2008 annual report - Christian Dior Finance

Transcription

2008 ANNUAL REPORT
T R A N S L AT I O N O F T H E F R E N C H “ R A P P O R T A N N U E L ”
This document is a free translation into English of the original French “Rapport Annuel”, hereafter referred to as the “Annual Report”.
It is not a binding document. In the event of a conflict in interpretation, reference should be made to the French version, which is the authentic text.
Chairman’s message
2
Executive and Supervisory Bodies Statutory Auditors
4
Simplified Organizational Chart of the Group
5
Financial Highlights
6
Management Report of the Board of
Directors
9
Consolidated financial statements
91
1. Consolidated income statement
92
2. Consolidated balance sheet
93
3. Consolidated statement of changes in equity
94
4. Consolidated cash flow statement
95
5. Notes to the consolidated financial statements
97
6. Statutory Auditors’ report
157
10
2. Results by business group
12
3. Operational risk factors and insurance policy
19
4. Financial policy
23
5. Results of Christian Dior SA
27
6. Company shareholders
28
7. Administrative matters
30
8. Financial authorizations
31
9. Information on compensation and benefits in
kind of company officers
34
10.List of offices or positions exercised in all
companies by company officers
37
11.Stock option and bonus share plans
44
12.Information that could have a bearing on a
takeover bid or exchange offer
51
Text of the resolutions
180
13.Employee information
52
Statutory Auditors’ reports
187
14.Effects of operations on the environment
66
15.Litigation and exceptional events
76
16.Subsequent events
77
General information
191
17.Recent developments and prospects
77
Report of the Chairman of the Board
of Directors on internal control
procedures
79
1. Corporate governance
80
2. Implementation of internal control procedures
and risk management
84
88
Parent company financial statements 159
1. Balance sheet
160
2. Income statement
162
3. Cash flow statement
163
4. Notes to the parent company financial statements164
5. Subsidiaries and investments as of
December 31, 2008
173
6. Investment portfolio, other investment
securities and short term investments
173
7. Company results over the last five fiscal years
174
8. Statutory Auditors’ reports
175
Resolutions
179
1. History of the Group
192
2. General information regarding
the parent company and its share capital
194
198
4. Stock market information
211
5. Main locations and properties
215
6. Supply sources and subcontracting
218
7. Statutory Auditors
221
8. Statement of the Company Officer responsible
for the annual financial report
222
2008 Annual Report
This English version of the “Rapport Annuel” is provisional
and may be subject to modification prior to publication in June 2009.
2008 Annual Report
1
The Christian Dior Group achieved another year of growth in 2008, a performance underscoring the strengths of our brands and
the outstanding appeal of our products. Our solid financial results, generated against the backdrop of the current economic and
financial crisis, once again reaffirm the relevance of our development strategy and our core values: creativity, refinement, elegance
and excellence.
In 2008, Christian Dior Couture continued to build on its success, concentrating its efforts on its strongest, most time-honored lines.
Its ongoing strategy favoring the development of iconic, resolutely upscale products, combined with investments in its network of
boutiques and in the modernization of its organization, gives further impetus to the House of Dior amid an uncertain economic
environment.
All of Dior’s product categories were once again resoundingly successful, with the glowing reception for its two haute couture
collections paying tribute to the brand’s know-how and singular sense of style. Dior’s ready-to-wear also made significant advances
thanks to its ever more refined and elegant collections. Leather Goods scaled new heights in 2008, driven in particular by the
Lady Dior handbag, which is increasingly acquiring the status of a brand icon, while at the same time proving to be an unqualified
commercial success. Dior Joaillerie’s collections continued to draw enthusiastic interest and the Milly Carnivora luxury jewelry
line was no exception.
Backed by its exceptional range of products, Christian Dior Couture resolutely made further investments in its network of boutiques,
this year pursuing a strategy of targeted openings in its highest potential markets: China, Russia and the Middle East. In these
markets, the opening of a Dior boutique is always a landmark event, with an eye-catching facade and a decor that recreates the
contemporary, refined ambiance of the Avenue Montaigne boutique, establishing the best profile for the House of Dior right from
the outset. In the same vein, the major exhibition Christian Dior and Chinese Artists helped to firmly position the brand at the highest
echelon of prestige in this strategic market.
2
2008 Annual Report
At LVMH, there have been many other successes this year. I will start with those that we owe to our leading brands. Louis Vuitton,
which enjoyed another record year, celebrated its timeless values through the iconic personalities that featured in its corporate
campaign. Parfums Christian Dior, demonstrating its exceptional image and its roots in the world of couture, once again outperformed
its competitors. Hennessy secured its leading position in China and Sephora gained further market share. From our rising stars,
we have continued to make excellent progress. Some examples are Ruinart’s remarkable achievements, further progress at Donna
Karan which has built on the performance of recent years, the strengthening position of Ardbeg whisky, and the accelerated growth
of Marc Jacobs, BeneFit and Make Up For Ever.
In all our business groups, 2008 has been an extremely innovative year. We have released new cuvees and designed high value-added
packaging for our cognacs, champagnes and whiskies. Louis Vuitton demonstrated its close involvement with the art world through
the launch of two Marc Jacobs collections conceived in collaboration with the artists Richard Prince and Takashi Murakami. Another
highlight was the launch of Damier Graphite, a new signature range for our male clientele. This line was remarkably successful in the
second half of the year and we have great ambitions for it and its numerous incarnations. We launched new perfumes: Dior Homme
Sport, Escale à Portofino by Christian Dior, Guerlain Homme, Play by Givenchy and KenzoPower. Our watch and jewelry brands
have extended their iconic ranges. In Geneva, TAG Heuer won its fifth Grand Prix in six years for the Grand Carrera chronograph
which was featured at Baselworld 2008. Chaumet launched a new collection of high-end jewelry and Sephora continued to affirm
its status as the most innovative brand in the global beauty and perfume sector.
2009 has started in a climate of considerable uncertainty for all businesses. It would be unwise to predict the length of the global
economic crisis at this stage. However, whatever happens, we have prepared ourselves for a difficult environment throughout the
year. We have strengthened our rigorous management by rapidly taking strict actions where necessary. I am also aware that we must
be even more selective in the decisions that concern the allocation of our resources: over the coming months, these decisions will
be focused exclusively on our key profitability drivers, the most important projects, the most lucrative markets and only genuinely
strategic opportunities.
Beyond short-term initiatives imposed by the current climate, the Christian Dior Group – and this, in my mind, is key – will continue
to implement its organic growth strategy, which is founded on innovation and geographic expansion. To achieve this, our Group
can count on a number of assets. In these turbulent economic and financial markets, one of the Group’s most important attributes is
the strength of its balance sheet. Our debt levels are modest. Having constantly focused on cash generation, we have the ability to
finance our own growth and therefore can calmly anticipate with, and I repeat, great vigilance, the moment of economic recovery.
I would like to highlight one other point: in troubled times, consumers have a need, more than ever, for reference points. In this
regard, I believe I can say that our brands have strong, timeless values, which carry a true message of quality and a real promise
of excellence. We will continue to support these brands so that they can once again assert their authenticity through powerful and
qualitative innovation as well as creative marketing.
We will also support them as they expand geographically. In recent years, we have conquered new territories. Thanks to an early
presence in the emerging countries, some of these markets are already important pillars of our growth. China, for example, has
become the biggest market for Hennessy cognac and is the second largest customer base for Louis Vuitton worldwide. The Group’s
more recent moves are also very promising. Glenmorangie and BeneFit have been hugely successful in Asia, Sephora in Eastern
Europe, Marc Jacobs in Europe, Hennessy in Vietnam, etc. In short, we will be on the front foot in all markets where we see strong
growth potential.
During the various crises that the Christian Dior Group has encountered throughout its history, our Group has always known how
to concentrate on its priorities and to take advantage of the strength of its brands to reinforce its leadership of the worldwide luxury
goods market. Our decentralized organization fosters a spirit of enterprise and also, therefore, reactivity - an essential quality in
periods of uncertainty. I know I can count on the men and women in the Christian Dior Group to meet the numerous challenges
ahead and to prepare our Group to continue its growth.
Bernard ARNAULT
2008 Annual Report
3
Executive and Supervisory Bodies
Statutory Auditors
Board of Directors
Performance audit committee
Bernard ARNAULT
Chairman
Eric GUERLAIN (1)
Chairman
Eric GUERLAIN (1) (2)
Vice Chairman
Renaud DONNEDIEU de VABRES (1)
Christian de LABRIFFE
Sidney TOLEDANO
Chief Executive Officer
Antoine BERNHEIM (1) (2)
Nominating and
compensation committee
Denis DALIBOT (2)
Renaud DONNEDIEU de VABRES (1) (3)
Pierre GODÉ
Christian de LABRIFFE
Antoine BERNHEIM (1)
Chairman
Pierre GODÉ
(2)
Eric GUERLAIN (1)
Jaime de MARICHALAR y SÁENZ
de TEJADA (1) (2)
Alessandro VALLARINO GANCIA (2)
Executive management
Sidney TOLEDANO
Statutory Auditors
ERNST & YOUNG AUDIT
represented by Jeanne Boillet
MAZARS
represented by Denis Grison
(1) Independent director.
(2) Renewal proposed at the Shareholders’ Meeting of May 14, 2009.
(3) Ratification of the co-optation proposed at the Shareholders’ Meeting of May 14, 2009.
4
2008 Annual Report
Simplified Organizational Chart
of the Group as of December 31, 2008
*
100%
Christian Dior Couture
100%
Financière Jean Goujon
42.4%
LVMH *
* Listed company.
2008 Annual Report
5
Consolidated revenue
by business group
by geographic region of delivery
(EUR millions)
(EUR millions)
by currency
(EUR millions)
(en millions d’euros)
6
2008 Annual Report
Key consolidated data
(EUR millions and percentage)
Revenue
Profit from recurring operations
Net profit
Group share of net profit
Cash from operations before changes in working capital (1)
Operating investments (2)
Equity
Net financial debt (3)
Net financial debt/Total equity ratio
2008
2007
2006
17,933
3,621
2,224
796
17,245
3,610
2,328
880
16,016
3,209
2,133
797
4,141
980
15,265
5,370
35%
4,145
988
13,940
4,479
32%
3,593
784
12,974
4,763
37%
2008
2007
2006
4.46
4.43
4.94
4.86
4.49
4.41
0.44
1.17
0.44
1.17
0.38
1.03
1.61
1.61
1.41
2008
2007 (6)
2006 (6)
Data per share
(EUR)
Earnings per share
Basic Group share of net profit
Diluted Group share of net profit
Dividend per share
Interim
Final
Gross amount paid in respect of the fiscal year (4)(5)
Information by business group
(EUR millions)
Revenue by business group
Wines and Spirits
Fashion and Leather Goods
Perfumes and Cosmetics
Watches and Jewelry
Selective Retailing
Other activities and eliminations
Total
Profit from recurring operations by business group
Wines and Spirits
Watches and Jewelry
Selective Retailing
765
3,126
6,010
2,868
879
4,376
(91)
17,933
9
1,060
1,927
290
118
388
(171)
787
3,226
5,628
2,731
833
4,164
(124)
17,245
731
2,994
5,222
2,519
737
3,877
(64)
16,016
74
1,058
1,829
256
141
426
(174)
Total
3,621
3,610
(1) Before tax and interest paid.
(2) Amounts presented in the consolidated cash flow statement.
(3) Net financial debt does not take into consideration purchase commitments for minority interests included in Other non-current liabilities.
See Note 17.1 to the consolidated financial statements for the definition of net financial debt.
(4) Excludes the impact of tax regulations applicable to the beneficiaries.
(5) For fiscal year 2008, amount proposed at the Combined Shareholders’ Meeting of May 14, 2009.
(6) Restated after reclassifying la Samaritaine from Selective Retailing to Other activities.
2008 Annual Report
56
962
1,633
222
80
387
(131)
3,209
7
8
2008 Annual Report
Management Report
of the Board of Directors
10
12
2.1
2.2
2.3
2.4
2.5
2.6
Wines and Spirits
Watches and Jewelry
Selective Retailing
12
14
15
16
17
18
3. Operational risk factors and insurance policy 19
3.1 Operational risk factors
3.2 Industrial and environmental risks
3.3 Risk coverage and insurance policies
4. Financial policy
19
21
22
23
4.1 Market risks
4.2 Consolidated cash flow
4.3 Financial structure
24
25
26
5. Results of Christian Dior
27
6. Company shareholders
28
6.1 Main shareholders
6.2 Shares held by members of
the management and supervisory bodies
6.3 Information on purchases and
sales of shares
6.4 Summary of transactions in Christian Dior
securities during the year by directors and
related persons as defined in Article R. 621-43-1
of the Code Monétaire et Financier
7. Administrative matters
7.1
7.2
7.3
7.4
Composition of the Board of Directors
List of offices and positions of Directors
Statutory Auditors
Modification of the Bylaws
8. Financial authorizations
28
28
28
29
30
30
30
30
30
31
8.1 Status of current delegations and authorizations 31
8.2 Authorizations to be renewed
32
9. Information on compensation and
benefits in kind of company officers
34
10. List of offices or positions exercised
in all companies by company officers
10.1Current offices of directors
10.2 Offices of directors to be ratified
10.3Offices of current directors to be renewed
11. Stock option and bonus share plans
11.1Options granted by the parent company,
Christian Dior
11.2Options granted by its subsidiary, LVMH
11.3Options granted to and exercised by
the group’s officers and the Group’s
first ten employees during the year
11.4Bonus shares granted by
the subsidiary, LVMH
37
37
40
40
44
44
46
48
50
12.Information that could have a bearing
on a takeover bid or exchange offer
51
13. Employee information
52
13.1Analysis and development of the workforce
13.2Work time
13.3Compensation
13.4Equality and diversity
13.5Training
13.6 Health and safety
13.7Employee relations
13.8Relations with third parties
13.9Compliance with international conventions
14. Effects of operations on the environment
14.1Water, raw material and energy consumption
14.2Soil use conditions, emissions into
the air, water and soil
14.3Measures taken to limit damage to the
biological equilibrium, natural habitats,
animal and plant species
14.4Organization of environmental protection
methods within the Group
52
57
58
59
61
62
63
64
65
66
66
70
73
73
15. Litigation and exceptional events
76
16. Subsequent events
77
17. Recent developments and prospects
77
2008 Annual Report
9
Management Report of the Board of Directors
Consolidated income statement
In 2008, revenue for the Christian Dior Group amounted to
17,933 million euros, up 4% from the previous year at actual rates.
Since January 1, 2007, the following changes were made in the
Group’s scope of consolidation: in Wines and Spirits, the stake
in the Chinese distiller Wen Jun Spirits, acquired in May 2007,
was consolidated for the first time in the second half of 2007;
in Watches and Jewelry, the Swiss watchmaker Hublot was
consolidated for the first time in the second half of 2008 and the
Italian penmaker Omas was sold and deconsolidated in the second
half of 2007; in Other activities, the media group Les Echos
was consolidated for the first time in the first half of 2008, the
business of the financial daily La Tribune, which was sold in
early 2008, was deconsolidated, and the Dutch yacht builder
Royal Van Lent was consolidated for the first time in the fourth
quarter of 2008. In 2008, John Galliano, a company specializing
in the creation and concession under license of fashion items and
luxury products, was consolidated in the accounts of Christian
Dior Couture. These changes in the scope of consolidation
contributed 1 point to revenue growth for the year.
At constant structure and exchange rates, organic revenue
growth was 7%.
The Group’s profit from recurring operations was 3,621 million
euros, up 0.3% from 2007. The current operating margin as a
percentage of revenue was 20.2%.
Operating profit, after other operating income and expenses
(-153 million euros in 2008 compared to -117 million euros in
2007) was 3,468 million euros, down 0.7%.
Consolidated net profit amounted to 2,224 million euros,
compared to 2,328 million euros in 2007. The Group share
of consolidated net profit was 796 million euros compared to
880 million euros in 2007.
The main financial items were as follows:
(EUR millions)
Revenue
Operating profit
Net profit
Of which Group share
Revenue growth in 2008 by business group was as follows:
• Revenue from Christian Dior Couture remained stable at
constant exchange rates and totaled 765 million euros. Revenue
growth at actual exchange rates was -3%.
• Revenue from Wines and Spirits totaled 3,126 million euros,
down 3% based on published figures. With the adverse impact
of exchange rate fluctuations decreasing revenue by 4 points,
organic growth was 1%. Although the start of the year was
affected by a reduction in the levels of wholesale inventories,
mainly in the United States and Japan, sales held up well
despite the difficult economic climate. In value terms, organic
growth was primarily generated by higher prices, although
champagne and cognac sales volumes were down by 7% and
6%, respectively.
• Revenue from Fashion and Leather Goods was 6,010 million
euros, reflecting organic growth of 10%, and 7% based on
10
2008 Annual Report
2008
2007
2006
17,933
3,621
3,468
2,224
796
17,245
3,610
3,493
2,328
880
16,016
3,209
3,082
2,133
797
published figures. Louis Vuitton turned in a remarkable
performance for the year, again recording double-digit organic
revenue growth. Fendi, Donna Karan and Marc Jacobs also
confirmed their potential, with strong increases in revenue.
• Revenue from Perfumes and Cosmetics was 2,868 million euros,
reflecting organic growth of 8%, and 5% based on published
figures. This performance was spurred by both innovation
and the enrichment of existing lines. All three categories of
products – perfume, make-up and skincare – enjoyed positive
growth. Virtually all of the brands in the portfolio contributed
to this performance, from flagship brands such as Parfums
Christian Dior or Guerlain to alternative and niche brands
such as BeneFit Cosmetics and Make Up For Ever.
• Revenue from Watches and Jewelry was 879 million euros,
reflecting negative organic revenue growth, declining by 2%,
and a rise of 6% based on published figures (negative impact
• Revenue from Selective Retailing was 4,376 million euros.
Organic revenue growth was 9%, and 5% based on published
figures. This growth was driven by Sephora, whose sales
strongly increased, not only on a same-store basis, but also
due to the expansion of its retail network in Europe, North
America, China and the Middle East.
of exchange rate fluctuations decreasing revenue by 2 points,
combined with a positive impact due to changes in the scope
of consolidation of 10 points). The positive impact related
to the integration of Hublot was 10 points. The year saw a
gloomy consumer market in the US and lower demand in
Japan. All this business group’s brands boosted their sales
in Europe and Asia. They posted significant growth in the
Middle East and in Russia.
Revenue
(EUR millions)
2008
Wines and Spirits
Watches and Jewelry
Selective Retailing
765
3,126
6,010
2,868
879
4,376
(91)
Total
17,933
2007 (1)
787
3,226
5,628
2,731
833
4,164
(124)
17,245
2006 (1)
731
2,994
5,222
2,519
737
3,877
(64)
16,016
2008
2007 (1)
2006 (1)
9
1,060
1,927
290
118
388
(171)
74
1,058
1,829
256
141
426
(174)
56
962
1,633
222
80
387
(131)
3,621
3,610
3,209
(1) After the reclassification of la Samaritaine from Selective Retailing to Other activities.
By business group, the breakdown of Group revenue remained
nearly stable. The contribution of Wines and Spirits fell by
2 points to 17%, that of Christian Dior Couture fell by 1 point
to 4%, while that of Fashion and Leather Goods rose by 1 point
to 34%. The contribution of all other business groups remained
unchanged, with Perfumes and Cosmetics at 16%, Selective
Retailing at 24%, and Watches and Jewelry at 5%. In Other
activities and eliminations, the increase in revenue for the
Media division resulting from the acquisition of the Les Echos
media group was partially offset by an increase in consolidation
eliminations arising from the strong revenue performance
achieved by the brands of the Perfumes and Cosmetics business
group via the Sephora retail network.
On first consolidation of LVMH in 1988, all brands then
owned by LVMH were revalued in the accounts of the
Christian Dior Group.
Investments
The net balance from investing activities (purchases and sales)
was a disbursement of 1,618 million euros. This includes, on
the one hand, net operating investments totaling 980 million
euros, and on the other hand, net financial investments totaling
638 million euros.
Research and development
Research and development expenses posted during the year
totaled 43 million euros in 2008 (compared to 46 million in 2007
and 43 million in 2006). These amounts cover scientific research
and development costs of skincare and make-up products in the
Perfumes and Cosmetics business group.
In the Christian Dior consolidated financial statements, LVMH’s
accounts are restated to account for valuation differences in
brands and other intangible assets recorded prior to 1988 in the
consolidated accounts of each of these companies.
Consequently, LVMH’s net profit was consolidated in the
amount of 2,317 million euros, compared to 2,318 million
euros before restatement and intra-group eliminations, and
is included in the Group share of net profit of Christian Dior
for 890 million euros.
2008 Annual Report
11
Results by business group
Profits by business group as shown below are those published by Christian Dior Couture and LVMH, which have therefore not
been restated for eliminations and consolidation adjustments.
2.1 Christian Dior Couture
2.1.1Highlights
Ongoing strategy targeting the highest end of the market
2008 was marked by the following:
Revenue growth in the very upscale portion of the Group’s
Ready-to-Wear, Leather Goods and Jewelry collections
further confirmed the legitimacy of its strategy, concentrating
on exceptional products befitting the excellent reputation of
the Dior brand. In 2008, this strategy was pursued through
prestigious events, particularly in China. The creation of a joint
venture with LVMH for Montres Dior is also in keeping with
this strategy, as it allows the brand to combine the production
and marketing of exceptional products in a priority market.
Stability of annual revenue performance in
a challenging economic environment
Christian Dior Couture’s annual revenue, which amounted to
765 million euros, remained stable at constant exchange rates.
Revenue growth at actual rates was -3%.
Revenue growth slowed considerably in the United States and
Japan as these markets have been particularly affected by the
current economic environment. However, revenue growth
was robust in the rest of the world, particularly in Europe, the
Middle East, and China.
Decline in operating profit
Revenue for Christian Dior Couture declined by 3% at actual
exchange rates compared with 2007, to 765 million euros. At
constant exchange rates, revenue would be 787 million euros,
remaining stable compared with the previous year.
Profit from recurring operations was 9 million euros. It
reflects mainly the business volume recorded by the Group
in 2008, the impact of supply chain enhancements and retail
network expansion.
Profit from recurring operations amounted to 9 million euros.
This decline is attributable mainly to lower business volumes,
the recognition of provisions for impairment of inventory,
and the 4% increase in operating expenses related in part to
network expansion.
Supply Chain project
Operating profit amounted to 2 million euros following the
recognition of other operating income and expenses totaling
7 million euros, mainly incurred in connection with internal
restructuring efforts.
This worldwide project aims to optimize the Group’s response
times and flexibility in the management of its production and
inventory.
Investments focused on high-growth markets
Dior’s retail network comprised 237 points of sale as of
December 31, 2008, up from 221 as of December 31, 2007.
The Group continued to expand in the Middle East with two
openings in Saudi Arabia (both in Riyadh) as well as two new
boutiques in Qatar and in Bahrain. Dior’s presence in China
was reinforced with the opening of five new boutiques (one in
Dalian, two in Tianjin, and two in Shenyang).
12
2.1.2Results of Christian Dior Couture
2008 Annual Report
Net financial expense was 18 million euros, which reflects
the increase in debt related to investments and increases in
inventory during the year.
The tax expense totaled 11 million euros. It was generated by
the beneficiary subsidiaries, together with the non-recognition
of tax credits by loss-making subsidiaries.
The Group share of net profit was a negative result of 29 million
euros, with profit attributable to minority interests amounting
to 2 million euros.
2.1.3Analysis of growth by business group
2008
2007
Change at actual exchange rates
Change at constant exchange rates
License royalties
Wholesale revenue
Retail revenue and other
36
164
565
33
162
592
+10%
+1%
-5%
+12%
+2%
-1%
Total
765
787
-3%
0%
(EUR millions)
License concessions
Wholesale activities
Christian Dior Couture licenses saw growth of 12% at constant
exchange rates, due in particular to the new concession for a
mobile telephony business.
Wholesale activities increased by 2% at constant rates in 2008.
The products that particularly contributed to this growth were
women’s Ready-to-Wear and Montres Dior, which was the
focus of a joint venture with LVMH entering into effect in
April 2008.
Retail sales and other
2008
2007
Change at actual rates
Change at constant rates
Europe and Middle East
Americas
Asia Pacific
292
74
199
277
97
218
+6%
-23%
-9%
+9%
-18%
-7%
Total
565
592
-5%
-1%
(EUR millions)
• Within the retail network, Europe and the Middle East
continued to deliver robust growth. In Europe, the new
Ready-to-Wear collections met with considerable success. In
a challenging economic environment, business volumes in the
United States and Japan declined considerably, especially
during the last quarter. In the Asia-Pacific region, China
sustained growth at a steady pace over the course of the year,
driven in particular during the month of December by a major
exhibition in Beijing: this event provided an opportunity
for renowned Chinese artists to express their personal
visions of the Christian Dior brand, thus enhancing its
image throughout Asia.
• Women’s Ready-to-Wear continued to show growth, seeking
inspiration in the history of the brand. John Galliano’s
collections for 2008 exemplified the know-how, refinement
and luxury that have built the brand’s stellar reputation and
were greeted with an enthusiastic reception, reaffirming the
stylistic continuity of Dior.
• The excellent performance of the Dior Soft and Jazz
products highlighted the strong revenue growth generated
by the resolutely upscale products of the Leather Goods
collection.
2.1.4Outlook for 2009
Christian Dior Couture’s aim in 2009, against the backdrop
of an uncertain economic climate worldwide, is to enhance its
operational flexibility and promote the growth of its iconic, very
high-end products.
Network investments will be concentrated in Russia (Saint
Petersburg, Yekaterinburg) and China. Plans for the closing
of a number of boutiques, whose growth and profitability
prospects are not in line with the Group’s objectives, are already
under way.
Advertising campaigns will focus on the Group’s product lines
that make the greatest contribution to strengthening the brand’s
image of timeless elegance and longevity.
Supported by the brand’s global reach and the excellence of
its products, Christian Dior Couture will pursue a strategy
targeting growth and profitability.
2008 Annual Report
13
2.2 Wines and Spirits
2.2.1Highlights
In 2008, Wines and Spirits revenue amounted to 3,126 million
euros, representing organic growth of 1%.
This business group’s performance varied by market. Demand
was less robust in United States and Japan due to the economic
environment, contrasting with a generally positive trend in
Europe, while expectations were exceeded in China, and in
some other asian markets such as Vietnam, as well as in Russia
and the Middle East. In 2008, China became the second largest
market for the Wines and Spirits business group.
Estates & Wines, the entity that holds the sparkling and still
wines of Moët Hennessy, generated continued organic growth
in all regions of the world, with the exception of the United
States and Japan.
Château d’Yquem achieved another record year, marked by
the success of its latest vintage, the 2007.
Cognac and Spirits
Profit from recurring operations was 1,060 million euros,
remaining stable compared to 2007.
Hennessy, the undisputed world leader in cognac, continued
to grow and consolidated its market share in 2008.
The decline in sales volumes was offset by the maintenance
of a pricing policy consistent with the high-end positioning of
this business group’s brands. These price increases, together
with tight cost control, offset the adverse impact of exchange
rate fluctuations, expenses relating to the reinforcement of
the distribution network, and advertising and promotional
expenditure focused on strategic markets. Operating margin
as a percentage of revenue for this business group increased
by 1.1 point to 33.9%.
For the first time in the history of the brand, China ranked first
among its markets. Hennessy is strengthening its leadership in
the world of premium spirits with the dynamic performance of
its V.S.O.P and X.O categories.
2.2.2Principal developments
Russia confirmed its position as the third pillar of Hennessy
growth. In the European countries, Hennessy maintained its
exceptional market share in Ireland. The brand is also growing
rapidly in Central and Eastern Europe and in certain countries
of Africa and the Middle East.
Champagnes and wines
In the difficult economic conditions of 2008, Moët & Chandon
demonstrated the strength of its brand, resisting the sluggishness
of its historic markets and achieving high growth rates in the
emerging markets, particularly in Central Europe, Africa, the
Middle East and China.
The brand continued its strategy of moving upscale. The Rosé
champagnes, a category that offers strong growth potential,
recorded the most dynamic performances.
Dom Pérignon continued its value creation strategy in its
traditional markets and strengthened its volume growth in its
new markets – Middle East, Central Europe and China.
Hennessy recorded very strong performances in the other
Asian markets.
In the United States, its second market, Hennessy, still the
category leader, continued its value creation strategy, backed
by the advertising campaign “Flaunt Your Taste.”
Glenmorangie strengthened its strategy designed to make it the
world leader in single malt whiskies based on the Glenmorangie
and Ardbeg brands. This strategy led the company to sell the
Glen Moray distillery along with other non-strategic assets. A
key highlight of 2008 was the very successful introduction of
the new line and the new visual identity for the Glenmorangie
brand.
Ruinart recorded a new record year in 2008. This growth was
the result of the strategy of developing value, giving priority to
the premium qualities, Ruinart Blanc de Blancs, Ruinart Rosé and
the prestigious Dom Ruinart vintage.
The strength of the brands of the Wines and Spirits business
group, the excellence of their products and the powerful
distribution network of Moët Hennessy will be major assets in
2009, in a difficult context, marked by a softness in demand and
by the wish of distributors to reduce their stocks.
The strategy implemented by Veuve Clicquot Ponsardin, an
expression of continuing creativity with an emphasis on its
oenological excellence, intensified brand loyalty, enabling the
company to withstand better than some of its direct competitors
the difficult economic environment of 2008 in the major
champagne markets. Veuve Clicquot recorded solid growth in
China, Latin America and in the Persian Gulf.
While it intensifies its management efforts and adapts sales
strategies market by market, the Wines and Spirits business group
will continue to invest in its best drivers of growth, profitability
and gains in market share. Innovation will continue to be our
priority. This dynamic strategy aimed at stimulating sales in the
short term will be a strong accelerator for the activities when
the economic situation improves.
In 2008, Krug continued to implement its value strategy and
its targeted investments in its key markets, as well as its policy
of growth in areas with strong potential (Hong Kong, Spain).
14
The brand consolidated its positions in the luxury champagne
segment.
2008 Annual Report
2.3 Fashion and Leather Goods
2.3.1Highlights
Other brands
In 2008, the Fashion and Leather Goods group posted sales of
6,010 million euros, representing organic growth of 10%. Profit
from recurring operations of 1,927 million euros was up 5%.
Demonstrating the effectiveness of the growth model defined by
its new management team, Donna Karan achieved a record year
despite a year-end impacted by the economic conditions.
Despite the unfavorable impact of exchange rate fluctuations,
Louis Vuitton once again performed remarkably well. Both
Fendi and Marc Jacobs continued to show profitable growth.
Other brands that are currently the focus of development or
revitalization strategies posted mixed results, which led to a slight
decline of 0.4 point in the operating margin as a percentage of
revenue for this business group, to 32.1%.
In line with its strategic plan, Loewe spent 2008 establishing
solid bases for future years by conducting major work on its
brand identity, renewing products and renovating its boutique
concept. The Loewe retail network consisted of 133 stores as
of December 31, 2008.
For Celine, 2008 was a year of transition, marked by the arrival
at year-end of a new management team and the appointment
as Artistic Director of Phoebe Philo, one of the most talented
stylists in the fashion world.
Louis Vuitton
In an unfavorable economic and monetary context, Louis
Vuitton recorded a good year, marked by strong momentum
in the Asian markets (China, Hong Kong, Macao, Korea and
others), in the countries of Eastern Europe and in the Middle
East. A phenomenon reflecting the enthusiasm generated by the
brand in the Chinese markets, China became the brand’s second
largest customer base in 2008. The year was also characterized
by an excellent performance in Western Europe and steady
growth in North America. Louis Vuitton based its progress
both on the growth achieved with its local customers and on the
development of new tourist customers, primarily from China,
Russia and the Middle East.
The brand actively continued to expand its retail network,
which totaled 425 stores as of December 31, 2008. New stores
were opened in all regions of the world, and at a very steady
rate in China and Korea based on the brand’s rapid success in
those countries.
Fendi
In 2008, Fendi continued to record strong and profitable organic
revenue growth.
Fendi continued to expand its retail network. The opening of
a flagship store on Avenue Montaigne in Paris and sites in two
new countries, Qatar and Mexico, were the principal highlights
of this growth. As of December 31, 2008, the Fendi network
had 180 stores around the world. The growth in business was
particularly strong in Europe, China and the Middle East.
Steady growth was also initiated in the countries of Eastern
Europe via a network of independent customers.
Marc Jacobs continued to record solid revenue growth. The
improvement of its profitability confirmed the remarkable
vitality of the brand.
Kenzo continued the improvement in its profitability. The
company steadily continued the global deployment of its new
store concept.
Givenchy confirmed the pertinence of its repositioning and its
commercial success. Women’s ready-to-wear recorded strong
growth in Europe and the United States. The brand also expanded
its presence in the Chinese market.
In 2009, Louis Vuitton will implement a dynamic program to
develop and introduce new products.
The many creative developments will be supported by an
ambitious communications policy.
The brand will continue to expand its retail network to strengthen
its presence in the most promising markets. A number of new
stores are planned in all regions, with particular emphasis on
China and Korea. A high-potential store will open in Dubai.
Fendi will continue to capitalize on its heritage in leather goods
by launching a new line that should be extremely successful. The
brand will enhance its offer in accessories and continue to expand
its store network selectively to meet its profit objectives.
All the fashion brands, based on the objectives and various
stages in their individual strategic plans, will continue more than
ever to focus on improving fundamentals. Pucci and Celine will
introduce the first collections from their new designers.
2008 Annual Report
15
2.4 Perfumes and Cosmetics
2.4.1Highlights
The Perfume and Cosmetics business group recorded revenue
for 2008 of 2,868 million euros, representing organic revenue
growth of 8%. This vitality was driven both by innovations
and by the expansion of existing lines. Profit from recurring
operations, at 290 million euros, rose 13%.
Despite a higher level of advertising and promotional expenditure,
and costs related to a fresh foray into the world of perfume by
Fendi and Pucci, tight control over product costs and other
operating expenses once again improved profitability. Operating
margin as a percentage of revenue for this business group thus
increased by 0.7 point to 10.1%.
Parfums Christian Dior
With significant revenue growth and new improvement in its
profitability in 2008 for the fifth consecutive year, Parfums
Christian Dior again illustrated its exceptional image, the
soundness of its strategy, and the quality of the resulting growth.
The brand’s growth, again greater than the market average,
was well distributed among its different geographic regions.
The leader in Europe, its first market, Parfums Christian Dior
expanded its position there with advances into Russia. The
brand also achieved solid growth in Asia and recorded the best
growth among its competitors in the United States. China and
the Middle East also confirmed their potential.
Dior’s growth, another balancing factor, is driven by all product
categories and, within each category, by the brand pillars, the
strategic lines developed over time and supported by a large
number of initiatives. The dynamic performance of the perfume
segment was driven by the exceptional vitality of the great classic
J’adore, and by new variations of Miss Dior and the success of two
new products launched during the year, Dior Homme Sport and
Escale à Portofino, which inaugurated a new fragrance collection.
The make-up segment, up sharply, was primarily carried by the
Dior Addict, Rouge Dior, and Diorshow product lines. The Capture
product line and the more recent L’Or de Vie premium skincare
products recorded excellent performances.
Guerlain
The company, born in 1828, recorded double-digit organic
revenue growth for the third consecutive year, along with a
new and solid improvement in its profitability.
The brand confirmed its momentum in all geographic zones,
particularly in its priority markets – France, Russia, Japan and
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2008 Annual Report
China. Relying on a strategy that has been implemented for
several years and is founded on high-end innovation, it generated
revenue growth in all product categories. The new men’s fragrance
Guerlain Homme was favorably received, while the House’s great
classic Shalimar achieved excellent performance.
Other brands
Parfums Givenchy recorded a substantial revenue growth and
a sharp increase in its profit from recurring operations. These
very positive results were driven by brand growth in almost all
regions of the world, with particularly satisfactory performances
in France, the Middle East, and China.
All product lines grew significantly. The women’s perfumes
making the strongest contributions were Very Irresistible Givenchy
and Ange ou Démon. The men’s portfolio recorded exceptional
growth in the second half thanks to the very strong startup of
the new Play line which was launched in only ten countries, and
the variant ∏ Neo launched in the rest of the world.
In 2008, Parfums Kenzo celebrated its 20th anniversary, marked
by the creation of limited editions in its iconic lines. Its iconic
perfume FlowerbyKenzo, launched in 2000, continued its strong
performance and is now established as a great perfume classic. The
KenzoKi skincare line continued to grow with the introduction of
Belle de Jour, a total care produce for the face that was launched
successfully in France and Russia.
BeneFit continued its rapid development in all its markets,
maintaining high profitability. One of the make-up leaders
in the United States and the United Kingdom, it confirmed
its success in the countries it has entered more recently, with
considerable success in China for its first full year of operations
in the market.
Make Up For Ever generated exceptional performance in 2008,
with very strong organic revenue growth in all its territories,
particularly in France and the United States, two markets
developed in partnership with Sephora. The revenue growth
went along with a new improvement in profit from recurring
operations.
Throughout 2009, the brands of the Perfumes and Cosmetics
business group will give priority to the development of the
flagship lines that make a major contribution to their results
and will focus on their most profitable markets. In order to
prepare for future successes, the business group will continue
to roll out high potential products with memorable initiatives
throughout the coming months.
Parfums Christian Dior will strengthen the pillars of its perfume
segment J’adore, Poison, Miss Dior, Eau Sauvage, will deploy a
number of creative innovations in make-up, particularly with
the introduction of a new foundation Diorskin Nude, and will
continue to enhance its Capture skincare line.
Guerlain will reinforce its strategic Shalimar, Guerlain Homme,
Terracotta and Orchidée Impériale lines, coupled with two major
new product launches in make-up and perfume.
Parfums Givenchy will benefit from the launch of Play
throughout its international distribution network and from a
new major initiative in the women’s perfume segment.
New products will be launched by Parfums Kenzo to enhance
its major FlowerbyKenzo, KenzoAmour and Les Eaux par Kenzo
lines.
2.5 Watches and Jewelry
2.5.1Highlights
In 2008, Watches and Jewelry revenue amounted to 879 million
euros, representing negative organic growth of 2%, and a rise
of 6% based on published figures (negative impact of exchange
rate fluctuations decreasing revenue by 2 points, combined with
a positive impact due to changes in the scope of consolidation
of 10 points).
Following four years of strong growth and a remarkable
turnaround in its profitability, in 2008 the Watches and Jewelry
business group recorded a decline in profit from recurring
operations to 118 million euros, down from 141 million euros in
2007. Against the backdrop of a slowdown in sales, operational
profitability fell to 13.4%.
The year was characterized by a sluggish American market and
by a decline in demand in Japan. All the brands increased their
revenue in Europe and Asia and recorded significant growth
in the Middle East and Russia, despite a clear slowdown in the
last quarter. The business group maintained its overall market
share. By taking appropriate measures in the second half of the
year, it has made effective preparations for 2009, which will be
marked by difficult economic conditions and retail overstocking
by a number of competing brands.
TAG Heuer
After the highly targeted 2007 launch, 2008 was for TAG Heuer
the year when the Grand Carrera collections were rolled out
worldwide. Affected by the US economy, the brand continued
to grow in many markets.
2008 was also the year of the highly reported launch of Meridiist,
the first line of cell phones directly inspired by the leadingedge materials and technologies controlled by TAG Heuer and
designed in collaboration with Modelabs.
In 2008, TAG Heuer won its fifth Geneva Watchmaking Grand
Prix. This high honor was awarded to the Grand Carrera Calibre
36 RS Caliper chronograph, the flagship model of the Grand
Carrera line.
TAG Heuer also earned the Silmo d’Or in Paris for its collection
of C-Flex eyewear developed in partnership with Logo. This
diversification into eyewear and sun glasses has expanded
strongly in the last three years.
Hublot
The acquisition of the watchmaker Hublot, announced in
April 2008, gives LVMH a new high-end brand with strong
growth potential.
Since its acquisition by the Group, Hublot has maintained strong
momentum and continued its industrial integration plan with
the construction of its manufacturing plant in Nyon. The brand
opened its first boutiques as part of a highly selective strategy
in Geneva, Shanghai and Kuala Lumpur.
Its revenue and profitability have increased in line with projections,
despite the deterioration in economic conditions.
The Hublot operations were consolidated in the Group’s results
as of May 1, 2008.
Chaumet
In 2008, Chaumet expanded its presence in several of its key
markets – Hong Kong, China and the Middle East – and
streamlined its operations in Korea. The brand recorded steady
growth in France and gained market share in Japan.
Other brands
De Beers continued to expand its international presence in the
United States, Asia and the Middle East.
Montres Dior continued to move more high-end to streamline
their global retail business.
In order to promote synergies with Dior Couture and Joaillerie,
the activity of Montres Dior is now managed in the form of a
joint venture between the Watches and Jewelry business group
and the Christian Dior Couture business group.
Fred recorded steady growth in France with its Force 10 jewelry
collection, which was successfully relaunched at the end of
2007. The flagship store on Place Vendôme was renovated and
generated steady growth.
2008 Annual Report
17
In a watch and jewelry market that will be difficult in 2009
because of the economic environment, the objective of the
Watches and Jewelry business group is to continue to gain
market share while consolidating the profitability which has
improved significantly in the last five years.
At the end of 2008, all the companies and sales subsidiaries
committed to cost-cutting plans in order to improve the
productivity of the entire business group.
Investments will be very focused on strategic developments,
particularly the continued industrial integration of the
TAG Heuer and Hublot brands.
2.6 Selective Retailing
2.6.1Highlights
Sephora
In 2008, Selective Retailing revenue amounted to 4,376 million
euros, representing organic growth of 9%. Its profit from recurring
operations of 388 million euros was down 9%.
Following on from the strong performance achieved in the last
four years, Sephora continued to grow at a steady pace in 2008;
it achieved revenue growth and market share gains in all regions
and maintained its good level of profitability. Revenue growth
was driven by growth on a same-store basis and by a number
of new stores. In this context of steady investments in order to
expand its network, Sephora’s profit from recurring operations
rose in line with revenue.
Sephora continued to improve its operating margin, despite
expenses resulting from its rapid expansion in Europe, the
United States, China, and the Middle East, thus confirming
its highly profitable growth momentum. Operating margin as
a percentage of revenue for the Selective Retailing business
group as a whole amounted to 8.9%.
DFS
Despite the impact of the economic difficulties in the second
half of 2008, DFS recorded solid revenue performance. The
slowdown in the markets related to Japanese tourism was offset
by the dynamic trends in destinations visited by other Asian
customers, particularly from China. Because it anticipated
early the rapid growth in these new customers and designed a
very attractive offer, DFS is now in a strong position to benefit
from their development, even if the investments weigh on the
profitability.
The year 2008 was marked by the opening of the Macao Galleria,
a high-potential business and resort destination.
During the year, DFS also began operating in the Middle East
at the Abu Dhabi international airport. This location is the first
step in the expansion planned by DFS in this region of the world.
The opening of a new concession in Terminal 3 of the Singapore
airport as well as the start of operations at the Mumbai (Bombay)
airport in India were other highlights of the year.
Miami Cruiseline
The business of Miami Cruiseline, with a customer base that
is primarily American, was impacted by the slowdown in the
cruise market and the softness in travellers’ spending. To meet
this situation, the company took a number of cost-cutting
measures.
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2008 Annual Report
More than 140 new stores were opened in 2008 in all regions
where Sephora is present (Europe, North America, Asia and
the Middle East). This number reflects the global success of
its concept and its ability to finance its growth from its own
resources. Sephora expanded within its key markets and entered
four new countries: the Netherlands, Kuwait, Hong Kong and
Singapore.
As of December 31, 2008, Sephora’s global network represented
898 stores in 23 countries.
In October 2008, in order to expand its presence in the highpotential Russian market, Sephora acquired an interest in the
second largest local operation in perfume and cosmetics retail,
which holds nearly 100 stores under the Ile de Beauté brand
name. This stake is consolidated using the equity method.
Revenue from the shopping websites sephora.com (United
States and Canada), sephora.fr (France) and sephora.cn (China)
continued to grow significantly. These sites are among the leaders
in their reference market.
Le Bon Marché
2008 was a transition year for Le Bon Marché, characterized
by the continued renovation work that is preparing for future
trends and will open new growth possibilities.
In a difficult commercial context at year-end, the store recorded
slightly slower activity and maintained solid profitability. The
second-half launch of the new website treeslbm.com was well
received.
Operational risk factors and insurance policy
In the very uncertain environment of 2009, the Abu Dhabi
business over a full year and the opening of a new site in Macao
will be positive elements for the activity of DFS. In the short
term, the “travel retail” leader should also benefit from a series
of adjustments made to its organization in the fourth quarter
of 2008 in order to simplify it, boost its efficiency and improve
the productivity of its stores. In the medium and long term,
DFS will remain focused on the growth opportunities related
to high-potential Asian customers and the expansion of its
presence in the Middle East.
Sephora will continue to gain market share by maintaining
the major vectors of its strategy. In particular, the brand will
rely on the introduction of a new wave of exclusive products,
on the innovations in its own brand products, and on growth
in its loyalty programs. Particular attention will be paid to the
efficiency of its organization in order to continue the trend of
profitable growth. New stores will be concentrated in markets
offering the greatest profitability in order to ensure a rapid return
on investment and in new high-potential territories like China.
Le Bon Marché has initiated very rigorous management measures,
while maintaining its investments in sales productivity.
3.Operational risk factors and insurance policy
3.1 Operational risk factors
3.1.1Counterfeit and parallel retail
networks
The Group’s brands, expertise and production methods can be
counterfeited or copied. Products may be distributed in parallel
retail networks without the Group’s consent.
Around the world, the Group is known for its brands, unrivaled
expertise and production methods unique to its products.
In particular, an action plan has been specifically drawn up
to address the counterfeiting of Louis Vuitton products. This
involves close cooperation with governmental authorities,
customs officials and lawyers specializing in these matters in
the countries concerned. The Group also plays a key role in all
of the trade bodies representing the major names in the luxury
goods industry, in order to promote cooperation and a consistent
global message against counterfeiting, all of which are essential
in successfully combating the problem.
Brands are the cornerstone of the Group’s business strategy. As
a result, the legal protection of its trademarks and brands is an
absolute necessity. Thus, brands, product names, trademarks, etc.
are always filed or registered to guarantee legal protection
both in France and in other countries. In general, the Group
takes all measures at the international level to ensure such legal
protection is complete.
