23%
44%
44%
44%
44%
44%
44%
44%
44%
44%
Fred Paris SA
Joaillerie de Monaco SA
Fred Inc.
Fred Londres Ltd
Benedom SARL
SELECTIVE RETAILING
Sephora SA
Sephora Luxembourg SARL
LVMH Iberia SL
LVMH Italia Spa
Sephora Portugal Perfumeria Lda
Sephora Pologne Spzoo
Sephora Deutschland GmbH
Clab Srl
Sephora Marinopoulos SA
Beauty Shop Romania SA
Spring Time Cosmetics SA
Sephora Tchéquie SRO
Sephora Monaco SAM
Sephora Patras
Sephora Cosmeticos España
Sephora China
Sephora Holding Asia
Sephora USA, Inc
Sephora Beauty Canada Inc
Magasins de la Samaritaine SA
DFS Holdings Ltd
DFS Australia Pty Ltd
DFS Australia Superannuation Pty Ltd
Travel Retail Shops Pty Ltd
Bloomburg Ltd
DFS European Logistics Ltd
DFS Group Ltd
DFS China Partners Ltd
DFS Macau Ltd
Duty Free Shoppers Hong Kong Ltd
Hong Kong International Boutique
Partners
TRS Duty Free Shoppers Hong Kong
Ltd
DFS Okinawa KK
TRS Okinawa
Paris, France
Monte Carlo, Monaco
Beverly Hills (California), U.S.A. (*)
Paris, France
60%
60%
60%
60%
60%
44%
44%
44%
44%
44%
Boulogne Billancourt, France
60% 44%
60% 44%
Madrid, Spain
60% 44%
Milan, Italy
60% 44%
Lisbon, Portugal
60% 44%
Warsaw, Poland
60% 34%
Bad Homburg, Germany
60% 44%
Milan, Italy
60% 44%
Athens, Greece (1)
60% 22%
Bucharest, Romania (1)
60% 22%
Athens, Greece (1)
60% 12%
60% 44%
Monaco
60% 44%
Alimos, Greece (1)
30% 11%
Madrid, Spain (1)
30% 22%
Shanghai, China
60% 36%
Shanghai, China
60% 44%
San Francisco (California), U.S.A. (*) 60% 44%
60% 44%
Paris, France
550% 25%
Hamilton, Bermuda
60% 27%
Sydney, Australia
60% 27%
Sydney, Australia
60% 27%
Sydney, Australia (2)
27% 12%
Hamilton, Bermuda
60% 27%
Hamilton, Bermuda
60% 27%
Delaware, USA
60% 27%
Hong Kong, China
60% 27%
Hong Kong, China
60% 27%
Hong Kong, China
60% 27%
Hong Kong, China
30% 14%
27% 12%
Okinawa, Japan
Okinawa, Japan (2)
60% 27%
27% 12%
141
JAL/DFS Duty Free Shoppers KK
DFS Korea Ltd
DFS Seoul Ltd
DFS Sdn. Bhd.
Gateshire Marketing Sdn Bhd.
DFS Merchandising Ltd
DFS New Caledonia Sarl
DFS New Zealand Ltd
TRS New Zealand Ltd
Commonwealth Investment
Company, Inc
DFS Saipan Ltd
Kinkaï Saipan L.P.
Singapore International Boutique
Partners
DFS Palau Ltd
DFS Galleria Taiwan Ltd
DFS Taiwan Ltd
Tou You Duty Free Shop Co. Ltd
DFS Singapore (Pte) Ltd
DFS Trading Singapore (Pte) Ltd
DFS Venture Singapore (Pte) Ltd
TRS Singapore Pte Ltd
Singapore International Boutique
Partners
DFS Group L.P.
LAX Duty Free Joint Venture 2000
Royal Hawaian Insurance
Company Ltd
Hawaï International Boutique Partners
JFK Terminal 4 Joint Venture 2001
DFS/Waters
DFS Guam L.P.