In addition, the Group takes various measures to fight the sale
of its products through parallel retail networks, in particular
by developing product traceability, prohibiting direct sales to
those networks, and taking specific initiatives aimed at better
controlling retail channels. In 2008, the cost of these initiatives
was 16 million euros.
The Group’s products, particularly leather goods, are subject to
counterfeiting, especially in Europe and South East Asia.
3.1.2Competition
Moreover, the Group’s perfumes and cosmetics may be found,
without the Group’s control, in points of sale that are inappropriate
for the image or nature of these products (known as parallel or
“gray market” trade).
Counterfeiting and parallel distribution have an immediate
adverse effect on revenue and profit and may damage the brand
image of the relevant products over time. The Group takes all
possible measures to protect itself against these risks.
The Group faces intense competition from an increasing number
of market participants and product offerings. Within this
environment, the positioning of products depends upon the image
of its brands and the exemplary quality and innovative content
of its products. Other factors influencing this positioning include
product design and style, brand image and reputation.
Competition in the markets in which the Group operates is also
being driven by the concentration of retail networks and the
emergence of new players. This is true for Wines and Spirits
2008 Annual Report
19
as well as Perfumes and Cosmetics which are currently facing
pressure on margins, a plethora of rival product launches and
encroachment by retail chains. Competition is also intensifying
in Fashion and Leather Goods, where the development and
constant improvement of products constitute the Group’s
primary strengths.
It is important to note that Group’s activity is equally spread
between three geographical and monetary regions: Asia, the
euro zone and the United States. This geographic balance helps
to offset the risk of exposure to any one area.
Finally, the Group operates to a very limited degree in countries
which impose restrictions on repatriation of profits or access
to foreign exchange.
3.1.3Regulations
In France, the European Union and all other countries in
which the Group operates, many of its products are subject
to specific regulations. Regulations apply to production and
manufacturing conditions, as well as to sales, consumer safety,
product labeling and composition.
3.1.4Seasonality
Nearly all of the Group’s activities are subject to seasonal
variations in demand. Historically, a significant proportion of
the Group’s sales – approximately 30% of the annual total – has
been generated during the peak holiday season in the fourth
quarter of the year. Unexpected events in the final months of
the year may adversely affect the Group’s business volume
and earnings.
3.1.5Worldwide operations
The Group conducts business internationally and as a result is
subject to various types of risks and uncertainties. These include
currency fluctuations which can affect transactions, customer
purchasing power, and the value of operating assets located
abroad, economic changes that are not necessarily simultaneous
from one country to another, and customs regulations or import
restrictions imposed by some countries that may, under certain
circumstances, penalize the Group. Please see the “Financial
policy” section below, for further information concerning the
currency hedges used to mitigate foreign exchange risks.
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2008 Annual Report
3.1.6Other risk factors
Customer risk
Because of the nature of its activities, the majority of the Group’s
sales are not affected by customer risk. Sales are made directly
to customers through Christian Dior Couture, our Selective
Retailing network, the Fashion and Leather Goods stores
and, to a lesser extent, the Perfumes and Cosmetics stores.
Together, these sales accounted for approximately 80% and
54% of total revenue for Christian Dior Couture and LVMH
respectively in 2008.
Furthermore, for revenue not included in this figure, the Group
may be exposed to customer risk, particularly in connection
with license commissions or wholesale activities. The Group’s
businesses are not dependent on a limited number of customers
whose default would have a significant impact on Group activity
level or earnings. At LVMH, the receivable auxiliary balance
as of December 31, 2008 is covered by credit insurance up to
83% of its gross value.
Country risk
In general, the Group has little or no presence in politically
instable regions.
The other risk factors, not directly related to business activities
but to financing and investment transactions, are described in
the “Financial policy” section below.
3.2 Industrial and environmental risks
To identify, analyze and provide protection against industrial
and environmental risks, the Group relies on a combination
of independent experts and qualified professionals from
various Group companies, and in particular safety, quality and
environmental managers.
A legal intelligence team has also been set up in order to better
manage the heightened risk of liability litigation, notably that
to which the Group’s brands are particularly exposed.
3.2.1Mitigating industrial risks
The business of the Group’s companies is such that particular
attention is paid to exposures arising from the storage and
transportation of raw materials and finished goods.
The Group consistently applies the highest safety standards as
part of its policy on industrial risk prevention. Working with
its insurers, LVMH applies HPR (Highly Protected Risks)
standards, the objective of which is to significantly reduce fire
risk, and has established an incentive program for risk prevention
investments which is taken into account by insurance companies
in their risk assessment process.
This approach is combined with an industrial and environmental
risk monitoring program. In 2008, engineering consultants
devoted about 275 audit days to the program.
In addition, prevention and protection schemes include
contingency planning to ensure business continuity.
3.2.2Preventing product-related risks –
Incident management
In addition to industrial safety, LVMH companies also work
to ensure greater product safety and traceability. The HACCP
method (Hazard Analysis Critical Control Point) is used by
companies in the Wines and Spirits and Perfumes and Cosmetics
business groups. This approach aims notably to reinforce the
Group’s anticipation and responsiveness in the event of a
product recall.
3.2.3Risks incurred by all Group activities
Due to the geographical locations of its operations, the Group’s
businesses may be exposed to natural catastrophes.
3.2.4Loss experience
In 2008, the Group’s businesses did not suffer the impact of
any significant disasters. All losses were fully covered by the
Group’s insurance policies.
3.2.5Verification of the proper application
of risk management policies
The Group conducts regular site visits and uses reporting
procedures to monitor the implementation and operation of risk
management actions at Group entities. This enables the Group
to review and assess the pertinence of its risk management policy
on an ongoing basis.
At LVMH, the Risk Management department works together
with the Group’s Internal Audit team on the development of
tools and methodologies for the identification and evaluation of
risks. These tools allow Group companies to take preemptive
action and implement corrective measures to reduce both the
likelihood of occurrence and severity of identified risks.
2008 Annual Report
21
3.3 Risk coverage and insurance policies
The Group has a dynamic global risk management policy based
primarily on the following:
• systematic identification and documentation of risks;
• procedures for risk prevention, occupational safety and
protection of persons and industrial assets;
• implementation of international incident management systems
and contingency plans;
• a comprehensive insurance program to reduce the financial
consequences of major events on the Group’s financial
position;
• worldwide coordination of master” and centralized insurance
programs.
The Group’s global approach is primarily based on transferring its
risks to the insurance markets under reasonable financial terms,
within the limits of the conditions available in those markets
both in terms of scope of coverage and limits. The extent of
insurance coverage is directly related to the constraints of the
insurance market.
Compared with the Group’s financial capacity, its level of selfinsurance does not seem significant. The deductibles payable
by Group companies in the event of a claim reflect an optimal
balance between coverage and the total cost of risk. Insurance
costs paid by Group companies are less than 0.30% of consolidated
revenue.
The financial ratings of the Group’s main insurance partners
are reviewed on a regular basis.
The main insurance programs coordinated by the Group are
designed to cover property damage and business interruption,
transportation, third party liability and product recall.
3.3.1Property and business interruption
insurance
Most of the Group’s manufacturing operations are covered under
a consolidated international insurance program for property
damage and associated operating losses. Other business operations
are covered under programs coordinated at corporate level.
Property damage insurance limits are provided in line with the
values of assets insured. Business interruption insurance limits
22
2008 Annual Report
reflect gross margin exposures of the Group companies for a
period of indemnity extending from 12 to 24 months based
on actual risk exposures. The upper limit of this program is
1.1 billion euros, an amount determined on the basis of the
Group’s maximum possible loss.
Coverage for “natural events” provided under the Group’s
international damage insurance program is limited to: 75 million
euros per claim and 150 million euros per year for LVMH and
200 million euros per claim in France (10 million euros outside
of France) for Christian Dior Couture. These limits are in line
with the Group companies’ risk exposures.
3.3.2Transport insurance
All Group operating entities are covered by an “Inventory and
Transit” transportation insurance contract.
3.3.3Third party liability
The Group has implemented a third-party liability and worldwide
product recall insurance program for all its subsidiaries
throughout the world. This program is designed to provide the
most comprehensive coverage for the Group’s known risks, given
the insurance capacity and coverage available internationally.
Coverage levels are in line with those of companies with
comparable business operations.
Both environmental losses arising from gradual as well as sudden,
accidental pollution and environmental liability (Directive
2004/35/EC) are covered under this program.
Specific insurance policies have been implemented for countries
where work-related accidents are not covered by state insurance
schemes, such as the United States. Coverage levels are in
line with the various legal requirements imposed by the
different states.
3.3.4Coverage for special risks
Insurance coverage for political risks, directors’ and officers’
liability, fraud and malicious intent, natural catastrophe,
acts of terrorism, data corruption or data loss, credit risk or
environmental risks, is obtained through specific worldwide
or local policies.
Financial policy
4.Financial policy
During the year, the Group’s financial policy focused on:
• Improving the Group’s financial structure, as evidenced by
the key indicators listed below:
-- substantial growth in equity;
-- reinforcement of the financial structure thanks to the increase
in the long term portion of net financial debt;
-- a determined, moderate reduction in the amount of cash and
cash equivalents, in response to the context of the financial
markets;
-- the Group’s financial flexibility, based on a significant reserve
of confirmed credit lines.
Equity before appropriation of profit increased by 9.5% to
15,265 million euros as of December 31, 2008, compared
to 13,940 million euros a year earlier. This improvement is
attributable both to net profit growth in 2008 and the positive
impact of currency translation due to the change in value of the
US dollar and the Japanese yen against the euro between the
end of 2007 and 2008, partially offset by dividend payments
totaling 905 million euros.
• Maintaining a prudent foreign exchange and interest rate
risk management policy designed primarily to hedge the risks
generated directly and indirectly by the Group’s operations
and investments.
With regard to foreign exchange risks, the Group continued
to hedge the risks of exporting companies using call options
or ranges to limit the negative impact of currency depreciation
while retaining most of the gains in the event of currency
appreciation. This strategy enabled the Group to obtain
hedging rates for the US dollar and the Japanese yen, its two
main invoicing currencies, comparable with those obtained
in 2007 and better than their respective average annual
exchange rates.
Apart from its cash and cash equivalents, the Group applies a
diversified short and long term investment policy. The Group’s
private equity investments continued to perform well in 2008
as in recent years, whereas its other short and long term
investments, in contrast to their performance in recent years,
suffered from the impact of the market downturn in 2008.
• A controlled increase in borrowing costs, with a cost of
net financial debt amounting to 322 million euros in 2008,
compared to 272 million euros in 2007. This change is the
result of widening credit and lending margins, increases in
short term interest rates in the euro zone and the rise in the
average net financial debt. Despite these developments, the
Group was able to limit the impact in 2008 of the upturn
in euro, Swiss franc and US dollar interest rates thanks to
the significant proportion of fixed-rate borrowings at the
beginning of the year.
Financial income and expenses were favorably impacted once
again by dividends received and by the net financial gains
relating to available for sale financial assets and other financial
instruments, including in particular the gains recorded on the
sale of the minority stake in the French video game retailer
Micromania. However, the recognition of changes in the fair
value of the ineffective portion of foreign currency hedges
had an adverse impact on financial income and expenses, but
to a lesser extent than in the previous year.
• Pursuing a dynamic dividend payout policy to shareholders,
to enable them to benefit from the company’s excellent
performances over the year:
-- an interim dividend for 2008 of 0.44 euro was paid in
December 2008;
-- proposal of a total gross dividend of 1.61 euro per share for
the period; as a result, total dividend payments to shareholders
by Christian Dior SA in respect of 2008 would amount to
293 million euros, before the impact of treasury shares.
• The current financial market situation, and in particular the
high cost of liquidity and the rise in counterparty risk, has
prompted the Group to limit its cash and cash equivalents.
2008 Annual Report
23
Financial policy
4.1 Market risks
4.1.1Exposure to foreign exchange rate risk
A substantial portion of the Group’s sales is denominated in
currencies other than the euro, particularly the US dollar and
the Japanese yen, while most of its manufacturing expenses
are euro-denominated.
Exchange rate fluctuations between the euro and the main
currencies in which the Group’s sales are denominated can
therefore significantly impact its revenue and earnings reported
in euros, and complicate comparisons of its year-on-year
performance.
The Group actively manages its exposure to foreign exchange
risk in order to reduce its sensitivity to unfavorable currency
fluctuations by implementing hedges such as forward sales
and options.
Owning substantial assets denominated in currencies other
than euros (primarily the US dollar and Swiss franc) is also a
source of foreign exchange risk with respect to the Group’s net
assets. This risk is managed via total or partial funding of these
assets with borrowings denominated in the same currency as
the corresponding asset.
The Group may use derivatives in order to reduce its exposure
to risk. Derivatives may serve as a hedge against fluctuations in
share prices. For instance, equity swaps in LVMH shares allow
cash-settled compensation plans index-linked to the change in
LVMH share to be covered. Derivatives may also be used to
build a synthetic long position.
4.1.4Exposure to liquidity risk
The Group’s local liquidity risks are generally not significant.
Its overall exposure to liquidity risk can be assessed with regard
to the amount of the short term portion of its net financial debt
before hedging (1.4 billion euros) and outstanding amounts in
respect of its commercial paper program (0.7 billion euros).
Should any of these borrowing facilities not be renewed, the
Group has access to undrawn confirmed credit lines totaling
3.6 billion euros.
4.1.2Exposure to interest rate risk
Therefore, the Group’s liquidity is based on the large amount
of its investments and long term borrowings, the diversity
of its investor base (bonds and commercial paper), and the
quality of its banking relationships, whether evidenced or not
by confirmed credit lines.
The Group’s exposure to interest rate risk may be assessed with
respect to the amount of its consolidated net financial debt, which
totaled approximately 5.4 billion euros as of December 31, 2008.
At this date, 55% of gross debt was subject to a fixed rate of
interest and 45% was subject to a floating interest rate.
4.1.5Organization of foreign exchange,
interest rate and equity market risk
management
Since the Group’s debt is denominated in various different
currencies, the Group’s exposure to fluctuations in interest rates
underlying the main currency-denominated borrowings (euro,
US dollar, Swiss franc and Japanese yen) varies accordingly.
The Group applies an exchange rate and interest rate management
strategy designed primarily to reduce any negative impacts of
foreign currency or interest rate fluctuations on its business
and investments.
This risk is managed using interest rate swaps and purchases
of interest rate caps (protections against an increase in interest
rate) designed to limit the adverse impact of unfavorable interest
rate fluctuations.
The Group has implemented a stringent policy, as well as strict
management guidelines to measure, manage and monitor these
market risks.
4.1.3Exposure to equity market risk
The Group’s exposure to equity market risk relates mainly
to Christian Dior and LVMH treasury shares which are held
primarily for stock option plans and bonus share plans. The
Group also now holds LVMH share-settled calls to cover these
commitments to employees. Christian Dior treasury shares, as
well as call options on Christian Dior shares, are considered as
equity instruments under IFRS, and as such have no impact
on the consolidated income statement.
Shares other than Christian Dior and LVMH treasury shares may
be held by some of the funds in which the Group has invested,
24
or even directly within non-current or current available for
sale financial assets.
2008 Annual Report
These activities are organized based on a strict segregation
of duties between risk measurement, hedging (front office),
administration (back office) and financial control.
The backbone of this organization is an integrated information
system which allows hedging transactions to be monitored in
real time.
Hedging decisions are made according to a clearly established
process that includes regular presentations to the Group’s various
executive bodies and detailed supporting documentation.
Potential counterparties are selected based on a minimum
rating level and in accordance with the Group’s risk
diversification strategy.
Financial policy
4.2 Consolidated cash flow
The consolidated cash flow statement, which is shown in the
consolidated financial statements, details the main cash flows
for the 2008 fiscal year.
Cash from operations before changes in working capital was
4,141 million euros, compared to 4,145 million euros a year
earlier.
Net cash from operations before changes in working capital
(i.e. after interest and income tax) amounted to 2,993 million
euros compared to the 2,968 million euros recorded in 2007.
Interest paid in 2008 amounted to 271 million euros, up from
252 million euros in 2007, an increase due mainly to higher
euro interest rates on average over the year, combined with
the increase in corporate spreads and the rise in the average
amounts outstanding on financial debt.
Income tax paid in 2008 amounted to 877 million euros, as
against 925 million euros in 2007.
Working capital requirements increased by 737 million euros.
Changes in inventories increased cash requirements by 829 million
euros, due in particular to the replenishment of distilled alcohol
inventories for cognac and those of base wines for champagne.
The year-on-year increase in trade accounts receivable was held
in check, generating a cash requirement of 19 million euros,
mainly at Parfums Christian Dior and at Hennessy, while the
increase in trade accounts payable provided additional cash
in the amount of 122 million euros, notably at Christian Dior
Couture, Sephora, Hennessy and Louis Vuitton.
Overall, net cash from operating activities posted a surplus of
2,256 million euros.
Net cash used in financial and operating investment activities
amounted to 1,618 million euros.
Group operating investments for the year, net of disposals,
resulted in net cash outflows of 980 million euros. This amount
reflects the Group’s growth strategy and that of its flagship brands
such as Louis Vuitton, Sephora and Parfums Christian Dior.
Disposals of non-current available for sale financial assets, net of
purchases, represented a net inflow of 30 million euros. Notable
events of 2008 included the acquisition of a 45% stake in the
Russian perfume retail chain Ile de Beauté and the disposal of
a stake in the French video game retailer Micromania. The net
impact of the purchase and sale of investments in consolidated
entities resulted in an outflow of 668 million euros, relating
mainly to the acquisitions of the Swiss watchmaker Hublot and
the Dutch luxury yacht builder Royal Van Lent.
Transactions relating to equity generated an outflow of
1,040 million euros over the year.
Acquisitions of Christian Dior and LVMH shares and related
derivatives by the Group, net of disposals, generated an outflow
of 146 million euros. In particular, a total of 820,000 LVMH
shares were acquired in order to be cancelled. As in previous
years, LVMH call options were acquired to cover commitments
for purchase options granted to employees.
In the year ended December 31, 2008, Christian Dior paid
287 million euros in dividends, excluding the amount attributable
to treasury shares, of which 209 million euros were distributed in
May in respect of the final dividend on 2007 profit and 78 million
euros in December in respect of the interim dividend for the
2008 fiscal year. Furthermore, the minority shareholders of
consolidated subsidiaries received 618 million euros in dividends,
mainly corresponding to dividends paid to minority interests in
LVMH SA and to Diageo with respect to its 34% stake in Moët
Hennessy and to minority interests in DFS.
After all operating, investing and equity-related activities, the
total cash requirement amounted to 402 million euros.
Borrowings and financial debt were amortized in 2008 for an
amount of 2,549 million euros, and 47 million euros were invested
in current available for sale financial assets.
Conversely, bond issues and new borrowings provided an inflow
of 2,555 million euros. In April 2008, LVMH reopened its 20052012 bond issue in the nominal amount of 160 million euros and
in June it carried out a public bond issue denominated in Swiss
francs, consisting of two tranches of 3, 5 and 7 years, each in
a nominal amount of 200 million Swiss francs. In addition, the
Group made use of its Euro Medium Term Notes program to
diversify its investor base and seize opportunities for private
placements. Furthermore, in December 2008, Christian Dior
proceeded with a 50 million euro 3 year bond issue. Overall,
the Group made greater use of long-term financial resources,
thus decreasing its reliance on its French commercial paper
program by 369 million euros.
As of December 31, 2008, cash and cash equivalents net of bank
overdrafts amounted to 653 million euros.
2008 Annual Report
25
Financial policy
4.3 Financial structure
Christian Dior Group’s consolidated balance sheet, which is
shown in the consolidated financial statements, totaled 35.6 billion
euros as of December 31, 2008, representing a year-on-year
increase of 3.7%.
Non-current assets amounted to 24.7 billion euros, compared to
23.8 billion at year-end 2007, thus corresponding to 70% of total
assets, a proportion equivalent to that recorded a year earlier.
Tangible and intangible fixed assets (including goodwill) increased
slightly to 22.6 billion euros from 21.7 billion euros at yearend 2007. Brands and other intangible assets amounted to
11.2 billion euros, from 10.7 billion euros as of December 31,
2007. This change is primarily attributable to the acquisition
of the Swiss watchmaker Hublot, the initial consolidation as of
January 1, 2008 of the media group Les Echos, acquired at the
very end of 2007, and the effects of exchange rate fluctuations
on brands and other intangible assets recognized in US dollars,
such as the DFS trade name, or in Swiss francs, such as the
TAG Heuer brand.
Goodwill decreased to 5.0 billion euros, from 5.4 billion euros a
year earlier. The positive impact of the goodwill recognized on
the initial consolidation of Les Echos, Hublot, the Dutch yacht
builder Royal Van Lent and John Galliano did not fully offset
the decline in goodwill recognized in relation to commitments
to buy back minority interests.
Property, plant and equipment amounted to 6.4 billion euros, up
from 5.7 billion euros at year-end 2007. This growth is chiefly
attributable to the levels of operating investments made by Louis
Vuitton, Sephora, DFS and Christian Dior Couture in their
retail networks and those of Hennessy and Moët & Chandon
in their production equipment as well as the impact of exchange
rate fluctuations, which together exceeded depreciation charges
during the year.
Investments in associates, non-current available-for-sale financial
assets, other non-current assets and deferred tax amounted to
2.1 billion euros and are thus stable compared to 2007. This
stability results principally from the acquisition of a 45% stake
in the Russian perfume retail chain Ile de Beauté, and the
increase in deferred tax assets, offset by the consolidation of the
investment in Les Echos and the disposal of a minority stake in
the company Micromania.
Inventories and work in progress amounted to 6.0 billion euros,
compared to 5.0 billion euros at year-end 2007, reflecting
business growth, the continued replenishment of distilled alcohol
inventories for cognac, acquisitions made in 2008, and the impact
of exchange rate fluctuations.
Trade accounts receivable remained stable at 1.7 billion euros.
26
2008 Annual Report
Cash and cash equivalents decreased from 1.6 billion euros as
of December 31, 2007 to 1.1 billion euros.
The Group share of equity before appropriation of profit increased
to 5.9 billion euros from 5.4 billion euros at year-end 2007.
Minority interests increased by 0.8 billion euros in 2008 to
9.3 billion euros.
Total equity thus amounted to 15.3 billion euros, compared
to 13.9 billion euros as of December 31, 2007, representing
43% of the balance sheet total versus 41% a year earlier. The
increase in equity (including minority interests) of 1.4 billion
euros resulted essentially from the net profit of the fiscal year,
which amounted to 2.2 billion euros, less 0.9 billion euros in
dividends paid.
Non-current liabilities amounted to 12.9 billion euros as of
December 31, 2008, including 4.6 billion euros in long-term
borrowings. This compares to 12.3 billion euros at year-end
2007, including 3.4 billion euros in long-term borrowings.
This increase was primarily due to the increase in long-term
borrowings, partially offset by the decrease in share purchase
commitments, which comprise the bulk of other non-current
liabilities. The proportion of non-current liabilities in the balance
sheet total was 36%, remaining stable compared to 2007.
Equity and non-current liabilities thus amounted to 28.1 billion
euros, and exceeded total non-current assets.
Current liabilities amounted to 7.5 billion euros as of
December 31, 2008, compared to 8.1 billion euros a year earlier,
due to the repayment of a significant portion of short-term
borrowings, this despite the acquisitions made and the rise in
trade accounts payable resulting from the increase in purchases of
distilled alcohol for cognac. Their relative weight in the balance
sheet total decreased to 21%.
Long-term and short-term borrowings, including the market value
of interest rate derivatives, and net of cash, cash equivalents and
current available-for-sale financial assets, amounted to 5.4 billion
euros as of December 31, 2008, compared to 4.5 billion euros a
year earlier, representing a gearing of 35%, compared to 32%
at year-end 2007.
As of December 31, 2008, confirmed credit facilities amounted
to more than 5.1 billion euros, of which only 1.5 billion euros
were drawn, which means that the undrawn amount available
was 3.6 billion euros. The Group’s undrawn confirmed credit
lines substantially exceeded the outstanding portion of its
commercial paper program, which amounted to 0.7 billion euros
as of December 31, 2008.
Results of Christian Dior
5.Results of Christian Dior
The results of Christian Dior consist primarily of dividend
revenue paid by Christian Dior Couture and indirectly by
LVMH, less financial expenses corresponding to the financing
of these investments.
Financial income totaled 312 million euros, compared to
327 million euros in 2007.
This consists, on the one hand, of dividends received from
subsidiaries, investments and other property totaling 436 million
euros and, on the other hand, of net interest expenses totaling
54 million euros and net additions to provisions on treasury
shares for 70 million euros.
Tax savings recognized under the tax consolidation agreement
totaled 4 million euros, compared to 18 million euros in 2007.
Net profit totaled 310 million euros, compared to 338 million
euros in 2007.
In addition, pursuant to CRC Regulation 2008-15 of
December 4, 2008, modifying CRC Regulation 99-03 of
April 29, 1999 relating to the general chart of accounts,
the Company has applied, with retroactive effect as of
December 31, 2007, the new rules concerning the accounting
treatment of share purchase or share subscription option plans
and bonus share plans granted to employees. These new rules
require that the provisions recognized in relation to exercisable
plans be apportioned over their entire vesting periods. The
retroactive application of this new regulation entailed a decrease
in the related provisions recognized as of December 31, 2007
in the amount of 560,709.00 euros, offset by a credit taken to
retained earnings, which thus increased from 27,622,628.41 euros
to 28,183,337.41 euros.
The proposal to allocate the distributable profit for the fiscal year ended December 31, 2008 is as follows:
Amount available for distribution (EUR)
• net profit:
plus
• retained earnings before appropriation:
Amount available for distribution:
309,976,093.49
28,183,337.41
338,159,430.90
Proposed appropriation
• distribution of a gross dividend of 1.61 euros per share:
• allocation to retained earnings:
292,580,547.28
45,578,883.62
Total
338,159,430.90
Should this appropriation be approved, the dividend would be
1.61 euros per share.
As an interim dividend of 0.44 euros per share was paid on
December 2, 2008, the balance of 1.17 euros will be paid out
on May 25, 2009.
With respect to this dividend distribution, individuals whose
tax residence is in France will be entitled to the 40% deduction
provided under Article 158 of the French Tax Code.
Finally, should the Company hold any treasury shares at the
time of the payment of this balance, the amount corresponding
to the dividend not paid on these shares will be allocated to
retained earnings.
Distribution of dividends
As required by law, we remind you of the dividends per share allocated for distribution over the past three fiscal years, and the
corresponding tax allowance:
(EUR)
2007
2006
2005
Gross dividend (1)
Tax allowance (2)
1.61
1.41
1.16
0.644
0.564
0.496
(2) For individuals with tax residence in France.
2008 Annual Report
27
Company shareholders
6.Company shareholders
6.1 Main shareholders
Pursuant to Article L. 233-13 of the French Commercial Code,
based on information received pursuant to Articles L. 233-7 and
L. 233-12 of that Code, the following is a list of shareholders
holding over 5% of the share capital or voting rights, to the best
of the Company’s knowledge:
December 31, 2008
Shareholders
Groupe Arnault (2)
December 31, 2007
Number
% of share
capital
% of voting
rights (1)
Number
% of share
capital
% of voting
rights (1)
126,174,170
69.43
81.37
126,023,237
69.35
81.32
(1) Theoretical voting rights.
(2) Groupe Arnault SAS, which is controlled by the family of Mr. Bernard Arnault, is the ultimate holding company of Christian Dior.
6.2 Shares held by members of the management and supervisory bodies
As of December 31, 2008, the members of the Board of Directors held directly, in a personal capacity and in the form of registered
shares, less than 0.2% of the share capital.
6.3 Information on purchases and sales of shares
it is specifically stated that the Company:
• over the past fiscal year, purchased 76,132 of its treasury
shares, at an average price of 82.82 euros. Total trading
expenses amounted to 9,457.90 euros.
These shares were purchased pursuant to Article L. 225208 of the French Commercial Code for allocation to share
purchase option plans.
At the close of the fiscal year, the number of shares thus held,
allocated to current or future share purchase option plans,
totaled 3,346,848, with a net value of 125,739,921.70 euros.
28
2008 Annual Report
They were purchased at an average price of 59.40 euros.
Their par value was 2 euros. These shares represented 1.85%
of the share capital.
• at fiscal year-end, also held 19,532 treasury shares, with a net
value of 749,198.69 euros.
These shares had been purchased with a view to stabilizing
the share price at an average price of 58.02 euros. These
shares have a par value of 2 euros and represent 0.01% of
the share capital.
In accordance with legal requirements, these shares are stripped
of their voting rights.
Company shareholders
6.4 Summary of transactions in Christian Dior securities during the year
by directors and related persons As defined in Article R. 621-43-1 of
the Code Monétaire et Financier
Person
Company(ies) related to the family of B. Arnault
Sidney Toledano
Individual(s) related to S. Toledano
Type of transaction
Purchase
Purchase of calls
Purchase (1)
Sale
Sale
Purchase
Number of shares
Average price (EUR)
154,058
1,000,000
52.16
28,000
8,000
20,000
20,000
25.00
37.35
74.50
74.50
(1) Exercise of share purchase options.
2008 Annual Report
29
Administrative matters
7.Administrative matters
7.1 Composition of the Board of Directors
It is proposed that:
• the Shareholders’ Meeting ratify the provisional appointment
by co-optation of Mr. Renaud Donnedieu de Vabres, made
by the Board of Directors on February 5, 2009, to replace
Mr. Raymond Wibaux, deceased, so that he may continue to
serve as Director for the remaining term of office of the latter;
• the Shareholders’ Meeting renew the term of office as Director
of Messrs. Éric Guerlain, Antoine Bernheim, Denis Dalibot,
Christian de Labriffe, Jaime de Marichalar y Sáenz de Tejada,
and Alessandro Vallarino Gancia for the statutory period of
three years.
7.2 List of offices and positions of Directors
The list of all positions and offices held by each Director during the last five years is provided in §10 below.
7.3 Statutory Auditors
As the terms of office of the Statutory Auditors are due to expire,
the Shareholders’ Meeting is asked to:
• appoint Auditex and reappoint Mr. Guillaume Potel as alternate
Statutory Auditors;
• appoint Ernst & Young et Autres and to reappoint Mazars,
both as principal Statutory Auditors;
for a six-year term that shall expire at the end of the Ordinary
Shareholders’ Meeting convened in 2015 to approve the financial
statements for the previous fiscal year.
7.4 Modification of the Bylaws
You are invited to modify the Bylaws of the Company to take into
consideration the new requirements enacted by the Law on the
Modernization of the Economy (LME) of August 4, 2008 on the
30
2008 Annual Report
timeframe within which a newly appointed Director must have
purchased shares of the Company, and on maintaining double voting
rights in the event of a merger or spinoff of a shareholder company.
Financial authorizations
8.Financial authorizations
8.1 Status of current delegations and authorizations
8.1.1Share repurchase program
Type
Share repurchase program
Maximum purchase price per share: 130 euros
Reduction of capital through
the retirement of shares purchased
under the repurchase program
Authorization date
Expiry/Duration
Amount authorized
Use
May 15, 2008
(9th resolution)
May 15, 2008
(10th resolution)
November 14, 2009
(18 months) (1)
November 14, 2009
(18 months) (1)
10% of share capital
18,172,704 shares
per 24-month period
18,172,704 shares
None
None
(1) A resolution renewing this authorization will be presented to the Shareholders’ Meeting of May 14, 2009. See §8.2 below.
8.1.2Authorizations to increase share capital
Type
Authorization
date/
Resolution
Capital increase with preferential subscription May 10, 2007
rights (ordinary shares, investment securities (8th resolution)
giving access to the share capital,
and incorporation of reserves)
Capital increase without preferential
May 10, 2007
subscription rights (ordinary shares
(9th resolution)
and investment securities giving access
to the share capital)
Capital increase in connection
May 10, 2007
with complex transactions:
(10th resolution)
• public exchange offer
• contribution in kind
Issue price
determination
method
Use
Free
None
July 9, 2009
40 million euros
Based on
(26 months) (1) 20,000,000 shares (2) (3) regulations in force
None
Expiry/
Duration
Amount authorized
July 9, 2009
(26 months) (1)
40 million euros
20,000,000 shares (2) (3)
July 9, 2009
(26 months) (1)
40 million euros
20,000,000 shares (2)(3)
18,172,704 shares (2)
Free
None
Free
None
(2) Maximum nominal amount. The nominal amount of any capital increase decided in application of other delegations of authority or issues reserved for
employees mentioned below would be offset against this amount.
(3) Amount may be increased subject to the limit of 15% of the initial issue in the event that the issue is oversubscribed (Shareholders’ Meeting of May 10,
2007, 11th resolution).
2008 Annual Report
31
8.1.3 Employee share ownership
Authorization date
Expiry/ Amount authorized/
Duration
Number of shares
Share subscription or
purchase options
May 11, 2006
(14th resolution)
July 10, 2009
3% of share capital
(38 months) (1)
5,451,811 shares
Allocation of bonus shares
May 15, 2008
(11th resolution)
May 15, 2008
(12th resolution)
July 14, 2011
(38 months)
July 14, 2010
(26 months)
Type
Capital increase reserved for
employees who are members
of a Corporate Savings Plan
Exercise price
Use as of
determination method December 31, 2008
Average share price
• granted:
over the 20 trading days
984,000
preceding the grant • available to be granted:
date (3)
4,467,811
1% of share capital
N/A
None
1,817,270 shares (2)
3% of share capital
Average share price
None
5,451,811 shares (2) over the 20 trading days
preceding the grant date
Maximum discount: 30%
(2) These issues would be offset against the maximum nominal amount of the capital increases decided in application of the above delegations of authority.
(3) Maximum authorized discount: 20%. Moreover, with regard to share purchase options, the price shall not be lower than 80% of the average price of
shares to be remitted by the Company when such options are exercised.
8.2 AutHoriZations to be renewed
8.2.1 Authorization to engage in stock
market transactions
The Board proposes that this authorization be renewed for a
period of eighteen months.
The Combined Shareholders’ Meeting of May 15, 2008 authorized
the Board of Directors to implement a program to repurchase
the Company’s shares. This authorization was not implemented
in 2008.
8.2.3 A
uthorizations to increase
the share capital
The Board proposes to this Meeting that this authorization be
renewed for a term of eighteen months, it being understood that
such shares may be acquired, in particular, to provide market
liquidity services (purchases/sales) under a liquidity contract,
to cover stock option plans, employee stock ownership plans
or any other form of share allocation or share-based payment,
to cover securities giving access to the Company’s shares, to
be retired, or to be held so as to be exchanged or presented as
consideration at a later date for external growth operations.
The total number of shares that may be acquired by the Company
would be limited to 10% of the share capital. The maximum
purchase price per share would be 130 euros.
8.2.2 Authorization to reduce the share capital
the Combined Shareholders’ Meeting of May 15, 2008 authorized
the Board of Directors, should it consider that such an action
serves the shareholders’ interests, to reduce the Company’s share
capital through cancellation of shares acquired in connection
with the share buy-back programs.
32
2008 Annual Report
The Combined Shareholders’ Meeting of May 10, 2007
delegated the Board of Directors the authority to increase the
share capital, including through the issue of any investment
securities giving either immediate or future access to the
share capital or conferring entitlement to debt securities.
The Board proposes that this authorization be renewed for a
period of twenty-six months.
In keeping with common practice, you are invited to authorize
the Board of Directors to issue, either in application of the
preferential right of shareholders to subscribe to such securities,
or with this right being excluded, with the understanding that
a priority right may be granted to shareholders if the issues are
performed on the French market.
In the event of an issue for which the preferential right of
shareholders is excluded, the issue price of shares shall be at
least equal to the minimum price set forth in legislative and
regulatory provisions in force at the time of the issuance.
In the event of any excess subscriptions in connection with
a capital increase, the number of shares to be issued may
be increased by the Board of Directors in accordance with
applicable laws.
You are also invited to renew for a period of twenty-six months
the delegation of authority granted to the Board of Directors
by the Combined Shareholders’ Meeting of May 10, 2007 to
increase the share capital by issuing shares as consideration
either for shares contributed to a public exchange offer or, in
an amount not to exceed 10% of the Company’s share capital,
for contributions in kind consisting of shares or investment
securities giving access to the Company’s share capital.
The overall ceiling for all of these capital increases is increased
from 40 million to 80 million euros.
8.2.4Employee share ownership
In the event that subscription options are allocated, your
authorization comprises an express waiver by shareholders of
their preferential right to subscribe to the shares that will be
issued as the options are exercised.
The subscription or purchase price of shares shall fall within
limits authorized by the provisions in force as of the option
grant date and in any event this price may not be lower than
the average share price during the twenty trading days prior
to the commencement date of such a plan.
Moreover, with regard to share purchase options, the purchase
price shall not be lower than the average price of shares to be
remitted by the Company when such options are exercised.
The Combined Shareholders’ Meeting of May 11, 2006
authorized subscription or purchase options for the Company’s
shares to be awarded, on one or more occasions, in favor of
the Group’s directors or employees. In accordance with legal
provisions, every year you receive a report on the use that is
made of this authorization.
The exercise period for options shall be determined in accordance
with provisions in force on the grant date and shall last a
maximum of ten years.
You are invited to renew this authorization for a period of
thirty-eight months.
At subsequent Ordinary Shareholders’ Meetings, the Board
of Directors will keep you informed of the number, price and
beneficiaries of the options granted, together with the number
of shares subscribed or purchased.
Your authorization will enable the Board of Directors to grant
new share subscription or purchase options, with the total
number of new options granting access to a number of shares
representing no more than 3% of the Company’s share capital.
The Board of Directors shall have the power to determine,
within the limits set by the law and the Meeting, the terms of
the option plan or plans.
2008 Annual Report
33
Information on compensation and benefits in kind of company officers
9.Information on compensation and benefits
in kind of company officers
• Summary of the remuneration, options and bonus shares granted to senior executive officers
Senior executive officers
(EUR)
Bernard Arnault
Sidney Toledano
Remuneration due in
respect of the fiscal year (1)
Valuation of options granted
during the fiscal year (2)
Valuation of bonus shares
granted during the fiscal year
2008
2007
2008
2007
2008
2007
3,879,396
1,431,810
4,002,011
1,451,645
12,516,000
1,085,000
13,799,525
1,065,500
N/A
N/A
N/A
N/A
(1) Gross remuneration and benefits in kind paid or borne by the Company and the companies controlled, subject to the provisions of Article L. 225-102-1
of the French Commercial Code, excluding directors’ fees. No remuneration is paid to senior executive officers by Christian Dior. Remuneration is
paid, for Bernard Arnault, by the LVMH Group and, for Sidney Toledano, by Christian Dior Couture.
(2) The breakdown of equity securities or securities giving access to the share capital granted to members of the Board of Directors during the fiscal year
is presented in §11.3.
• Summary of the remuneration of each senior executive officer
(Gross remuneration and benefits in kind paid or borne by the Company and the companies controlled, subject to the provisions
of Article L. 225-102-1 of the French Commercial Code.)
Bernard Arnault
Amounts due for the fiscal year
Compensation (EUR)
Fixed compensation (1)
Variable compensation (1)
Exceptional compensation
Directors’ fees
Benefits in kind
Total
Amounts paid in the fiscal year
2008
1,679,396
2,200,000
N/A
119,060
Company car
2007
1,702,011
2,300,000
N/A
119,060
N/A
2008
1,679,396
2,300,000 (2)
N/A
119,060
Company car
3,998,456
4,121,071
4,098,456
2007
1,702,011
2,300,000 (2)
N/A
119,060
N/A
4,121,071
(1) Remuneration paid by the LVMH Group (no remuneration is paid by Christian Dior).
(2) Amounts paid in respect of the prior fiscal year.
Sidney Toledano
Amounts due for the fiscal year
Compensation (EUR)
Fixed compensation (1)
Variable compensation (1)
Exceptional compensation
Directors’ fees
Benefits in kind
Total
Amounts paid in the fiscal year
2008
2007
881,810
550,000
36,530
Company car
801,645
650,000
36,530
Company car
1,468,340
1,488,175
(1) Remuneration paid by Christian Dior Couture (no remuneration is paid by Christian Dior).
(2) Amounts paid in respect of the prior fiscal year.
34
2008 Annual Report
2008
2007
881,810
650,000 (2)
36,530
Company car
801,645
600,000 (2)
36,530
Company car
1,568,340
1,438,175
• Work contract, specific pension, leaving indemnities and non-competition clause in favor
of senior executive officers
Senior executive officers
Bernard Arnault
Chairman of the Board of Directors
Sidney Toledano
Work contract
Indemnities or benefits due or
Indemnities
Supplementary
likely to become due on the
relating to a nonpension cessation or change of functions competition clause
Yes
No
Yes
-
X
X (2)
-
No
Yes
No
Yes
No
X (1)
-
-
X
-
X
-
X
-
X
X
-
(1) This supplementary pension, instituted by LVMH, is only acquired if the beneficiary simultaneously asserts his rights to his standard legal pension entitlement.
This supplemental payment corresponds to a specific percentage of the beneficiary’s salary, to which a ceiling is applied on the basis of the reference
salary determined by the French social security scheme.
Amount of the commitment by LVMH as of December 31, 2008 for Bernard Arnault: 15,093,225 euros.
(2) The work contract of Mr. Sidney Toledano has been suspended for the duration of his term of office as Chairman and Chief Executive Officer of
Christian Dior Couture.
• Summary of compensation, benefits in kind and commitments given
to other company officers (1)
Members of the Board of Directors
(EUR)
Antoine Bernheim
Denis Dalibot (2) (3) (4)
Pierre Godé (2)
Eric Guerlain
Christian de Labriffe
Jaime de Marichalar y Sáenz de Tejada
Alessandro Vallarino Gancia
Raymond Wibaux
Fixed compensation paid in
Variable compensation paid in
2008
2007
2008
2007
515,262
1,155,000
-
383,150
710,878
-
521,000
200,000
-
496,271
-
(1) Gross remuneration and/or fees and benefits in kind paid or borne by the Company and the companies controlled, subject to the provisions of Article
L. 225-102-1 of the French Commercial Code and received by the company officer or a company controlled by the latter.
(2) The breakdown of equity securities or securities giving access to the share capital granted to members of the Board of Directors during the fiscal
year is presented in §11.3.
(3) Benefits in kind: company car.
(4) Excluding retirement indemnity paid in 2008: 1,567,359 euros.
2008 Annual Report
35
• Breakdown of equity shares or securities giving access to the share capital granted to
members of the Board of Directors during the fiscal year
This breakdown is presented in §11.3 below.
• Directors’ fees paid to senior executive officers and other company officers (1)
Members of the Board of Directors
(EUR)
Bernard Arnault
Antoine Bernheim
Denis Dalibot
Pierre Godé
Eric Guerlain
Christian de Labriffe
Jaime de Marichalar y Sáenz de Tejada
Sidney Toledano
Alessandro Vallarino Gancia
Raymond Wibaux
Directors’ fees paid in
2008
2007
119,060
119,060
279,530
500,030
29,632
30,050
127,144
131,463
9,530
9,530
9,530
9,530
24,915
24,915
36,530
36,530
9,530
9,530
9,530
9,530
(1) Directors’ fees paid by the Company and the companies controlled, subject to the provisions of Article L. 225-102-1 of the French Commercial Code.
36
2008 Annual Report
List of offices or positions exercised in all companies by company officers
10.List of offices or positions exercised in
all companies by company officers
Pursuant to Article L. 225-102-1 of the French Commercial Code, the following are all offices and positions exercised in all companies
by each company officer as well as the positions and offices they have exercised since January 1, 2004.
10.1 Current offices of directors
Mr. Bernard ARNAULT
Chairman of the Board of Directors
Date of birth: March 5, 1949. French.
Business address: LVMH – 22, avenue Montaigne – 75008 Paris
(France).
Date of first appointment: March 20, 1985.
Expiration of term: Annual Meeting convened to approve the
financial statements for the 2010 fiscal year.
Number of Christian Dior shares held in a personal capacity:
39,697 shares.
Mr. Bernard Arnault began his career as an engineer with FerretSavinel, where he became Senior Vice President for Construction
in 1974, Chief Executive Officer in 1977 and finally Chairman
and Chief Executive Officer in 1978.
He remained with this company until 1984, when he became
Chairman and Chief Executive Officer of Financière Agache
and of Christian Dior. Shortly thereafter he spearheaded a
reorganization of Financière Agache following a development
strategy focusing on luxury brands. Christian Dior was to
become the cornerstone of this new structure.
In 1989, he became the leading shareholder of LVMH Moët
Hennessy - Louis Vuitton, and thus created the world’s leading
luxury products group. He assumed the position of Chairman
and Chief Executive Officer in January 1989.
Current positions and offices
Christian Dior Group/Groupe Arnault
-- LVMH Moët Hennessy - Louis Vuitton SA: Chairman and
Chief Executive Officer;
-- Raspail Investissements SA: Director;
-- Société Civile du Cheval Blanc: Director;
-- Fondation Louis Vuitton pour la Création, Fondation
d’Entreprise: Chairman of the Board of Directors.
• International:
-- LVMH Moët Hennessy - Louis Vuitton Japan KK (Japan):
Director.
Other
• France:
-- Carrefour SA: Director;
-- Lagardère SCA: Member of the Supervisory Board;
-- Métropole Télévision “M6” SA: Member of the Supervisory
Board.
Positions and offices that have terminated
since January 1, 2004
• France:
-- Financière Agache SA: Permanent Representative of Montaigne
Participations et Gestion SA, Director;
-- Gasa Développement SAS and Société Financière SaintNivard SAS: Legal Representative of Montaigne Participations
et Gestion SA, Chairman;
• France:
-- Montaigne Participations et Gestion SA: Chairman and Chief
Executive Officer.
-- Christian Dior SA: Chairman of the Board of Directors;
• International:
-- Christian Dior Couture SA: Director;
-- Moët Hennessy Inc. (United States): Director.
-- Groupe Arnault SAS: Chairman;
2008 Annual Report
37
Mr. Sidney TOLEDANO
-- Christian Dior Couture Maroc (Morocco): Manager;
Date of birth: July 25, 1951. French.
-- Christian Dior Far East Ltd (Hong Kong): Director;
Business address: Christian Dior Couture – 11, rue François 1er – 75008 Paris (France).
-- Christian Dior GmbH (Germany): Manager;
Date of first appointment: September 11, 2002.
-- Christian Dior Hong Kong Ltd (Hong Kong): Director;
-- Christian Dior Italia Srl (Italy): Chairman;
20,200 shares.
Mr. Sidney Toledano began his career in 1977 as a marketing
consultant with Nielsen International. He then served as
Company Secretary of Kickers before joining the Executive
Management of Lancel in 1984. In 1994, he joined Christian
Dior Couture as Deputy Chief Executive Officer. He has been
its Chairman since 1998.
• France:
-- Christian Dior SA: Chief Executive Officer and Director;
-- Christian Dior Couture CZ (Czech Republic): Director;
-- Christian Dior Guam Ltd (Guam): Director;
-- Christian Dior KK (Japan): Representative Director;
-- Christian Dior Macau Ltd (Macau): Director;
-- Christian Dior New Zealand Ltd (New Zealand):
Director;
-- Christian Dior S. de RL de CV (Mexico): Chairman and
Director;
-- Christian Dior Saipan Ltd (Saipan): Director;
-- Christian Dior Singapore Pte Ltd (Singapore): Director;
-- Christian Dior Taiwan Ltd (Taiwan): Director (Director A);
-- Christian Dior UK Ltd (United Kingdom): Chairman and
Director;
-- Christian Dior Inc. (United States): Chairman and Director;
-- Fendi Adele Srl (Italy): Director;
-- Fendi Asia Pacific Limited (Hong Kong): Director;
-- Christian Dior Couture SA: Chairman and Chief Executive
Officer;
-- Fendi International BV (Netherlands): Chairman and Director A;
-- Fendi France SAS: Chairman;
-- Fendi Italia Srl (Italy): Director;
-- Fendi International SA: Chairman of the Board of
Directors;
-- Fendi North America Inc. (United States): Director;
-- John Galliano SA: Chairman of the Board of Directors;
-- Fendi Srl (Italy): Director;
-- Les Jardins d’Avron SAS: Permanent Representative of
Christian Dior Couture SA, Chairman.
-- Les Ateliers Horlogers Dior SA (Switzerland): Director;
• International:
-- Bopel Srl (Italy): Chairman;
-- Calto Srl (Italy): Chairman of the Board of Directors;
-- CDCH SA (Luxembourg): Chairman of the Board of
Directors;
-- Christian Dior (Fashion) Malaysia Sdn (Malaysia):
Director;
-- Fendi SA (Luxembourg): Director;
-- Les Jardins d’Avron LLC (United States): Chairman;
-- Lucilla Srl (Italy): Chairman;
-- Mardi SpA (Italy): Chairman and Managing Director.
• France:
-- Christian Dior Australia Pty Ltd (Australia): Director;
-- John Galliano SA: Chief Executive Officer.
-- Christian Dior Belgique SA (Belgium) : Permanent
Representative of Christian Dior Couture SA: Managing
Director;
• International:
-- Christian Dior Commercial Shanghai Co Ltd (China):
Chairman;
-- Christian Dior Couture Korea Ltd. (Korea): Director;
38
2008 Annual Report
-- Calto Srl. (Italy): Manager;
-- Christian Dior Couture Rus LLC (Russia): General
Director;
-- Christian Dior Couture S. de RL de CV (Mexico): General
Director;
-- Christian Dior Couture Stoleshnikov LLC (Russia): General
Director;
-- Sevrilux SNC: Legal Representative of Financière Agache,
Manager;
-- Christian Dior Espanola SL (Spain): Manager;
-- Sofidiv SAS: Member of the Management Committee;
-- Christian Dior Guam Ltd (Guam): Chairman;
-- Société Civile du Cheval Blanc: Director;
-- Christian Dior Puerto Banus SL (Spain): Manager;
-- Association du Musée Louis Vuitton: Permanent Representative
of LVMH Fashion Group: Director.
-- Christian Dior Saipan Ltd (Saipan): Chairman;
-- Fendi Immobili Industriali Srl (Italy): Director.
• International:
-- LVMH Moët Hennessy - Louis Vuitton Inc. (United States):
Director;
Mr. Pierre GODÉ
Advisor to the Chairman
Date of birth: December 4, 1944. French.
Business address: LVMH – 22, avenue Montaigne – 75008 Paris
(France).
Date of first appointment: May 14, 2001.
200 shares.
Mr. Pierre Godé began his career as a lawyer admitted to the
Lille bar and has taught at the Lille and Nice university law
faculties. He has been Advisor to the Chairman of Groupe
Arnault since 1986.
• France:
-- Christian Dior SA: Director;
-- Financière Agache SA: Chairman and Chief Executive
Officer;
-- Financière Jean Goujon SAS: Chairman;
-- Groupe Arnault SAS: Chief Executive Officer;
-- Les Echos SAS: Member of the Supervisory Board;
-- LVMH Moët Hennessy - Louis Vuitton SA: Director;
-- Raspail Investissements SA: Chairman and Chief Executive
Officer;
-- SA du Château d’Yquem: Director;
-- Semyrhamis SAS: Member of the Supervisory Committee;
-- Sofidiv UK Limited (United Kingdom): Director.
Other
• France:
-- Havas SA: Director;
-- Redeg SARL: Manager.
• France:
-- DI Group SA: Permanent Representative of LVMH Moët
Hennessy - Louis Vuitton: Director;
-- Le Bon Marché International SA: Director;
-- Le Bon Marché, Maison Aristide Boucicaut SA: Director,
Managing Director;
-- LVMH Fashion Group SA: Member of the Executive Board
and Chief Executive Officer;
-- Montaigne Finance SAS: Member of the Supervisory
Committee;
-- Montaigne Participations et Gestion SA: Director;
-- Parfums Christian Dior SA: Permanent Representative of
Financière Agache SA, Director;
-- PMG SARL: Manager;
-- Sifanor SAS: Member of the Supervisory Committee;
-- GIE LVMH Services: Member of the College of Directors.
• International:
-- Christian Dior Inc. (United States): Director;
-- Fendi SA (Luxembourg): Director;
-- LVMH Moët Hennessy Louis - Vuitton Japan KK (Japan):
Director;
-- LVMH Services Limited (United Kingdom): Director.
2008 Annual Report
39
10.2 Office of director to be ratified
Mr. Renaud DONNEDIEU DE VABRES
Business address: Allard Palaces – 54-56 avenue Hoche – 75008 Paris (France).
• France:
Date of first appointment: February 5, 2009.
-- Fondation Louis Vuitton pour la Création, Fondation
d’Entreprise: Director.
200 shares.
Other
After serving in the prefectoral administration as a sub-prefect,
Mr. Renaud Donnedieu de Vabres was appointed as a member
of France’s highest administrative body, the Council of State,
and embarked on a political career in 1986, notably serving as
an aide to the Minister of Defense. He was elected as a deputy
to the National Assembly representing the Indre-et-Loire
département in 1997 and remained in this post until 2007. In
2002, he was appointed as Minister Delegate for European
Affairs and then as Minister of Culture and Communication,
from 2004 to 2007. In 2008, he was named the Ambassador for
Culture during the French presidency of the European Union.
Since early 2009, he has served as Advisor for Strategy and
Development to Mr. Alexandre Allard, Chief Executive Officer
of Allard Palaces.
-- Allard Palaces SAS: Advisor for Strategy and Development
to Mr. Alexandre Allard.
Positions and office that have terminated
Other
• France:
-- Minister of Culture and Communication;
-- Ambassador for Culture during the French presidency of the
European Union.
10.3 Offices of current directors to be renewed
Mr. Éric GUERLAIN
Date of birth: May 2, 1940. French.
Correspondence address: Chez Christian Dior – 30 avenue
Montaigne – 75008 Paris (France).
Date of first appointment: June 29, 1994.
-- Christian Dior SA: Vice-Chairman and Director;
97,836 shares.
-- Guerlain SA, Permanent Representative of LVMH Fashion
Group: Director.
Mr. Eric Guerlain began his career as a financial analyst and
served in various roles with the Morgan Stanley Group between
1968 and 1974, in New York and Paris.
Other
In 1974, he joined J.P. Morgan as director of the international
financial affairs department. In 1979, the bank assigned him
to co-lead J.P. Morgan Ltd. Investment Bank in London as
Vice-Chairman. He then worked at Lazard Brothers Ltd as a
consultant until 1989.
-- Société Hydroélectrique d’Énergie SA: Chairman of the
Board of Directors;
At the same time, since 1970 he has been a Director of Guerlain SA
and, in 1990, assumed the chairmanship of the Supervisory Board
of the controlling holding company of the Guerlain Group. He
served in that position until 1994.
40
• France:
2008 Annual Report
• France:
• None
Mr. Antoine BERNHEIM
Date of birth: September 4, 1924. French.
Business address: Assicurazioni Generali SpA c/o Generali
France – 7 Boulevard Haussmann – 75009 Paris (France).
Other
• France:
-- Bolloré SA: Vice-Chairman and Director;
-- Ciments Français SA: Director;
-- Eurazeo SA: Member of the Supervisory Board;
36,248 shares.
-- Havas: Director;
Mr. Antoine Bernheim was Managing Partner of Lazard
Frères & Cie from 1967 to 2000 and Partner of Lazard LLC
from 2000 to 2005. He served as Chairman and Chief Executive
Officer of La France SA from 1974 to 1997 and of Euromarché
from 1981 to 1991. Chairman of Generali SpA between 1995
and 1999, he was reappointed to this position in 2002.
-- Société Française Générale Immobilière SA: Chief Executive
Officer;
• International:
-- BSI: Banca della Svizzera Italiana (Switzerland): Director;
-- Mediobanca (Italy): Director.
Generali Group
• France:
• France:
-- Bolloré Investissement SA: Vice-Chairman and Director;
-- Generali France SA: Director.
-- Partena: Managing Partner;
• International:
-- Rue Impériale: Director.
-- Alleanza Assicurazioni (Italy): Vice-Chairman and
Director;
• International:
-- AMB Generali Holding AG (Germany): Director;
-- Banca Intesa SpA (Italy): Director;
-- Lazard LLC (United States): Partner.
-- Assicurazioni Generali SpA (Italy): Chairman;
-- Generali España Holding SA (Spain): Director;
-- Generali Holding Vienna AG (Austria): Director;
Mr. Denis DALIBOT
-- Graafschap Holland (Netherlands): Director;
Date of birth: November 15, 1945. French.
-- Intesa Sanpaolo (Italy): Vice-Chairman of the Supervisory
Board.
Business address: Financière Agache – 11, rue François 1er –
75008 Paris (France).
• France:
-- Financière Jean Goujon SAS: Vice-Chairman and Member
of the Supervisory Committee;
200 shares.
Mr. Denis Dalibot began his career with the ITT Group. From
1984 to 1987 he served as Deputy Administration and Finance
Director for Sagem. He joined Groupe Arnault in 1987 as Group
Finance Director, a position he held until 2007. He is currently
the Managing Director of Financière Agache.
-- LVMH Fashion Group SA: Vice-Chairman and Director;
-- LVMH Finance SA: Vice-Chairman and Director;
-- LVMH Moët Hennessy - Louis Vuitton SA: Vice-Chairman
and Director.
• International:
• France:
-- LVMH Moët Hennessy - Louis Vuitton Inc. (United States):
Director.
-- Agache Développement SA: Chairman and Chief Executive
Officer;
2008 Annual Report
41
-- Ateliers AS SA: Permanent representative of Christian Dior
Couture SA, Director;
-- Belle Jardinière SA: Director;
-- FA Investissement SAS: Chairman;
-- Sifanor SAS: Chairman;
-- Société d’Exploitation de l’Hôtel Cheval Blanc SAS: Member
of the Supervisory Committee.
-- Europatweb SA: Chairman and Chief Executive Officer;
• International:
-- Europatweb Placements SAS: Legal Representative of
Europatweb;
-- Publications Professionnelles Holding SAS (Luxembourg):
Director.
-- Financière Agache SA: Director – Managing Director;
-- Financière Agache Private Equity SA: Director;
-- Financière Jean Goujon SAS: Member of the Supervisory
Committee;
Mr. Christian de LABRIFFE
-- Franck & Fils SA: Permanent Representative Le Bon
Marché – Maison Aristide Boucicaut: Director;
Business address – Rothschild et Compagnie Banque, 29 avenue
de Messine, 75008 Paris (France).
-- GA Placements SA, Permanent Representative of Europatweb:
Director;
-- Groupe Arnault SAS: Member of the Management
Committee;
-- Kléber Participations SARL: Manager;
-- Le Jardin d’Acclimatation SA, Permanent Representative
of Ufipar: Director;
-- Lyparis SAS: Member of the Supervisory Committee;
-- Montaigne Finance SAS: Chairman;
-- Montaigne Investissements SCI: Manager;
-- Montaigne Services SNC: Manager;
-- Raspail Investissements SA: Permanent Representative of
Financière Agache, Director;
-- Semyrhamis SAS: Member of the Supervisory Committee;
-- Sevrilux SNC: Legal Representative of Financière Agache,
Manager.
204 shares.
Mr. Christian de Labriffe began his career with Lazard Frères &
Cie, where he was Managing Partner from 1987 to 1994.
Since 1994, he has been Managing Partner of Rothschild &
Cie Banque.
Rothschild Group
• France:
-- Financière Rabelais SAS: Chairman;
-- Montaigne Rabelais SA: Chairman of the Board of
Directors;
-- Rothschild & Cie SCS: Managing Partner;
• International:
-- Rothschild & Cie Banque SCS: Managing Partner;
-- Aurea Finance (Luxembourg): Chairman.
-- Transaction R SAS: Chairman.
Other
• France:
• France:
-- Groupement Foncier Agricole Dalibot: Manager.
-- Christian Dior Couture SA: Director.
• France:
-- Agache Développement SAS: Chairman;
-- Bon Marché International SA: Director;
42
2008 Annual Report
Other
• France:
-- Bénéteau SA: Member of the Supervisory Board;
-- Paris Orléans SA: Member of the Supervisory Board.
• France:
-- Holding Financier Jean Goujon: Director;
-- Nexity France: Director;
-- Axa Mediterranean Holding SA, Axa Aurora Ibérica SA de
Seguros y Reaseguros, y Axa Aurora Vida SA de Seguros y
Reaseguros (Spain): Director;
-- Portland Valderrivas (Spain): Director;
-- Sociedad General Immobiliaria de España SA (Spain):
Director.
-- Rothschild Conseil International: Director.
• International:
-- Investec Asset Management Inc. (United Kingdom):
Director.
• France:
-- Credit Suisse Hottinguer: Member of the Supervisory Board.
Mr. Jaime de MARICHALAR y SÁENZ de
TEJADA (Duke of Lugo)
Date of birth: April 7, 1963. Spanish.
Business address: Crédit Suisse – Ayala, 42 – 28001 Madrid
(Spain).
200 shares.
Mr. Jaime de Marichalar y Sáenz de Tejada began his career
in 1986 in Paris where he worked for Banque Indosuez on
the MATIF Futures Market. He then joined Crédit Suisse
and worked for the Investment Bank and in Private Banking.
In January 1998, he was appointed Chief Executive Officer
of Crédit Suisse in Madrid. He is also Chairman of the
Axa Foundation.
Crédit Suisse
• International:
-- Crédit Suisse (Spain): Chief Executive Officer and
Advisor.
• France:
-- Christian Dior SA: Director.
• International:
-- Groupe LVMH: Advisor to the Chairman for Spain;
-- Loewe SA (Spain): Director.
Other
• International:
-- Art+Auction Editorial (United States and United Kingdom):
Member of the Supervisory Board;
Mr. Alessandro VALLARINO GANCIA
Date of birth: October 15, 1967. Swiss.
Business address: AAP SA, 15, rue du Jeu de l’Arc – 1211 Geneva
(Switzerland).
Number of Christian Dior shares held in a personal capacity: 200
shares.
From 1992 to 1993, Mr. Alessandro Vallarino Garcia worked
as a junior management consultant in the Consumer Goods
department of Roland Berger & Partners in Munich. He
joined the investment bank Alex. Brown & Sons Inc. in the
United States, for whom he worked as a financial consultant
from 1993 to 1996.
From 1996 to 2001, he worked as an investment banker for
institutional clients at Donaldson Lufkin & Jenrette International
Inc. (DLJ) in New York and Geneva. Following the acquisition
of DLJ by Crédit Suisse First Boston he became founderdirector of AAP SA, a company specializing in alternative
funds and asset management, since 2001.
• France:
-- Christian Dior SA: Director.
Other
• International:
-- AAP SA (Switzerland): Chief Executive Officer.
• None
2008 Annual Report
43
Stock option and bonus share plans
11.Stock option and bonus share plans
11.1 Options granted by the parent company, Christian Dior
Eleven share purchase option plans set up by Christian Dior
were in force as of December 31, 2008. The beneficiaries of these
option plans are selected in accordance with the following criteria:
performance, development potential, and contribution to a key
position. The exercise price of options is calculated in accordance
with applicable laws. Each plan has a term of ten years. Share
purchase options may be exercised after the end of a period of
three to five years from the plan’s commencement date.
For all plans, one option gives the right to one share.
11.1.1 S
hare purchase option plans
Under the authorization granted by the Meeting held on May 30, 1996
Number of options granted (1)
Plan commencement
Number of
date
beneficiaries
Total
of which
company
officers
(EUR)
Number
of options
exercised
in 2008 (3)
23
14
20
17
98,400
89,500
100,200
437,500
65,000
50,000
65,000
308,000
28,200
38,000
31,000
121,000
18.29
25.36
56.70
45.95
27,000
38,500
2,000
-
25,500
352,000
362,500
725,600
488,000
218,200
-
67,500
740,000
November 3, 1998 (4)
January 26, 1999
February 15, 2000
February 21, 2001
Total
Of which
first ten
employees
Exercise
price (2) (3)
Number of
options not
exercised as of
12/31/2008 (3)
(1) Number of options as of the plan’s commencement date, without any restatement for the adjustments related to the July 2000 four-for-one stock
split. Options granted to active company officers/employees as of the plan’s commencement date.
(2) Figures for periods prior to 1999 result from the translation into euros of data originally presented in French francs.
(3) Adjusted for the transaction referred to under (1).
(4) Plan expired on November 3, 2008.
Number of options granted to company officers (1)
Plan commencement date
November 3, 1998
January 26, 1999
February 15, 2000
February 21, 2001
(2)
Total
Bernard Arnault
Sidney Toledano
Pierre Godé
Denis Dalibot
50,000
50,000
50,000
220,000
7,000
7,000
7,000
30,000
15,000
15,000
15,000
65,000
3,500
3,500
3,500
15,000
370,000
51,000
110,000
25,500
(1) Number of options as of the plan’s commencement date, without any restatement for the adjustments related to the July 2000 four-for-one stock
split, granted to company officers as of December 31, 2008.
(2) Plan expired on November 3, 2008.
44
2008 Annual Report
Plan commencement
date
February 18, 2002
February 18, 2003
February 17, 2004
May 12, 2005
February 15, 2006
of which
company of which first
officers ten employees
Number of
beneficiaries
Total
24
25
26
27
24
504,000
527,000
527,000
493,000
475,000
310,000
350,000
355,000
315,000
305,000
153,000
143,000
128,000
124,000
144,000
2,526,000
1,635,000
692,000
Total
Exercise
price
(EUR)
33.53
29.04
49.79
52.21
72.85 (2)
Number
of options
exercised
in 2008
Number of
options not
exercised as of
12/31/2008
8,000
35,000
10,000
92,502
121,002
436,000
438,000
-
443,000
53,000
1,530,504
(1) Options granted to active company officers/employees as of the plan’s commencement date.
(2) The exercise price for Italian residents is: 77.16 euros.
February 18, 2002
February 18, 2003
February 17, 2004
May 12, 2005
February 15, 2006
Total
Bernard Arnault
Sidney Toledano
Pierre Godé
Denis Dalibot
220,000
220,000
220,000
220,000
220,000
35,000
40,000
45,000
50,000
50,000
65,000
65,000
65,000
20,000
-
20,000
25,000
25,000
25,000
35,000
1,100,000
220,000
215,000
130,000
(1) Options granted to active company officers/employees as of December 31, 2008.
Plan commencement
date
September 6, 2006
January 31, 2007
May 15, 2008
Total
Number of
beneficiaries
Total
of which
company
officers
Of which
ten first
employees
1
28
25
20,000
480,000
484,000
285,000
320,000
20,000
133,000
147,000
984,000
605,000
300,000
Exercise
price
(EUR)
Number
of options
exercised in
2008
Number of
options not
exercised as of
12/31/2008
-
20,000
455,000
484,000
74.93
85.00
73.24 (2)
959,000
(2) The exercise price for Italian residents is: 73.47 euros.
Bernard Arnault
Sidney Toledano
Pierre Godé
Denis Dalibot
September 6, 2006
January 31, 2007
May 15, 2008
200,000
200,000
50,000
50,000
-
35,000
70,000
Total
400,000
100,000
-
105,000
(1) Options granted to active company officers/employees as of December 31, 2008.
Exercise of existing share purchase options does not entail any dilution for shareholders.
2008 Annual Report
45
11.1.2 S
hare subscription option plans
11.1.3 B
onus shares
None
None
11.1.4 M
ovements during the fiscal year
Share purchase option plans
Number of options
2008
Options outstanding as of January 1
Options granted
Options exercised
Expired options
Options outstanding as of December 31
2,926,004
484,000
(120,500)
(60,000)
3,229,504
2007
4,016,700
480,000
(1,535,696)
(35,000)
2,926,004
2006
3,993,213
495,000
(335,713)
(135,800)
4,016,700
11.2 Options granted by its subsidiary, LVMH
11.2.1 S
hare purchase option plans
Under the authorization granted by the Meeting held on June 8, 1995
Plan commencement
date
of which
Number of
beneficiaries
Total
346
4
364
9
552
269,130
15,800
320,059
44,000
376,110
97,500
97,000
5,000
122,500
65,500
15,800
99,000
39,000
81,000
1,025,099
322,000
300,300
January 29, 1998
March 16, 1998 (3)
January 20, 1999
September 16, 1999
January 19, 2000
(3)
Total
Number
Number of
of options
options not
Exercise
exercised (2)
price (2) exercised
in 2008 (2) as of 12/31/2008
(EUR)
25.92
31.25
32.10
54.65
80.10
40,280
110,140
-
91,450
150,000
1,586,800
150,420
1,828,250
(1) Number of options as of the plan’s commencement date, without any restatement for the adjustments related to the June 1999 grant of bonus shares
or the July 2000 five-for-one stock split. Options granted to active company officers/employees as of the plan’s commencement date.
(2) Adjusted for the transactions referred to under (1).
(3) Plans expired respectively on January 28 and March 15, 2008.
46
2008 Annual Report
Plan commencement
date
January 23, 2001
March 6, 2001
May 14, 2001
May 14, 2001
September 12, 2001
January 22, 2002
May 15, 2002
January 22, 2003
Number of
beneficiaries
786
1
44,669
4
1
993
2
979
Total
(1)
(2)
(3)
(4)
Total
of which
Exercise
price
(EUR)
2,649,075
40,000
1,105,877 (2)
552,500
50,000
3,284,100
987,500
450,000
1,215,000
445,000
40,000
102,500
50,000
505,000
65.12
63.53
66.00
61.77
52.48
43.30 (3)
8,560
3,213,725
1,220,000
8,560
495,000
54.83
37.00 (4)
10,903,837
3,872,500
1,646,060
Number
of options
exercised in
2008
Number of
options not
exercised as of
12/31/2008
6,250
2,775
-
1,822,665
30,000
478,319
552,500
50,000
36,018
82,763
1,882,944
5,560
1,212,010
127,806
6,033,998
Number
of options
exercised in
2008
Number of
options not
exercised as of
12/31/2008
92,600
-
2,561,925
1,878,875
92,600
4,440,800
Options granted to active company officers/employees as of the plan’s commencement date.
25 options were granted to each beneficiary.
The exercise price is 45.70 euros for Italian residents and 43.86 euros for US residents.
The exercise price for Italian residents is 38.73 euros.
Exercise of existing share purchase options does not entail any dilution for shareholders.
11.2.2 S
hare subscription options
Plan commencement
date
January 21, 2004
May 12, 2005
Total
of which
Number of
beneficiaries
Total
906
495
2,747,475
1,924,400
972,500
862,500
457,500
342,375
4,671,875
1,835,000
799,875
Exercise
price
(EUR)
55.70 (2)
52.82 (2)
(2) Exercise prices for Italian residents for plans commencing on January 21, 2004 and May 12, 2005 are 58.90 euros and 55.83 euros respectively.
2008 Annual Report
47
Plan commencement
date
of which
Number of
beneficiaries
Total
520
524
545
1,789,359
1,679,988
1,698,320
852,500
805,875
766,000
339,875
311,544
316,138
5,167,667
2,424,375
967,557
May 11, 2006
May 10, 2007
May 15, 2008
Total
Exercise
price
(EUR)
Number
Number of
of options
options not
exercised in exercised as of
2008
12/31/2008
78.84 (2)
86.12
72.50 (2)
-
1,765,609
1,669,731
1,693,520
-
5,128,860
(2) Exercise prices for Italian residents for plans commencing on May 11, 2006 and May 15, 2008 are 82.41euros and 72.40 euros respectively.
11.3 Options granted to and exercised by the group’s officers and
the group’s first ten employees during the year
11.3.1 O
ptions granted during the year to senior executive officers of the Company
Beneficiary
Bernard Arnault
Sidney Toledano
Company granting
the options
Plan date
Option type
Christian Dior
May 15, 2008
LVMH
Christian Dior
Valuation of
options
Exercise
price
(EUR)
Number of
options
Purchase
4,340,000
200,000
73.24
May 15, 2008
Subscription
8,176,000
400,000
72.50
May 15, 2008
Purchase
1,085,000
50,000
73.24
Pursuant to the decision of the Board of Directors of May 15,
2008, when exercising their options, the Chairman of the Board
of Directors and the Chief Executive Office, shall be obliged
to keep until they cease their functions a number of shares
(EUR)
Exercise
period
May 15, 2012 –
May 14, 2018
May 15, 2012 –
May 14, 2018
May 15, 2012 –
May 14, 2018
determined based on the exercise date and the corresponding
percentage of their total gross compensation.
11.3.2 O
ptions granted to other company officers of the Company during the year
Beneficiary
Denis Dalibot
Pierre Godé
48
2008 Annual Report
Company granting
the options
Plan date
Number of
options
Exercise price
Christian Dior
May 15, 2008
70,000
73.24
LVMH
May 15, 2008
40,000
72.50
(EUR)
Exercise
period
May 15, 2012 –
May 14, 2018
May 15, 2012 –
May 14, 2018
11.3.3 O
ptions exercised during the year by each senior executive officer of the Company
Beneficiary
Sidney Toledano
Company granting
the options
Plan date
Option type
Number of
options exercised
Exercise price
Christian Dior
January 26, 1999
Purchase
28,000
25.36
(EUR)
11.3.4 O
ptions exercised during the fiscal year by other company officers
None of the other officers of the Company exercised any options during the fiscal year.
11.3.5 O
ptions granted during the fiscal year by the Company and any Group company to
the ten employees, other than company officers, holding the largest number of options
Company granting options
Christian Dior
LVMH
Plan date
Number of
options
Exercise price
May 15, 2008
May 15, 2008
May 15, 2008
147,000
296,138
30,000
73.24
72.50
72.70
(EUR)
11.3.6 O
ptions exercised during the fiscal year by the ten employees of the Group,
other than company officers, having exercised the largest number of options
Company granting options
Christian Dior
Christian Dior
Christian Dior
Christian Dior
Christian Dior
LVMH
LVMH
LVMH
LVMH
LVMH
Plan date
Number of
options
Exercise price
November 3, 1998
January 26, 1999
February 18, 2003
February 17, 2004
May 12, 2005
January 29, 1998
January 20, 1999
January 22, 2002
January 22, 2003
January 21, 2004
26,000
2,000
8,000
35,000
10,000
5,500
55,620
1,500
51,208
26,000
18.29
25.36
29.04
49.79
52.21
25.92
32.10
43.30
37.00
55.70
2008 Annual Report
(EUR)
49
11.4 bonus shares granted by the subsidiary, LVMH
11.4.1 Shares granted to employees
Beneficiaries of bonus shares are selected among the active employees of the Group’s French subsidiaries on the basis of their level
of responsibility and their individual performance.
The allocation of bonus shares to their beneficiaries shall only be definitive after a vesting period of two years. In addition, the shares
shall be subject to a compulsory two-year holding period as from the end of the vesting period.
Number of shares granted
Number of
beneficiaries
Initial
allocation
May 12, 2005
333
97,817
May 11, 2006
347
164,306
May 10, 2007
348
152,076
May 15, 2008
347
162,972
of which
officers ten employees Shares vested
Balance as of
12/31/2008
-
23,325
30,575
34,805
93,059
154,090
-
148,487
-
32,415
-
162,972
11.4.2 Shares
granted during the fiscal year to senior executive officers and
other company officers
Senior executive officers and other company officers do not benefit from any bonus share allocations.
11.4.3 S
hares vested during the fiscal year to the Group’s ten employees,
other than company officers, having received the largest number of shares
Company granting bonus shares
LVMH
50
2008 Annual Report
Initial grant date
Number of shares
May 11, 2006
28,550
Information that could have a bearing on a takeover bid or exchange offer
12.Information that could have a bearing on
a takeover bid or exchange offer
Pursuant to the provisions of Article L. 225-100-3 of the French
Commercial Code, the capital structure and other information
that could have a bearing on a takeover bid or exchange offer
are presented below:
-- increase the share capital, with or without shareholders’
pre-emption rights, in a total nominal amount not to exceed
40 million euros, or 11% of the Company’s current share
capital;
• capital structure of the Company: the Company is controlled
by Groupe Arnault, which controlled 69.43% of the
capital and 81.37% of the theoretical voting rights as of
December 31, 2008;
-- grant share subscription options, within the limit of 3% of
the share capital;
• share issuance and buybacks: under various resolutions,
the Shareholders’ Meeting has delegated to the Board of
Directors the power to:
-- allocate bonus shares, within the limit of 1% of the share
capital.
The law provides for the suspension during the period of a
takeover bid or exchange offer of any delegation whose application
would be likely to cause the operation to fail.
2008 Annual Report
51
Employee information
13.Employee information
Note on methodology
In 2008, the Human Resources Department continued its efforts
aimed at reinforcing the quality and reliability of employeerelated reporting within the Group. In particular, the alignment
of organizational and legal entities involved a formal assessment
of the consistency of the Group’s social and financial reporting.
The scope of financial reporting now covers all staff employed
by Group companies consolidated on a full or proportional basis,
but does not include equity-accounted associates.
The definition of the indicators used by human resources
personnel has also been improved. In order to minimize the impact
of recurring differences between countries, a descriptive sheet
has been produced for each indicator specifying its relevance,
the elements of information tracked, the procedure to be applied
to gather information, and the various controls to be performed
when entering data. New information system controls were
also developed to enhance the reliability and consistency of
information entered.
Workforce information provided below relates to all consolidated
companies, including the Group’s share in joint ventures.
Human resources indicators were calculated for a scope of
534 organizational entities covering more than 99% of the
worldwide workforce and encompass all staff employed during
the year, including those employed by joint ventures.
Since fiscal year 2007, the Group’s annual reporting of employee
information has been audited each year, based on data from
LVMH, by the Environment and Sustainable Development
department of Deloitte & Associés, the LVMH Group’s statutory
auditor; the verified indicators are identified with the symbol.
In 2008, Deloitte & Associés issued a report based on a limited
review of this work.
13.1 Analysis and development of the workforce
13.1.1 Breakdown of the workforce
The Group’s total workforce as of December 31, 2008
amounted to 80,343 employees. Of this total, 72,912 employees
worked under permanent contracts (CDI) and 7,431 worked
under fixed-term contracts (CDD). Part-time employees
represented 16% of the total workforce, or 12,522 individuals.
The portion of staff outside France now remains at 74% of
the workforce worldwide.
The Group’s average Full Time Equivalent (FTE) workforce in
2008 comprised 72,619 employees, a rise of 9.6% on 2007.
52
2008 Annual Report
The main changes are due to organic growth and the opening
of new stores, essentially in Europe, Asia and the United States
and changes in scope of consolidation. The workforce of Fashion
and Leather Goods, Selective Retailing and Christian Dior
Couture increased by an average of more than 10%. Among
the changes in the scope of consolidation in 2008, we should
note the acquisition of the Swiss watchmaker Hublot, Royal
Van Lent yachts, and the Les Echos media group.
The tables below show the breakdown of the workforce, by business group, geographic region and professional category.
Breakdown by business group
Total headcount as of December 31 (1)
2008
%
2007
%
2006
%
3,256
6,438
22,467
17,163
2,261
27,347
1,411
4
8
28
21
3
34
2
2,949
6,313
20,803
15,719
2,014
26,323
713
4
8
28
21
3
35
1
2,650
5,521
17,951
14,747
1,882
23,275
877
4
8
27
22
3
35
1
80,343
100
74,834
100
66,903
100
Average headcount during the period Christian Dior Couture
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other
3,140
6,470
20,793
15,908
2,161
22,945
1,202
4
9
29
22
3
31
2
2,777
6,780
19,028
14,275
1,994
20,494
893
4
10
29
22
3
31
1
2,556
5,462
16,904
13,453
1,836
18,612
938
%
4
9
28
23
3
31
2
Total
72,619
100
66,241
100
59,761
100
2008
%
2007
%
2006
%
France
Europe (excluding France)
United States
Japan
Asia (excluding Japan)
Other
20,818
17,749
17,020
5,301
15,713
3,742
26
22
21
7
19
5
20,063
16,777
16,469
5,302
13,751
2,472
27
23
22
7
18
3
19,880
13,615
14,543
4,956
11,670
2,239
30
21
22
7
17
3
Total
80,343
100
74,834
100
66,903
100
Average headcount during the period (2)
France
United States
Japan
Other
20,031
15,551
13,966
5,319
14,546
3,206
28
22
19
7
20
4
19,530
14,250
12,512
5,383
12,371
2,195
29
22
19
8
19
3
19,329
11,591
11,357
4,926
10,536
2,022
32
20
19
8
18
3
Total
72,619
100
66,241
100
59,761
100
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other
Total
(2)
(1) Total permanent and fixed-term headcount.
(2) Average permanent and fixed-term headcount on a full-time equivalent basis.
Breakdown by geographic region
2008 Annual Report
53
Breakdown by professional category
2008
%
2007
%
2006
%
13,593
8,306
46,498
11,946
17
10
58
15
11,920
7,293
45,515
10,106
16
10
61
13
10,937
6,493
40,787
8,686
16
10
61
13
80,343
100
74,834
100
66,903
100
Managers
Technicians – Team leaders
Office and sales personnel
Labor and production workers
12,987
7,935
40,424
11,273
18
11
56
15
11,909
8,399
36,090
9,843
18
13
54
15
10,626
6,288
34,237
8,610
18
11
57
14
Total
72,619
100
66,241
100
59,761
100
Managers
Technicians – Team leaders
Total
Average headcount during the period (2)
Average age and breakdown by age
The average age of staff employed under permanent contracts worldwide is 36 years and the median age is 34 years. The youngest
age ranges are found among sales personnel, mainly in the Asia-Pacific region and the United States.
(%)
Age: Less than 25 years
age 25 – 29
age 30 – 34
age 35 – 39
age 40 – 44
age 45 – 49
age 50 – 54
age 55 – 59
age 60 and over
Average age
Global
workforce
France
13.0
21.0
18.5
14.9
11.5
8.8
6.3
4.1
1.9
100.0
36
7.2
15.2
16.6
15.7
14.5
12.5
10.0
6.9
1.4
100.0
39
Europe (1)
11.9
18.7
20.5
17.4
12.5
8.5
5.4
3.4
1.7
100.0
36
United
States
Japan
18.9
22.2
15.3
11.8
9.3
7.8
6.1
4.5
4.1
100.0
36
6.8
25.2
30.1
17.6
9.8
5.9
2.9
1.6
0.1
100.0
34
Asia (2)
17.8
28.0
18.3
13.4
9.6
6.4
3.9
1.7
0.9
100.0
33
Other
countries
13.2
24.2
20.4
15.2
10.8
6.9
5.2
3.1
1.0
100.0
35
(1) Excluding France.
(2) Excluding Japan.
Average length of service and breakdown by length of service
The average length of service within the Group is 10 years in France and about four to six years in the other geographic regions.
This difference is mainly due to the predominance in these other regions of retail activities characterized by a high turnover rate. It
is also the result of recent expansion by Group companies into emerging markets, where there is a greater fluidity of employment.
54
2008 Annual Report
(%)
Age: less than 5 years
5 – 9 years
10 – 14 years
15 – 19 years
20 – 24 years
25 – 29 years
30 years and over
Average length of service
Global
workforce
France
60.6
19.8
7.5
4.9
3.2
2.0
2.0
100.0
6
38.0
24.3
10.9
9.0
7.0
5.2
5.6
100.0
10
Europe (1)
62.7
21.8
7.5
4.1
1.8
0.9
1.2
100.0
5
United
States
Japan
76.2
14.6
4.1
2.3
1.6
0.7
0.5
100.0
4
55.4
29.3
7.9
4.5
2.0
0.6
0.3
100.0
6
Asia (2)
Other
countries
72.2
14.6
6.6
3.6
1.9
0.7
0.4
100.0
5
69.7
16.2
7.1
2.8
2.1
1.0
1.1
100.0
5
13.1.2 Joiners, leavers and internal mobility
Identifying and attracting talent are key strategic objectives of
the Group companies’ recruitment policy. The Group’s image
coupled with the wide range of positions offered attracts these
talents, as demonstrated by the success of the “Join LVMH”
pages on the Group’s Web site: in a twelve-month period, more
than 140,000 applications were submitted in response to more
than 2,800 job openings.
The size of the Group, as well as the broad spectrum of
professions represented, and its opportunities for career growth
are widely recognized. The 2008 Universum French Graduate
Survey involving 13,600 students from 105 leading French
institutions ranked LVMH at the top of the list of companies
preferred by young business school graduates, for the third
year running.
The Group reaffirms its ambition to remain the employer of
choice in its field through a number of specific positioning and
promotional efforts focusing on LVMH’s employer brand. In this
spirit, the human resources teams are developing a new marketing
drive to reinforce the Group’s attractiveness in increasingly tight
labor markets, particularly outside those where the Group has
traditionally attracted talent. The goal is to enhance the Group’s
reputation worldwide and fuel the desire to join LVMH, whose
work culture, with its innovative style, both multi-faceted and
unique, embodies a certain “art of living together”.
In order to present the career opportunities offered by the
Group, the Group’s teams took part in about a hundred events
during the year, on the campuses of leading and prestigious
institutions of higher learning in France and abroad. Special
attention was given to programs delivering internationally
renowned MBAs, in Europe (IMD, London Business School,
INSEAD and HEC, to name a few), in the United States
(Harvard, Columbia, Wharton and Stanford, among others)
and increasingly in Asia (Tsinghua, Fudan, NUS, Hong Kong
University, Waseda, Keiko, Tokyo University, etc.). Apart from
the events at these institutions, the Group also demonstrated its
strong commitment to attracting the best talent by partnering
with ESSEC in the creation of an endowed chair in luxury
brand marketing and management in France and through
LVMH scholarships awarded to students in Asia.
In line with the high growth rates recorded over the last several
years, the Group develops targeted programs for the identification
and accelerated training of its future executives. Among the
initiatives launched in this vein, “FuturA” seeks to recruit and
nurture talented individuals who, following a first substantial
and successful career experience, will be able to tap into and
sustain their entrepreneurial spirit within the Group. In 2008,
through its FuturA program, the Group attracted and selected
80 special individuals from among thousands of highly qualified
applicants. These men and women add their numbers to the
existing group of high-potential internal resources, who are
the focus of special attention with targeted efforts to increase
professional exposure (quick career advancement, a variety of
challenges to test their mettle, international perspective, etc.) and
personal development (individual development plans regularly
reviewed at the Group level, meetings with senior executives,
training, etc.).
Worldwide in 2008, nearly 23,833 individuals were hired under
permanent contracts, including 3,001 in France. A total of
5,787 people were recruited in France under fixed-term contracts.
The seasonal sales peaks, at the end of year holiday season and
the harvest season, are the two main reasons for using fixedterm contracts.
Departures from Group companies in 2008 (all causes combined)
affected a total of 18,495 employees working under permanent
contracts, of which almost half were employed within the Selective
Retailing business group, which traditionally experiences a
high turnover rate. The leading causes for departure were
resignations (73% of total departures) and individual layoffs
(13% of total departures).
The overall turnover rate increased by about 10% compared to
previous years and continues to show marked differences across
geographic regions: the highest rates are recorded in North
America and Asia, where labor markets are more fluid.
2008 Annual Report
55
Turnover by geographic region
(%)
2008
France
Total turnover (1)
Of which
Voluntary turnover (2)
Involuntary turnover (3)
25.1
11.8
18.6
5.9
6.5
4.0
(1)
(2)
(3)
(4)
(5)
United
States
Japan
19.2
47.7
12.9
14.4
4.2
37.5
9.9
11.9
0.8
Europe (4)
Other
countries
2007
2006
31.2
17.1
22.5
20.5
23.2
7.8
12.2
4.7
17.4
4.4
14.8
5.0
Asia (5)
All reasons.
Resignations.
Redundancies/end of trial period.
Excluding France.
Excluding Japan.
Breakdown of movements (1) of employees working under permanent contracts by business group and
geographic region
Joiners
Leavers
2008
2007
2006
2008
2007
2006
By business group
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other
1,038
868
5,427
4,283
459
11,607
151
733
983
4,811
3,064
440
9,420
106
598
923
3,611
2,254
318
6,502
83
812
750
3,693
2,812
339
9,713
376
606
742
3,512
2,635
295
7,071
79
586
580
3,356
2,070
302
5,395
83
Total
23,833
19,557
14,289
18,495
14,940
12,372
3,001
4,282
8,535
831
6,323
861
2,872
3,760
6,266
680
5,223
756
2,075
2,682
5,018
642
3,314
558
2,554
2,973
7,243
582
4,643
500
2,158
2,834
5,201
629
3,689
429
1,820
2,466
4,222
559
2,961
344
23,833
19,557
14,289
18,495
14,940
12,372
(number)
By geographic region
France
United States
Japan
Other countries
Total
(1) Under permanent contracts, including conversions of fixed-term contracts to permanent contracts and excluding internal mobility within the Group.
The Group encourages mobility among its staff, from one
geographic region to another, or from one Group company to
another. The wide range of companies making up the Group,
their unique corporate identities as well as their expertise in a
variety of business segments, lend favor to these two forms of
mobility. Today about 40% of all managerial positions are filled
by means of internal mobility and in 2008 more than 930 of these
movements were from one Group company to another.
56
2008 Annual Report
The Group also fosters mobility between professional categories
by encouraging its employees to acquire new skills, especially
by pursuing qualifying training or degree programs. More than
4,150 staff members were promoted in 2008, representing 5.7%
of the total workforce.
13.2 Work time
13.2.1 Work time organization
Worldwide, 16% of employees benefit from variable or adjusted working hours and 34% work as a team or alternate their working hours.
Global workforce affected by various forms of working hours’ adjustment: breakdown by geographic region
Workforce concerned (1) (%)
Global
workforce
France
16
16
39
11
34
7
Variable adjusted schedules
Part-time
Teamwork, alternating hours or
night shifts
United
States
Japan
13
20
4
31
17
1
2
8
13
9
60
85
57
26
Europe (2)
Asia (3)
Other
countries
(1) In percentage of number of employees under permanent contracts, except for part-time workers, in percentage of total number of employees.
Global workforce in France affected by various forms of working hours’ adjustment: breakdown by
professional category
Workforce concerned (%)
Workforce France
Managers
Technicians
and team
leaders
39
11
33
3
59
6
58
22
4
7
7
-
5
2
22
15
-
17
14
31
Variable/adjusted schedules
Part-time
Teamwork, alternating hours or
night shifts
Employees benefiting from
time off in lieu
Office
and sales
personnel
Labor and
production
workers
13.2.2 Overtime
The cost of the volume of overtime is 39 million euros, or an average of 1.7% of the worldwide payroll. This cost varies between 1%
and 2% of the payroll depending on the geographic region.
Percentage of overtime by geographic region
(%)
Overtime
Global
workforce
France
1.7
1.5
Europe (1)
2.0
United
States
Japan
1.7
1.8
Asia (2)
Other
countries
1.5
0.9
2008 Annual Report
57
13.2.3 Absenteeism
The worldwide absentee rate of the Group for employees working
under permanent and fixed-term contracts is 4.5%. It increased
slightly compared with previous years (4.6% in 2007 and 4.1% in
2006). This adverse development is attributable to the two main
causes of absence – illness (2.1%) and maternity leave (1.4%).
The overall absentee rate of the European entities is twice as
high as that recorded in other geographic regions.
Absentee rate(1) by geographic region and by reason
Global
workforce
France
Illness
Work/work-travel accidents
Maternity
Paid absences (family events)
Unpaid absences
2.1
0.2
1.4
0.4
0.4
3.5
0.4
1.5
0.4
0.3
Overall absentee rate
4.5
6.1
(%)
United
States
Japan
2.9
0.1
2.0
0.7
0.3
1.2
0.2
0.6
0.2
0.3
0.3
2.5
0.3
0.5
1.1
0.1
0.9
0.6
0.4
1.1
0.2
0.7
0.1
0.2
6.0
2.5
3.6
3.1
2.3
Europe (2)
Asia (3)
Other
countries
(1) Number of days absent divided by the theoretical number of days worked.
13.3 Compensation
13.3.1 Average salary
The table below shows the gross average monthly compensation paid to Group employees in France under permanent contracts
who were employed throughout the year:
Employees concerned (%)
2008
2007
2006
Less than 1,500 euros
1,501 to 2,250 euros
2,251 to 3,000 euros
Over 3,000 euros
10.4
28.9
24.1
36.6
12.5
37.8
18.7
31.0
19.8
30.5
19.7
30.0
100.0
100.0
100.0
Total
58
2008 Annual Report
13.3.2 Personnel costs
Worldwide personnel costs break down as follows:
2008
2007
2006
Gross payroll – fixed term or permanent
Employers’ social security contributions
Temporary staffing costs
2,331.5
609.6
135.2
2,186.7
582.4
109.0
2,064.0
533.4
99.2
Total personnel costs
3,076.3
2,878.1
2,696.6
(EUR millions)
Outsourcing and temporary staffing costs remain stable, accounting for 7.4% of the total payroll worldwide, including employer’s
social security contributions.
13.3.3 I ncentive schemes, profit sharing and company savings plans
All companies in France with at least 50 employees have an incentive scheme, profit sharing or company savings plan. These plans
accounted for a total expense of 107.7 million euros in 2008, a rise of 16% against 2007.