Guam International Boutique Partners
DFS Liquor Retailing Ltd
Twenty Seven—Twenty Eight Corp.
TRS Hawaii LLC
TRS Saipan
TRS Guam
Le Bon Marché SA
SEGEP SNC
Franck & Fils SA
Chiba, Japan (2)
Seoul, South Korea
Seoul, South Korea
Dutch Antilles
Nouméa, New Caledonia
Auckland, New Zealand (2)
24%
60%
60%
60%
60%
60%
60%
60%
27%
60%
60% 27%
60% 27%
60% 14%
Koror, Palau
Taipei, Taiwan
Taipei, Taiwan
Taipei, Taiwan
Singapore
Singapore
Singapore
Singapore (2)
Singapore
60%
60%
60%
60%
60%
60%
60%
27%
60%
Delaware, U.S.A.
Los Angeles (California), U.S.A
Honolulu, (Hawaii), U.S.A.
60% 27%
60% 21%
60% 27%
Honolulu, (Hawaii), U.S.A.
New York, U.S.A.
Dallas (Texas), U.S.A.
Tamuring, Guam
Tamuring, Guam
Delaware, U.S.A.
Delaware, U.S.A.
Honolulu, (Hawaii), U.S.A. (2)
Garapan, Saipan, Marianna
Islands (2)
Tumon, Guam (2)
Paris, France
Paris, France
Paris, France
60%
60%
60%
60%
60%
60%
60%
45%
45%
14%
22%
19%
27%
14%
27%
27%
12%
12%
45%
60%
60%
60%
12%
44%
44%
44%
142
11%
27%
27%
27%
27%
27%
27%
27%
12%
26%
27%
27%
27%
27%
27%
27%
27%
12%
14%
Balthazar SNC
Tumon Entertainment LLC
Comete Guam Inc.
Tumon Games LLC
Tumon Aquarium LLC
Comete Saipan Inc.
Cruise Line Holdings Co
On-Board Media Inc.
Starboard Cruise Services Inc.
Starboard Holdings Ltd
International Cruise Shops
South Florida Custom Brokers, Inc.
Miami Airport Duty-Free Joint
Venture
Fort Lauderdale Partnership
OTHER ACTIVITIES
DI Group SA
DI Services SAS
Imprimerie Desfossés SARL
Tribune Desfossés SAS
Radio Classique SAS
Les Editions Classique Affaires SARL
DI Régie SAS
SFPA SARL
D2I SAS
Investir Publications SAS
Investir Formation SARL
Compo Finance SARL
SID Presse SARL
SID Développement SAS
SID Editions SAS
SID Magazine SA
SOFPA SA
De Beers LV Ltd
Ufipar SAS
L Capital Management SAS
Sofidiv SAS
GIE LVMH Services
Moët Hennessy SNC
LVMH Services Ltd
Moët Hennessy Investissements
LVMH Fashion Group SA
Paris, France
Tamuning, Guam
Tamuning, Guam
Tamuning, Guam
Tamuning, Guam
Saipan NMI
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Cayman Islands
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
Ft Lauderdale (Florida) U.S.A.
60% 33%
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Lausanne, Switzerland
London, United Kingdom (2)
Paris, France
Paris, France
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
30%
60%
60%
60%
60%
60%
60%
60%
60%
143
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
29%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
22%
44%
44%
44%
38%
29%
44%
29%
44%
Moët Hennessy International SA
Creare SA
Creare Pte Ltd
Jean Goujon SAS
Delphine SAS
LVMH Finance SA
Primae SA
Eutrope SAS
Flavius Investissements SA
Cie Financière Laflachère SA
LV Capital SA
Micromania S.A.S
SFMI SA
LC Oméga Holdings SA
Moët Hennessy Inc.
One East 57th Street LLC
LVMH Moët Hennessy Louis
Vuitton Inc.