(EUR millions)
Profit sharing
Incentive
Employers’ contribution to company savings plan
Total personnel costs
2008
2007
2006
62.9
39.2
5.6
51.3
36.2
5.4
47.9
34.4
4.9
107.7
92.9
87.2
In 2001, the Group set up a worldwide share purchase option plan under which 25 options were allocated to all Group employees
with a strike price of 66 euros. Since May 2005 the beneficiaries of this plan have been able to exercise their options at any time
until May 2009.
13.4 Equality and Diversity
LVMH is a signatory of the United Nations Global Compact and,
in France, of the Charte de la Diversité and the Charte d’Engagement
des Entreprises au service de l’Égalité des chances dans l’Éducation.
These commitments were concretely expressed by human
resources teams across the Group’s houses through a systematic
review of hiring practices so as to reinforce their objectivity.
As a complement to the efforts of human resources personnel,
special training sessions were organized in order to raise the
awareness of executive-level staff in relation to these issues,
at the very outset of the process, when specifying recruitment
needs and defining job positions.
In 2008, the Group launched a procedure for the self-assessment
of hiring practices, encompassing all its houses in France and
Switzerland. The services of two independent firms were
enlisted in order to test the responses of individuals with hiring
responsibility to applicants whose specific characteristics might
lead to discrimination, especially in relation to ethnic origins. This
operation, in compliance with internationally recognized codes
of conduct, was monitored by an internal committee responsible
for ensuring the confidentiality of information handled and the
respect for ethical principles.
13.4.1 E
quality of opportunity for men and
women
The proportion of women within the Group workforce has
remained broadly unchanged for several years and now amounts
to about 73%. This proportion is also reflected in new hires,
72% of whom were women in 2008. The significant percentage
of female employees is explained in part by the nature and
attractiveness of the Group’s business segments. Women are
particularly prominent in Perfumes and Cosmetics (82%),
retail sales of luxury products (80%) and Fashion and Leather
Goods (73%). Conversely, the majority of staff in Wines and
Spirits are men, representing 65% of the workforce in this
business group.
2008 Annual Report
59
Proportion of female employees in new joiners (1) and in the Group’s active workforce
Joiners
Group employees
2008
2007
2006
2008
2007
2006
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other
77
44
70
83
57
70
60
71
45
71
83
57
77
54
76
40
71
86
56
81
57
75
35
73
82
55
80
57
75
34
74
81
56
79
53
74
33
74
81
56
79
53
Breakdown by professional category
Managers
Technicians and team leaders
57
68
76
61
59
67
79
58
60
70
81
65
59
69
81
64
58
70
80
62
57
70
81
62
France
United States
Japan
Other countries
70
79
66
79
74
73
71
76
72
79
76
69
69
79
76
82
78
61
68
76
74
77
76
62
68
76
73
77
76
61
67
75
73
77
77
62
Total
72
74
76
73
72
72
(% Women)
(1) Under permanent contracts, including internal mobility and transfers from fixed-term to permanent contracts.
An increasing number of management positions are also being
filled by women, who make up 59% of managers, as they did last
year. Equality of opportunity also prevails in career advancement.
Accordingly, 71% of staff promoted in 2008 were women.
In addition, 30% of executive committee members are women
and seven Group companies are chaired by women: Veuve
Clicquot Ponsardin, Krug, Fred, Montres Dior, Kenzo Parfums,
e-Luxury and Acqua di Parma.
13.4.2 M
anagement of older staff
Access to employment by older staff and their retention are areas
of constant concern for the Group, consistent with its diversity
policy as well as its twin goals of preserving skills and expertise
and promoting the transfer of know-how. Among the many
examples of the Group’s ability to motivate and engage older
employees may be noted the mentoring programs established
by all Group companies and the recent initiative by Parfums
Givenchy, which has signed a company agreement with trade
unions to organize and promote the career perspectives of
older staff.
Worldwide, 12.2% of the Group’s active workforce are over
the age of 50. In France, this population accounts for 18.3%
of employees.
60
2008 Annual Report
13.4.3 E
mployment and integration of
disabled workers
Mission Handicap, a joint initiative by 24 Houses of the Group,
has provided added impetus for the promotion of policies
facilitating the employment of disabled persons. Human resources
personnel have been trained in the recruitment and management
of disabled employees. Special training sessions are organized on
a regular basis, to facilitate the utilization of these staff members
in all areas of activity. By way of example, Hennessy has trained
its executive-level staff in the integration of disabled employees
and DFS Group has developed a program intended to guarantee
equality of opportunity. All employees of the Guerlain Spa on
the Champs-Elysées in Paris have been trained to address the
special needs of disabled customers.
In the area of recruitment, 15 Houses took part this year in
operations targeting disabled applicants: speed recruitment
events, events organized by ADAPT (Association pour l’insertion
sociale et professionnelle des personnes handicappées), HandiChat,
use of video CVs, etc. Several partnerships with specialized
institutions have been developed with a view to facilitating
access for disabled applicants to the Group’s professions. For
example, TAG Heuer (Switzerland) supports professional
retraining centers for watchmaking skills and both Louis Vuitton
and Parfums Givenchy collaborate on a regular basis with the
Cap Emploi disabled employment agencies in France. An
accessibility audit was commissioned for the Group’s Web
site so as to ensure equal access to job offers, regardless of the
means used to browse through the site.
In anticipation of recruitment needs, the Group conducted
several actions designed to enhance the qualifications of
disabled persons: the creation of two professionalization
programs tailored for these job seekers targeting skills used
in sales and office positions, and the creation of ARPEJEH
(Accompagner la Réalisation des Projets d’Études de Jeunes Élèves et
Étudiants Handicapés), founded in part by LVMH, whose aim
is to offer advice and guidance to disabled junior and senior
high school students.
The Group is particularly attentive to the need to ensure
that employees who become disabled are able to continue
working, as illustrated by the specially designed facilities at
Moët & Chandon and Parfums Christian Dior, which allow
staff members with medical limitations to continue to work in
their jobs under appropriate conditions.
Disabled staff represent 0.8% of the Group’s global workforce.
In 2008, this rate was 2.0% for France, with a total of 4.5 million
euros in services sub-contracted to ESATs (assisted employment
centers) or disabled-friendly companies, an increase of 58%
compared to the previous year. The Group thus helps provide
support to disabled people who wish to be oriented to these
institutions thanks to its involvement in the Delta Insertion project.
13.5 Training
Group companies offer a broad range of training programs
to allow staff to develop their professional skills and their
specific business line expertise as artisans and creators as well
as to share a common vision. Consistent with the Group’s
organizational philosophy, each company is given complete
latitude to develop its own initiatives in this area, specifically
tailored to its professions.
In addition to its orientation seminars, the Group offers a wide
range of training programs in human resource management,
sales techniques, marketing, project management, foreign
languages, etc. The training programs are organized either within
companies or at external institutions, involving as trainers both
highly respected educators and Group managers considered as
experts in their particular areas of expertise.
Global workforce
Training investment (EUR millions)
Portion of total payroll (%)
Number of days training per employee
Average cost of training per employee (EUR)
Employees trained during the year (%)
Lastly, the LVMH House, founded in London in 1999, a center
specifically dedicated to the professional development of Group
executives, experienced a new surge in attendance in 2008, with
the record-setting participation of 360 people in 16 forums. A
venue for sharing and exchange, this center attracts LVMH
managers from around the world to its forums addressing
issues of strategic importance, such as leadership, luxury brand
building, knowing luxury customers, and innovation as a driver
of excellence.
A substantial portion of training also takes place on the job on
a daily basis and is not factored into the indicators presented
below.
2008 (1)
2007
2006
60.1
2.6
2.7
748
63.4
57.1
2.7
3.7
762
69.6
54.4
2.8
4.9
806
70.5
(1) In 2008, a new more restrictive definition of training initiatives was applied for global social reporting purposes.
In 2008, training expenses incurred by the Group’s companies
throughout the world represented a total of 60.1 million euros,
or 2.6% of total payroll.
The average training investment per full-time equivalent person
remained stable at over 750 euros. In 2008, the total number
of training days amounted to 216,620 days, representing an
equivalent of around 980 people receiving full-time training for
the entire year. This volume of training days was 24% lower than
2007 following the implementation of a new more restrictive
definition of training initiatives, which was applied in 2008 for
social reporting purposes.
Other indicators, such as the training penetration date and
the average number of days training per employee were also
impacted. Thus a total of 63.4% of employees received at least
one day of training during the year and the average number
of days training came to 2.7 days per employee. The training
investment is spread across all professional categories and
geographic regions in accordance with the table below.
2008 Annual Report
61
Breakdown of training investment by geographic region and professional category
France
Training investment (EUR millions)
Portion of total payroll (%)
Employees trained during the year (%)
of which: Executives and Managers
Technicians and Team leaders
Sales
27.7
3.5
67.0
69.0
69.0
60.0
74.0
Europe (1) United States
10.1
2.0
59.3
65.0
59.0
59.0
57.0
Japan
8.7
1.7
54.1
60.0
26.0
60.0
9.0
5.2
2.9
81.6
71.0
79.0
84.0
82.0
Asia (2)
6.9
2.5
65.5
67.0
69.0
65.0
69.0
Other markets
1.5
2.4
70.2
61.0
75.0
70.0
80.0
Moreover, the Group organizes integration and awareness seminars for new hires focusing on its culture, its brands, its values as
well as its key management principles. More than 19,700 employees attended seminars of this type in 2008.
13.6 Health and Safety
In 2008, there were a total of 1,023 work accidents resulting in leave of absence which resulted in 19,903 lost working days. A total
of 251 work-travel related accidents were also noted, leading to 6,223 lost working days.
Lost time accidents by business group and geographic region break down as follows:
Number of
accidents
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other
France
United States
Japan
Other markets
2008
2007 (4)
Group
Frequency rate (1)
Severity rate (2)
52
184
210
176
6
391
4
8.19
13.41
4.91
5.33
1.38
8.23
1.65
0.04
0.38
0.10
0.08
0.01
0.16
0.01
458
146
164
13
160
82
1,023
14.43
4.43
5.59
1.20
5.19
13.43
6.81
0.37
0.07
0.09
0.01
0.07
0.17
0.13
1,026
9.13
0.22
(1) The Frequency rate is equal to the number of accidents resulting in leave of absence, multiplied by 1,000,000 and divided by the total number of
hours worked (3).
(2) The Severity rate is equal to the number of workdays lost, multiplied by 1,000 and divided by the total number of hours worked (3).
(3) For companies located outside France, the total number of hours worked per employee is estimated at 2,000 on a full-time equivalent basis.
(4) 2007 data combines workplace accidents and work-travel accidents without distinction.
62
2008 Annual Report
The Group invested over 14.2 million euros in Health and
Safety in 2008. This includes expenses for occupational medical
services, small protective equipment as well as programs for
improving personal safety and health, such as compliance, the
posting of warnings, replacement of protective devices, fire
prevention training, noise reduction.
The total amount of expenditure and investments promoting
health and safety in the workplace and improvements in working
conditions amounted to 49.4 million euros in 2008, representing
2.1% of the Group’s gross payroll worldwide.
Almost 16,800 Group company employees received safety
training worldwide.
Workgroups bringing together human resources managers
from all Group companies have built and implemented training
modules addressing the causes of workplace stress. These
workgroups benefited considerably from the contributions
of invited experts: psychologists, victimologists, and other
specialized medical practitioners. By way of example, in
collaboration with IFAS (Institut Français d’Action sur le Stress)
and OMSAD (Observatoire Médical du Stress de l’Anxiété et de
la Dépression), Hennessy introduced a procedure that aims
to measure the overall level of excess stress in the company
and to involve the entire workforce in the identification of
sectors and populations most prone to stress so as to implement
preventive actions.
Additionally, training modules relating to the prevention of
harassment in the workplace are offered to human resources
staff and to operational managers at Group companies. Some
fifty staff members have already taken part in these training
programs.
13.7 Employee relations
13.7.1 S
tatus of collective agreements
In France, Group companies have works councils, employee representatives, as well as health and safety committees. The Group
Committee was formed in 1985.
In 2008, employee representatives attended 1,517 meetings:
Nature of the meetings
Number
Works council
Employee representatives
Health and Safety Committee
Other
560
464
119
374
1,517
Total
As a result of these meetings, 100 company-wide agreements
were signed (such as annual negotiations on wages and work
schedules, incentive and profit sharing agreements and company
savings plans). Specific agreements related to the employment
of disabled persons, professional equality between women and
men, anticipatory management of jobs and skills, and labormanagement dialogue have been signed at Group companies.
13.7.2 S
ocial and cultural activities
In 2008, in France, the various companies of the Group
allocated a budget of over 15.3 million euros, or 1.9% of total
payroll expenses, to social and cultural activities in France via
contributions to works councils.
Total catering costs for all LVMH employees represent a budget
of 13.1 million euros.
2008 Annual Report
63
13.8 Relations with third parties
13.8.1 R
elations with suppliers
Apart from the many initiatives and commitments undertaken
by Group companies, a Group-wide project was launched in
2007. At the behest of Executive Management, the Group’s key
purchasing managers, along with legal and human resources
experts, were brought together in order to document the Group’s
strong convictions and high standards in this area in the form of
a Supplier Code of Conduct. This Code officially establishes the
full set of requirements forming a shared frame of reference to be
used throughout the Group in all relationships with suppliers.
has developed a Vendor Code of Conduct designed to ensure
respect for fundamental principles of industrial relations and labor
law and for the highest ethical standards. It has also developed
a Vendor Profile Questionnaire, a document signed by the
subcontractor when the pre-approval request is submitted. The
company has also introduced a Vendor Compliance Agreement,
which calls for independent audits of suppliers to ensure that
commitments have been observed. Similarly, TAG Heuer requires
that all new foreign suppliers submit a written pledge indicating
their compliance with the SA 8000 standard. The same is true for
Parfums Christian Dior, Parfums Givenchy, and Guerlain, who
have introduced specifications documents including compliance
with the SA 8000 standard among their provisions. Moreover,
the regular coordination of procurement managers ensures the
consistency of audit practices with respect to vendors in order to
ensure the appropriate application of ethical principles defined
in the code of conduct.
In 2008, this Supplier Code of Conduct was deployed and
implemented. In adopting this Code, each company tailored
the contents to its specific business activities, amending the
document to include additional requirements, where applicable,
to respond to specific challenges faced in its business.
13.8.2 I mpact of the business on local
communities in terms of employment
and regional development
A large proportion of the Group’s manufacturing facilities
are located in France, Italy and Spain. Similarly, most of the
Group’s sub-contractors are located in Europe, thus facilitating
the observance by these partners of social responsibility and
sustainable development values in accordance with European
and national laws.
Applied by all Group companies, compliance with the Supplier
Code of Conduct is now a necessary prerequisite for all partners.
It lays down precise ethical guidelines in the areas of social
responsibility (forced labor, discrimination, harassment, child
labor, compensation, hours of work, freedom of association and
collective bargaining, health and safety, etc.), the environment
(impact reduction, use of green technologies, waste reduction,
compliance with regulations and standards), and the fight against
corruption. This Code of Conduct also sets forth the principle
and procedures for the control and audit of compliance with
these guidelines.
Among many initiatives by Group companies illustrating
this commitment, Moët & Chandon, for example, establishes
a specifications document presented for signature to its
subcontractors that addresses respect for the environment and
fundamental labor law compliance, among other issues. Audits
are also carried out on suppliers. In its supplier specifications
documents, Sephora includes clauses dealing with the individual
rights of employees, child labor prevention, equality of opportunity
and treatment, working time policy, and the protection of the
environment. Louis Vuitton has put in place an ethical system of
preliminary audits founded on compliance with local regulations
as well as the SA 8000 social accountability standard, which is
based on international workplace norms included in the ILO
conventions: no child labor, no forced labor, providing a safe and
healthy work environment, freedom of association and the right
to collective bargaining, no discrimination, disciplinary practices,
compliance with working hour and wage regulations. To ensure
that they will be able to perform preliminary audits independently,
Louis Vuitton’s buyers receive theoretical training covering the
approach and criteria as well as practical training in the field in
the company of an SA 8000 auditor. Donna Karan International
64
2008 Annual Report
The Group follows a policy of maintaining and developing
employment. Thanks to the strong and consistent growth achieved
by our brands, many sales positions are created in all countries
where we are present, particularly as a result of the expansion
of our brands’ retail networks.
Layoffs for non-disciplinary reasons account for 4% of total
departures.
A number of the Group’s larger companies have been established
for many years in specific regions of France and play a major role
in creating jobs in their respective regions: Parfums Christian
Dior in Saint-Jean-de-Braye (near Orleans), Veuve Clicquot
Ponsardin and Moët & Chandon in the Champagne region,
and Hennessy in the Cognac region have developed longstanding relationships with local authorities, covering cultural
and educational aspects as well as employment. Sephora, which
has stores throughout France (two-thirds of its workforce is
employed outside the Paris region), regularly carries out a range
of measures encouraging the development of job opportunities
at the local level.
13.8.3 R
elations with educational
institutions and apprenticeship
associations
Throughout the world, Group companies have developed
a number of partnerships with management schools and
engineering schools, but also with fashion design schools and
schools specializing in areas specific to our businesses. Key
companies give presentations on the campuses of these schools
several times a year. A number of the classes taught feature
lectures by the Group’s senior executives.
Many initiatives to promote the occupational integration of
young people are undertaken to allow all employees to participate
actively in the Group’s commitment to society.
A signatory of the Apprenticeship Charter, the Group considerably
developed apprenticeship, which facilitate young people’s
access to qualifications. It increased 16% from last year with
524 apprentices working in France as of December 31, 2008
at Group companies. Among the various events scheduled
throughout the year, “open door” days or orientation programs are
often offered to young apprentices by Group companies (notably
Christian Dior Couture, Hennessy, Parfums Givenchy, Louis
Vuitton, Le Bon Marché and TAG Heuer) so as to introduce
them to their professions and products. Mentors are also prized
by companies such as Givenchy Couture and Le Bon Marché
for their involvement in the transfer of know-how. Similar
initiatives are undertaken abroad, particularly in Brazil, where
young people from disadvantaged backgrounds are recruited
through the “Menor Aprendiz” program.
Contacts and partnerships with training institutions as well
as local actions in secondary schools have been developed
further, particular with middle schools singled out for the
“Ambition Réussite” priority education program (Celine) and
other companies are also spearheading the creation of curricula
in the regions where they maintain operations.
This year, in partnership with “Nos quartiers ont des talents”,
Guerlain, Parfums Givenchy and La Grande Épicerie de Paris,
together with other Group companies, launched an operation
to assist young graduates from disadvantaged backgrounds in
finding their first jobs. Experienced senior-level staff or senior
executives at these companies participating as sponsors in this
program provide individualized assistance to job seekers and
help them crystallize their career plans.
Finally, in order to promote the integration of young people
through education regardless of their background or origin,
LVMH funds ten scholarships offered by the association
“Promotion des Talents”.
13.9 Compliance with international conventions
Taking each individual, his or her freedom and dignity, personal
growth and health into consideration in each decision is the
foundation of a doctrine of responsibility to which all Group
companies adhere.
and political opinion, etc. as defined in the standards of the
International Labor Organization. This culture and these practices
also generate respect for freedom of association, respect for the
individual, and the prohibition of child and forced labor.
Accordingly, all Group companies have policies for equal
opportunity and treatment irrespective of gender, race, religion
2008 Annual Report
65
Effects of operations on the environment
14.Effects of operations on the environment
The reporting scope of environmental indicators in 2008 includes
the following:
• the impacts of the fleets of vehicles owned by the Group
outside France used for employee travel;
• the production facilities and warehouses owned and/or operated
by companies in which the Group controls more than 50%
of the share capital or over which it exercises operational
control;
• energy consumption arising from the shipment of merchandise
exclusively by external transport companies;
• the French stores of Sephora, Celine, Guerlain, Christian Dior
Couture and Louis Vuitton, Le Bon Marché, DFS stores and
the main stores of Fendi;
• the main administrative sites located in France.
In 2008, the reporting scope was extended to 443 sites (417 sites
in 2007). Changes in the reporting scope since 2007 comprise the
integration of Make Up For Ever, the stores and administrative
sites of Louis Vuitton, new Moët-Hennessy administrative sites,
new DFS stores, Christian Dior Couture stores in France and
the disposal of Glen Moray (Glen Moray was only consolidated
for a period of six months).
The 2008 reporting scope does not include:
• the environmental impacts of the administrative buildings
and of stores owned directly or franchised by Perfumes and
Cosmetics, and Fashion and Leather Goods, except for brands
identified above;
• waste production for stores (with the exception of Le Bon
Marché and DFS stores);
• the companies in which the Group controls less than 50% of
the share capital or over which it does not exercise operational
control;
• a certain number of boutiques, representing 63% of the sales
area;
• a certain number of the Group’s sites, generally not related
to production (BeneFit, Berluti, Donna Karan, Emilio Pucci,
Fresh, Hublot, Marc Jacobs, StefanoBi, Thomas Pink, Wen
Jun Distillery).
Pursuant to Decree No. 2002-221 of February 20, 2002, known
as the “NRE decree” (nouvelles régulations économiques), the
following sections provide information concerning the nature and
importance of the elements that have a relevant and significant
impact on operations. The indicators retained were selected
by the Group’s environmental department and validated by
the Statutory Auditors. Since fiscal year 2002, the Group’s
annual environmental data reporting has been verified each
year, on the basis of data from LVMH, by the Environment and
Sustainable Development department of Ernst & Young, the
Group’s statutory auditors: the verified indicators are marked
with the symbol .
14.1 Water, raw material and energy consumption
14.1.1 W
ater consumption
Water consumption analyzed based on the following:
• process requirements: use of water for cleaning purposes (tanks,
products, equipment, floors), air conditioning, employees,
product manufacturing, etc; such water consumption generates
waste water;
66
2008 Annual Report
• agricultural requirements: water consumption for vine irrigation
outside France, as irrigation is not practiced in France. As
such, water is taken directly from its natural environment
for irrigation purposes. Its consumption varies each year
according to changes in weather conditions. Please note that
water consumption for agricultural purposes is measured by
the sites, producing less precise estimates than for process
water consumption.
(in m3)
Process requirements
Agricultural requirements (vine irrigation)
Water consumption used for the process requirements of the
Group’s companies decreased 1% in absolute terms between
2007 and 2008 and amounted to approximately 2.37 million cubic
2008
2007
Change (%)
2,373,628
6,813,268
2,409,340
6,875,388
- 1
- 1
meters. By way of comparison, for the manufacturing sector in
France, water consumption amounts to about 2.9 billion cubic
meters (IFEN, 2006).
Water consumption by business group
process requirements (in m3)
2008
2007
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding Company
15,361 1,384,662
364,483
192,282
12,895
386,080
17,865
9,207
1,418,267
369,952
172,206
17,585 (2)
404,529
17,594
Total
2,373,628
2,409,340
(1)
Change (%)
+ 67
- 2
- 2
+ 12
- 27
- 5
+ 2
- 1
(1) Change due to the integration of new stores.
(2) One-off increase in consumption in 2007 following an on-site malfunction.
Water consumption for vineyard irrigation purposes is
essential for the preservation of vines in California, Argentina,
Australia and New Zealand due to the climate in these areas.
This practice is closely supervised by the local authorities that
deliver authorizations. The Group has also taken measures to
limit consumption:
14.1.2 E
nergy consumption
• recovery of rain water by Domaine Chandon California,
Domaine Chandon Australia, Bodegas Chandon Argentina;
reuse of treated waste water by Domaine Chandon Carneros,
California; recovery of water run-off by the creation of artificial
lakes by Newton and Cape Mentelle;
In 2008, the subsidiaries included in the reporting scope consumed
509,190 MWh provided by the following sources: 56% electricity,
23% natural gas, 10% heavy fuel oil, 5% steam, 5% fuel oil
and 1% butane-propane. This represents an increase of 4%
compared to 2007.
• drafting of agreements on measures and specifications with
respect to water requirements: analyses of ground humidity,
leaves, visual vine inspections, adaptation of supplies according
to the requirements of each land plot (Domaine Chandon
Australia);
This consumption corresponds, in decreasing order of use to
Wines and Spirits (38%), Selective Retailing (28%), Fashion
and Leather Goods (15%) and Perfumes and Cosmetics (15%).
The remaining 4% is generated by Watches and Jewelry,
Christian Dior Couture and the administrative activities of the
holding structure.
• standardized drip method of irrigation: between 73% and 100%
of wine-producing regions have now adopted this method;
• weather forecasts for optimized irrigation (weather stations
at Domaine Chandon California);
Energy consumption corresponds to the combined internal
(combustion on a Group site, such as fuel oil for electricity
generators, butane, propane and natural gas) and external
(combustion does not occur on site) energy sources.
By way of comparison, for the manufacturing sector in
France, electricity and natural gas consumption amount to
123,000,000 MWh and 154,000,000 MWh, respectively (French
Ministry of Finance, 2007).
• periodical inspections of irrigation systems to avoid the risk
of leakage;
• adoption of the “reduced loss irrigation” technique, which
reduces water consumption and actually improves the quality
of the grapes, the size of the vine, yielding an enhanced
concentration of aroma and color.
2008 Annual Report
67
Energy consumption by business group
Change
2008
2007
Wines and Spirits
Watches and Jewelry Selective Retailing
Holding Company
6,394
193,318
74,177
77,473
7,661
144,432
5,735
4,438
211,311
74,357
63,765
11,143
117,969
5,607
+44 (1)
-9 (2)
+22 (3)
-31 (4)
+22 (5)
+2
Total
509,190
488,590
+4
(in MWh)
(1)
(2)
(3)
(4)
(5)
(%)
Change due to the integration of new stores.
Change due to the temporary closure for work on a site and the change in reporting scope.
Change due to the increase in business volumes and the integration of new sites.
Change due to the implementation of new more energy-saving processes.
Change due to the integration of new DFS stores.
Consumption by energy source
Electricity
Natural gas
Heavy
fuel oil
Fuel oil
Vapor
Butane
Propane
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding Company
4,752
63,357
37,840
56,850
4,129
115,399
4,576
1,029
50,896
34,078
16,371
2,503
10,343
433
49,278
20
24
-
10,130
98
920
1,029
13,592
34
613
14,556
2,141
356
5,074
692
5,101
2,976
-
Total
286,903
115,653
49,322
25,803
23,432
8,077
(in MWh)
14.1.3 R
aw material consumption
Given the variety of the Group’s operations and the resulting
multiplicity of the raw materials used, the only significant,
relevant criterion used by all of the Group’s brands retained
for the analysis of raw material consumption is the quantity,
measured in metric tons, of primary and secondary packaging
used for consumer goods placed on the market:
• Christian Dior Couture: boutique bags, pouches, cases, etc.
• Wines and spirits: bottles, boxes, caps, etc.
68
2008 Annual Report
• Perfumes and Cosmetics: bottles, cases, etc.
• Fashion and Leather Goods: boutique bags, pouches,
cases, etc.
• Watches and Jewelry: cases and boxes, etc.
• Selective Retailing: boutique bags, pochettes, cases, etc.
The packaging used for transport is excluded from this
analysis.
Packaging placed on the market
Change
2008
2007
Wines and Spirits
Watches and Jewelry
Selective Retailing
90
147,728
23,887
5,266
421
1,538
129
152,089
21,261
5,136
512
1,373
-30 (1)
-3
+12 (2)
+3
-18
+12
Total
178,930
180,500
-1
(in MWh)
(%)
(1) Change due to reductions in purchases and lower packaging weights for certain products.
(2) Change due to the increase in business volumes and the integration of Make Up For Ever.
Breakdown of the total weight of packaging consumed, by type of material, in 2008
Glass
Paper-cardboard
Plastic
Metal
Other packaging
material
Wines and Spirits
Watches and Jewelry
Selective Retailing
126,294
11,014
235
83
17,362
5,085
4,523
413
260
6
1,379
6,096
2
957
1,204
812
14
50
1
1,489
880
727
8
36
Total
137,543
27,726
8,440
2,080
3,141
(in metric tons)
The introduction of environmental strategies within our product
design processes is gaining ground. Building on achievements
such as Ecopublicité in 2007 and Moët & Chandon’s eco-design
tool, other procedures have been implemented across the Group
to measure the impact on the environment of design decisions.
Following the lead of Parfums Christian Dior, Guerlain, Parfums
Kenzo and Parfums Givenchy have collaborated in the creation
of a tool for evaluating the environmental performance of their
packaging. A number of issues are considered from the product
development phase itself: separability of materials, volume,
weight, use of refills, and the selection of environmentally
friendly materials. While in no way detracting from the quality
of its products, Loewe has managed to significantly increase the
utilization rates of raw hides or skins used in manufacturing
handbags; this waste has now been increased to nearly 70%
whereas it was 50% in some cases in the past. Louis Vuitton
continues to expand its replacement of solvent-based products
with water-based products, including in the processes used to
produce patent leather and the glues used in the manufacture
of all leather goods. Energy audits and an analysis of the retail
store concept life cycle were also conducted. These enabled
the identification of areas where improvements may be made,
in relation to lighting, air conditioning or the design of fixtures
and fittings.
2008 Annual Report
69
14.2 Soil use conditions, emissions into the air, water and soil
14.2.1 S
oil use
of its vineyards will be covered and the development of underthe-row tillage will be launched. Pheromone confusion (an
alternative to the use of insecticides) has also been implemented
for 70% of the total surface. The Group continues to promote
sustainable grape- growing practices among its grape suppliers,
which now account for 90% of grape supplies.
Soil pollution from old manufacturing facilities (cognac and
champagne production; trunk production) is insignificant.
The more recent production facilities are generally located
on former farmland with no history of pollution. Finally, the
Group’s manufacturing operations require very little soil use,
except for wine production.
Integrated grape-growing practices have also been implemented
by the Estates & Wines companies in Australia, New Zealand
and California: cover planting, use of alternatives to certain
insecticides, verification of soil erosion, etc. Cape Mentelle
has converted a portion of its vineyards to be farmed
organically.
Integrated grape growing (viticulture raisonnée) is an advanced
method that combines cutting-edge technology with traditional
methods, covering all stages of the wine producing process.
This method, used for several years by Wines and Spirits, was
developed further this year. Thanks to equipment allowing for
highly localized application, Moët & Chandon continues to
reduce the use of plant protection products, achieving 34% less
herbicide use in 2008 compared with 2005. Cover planting and
experiments with the sowing of winter grains are also contributing
to reductions in the use of plant protection products. Cloudy
Bay, which has reduced its wastewater discharge per metric ton
of grapes pressed by 30%, pursues its commitment to farming its
vineyards organically through the planting of eucalyptus trees,
which help to make better use of wine-making by-products and
increase carbon capture. At its Omaka Valley site, Cloudy Bay
has installed artificial nests for falcons, the natural predators of
the most destructive insect pests feeding on ripe grapes.
14.2.2 G
reenhouse gas emissions
Given the nature of the Group’s operations, the only emissions
that have a significant impact on the environment are greenhouse
gas emissions.
Estimated greenhouse gas emissions in tons of CO2 (carbon
dioxide) equivalent correspond to the site energy consumption
emissions, as defined in section 14.1.2. These include direct
emissions (on-site combustion) and indirect emissions (from
the generation of electricity and vapor used by the sites).
CO2 emission factors are updated every year for each energy
source, notably for electricity. This update may lead to
significant changes.
For Veuve Clicquot in 2008, partial or controlled cover planting
is being used for 70% of its total vineyard surface. In 2009, 80%
Breakdown of emissions by business group in 2008
Of which
(in metric tons CO2 equivalent)
Wines and Spirits
Fashion and Leather Goods Watches and Jewelry
Selective Retailing
Holding Company
Total
(1)
(2)
(3)
(4)
70
CO2 emissions
in 2008
Direct CO2
emissions
Indirect CO2
emissions
CO2 emissions
in 2007
Changes
787
49,087
12,023
17,463
879
45,992
676
212
28,315
7,052
4,315
757
5,821
98
575
20,772
4,971
13,148
122
40,171
578
411
51,217
10,914
13,661
1,760
32,083
606
+91 (1)
-4
+10
+28 (2)
-50 (3)
+43 (4)
+12
126,907
46,570
80,337
110,652
Change due to the integration of new stores.
Change due to the integration of new sites.
Change due to the implementation of new more energy-saving processes.
Change due to the integration of new sites.
2008 Annual Report
(%)
+15
Sales areas not included in the reporting scope (62% of the
Group’s total sales area) generate estimated greenhouse gas
emissions of 112,378 metric tons of CO2 equivalent.
The Group continues its efforts to reduce and optimize its energy
consumption. As a first essential step in fighting climate change,
the Bilan Carbone® evaluates the extent of direct or indirect
greenhouse gas emissions generated by the Group’s operations
so that priority action plans for emission reduction and energy
efficiency improvement may then be implemented. A forerunner
in this area, the LVMH Group has been using this method for
a number of years: Hennessy, Parfums Christian Dior, Louis
Vuitton, Moët & Chandon and Veuve Clicquot were the first
Group companies to implement this method. In 2008, Parfums
Kenzo, Guerlain and Domaine Chandon Australia conducted
their first Bilan Carbone® assessments. Others are currently
under way at Parfums Givenchy and Le Bon Marché. In addition,
several Group companies have set emission reduction targets.
For example, Guerlain set itself the ambitious goal of reducing
its emissions by 12% between 2007 and 2010.
The Bilan Carbone® also serves as a powerful vehicle for
communication across the Group and as an aid to decisionmaking processes, as do the energy audits often associated
with this method. For instance, Guerlain conducted an energy
audit of all of its sites, which has allowed it to anticipate the
level of investment required over the coming years: lighting
improvements in its stores, renewable energy studies, etc.
Similarly, Le Bon Marché and Parfums Christian Dior drew up
plans for improvements in their fixtures based on the findings of
their audits. The perfume maker had notably set itself ambitious
reduction targets for its energy consumption in 2007: an 11%
decrease in electricity use, through the optimization of lighting
and air conditioning for its premises, and a 30% decrease in gas
use, particularly by recovering waste heat from its manufacturing
processes to produce hot water for washing and bathing.
For its part, Moët & Chandon mapped its energy consumption
and identified potential savings at the Ruinart site in Reims. It
also carried out an infrared thermal analysis via helicopter of
all its buildings in Epernay, in collaboration with municipal
authorities.
With respect to transportation, one of the Group’s fundamental
drivers for environmental improvements, Louis Vuitton,
Veuve Clicquot and Moët & Chandon have decided to favor
inland waterway transport as an alternative to road transport to
carry goods intended for export from Gennevilliers to Le Havre.
For the Group’s champagnes, the potential reduction has already
been estimated at 500 metric tons of CO2 equivalent. Employee
commuting is also the focus of improvements. Accordingly, the
launch of a green commuting plan by Parfums Christian Dior
was very positively received: more than 70% of employees
responded to a questionnaire designed to encourage the search
for alternatives to single occupancy vehicle commuting. Hennessy
continues to favor the shipment of its products by boat, a method
generating 85 times less greenhouse gas emissions than air
transport: in terms of metric tons-kilometers, 88% of Hennessy’s
products were shipped using this means of transport, 9% by
road, and 2% by rail.
14.2.3 D
ischarges to water
The significant, relevant emissions retained are the discharges
of substances causing eutrophization by Wines and Spirits
and Perfumes and Cosmetics operations. The Group’s other
business groups have a very limited impact on water quality.
Eutrophization is the excessive build-up of algae and aquatic
plants caused by excess nutrients in the water (particularly
phosphorus), which reduces water oxygenation and adversely
impacts the environment. The parameter used is the chemical
oxygen demand (COD) calculated after treatment of the
discharges in the Group’s own plants or external plants with
which the Group has partnership agreements. The following
operations are considered as treatment: city and county waste
water collection and treatment, independent collection and
treatment (aeration basin) and land application. In 2008, COD
discharges dropped by 33%.
COD after treatment (metric tons)
2008
2007
Change (%)
Wines and Spirits
1,396
16
1,997
102
-30 (1)
-84 (2)
Total
1,412
2,099
-33
(1) Change due to the temporary closure for work on a site and the change in reporting scope.
(2) Change due to improvements in the monitoring of rejects.
2008 Annual Report
71
14.2.4 W
aste
Group companies continued their efforts with respect to the
sorting and recovery of waste. On average, 88% of the waste was
recovered in 2008 compared to 94% in 2007. This reduction was
attributable to the disposal of a site which produced a significant
amount of recyclable waste. In parallel, waste production fell
10% in 2008.
Recovered waste is waste for which the final use corresponds
to one of the following channels:
• reuse, i.e. the waste is used for the same purpose for which
the product was initially designed;
• recycling, i.e. the direct reintroduction of waste into its
original manufacturing cycle resulting in the total or partial
replacementsols of an unused raw material, controlled
composting or land treatment of organic waste to be used
as fertilizer;
• incineration for energy production, i.e. the recovery of the
energy in the form of electricity or heat by burning the
waste.
In 2008, Domaine Chandon Australia built a composting facility
for its green waste, which is now 100% recycled. Moët & Chandon
continued its experiments in the recovery and recycling of shoots
thinned from vine trunks. Based on two recycling techniques, the
composting of wood and the recovery of energy, this project is
being developed in partnership with a service provider and may
in future be extended throughout the region. Using this approach,
800 metric tons were recovered and recycled in 2008.
Waste produced in 2008
(in metric tons)
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding Company
Waste
produced
in 2008
Waste
produced
in 2007
Change in waste
produced
17
192
738 (2)
64
27
12
1
236
57,446
7,143
6,304
222
4,266
706
380
69,262
6,735
5,129
223
3,143
480
-38
-17 (3)
+6
+23 (4)
+36 (4)
+47 (4)
76,323
85,352
-11
1,051
Total
(1)
(2)
(3)
(4)
Hazardous
or special waste
in 2008 (1)
(%)
Waste to be sorted and treated separately from other “common” waste (boxes, plastic, wood, paper, etc.).
Some products that are removed from the manufacturing cycle are treated in the same way as hazardous waste to prevent counterfeiting attempts.
Change due to the temporary closure for work on a site and the change in reporting scope.
Change related to the integration of new Louis Vuitton, DFS and Moët Hennessy sites.
Waste recovery in 2008
Re-used
Material
recovery
Energy
recovery
Total
recovery
Wines and Spirits
Watches and Jewelry
Selective Retailing
Holding Company
44
29
7
2
-
31
59
56
42
41
50
34
25
3
30
16
35
32
32
100
91
93
60
76
82
66
Total
23
56
9
88
(in %)
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2008 Annual Report
14.3 M easures taken to limit damage to the biological equilibrium,
natural habitats, animal and plant species
Fashion and Leather Goods, and Watches and Jewelry
implemented procedures to improve compliance with the
convention on international trade in endangered species (CITES).
Through a system of import-export permits, this convention was
set up to prevent certain species of endangered fauna and flora
against over-exploitation in the course of international trade.
Perfumes and Cosmetics’ laboratories request that their partners
provide information on the bio-diversity and bio-availability of
every new plant studied. Companies in this business group have
undertaken not to use any protected, rare or endangered plants
in their operations. They favor plants that are commonly used
or grown specifically to meet their activity’s requirements.
Following the example of Parfums Christian Dior, which publicly
announced its decision to refrain from testing the safety of its
cosmetic products on animals in 1989, all other companies in the
Perfumes and Cosmetics business group have also discontinued
this practice. Furthermore, for the last several years, the Group
has collaborated with teams of university researchers to establish
programs for the development of alternative methods, especially
for allergy testing. The Group’s toxicologists have also participated
in the official validation processes for alternative methods in
several areas, including phototoxicity, eye irritation, and skin
absorption.
14.4 Organization of environmental protection methods within the group
14.4.1 O
rganization
• define and consolidate the environmental indicators;
The LVMH Group has had an environment management team
since 1992. In 2001 it established an “Environment Charter” signed
by the Chairman of the Group, which requires that each company
undertakes to set up an effective environment management
system, create think-tanks to assess the environmental impacts
of the Group’s products, manage risks and adopt the best
environmental practices. In 2003, Bernard Arnault joined the
United Nations’ Global Compact program. In 2007, he also
endorsed Gordon Brown’s Millennium Development Goals.
• work alongside the various key players (associations, rating
agencies, government authorities, etc.).
The Group undertakes to:
• apply precaution to all issues impacting the environment;
• undertake initiatives to promote greater environmental
responsibility;
• favor the development and distribution of environmentallyfriendly technologies.
The Group’s environment management team was set up with
the following objectives:
• implement the environmental policies of the Group companies,
based on the Group’s Charter;
• conduct environmental audits to assess Group companies’
environmental performance;
• monitor regulatory and technical issues;
• create management tools;
• help companies anticipate risks;
• train employees and increase environmental awareness at all
management levels;
LVMH’s Environmental Charter requires that all Group
companies adapt this document for their internal purposes so
as to reflect the nature of their own operations. Not only have
all the companies begun implementing their own environmental
management systems, but an ever increasing number of them have
established their own environmental committees to supervise the
deployment of this approach across their organizations. In 2008,
this was the case for Domaine Chandon California, which created
its “Green Team” in January to communicate the Group’s policies
and objectives to all employees and pull together all information
on the company’s efforts in this area. Celine also created its own
environmental committee, “CIEL”, which steers and monitors
progress on action plans applied by the company at its two
headquarters and at its production facility in Florence. In June,
Le Bon Marché founded an environmental committee (Cosmos),
including as members no less than fourteen representatives of
the store’s various departments, which has drafted an action plan
for 2009. The store had previously conducted an energy audit
whose findings resulted in the determination of a 20% reduction
target for its energy consumption. In addition, Guerlain, through
its new sustainable development committee, is focusing on four
priorities: eco-design, relations with suppliers, eco-citizenship,
and movements of goods and personnel. Targets and tools for
monitoring actions have already been put in place to address
each of these areas.
The Group companies’ environment correspondents meet as
part of the LVMH Environment Commission coordinated by the
Group’s environment management team once every three months
and post their conclusions on the Group’s Environment Extranet
page, LVMHMind, which is accessible to all employees.
2008 Annual Report
73
Almost all of the companies, in all of the Group’s business groups,
stepped up their employee training and awareness programs this
year. In 2008, these programs resulted in 18,489 training hours,
a 4% increase compared to 2007 (16,726 hours).
New executives are briefed in the Group’s environmental policy,
the available tools and its environmental safety network as part
of their orientation seminar.
Over and above these initiatives, the Group’s companies also
disseminate written information concerning the environment:
• following the introduction of its Environmental Charter to
all of its employees at its annual convention in 2007, Parfums
Christian Dior held an awareness event – Environment Week –
in September 2008. On this occasion, all 1,400 staff members
were able to take part in a discovery activity, hear presentations,
and participate in discussion forums dealing with the impact of
respect for the environment in the company’s businesses, and
also had the opportunity to engage in fun activities designed
to build awareness of biodiversity, natural raw materials, the
sorting of waste, and eco-driving. Each quarter, achievements
of ongoing and new projects are celebrated in the company’s
in-house newsletter My Dior;
• on April 22, 2008 (Earth Day), DFS launched a major climate
change awareness campaign. In each of its stores, an island
display presented more than a hundred green practices worth
adopting to reduce one’s carbon footprint. All employees and
customers had the option to add their own suggestions, as
personal green commitments, using an interface designed for
this purpose. These suggestions were then added to those
displayed on the island to bring attention to the need for
collective action;
• Louis Vuitton coordinated its internal communications efforts
in connection with national or international events. For
instance, a topical exhibition and a card game in the form of
a quiz were organized in honor of Sustainable Development
Week. Posters on sustainable transportation and the company’s
best practices were designed in honor of European Mobility
Week, which also provided the occasion to launch a call for
employees to select two remarkable actions to be promoted
in production facilities or stores;
• the holding company also participated, as it does every
year, in Sustainable Development Week, taking cotton –
and specifically organic cotton – as the theme of its 2008
contribution, with the wide distribution of Erik Orsenna’s
film “Sur les routes du coton” and by inviting experts to take
part in discussion forums.
14.4.2 E
valuation and certification programs
In accordance with the Group’s Environment Charter, every
company is responsible for designing and implementing its own
environment management system, and, in particular, for defining
its own environment policy and objectives. Each company has
access to a Group self-assessment guide and can, if it wishes,
apply for ISO 14001 or EMAS certification for its system.
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2008 Annual Report
The Group requires all companies to put in place environmental
management systems. Following the certifications obtained,
and successfully renewed, by Hennessy, Veuve Clicquot,
Moët & Chandon, as well as those obtained by Belvedere and by
Louis Vuitton for its logistics facility and its production facility in
Barbera, this initiative is well established within the Group and
other companies have set in motion similar processes. Continuing
its efforts, Louis Vuitton has obtained ISO 14001 certification for
its Paris headquarters (at the Pont Neuf) and is in the process
of obtaining the same certification for its central warehouse
and the remainder of its production facilities. Other companies,
including Parfums Christian Dior, Guerlain and Glenmorangie,
have begun the process of obtaining certification.
In 2008, Veuve Clicquot and Moët & Chandon obtained
ISO 22000 certification, the specific standard for food safety
management. Covering all operations in the food chain, ISO 22000
seeks to harmonize food safety management practices so as to
guarantee maximum safety. See also section 3.2, Industrial and
Environmental Risks, for details on risk prevention.
Since the 2002 fiscal year, the LVMH Group’s annual
environmental data reporting has been audited each year, based
on data from LVMH, by the Environment and Sustainable
Development department of Ernst & Young, the Group’s statutory
auditors.
14.4.3 M
easures to ensure compliance with
applicable laws and regulations
Group companies are audited on a regular basis, either by
third parties, insurers or internal auditors, which enables them
to keep their compliance monitoring plan up-to-date. In 2008,
52 external environment audits ( ) and 46 internal environment
audits ( ) were performed on-site, a 17% increase from 2007.
These audits correspond to an inspection of one or more sites of
the same company based on all relevant environmental issues –
waste, water, energy, and environmental management – and are
documented in a written report including recommendations.
This figure does not include the numerous compliance controls
that may be performed on a specific environmental regulation
topic, i.e., a waste sorting inspection, performed periodically
by the Group companies on their sites. Since 2003, a review of
environmental regulatory compliance is also performed by the
insurance companies, which now includes an environmental
inspection during their fire safety visits to Group company sites.
A total of 30 visits were performed in 2008.
The main environmental legal and regulatory measures introduced
by the Group during 2008 include the implementation of the
European Union’s new REACH Regulation for all of the Group’s
businesses as well as the establishment of financial contributions
to authorized bodies for the funding of recovery systems for
textile products placed on the French market and for unsolicited
advertising materials in France.