598 Madison Leasing Corp.
1896 Corp.
LVMH Participations BV
Vuitton BV
Louis Vuitton Prada Holding BV
Sofidiv UK Ltd
Vuitton KK
Osaka Fudosan Company Ltd
LVMH Asia Pacific Ltd
LVMH Moët Hennessy Louis Vuitton
SA
Singapore
Paris, France
Paris, France
Nice, France (2)
Nice, France (2)
Boulogne Billancourt, France (2)
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
15%
15%
15%
60%
60%
60%
29%
38%
38%
44%
44%
44%
44%
44%
44%
44%
44%
11%
11%
11%
29%
44%
44%
60%
60%
60%
60%
44%
44%
44%
44%
Tokyo, Japan
60% 44%
60% 44%
60% 44%
Tokyo, Japan
Hong Kong, China
Paris, France
60% 44%
60% 44%
60% 44%
(*) The address listed is the administrative office of the companies; corporate registration for the company is
in the State of Delaware.
(1) Company consolidated on a proportional basis.
(2) Company consolidated using the equity method.
(3) Joint venture with Diageo: only Moët Hennessy activity added.
144
STATUTORY AUDITORS’ REPORT
ON THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2005
MAZARS & GUERARD
MAZARS
Le Vinci - 4, allée de l’Arche
S.A. with capital of 8,320,000 euros
Statutory Auditor
Member of Compagnie Régionale
de Paris
ERNST & YOUNG AUDIT
Faubourg de l’Arche
11, allée de l’Arche
S.A.S. with variable capital
Statutory Auditor
Member of Compagnie Régionale
de Versailles
To the Shareholders,
In performing the mission that has been assigned to us by your Annual General Meeting, we
have reviewed the consolidated financial statements of the Christian Dior company for the
year ended December 31, 2005, as they appear in this report.
The consolidated financial statements were drawn up by the Board of Directors. It is our
task, based on our audit, to express an opinion on these statements. These statements were
prepared for the first time in conformity with the IFRS standards as adopted in the
European Union. They include comparative data for the 2004 financial year restated in
accordance with the same rules.
I. OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS
We have conducted our audit in accordance with auditing standards generally accepted in
France. Those standards require that we plan and perform the audit to obtain reasonable
assurance that the financial statements are free of material misstatement. An audit includes
examining, by sampling, evidence supporting the amounts and disclosures contained in the
financial statements. It also includes assessing the accounting principles used and significant
estimates made by management to prepare the accounts, as well as evaluating the overall
financial statement presentation. We believe that our controls provide a reasonable basis for
the opinion expressed below.
We certify that, according to IFRS accounting standards as adopted in the European Union,
the consolidated financial statements faithfully and fairly present, in all material respects, the
assets, the financial position and the results of all the companies included in the
consolidation.
II. JUSTIFICATION OF OUR ASSESSMENT
Pursuant to the provisions of Article L.823-9 of the French Commercial Code governing the
justification of our assessment, we provide you with the following information:
• We believe that note 1.9 to the financial statement provides adequate information in regard
to the accounting treatment of purchasing commitments of minority interests, which is not
precisely specified in the IFRS standards as adopted in the European Union.
• The valuation of brands and goodwill has been tested using the method described in note
1.11 to the financial statements. We have assessed the legitimacy of the methodology used,
which was based on a set of estimates and examined the amounts and assumptions used by
the company to make these valuations.
145
The assessments we made are part of our audit of the consolidated financial statements in
their entirety and, therefore, have contributed to the formation of our opinion as expressed
in the first part of this report.
III. SPECIFIC VERIFICATION
Furthermore, we have also performed verifications of information contained in the
management report of the Group, in accordance with accounting principles generally
accepted in France. We have no comments to make on their accuracy and consistency with
the consolidated financial statements.
Paris-La Défense, April 10, 2006
The Auditors
MAZARS & GUERARD
MAZARS
ERNST & YOUNG AUDIT
Denis Grison
Christian Mouillon
146

onmay 11, 2006 - Christian Dior Finance

Transcription

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