Parfums Christian Dior’s Saint-Jean de Braye site continued
the updating of its operating authorization application file.
14.4.4 E
xpenses incurred to anticipate
the effects of operations on the
environment
Amounts were recognized under the relevant environmental
expense headings in accordance with the recommendations of
the CNC (French National Accounting Council). Operating
expenses and capital expenditure were recognized for each of
the following headings:
• air and climate protection;
• waste water management;
• waste management;
• protection and purification of the ground, underground water
and surface water;
• noise and vibration reduction;
• biodiversity and landscape protection;
• radiation protection;
• research and development;
• other environmental protection measures.
Environmental protection expenses in 2008 break down as
follows:
• operating expenses: 7.2 million euros;
• capital expenditure: 5.2 million euros.
14.4.5 P
rovisions and guarantees given for
environmental risks
No provision was established for environmental risks in fiscal
year 2008.
14.4.6 O
bjectives assigned by the Group to
its subsidiaries abroad
The Group requests that each subsidiary, regardless of its
geographic location, applies the Group’s environmental policy
as set forth in the Charter, which stipulates that each subsidiary
defines its own environmental objectives and communicates the
annual indicators included in this section.
14.4.7 C
onsumer safety
Protecting human health by carefully selecting the ingredients
used in manufacturing products, prior to any production
processes, and by determining alternative production methods
where required is a priority for the Group.
Cosmetics manufactured or sold in Europe are regulated by
Council Directive 76/768/EEC. Considered by experts as one
of the most stringent texts among those regulating cosmetics
throughout the world, this directive governs all substances used
by the cosmetics industry and requires that a risk assessment
be performed before any product may be marketed taking
into consideration their conditions of use. Furthermore, the
European Commission’s Scientific Committee on Consumer
Products (SCCP) evaluates the safety of substances used in
cosmetic products on an ongoing basis.
The Group is particularly vigilant in enforcing compliance with
regulations, and also monitors the opinions of scientific committees
and the recommendations of professional associations. Apart
from their attention to these texts, the Group’s toxicologists, who
assume responsibility for product safety, determine the necessary
guidelines for Group suppliers and the development teams.
The Group’s experts participate regularly in the workgroups
of national and European authorities and are very active in
professional organizations.
In the area of environmental protection, developments in scientific
knowledge and/or regulations may sometimes lead the Group to
replace certain ingredients. For example, the Group’s Perfumes
and Cosmetics companies do not develop products containing
triclosan, phthalates or formaldehyde-releasing preservatives.
Moreover, following the example of Parfums Christian Dior,
which publicly announced its decision in 1989, LVMH Group’s
various Perfumes and Cosmetics brands no longer conduct tests
on animals for the purpose of assessing the safety of cosmetics
products and are making dynamic investments together in
alternative test research, particularly in the area of allergies
with fundamental research partners, and in the area of systemic
toxicity under the auspices of Colipa, the European federation
of cosmetic product manufacturers.
With respect to its activities in the area of wines and spirits,
the Group promotes the responsible consumption of alcohol:
drink less but better. As a founding member of “Entreprise et
Prévention”, an association created some fifteen years ago, the
Group works closely with government authorities to encourage
responsible consumption of alcohol. Also an active member
of the European Alcohol and Health Forum created by the
European Commission, Moët Hennessy contributes to the
definition of the alcohol policies to be implemented within
member states. All of the wine and spirit brands apply responsible
marketing policies consistent with the guidelines developed by
Moët Hennessy. With a firm belief in the effectiveness of targeted
efforts, Moët Hennessy continues to develop many initiatives
aimed at raising awareness among its employees and even among
visitors to the Group’s distilleries, vineyards, and wineries.
Lastly, the adoption of a Responsible Alcohol Consumption
Charter has enabled the Group to voice its strong convictions
in this area and thus invite all of its partners to follow its lead
in this vision of the future.
2008 Annual Report
75
Litigation and exceptional events
15.Litigation and exceptional events
As part of its day-to-day management, the Group is party to
various legal proceedings concerning trademark rights, the
protection of intellectual property rights, the protection of
Selective Retailing networks, licensing agreements, employee
relations, tax audits, and any other matters inherent to its
business. The Group believes that the provisions recorded in
the balance sheet in respect of these risks, litigation proceedings
and disputes that are in progress and any others of which it is
aware at the year-end are sufficient to avoid its consolidated
financial net worth being materially impacted in the event of
an unfavorable outcome.
Following the decision delivered in March 2006 by the Conseil
de la Concurrence (the French antitrust authority) regarding the
luxury perfume sector in France, and the judgment rendered on
June 26, 2007 by the Paris Court of Appeal, the Group companies
concerned took their case to the Cour de Cassation, the highest
court in France. In July 2008, the Cour de Cassation overturned
the decision of the Paris Court of Appeal and referred the case
to the same, differently composed jurisdiction. The decision of
the Paris Court of Appeal is expected to be rendered by the
end of 2009.
In 2006, Louis Vuitton Malletier, Christian Dior Couture, and
the French companies of the Perfumes and Cosmetics business
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2008 Annual Report
group filed lawsuits against eBay in the Paris Commercial Court.
Louis Vuitton Malletier and Christian Dior Couture demanded
compensation for losses caused by eBay’s participation in the
commercialization of counterfeit products and its refusal to
implement appropriate procedures to prevent the sale of such
goods on its site. The Perfumes and Cosmetics brands sued eBay
for undermining their selective retailing networks. In a decision
delivered on June 30, 2008, the Paris Commercial Court validated
the claims submitted, ordering eBay to pay 19.3 millions euros
to Louis Vuitton Malletier, 16.4 million euros to Christian Dior
Couture, and 3.2 million euros to the Group’s Perfumes and
Cosmetics brands. The court also barred eBay from running
advertisements for perfumes and cosmetics under the Dior,
Guerlain, Givenchy and Kenzo brands, failing which it would incur
a fine of 50,000 euros per day. In response, eBay filed a petition
with the Paris Court of Appeal. On July 11, 2008, the President
of the Paris Court of Appeal denied eBay’s petition to stay the
provisional execution order delivered by the Paris Commercial
Court. The case is pending before the Paris Court of Appeal.
A judgment rendered in the United States in February 2009
dismissed the claims of service providers who had filed legal
proceedings against the Group’s US subsidiaries with the aim of
obtaining certain benefits related to the status of employee.
Recent developments and prospects
16.Subsequent events
There were no significant subsequent events as of February 5, 2009, the date on which the financial statements were approved for
publication by the Board of Directors, or as of the publication date of this document.
17.Recent developments and prospects
As long term visibility remains poor and given the extent of the
worldwide economic and financial crisis, the Christian Dior
Group continues to apply a highly rigorous management approach
to all of its businesses. The Group plans to mobilize its resources
to serve its most profitable business activities and markets,
pursuing its internal growth strategy by leveraging the worldwide
leadership positions of its brands.
Bolstered by the flexibility of its organization and the good balance
between its different businesses and geographical presence, the
Christian Dior Group’s objective in 2009 is to continue to increase
its leadership of the worldwide luxury goods market.
2008 Annual Report
77
78
2008 Annual Report
Report of the Chairman of
the Board of Directors on internal
control procedures
This report, which has been drawn up in accordance with the provisions of Article L. 225-37 of the French Commercial Code, was
approved by the Board of Directors at its meeting on February 5, 2009.
Its purpose is to give an account of the membership of the Board of Directors of Christian Dior SA, the preparation and organization
of its work, as well as the compensation policy applied and the internal control procedures established by the Board.
2008 Annual Report
79
Report of the Chairman of the Board of Directors on internal control procedures
Corporate governance
1.Corporate governance
1.1 Board of Directors
The Board of Directors is the strategic body of the Company
which is primarily responsible for enhancing the Company’s
value and for defending the corporate interests. Its main missions
involve ensuring that the underlying strategy of the Company
and the Group is adopted and overseeing its implementation,
verifying the truth and fairness of information concerning the
Company and the Group and protecting its assets.
The Board of Directors of Christian Dior acts as guarantor of its
rights of each of the shareholders and ensures that shareholders
fulfill all their duties.
In its meeting of December 16, 2008, the Board of Directors
adhered to the recommendations of AFEP/MEDEF issued
on October 8, 2008 relating to the compensation of company
officers of listed entities and decided that the AFEP/MEDEF
Code of Corporate Governance for Listed Companies would
be applied by the Company. This document may be viewed on
the MEDEF Web site (www.medef.fr).
The Board of Directors has adopted a Charter that sets forth,
in particular, rules governing its membership, its missions, its
procedures, and its responsibilities.
Two committees, the Performance Audit Committee and the
Nominations and Compensation Committee, whose membership,
roles and missions are defined by internal rules, have been
established by the Board.
Any candidate for appointment as Director as well as any
permanent representative of a legal entity shall receive a copy of
the Board of Directors’ Charter and of the internal rules governing
the Committees prior to assuming his or her duties.
Pursuant to the provisions of the Board of Directors’ Charter,
Directors must bring to the attention of their Chairman any
instance, even potential, of a conflict of interest between their
duties and responsibilities to the Company and their private
interests and/or other duties and responsibilities. They must also
provide him with details of any conviction in relation to fraudulent
offenses, any official public incrimination and/or sanctions, any
disqualifications from acting as a member of an administrative
or management body imposed by a court as well as of any
bankruptcy, receivership or liquidation proceedings to which
they have been a party. No information has been communicated
to the Chairman with respect to this obligation.
1.2 Membership and missions
• The Board of Directors consists of ten members: Messrs.
Bernard Arnault, Antoine Bernheim, Denis Dalibot,
Renaud Donnedieu de Vabres, Pierre Godé, Éric Guerlain,
Christian de Labriffe, Jaime de Marichalar y Sáenz de
Tejada, Sidney Toledano, Alessandro Vallarino Gancia.
Four of whom: Messrs. Antoine Bernheim, Éric Guerlain,
Jaime de Marichalar y Sáenz de Tejada and Renaud Donnedieu
de Vabres, are considered as an independent and hold no
interests in the Company.
During its meeting of February 5, 2009, the Board of Directors
reviewed the status of each Director currently in office, in
particular with respect to the independence criteria set forth in
the AFEP/MEDEF Code of Governance of Listed Companies,
and made the following determinations:
(i) Mr. Antoine Bernheim is to be considered, given his
personal situation, as an independent Director, despite having
served as a member of the Company’s Board of Directors
for more than twelve years and of the boards of directors of
other companies that are subsidiaries of Groupe Arnault and
the LVMH Group;
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2008 Annual Report
(ii) Mr. Éric Guerlain is to be considered, given his personal
situation, as an independent Director, despite having served
as a member of the Company’s Board of Directors for more
than twelve years and of the boards of directors of a subsidiary
of the LVMH Group;
(iii) Mr. Jaime de Marichalar y Sáenz de Tejada is to be
considered, given his personal situation, as an independent
Director, despite having served as a member of the Board
of Directors of a subsidiary of the LVMH Group and his
capacity of Advisor to the Chairman of the LVMH Group
for Spain;
(iv) Mr. Renaud Donnedieu de Vabres doit is to be considered
as an independent Director, despite having served as a member
of the board of directors of La Fondation Louis Vuitton pour la
Création, since this function does not compromise the free
exercise of his judgment.
Moreover, during its meeting of February 5, 2009, the
Board of Directors, examined the position of Mr. Sidney
Toledano with regard to his employment contract with
Christian Dior Couture SA. It was noted that this contract,
which was suspended when he was appointed Chairman
and CEO of Christian Dior Couture, was dated a significant
amount of time prior to this appointment. In addition, the
principal functions of Mr. Sidney Toledano remain the
executive management of Christian Dior Couture. Under
these conditions, the Board of Directors considered that,
notwithstanding the AFEP/MEDEF recommendation, there
is no basis to request Mr. Sidney Toledano to relinquish his
employment contract with Christian Dior Couture given his
mandate as Chief Executive Officer of Christian Dior SA.
relating to company officer compensation, and its adoption
of the Code of Governance for Listed Companies issued by
these organizations.
The Company’s bylaws require that each Director hold,
directly and personally, at least 200 shares.
The Board noted that it had received the information required
for the fulfillment of its missions in timely fashion and that each
Director had been able, in addition to any discussions during
Board meetings, to ask questions of executive management
and obtain the requested details and explanations.
• Over the course of the 2008 fiscal year, the Board of Directors
met four times as convened by its Chairman, by written notice
sent to each of the Directors at least one week in advance
of the meeting. The average attendance rate of directors at
these meetings was 79%.
The Board approved the annual and half-yearly financial
statements and notably issued its opinion on the issuance
of bonds, the establishment of a share subscription plan,
various agreements with affiliated companies, as well as the
Company’s adhesion to the AFEP/MEDEF recommendations
In its meeting of February 5, 2009, the Board of Directors
reviewed its membership, organization and procedures.
The Board came to the conclusion that its membership may
be considered as balanced, with regard to its percentage of
external Directors, the breakdown of share capital, and with
respect to the diversity and the complementarity of the skills
and experiences of its members.
The Group’s financial position was presented in a clear and
detailed manner when the annual and half-yearly financial
statements were submitted for the Board’s approval.
The ways in which the Group may respond to changes in the
economic and financial environment gave rise to exchanges
between Directors and Executive Management.
1.3 Executive Management
The Board of Directors decided to assign the roles of Chairman and Chief Executive Officer to different persons. It made no change
in the powers vested in the Chief Executive Officer.
1.4 Performance Audit Committee
The main tasks of the Performance Audit Committee are to ensure
that the Company and the Group’s accounting policies comply
with generally accepted accounting principles, to review the
individual company and consolidated financial statements before
they are submitted to the Board of Directors, and to ensure the
effective implementation of the Group’s internal controls.
It currently consists of three members, two of whom are
independent, appointed by the Board of Directors. The
current members of the Performance Audit Committee are
Messrs. Éric Guerlain (Chairman), Renaud Donnedieu de
Vabres, and Christian de Labriffe.
The Performance Audit Committee met three times in 2008.
All of these meetings were attended by all of the members of
the Committee, with the exception of one meeting where one
of the members of the Committee was unable to participate.
These meetings were also attended by a member of the Board
of Directors, by the Statutory Auditors, Chief Financial Officer,
the Company Accounting Director and the Accounting Director
of LVMH. The Internal Audit Director of the LVMH Group,
Management Control Director and Internal Audit Director of
Christian Dior Couture also attended the meeting of the Audit
Committee in which the internal controls at the LVMH Group
and Christian Dior Couture were reviewed.
In addition to reviewing the annual and half-yearly parent
company and consolidated financial statements, the Committee’s
work focused on examining the exercise of internal controls within
the Group, the accounting options applied by the Company,
the Group’s exposure to foreign exchange risks and the fiscal
position of the Company.
2008 Annual Report
81
1.5 Nominations and Compensation Committee
The main responsibilities of the Nominations and Compensation
Committee are to issue:
• proposals on compensation, benefits in kind and subscription or
purchase options for the Chairman of the Board of Directors,
the Chief Executive Officer and the Group Managing
Director(s) of the Company, as well as on the allocation of
directors’ fees paid by the Company;
• opinions on candidates for the positions of Director, Advisory
Board member, Group Executive Committee member or
member of Executive Management of the Company’s main
subsidiaries.
It currently consists of three members, two of whom are
independent, appointed by the Board of Directors. The current
members of the Nominations and Compensation Committee
are Messrs. Antoine Bernheim (Chairman), Pierre Godé and
Éric Guerlain.
The Nominations and Compensation Committee met twice
during the 2008 fiscal year, with all members in attendance: It
issued proposals on the allocation of share subscription options
to the Chairman of the Board of Directors and Chief Executive
Officer and the compensation and benefits in kind of the Chief
Executive Officer in respect of his functions at Christian Dior
Couture, as well as the allocation of directors’ fees. It also
examined the recommendations made by the Nominations and
Compensation Committee of LVMH in favor of the directors of
LVMH that are company officers at Christian Dior SA. Finally,
it issued an opinion on the renewal of directors’ terms in office
due to expire in 2008.
Furthermore, in advance of the Board of Directors’ meeting of
February 5, 2009, the Committee examined all of the appointments
due to expire at the annual shareholders’ meeting called to approve
the financial statements for the year ended December 31, 2008
as well as the position of Mr. Sidney Toledano, in light of his
employment contract with Christian Dior Couture SA. It issued
recommendations on the variable compensation for 2008 of
Mr. Sidney Toledano, which was paid by Christian Dior Couture,
in addition to his compensation and benefits in kind for 2009,
and declared itself in favor of implementing a profit sharing
mechanism based on the medium-term performance of Christian
Dior Couture SA. It also approved the proposed appointment
of Mr. Renaud Donnedieu de Vabres as Director.
1.6 Advisory Board
Advisory Board members are invited to meetings of the Board
of Directors and are consulted for decision-making purposes,
although their absence cannot undermine the validity of the
Board of Directors’ deliberations.
They are appointed by the Shareholders’ Meeting on the proposal
of the Board of Directors.
The Company does not have any Advisory Board members.
1.7 Participation in Shareholders’ Meetings
The terms and conditions of participation by shareholders in
Shareholders’ Meetings, and in particular the conditions for
the attribution of double voting rights to registered shares, are
defined in Articles 17 to 23 of the bylaws (see the “General
information – General information regarding the Company
and its share capital”).
1.8 Information that might have an impact on a takeover bid or
exchange offer
Information that might have an impact on a takeover bid or
exchange offer, as required by Article L. 225-100-3 of the French
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2008 Annual Report
Commercial Code, is published in the “Report of the Board of
Directors to the Shareholders’ Meeting”.
1.9 Compensation policy for company officers
Directors fees paid to the members of the Board of
Directors
The Shareholders’ Meeting sets the total amount of directors’
fees to be paid to the members of the Board of Directors.
This amount is divided among the members of the Board of
Directors, in accordance with the rule defined by the Board of
Directors, based on the proposal of the Directors’ Nominations
and Compensation Committee, namely:
(i) two units for each Director;
(ii) one additional unit for serving as a Committee member;
(iii)two additional units for serving as both a Committee
member and a Committee Chairman;
(iv)two additional units for serving as Chairman of the
Company’s Board of Directors;
with the understanding that the amount corresponding to one
unit is obtained by dividing the overall amount allocated to
be paid as directors’ fees by the total number of units to be
distributed.
The Nominations and Compensation Committee can recommend
that all or part of the directors’ fees be allocated based on the
attendance rate of the members at the meetings of the Board
of Directors.
In respect of the 2008 fiscal year, Christian Dior paid a total
of 147,715 euros in directors’ fees to the members of its Board
of Directors.
Other compensation
Compensation and benefits awarded to company officers are
mainly determined on the basis of the degree of responsibility
ascribed to their missions, their individual performance, as well
as the Group’s performance and the attainment of targets. This
determination also takes into account compensation paid by
similar companies with respect to their size, industry segment
and extent of international operations.
A portion of the compensation paid to executive management
of the Company and the executive management of the principal
subsidiaries and operating units is based on the attainment of
both financial and qualitative targets. The financial criteria are
growth in revenue, operating profit and cash flow, with each of
these items representing one-third of the total determination.
The variable portion is capped at 120% of the fixed portion for
the Chief Executive Officer.
In the event of the departure of an executive officer of the
Company, he or she is not entitled to receive any specific
compensation or benefit by virtue of any special arrangement
constituting an exception to the rules of stock option plans
governing the exercise of these options.
A non-competition indemnity, authorized by the Board of
Directors on February 8, 2008, pursuant to Article L. 225-42-1
of the French Code of Commerce, is stipulated in favor of the
Chief Executive Officer, Mr. Sidney Toledano, in respect of his
employment contract with Christian Dior Couture, and under the
terms of which, in the event of his departure, he would receive
an indemnity for twenty-four equal to the gross average monthly
salary received over the previous twelve months.
Upon their retirement, Group directors and where applicable
company officers may receive a supplemental retirement benefit
provided that they assert at the same time their entitlement
to their basic retirement benefits under compulsory pension
schemes. This supplemental payment corresponds to a specific
percentage of the beneficiary’s salary, to which a ceiling is
applied on the basis of the reference salary determined by the
French social security scheme. Provisions recognized in 2008
for these supplemental retirement benefits are included in the
amount shown for post-employment benefits under Note 30.3
of the consolidated financial statements.
An exceptional bonus may be awarded to certain Directors
with respect to any specific mission with which they have been
entrusted. The amount of this bonus shall be determined by the
Board of Directors and reported to the Company’s Statutory
Auditors.
2008 Annual Report
83
Implementation of internal control procedures and risk management
2.Implementation of internal control procedures and
risk management
The Christian Dior Group uses an internal reference guide which
is consistent with COSO principles (Committee of Sponsoring
Organizations of the Treadway Commission) and which the
Autorité des Marchés Financiers (French market regulator – AMF)
has taken as the basis for its Reference Framework.
Under the impetus of the Board of Directors, the Performance
Audit Committee and Executive Management, the purpose
of the internal control procedures that are applied within the
Group is to provide reasonable assurance that the following
objectives will be achieved:
• to ensure that management and operations-related measures,
as well as the conduct of personnel, are consistent with
the definitions contained in the guidelines applying to the
Company’s activities by its management bodies, applicable
laws and regulations, and the Company’s internal values,
rules, and regulations;
• to ensure that the accounting, financial, and management
information communicated to the management bodies of
Group companies reflect a fair view of these companies’
activity and financial position.
One of the objectives of the internal control system is to
prevent and control risks resulting from the Company’s
activity and the risk of error or fraud, particularly in the
areas of accounting and finance. As with any control system,
however, it cannot provide an absolute guarantee that these
risks are completely eliminated.
Christian Dior’s internal control takes into consideration the
Group’s specific structure. Christian Dior is a holding company
that controls two main assets: a 42.4% equity stake in LVMH,
and a 100% equity stake in Christian Dior Couture. LVMH is a
listed company, whose Chairman is also Chairman of Christian
Dior, with several directors serving at both companies. Christian
Dior Couture has a Board of Directors whose composition is
similar to that of Christian Dior.
The sections below on internal control deal with procedures
relating to Christian Dior Couture, followed by those relating
to the holding company, Christian Dior SA. Procedures
relating to LVMH are described in the report filed by
that company, which may be consulted as a supplement
to this report.
Christian Dior Couture SA (hereafter the Company) creates,
produces and distributes all of the brand’s products internationally.
It also engages in retail activities in the various markets through
its 57 subsidiaries.
are consistent with the definitions contained in the guidelines
applying to the company’s activities by its management bodies,
applicable laws and regulations, and the company’s internal
values, rules, and regulations.
Given this dual role, internal control is applied directly to
Christian Dior Couture SA, and in an oversight capacity to
all subsidiaries.
It also involves ensuring that the accounting, financial, and
management information communicated to the company’s
management bodies reflect a fair view of the company’s activity
and financial position.
2.1.1 Definition
Moreover, the company has defined as an additional objective
the protection of assets (with a particular emphasis on the
brand).
The purpose of the internal control procedures that are applied,
in line with the COSO framework, is to provide reasonable
assurance that the following objectives will be achieved:
• the control of activities and processes, the efficiency of
operations and the efficient utilization of resources;
• the reliability of financial and accounting information;
• compliance with applicable laws and regulations.
This involves, therefore, ensuring that management and
operations-related measures, as well as the conduct of personnel,
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2008 Annual Report
2.1.2 Limits of internal control
No matter how well designed and applied, the internal control
mechanism cannot provide an absolute guarantee that the
company’s objectives will be achieved. All internal control
systems have their limits due notably to the uncertainties of the
outside world, individual judgment or malfunctions resulting
from human or other errors.
2.1.3 Internal control components
-- the annual budget;
The internal control system is based on the definition and
identification of the following components:
-- monthly reports on actual data compared with budget with
in-depth and formalized analyses of any discrepancies.
• appropriate controls;
• Executive Management and the Finance Department are also
responsible for training all financial personnel worldwide
(internal or external administrative departments) in order to
ensure the strict application of IAS and Group rules.
• an information and communications system that enables
responsibilities to be exercised efficiently and effectively.
• Senior executives maintain a regular presence at subsidiaries
and on their management bodies, in particular at board level.
The risk management system identifies and assesses the main risks
likely to affect the achievement of the operational and financial
objectives, as well as the objectives relating to compliance with
the laws and regulations in force.
• Store Committees have been set up to formally authorize
the signature of commercial leases and investments in the
distribution network. They are made up of the Chairman, the
Vice-President in charge of the network, the Chief Financial
Officer, the Director of Management Audit, the Chief Legal
Officer and the architects.
• a general control environment;
• a risk assessment system;
Risks are classified by category (strategic, operational, financial,
legal and intangible) and key process.
Risks are mapped according to their frequency and intensity
and controls devised for identified risks are put in place in
order to limit the impact of such risks, although their absolute
elimination cannot be guaranteed.
Controls rely on the following resources:
• a consolidation standards manual fully updated to take account
of the new tools for reporting consolidated financial data
and the transition to presentation formats by type of income
statement;
• communication of all the operational procedures applicable
to head office and point-of-sale operations combined in a
specific, regularly updated manual;
• integrated point-of-sale management software (deployed
across the whole distribution network) which standardizes
store control rules and provides head office with detailed sales
information on each store in the network;
• Lastly, internal audit covers the following main areas:
-- points of sale: review of the main processes of store management
(sales, pricing, cash flow, inventories, administration and
security, personnel, external purchases, supplies);
-- country head quarters: review of main cycles (purchases
of goods, external purchases and expense claims, human
resources, inventories and logistics, information systems,
investments, accounting and finance);
-- the accounts departments of countries responsible for producing
subsidiaries’ financial reports: audit of financial reports
prepared by back offices and monitoring of the application of
the Christian Dior Couture Group’s accounting principles.
On completion of audit assignments, reports containing
recommendations are presented to the Chairman and sent to
each subsidiary. Implementation of the recommendations made
is closely monitored.
• delegations of powers that are limited, precise, managed and
known to the actors involved in terms of both expenditure
commitments and rules;
2.1.5 I nternal controls related to financial
and accounting information
• a separation of the scheduling of expenditures and
payments.
Organization
2.1.4 Departments involved in internal
control
• The Legal Department conducts upstream checks:
-- prior to the signing of any substantial agreement negotiated
by the head office or subsidiaries;
-- on the length of time third-party designs and brands have
been in existence.
• Executive Management and the Finance Department closely
monitors management information so that it can intervene in
the process of defining objectives then oversee their realization
through:
-- three-year strategic plans;
Internal controls of accounting and financial information are
organized based on the cooperation and control of the following
departments: Accounting and Consolidation, Management
Control, Information Systems.
• Accounting and Consolidation is responsible for updating and
distributing group-wide accounting standards and procedures.
It oversees their application and establishes appropriate
training programs. It is in charge of producing consolidated
and individual company financial statements on a quarterly,
half-yearly and annual basis.
• Management Control is responsible for coordinating the
budget process and its revisions during the year as well as for
the three-year strategic plan. It produces the monthly operating
report and all reviews required by Executive Management;
it also tracks capital expenditures and cash flow, as well as
producing statistics and specific operational indicators.
2008 Annual Report
85
• Information Systems disseminates the Group’s technical
standards, which are indispensable given the decentralized
structure of the Group’s equipment, applications, networks, etc.,
and identifies any potential synergies. It develops and maintains
a telecommunications system shared by the Group. Finally, it
coordinates policy for system and data security and preparation
of emergency contingency plans.
Accounting and management policies
Subsidiaries adopt the accounting and management policies
considered by the Group as appropriate for the individual
company and consolidated financial statements. A consistent
set of accounting standards is applied throughout, together
with consistent formats and tools to submit data to be
consolidated.
Management reporting
Each year, all of the Group’s consolidated entities produce a
three-year plan, a complete budget and annual forecasts. Detailed
instructions are sent to the companies for each process.
These key steps represent opportunities to perform detailed
analyses of actual data compared with budget, and to foster
ongoing communication between companies and the Group – an
essential feature of the financial internal control mechanism.
2.1.6 Outlook for 2009
• Strengthening of the structure of internal audit to enable:
-- the production of a manual of all Group administrative and
operational procedures at both head office and subsidiary
level;
-- the completion of more frequent audits of all Group
subsidiaries (in particular, continuation of the auditing of
production plants).
• Implementation of integrated point-of-sale management
software in Brazil, the only country where this has so far
not been done.
• Extension to the other product divisions of the new production
and invoicing management system (Movex) implemented
for Men’s Ready-To-Wear in 2006 and Women’s ReadyTo-Wear in 2008, with a view to replacing the wholesale
divisions’ production and invoicing system (Synergie) at
headquarters.
• Plan to outsource the IT equipment room.
• Supervision, by an environment manager, of the application of
the European REACH regulations, introduction of a Supplier
Charter and Code of Conduct and collaboration with French
ecology organizations in the area of recycling.
A team of controllers at the parent company, specialized by
geographic region and product category, is in permanent
contact with the subsidiaries, thus ensuring better knowledge
of performance and management decisions as well as
appropriate control.
2.2 Christian Dior
2.2.1 Control environment
As noted above, Christian Dior is a holding company whose assets
are essentially limited to two equity holdings: Christian Dior
Couture and LVMH.
The business of Christian Dior SA is therefore essentially
dedicated to:
• protecting the legal title of these two equity holdings;
• exercising the rights and authority of a majority shareholder,
notably by its:
-- presence on the boards and at the meetings of the
subsidiaries,
-- monitoring of dividends paid by the subsidiaries,
-- control of the subsidiaries’ financial performance;
86
2008 Annual Report
• providing accurate financial information, in line with applicable
laws, given its status as a listed company.
Given the limited number of tasks described above, and its
membership of a Group with the necessary administrative
skills, Christian Dior uses the Group’s specialized services in the
areas specific to a holding company, namely legal, financial and
accounting matters. An assistance agreement has been entered
into with Groupe Arnault SAS.
Regarding the Group’s external services, the Shareholders’
Meeting of Christian Dior appointed two first-tier accounting
firms as Statutory Auditors, one of which also serves in the same
role at Christian Dior Couture and LVMH.
2.2.2 Risk control
Risk control is based first and foremost on a regular review
of the risks incurred by the Company so that internal control
procedures can be adapted.
2.2.3 Control activities
Key elements of internal control procedures
Given the nature of the Company’s activity, the primary objective
of internal control systems is to mitigate risks of error and fraud
in accounting and finance. The following principles form the
basis of our organization:
• very limited, very precise delegation of powers, which are
known by the counterparties involved, with sub-delegations
reduced to a minimum;
• upstream legal control before signing agreements;
• separation of the expense and payment functions;
• secured payments;
• procedural rules known by potential users;
• integrated databases (single entry for all users);
• frequent audits (internal and external).
Legal and operational control exercised by the
parent company over the subsidiaries
Asset control
Securities held by the subsidiaries are subject to a quarterly
reconciliation between the Company’s Accounting Department
and the Securities departments of the companies concerned.
Operational control
Christian Dior SA exercises operational control over its
subsidiaries through the following:
2.2.4 I nformation and communication
systems
The strategic plans in terms of information and communication
systems of the parent company Christian Dior are coordinated
by the Group Finance Department.
Aspects of internal control such as the segregation of duties
and access rights are integrated at the time of implementation
of new information systems.
2.2.5 I nternal controls relating to the
preparation of the parent company’s
financial and accounting information
The individual company and consolidated financial statements
are subject to a detailed set of instructions and a specially adapted
data submission system designed to facilitate complete and
accurate data processing within suitable timeframes.
The exhaustive controls performed at the sub-consolidation
levels (LVMH and Christian Dior Couture) guarantee the
integrity of the information.
Financial information intended for the financial markets (financial
analysts, investors, individual shareholders, market authorities)
is provided under the supervision of the Finance Department.
This information is strictly defined by current market rules,
specifically the principle of equal treatment of investors.
This report on internal control, based on the contribution of
the abovementioned internal control and risk management
stakeholders, was conveyed in its draft form to the Performance
Audit Committee for its opinion and approved by the Board of
Directors at its meeting of February 5, 2009.
Conclusion
Over and above its existing internal control mechanism, in
2008 the Christian Dior Group reinforced continuing efforts
to improve its internal control.
• legal bodies, Boards of Directors and shareholders’ meetings,
at which the Company is systematically represented;
• management information used by managers of
Christian Dior SA in the process of defining objectives
and monitoring their fulfillment:
-- three-year and annual budget plans,
-- monthly reporting presenting results compared to budget
and variance analysis,
-- quarterly meetings to analyze performance.
2008 Annual Report
87
Statutory Auditors’ report
3.Statutory Auditors’ report
Statutory Auditors’ report, prepared in accordance with article L. 225-235
of the French Commercial Code (Code de commerce), on the report
prepared by the chairman of the Board of Directors of Christian Dior
MAZARS
ERNST & YOUNG Audit
Tour Exaltis
61, rue Henri-Regnault
92400 Courbevoie
Faubourg de l’Arche
11, allée de l’Arche
92037 Paris-La Défense Cedex
SA with share capital of 8,320,000 euros
SAS with variable share capital
Statutory Auditors
Member of the Versailles
regional organization
Statutory Auditors
To the Shareholders,
In our capacity as Statutory Auditors of Christian Dior SA and in accordance with article L. 225-235 of the French Commercial
Code (Code de commerce), we hereby report to you on the report prepared by the Chairman of your Company in accordance with
Article L. 225-37 of the French Commercial Code for the year ended December 31, 2008.
It is the Chairman’s responsibility to prepare and to submit for the Board of Directors’ approval a report on internal control and
risk management procedures implemented by the Company and to provide the other information required by Article L. 225-37 of
the French Commercial Code relating to matters such as corporate governance.
Our role is to:
• report on the information contained in the Chairman’s report in respect of the internal control procedures relating to the preparation
and processing of the accounting and financial information;
• confirm that the report also includes the other information required by Article L. 225-37 of the French Commercial Code.
It should be noted that our role is not to verify the fairness of this other information.
We conducted our work in accordance with professional standards applicable in France.
88
2008 Annual Report
Information on the internal control procedures relating to the preparation and processing of accounting and
financial information
The professional standards require that we perform the necessary procedures to assess the fairness of the information provided in
the Chairman’s report in respect of the internal control procedures relating to the preparation and processing of the accounting and
financial information. These procedures consist mainly in:
• obtaining an understanding of the internal control procedures relating to the preparation and processing of the accounting and
financial information on which the information presented in the Chairman’s report is based and of the existing documentation;
• obtaining an understanding of the work involved in the preparation of this information and of the existing documentation;
• determining if any material weaknesses in the internal control procedures relating to the preparation and processing of the accounting
and financial information that we would have noted in the course of our work are properly disclosed in the Chairman’s report.
On the basis of our work, we have nothing to report on the information in respect of the Company’s internal control procedures
relating to the preparation and processing of the accounting and financial information contained in the report prepared by the
Chairman of the Board of Directors in accordance with article L. 225-37 of the French Commercial Code.
Other information
We confirm that the report prepared by the Chairman of the Board of Directors also contains the other information required by
article L. 225-37 of the French Commercial Code.
Courbevoie and Paris-La Défense, March 24, 2009
The Statutory Auditors
MAZARS
ERNST & YOUNG Audit
Denis Grison
Jeanne Boillet
This is a free translation of the original French text for information purposes only.
2008 Annual Report
89
90
2008 Annual Report
92
2. Consolidated balance sheet
93
3. Consolidated statement of changes in equity
94
4. Consolidated cash flow statement
95
5. Notes to the consolidated financial statements
97
157
2008 Annual Report
91
1.Consolidated income statement
(EUR millions, except for earnings per share)
Notes
2008
2007
2006
Revenue
22-23
17,933
17,245
16,016
Cost of sales
(6,305)
(6,060)
(5,745)
Gross margin
11,628
11,185
10,271
Marketing and selling expenses
(6,490)
(6,118)
(5,707)
General and administrative expenses
(1,517)
(1,457)
(1,355)
3,621
3,610
3,209
Other operating income and expenses
22-23
24
Operating profit
3,468
Cost of net financial debt
Other financial income and expenses
(117)
3,493
(127)
3,082
(322)
(272)
(230)
(26)
(45)
123
Net financial income (expenses)
25
(348)
(317)
(107)
Income taxes
26
(904)
(855)
(850)
Income (loss) from investments in associates
8
7
8
Net profit before minority interests
2,224
2,328
2,133
Minority interests
1,428
1,448
1,336
796
880
797
4.46
4.94
4.49
178,304,484
178,147,605
177,522,442
4.43
4.86
4.41
178,932,178
179,109,815
179,242,114
7
Net profit – Group share
Basic Group share of net earnings per share (EUR)
27
Number of shares on which the calculation is based
Diluted Group share of net earnings per share (EUR)
Number of shares on which the calculation is based
92
(153)
2008 Annual Report
27
Consolidated balance sheet
2.Consolidated balance sheet
Assets
(EUR millions)
Brands and other intangible assets - net
Goodwill net
Property, plant and equipment - net
Investments in associates
Non-current available for sale financial assets
Other non-current assets
Deferred tax
Non-current assets
Inventories and work in progress
Trade accounts receivable
Income taxes (1)
Other current assets
Cash and cash equivalents
Current assets
Notes
2008
2007
2006
3
4
6
7
8
11,212
5,048
6,352
219
375
858
674
24,738
5,966
1,721
10,654
5,398
5,671
132
823
614
556
23,848
5,003
1,675
10,885
5,120
5,432
128
505
693
451
23,214
4,524
1,539
235
1,851
1,077
10,850
156
2,037
1,615
10,486
100
1,635
1,359
9,157
35,588
34,334
32,371
2008
2007
2006
363
2,205
(256)
354
2,636
(167)
796
5,931
9,334
15,265
4,615
977
4,016
3,254
12,862
2,522
2,348
363
2,205
(240)
433
1,999
(263)
880
5,377
8,563
13,940
3,387
981
3,761
4,147
12,276
3,678
2,167
363
2,205
(229)
418
1,447
(53)
797
4,948
8,026
12,974
4,188
991
3,786
3,758
12,723
2,661
1,967
308
326
1,957
7,461
339
298
1,636
8,118
281
263
1,502
6,674
35,588
34,334
32,371
26
9
10
11
13
Total assets
Liabilities and equity
(EUR millions)
Share capital
Share premium account
Treasury shares and related derivatives
Revaluation reserves
Other reserves
Cumulative translation adjustment
Group share of net profit
Equity – Group share
Minority interests
Total equity
Long term borrowings
Provisions
Deferred tax
Other non-current liabilities
Non-current liabilities
Short term borrowings
Trade accounts payable
Income taxes (1)
Provisions
Other current liabilities
Current liabilities
Total liabilities and equity
Notes
14
16
17
18
26
19
17
18
20
(1) As of December 31, 2008, the Group’s income tax liability with respect to the French tax consolidation structure is presented after offsetting advance
tax payments. The balance sheets for the years ended December 31, 2007 and December 31, 2006 were restated for comparability purposes.
2008 Annual Report
93
Consolidated statement of changes in equity
3.Consolidated statement of changes in equity
(EUR millions)
Number of
shares
Notes
Share
Share premium
capital account
14.1
As of December 31, 2005
181,727,048
363
2,205
Treasury
shares and
related
derivatives
Cumulative Net profit
Revaluation translation and other
reserves adjustment
reserves
14.2
14.4
14.5
(157)
292
126
Translation adjustment
126
Net profit
Group
share
Minority
interests
4,468
7,400
11,868
(179)
(321)
(500)
126
175
301
Total
16
1,639
(179)
Income and expenses recognized
directly in equity
Total equity
797
797
1,336
2,133
797
744
1,190
1,934
23
23
21
44
1
(71)
(9)
(80)
-
6
6
(216)
(216)
(439)
(655)
Changes in consolidation scope
-
(6)
(6)
Effects of purchase commitments
for minority interests
-
(137)
(137)
Other
-
-
-
4,948
8,026
12,974
(210)
(360)
(570)
15
54
69
880
880
1,448
2,328
880
685
1,142
1,827
27
27
26
53
(11)
(22)
53
31
-
1
1
Total recognized income and expenses
-
-
-
126
(179)
Stock option plan and similar expenses
(Acquisition)/disposal of treasury
shares and related derivatives
(72)
Capital increase in subsidiaries
Interim and final dividends paid
181,727,048
363
2,205
(229)
418
(53)
2,244
(210)
directly in equity
15
Net profit
-
-
-
15
(210)
(11)
(261)
(544)
(805)
-
(15)
(15)
-
(126)
(126)
Other
-
-
-
5,377
8,563
13,940
96
179
275
(79)
(75)
(154)
(261)
181,727,048
363
2,205
(240)
433
(263)
2,879
96
directly in equity
(79)
Net profit
796
796
1,428
2,224
796
813
1,532
2,345
27
27
27
54
25
9
(64)
(55)
-
5
5
(287)
(287)
(618)
(905)
-
20
20
-
(139)
(139)
(8)
(8)
8
-
3,432
5,931
9,334
15,265
-
-
-
(79)
96
(16)
Other
94
2008 Annual Report
181,727,048
363
2,205
(256)
354
(167)
Consolidated cash flow statement
4.Consolidated cash flow statement
2008
2007
2006
3,468
3,493
3,082
Net increase in depreciation, amortization and provisions, excluding tax and financial items
749
680
515
Other unrealized gains and losses, excluding financial items
(34)
(39)
(17)
(EUR millions)
Notes
I - Operating activities
Operating profit
Dividends received
17
33
33
Other adjustments
(59)
(22)
(20)
Cash from operations before changes in working capital
4,141
4,145
3,593
Cost of net financial debt: interest paid
(271)
(252)
(225)
Income taxes paid
(877)
(925)
(788)
Net cash from operations before changes in working capital
2,993
Change in inventories and work in progress
2,968
2,580
(829)
(626)
(362)
Change in trade accounts receivable
(19)
(203)
(157)
Change in trade accounts payable
122
223
234
Change in other receivables and payables
(11)
82
37
Total change in working capital
(737)
Net cash from operating activities
(524)
2,256
2,444
(1,071)
(1,025)
(248)
2,332
II - Investing activities
Purchase of tangible and intangible fixed assets
Proceeds from sale of tangible and intangible fixed assets
100
Guarantee deposits paid and other operating investments
Operating investments
(807)
58
11
(9)
(21)
12
(980)
(988)
(784)
Purchase of non-current available for sale financial assets
8
(155)
(45)
(88)
Proceeds from sale of non-current available for sale financial assets
8
185
33
172
2.4
(668)
(329)
(68)
Impact of purchase and sale of consolidated investments
Financial investments
Net cash from (used in) investing activities
(638)
(341)
(1,618)
(1,329)
16
(768)
III - Transactions relating to equity
Capital increases subscribed by minority interests
11
1
6
(146)
(3)
(72)
14.3
(287)
(261)
(216)
16
(618)
(544)
(439)
(1,040)
(807)
(721)
2,555
2,209
1,286
(2,549)
(1,956)
(2,136)
(47)
(278)
(181)
(41)
(25)
(1,031)
59
(45)
(1)
(384)
238
(189)
16
Purchase and proceeds from sale of treasury shares and related derivatives by the Group
Interim and final dividends paid by Christian Dior SA
Interim and final dividends paid to minority interests in consolidated subsidiaries
Net cash from (used in) transactions relating to equity
IV - Financing activities
Proceeds from borrowings
Repayment of borrowings
Purchase and proceeds from sale of current available for sale financial assets
12
Net cash from (used in) financing activities
V – Effect of exchange rate changes
Net increase (decrease) in cash and cash equivalents (I+II+III+IV+V)
Cash and cash equivalents at beginning of period
13
1,037
799
988
Cash and cash equivalents at end of period
13
653
1,037
799
11
6
8
Transactions generating no change in cash:
- Acquisitions of assets by means of finance leases
2008 Annual Report
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Notes to the consolidated financial statements
Note 1
Accounting policies
98
Note 2
Changes in the scope of consolidation
105
Note 3
Brands, trade names and other intangible assets
108
Note 4
Goodwill
110
Note 5
Impairment testing of intangible assets with indefinite useful lives
111
Note 6
Property, plant and equipment
112
Note 7
Investments in associates
114
Note 8
Non-current available for sale financial assets
114
Note 9
Inventories and work in progress
115
Note 10 Trade accounts receivable
116
Note 11 Other current assets
117
Note 12 Current available for sale assets
118
Note 13 Cash and cash equivalents
118
Note 14 Equity
119
Note 15 Share purchase option plans
122
Note 16 Minority interests
124
Note 17 Borrowings
125
Note 18 Provisions
127
Note 19 Other non-current liabilities
128
Note 20 Other current liabilities
129
Note 21 Financial instruments and market risk management
129
Note 22 Segment information
135
Note 23 Revenue and expenses by nature
139
Note 24 Other operating income and expenses
140
Note 25 Net financial income/expense
140
Note 26 Income taxes
141
Note 27 Earnings per share
144
Note 28 Provisions for pensions, medical costs and similar commitments
144
Note 29 Off balance sheet commitments
147
Note 30 Related party transactions
149
Note 31 Subsequent events
150
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97
5.Notes to the consolidated financial statements
Note 1 - Accounting policies
1.1General framework and environment
• amendments to IAS 23 Borrowing costs;
The consolidated financial statements for the year ended
December 31, 2008 were established in accordance with
international accounting standards and interpretations (IAS/
IFRS) adopted by the European Union and applicable on
December 31, 2008. These standards and interpretations have
been applied consistently to the fiscal years presented. The
financial statements were approved for publication by the Board
of Directors on February 5, 2009.
• amendments to IFRS 2 Share-based payment vesting conditions
and cancellations;
The depth and duration of the current economic and financial
crisis, which left its mark on fiscal year 2008, are difficult to predict
with accuracy. The Group’s consolidated financial statements for
the year ended December 31, 2008 were prepared taking into
consideration this immediate context, particularly with respect to
the valuation of current and non-current available for sale financial
assets and financial instruments, the expected level of inventory
turnover and the recoverability of trade receivables. Assets
whose value is assessed with reference to longer term prospects,
especially intangible or real estate assets, have been valued using
assumptions taking into account an economic and financial crisis
whose duration would be limited in time, particularly with respect
to its impact on future cash flows from operating activities, with
the financial indicators used in these valuations nevertheless being
those prevailing at the balance sheet date.
1.2Changes in the accounting framework
in 2008
Standards, amendments and interpretations for
which application is mandatory in 2008
The standards, amendments and interpretations applicable to
the Group have been implemented since January 1, 2007 and
do not have a significant impact on the consolidated financial
statements presented; they relate to:
• IFRIC 13 Customer loyalty programmes, which was applied
early as of the 2007 consolidated financial statements.
Standards, amendments and interpretations for
which application is optional in 2008
The following standards, amendments and interpretations
applicable to the Group, whose mandatory application date is
January 1, 2009, were not applied early in 2008; they relate to:
• IFRS 8 Segment reporting;
• amendments to IAS 1 Presentation of financial statements;
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2008 Annual Report
• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction.
The application of these standards, amendments and interpretations
in 2009 is not expected to have a material impact on the Group’s
consolidated financial statements. In particular, the application
of IFRS 8 will alter neither the structure of published figures nor
the amount of goodwill allocated to each business segment.
In addition, the Group has opted for early application, as of the
2009 fiscal year, of the amendment to IAS 38 Intangible assets,
relating to the recognition of advertising and promotion expenses.
See Note 11 for a discussion of the impact of this amendment.
1.3First-time adoption of IFRS
The first accounts prepared by the Group in accordance
with IFRS were the financial statements for the year ended
December 31, 2005, with a transition date of January 1, 2004.
IFRS 1 allowed for exceptions to the retrospective application
of IFRS at the transition date. The procedures implemented by
the Group with respect to these exceptions are listed below:
• business combinations: the exemption from retrospective
application was not applied. The Christian Dior Group
has retrospectively restated acquisitions made since 1988,
the date of the initial consolidation of LVMH. IAS 36
Impairment of Assets and IAS 38 Intangible Assets were
applied retrospectively as of this date;
• measurement of property, plant and equipment and intangible
assets: the option to measure these assets at fair value at the
date of transition was not applied with the exception of the
entire real estate holdings of Christian Dior Couture;
• employee benefits: actuarial gains and losses previously deferred
under French GAAP at the date of transition were recognized;
• foreign currency translation of the financial statements of
foreign subsidiaries: translation reserves relating to the
consolidation of subsidiaries that prepare their accounts in
foreign currency were reset to zero as of January 1, 2004 and
offset against “Other reserves”;
• share-based payment: IFRS 2 Share-Based Payment was
applied to all share subscription and share purchase option
plans that were open at the date of transition, including those
created before November 7, 2002, the date before which
application is not mandatory.
1.4Use of estimates
For the purpose of preparing the consolidated financial statements,
measurement of certain balance sheet and income statement
items requires the use of hypotheses, estimates or other forms of
judgment. This is particularly true of the valuation of intangible
assets, purchase commitments for minority interests and of the
determination of the amount of provisions for contingencies
and losses or for impairment of inventories and, if applicable,
deferred tax assets. Such hypotheses, estimates or other forms of
judgment which are undertaken on the basis of the information
available, or situations prevalent at the date of preparation of the
accounts, may prove different from the subsequent actual events.
1.5Methods of consolidation
The subsidiaries in which the Group holds a direct or indirect
de facto or de jure controlling interest are fully consolidated.
Jointly controlled companies are consolidated on a proportionate
basis.
For distribution subsidiaries operating in accordance with the
contractual distribution arrangements with the Diageo Group,
only the portion of assets and liabilities and results of operations
relating to Christian Dior Group activities is included in the
consolidated financial statements (see Note 1.23).
Companies where the Group has significant influence but no
controlling interest are accounted for using the equity method.
1.6Foreign currency translation of
the financial statements of foreign
subsidiaries
The consolidated financial statements are stated in euros; the
financial statements of subsidiaries stated in a different functional
currency are translated into euros:
Foreign exchange gains and losses arising from the translation
of inter-company transactions or receivables and payables
denominated in foreign currencies, or from their elimination,
are recorded in the income statement unless they relate to
long term inter-company financing transactions which can be
considered as transactions relating to equity. In the latter case,
translation adjustments are recorded in equity under “Cumulative
translation adjustment”.
Derivatives which are designated as hedges of commercial foreign
currency transactions are recognized in the balance sheet at
their market value at the balance sheet date and any change in
the market value of such derivatives is recognized:
• within cost of sales for the effective portion of hedges of
receivables and payables recognized in the balance sheet at
the end of the period;
• within equity (as a revaluation reserve) for the effective portion
of hedges of future cash flows (this part is transferred to cost of
sales at the time of recognition of the hedged assets and liabilities);
• within net financial income/expense for the ineffective portion
of hedges; changes in the value of discount and premium
associated with forward contracts, as well as the time value
component of options, are systematically considered as
ineffective portions.
When derivatives are designated as hedges of subsidiaries’
equity in foreign currency (net investment hedge), any change in
market value of the derivatives is recognized within equity under
“Cumulative translation adjustment” for the effective portion and
within net financial income/expense for the ineffective portion.
Market value changes of derivatives not designated as hedges
are recorded within net financial income/expense.
1.8Brands, trade names and other
intangible assets
• at the average rates for the period for income statement items.
Only acquired brands and trade names that are well known and
individually identifiable are recorded as assets at their values
calculated on their dates of acquisition.
Translation adjustments arising from the application of these rates
are recorded in equity under “Cumulative translation adjustment”.
Costs incurred in creating a new brand or developing an existing
brand are expensed.
1.7Foreign currency transactions and
hedging of exchange rate risks
Brands, trade names and other intangible assets with finite useful
lives are amortized over their useful lives. The classification of a
brand or trade name as an asset of definite or indefinite useful
life is generally based on the following criteria:
• at the period-end exchange rates for balance sheet items;
Foreign currency transactions of consolidated companies are
translated to their functional currencies at the exchange rates
prevailing at the transaction dates.
Accounts receivable, accounts payable and debts denominated
in foreign currencies are translated at the applicable exchange
rates at the balance sheet date. Unrealized gains and losses
resulting from this translation are recognized:
• the brand or trade name’s positioning in its market expressed in
terms of volume of activity; international presence and notoriety;
• its expected long term profitability;
• its degree of exposure to changes in the economic environment;
• any major event within its business segment liable to its future
development;
• within cost of sales in the case of commercial transactions;
• its age.
• within net financial income/expense in the case of financial
transactions.
Amortizable lives of brands and trade names, depending on
their estimated longevity, range from 5 to 40 years.
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99
Amortization and any impairment expense of brands and trade
names are recognized within “Other operating income and
expenses”.
Impairment tests are carried out for brands, trade names and
other intangible assets using the methodology described in
Note 1.12.
Research expenditure is not capitalized. New product development
expenditure is not capitalized unless the final decision to launch
the product has been taken.
Intangible assets other than brands and trade names are amortized
over the following periods:
• leasehold rights, key money: based on market conditions
generally between 100% and 200% of the lease period;
• development expenditure: 3 years at most;
• software: 1 to 5 years.
1.9Goodwill
When the Group takes de jure or de facto control of an enterprise,
its assets, liabilities and contingent liabilities are estimated at
their fair value and the difference between the cost of taking
exclusive control and the Group’s share of the fair value of
those assets, liabilities and contingent liabilities is recognized
as goodwill.
The cost of taking control is the price paid by the Group in
the context of an acquisition, or an estimate of this price if the
transaction is carried out without any payment of cash.
Pending specific guidance from current standards, the difference
between the cost and carrying amount of minority interests
purchased after control is acquired is recognized as goodwill.
Goodwill is accounted for in the functional currency of the
acquired entity.
Goodwill is not amortized but is subject to annual impairment
testing using the methodology described in Note 1.12. Any
impairment expense recognized is included within “Other
operating income and expenses”.
• the difference between the amount of the commitment and the
reclassified minority interests is recorded as goodwill.
This accounting policy has no effect on the presentation of
minority interests within the income statement.
The accounting treatment described above nevertheless elicits
the following observation: certain interpretations of these texts
lead to the recognition of the entire amount of goodwill as a
deduction from equity; under other interpretations, goodwill
is maintained under assets but in an amount frozen at the
acquisition date, with subsequent changes being taken directly
to the income statement.
1.11 Property, plant and equipment
With the exception of vineyard land and the entire real estate
holding of Christian Dior Couture, the gross value of property,
plant and equipment is stated at acquisition cost. Any borrowing
costs incurred prior to use of assets are expensed.
Vineyard land is recognized at the market value at the balance
sheet date. This valuation is based on official published data
for recent transactions in the same region, or on independent
appraisals. Any difference compared to historical cost is
recognized within equity in “Revaluation reserves”. If market
value falls below acquisition cost the resulting impairment is
charged to the income statement.
Vines for champagnes, cognacs and other wines produced by
the Group, are considered as biological assets as defined in
IAS 41 Agriculture. As their valuation at market value differs
little from that recognized at historical cost, no revaluation is
undertaken for these assets.
Investment property is measured at cost.
Assets acquired under finance leases are capitalized on the
basis of the lower of their market value and the present value
of future lease payments.
Property, plant and equipment is depreciated on a straight-line
basis over its estimated useful life:
• buildings including investment property
20 to 50 years;
• machinery and equipment
3 to 25 years;
1.10 Purchase commitments for minority
interests
• store improvements
3 to 10 years;
• producing vineyards
18 to 25 years.
The Group has granted put options to minority shareholders
of certain fully consolidated subsidiaries.
The depreciable amount of property, plant and equipment
comprises its acquisition cost less any estimated residual
value.
Pending guidance from IFRS on this subject, the Group
recognizes these commitments as follows at each period-end:
• the contractual value of the commitment at this date appears
in “Other non-current liabilities”;
• the corresponding minority interests are reclassified and
included in the above amount;
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2008 Annual Report
Expenses for maintenance and repairs are charged to the income
statement as incurred.
1.12 Impairment testing of fixed assets
Intangible and tangible fixed assets are subject to impairment
testing whenever there is any indication that an asset may
be impaired, and in any event at least annually in the case of
intangible assets with indefinite useful lives (mainly brands,
trade names and goodwill). When the carrying amount of such
assets is greater than the higher of their value in use or net
selling price, the resulting impairment loss is recognized within
“Other operating income and expenses”, allocated in priority
to any existing goodwill.
Value in use is based on the present value of the cash flows
expected to be generated by these assets. Net selling price is
estimated by comparison with recent similar transactions or on
the basis of valuations performed by independent experts.
Cash flows are forecast for each business segment defined as
one or several brands or trade names under the responsibility
of a specific management team. Smaller scale cash generating
units, e.g. a group of stores, may be distinguished within a
particular business segment.
Brands and goodwill are chiefly valued on the basis of the present
value of forecast cash flows, or of comparable transactions
(i.e. using the revenue and net profit coefficients employed for
recent transactions involving similar brands), or of stock market
multiples observed for related businesses. Other complementary
methods may also be employed: the royalty method, involving
equating a brand’s value with the present value of the royalties
required to be paid for its use; the margin differential method,
applicable when a measurable difference can be identified
between the amount of revenue generated by a branded product
in comparison with an unbranded product; and finally the
equivalent brand reconstitution method involving, in particular,
estimation of the amount of advertising required to generate a
similar brand.
The forecast data required for the cash flow methods is based
on budgets and business plans prepared by management of the
related business segments. Detailed forecasts cover a five-year
period, a period which may be extended in the case of certain
brands undergoing strategic repositioning, or which have a
production cycle exceeding five years. Moreover, a final value
is also estimated, which corresponds to the capitalization in
perpetuity of cash flows most often arising from the last year
of the plan. When several forecast scenarios are developed, the
probability of occurrence of each scenario is assessed. Forecast
cash flows are discounted on the basis of the rate of return to be
expected by an investor in the applicable business and include
assessment of the risk factor associated with each business.
Current available for sale financial assets include temporary
investments in shares, shares of Sicav, FCP and other mutual
funds, excluding investments made as part of the daily cash
management, accounted for as cash and cash equivalents (see
Note 1.16).
Available for sale financial assets are measured at their listed
value at balance sheet date in the case of quoted investments,
and at their net realizable value at that date in the case of
unquoted investments.
Positive or negative changes in value are taken to equity within
“Revaluation reserves”. If an impairment loss is judged to
be definitive, a provision for impairment is recognized and
charged to net financial income/expense; the impairment is only
reversed through the income statement at the time of sale of the
corresponding available for sale financial assets.
1.14 Inventories and work in progress
Inventories other than wine produced by the Group are
recorded at the lower of cost (excluding interest expense) and
net realizable value; cost comprises manufacturing cost (finished
goods) or purchase price, plus incidental costs (raw materials,
merchandise).
Wine produced by the Group, especially champagne, is measured
at the applicable harvest market value, as if the harvested grapes
had been purchased from third parties. Until the date of the
harvest, the value of grapes is calculated pro rata temporis on
the basis of the estimated yield and market value.
Inventories are valued using the weighted average cost or
FIFO methods.
Due to the length of the aging process required for champagne
and cognac, the holding period for these inventories generally
exceeds one year. However, in accordance with industry practices,
these inventories are nevertheless classified as current assets.
Provisions for impairment of inventories are chiefly recognized
for businesses other than Wines and Spirits. They are generally
required because of product obsolescence (date of expiry, end
of season or collection, etc.) or lack of sales prospects.
1.15 Trade accounts receivable
Trade accounts receivable are recorded at their face value.
A provision for impairment is recorded if their net realizable
value, based on the probability of their collection, is less than
their carrying amount.
1.13 Available for sale financial assets
1.16 Cash and cash equivalents
Available for sale financial assets are classified as current or
non- current based on their nature and the estimated period
for which they will be held.
Cash and cash equivalents comprise cash on hand and highly
liquid monetary investments subject to an insignificant risk of
changes in value.
Non-current available for sale financial assets mainly include
participating investments (strategic and non-strategic).
Monetary investments are measured at their market value
and at the exchange rate prevailing at the balance sheet date,
with any changes in value recognized as part of net financial
income/expense.
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101
1.17 Provisions
A provision is recognized whenever an obligation exists towards
a third party resulting in a probable disbursement for the Group,
the amount of which may be reliably estimated.
When execution of its obligation is expected to be deferred
by more than one year, the provision amount is discounted,
the effects of which are generally recognized in net financial
income/expense.
1.18 Borrowings
Borrowings are measured at amortized cost, i.e. nominal value net
of premium and issue expenses, which are charged progressively
to net financial income/expense using the effective interest
method.
In the case of hedging against fluctuations in the capital amount
of borrowings resulting from interest rate risk, both the hedged
amount of borrowings and the related hedges are measured at
their market value at the balance sheet date, with any changes
in those values recognized within net financial income/expense
for the period. Market value of hedged borrowings is determined
using similar methods as those described hereafter in Note 1.19
Derivatives.
In the case of hedging of future interest payments, the related
borrowings remain measured at their amortized cost whilst any
changes in value of the effective hedge portions are taken to
equity as part of revaluation reserves.
Changes in value of non-hedge derivatives, and of the ineffective
portions of hedges, are recognized within net financial income/
expense.
Financial debt bearing embedded derivatives is measured at
market value; changes in market value are recognized within
net financial income/expense.
Net financial debt comprises short and long term borrowings,
the market value at the balance sheet date of interest rate
derivatives, less the value of current available for sale financial
assets, other financial assets, in addition to the market value at
the balance sheet date of related foreign exchange derivatives,
and cash and cash equivalents at that date.
1.19 Derivatives
The Group enters into derivative transactions as part of its
strategy for hedging foreign exchange and interest rate risks.
IAS 39 subordinates the use of hedge accounting to demonstration
and documentation of the effectiveness of hedging relationships
when hedges are implemented and subsequently throughout their
existence. A hedge is considered to be effective if the ratio of
changes in the value of the derivative to changes in the value of
the hedged underlying remains within a range of 80 to 125%.
Derivatives are recognized in the balance sheet at their market
value at the balance sheet date. Changes in their value are
accounted for as described in Note 1.7 in the case of foreign
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2008 Annual Report
exchange hedges, and as described in Note 1.18 in the case of
interest rate hedges.
Market value is based on market data and on commonly used
valuation models, and may be confirmed in the case of complex
instruments by reference to values quoted by independent
financial institutions.
Derivatives with maturities in excess of twelve months are
disclosed as non-current assets and liabilities.
1.20 C
hristian Dior and LVMH treasury
Christian Dior treasury shares
Christian Dior shares that are held by the Group are measured
at their acquisition cost and recognized as a deduction from
consolidated equity, irrespective of the purpose for which they
are held.
The cost of disposals of shares is determined by allocation category
(see Note 14.2) using the FIFO method. Gains and losses on
disposal, net of income taxes, are taken directly to equity.
LVMH treasury shares and related derivatives
Purchases and sales by LVMH of its own shares, resulting in
changes in percentage holdings of Christian Dior Group in
LVMH, are treated in the consolidated accounts of Christian Dior
Group as acquisitions and disposals of minority interests.
For the sake of simplicity of presentation, the treatment of
these minority interests was modified in 2007 and they are now
recognized as a group over the period. The impact of this change
was not significant for the 2006 fiscal year.
Options to purchase LVMH shares that are held by the Group
are measured at their acquisition cost and recognized as a
deduction from consolidated equity.
1.21 P
ensions, medical costs and other
employee or retired employee
commitments
When payments are made by the Group in respect of retirement
benefits, pensions, medical costs and other commitments to
third party organizations which assume the payment of benefits
or medical expense reimbursements, these contributions are
expensed in the period in which they fall due with no liability
recorded on the balance sheet.
When retirement benefits, pensions, medical costs and other
commitments are to be borne by the Group, a provision is
recorded in the balance sheet in the amount of the corresponding
actuarial commitment, and any changes in this commitment
are expensed within profit from recurring operations over the
period, including effects of discounting.
When this commitment is either partially or wholly funded by
payments made by the Group to external financial organizations,
these payments are deducted from the actuarial commitment
recorded in the balance sheet.
The actuarial commitment is calculated based on assessments
that are specifically designed for the country and the Group
company concerned. In particular, these assessments include
assumptions regarding salary increases, inflation, life expectancy,
staff turnover and the return on plan assets.
Cumulative actuarial gains or losses are amortized if, at the yearend, they exceed 10% of the higher of the total commitment or
the market value of the funded plan assets. These gains or losses
are amortized in the period following their recognition over the
average residual active life of the relevant employees.
1.22 Current and deferred tax
Deferred tax is recognized in respect of temporary differences
arising between the amounts of assets and liabilities for purposes
of consolidation and the amounts resulting from application of
tax regulations.
Deferred tax is measured on the basis of the income tax rates
enacted at the balance sheet date; the effect of changes in rates is
recognized during the periods in which changes are enacted.
Future tax savings from tax losses carried forward are recorded
as deferred tax assets on the balance sheet and impaired where
appropriate; only amounts for which future use is deemed
probable are recognized.
Deferred tax assets and liabilities are not discounted.
Taxes payable in respect of the distribution of retained earnings
of subsidiaries are provided for if distribution is deemed
probable.
1.23 Revenue recognition
Revenue
Revenue mainly comprises direct sales to customers and sales
through distributors. Sales made in stores owned by third parties
are treated as retail transactions if the risks and rewards of
ownership of the inventories are retained by the Group.
Direct sales to customers are made through retail stores for
Fashion and Leather Goods, certain Perfumes and Cosmetics,
certain Watches and Jewelry brands and Selective Retailing.
These sales are recognized at the time of purchase by retail
customers.
Wholesale sales through distributors are made for Wines and
Spirits, and certain Perfumes and Cosmetics and Watches and
Jewelry brands. The Group recognizes revenue when title
transfers to third party customers.
Revenue includes shipment and transportation costs re-billed
to customers only when these costs are included in products’
selling prices as a lump sum.
Revenue is presented net of all forms of discount. In particular,
payments made in order to have products referenced or, in
accordance with agreements, to participate in advertising
campaigns with the distributors, are deducted from revenue
and the corresponding trade accounts receivable.
Provisions for product returns
Perfumes and Cosmetics and, to a lesser extent, Fashion and
Leather Goods and Watches and Jewelry companies may accept
the return of unsold or outdated products from their customers
and distributors.
Where this practice is applied, revenue and the corresponding
trade receivables are reduced by the estimated amount of such
returns, and a corresponding entry is made to inventories.
The estimated rate of returns is based on statistics of historical
returns.
Businesses undertaken in partnership with Diageo
A significant proportion of revenue for the Group’s Wines
and Spirits businesses are achieved within the framework of
distribution agreements with Diageo generally taking the form
of shared entities which sell and deliver both groups’ brands to
customers. On the basis of the distribution agreements, which
provide specific rules for allocating these entities’ net profit
and assets and liabilities between the Group and Diageo, the
Group only recognizes the portion of their revenue and expenses
attributable to its own brands.
1.24 Advertising and promotion expenses
Advertising and promotion expenses include the costs of producing
advertising media, purchasing media space, manufacturing
samples and publishing catalogs, and in general, the cost of
all activities designed to promote the Group’s brands and
products.
Advertising and promotion expenses are recognized as expenses
for the period in which they are incurred; the cost of media
campaigns in particular is time-apportioned over the duration
of these campaigns and the cost of samples and catalogs is
recognized when they are made available to customers.
Beginning with the 2009 fiscal year, in application of IAS 38 as
amended, advertising and promotion expenses will be recorded
upon receipt or production of goods or upon completion of
services rendered.
1.25 Stock option and similar plans
Share purchase and subscription option plans give rise to
recognition of an expense based on the expected benefit granted
to beneficiaries calculated, using the Black & Scholes method,
at the date of the Board Meeting that granted the options.
For bonus share plans, the expected benefit is calculated on
the basis of the closing share price on the day before the Board
2008 Annual Report
103
Meeting at which the decision to initiate the plan is made, and
dividends expected to accrue during the vesting period.
For cash-settled compensation plans index-linked to the change in
LVMH share price, the gain over the vesting period is estimated
based on the type of plan as described above.
For all plans, the expense is apportioned on a straight-line basis
over the vesting period, with a corresponding:
• impact on reserves for share purchase and subscription
option plans;
• balance sheet impact for cash-settled plans.
After the vesting period has expired, only cash-settled plans
have an impact on the income statement, in the amount of the
change in the LVMH share price.
1.26 Profit from recurring operations and
other operating income and expenses
The Group’s main business is the management and development
of its brands and trade names. Profit from recurring operations
is derived from these activities, whether they are recurring or
non-recurring, core or incidental transactions.
Other operating income and expenses comprises income statement
items which, due to their nature, amount or frequency, may not be
considered as inherent to the Group’s recurring operations. This
caption reflects in particular the impact of changes in the scope
of consolidation and the impairment of brands and goodwill, as
well as any significant amount of gains or losses arising on the
disposal of fixed assets, restructuring costs, costs in respect of
disputes, or any other non-recurring income or expense which
may otherwise distort the comparability of profit from recurring
operations from one period to the next.
104
2008 Annual Report
1.27 Earnings per share
Earnings per share are calculated based on the weighted average
number of shares outstanding during the period, excluding
treasury shares.
Diluted earnings per share are calculated based on the weighted
average number of shares before dilution and adding the weighted
average number of shares that would result from the exercise
of all existing subscription options during the period or any
other diluting instrument. It is assumed for the purposes of
this calculation that the funds received from the exercise of
options, supplemented by the expense to be recognized for stock
option and similar plans (see Note 1.25), would be employed to
re-purchase Christian Dior shares at a price corresponding to their
average trading price over the period. Diluting instruments issued
by subsidiaries are also taken into account in the determination
of the Group share of net profit.
Note 2 - Changes in the scope of consolidation
2.1Fiscal year 2008
Wines and Spirits
Watches and Jewelry
• In February 2008, the Group acquired the whole share capital
of the Spanish winery Bodega Numanthia Termes, a producer
of wines from the Toro region, for total consideration of
27 million euros. This acquisition was consolidated with effect
from March 2008.
In April 2008, the Group acquired the entire share capital of the
Swiss watchmaker Hublot for total consideration of 306 million
euros (486 million Swiss francs), including 2 million euros in
acquisition costs. This acquisition price was paid in July 2008,
upon fulfillment of contractual conditions precedent. Hublot
was fully consolidated with effect from May 2008. The table
below summarizes the provisional purchase price allocation, on
the basis of Hublot’s balance sheet as of May 1, 2008:
• In December 2008, the Group acquired the whole share capital
of the Montaudon champagne house, owner of its eponymous
brand, for total consideration of 29 million euros (including
acquisition costs in the amount of 1.2 million euros), excluding
any contractual earnout payments. This acquisition will be
consolidated with effect from January 1, 2009.
(EUR millions)
Allocation of purchase price
Brand
Inventories
Working capital, excluding inventories
Net financial debt
Deferred taxes
Provisions
Net assets acquired
Goodwill
219
7
2
40
(5)
(3)
(57)
(6)
197
109
Total cost of acquisition
306
The goodwill mainly represents the company’s expertise in
designing and manufacturing timepieces, and the synergies
arising from the brand’s integration into the distribution network
of the Watches and Jewelry business group.
Carrying amount
7
2
43
(5)
(3)
(6)
38
Other activities
• The equity stake in the Les Echos media group, acquired in
December 2007 and recognized under non-current available
for sale financial assets as of December 31, 2007, was fully
consolidated with effect from January 1, 2008. The total
consideration paid in 2007 for 100 per cent of the share capital
was 244 million euros, including 4 million euros in acquisition
costs and excluding the assumption by the Group of Pearson’s
financial debt with respect to the Les Echos group, which
amounted to 107 million euros.
2008 Annual Report
105
The table below summarizes the purchase price allocation, on the basis of the balance sheet for the Les Echos group as of January 1, 2008:
(EUR millions)
Allocation of purchase price
Brands and other intangible assets
Working capital
Receivable vis-à-vis Pearson, assigned to the Group
Deferred taxes
Provisions
Net assets acquired
Goodwill
147
4
2
(29)
107
21
(48)
(14)
190
161
351
Brands and other intangible assets essentially comprise the
financial daily Les Echos and subscriber databases. These
intangible assets are amortized over periods of no more than
fifteen years. The amount recognized for goodwill mainly
represents the human capital formed by the editorial teams of the
Les Echos group, which cannot be isolated on the balance sheet.
• The business of the financial daily La Tribune, sold in
February 2008, was deconsolidated with effect from this date.
(EUR millions)
Non-current assets (1)
Work in-process
Non-current liabilities
Current liabilities
Minority interests
Net assets acquired
Provisional goodwill, including brand (1)
Carrying amount
5
4
2
(26)
107
21
(1)
(8)
104
• In October 2008, the Group acquired a 90% equity stake in
Royal Van Lent, the Dutch designer and builder of yachts
sold under the Feadship brand, with the remaining 10% stake
of the share capital being subject to a purchase commitment.
Royal Van Lent was fully consolidated with effect from
October 2008. The table below summarizes the provisional
allocation of the purchase price of 362 million euros, including
acquisition costs in the amount of 3 million euros, on the basis
of Royal Van Lent’s balance sheet as of October 1, 2008; as of
the balance sheet date, the acquired company’s tangible and
intangible fixed assets are in the process of being measured.
Provisional allocation
of purchase price
5
47
18
(9)
(16)
(14)
31
331
362
(1) Valuation pending.
In January 2008, Christian Dior Couture acquired 87% of the capital of John Galliano SA, a company specializing in the creation
and concession under license of fashion items and luxury products, for total consideration of 17 million euros.
106
2008 Annual Report
2.2Fiscal year 2007
Wines and Spirits
In May 2007, the Group acquired for 25 million euros 55% of
the share capital of Wen Jun Spirits and Wen Jun Spirits Sales,
which produce and distribute white liquor in China. Wen Jun
group was fully consolidated as of the second half of the year.
Also in May 2007, the Group increased its investment in Newton
Vineyards from 80% to 90%, for a total amount of 5 million
US dollars.
In May 2007, the Group increased its investment in Fendi from
94% to 100%, for an amount of 66 million euros.
Watches and Jewelry
Omas was divested in October 2007.
Selective Retailing
In September 2007, the Group acquired a distribution license in
Vietnam for local duty free operators on a joint-venture basis;
the acquisition price, 52 million US dollars, represents the value
of the distribution rights and inventories.
2.3Fiscal year 2006
In 2006 changes in the scope of consolidation concerned the
acquisition of minority interests, mainly in the United States
(Fresh and Donna Karan), in addition to certain distribution
subsidiaries in Asia.
2.4Impact of changes in the scope of consolidation on cash and cash equivalents
(EUR millions)
2008
2007
Purchase price of consolidated investments
Positive cash balance/(net overdraft) of companies acquired
Proceeds from sale of consolidated investments
(Positive cash balance)/net overdraft of companies sold
(778)
153
(43)
(352)
16
9
(2)
(71)
3
-
Impact of changes in the scope of consolidation
on cash and cash equivalents
(668)
(329)
(68)
• In 2008, the main impacts of acquisitions of consolidated
investments on the Group’s cash and cash equivalents break
down as:
-- 303 million euros for the acquisition of Hublot group;
-- 236 million euros for the acquisition of Royal Van Lent;
-- 29 million euros for the acquisition of Montaudon;
-- 27 million euros for the acquisition of Bodega Numanthia
Termes;
-- cash and cash equivalents of the Les Echos group in the amount
of 21 million euros;
-- and finally 17 million euros for the acquisition of John
Galliano SA.
Amounts in respect of the sale of consolidated investments mainly
correspond to impacts of the disposal of La Tribune.
2006
• In 2007, the impact on the Group’s cash and cash equivalents
of acquisitions of consolidated investments was related to:
-- the acquisition of Les Echos group for 240 million euros, not
consolidated as of this date;
-- the acquisition of minority interests in Fendi for 66 million
euros;
-- 20 million euros paid during the year for the acquisition in
Vietnam of a local duty-free operator’s distribution license;
-- and finally to the acquisition of 55% of the Wen Jun group
for 8 million euros.
• In 2006, the impact on the Group’s cash and cash equivalents
of acquisitions of consolidated investments was mainly the
result of the staggered payment for minority interests in
Fendi in the amount of 25 million euros, the acquisition of
minority interests in Donna Karan for 8 million euros and
15% of Fresh for 4 million euros.
2008 Annual Report
107
2.5Impact of acquisitions on period net profit and pro forma information
Acquisitions had no material impact on net income for the year.
If the acquisitions of the 2008 fiscal year had been carried out as of January 1, the impact on the consolidated income statement
would have been as follows:
(EUR millions)
2008 – Published
consolidated income
statement
Pro forma
restatements
2008 – Pro forma
consolidated
income statement
17,933
3,621
796
100
9
4
18,033
3,630
800
Revenue
Net profit – Group share
Note 3 - Brands, trade names and other intangible assets
2008
(EUR millions)
Brands
Trade names
License rights
Leasehold rights
Software
Other
Total
o/w: assets held under finance leases
Gross
Amortization and
impairment
2007
2006
Net
Net
Net
9,275
3,218
41
326
368
277
(355)
(1,309)
(26)
(205)
(258)
(140)
8,920
1,909
15
121
110
137
8,519
1,819
15
123
85
93
8,422
2,003
203
112
72
73
13,505
14
(2,293)
(14)
11,212
-
10,654
-
10,885
1
3.1Movements in the year
Movements during the year ended December 31, 2008 in the net amounts of brands, trade names and other intangible assets were
as follows:
Gross value
(EUR millions)
Brands
Trade names
Acquisitions
Disposals
Other movements
8,855
(3)
360
63
-
3,060
158
-
9,275
3,218
108
2008 Annual Report
Other
intangible assets
844
119
(21)
41
19
10
1,012
Total
12,759
119
(24)
401
240
10
13,505
Accumulated amortization and impairment
(EUR millions)
Brands
Trade names
Other
intangible assets
Total
Amortization expense
Impairment expense
Disposals
Other movements
(336)
(21)
1
1
(1,241)
(68)
-
(528)
(102)
18
(6)
(10)
(1)
(2,105)
(123)
18
(6)
(77)
-
(355)
(1,309)
(629)
(2,293)
1,909
383
11,212
Net carrying amount as of December 31, 2008
Changes in the scope of consolidation for the year ended
December 31, 2008 are mainly attributable to the acquisition of
Hublot in the amount of 219 million euros and the acquisition of
the Les Echos media group for 147 million euros. See also Note 2.
The translation adjustment is mainly attributable to intangible
assets recognized in US dollars and Swiss francs, following the
8,920
change in the exchange rate of these currencies with respect to
the euro during the fiscal year. The DFS trade name and the
TAG Heuer brand were particularly affected.
The gross value of amortized brands is 540 million euros as of
December 31, 2008.
3.2Movements in prior years
Net carrying amount
(EUR millions)
Brands
Trade names
Other
intangible assets
Total
Acquisitions
Disposals
Impairment expense
Other
Acquisitions
Disposals
Impairment expense
Other
8,499
(6)
(72)
1
8,422
60
(18)
(6)
(10)
(103)
174
2,204
(201)
2,003
(184)
-
483
91
(2)
(81)
(29)
(2)
460
109
(6)
15
(85)
(1)
(14)
(162)
11,186
91
(2)
(87)
(302)
(1)
10,885
169
(6)
(3)
(91)
(11)
(301)
12
8,519
1,819
316
10,654
In June 2007, the Group acquired ownership of the Belvedere
brand in the United States for 83 million US dollars; until that
date, the Group owned the brand in the rest of the world but
held it under license in the United States. The rights attached
to the license, amounting to 244 million US dollars, which were
recognized under “Other intangible assets”, were reclassified
under “Brands”.
2008 Annual Report
109
3.3Brands and trade names
The breakdown of brands and trade names by business group is as follows:
2008
(EUR millions)
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other activities
Brands and trade names
Gross
Amortization and
impairment
2007
2006
Net
Net
Net
47
2,764
3,876
1,284
1,172
3,171
179
(9)
(311)
(20)
(6)
(1,262)
(56)
47
2,755
3,565
1,264
1,166
1,909
123
25
2,813
3,563
1,263
835
1,820
19
25
2,615
3,608
1,267
859
2,003
48
12,493
(1,664)
10,829
10,338
10,425
The brands and trade names recognized in the table above are
those that the Group has acquired. The principal acquired brands
and trade names as of December 31, 2008 are:
• Other activities: the publications of the media group
Les Echos-Investir and the Feadship brand, whose value is in
the process of being measured as of December 31, 2008.
• Wines and Spirits: Hennessy, Moët & Chandon, Veuve
Clicquot, Krug, Château d’Yquem, Belvedere, Glenmorangie,
Newton Vineyards and Numanthia Termes;
These brands and trade names are recognized in the balance sheet
at their value determined as of the date of their acquisition by the
Group, which may be much less than their value in use or their net
selling price as of the closing date for the consolidated financial
statements. This is notably the case for the brands Louis Vuitton,
Christian Dior Couture, Veuve Clicquot, and Parfums Christian
Dior, or the trade name Sephora, with the understanding that
this list must not be considered as exhaustive.
• Fashion and Leather Goods: Louis Vuitton, Fendi, Donna Karan
New York, Celine, Loewe, Givenchy, Kenzo, Thomas Pink,
Berluti, and Pucci;
• Perfumes and Cosmetics: Parfums Christian Dior, Guerlain,
Parfums Givenchy, Make Up for Ever, BeneFit Cosmetics,
Fresh and Acqua di Parma;
• Watches and Jewelry: TAG Heuer, Zenith, Chaumet,
Hublot and Fred;
• Selective Retailing: DFS Galleria, Sephora and Le Bon Marché;
Brands developed by the Group, notably Dom Pérignon as well
as the De Beers trade name developed as a joint-venture with
the De Beers Group, are not capitalized in the balance sheet.
Please refer also to Note 5 for the impairment testing of
brands, trade names and other intangible assets with indefinite
useful lives.
Note 4 - Goodwill
2008
(EUR millions)
Gross
Impairment
2007
2006
Net
Net
Net
Goodwill arising on consolidated investments
Goodwill arising on purchase commitments for
minority interests
5,054
(1,086)
3,968
3,322
3,337
1,083
(3)
1,080
2,076
1,783
Total
6,137
(1,089)
5,048
5,398
5,120
Please refer also to Note 19 for goodwill arising on purchase commitments for minority interests.
110
2008 Annual Report
Changes in net goodwill during the fiscal years presented break down as follows:
2008
(EUR millions)
Gross
As of January 1
Changes in purchase commitments for minority
interests
Changes in impairment
6,425
686
As of December 31
Impairment
(1,027)
1
(1,060)
-
86
(31)
(32)
6,137
(1,089)
Changes in the scope of consolidation for the year ended
December 31, 2008 are attributable to the impact of the
consolidation of the Les Echos media group for 161 million
euros, the Royal Van Lent acquisition in the amount of 331 million
euros, and the Hublot acquisition for 109 million euros. See
also Note 2.
2007
2006
Net
Net
Net
5,398
687
5,120
66
5,058
15
272
220
(60)
(15)
(158)
(1,060)
(31)
54
5,048
5,398
5,120
Changes in the scope of consolidation for 2007 included
39 million euros for the increase in the Group’s investment in
Fendi and 14 million euros for the impact of the consolidation
of Wen Jun.
Note 5 - Impairment testing of intangible assets
with indefinite useful lives
Brands, trade names, and other intangible assets with indefinite
useful lives as well as the goodwill arising on acquisition have been
subject to annual impairment testing. No significant impairment
expense has been recognized in respect of these items during
the course of fiscal year 2008.
Business group
As described in Note 1.12, these assets are generally valued on
the basis of the present value of forecast cash flows determined
in the context of multi-year business plans drawn up over the
course of each fiscal year. The main assumptions retained in
2008, for the determination of these forecast cash flows are
as follows:
Period covered
by the plan
Wines and Spirits
Watches and Jewelry
Selective Retailing
Other
5 years (1)
5 years (1)
5 years
5 years (1)
5 years
5 years
Pre-tax
discount rate
Growth rate for
the period after the plan
10.5 to 17%
13 to 19%
13 to 17%
16 to 17%
12 to 13%
10 to 12%
2%
2%
2%
2%
2%
2%
(1) Five-year plans may be prolonged up to ten years for brands undergoing strategic repositioning, or for which production cycle exceeds five years.
See also Note 1.1 for details concerning the adjustments made in
valuation assumptions for intangible assets to take into account
the current economic crisis.
Discount rates used as of December 31, 2008 remain comparable
to those used as of December 31, 2007 due to contrasting market
trends, which saw an increase in risk premiums and a decline
in interest rates.
Growth rates applied for the period not covered by the plans are
based on market estimates for the business groups concerned.
A one point change in the pre-tax discount rate, applied to the
overall cash flow forecast for each business group, or a 0.5%
reduction in the growth rate for the period not covered by the
plans would give rise to an impairment expense for related
intangible assets of two business segments, in an amount not
to exceed 50 million euros.
2008 Annual Report
111
Note 6 - Property, plant and equipment
2008
(EUR millions)
Land
Vineyard land and producing vineyards
Buildings
Investment property
Machinery and equipment
Other tangible fixed assets (including assets in progress)
Total
o/w: assets held under finance leases
historical cost of vineyard land and producing vineyards
2007
2006
Net
Net
Net
(77)
(740)
(52)
(2,542)
(525)
806
1,613
1,107
293
1,648
885
767
1,426
1,080
286
1,440
672
784
1,348
1,074
298
1,375
553
(3,936)
(115)
(77)
6,352
150
480
5,671
163
464
5,432
185
462
Gross
Depreciation
and impairment
806
1,690
1,847
345
4,190
1,410
10,288
265
557
6.1Movements in the year
Movements in property, plant and equipment during 2008 break down as follows:
Vineyard land
and producing
vineyards
Land and
buildings
Acquisitions
Change in the market value
of vineyard land
Disposals and retirements
Other movements, including transfers
1,499
24
2,547
50
1,690
Gross value
(EUR millions)
Accumulated depreciation
and impairment
(EUR millions)
173
(5)
1
(6)
4
Vineyard land
and producing
vineyards
(59)
13
90
12
2,653
Land and
buildings
Depreciation expense
Impairment expense
Other movements, including transfers
(73)
(6)
2
-
(700)
(58)
27
(8)
(1)
(77)
(740)
Net carrying amount
as of December 31, 2008
1,613
1,913
Investment
Machinery
property and equipment
334
(1)
7
5
345
3,754
429
(239)
18
71
157
Other tangible
fixed assets
(including assets
in progress)
Total
1,145
487
9,279
990
(51)
1
19
(191)
173
(355)
33
181
(13)
4,190
1,410
10,288
Investment
Machinery
Other tangible
fixed assets
(including assets
in progress)
Total
(48)
(5)
1
-
(2,314)
(393)
222
(11)
(40)
(6)
(473)
(88)
36
(5)
5
(3,608)
(550)
288
(11)
(53)
(2)
(52)
(2,542)
(525)
(3,936)
293
1,648
885
6,352
Property, plant and equipment acquisitions consisted mainly of investments by Louis Vuitton, Sephora and DFS in their retail
networks in addition to investments by Hennessy and Moët & Chandon in their production equipment.
112
2008 Annual Report
6.2Movements in prior years
Net carrying amount
(EUR millions)
Vineyard land
and producing
vineyards
Land and
buildings
Investment
Machinery
Other tangible
fixed assets
(including assets
in progress)
TOTAL
Acquisitions
Impairment expense
of vineyard land
Other, including transfers
Acquisitions
Impairment expense
of vineyard land
Other, including transfers
1,217
7
(6)
133
1,876
110
(2)
(65)
-
312
1
(5)
-
1,363
298
(5)
(331)
(8)
-
490
310
(1)
(76)
(1)
-
5,258
726
(8)
(483)
(9)
133
(7)
4
1,348
15
(8)
(5)
81
(78)
17
1,858
98
(4)
(66)
-
(11)
1
298
1
(5)
-
(63)
121
1,375
343
(40)
(350)
-
(19)
(150)
553
413
(80)
-
(178)
(7)
5,432
870
(52)
(506)
81
(6)
1
(62)
23
(8)
-
(48)
160
(31)
(183)
(155)
1
1,426
1,847
286
1,440
672
5,671
Property, plant and equipment acquisitions in 2006 and 2007 consisted mainly of investments by Louis Vuitton, Sephora and DFS
in their retail networks.
2008 Annual Report
113
Note 7 -Investments in associates
2008
(EUR millions)
Gross
Impairment
2007
2006
Net
Net
Net
Share of net assets of associates as of January 1
Share of net profit (loss) for the period
Dividends paid
132
8
(7)
84
2
-
132
8
(7)
84
2
128
7
(4)
1
-
131
8
(7)
(3)
(1)
Share of net assets of associates
as of December 31
219
-
219
132
128
As of December 31, 2008, investments in associates consisted
primarily of:
• a 40% equity stake in Mongoual SA, a real estate company
which owns a property held for rental in Paris (France),
which is the head office of LVMH Moët Hennessy - Louis
Vuitton SA;
• a 45% equity stake in the group owning Ile de Beauté stores,
one of the leading perfume and cosmetics retail chains in
Russia, acquired in October 2008.
Total rents invoiced by Mongoual SA to the Group amounted to
15 million euros in 2008 (15 million euros in 2007 and 14 million
euros in 2006).
Sales by the Perfumes and Cosmetics business group to Ile
de Beauté from October to December 2008 amounted to
11 million euros.
The 23.1% equity stake in Micromania was sold in 2008.
Note 8 -Non-current available for sale financial assets
2008
(EUR millions)
Total
2007
2006
Gross
Impairment
Net
Net
Net
433
(58)
375
823
505
2007
2006
Non-current available for sale financial assets changed as follows during the fiscal years presented:
(EUR millions)
2008
As of January 1
Acquisitions
Disposals at net realized value
Changes in market value
Reclassifications as consolidated investments
823
62
(114)
(14)
(352)
(34)
4
505
374
(33)
(8)
(1)
(14)
451
86
(162)
132
5
(7)
375
823
505
As of December 31
114
2008 Annual Report
Acquisitions in 2008 include the Montaudon champagne house
in the amount of 29 million euros; this acquisition will be
consolidated in fiscal year 2009. The change in cash flow relating
to this acquisition is classified in the consolidated cash flow
statement under the heading “Impact of purchase and sale of
consolidated investments”. See Note 2 Changes in the scope
of consolidation.
Disposals in 2008 include in particular the Group’s share in the
transactions carried out by the investment fund L Capital, notably
the sale of its stake in the French video game retailer Micromania.
The main disposals in 2006 concerned various investments
held by L Capital FCPR.
The net gain/loss on disposal is analyzed in Note 25 Net financial
income/expense.
Acquisitions in fiscal year 2007 mainly comprised Les Echos
group in the amount of 350 million euros; this acquisition has
been be consolidated in fiscal year 2008.
Impairment is determined on the basis of the accounting policies
described in Note 1.13.
Non-current available for sale financial assets held by the Group as of December 31, 2008 include the following:
Percentage
interest
(EUR millions)
L Capital FCPR (France) L Capital 2 FCPR (France) (2)
Tod’s Spa (Italy) (1)
Xinyu Hengdeli Holdings Ltd (China) (1)
Other investments
Sub-total
Montaudon
(2)
Total
45.8%
18.5%
3.5%
7.5%
100%
Net value
Revaluation
reserve
Dividends
received
8
56
32
21
229
346
29
(32)
14
(15)
41
8
1
1
8
10
375
8
10
Equity (3)
Net profit (3)
107
206
567
209
(2)
(6)
77
41
(1) Market value of securities as of the close of trading on December 31, 2008.
(2) Valuation at estimated net realized value.
(3) Figures provided reflect company information prior to December 31, 2008, as year-end accounting data was not available at the date of preparation
of the consolidated financial statements.
L Capital FCPR is an investment fund for which the bylaws and the management schemes do not allow the Group to exercise
exclusive control, joint control or significant influence on shareholdings held.
Note 9 -Inventories and work in progress
(EUR millions)
2008
2007
2006
Wines and distilled alcohol in the process of aging
Other raw materials and work in progress
2,928
730
3,658
591
2,326
2,917
6,575
(609)
5,966
2,683
476
3,159
486
1,926
2,412
5,571
(568)
5,003
2,406
435
2,841
600
1,629
2,229
5,070
(546)
4,524
Goods purchased for resale
Finished products
Gross amount
Impairment
Net amount
2008 Annual Report
115
The net change in inventories for the periods presented breaks down as follows:
2008
(EUR millions)
Gross
As of January 1
Change in gross inventories
Fair value adjustment for the harvest of the period
Reclassifications
5,571
832
24
92
124
(68)
As of December 31
6,575
2007
2006
Net
Net
Net
(568)
(70)
(4)
(29)
62
5,003
832
24
(70)
88
95
(6)
4,524
625
35
(47)
25
(159)
-
4,270
357
23
21
3
(150)
-
(609)
5,966
5,003
4,524
2008
2007
2006
Impairment
The effects on Wines and Spirits’ cost of sales of marking harvests to market are as follows:
(EUR millions)
Fair value adjustment for the harvest of the period
Adjustment for inventory consumed
53
(29)
50
(15)
41
(18)
24
35
23
(EUR millions)
2008
2007
2006
Trade accounts receivable - nominal amount
Provision for impairment
Provision for product returns
1,919
(62)
(136)
1,865
(58)
(132)
1,734
(60)
(135)
Net amount
1,721
1,675
1,539
Net effect on cost of sales of the period
Note 10- Trade accounts receivable
There is no difference between the market value of trade accounts
receivable and their carrying amount.
The amount of the impairment expense in 2008 is 12 million
euros (compared to 9 million euros in 2007 and 8 million euros
in 2006).
116
2008 Annual Report
Approximately 54% of the Group’s sales is generated through
its own stores. The receivable auxiliary balance is comprised
primarily of work-in-progress inventories for wholesalers or
agents, who are limited in number and with whom the Group
maintains ongoing relationships for the most part. Credit insurance
is taken out whenever the likelihood that receivables may not
be recoverable is justified on reasonable grounds.
As of December 31, 2008, the breakdown of the nominal amount of trade receivables and of provisions for impairment by age was
as follows:
(EUR millions)
Not due
less than 3 months
more than 3 months
Overdue
less than 3 months
more than 3 months
Total
Nominal amount
of receivables
Provision for
impairment
Net amount of
receivables
1,572
59
1,631
(5)
(1)
(6)
1,567
58
1,625
196
92
288
(15)
(41)
(56)
181
51
232
1,919
(62)
1,857
Note 11- Other current assets
(EUR millions)
Current available for sale financial assets
Fair value of derivatives
Tax accounts receivable, excluding income taxes
Advances and payments on account to vendors
Prepaid expenses
Other receivables, net
Total
Prepaid expenses include samples and advertising materials,
particularly for Perfumes and Cosmetics, in the amount
of 125 million euros as of December 31, 2008 (94 million
euros as of December 31, 2007, 88 million euros as of
December 31, 2006).
2008
2007
2006
590
265
296
146
315
239
879
314
260
113
243
228
607
252
239
104
237
196
1,851
2,037
1,635
As of January 1, 2009, in application of IAS 38 as amended,
an amount of 116 million euros will be reclassified in equity
(140 million euros after taking into account items appearing
in inventory or under non-current assets). See 1.2 Changes
in the accounting framework in 2008.
Please also refer to Note 12 Current available for sale financial assets and Note 21 Financial instruments and market risk
management.
2008 Annual Report
117
Note 12- Current available for sale assets
2008
2007
2006
Unlisted securities, shares in non money market, SICAV and mutual funds
Listed securities
471
119
601
278
462
145
Total
590
679
879
741
607
506
2007
2006
(EUR millions)
Of which: historical cost of current available for sale financial assets
Net value of current available for sale financial assets changed as follows during the fiscal years presented:
(EUR millions)
2008
As of January 1
Acquisitions
Disposals at net realized value
Changes in market value
Reclassification of non-current available for sale financial assets
Changes in scope of consolidation
879
107
(115)
(233)
(92)
1
43
607
370
(92)
58
(64)
422
336
(156)
42
(1)
(36)
590
879
607
As of December 31
The results on disposal are analyzed in Note 25 Net financial income/expense.
See also Note 1.13 for the method used to determine impairment losses on current available for sale financial assets.
Note 13- Cash and cash equivalents
(EUR millions)
Fixed term deposits (less than 3 months)
SICAV and FCP money market funds
Ordinary bank accounts
Cash and cash equivalents per balance sheet
2008
2007
2006
68
75
934
430
99
1,086
126
148
1,085
1,077
1,615
1,359
As of December 31, 2007, cash and cash equivalents included an amount of 28 million euros, which guaranteed borrowings of same amount
(50 million euros as of December 31, 2006).
The reconciliation between cash and cash equivalents as shown in the balance sheet and net cash and cash equivalents appearing
in the cash flow statement is as follows:
(EUR millions)
2008
2007
2006
Bank overdrafts
1,077
(424)
1,615
(578)
1,359
(560)
653
1,037
799
Net cash and cash equivalents per cash flow statement
118
2008 Annual Report
Note 14- Equity
14.1 Share capital
As of December 31, 2008, issued and fully paid-up shares totaled 181,727,048 (181,727,048 shares as of December 31, 2007 and
2006), with a par value of 2 euros per share, including 126,483,627 shares with double voting rights. Double voting rights are granted
to registered shares held for at least three years (126,482,210 as of December 31, 2007, 126,581,274 as of December 31, 2006).
14.2 Treasury shares and related derivatives
The impact on the net assets of the Group of the Christian Dior shares and LVMH share purchase options held within the framework
of the share purchase option plans breaks down as follows:
2008
2007
2006
Christian Dior portion in LVMH share-based calls (1)
200
56
198
42
181
48
Treasury shares and related derivatives
256
240
229
(EUR millions)
(1) When the calls are exercised and securities are provided in close succession, the settlement of these transactions has no impact on the percentage interest.
Until fiscal year 2006, LVMH shares to be delivered under share
purchase option plans were held by LVMH and allocated to these
plans as from the launch date of the plans. In the first half of
2006, this method of hedging was replaced for certain existing
plans by the purchase of LVMH share purchase options (LVMH
share-based calls). The LVMH shares that were replaced by
the LVMH share-based calls were reallocated to cover plans
other than share purchase option plans.
The portfolio of Christian Dior shares is allocated as follows:
2008
2007
2006
Number
Value
Value
Value
Share purchase option plans (including expired options)
Other
3,346,848
19,532
199
1
197
1
180
1
3,366,380
200
198
181
Number of shares
Value
(EUR millions)
The portfolio movements relating to Christian Dior’s treasury shares in 2008 were as follows:
(EUR millions)
Purchases
Options exercised
Proceeds from disposals
Gross capital gain (loss) on disposal
3,410,748
76,132
(120,500)
-
198
6
(4)
-
3,366,380
200
As of December 31, 2008, the market value of other Christian Dior shares held was 0.8 million euros.
2008 Annual Report
119
14.3 Dividends paid by the parent company Christian Dior SA
In accordance with French regulations, dividends are deducted
from the profit for the year and reserves available for distribution
of the parent company, after deducting applicable withholding
tax and the value of treasury shares. As of December 31, 2008,
the amount available for distribution was 2,623 million euros;
after taking into account the proposed dividend distribution
in respect of the 2008 fiscal year, the amount available for
distribution is 2,331 million euros.
2008
(EUR millions, except for data per share in EUR)
Interim dividend for the current year (2008: 0.44 euro; 2007: 0.44 euro and 2006: 0.38 euro)
Impact of treasury shares
Final dividend for the previous year (2007: 1.17; 2006: 1.03 euro; 2005: 0.84 euro)
Impact of treasury shares
Total gross amount (1) disbursed during the period
2007
2006
80
(2)
78
213
(4)
209
80
(2)
78
187
(4)
183
69
(2)
67
153
(4)
149
287
261
216
The final dividend for 2008, as proposed to the Shareholders’ Meeting of May 14, 2009 is 1.17 euro per share, representing a total
disbursement of 213 million euros excluding the effects of treasury shares.
14.4 Revaluation reserves
Revaluation reserves record the unrealized gains and losses in respect of current and non-current available for sale financial assets,
hedges of future foreign currency cash flows and vineyard land, primarily in Champagne.
These reserves changed as follows during the fiscal years presented:
Equity – Group share
(EUR millions)
Change in value
Transfer to profit for the year
Tax impact
Gains and losses recognized in equity
Change in value
Tax impact
Change in value
Tax impact
120
2008 Annual Report
Available for sale
financial assets
Hedges of
future foreign
currency cash flows
Vineyard
land
Total
Group share
109
125
(69)
(1)
55
164
4
(13)
8
(1)
163
(82)
(29)
9
(102)
(3)
89
(25)
(23)
41
38
91
(70)
(23)
(2)
36
44
(84)
22
(18)
186
46
(16)
30
216
28
(10)
18
234
62
(21)
41
292
260
(94)
(40)
126
418
123
(83)
(25)
15
433
24
(113)
10
(79)
61
18
275
354
Minority interests
(EUR millions)
Available for sale
financial assets
Change in value
Tax impact
Change in value
Tax impact
Change in value
Tax impact
Hedges of
future foreign
currency cash flows
Vineyard
Total share of
land minority interests
137
159
(88)
(1)
70
207
4
(16)
10
(2)
205
(104)
(37)
12
(129)
(7)
108
(37)
(24)
47
40
143
(103)
(20)
20
60
84
(127)
25
(18)
308
88
(30)
58
366
54
(18)
36
402
111
(39)
72
438
355
(125)
(55)
175
613
201
(119)
(28)
54
667
91
(164)
(2)
(75)
76
42
474
592
14.5 Cumulative translation adjustment
The change in the translation adjustment recognized under equity (Group share) and the closing balance, net of hedging effects of
net assets denominated in foreign currency, break down as follows by currency:
(EUR millions)
2008
Change
2007
2006
US dollar
Japanese yen
Hong Kong dollar
Pound sterling
Other currencies
Hedges of foreign currency net assets (1)
(150)
26
4
(50)
17
84
26
31
(47)
34
(234)
(27)
(3)
(17)
(68)
(5)
13
(1)
(14)
(32)
18
8
TOTAL
(167)
96
(263)
(53)
(1) See Note 17.5 Analysis of gross borrowings by currency after hedging.
14.6 Strategy relating to the Group’s
financial structure
The Group firmly believes that the management of its financial
structure contributes, together with the development of the
companies it owns and the management of its brand portfolio,
to its objective of driving value creation for its shareholders.
Furthermore, maintaining a strong credit rating and providing
adequate security to the Group’s bondholders and bank creditors
are regarded as objectives in their own right.
The Group manages its financial structure so as to ensure
real financial flexibility, allowing it both to seize opportunities
and enjoy significant access to markets offering favorable
conditions.
To this end, the Group monitors a certain number of financial
ratios and aggregate measures of financial risk, including:
• net financial debt (see Note 17) to equity;
• net financial debt to cash from operations before changes in
working capital;
• long term resources to fixed assets;
• net cash from operating activities;
• cash flow before financing activities;
• proportion of long term debt in net financial debt.
2008 Annual Report
121
Long-term resources are understood to correspond to the sum
of equity and non-current liabilities.
With respect to these indicators, the Group seeks to maintain
levels allowing for considerable financial flexibility.
The Group also promotes financial flexibility by maintaining
numerous and varied banking relationships, through the frequent
recourse to several negotiable debt markets (both short and long
term), by holding a large amount of cash and cash equivalents,
and through the existence of sizable amounts in undrawn
confirmed credit lines.
Christian Dior SA observes a steady dividend distribution policy,
intended to ensure stable returns for shareholders, while making
them partners in the growth of the Group.
In particular, the Group’s undrawn confirmed credit lines often
largely exceed the outstanding portion of its commercial paper
program.
Where applicable, these indicators are adjusted to reflect the
Group’s off-balance sheet financial commitments.
Note 15- Share purchase option plans
The Shareholders’ Meeting of May 11, 2006 authorized the
Board of Directors, for a period of thirty-eight months expiring
in July 2009, to grant share subscription or purchase options
to Group company employees or Directors, on one or more
occasions, in an amount not to exceed 3% of the Company’s
share capital.
As of December 31, 2008, no subscription plan had been allocated
by Christian Dior SA.
Each plan is valid for 10 years and the options may be exercised
after a three or five year period.
In certain circumstances, in particular in the event of retirement,
the period of three or five years before options may be exercised
is not applicable.
For all plans, one option entitles the holder to purchase one
share.
Share purchase option plans
The main characteristics of share purchase option plans and changes having occurred during the year are as follows:
Number
of options
granted (1)
Exercise
price (EUR)
(2) (3)
Christian Dior
November 3, 1998 (4)
January 26, 1999
February 15, 2000
February 21, 2001
February 18, 2002
February 18, 2003
February 17, 2004
May 12, 2005
February 15, 2006
98,400
89,500
100,200
437,500
504,000
527,000
527,000
493,000
475,000
18.29
25.36
56.70
45.95
33.53
29.04
49.79
52.21
72.85 (5)
September 6, 2006
January 31, 2007
May 15, 2008
20,000
480,000
484,000
74.93
85.00
73.24 (6)
Total Christian Dior
Vesting
period of
rights
Number of
options exercised
in 2008 (3)
Number of Number of options
options expired to be exercised as
in 2008 (3)
of 12/31/2008 (3)
5 years
5 years
5 years
3 years
3 years
3 years
3 years
3 years
27,000
38,500
2,000
8,000
35,000
10,000
20,000
25,500
352,000
362,500
92,502
121,002
436,000
438,000
3 years
3 years
4 years
-
20,000
20,000
443,000
20,000
455,000
4 years
-
-
484,000
120,500
60,000
3,229,504
(1) Number of options at the commencement of the plan, without any restatement for the adjustments linked to the four-for-one stock split in July 2000
at Christian Dior.
(2) Figures for periods prior to 1999 result from the translation into euros of data originally presented in French francs.
(3) Restated following the operations referred to in (1) above.
(4) Plan expired November 3, 2008.
(5) Exercise price for residents of Italy: 77.16 euros.
(6) Exercise price for residents of Italy: 73.47 euros.
122
2008 Annual Report
Movements during the year
(EUR millions)
Number
2008
2007
2006
Weighted average
exercise price
Weighted average
exercise price
Weighted average
exercise price
(EUR)
Number
(EUR)
Number
(EUR)
Share purchase options
outstanding as of January 1
Options granted during the period
Expired options
Options exercised during the period
2,926,004
484,000
(60,000)
(120,500)
57.83
73.24
70.02
33.86
4,016,700
480,000
(35,000)
(1,535,696)
43.88
85.00
49.58
30.01
3,993,213
495,000
(135,800)
(335,713)
38.78
73.02
36.96
28.98
Share purchase options
outstanding as of
December 31
3,229,504
60.81
2,926,004
57.83
4,016,700
43.88
Expense for the period
The unit value of each option plan is determined on the basis of the Black & Scholes method, as described in Note 1.25.
The assumptions and criteria retained for this calculation are as follows:
LVMH
LVMH share price on the grant date (EUR)
Average exercise price (EUR)
Volatility of LVMH shares (%)
Dividend distribution rate (%)
Risk-free investment rate (%)
Vesting period
2008 Plans
2007 Plans
2006 Plans
75.01
72.51
27.5
2.4
4.1
4 years
86.67
86.12
24.0
2.0
4.4
4 years
84.05
79.07
24.5
1.4
4.1
4 years
The volatility of LVMH’s shares is determined on the basis of their implicit volatility.
The average unit values of share subscription options and bonus shares allocated in 2008 are 20.44 euros and 71.66 euros,
respectively.
Christian Dior
Christian Dior share price on the grant date (EUR)
Average exercise price (EUR)
Volatility of Christian Dior shares (%)
Dividend distribution rate (%)
Risk-free investment rate (%)
Vesting period
The volatility of Christian Dior’s shares is determined on the
basis of their implicit volatility.
Based on the above assumptions and parameters, the average
unit values of the share purchase options allocated on May 15,
2008 was 21.70 euros for the French plan and 21.61 euros for
the Italian plan.
May
2008 Plan
January
2007 Plan
September
2007 Plan
February
2006 Plan
76.15
73.24
25.00
2.10
4.20
4 years
84.40
85.00
24.00
2.00
4.40
4 years
81.05
74.93
24.50
1.40
4.10
3 years
77.40
72.85
24.50
1.40
4.10
3 years
The expense for the period recognized for the Christian Dior
share purchase plans in 2008 was 9 million euros (10 million
euros in 2007 and 9 million euros in 2006).
2008 Annual Report
123
Consolidated stock option expense
The total expense recognized in fiscal year 2008 is presented below; all plans which had not yet vested as of January 1, 2004,
the date of transition to IFRS, are taken into account.
(EUR millions)
2008
2007
2006
Christian Dior share purchase option plans
LVMH share subscription and purchase option plans, bonus share plans
Cash-settled LVMH-share based incentive plans
9
44
(6)
10
43
3
9
34
1
Expense for the year
47
56
44
(EUR millions)
2008
2007
2006
As of January 1
Minority interests’ share of net profit
Dividends paid to minority interests
Changes in scope of consolidation:
impact of LVMH treasury shares
acquisition of minority interests in Fendi
acquisition of minority interests in Donna Karan
consolidation of Wen Jun
consolidation of Royal Van Lent
other changes in the scope of consolidation
Total changes in the scope of consolidation
Capital increases subscribed by minority interests
Minority interests’ share in the following changes:
revaluation reserves
translation adjustment
stock option plan expenses
Effects of purchase commitments for minority interests
Other
8,563
1,428
(618)
8,026
1,448
(544)
7,400
1,336
(439)
(64)
14
6
(44)
5
53
(27)
9
3
38
1
(9)
(2)
(4)
(15)
6
(75)
179
27
(139)
8
54
(360)
26
(126)
-
175
(321)
21
(137)
-
As of December 31
9,334
Note 16- Minority interests
See also Note 14.4 concerning the analysis of minority interests’ share in revaluation reserves.
124
2008 Annual Report
8,563
8,026
Note 17- Borrowings
17.1 Net financial debt
(EUR millions)
Gross amount of borrowings
Interest rate risk derivatives
Other derivatives
Borrowings net of derivatives
Current available for sale financial assets
Other financial assets
Net financial debt
2008
2007
2006
4,615
2,522
7,137
(66)
(4)
7,067
(590)
(30)
(1,077)
3,387
3,678
7,065
(60)
7,005
(879)
(32)
(1,615)
4,188
2,661
6,849
(83)
6,766
(607)
(37)
(1,359)
5,370
4,479
4,763
Net financial debt does not take into consideration purchase commitments for minority interests included in “Other non-current
liabilities” (see Note 19).
The impact of interest rate derivatives is detailed in Note 21.
17.2 Breakdown of gross borrowings by nature
(EUR millions)
2008
2007
2006
Bonds and EMTNs
Finance and other long term leases
Bank borrowings
2,934
129
1,552
2,318
118
951
3,039
132
1,017
Bonds and EMTNs
Bank borrowings
Commercial paper
Other borrowings and credit facilities
Perpetual bonds
Bank overdrafts
Accrued interest
4,615
127
23
436
717
714
424
81
3,387
907
18
207
1,086
806
578
76
4,188
220
22
571
516
676
12
560
84
2,522
3,678
2,661
Total gross borrowings
7,137
7,065
6,849
Fair value of gross borrowings
7,239
7,052
6,865
The portion of financial debt recognized in accordance with the fair value option described in Note 1.18 amounted to 407 million
euros as of December 31, 2007 and 404 million euros as of December 31, 2006; its nominal value was 658 million euros as of
December 31, 2007 and 1,420 million euros as of December 31, 2006.
2008 Annual Report
125
17.3 Bonds and EMTNs
Initial effective
Maturity interest rate (1) (%)
(EUR millions)
CHF 200,000,000; 2008
CHF 200,000,000; 2008
EUR 50,000,000; 2008
EUR 760,000,000; 2005 and 2008 (2)
CHF 300,000,000; 2007
EUR 150,000,000; 2006
EUR 600,000,000; 2004
EUR 750,000,000; 2003
EUR 500,000,000; 2001
Public bond issues
- in euros
- in foreign currencies
Private placements (EMTNs)
2008
2007
2006
2015
2011
2011
4.04
3.69
6.12
135
135
50
-
-
2012
2013
2011
2011
2010
2008
3.76
3.46
4.37
4.74
5.05
6.27
749
206
149
609
742
2,775
286
286
598
185
149
604
742
502
2,780
405
40
445
598
150
606
746
508
2,608
593
58
651
3,061
3,225
3,259
Total bonds and EMTNs
(1) Before impact of interest rate hedges set up at the time of, or subsequent to, each issuance.
(2) Accumulated amounts and weighted average initial effective interest rate for a 600 million euro bond issued in 2005 at an initial effective interest rate
of 3.43%, which was supplemented in 2008 by an amount of 160 million euros issued at an effective rate of 4.99%.
17.4 Analysis of gross borrowings by payment date before hedging
(EUR millions)
Payment date
2009
2010
2011
2012
2013
Thereafter
Total
2008
(EUR millions)
2,522
1,286
1,214
1,293
486
336
Payment date
7,137
Total
Maturing in 2009
First quarter
Second quarter
Third quarter
Fourth quarter
1,871
175
119
357
2,522
17.5 Analysis of gross borrowings by currency after hedging
(EUR millions)
2008
2007
2006
Euro
US dollar
Swiss franc
Yen
Other currencies
5,160
274
820
503
310
5,248
332
668
395
362
4,557
554
814
358
483
Total
7,067
7,005
6,766
In general, the purpose of foreign currency borrowings is to hedge net foreign currency-denominated assets of consolidated companies
located outside of the euro zone.
126
2008 Annual Report
17.6 Analysis of gross borrowing by interest rate type after hedging
(EUR millions)
2008
2007
2006
Floating rate
Capped floating rate
Fixed rate
3,207
3,860
3,895
3,110
2,601
1,475
2,690
Total
7,067
7,005
6,766
17.7 Sensitivity
17.8 Covenants
On the basis of net debt as of December 31, 2008:
As is normal practice for syndicated loans, Christian Dior Group
has signed commitments to maintain a percentage interest and
voting rights for certain of its subsidiaries.
• an instantaneous increase of 1 point in the yield curves of the
Group’s debt currencies would raise the cost of net financial
debt by 32 million euros after hedging;
• an instantaneous decline of 1 point in these same yield curves
would lower the cost of net financial debt by 32 million euros
after hedging, and would raise the fair value of gross fixed-rate
borrowings by 57 million euros after hedging.
Under the terms of certain credit agreements, the Group has
undertaken to comply with certain financial ratios (net financial
debt to equity, net financial debt to EBITDA or cash flow;
coverage of financial debt by assets). The current level of these
ratios ensures that the Group has a real financial flexibility with
regard to these commitments.
17.9 Undrawn confirmed credit lines
17.10 Guarantees and collateral
As of December 31, 2008, unused irrevocable confirmed credit
lines totaled 3.6 billion euros.
As of December 31, 2008, borrowings hedged by collateral were
less than 100 million euros.
Note 18- Provisions
(EUR millions)
Provisions for pensions, medical costs and similar commitments
Provisions for contingencies and losses
Provisions for reorganization
Non-current provisions
Current provisions
Total
2008
2007
2006
235
708
34
977
7
247
72
326
242
712
27
981
5
230
63
298
263
690
38
991
4
149
110
263
1,303
1,279
1,254
2008 Annual Report
127
In 2008, the changes in provisions were as follows:
(EUR millions)
Other items
(including
translation December 31,
adjustment)
2008
December 31,
2007
Increases
247
39
(41)
(7)
2
2
242
942
90
184
46
(119)
(39)
(62)
(4)
14
12
(4)
1
955
106
1,279
269
124
145
(199)
(125)
(74)
(73)
(54)
(19)
28
(1)
1,303
Provisions for pensions, medical
costs and similar commitments
Provisions for contingencies and
losses
Total
o/w: profit from recurring operations
net financial income (expense)
other
are examined in Note 28.
Provisions for contingencies and losses correspond to the estimate
of the impact on assets and liabilities of risks, disputes, or actual
Amounts
used
Changes
Amounts
in scope of
released consolidation
or probable litigation arising from the Group’s activities; such
activities are carried out worldwide, within what is often an
imprecise regulatory framework that is different for each country,
changes over time, and applies to areas ranging from product
composition to the tax computation.
Note 19- Other non-current liabilities
(EUR millions)
2008
2007
2006
Purchase commitments for minority interests
Market value of derivatives
Employee profit sharing (1)
Other liabilities
2,965
31
89
169
3,862
20
109
156
3,490
18
100
150
Total
3,254
4,147
3,758
(1) French companies only, pursuant to legal provisions.
As of December 31, 2006, 2007 and 2008 purchase commitments
for minority interests mainly include the put option granted
to Diageo plc for its 34% share in Moët Hennessy SNC, with
six-month’s advance notice and for 80% of its market value at
the exercise date of the commitment.
128
2008 Annual Report
With regard to this commitment valuation, the market value was
determined by applying the share price multiples of comparable
firms to Moët Hennessy’s consolidated operating results.
Purchase commitments for minority interests also include
commitments relating to minority shareholders in BeneFit (20%)
and in Sephora in various countries.
Note 20- Other current liabilities
(EUR millions)
Market value of derivatives
Employees and social institutions
Employee profit sharing (1)
Taxes other than income taxes
Advances and payments on account from customers
Deferred payment for tangible and financial non-current assets
Deferred income
Other
Total
2008
2007
2006
166
589
67
250
208
174
69
434
31
543
39
240
81
273
49
380
44
517
29
245
71
170
47
379
1,957
1,636
1,502
(1) French companies only, pursuant to legal provisions.
Derivatives are analyzed in Note 21.
Note 21- Financial instruments and market risk management
Financial instruments are mainly used by the Group to hedge
risks arising from Group activity and protect its assets.
21.2 P
resentation of financial instruments
in the balance sheet
21.1 Foreign exchange, interest rate and
equity market risk management
Breakdown of financial assets and liabilities
according to the measurement categories defined by
IAS 39
The management of these market risks and of transactions
involving financial instruments is centralized.
The Group has implemented a stringent policy, as well as rigorous
management guidelines to measure, manage and monitor these
market risks.
These activities are organized based on a strict segregation
of duties between risk measurement, hedging (front office),
administration (back office) and financial control.
The backbone of this organization is an information system which
allows hedging transactions to be monitored quickly.
Hedging decisions are made according to an established process
that includes regular presentations to the Group’s executive
bodies and detailed documentation.
In addition to the accounting policies applied described in
Notes 1.13, 1.16, 1.18 and 1.19, the following explanations
apply specifically to these tables:
• fair value may be considered as nearly equivalent to market
value, the latter being defined as the price that an informed
third party acting freely would be willing to pay or receive
for the asset or liability in question;
• the category “Other and non-financial” includes prepaid
expenses and deferred income, trade accounts payable,
purchase commitments for minority interests (see Notes 1.10
and 19) as well as other liabilities except derivatives.
Potential counterparties are selected based on a minimum rating
level and in accordance with the Group’s risk diversification
strategy.
2008 Annual Report
129
Fiscal year 2008
December 31, 2008
(EUR millions)
Notes
Non-current available for
sale financial assets
8
10
Fair Loans and
value receivables
Available
for sale
assets
Change in
value through
Derivatives
income
Debt at
amortized
cost
Other
and nonfinancial
375
375
-
375
-
-
-
-
858
858
665
-
193
-
-
-
1,721
1,721
1,721
-
-
-
-
-
11
1,851
1,851
681
590
265
-
-
315
13
1,077
1,077
-
-
-
1,077
-
-
Assets
Other non-current
liabilities
Balance
sheet
value
5,882
5,882
3,067
965
458
1,077
-
315
17
4,615
4,715
-
-
-
-
4,615
-
19
3,254
3,254
-
-
31
-
-
3,223
17
20
Liabilities
2,522
2,524
-
-
-
-
2,522
-
2,348
2,348
-
-
-
-
-
2,348
1,957
1,957
-
-
166
-
-
1,791
14,696
14,798
-
-
197
-
7,137
7,362
Fair Loans and
value receivables
Available
for sale
assets
Change in
value through
Derivatives
income
Debt at
amortized
cost
Other
and nonfinancial
Fiscal year 2007
December 31, 2007
(EUR millions)
Notes
10
11
13
823
614
1,675
2,037
1,615
823
614
1,675
2,037
1,615
580
1,675
601
-
823
879
-
34
314
-
1,615
-
243
-
17
6,764
3,387
6,764
3,374
2,856
-
1,702
-
348
-
1,615
-
3,387
243
-
4,147
3,678
2,167
1,636
4,147
3,678
2,167
1,636
-
-
20
31
407
-
3,271
-
4,127
2,167
1,605
15,015
15,002
-
-
51
407
6,658
7,899
8
Assets
Other non-current
liabilities
Liabilities
130
2008 Annual Report
Balance
sheet
value
19
17
20
Fiscal year 2006
December 31, 2006
Notes
(EUR millions)
Fair Loans and
value receivables
Available
for sale
assets
Change in
value through
Derivatives
income
Debt at
amortized
cost
Other
and nonfinancial
10
11
13
505
693
1,539
1,635
1,359
505
693
1,539
1,635
1,359
649
1,539
545
-
505
607
-
44
252
-
1,359
-
231
-
17
5,731
4,188
5,731
4,204
2,733
-
1,112
-
296
-
1,359
392
3,796
231
-
3,758
2,661
1,967
1,502
3,758
2,661
1,967
1,502
-
-
18
44
12
-
2,649
-
3,740
1,967
1,458
14,076
14,092
-
-
62
404
6,445
7,165
8
Assets
Other non-current
liabilities
Balance
sheet
value
19
17
20
Liabilities
Breakdown of financial assets and liabilities measured at fair value by measurement method
2008
(EUR millions)
Available
for sale
assets
Published price
quotations
Valuation technique:
based on observable
market data
not based on
observable market
data
Other (1)
471
Assets
965
Published price
quotations
Valuation technique:
based on observable
market data
not based on
observable market
data
Liabilities
2007
Derivatives
302
Change
in value
through
income
Available
for sale
assets
1,077
517
458
601
163
234
29
350
458
1,077
1,702
2006
Derivatives
Change
in value
through
income
Available
for sale
assets
1,615
405
348
462
Derivatives
Change
in value
through
income
1,359
296
245
348
1,615
1,112
296
407
197
197
51
-
51
1,359
404
62
407
62
404
(1) This corresponds to the acquisition price of Montaudon as of December 31, 2008 and to the acquisition price of the Les Echos group as of
December 31, 2007.
2008 Annual Report
131
21.3 Summary of derivatives
Derivatives are recorded in the balance sheet for the amounts and in the captions detailed as follows:
Notes
(EUR millions)
Interest rate risk
Assets:
non-current
current
Liabilities:
non-current
current
Liabilities:
2007
2006
21.4
36
80
(29)
(21)
66
28
73
(20)
(21)
60
40
89
(16)
(30)
83
21.5
17
185
(2)
(70)
130
6
241
(10)
237
4
163
(2)
(14)
151
Foreign exchange risk
Assets:
non-current
current
Liabilities:
non-current
current
Other risks
Assets:
2008
non-current
current
non-current
current
140
(75)
65
-
-
Total
Assets:
Liabilities:
non-current
current
non-current
current
11
19
20
193
265
(31)
(166)
261
34
314
(20)
(31)
297
44
252
(18)
(44)
234
21.4 Derivatives used to manage interest rate risk
The Group manages its interest rate exposure on the basis of total net financial debt. The objective of its management policy is to
protect net profit against a sharp rise in interest rates.
As such, the Group uses interest rate swaps and options (caps and floors).
Derivatives used to manage interest rate risk outstanding as of December 31, 2008 break down as follows:
Nominal amounts by maturity
(EUR millions)
Interest rate swaps in euros:
- fixed rate payer
- floating rate payer
Foreign currency swaps
Total
(1) Gain/(Loss).
132
2008 Annual Report
Market value (1)
2009
2010
to 2014
Total
200
818
103
1,333
1,502
148
1,533
2,320
251
Fair value
hedges
Unallocated
amounts
TOTAL
(10)
50
-
(6)
32
(16)
50
32
40
26
66
21.5 Derivatives used to manage foreign exchange risk
A significant part of both Group companies’ sales to customers
and their own retail subsidiaries and certain purchases are
denominated in currencies other than their functional currency;
the majority of these foreign currency-denominated cash flows
are inter-company cash flows. Hedging instruments are used
to reduce the risks arising from foreign currency fluctuations
against the various companies’ functional currencies and are
allocated to either accounts receivable or accounts payable
for the fiscal year, or, under certain conditions, to transactions
anticipated for future periods.
Future foreign currency-denominated cash flows are broken
down as part of the budget preparation process and are hedged
progressively over a period not exceeding one year unless a
longer period is justified by probable commitments. As such, and
according to market trends, identified foreign exchange risks are
hedged progressively using forward contracts or options.
The Group may also use appropriate financial instruments to
hedge the net worth of foreign subsidiaries, in order to limit
the impact of foreign currency fluctuations against the euro on
consolidated equity.
Derivatives used to manage foreign exchange risk outstanding as of December 31, 2008 break down as follows:
Nominal amounts by fiscal year of allocation
(EUR millions)
Options purchased
Put USD
Put JPY
Other
Ranges
Written USD
Written JPY
Other
Fair value (1)
Foreign
Fair value currency net
hedges asset hedges
2009 Thereafter
Total
Future cash
flow hedges
659
380
108
1,147
-
668
410
110
1,188
26
1
26
53
-
-
2
2
1
5
28
3
27
58
(72)
32
(40)
569
383
952
99
99
497
514
1,011
15
(25)
(10)
(1)
(1)
-
1
(3)
(2)
15
(28)
(13)
486
49
23
49
607
830
311
(15)
14
1,140
(1)
(1)
1,315
360
8
63
1,746
66
5
(2)
6
75
18
1
19
13
13
7
(12)
2
1
(2)
104
(6)
7
105
15
(1)
14
(7)
(36)
(1)
3
7
(34)
(7)
(21)
(1)
2
7
(20)
27
(33)
130
2008
9
30
2
41
Not
allocated Total
Forward exchange
contracts (2)
USD
JPY
GBP
Other
Foreign exchange
swaps (2)
CHF
USD
GBP
JPY
Other
Total
237
445
52
59
50
843
-
-
237
445
52
59
50
843
-
-
118
18
(1) Gain/(Loss).
(2) Sale/(Purchase).
The impact on income statement of gains and losses on hedges of future cash flows as well as the future cash flows hedged, using
these instruments, will be recognized in 2009.
2008 Annual Report
133
The impacts of a positive or negative change in the value of the US dollar and the Japanese yen on the net profit for the year, equity
(excluding net profit), and the market value of derivatives, after tax effect, as of December 31, 2008 would be as follows:
US dollar
+10%
(EUR millions)
Impact on net profit
Impact on equity, excluding net profit
Impact on market value of derivatives
47
442
(267)
Japanese yen
-10%
+10%
(83)
(458)
190
-10%
2
4
(84)
7
(14)
83
The changes above include the impact on fair value of derivatives of exchange rate fluctuations as well as currency translation
adjustments resulting from consolidation of foreign-currency denominated subsidiaries.
21.6 Financial instruments used to manage
equity risk
as of December 31, 2008 would impact net profit for an amount
of 9 million euros.
The Group’s investment policy is designed to take advantage of a
long term investment horizon. Occasionally, the Group may invest
in equity-based financial instruments with the aim of enhancing
the dynamic management of its investment portfolio.
Derivatives used to manage equity risk outstanding as of
December 31, 2008 had a positive fair value of 65 million euros.
Most of these instruments mature in 2010 and 2011.
The Group is exposed to risks of share price changes either
directly, as a result of its holding of equity investments and
current available for sale financial assets, or indirectly, as a
result of its holding of funds which are themselves partially
invested in shares.
21.7 Liquidity risk
The Group may also use equity-based derivatives to create
synthetically an economic exposure to certain assets, or to
hedge cash-settled compensation plans index-linked to the
LVMH share price. The carrying amount of these unlisted
financial instruments corresponds to the estimate of the amount,
provided by the counterparty, of the valuation at the balance
sheet date. The valuation of financial instruments thus takes
into consideration market parameters such as interest rates,
share prices and volatility.
For those derivatives, with a nominal value of 1.1 billion euros,
a uniform variation of 1% in their underlying assets’ share prices
In addition to local liquidity risks, which are generally immaterial,
the Group’s exposure to liquidity risk can be assessed in relation
to the amount of its short-term borrowings net of cash and cash
equivalents (1.4 billion euros), or through the outstanding amount
of its commercial paper program (0.7 billion euros).
Should any of these instruments not be renewed, the Group
has access to undrawn confirmed credit lines totaling
3.6 billion euros.
The Group’s liquidity is based on the amount of its investments
and long-term borrowings, the diversity of its investor base
(bonds and short-term paper), and the quality of its banking
relationships, whether evidenced or not by confirmed lines
of credit.
The following table present the contractual schedule of disbursements for financial liabilities recognized as of December 31, 2008,
at nominal value and with interest, excluding discounting effects:
(EUR millions)
2009
2010
2011
2012
2013
Over
5 years
Total
Bonds and EMTNs
Bank borrowings
Other borrowings and credit facilities
Commercial paper
Bank overdrafts
Gross financial debt
Derivatives
Other financial liabilities
Other financial liabilities
244
441
500
40
717
424
2,366
28
1,722
2,348
4,098
842
557
30
1,429
5
26
31
1,040
261
18
1,319
27
21
48
795
559
17
1,371
23
23
337
165
15
517
(4)
25
21
137
184
364
685
10
163
173
3,395
2,167
500
484
717
424
7,687
66
1,980
2,348
4,394
Total financial liabilities
6,464
1,460
1,367
1,394
538
858
12,081
134
2008 Annual Report
Note 22- Segment information
22.1 Information by business group
Fiscal year 2008
Christian
Dior
Couture
Wines
and
Spirits
Fashion
and Leather
Goods
Perfumes
and
Cosmetics
Watches
and
Jewelry
Sales outside the Group
Sales between business
groups
749
3,117
5,975
2,664
856
4,361
211
16
9
35
204
23
15
17
Total revenue
765
3,126
6,010
2,868
879
4,376
228
9
1,060
1,927
290
118
388
(EUR millions)
Profit from recurring
operations
Other operating income
and expenses
Other and
Selective
holding
Retailing companies
Not allocated
and eliminations
(1) (4) (5)
2008
-
17,933
(319)
-
(319) 17,933
(150)
(21)
3,621
(7)
13
(61)
(28)
(1)
(28)
(38)
(3)
41
157
338
146
39
228
160
-
1,109
46
-
73
-
236
20
111
-
23
-
148
-
36
11
-
673
31
Inventories
Other operating assets (6)
87
209
444
4,087
3,408
2,578
4,722
850
1,947
1,649
293
805
1,434
400
318
2,630
776
1,390
1,283
109
2,256
Total assets
740
Equity
Operating liabilities (6)
182
10,073
1,069
7,519
1,141
2,747
883
2,152
189
4,796
1,111
3,648
551
3,913
15,265
15,197
35,588
15,265
20,323
Total liabilities
and equity
182
1,069
1,141
883
189
1,111
551
30,462
35,588
Depreciation and
amortization
Impairment
Brands, trade names,
licenses and goodwill (3)
(153)
- 15,892
(79) 5,966
3,992 13,730
Since the Samaritaine department store was reclassified in 2008 from Selective Retailing to Other activities and holding companies,
2007 and 2006 data was restated in order to facilitate comparison with 2008 data.
2008 Annual Report
135
Fiscal year 2007
Christian
Dior
Couture
Wines
and
Spirits
Fashion
and Leather
Goods
groups
776
3,220
5,591
2,561
808
4,152
137
11
6
37
170
25
12
6
Total revenue
787
3,226
5,628
2,731
833
4,164
143
74
1,058
1,829
256
141
426
(141)
(33)
(EUR millions)
operations
and expenses
-
(4)
Perfumes Watches
and
and
Cosmetics Jewelry
Other and
Not allocated
Selective
holding and eliminations
(1) (4) (5)
Retailing companies
2007
17,245
(267)
-
(267) 17,245
3,610
(18)
(17)
(3)
(12)
(72)
9
(117)
38
199
241
116
28
242
174
-
1,038
43
-
69
-
210
-
103
-
21
1
122
-
27
10
-
595
11
42
191
426
5,207
3,036
2,429
4,956
622
1,739
1,645
263
709
979
268
266
2,525
626
1,329
398
45
1,906
Equity
659
171
10,672
1,064
7,317
977
2,617
833
1,513
155
4,480
1,010
2,349
379
4,727
13,940
15,805
34,334
13,940
20,394
Total liabilities
and equity
171
1,064
977
833
155
1,010
379
29,745
34,334
Depreciation and
amortization
Impairment
Inventories
Total assets
136
2008 Annual Report
- 15,752
(48) 5,003
4,775 13,579
Fiscal year 2006
Christian
Dior
Couture
Wines
and
Spirits
Watches
and
Jewelry
Selective
Retailing
groups
720
2,989
5,190
2,379
724
3,865
149
11
5
32
140
13
12
16
Total revenue
731
2,994
5,222
2,519
737
3,877
165
56
962
1,633
222
80
387
(124)
(7)
3,209
-
(12)
(44)
(30)
(9)
(16)
(16)
-
(127)
55
107
308
99
25
185
51
-
830
38
-
61
-
208
5
98
-
21
-
117
3
16
14
-
559
22
42
142
580
4,956
2,730
2,220
5,048
603
1,752
1,639
244
648
1,009
235
229
2,643
558
1,153
411
50
1,602
Equity
764
163
9,906
1,025
7,403
935
2,531
736
1,473
156
4,354
932
2,063
350
3,877
12,974
15,100
32,371
12,974
19,397
Total liabilities
and equity
163
1,025
935
736
156
932
350
28,074
32,371
(EUR millions)
operations
and expenses
Depreciation and
amortization
Impairment
Inventories
Total assets
Fashion Perfumes
and Leather
and
Goods Cosmetics
Other and
Not allocated
holding and eliminations
(1) (4) (5)
companies
-
2006
16,016
(229)
-
(229) 16,016
- 15,748
(38) 4,524
3,915 12,099
(1) Eliminations correspond to sales between business groups; these generally consist of sales from business groups other than Selective Retailing to Selective
Retailing. Selling prices between the different business groups correspond to the prices applied in the normal course of business for transactions involving
wholesalers or distributors outside the Group.
(2) Operating investments correspond to amounts capitalized during the fiscal year rather than payments made during the fiscal year with respect to these
investments.
(3) Brands, trade names, licenses, and goodwill correspond to the net carrying amounts shown under Notes 3 and 4.
(4) Assets not allocated include investments in associates, available for sale financial assets, other financial assets, and income tax receivables.
(5) Liabilities not allocated include borrowings and both current and deferred tax liabilities.
(6) As of December 31, 2008, the figure shown for the Group’s income tax liability with respect to the French tax consolidation structure was offset by
advance payments made. Other operating assets and liabilities as of December 31, 2007 and December 31, 2006 were restated to facilitate comparison
with 2008 information.
22.2. Information by geographic region
Revenue by geographic region of delivery breaks down as follows:
(EUR millions)
2008
2007
2006
France
United States
Japan
Other
2,747
4,256
4,018
1,855
3,519
1,538
2,457
4,064
4,244
1,949
3,199
1,332
2,295
3,531
4,141
2,086
2,798
1,165
17,933
17,245
16,016
Revenue
2008 Annual Report
137
Operating investments by geographic region are as follows:
(EUR millions)
France
United States
Japan
Other
Operating investments
2008
2007
2006
509
195
169
19
158
59
415
241
203
37
97
45
327
128
142
92
87
54
1,109
1,038
830
Operating investments correspond to the amounts capitalized during the fiscal year rather than payments made during the fiscal year.
No geographic breakdown of segment assets is provided since a significant portion of these assets consists of brands and goodwill,
which must be analyzed on the basis of the revenue generated by these assets in each region, and not in relation to the region of
their legal ownership.
22.3 Quarterly information
Quarterly sales by business group break down as follows:
Fiscal year 2008
(EUR millions)
Christian
Dior Wines and
Couture
Spirits
Fashion
and Leather Perfumes and
Goods
Cosmetics
Watches
and
Jewelry
Other and
Selective
holding
Retailing companies Eliminations Total
First quarter
Second quarter
Third quarter
Fourth quarter
184
182
197
202
640
652
746
1,088
1,445
1,323
1,471
1,771
717
645
719
787
211
206
239
223
1,011
979
1,015
1,371
56
54
43
75
Total revenue
765
3,126
6,010
2,868
879
4,376
228
Christian
Dior Wines and
Couture
Spirits
Fashion
and Leather
Goods
Perfumes
and
Cosmetics
Watches
and
Jewelry
(84)
(69)
(78)
(88)
4,180
3,972
4,352
5,429
(319) 17,933
Fiscal year 2007
(EUR millions)
Other and
Selective
holding
First quarter
Second quarter
Third quarter
Fourth quarter
184
184
202
217
689
625
759
1,153
1,347
1,254
1,420
1,607
663
601
697
770
189
201
199
244
937
947
987
1,293
41
35
30
37
Total revenue
787
3,226
5,628
2,731
833
4,164
143
Christian
Dior Wines and
Couture
Spirits
Fashion
and Leather
Goods
Perfumes
and
Cosmetics
Watches
and
Jewelry
(66)
(63)
(67)
(71)
3,984
3,784
4,227
5,250
(267) 17,245
Fiscal year 2006
(EUR millions)
Other and
Selective
holding
First quarter
Second quarter
Third quarter
Fourth quarter
165
164
193
209
632
588
674
1,100
1,296
1,170
1,263
1,493
597
572
638
712
157
176
176
228
891
900
920
1,166
39
51
43
32
Total revenue
731
2,994
5,222
2,519
737
3,877
165
138
2008 Annual Report
(60)
(49)
(63)
(57)
3,717
3,572
3,844
4,883
(229) 16,016
Note 23- Revenue and expenses by nature
23.1 Revenue
Revenue consists of the following:
2008
2007
2006
Revenue generated by brands and trade names
Royalties and license revenue
Income from investment property
Other
17,519
165
78
171
16,886
140
39
180
15,657
132
34
193
Total
17,933
17,245
16,016
(EUR millions)
2008
2007
2006
Advertising and promotion expenses
Commercial lease expenses
Personnel costs
Research and development expenses
2,125
1,051
3,043
43
2,038
1,064
2,830
46
1,850
1,016
2,710
43
(EUR millions)
23.2 Expenses by nature
Profit from recurring operations includes the following expenses:
Advertising and promotion expenses mainly consist of the cost
of media campaigns and point-of-sale advertising, and also
include personnel costs dedicated to this function.
As of December 31, 2008, a total of 2,551 stores were operated
by the Group worldwide (2,269 in 2007 and 2,074 in 2006),
particularly by Fashion and Leather Goods and Selective
Retailing.
In certain countries, leases for stores are contingent on the payment of minimum amounts in addition to a variable amount, especially
for stores with lease payments indexed to revenue. The total lease expense for the Group’s stores breaks down as follows:
2008
2007
2006
492
175
221
163
488
176
204
196
440
173
209
194
1,051
1,064
1,016
(EUR millions)
2008
2007
2006
Salaries and social charges
Pensions, medical costs and similar expenses in respect of defined benefit plans
Stock option plan and related expenses
2,965
31
47
2,732
42
56
2,603
63
44
Total
3,043
2,830
2,710
(EUR millions)
Fixed or minimum lease payments
Variable portion of indexed leases
Airport concession fees - fixed portion or minimum amount
Airport concession fees - variable portion
Commercial lease expenses for the period
Personnel costs consist of the following elements:
2008 Annual Report
139
Note 24- Other operating income and expenses
2008
(EUR millions)
Net gains (losses) on disposals of fixed assets
Restructuring costs
Amortization or impairment of brands, trade names, goodwill and other property
Other, net
Other operating income and expenses
In 2008, other operating income and expenses comprised capital
gains realized on the sale of various assets in the amount of
11 million euros and costs for the restructuring of industrial and
commercial processes in the amount of 90 million euros. These
amounts related to the discontinuation of certain product lines,
the closure of retail stores considered as insufficiently profitable
and the reorganization of the operations of Glenmorangie. The
latter notably included the gradual withdrawal from activities
performed on behalf of third parties and the disposal of certain
2007
2006
11
(90)
(57)
(17)
(72)
(25)
(16)
(4)
(63)
(28)
(36)
(153)
(117)
(127)
assets, notably the industrial facility in Broxburn (United
Kingdom) as well as the Glen Moray brand and distillery.
In 2007, other operating income and expenses mainly comprised
the net loss on the sale of La Tribune group, the logistics company
Kami (Fashion and Leather Goods), Omas writing instruments
and disposals of minority interests mentioned in Note 1.20.
In 2006, restructuring costs, which were of a commercial or
industrial nature, mainly related to the Fashion and Leather
Goods and the Perfumes and Cosmetics business groups.
Note 25- Net financial income/expense
(EUR millions)
2008
2007
2006
Borrowing costs, excluding perpetual bonds
Interest and income from current available for sale financial assets
Fair value adjustment of borrowings and hedges, excluding perpetual bonds
Net cost of perpetual bonds
Cost of net financial debt
Dividends received from non-current available for sale financial assets
Ineffective portion of foreign currency hedges
Net gain/(loss) related to available for sale financial assets and other financial instruments
Other items - net
Other financial income and expenses
(316)
18
(24)
(322)
11
(64)
53
(26)
(26)
(308)
32
2
2
(272)
29
(97)
44
(21)
(45)
(254)
26
(2)
(230)
26
(45)
163
(21)
123
Net financial income/(expense)
(348)
(317)
(107)
In 2007 and 2006, proceeds relating to available for sale financial
assets and other financial instruments included capital gains in the
amounts of 44 million euros and 163 million euros, respectively.
In 2008, this item notably included LVMH’s share in the capital
140
2008 Annual Report
gains arising on the sale of the French video game retailer
Micromania as well as various impairment losses on available
for sale financial assets.
Income from cash, cash equivalents and current available for sale financial assets comprises the following items:
2008
2007
2006
Income from cash and cash equivalents
Interest from financial receivables
6
12
21
11
18
8
Interest and income from current available for sale financial assets
18
32
26
(EUR millions)
The revaluation effects of financial debt and interest rate derivatives, excluding perpetual bonds, are attributable to the following items:
(EUR millions)
2008
2007
2006
Hedged financial debt, excluding perpetual bonds
Hedging instruments
Unallocated derivatives
Debt recognized in accordance with the fair value option
(12)
11
(15)
(8)
16
(15)
(2)
3
75
(77)
(4)
6
Effects of revaluation of financial debt and rate instruments,
excluding perpetual bonds
(24)
2
-
2007
2006
The ineffective portion of exchange rate derivatives breaks down as follows:
(EUR millions)
2008
Financial cost of commercial foreign exchange hedges
Financial cost of foreign-currency denominated net asset hedges
Change in the fair value of unallocated derivatives
(71)
11
(4)
(97)
(1)
1
(47)
(7)
9
Ineffective portion of foreign exchange derivatives
(64)
(97)
(45)
(EUR millions)
2008
2007
2006
Current income taxes for the period
Current income taxes relating to previous periods
Current income taxes
Change in deferred income taxes
Impact of changes in tax rates on deferred taxes
Deferred income taxes
(917)
5
(912)
8
8
(991)
6
(985)
83
47
130
(990)
4
(986)
136
136
Total tax expense per income statement
(904)
8
(855)
(53)
(850)
(95)
Note 26- Income taxes
26.1 Analysis of the income tax expense
Tax on items recognized in equity
The effective tax rate is as follows:
(EUR millions)
Profit before tax
Total income tax expense
Effective tax rate
2008
2007
2006
3,120
(904)
29.0%
3,176
(855)
26.9%
2,975
(850)
28.6%
2008 Annual Report
141
26.2 Analysis of the difference between the theoretical and effective income tax rates
The theoretical income tax rate, defined as the rate applicable in law to the Group’s French companies, may be reconciled as follows
to the effective income tax rate disclosed in the consolidated financial statements:
(as % of income before tax)
2008
2007
2006
French statutory tax rate
- changes in tax rates
- differences in tax rates for foreign companies
- tax losses and tax loss carry forwards
- difference between consolidated and taxable income, income taxable at reduced rates
- withholding taxes
34.4
(6.1)
(0.2)
0.6
0.3
34.4
(1.5)
(4.4)
(3.6)
1.6
0.4
34.4
0.1
(3.1)
(5.1)
1.9
0.4
Effective tax rate of the Group
29.0
26.9
28.6
Since 2000, French companies have been subject to additional income tax, at a rate of 3.3% for 2006, 2007 and 2008, bringing the
theoretical tax rate to 34.4% in each fiscal year.
26.3 Sources of deferred taxes
In the income statement:
(EUR millions)
Valuation of brands
Fair value adjustment of vineyard land
Other revaluation adjustments
Gains and losses on available for sale financial assets
Gains and losses on hedges of future foreign currency cash flows
Provisions for contingencies and losses (1)
Intercompany margin included in inventories
Other consolidation adjustments (1)
Losses carried forward
TOTAL
2008
2007
2006
(38)
3
(3)
16
2
10
8
(45)
(3)
(3)
(8)
(12)
80
11
(33)
28
11
63
(8)
22
26
105
42
8
130
136
2008
2007
2006
In equity:
(EUR millions)
(59)
(7)
23
(26)
18
(33)
(46)
(2)
(43)
TOTAL
(43)
(41)
(91)
142
2008 Annual Report
In the balance sheet:
2008
(3,213)
(503)
(305)
(23)
(14)
(EUR millions)
Valuation of brands
Other revaluation adjustments
Provisions for contingencies and losses (1)
143
301
148
124
Intercompany margin included in inventories
Other consolidation adjustments (1)
Losses carried forward
2007
(3,015)
(443)
(318)
(7)
(27)
2006
(3,115)
(412)
(316)
(36)
(25)
78
223
160
144
94
212
89
174
(3,342)
(3,205)
(3,335)
2008
2007
2006
Deferred tax assets
Deferred tax liabilities
674
(4,016)
556
(3,761)
451
(3,786)
Net deferred tax asset (liabilities)
(3,342)
(3,205)
(3,335)
TOTAL
(1) Mainly tax-driven provisions, accelerated tax depreciation and finance lease.
Net deferred taxes on the balance sheet include the following assets and liabilities:
(EUR millions)
26.4 Tax loss carry forwards
26.5 Tax consolidation
As of December 31, 2008, for LVMH SA unused tax loss carry
forwards and tax credits, for which no deferred tax assets were
recognized, had a potential impact on the future tax expense
of 307 million euros (360 million euros in 2007, 529 million
euros in 2006).
• Tax consolidation agreements in France allow certain French
companies of the Group to combine their taxable profits to
calculate the overall tax expense for which only the parent
company is liable.
As of December 31, 2008, for Christian Dior, ordinary tax
loss carry forwards amounted to 199 million euros (87 million
euros in 2007, 83 million euros in 2006). On the basis of the
prospects for the use of these tax loss carry forwards, deferred
tax assets were recognized in the amount of 30 million euros
as of December 31, 2008, the same amount recognized a year
earlier (compared to 28 million euros as of December 31, 2006).
Unused tax loss carry forwards for which no deferred tax assets
were recognized had a potential impact on the future tax expense
of 39 million euros.
This tax consolidation agreement generated for the Group
a decrease in the current tax expense of 121 million euros
in 2008, of which 117 million euros were for LVMH and
4 million euros for Christian Dior (103 million euros in 2007,
63 million euros in 2006 for the Group).
• The application of other tax consolidation agreements in
certain foreign countries, notably in the United States and
Italy, generated current tax savings of 96 million euros in 2008
(119 million euros in 2007, 113 million euros in 2006).
2008 Annual Report
143
Note 27- Earnings per share
2008
Group share of net earnings (EUR millions)
Impact of diluting instruments on subsidiaries
796
(4)
2007
880
(10)
2006
797
(6)
792
181,727,048
(3,422,564)
178,304,484
870
181,727,048
(3,579,443)
178,147,605
791
181,727,048
(4,204,606)
177,522,442
Average number of shares on which the above calculation is based
Dilution effect of stock option plans
4.46
178,304,484
627,694
4.94
178,147,605
962,210
4.49
177,522,442
1,719,672
Average number of shares in circulation after dilution
178,932,178
179,109,815
179,242,114
4.43
4.86
4.41
Group share of net earnings, diluted
Average number of shares in circulation during the period
Average number of Christian Dior treasury shares owned during the period
Average number of shares on which the calculation before dilution is based
Basic Group share of net earnings per share (EUR)
Diluted Group share of net earnings per share (EUR)
Note 28- Provisions for pensions, medical costs and similar commitments
28.1Expense for the year
(EUR millions)
2007
2006
Current service cost
Impact of discounting
Expected return on plan assets
Amortization of actuarial gains and losses
Past service cost
Changes in regime
37
23
(18)
(11)
2
(2)
38
22
(18)
(2)
2
-
48
22
(14)
1
2
4
Total expense for the period for defined benefit plans
31
(77)
42
17
63
25
Effective return on/(cost of) plan assets
144
2008
2008 Annual Report
28.2 Net recognized commitment
(EUR millions)
2008
2007
2006
Benefits covered by plan assets
Benefits not covered by plan assets
Defined benefit obligation
Fair value of plan assets
Actuarial differences not recognized in the balance sheet
Past service cost not yet recognized
Unrecognized items
549
118
667
(351)
(79)
(17)
(96)
503
116
619
(403)
27
(8)
19
510
135
645
(385)
10
(10)
-
Net recognized commitment
220
235
260
Of which:
Non-current provisions
Current provisions
Other assets
235
7
(22)
242
5
(12)
263
4
(7)
TOTAL
220
235
260
28.3 Breakdown of the change in net recognized commitment
Defined benefit
obligation
(EUR millions)
Fair value
of plan assets
Unrecognized
amounts
Net recognized
commitment
Net expense for the period
Payments to beneficiaries
Contributions to plan assets
Contributions of employees
Changes in scope and reclassifications
Changes in regime
Actuarial differences: experience impacts
Actuarial differences: change in assumptions
619
60
(47)
2
11
14
(2)
(2)
12
(403)
(18)
31
(39)
(2)
(9)
(7)
96
-
19
(11)
(1)
1
2
(94)
(12)
235
31
(16)
(39)
1
8
-
667
(351)
(96)
220
The actuarial assumptions applied to estimate commitments as of December 31, 2008 in the main countries where such commitments
have been undertaken, were as follows:
2008
(percentage)
Discount rate
Expected return on
investments
Future rate of increase
in salaries
2007
2006
France
Japan
United
States
France
Japan
United
States
France
Japan
United
States
5.5
2.25
6.0
5
2.25
6
4.5
2
5.75
4.5
4.0
7.75
4.75
4
7.75
4.5
4
8
3.5
2.5
4.5
3.25
2.5
4.5
2 to 4
2 to 4
2 to 4.5
The expected rate of return on investments is an overall rate reflecting the structure of the financial assets mentioned in
Note 28.5.
The assumed rate of increase of medical expenses in the United States is between 8% and 5% over the next four years, and 5%
thereafter.
2008 Annual Report
145
28.4 Analysis of benefits
The breakdown of the defined benefit obligation by type of benefit plan is as follows:
2008
2007
2006
Retirement and other indemnities
Medical costs of retirees
Jubilee awards
Pensions
Early retirement indemnities
Other
116
42
11
478
9
11
95
36
11
453
12
12
89
49
11
467
13
16
667
619
645
(EUR millions)
Geographic breakdown of defined benefit obligation is as follows:
2008
2007
2006
France
United States
Japan
299
159
126
74
9
279
178
100
53
9
281
191
112
52
9
667
619
645
(EUR millions)
The main components of the Group’s net commitment for
retirement and other benefit obligations as of December 31,
2008 are as follows:
• in France, these commitments mainly include jubilee
awards and retirement indemnities, the payment of which
is determined by French law and collective bargaining
agreements, respectively after a certain number of years of
service or upon retirement; they also include the commitment
to members of the Group’s executive bodies, who are covered
by an additional pension plan after a certain number of
years’ service, the amount of which is linked to their last
year’s remuneration;
• in Europe (excluding France), the main commitments concern
pension schemes and schemes for the reimbursement of the
medical expenses of retirees, set up in the United Kingdom
by certain Group companies, as well as the TFR (Trattamento
di Fine Rapporto) in Italy, a legally required end-of-service
allowance, paid regardless of the reason for the employee’s
departure from the Company, and in Switzerland, participation
by Group companies in the mandatory Swiss occupational
pension scheme, the LPP (Loi pour la Prévoyance Professionnelle);
• in the United States, the commitment relates to defined benefit
plans or schemes for the reimbursement of medical expenses
of retirees set up by certain Group companies.
28.5 Analysis of related plan assets
Market value of the underlying investments in plan assets is as follows:
(percentage)
Shares
Bonds
- Private issues
- Public issues
Real estate, cash and other assets
Fair value of related plan assets
2008
2007
2006
43
51
48
36
13
8
33
11
5
32
15
5
100
100
100
Plan assets do not include any real estate assets operated by the Group or any LVMH or Christian Dior shares for significant amounts.
The sums that will be paid to the funds in 2009 are estimated at 45 million euros.
146
2008 Annual Report
Note 29- Off balance sheet commitments
29.1 Purchase commitments
(EUR millions)
2008
2007
2006
Grapes, wines and distilled alcohol
Other purchase commitments for raw materials
Industrial and commercial fixed assets
Investments in joint venture shares and non-current available for sale financial assets
1,671
64
180
63
1,690
24
105
55
1,547
41
151
84
Some Wines and Spirits companies have contractual purchase
arrangements with various local producers for the future supply
of grapes, still wines and distilled alcohol. These commitments
are valued, depending on the nature of the purchases, on the
basis of the contractual terms or known year-end prices and
estimated production yields.
As of December 31, 2008, the maturity dates of these commitments break down as follows:
(EUR millions)
Grapes, wines and distilled alcohol
Other purchase commitments for raw materials
Industrial and commercial fixed assets
Investments in joint venture shares and non-current available for sale financial assets
Less than
one year
One to
five years
More than
five years
Total
489
40
90
23
643
24
90
28
539
12
1,671
64
180
63
29.2 Lease and similar commitments
In addition to leasing its stores, the Group also finances some of its equipment through long term operating leases. Some fixed assets
and equipment were also purchased or refinanced under finance leases.
Operating leases and concession fees
The fixed or minimum portion of commitments in respect of operating lease or concession contracts over the irrevocable period of
the contracts were as follows as of December 31, 2008:
(EUR millions)
2008
2007
2006
Less than one year
One to five years
More than five years
824
2,077
1,025
722
1,928
979
643
1,460
833
Commitments given for operating leases and concession fees
3,926
24
50
8
3,629
21
42
4
2,936
20
46
2
82
67
68
Less than one year
One to five years
Commitments received for sub-leases
2008 Annual Report
147
Finance leases
The amount of the Group’s irrevocable commitments under finance lease agreements as of December 31, 2008 breaks down as follows:
2008
(EUR millions)
Minimum
future
payments
2007
Present
value of
payments
Minimum
future
payments
2006
Present
value of
payments
Minimum
future
payments
Present
value of
payments
Less than one year
One to five years
Total future minimum payments
Of which: financial interest
40
81
364
485
(317)
41
61
66
22
69
344
435
(299)
21
45
70
27
76
395
498
(345)
27
50
76
Present value of minimum
future payments
168
168
136
136
153
153
29.3 Contingent liabilities and outstanding litigation
As part of its day-to-day management, the Group is party to
various legal proceedings concerning brand rights, the protection
of intellectual property rights, the set-up of selective retailing
networks, licensing agreements, employee relations, tax audits
and other areas relating to its business. The Group believes that
the provisions recorded in the balance sheet in respect of these
risks, litigation or disputes, known or outstanding at year-end,
are sufficient to avoid its consolidated financial net worth being
materially impacted in the event of an unfavorable outcome.
29.4 Collateral and other guarantees
As of December 31, 2008, these commitments break down as follows:
2008
2007
2006
Securities and deposits
Other guarantees
59
48
61
28
56
56
Guarantees given
107
89
112
25
32
63
One to five More than five
years
years
TOTAL
(EUR millions)
Guarantees received
Maturity dates of these commitments are as follows:
(EUR millions)
Less than one
year
Securities and deposits
Other guarantees
17
24
19
24
23
-
59
48
Guarantees given
41
43
23
107
8
14
3
25
Guarantees received
29.5 Other commitments
The Group is not aware of any significant off balance sheet commitments other than those described above.
148
2008 Annual Report
Note 30- Related party transactions
30.1 Relations of the Christian Dior Group with the Groupe Arnault and Financière Agache Groups
The parent company of Christian Dior Group is Financière Agache SA, which is controlled by Groupe Arnault SAS.
Relations of the Christian Dior Group with the Groupe Arnault Group
Groupe Arnault SAS provides assistance to the Christian Dior Group in the areas of development, engineering, corporate and real
estate law. In addition, Groupe Arnault SAS leases office premises to LVMH.
The Christian Dior Group leases office space to the Groupe Arnault Group and also provides it with various forms of administrative assistance.
Transactions between the Christian Dior Group and the Groupe Arnault Group may be summarized as follows:
(EUR millions)
• Amounts billed by the Groupe Arnault Group to the Christian Dior Group
Trade accounts payable as of December 31
• Amounts billed by the Group Christian Dior to the Groupe Arnault Group
Trade accounts receivable as of December 31
2008
(10)
(1)
3
2
2007
(10)
(1)
3
1
2006
(9)
(2)
2
1
In September 2008, a Christian Dior Group company sold a property located in New York to an affiliate of Groupe Arnault for a
price of 17 million US dollars.
Relations of the Christian Dior Group with the Financière Agache Group
In January 2008, Christian Dior Couture acquired John Galliano, a company that operates licenses and provides creative
direction services to Christian Dior Couture, from a subsidiary of Financière Agache for total consideration of 17 million euros.
Transactions between the Christian Dior Group and the Financière Agache Group may be summarized as follows:
(EUR millions)
• Amounts billed by the Financière Agache Group to the Christian Dior Group
Trade accounts payable as of December 31
• Amounts billed for financial interest to Christian Dior Group
Balance of current account liabilities as of December 31
• Amounts billed by the Christian Dior Group to the Financière Agache Group
Trade accounts receivable as of December 31
• Amounts billed for financial interest to Groupe Financière Agache
Balance of current account assets as of December 31
2008
(1)
-
2007
(10)
(2)
(3)
(28)
1
1
-
2006
(9)
(2)
(4)
(46)
1
1
1
-
Lastly, in February 2008, a Christian Dior Group company acquired a work of art valued at 15.9 million euros from an affiliate of
Financière Agache.
2008 Annual Report
149
30.2 Relations of the Christian Dior Group with Diageo
Moët Hennessy is the holding company for the LVMH Group’s
Wines and Spirits businesses, with the exception of Château
d’Yquem and certain champagne vineyards. Since 1994,
Diageo has held a 34% stake in Moët Hennessy. At this time
an agreement has been concluded between Diageo and Moët
Hennessy for the apportionment of holding company expenses
between Moët Hennessy and the other holding companies of
the LVMH Group.
Under this agreement, Moët Hennessy assumed 23% of shared
expenses in 2008 (24% in 2007 and 2006). After taking into
consideration the effects of the agreement, Moët Hennessy’s
total administrative expenses amounted to 32 million euros in
2008 (33 million euros in 2007, 27 million euros in 2006); the
total administrative expenses borne by the Wines and Spirits
business group amounted to 74 million euros in 2008 (55 million
euros in 2007, 48 million euros in 2006).
Lastly, in September 2008, as part of the gradual withdrawal by
Glenmorangie from bottling activities on behalf of third parties,
LVMH sold the Broxburn plant (United Kingdom) to Diageo
for 15.5 million pounds sterling.
30.3 Executive bodies
The total compensation paid to the members of the Board of Directors, in respect of their functions within the Group, breaks down
as follows:
2008
2007
2006
Gross compensation, employers’ charges and benefits in kind
Post-employment benefits
Other long term benefits
End of contract indemnities
Stock option and similar plans
13
1
14
10
1
15
9
1
13
TOTAL
28
26
23
(EUR millions)
The net commitment recognized as of December 31, 2008 for post-employment benefits is 1 million euros (1 million euros as of
December 31, 2007 and as of December 31, 2006).
Note 31- Subsequent events
There were no significant subsequent events as of February 5, 2009, the date on which the accounts were approved for publication
by the Board of Directors.
150
2008 Annual Report
Consolidated companies
Percentage
Consolidation Interest
method
Companies
Registered office
Christian Dior SA
Financière Jean Goujon
Sadifa
Lakenbleker
Paris, France
Paris, France
Paris, France
Amsterdam, Netherlands
FC
FC
FC
100%
100%
100%
Paris, France
Monaco, Principality of Monaco
Dusseldorf, Germany
New York, USA
London, United Kingdom
Geneva, Switzerland
Paris, France
Badia a Settimo-Scandicci, Italy
Pierre Bénite, France
Hong Kong, China
Kuala-Lumpur, Malaysia
FC
FC
FC
FC
FC
FC
FC
FC
ME
FC
FC
100%
100%
100%
100%
100%
100%
100%
75%
25%
100%
100%
Hong Kong, China
Hong Kong, China
Singapore, Republic of Singapore
Saipan, Saipan
Sydney, Australia
Auckland, New Zealand
Bangkok, Thailand
Tokyo, Japan
Seoul, South Korea
Tumon Bay Guam, Guam
Madrid, Spain
Sao Paulo, Brazil
Milan, Italy
Brussels, Belgium
Lugagnano Val d’Arda, Italy
Marbella-Puerto Banus, Spain
New York, USA
Sieci-Pontassieve, Italy
Prague, Czech Republic
Casablanca, Morocco
Dubai, United Arab Emirates
Macao, Macao
Pforzheim, Germany
Lomas, Mexico
Shanghai, China
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
100%
90%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70%
75%
100%
51%
100%
100%
100%
100%
100%
100%
100%
Paris, France
Bangkok, Thailand
Abu Dhabi, United Arab Emirates
Luxembourg, Luxembourg
Athens, Greece
Moscow, Russia
Moscow, Russia
FC
FC
FC
100%
100%
100%
(2)
(2)
FC
FC
FC
FC
75%
51%
100%
100%
Milan, Italy
FC
100%
(2)
(2)
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 Espanola SL
Christian Dior do Brasil Ltda
Christian Dior Italia Srl
Christian Dior Belgique SA
Bopel Srl
Christian Dior Puerto Banus SL
Les Jardins d’Avron LLC
Lucilla Srl
Christian Dior Couture CZ s.r.o.
Christian Dior Couture Maroc
Christian Dior Couture FZE
Christian Dior Macau Company Ltd
Les Ateliers Bijoux GmbH
Christian Dior S. de R.L. de CV
Christian Dior Commercial
(Shanghai) Co. Ltd
Ateliers Modèles SAS
Ateliers Modèles UK
Baby Siam Couture Company Ltd
CDC Abu-Dhabi LLC
CDCH SA
Dior Grèce SA
Christian Dior Couture RUS LLC
Stoleshnikov LLC
Calto Srl
CDC General Trading LLC
Christian Dior Istanbul
Magazacilik Anonim Sirketi
Christian Dior Trading India Private Ltd
Manifatturauno Srl
John Galliano SA
Maslak-Istanbul, Turkey
FC
51%
Mumbai, India
Fosso (Venice), Italy
Paris, France
FC
FC
FC
51%
80%
91%
Percentage
method
Companies
Registered office
Les Ateliers Horlogers Dior SA
Dior Montres SARL
Christian Dior Couture Qatar LLC
Le Gosse SA
Vanity Srl
La Chaux-de-Fonds, Switzerland (3)
Paris, France (3)
Doha, Qatar
Geneva, Switzerland
Vigonovo (Venice), Italy
(2)
(2)
FC
FC
100%
100%
Epernay, France
Barcelona, Spain
Geneva, Switzerland
Epernay, France
New York, USA
Mexico, Mexico
Ay, France
Ay, France
Ay, France
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
Brussels, Belgium
Gye sur Seine, France
Vienna, Austria
Warsaw, Poland
New York, USA
Baarn, Netherlands
New York, USA
Courbevoie, France (1)
Buenos Aires, Argentina
Epernay, France
Yountville (California), USA
Margaret River, Australia
Sydney, Australia
Sao Paulo, Brazil
FC
FC
FC
FC
FC
FC
FC
FC
FC
PC
FC
FC
FC
FC
FC
29%
29%
26%
29%
29%
29%
29%
29%
29%
14%
29%
29%
29%
29%
29%
Blenheim, New Zealand
Coldstream Victoria, Australia
St Helena (California), USA
Reims, France
Reims, France
FC
FC
FC
FC
FC
FC
29%
29%
29%
26%
29%
29%
New York, USA (*)
Tokyo, Japan
Helsinki, Finland
Stockholm, Sweden
Hoevik, Norway
Copenhagen, Denmark
Munich, Germany
Milan, Italy
Reims, France
Reims, France
Madrid, Spain
Sauternes, France
Sauternes, France
Cognac, France
Amsterdam, Netherlands (1)
Dublin, Ireland
Dublin, Ireland
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
PC
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
28%
29%
29%
29%
11%
WINES AND SPIRITS
Champagne Moët & Chandon SCS
Moët Hennessy UK Ltd
Moët Hennessy España SA
Moët Hennessy (Switzerland) SA
Champagne Des Moutiers SA
Schieffelin Partner Inc
Moët Hennessy de Mexico, SA de CV
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
Moët Hennessy Polska SP Z.O.O.
Moët Hennessy Czech Republic Sro
Schieffelin & Somerset
Moët Hennessy (Nederland) BV
Moët Hennessy USA, Inc
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
Veuve Clicquot Ponsardin SCS
Société Civile des Crus de
Champagne SA
Veuve Clicquot UK Ltd
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 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
FC
FC
2008 Annual Report
72%
72%
151
Percentage
method
Companies
Registered office
Hennessy Far East Ltd
Moët Hennessy Diageo Hong Kong Ltd
Riche Monde (China) Ltd
Moët Hennessy Diageo Singapore
PTE Ltd
Riche Monde Malaisie Inc
Riche Monde Taipei Ltd
Diageo Moët Hennessy Thailand Ltd
Moët Hennessy Korea Ltd
Moët Hennessy Shanghai Ltd
Moët Hennessy India Pvt. Ltd
Moët Hennessy Taiwan Ltd
MHD Chine Co Ltd
MHWH Limited
Moët Hennessy Whitehall Russia SA
Moët Hennessy Vietnam
Importation Co. Ltd
Moët Hennessy Vietnam Distribution
Moët Hennessy Diageo KK
Moët Hennessy Asia Pacific PTE Ltd
Moët Hennessy Australia Ltd
Millennium Import LLC
Millennium Brands Ltd
Polmos Zyrardow
Moët Hennessy VR Ltd
The Glenmorangie Company Ltd
Macdonald & Muir Ltd
Glenaird Ltd
The Scotch Malt Whisky Society Ltd
Wen Jun Spirits Company Ltd
Wen Jun Spirits Sales Company Ltd
Hong Kong, China
Hong Kong, China (1)
Shanghai, China (1)
Singapore (1)
FC
FC
FC
FC
29%
29%
29%
29%
Petaling Jaya, Malaysia (1)
Taipei, Taiwan (1)
Bangkok, Thailand (1)
Seoul, South Korea
Shanghai, China
New Delhi, India
Taipei, Taiwan
Shanghai, China (1)
Limassol, Cyprus
Moscow, Russia
Ho Chi Minh City, Vietnam
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
14%
29%
29%
29%
29%
29%
29%
29%
14%
14%
29%
Ho Chi Minh City, Vietnam
Tokyo, Japan (1)
Singapore
Rosebury, Australia
Minneapolis, Minnesota, USA
Dublin, Ireland
Zyrardow, Poland
Edinburgh, United Kingdom
Chengdu, China
Chengdu, China
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
29%
29%
29%
29%
29%
29%
29%
29%
29%
29%
14%
29%
16%
16%
FC
FC
44%
44%
FC
FC
FC
FC
FC
FC
44%
43%
44%
44%
44%
44%
(2)
(2)
FC
44%
(2)
(2)
FC
44%
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
FC
FC
FC
FC
44%
44%
44%
44%
FASHION AND LEATHER GOODS
Louis Vuitton Malletier SA
Paris, France
Manufacture de souliers
Fiesso d’Artico, Italy
Louis Vuitton S.r.l.
Louis Vuitton Saint Barthélémy SNC Saint Bartholomew, French Antilles
Louis Vuitton Cantacilik Ticaret AS Istanbul, Turkey
Les Ateliers de Pondichery Private Ltd Pondichéry, India
Louis Vuitton International SNC Paris, France
Louis Vuitton India Holding Private Ltd Bangalore, India
Société des Ateliers Louis Vuitton SNC Paris, France
Louis Vuitton Bahrein
Manama, Bahrain
Société Louis Vuitton Services SNC Paris, France
Louis Vuitton Qatar LLC
Doha, Qatar
Société des Magasins Louis
Paris, France
Vuitton France SNC
Belle Jardinière SA
Paris, France
Belle Jardinière Immo SAS
Paris, France
Sedivem SNC
Paris, France
Les Ateliers Horlogers Louis Vuitton SA La Chaux-de-Fonds, Switzerland
Louis Vuitton Monaco SA
Monte Carlo, Monaco
ELV SNC
Paris, France
LVMH Fashion Group UK Ltd
Louis Vuitton Deutschland GmbH Düsseldorf, Germany
Louis Vuitton Ukraine LLC
Kiev, Ukraine
LV Cup España SL
Valencia, Spain
Sociedad Catalana Talleres
Barcelona, Spain
Artesanos Louis Vuitton SA
Louis Vuitton BV
Louis Vuitton Belgium SA
Brussels, Belgium
Louis Vuitton Hellas SA
Athens, Greece
Louis Vuitton Cyprus Limited
Nicosia, Cyprus
152
2008 Annual Report
Percentage
method
Companies
Registered office
Louis Vuitton Portugal Maleiro, Ltda.
Louis Vuitton Ltd
Louis Vuitton Danmark A/S
Louis Vuitton Aktiebolag SA
Louis Vuitton Suisse SA
Louis Vuitton Ceska s.r.o.
Louis Vuitton Osterreich GmbH
LV US Manufacturing, Inc
Somarest SARL
Louis Vuitton Hawaii, Inc
Atlantic Luggage Company Ltd
Louis Vuitton Guam, Inc
Louis Vuitton Saipan, Inc
Louis Vuitton Norge AS
San Dimas Luggage Company
Louis Vuitton Vietnam Company Ltd
Louis Vuitton Suomy Oy
Louis Vuitton Romania Srl
LVMH FG Brasil Ltda
Louis Vuitton Panama
Louis Vuitton Mexico S de RL de CV
Louis Vuitton Uruguay SA
Louis Vuitton Chile Ltda
Louis Vuitton (Aruba) NV
LVMH Fashion Group Pacific Ltd
LV Trading Hong Kong 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 Trading India Private Ltd
Louis Vuitton EAU LLC
Louis Vuitton FZCO
Louis Vuitton Korea Ltd
LVMH Fashion Group Trading
Korea Ltd
Louis Vuitton Hungaria Sarl
Louis Vuitton Argentina SA
Louis Vuitton Vostock LLC
LV Colombia SA
Louis Vuitton Maroc Sarl
Louis Vuitton Venezuela SA
Louis Vuitton South Africa Ltd
Louis Vuitton Macau Company Ltd
LVMH Fashion Group (Shanghai)
Trading Co. Ltd
LVJ Group KK
LVMH Fashion Group Americas Inc
Louis Vuitton Canada, Inc
Marc Jacobs International, LLC
Marc Jacobs International (UK) Ltd
Marc Jacobs Trademark, LLC
Marc Jacobs Japon KK
Marc Jacobs International Japan
Co Ltd
Loewe SA
Loewe Hermanos SA
Lisbon, Portugal
Tel Aviv, Israel
Copenhagen, Denmark
Stockholm, Sweden
Geneva, Switzerland
Vienna, Austria
New York, USA
Sibiu, Romania
Honolulu (Hawaii), USA
Hamilton, Bermuda
Guam
Saipan, Mariana Islands
Oslo, Norway
New York, USA
Hanoi, Vietnam
Helsinki, Finland
Bucharest, Romania
Sao Paulo, Brazil
Panama City, Panama
Mexico, Mexico
Montevideo, Uruguay
Santiago de Chile, Chile
Oranjestad, Aruba
Hong Kong, China
Hong Kong, China
Hong Kong, China
Makati, Philippines
Singapore
Jakarta, Indonesia
Kuala-Lumpur, Malaysia
Bangkok, Thailand
Taipei, Taiwan
Sydney, Australia
Shanghai, China
New Delhi, India
Seoul, South Korea
Seoul, South Korea
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
(2)
(2)
FC
FC
FC
29%
44%
44%
Budapest, Hungary
Moscow, Russia
Santafe de Bogota, Colombia
Casablanca, Morocco
Caracas, Venezuela
Johannesbourg, South Africa
Macao, China
Shanghai, China
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
44%
44%
44%
44%
Tokyo, Japan
New York, USA (*)
Toronto, Canada
New York, USA (*)
New York, USA (*)
Tokyo, Japan
Tokyo, Japan
FC
FC
FC
FC
FC
FC
FC
FC
43%
44%
44%
42%
44%
14%
21%
43%
Madrid, Spain
Madrid, Spain
FC
FC
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
18%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
43%
44%
44%
43%
44%
44%
44%
22%
Percentage
method
Companies
Registered office
Manufacturas Loewe SL
LVMH Fashion Group France
SNC
Loewe Hermanos UK Ltd
Loewe Saïpan, Inc
Loewe Guam, Inc
Loewe Hong Kong Ltd
Loewe Commercial & Trading Co, Ltd
Loewe Fashion Pte Ltd
Loewe Fashion (M) SDN BHD
Loewe Taiwan Ltd
Loewe Korea Ltd
Berluti SA
Société de Distribution Robert
Estienne SNC
Manifattura Ferrarese S.r.l.
Berluti LLC
Rossimoda SpA
Rossimoda USA Ltd
Rossimoda France SARL
Brenta Suole S.r.l.
LVMH Fashion Group Services SAS
Montaigne KK
Modulo Italia S.r.l.
Celine SA
Avenue M International SCA
Enilec Gestion SARL
Celine Montaigne SA
Celine Monte-Carlo SA
Celine Production S.r.l.
Celine Suisse SA
Celine UK Ltd
Celine Inc
Celine Hong Kong Ltd
Celine Commercial & Trading
(Shanghai) Co Ltd
Celine (Singapour) Pte Ltd
Celine Guam Inc
Celine Korea Ltd
Celine Taïwan Ltd
CPC International Ltd
Kenzo SA
Kenzo Belgique SA
Kenzo Homme UK Ltd
Kenzo Japan KK
Givenchy SA
Givenchy Corporation
Givenchy Co. Ltd
Givenchy China Co. Ltd
Givenchy Shanghai Commercial
and Trading Co., Ltd
GCCL Macau 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
Madrid, Spain
Paris, France
FC
FC
44%
44%
Guam
Hong Kong, China
Shanghai, China
Singapore
Kuala Lumpur, Malaysia
Taipei, Taiwan
Seoul, South Korea
Paris, France
Paris, France
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
44%
44%
43%
44%
44%
44%
Ferrara, Italy
New York, USA
Vigonza, Italy
New York, USA
Paris, France
Vigonza, Italy
Paris, France
Tokyo, Japan
Milan, Italy
Paris, France
Paris, France
Paris, France
Paris, France
Monte Carlo, Monaco
Florence, Italy
Geneva, Switzerland
New York, USA (*)
Hong Kong, China
Shanghai, China
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
43%
43%
43%
28%
44%
43%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
43%
43%
Singapore
Tumon, Guam
Seoul, South Korea
Taipei, Taiwan
Hong Kong, China
Paris, France
Brussels, Belgium
Tokyo, Japan
Paris, France
New York, USA
Tokyo, Japan
Hong Kong, China
Shanghai, China
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
44%
43%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
Macao, China
New York, USA
New York, USA (*)
New York, USA
Oldenzaal, Netherlands
New York, USA
New York, USA
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
44%
44%
44%
FC
44%
FC
44%
Companies
Registered office
Percentage
method
Donna Karan Company Store
(UK) Ltd
Donna Karan H. K. Ltd
Donna Karan (Italy) S.r.l.
Donna Karan (Italy) Production
Services S.r.l.
Fendi International BV
Fun Fashion Qatar WLL
Fendi International SA
Fun Fashion Emirates LLC
Fendi SA
Fun Fashion Bahrain WLL
Fendi S.r.l.
Fendi Dis Ticaret LS
Fendi Adele S.r.l.
Fendi Immobili Industriali S.r.l.
Fendi Italia S.r.l.
Fendi UK Ltd
Fendi France SAS
Fendi North America Inc
Fendi Australia Pty Ltd
Fendi Guam Inc
Fendi (Thailand) Company 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.
Fun Fashion Genève SA
Fun Fashion FZCO LLC
Fendi Marianas, Inc
Fun Fashion Kuwait Co. W.L.L.
Fun Fashion Germany
GmbH & Co. KG
Fendi Macau Company Ltd
Fendi Germany GmbH
Fun Fashion Napoli Srl
Fendi (Shanghai) Co Ltd
Outshine Corporation, SL
Fun Fashion India Pte Ltd
Interservices & Trading SA
Fendi Silk SA
Outshine Mexico, S. de RL de CV
Maxelle SA
Taramax Inc
Primetime Inc
Taramax SA
Taramax Japan KK
Support Retail Mexico, S. de RL de CV
Emilio Pucci S.r.l.
Emilio Pucci International BV
Emilio Pucci, Ltd
Emilio Pucci Hong Kong Co. 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
FC
44%
Hong Kong, China
Milan, Italy
Milan, Italy
FC
FC
FC
44%
44%
44%
Doha, Qatar
Paris, France
Manama, Bahrain
Rome, Italy
Istanbul, Turkey
Rome, Italy
Rome, Italy
Rome, Italy
Paris, France
New York, USA (*)
Sydney, Australia
Tumon, Guam
Bangkok, Thailand
Hong Kong, China
Seoul, South Korea
Taipei, Taiwan
Hong Kong, China
Hong Kong, China
Singapore
Geneva, Switzerland
Tumon, Guam
Kuwait City, Kuwait
Stuttgart, Germany
FC
44%
Macao, China
Stuttgart, Germany
Rome, Italy
Shanghai, China
Marbella, Spain
Mumbai, India
Lugano, Switzerland
Lugano, Switzerland
Mexico City, Mexico
Neuchâtel, Switzerland
New Jersey, USA
New Jersey, USA
Neuchâtel, Switzerland
Tokyo, Japan
Mexico City, Mexico
Florence, Italy
Baarn, Netherlands
New York, USA
Hong Kong, China
Rotterdam, Netherlands
New York, USA (*)
Dublin, Ireland
Brussels, Belgium
Paris, France
San Francisco (California), USA
(2)
(2)
FC
44%
(2)
(2)
FC
44%
(2)
(2)
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
26%
44%
(2)
(2)
FC
22%
FC
FC
FC
FC
FC
44%
44%
22%
44%
31%
(2)
(2)
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
22%
44%
22%
22%
22%
22%
22%
44%
44%
29%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
2008 Annual Report
153
Companies
Registered office
PERFUMES AND COSMETICS
Parfums Christian Dior SA
Paris, France
LVMH P&C Thailand Co. Ltd
Bangkok, Thailand
LVMH Parfums & Cosmétiques Sao Paulo, Brazil
do Brasil Ltda
France Argentine Cosmetics SA Buenos Aires, Argentina
LVMH P&C Shanghai Co. Ltd
Shanghai, China
Parfums Christian Dior Finland Oy Helsinki, Finland
LVMH P&C Inc
New York, USA
SNC du 33 avenue Hoche
Paris, France
LVMH Fragrances & Cosmetics Singapore
(Sinpagore) Pte Ltd
Parfums Christian Dior Orient Co. Dubai, United Arab Emirates
Parfums Christian Dior Emirates Dubai, United Arab Emirates
Parfums Christian Dior Pologne Warsaw, Poland
Parfums Christian Dior (UK) Ltd London, United Kingdom
Parfums Christian Dior BV
Iparkos BV
Parfums Christian Dior S.A.B.
Brussels, Belgium
Parfums Christian Dior (Ireland) Ltd Dublin, Ireland
Parfums Christian Dior Hellas SA Athens, Greece
Parfums Christian Dior A.G.
Zurich, Switzerland
Christian Dior Perfumes LLC
New York, USA
Parfums Christian Dior Canada Inc Montreal, Canada
LVMH P&C de Mexico SA de CV Mexico, Mexico
Parfums Christian Dior Japon KK Tokyo, Japan
Singapore
(Singapore) Pte Ltd
Inalux SA
LVMH P&C Asia Pacific Ltd
Hong Kong, China
Fa Hua Fragrance & Cosmetic Co. Ltd Hong Kong, China
LVMH P&C Korea Ltd
Seoul, South Korea
Hong Kong, China
Hong Kong Ltd
LVMH P&C Malaysia Sdn berhad Inc Kuala Lumpur, Malaysia
Fa Hua Hong Kong Co, Ltd
Hong Kong, China
Pardior SA de CV
Mexico, Mexico
Parfums Christian Dior A/S Ltd Copenhagen, Denmark
LVMH Perfumes & Cosmetics
Sydney, Australia
Group Pty Ltd
Parfums Christian Dior AS Ltd
Hoevik, Norway
Parfums Christian Dior AB
Stockholm, Sweden
Parfums Christian Dior (New
Zealand) Ltd
Parfums Christian Dior GmbH
Vienna, Austria
Austria
Cosmetic of France Inc
Miami (Florida), USA
GIE LVMH P&C Recherche
Paris, France
GIE Parfums et Cosmétiques
Levallois Perret, France
Information Services - PCIS
Perfumes Loewe SA
Madrid, Spain
Acqua Di Parma S.r.l.
Milan, Italy
Acqua Di Parma LLC
New York, USA
Guerlain SA
Paris, France
LVMH Parfums & Kosmetik
Wiesbaden, Germany
Deutschland GmbH
Guerlain GesmbH
Vienna, Austria
Cofra GesmbH
Vienna, Austria
Guerlain SA (Belgique)
Fleurus, Belgium
Oy Guerlain AB
Helsinki, Finland
Guerlain Ltd
LVMH Perfumes e Cosmetica Lda Lisbon, Portugal
154
2008 Annual Report
Percentage
method
FC
FC
FC
44%
22%
44%
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
44%
FC
FC
EM
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
26%
14%
9%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
FC
FC
FC
44%
44%
44%
FC
44%
FC
FC
FC
44%
44%
44%
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
44%
Percentage
method
Companies
Registered office
Guerlain SA (Suisse)
Guerlain Inc
Guerlain Canada Ltd
Guerlain De Mexico SA
Guerlain Asia Pacific Ltd (Hong Kong)
Guerlain KK
Guerlain Oceania Australia Pty Ltd
Make Up For Ever SA
Make Up For Ever UK Ltd
Make Up For Ever LLC
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
Kenzo Parfums Singapore
La Brosse et Dupont SAS
La Brosse et Dupont Portugal SA
Mitsie SAS
LBD Iberica SA
LBD Ménage SAS
LBD Belux SA
SCI Masurel
SCI Sageda
LBD Italia S.r.l.
Inter-Vion Spolka Akeyjna SA
Europa Distribution SAS
LBD Hong Kong
LBD Antilles SAS
LBD Canada Inc
BeneFit Cosmetics LLC
BeneFit Cosmetics UK Ltd
BeneFit Cosmetics Korea
BeneFit Cosmetics SAS
BeneFit Cosmetics Hong Kong
BeneFit Cosmetics Ireland Ltd
Fresh Inc
LVMH Cosmetics Services KK
Parfums Luxe International SA
Geneva, Switzerland
New York, USA
Montreal, Canada
Mexico, Mexico
Hong Kong, China
Tokyo, Japan
Melbourne, Australia
Paris, France
New York, USA (*)
Levallois Perret, France
Düsseldorf, Germany
New York, USA (*)
Toronto, Canada
Tokyo, Japan
New York, USA (*)
Paris, France
New York, USA (*)
Singapore
Villepinte, France
S. Domingos de Rana, Portugal
Tarare, France
Barcelona, Spain
Beauvais, France
Brussels, Belgium
Tourcoing, France
Orange, France
Stezzano, Italy
Warsaw, Poland
Saint Étienne, France
Hong Kong, China
Ducos, Martinique, France
St Augustin de Desmaures, Quebec
Seoul, South Korea
Boulogne Billancourt, France
Hong Kong, China
Dublin, Ireland
Boston (Massachusetts), USA
Tokyo, Japan
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
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%
44%
44%
44%
44%
22%
44%
44%
44%
22%
35%
35%
35%
35%
35%
35%
35%
44%
44%
La Chaux-de-Fonds, Switzerland
Madrid, Spain
Paris, France
Milan, Italy
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
Bad Homburg, Germany
FC
44%
Manchester, United Kingdom
Springfield (New Jersey), USA
Toronto, Canada
Hong Kong, China
Singapore
FC
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
43%
44%
FC
44%
WATCHES AND JEWELRY
TAG Heuer International SA
TAG Heuer SA
LVMH Relojeria & Joyeria España SA
LVMH Montres & Joaillerie France SA
LVMH Watch & Jewelry Italy
Holding SpA
LVMH Watch & Jewelry Central
Europe GmbH
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
Malaysia Sdn Bhd
Percentage
method
Companies
Registered office
LVMH Watch & Jewelry Capital
Pte Ltd
LVMH Watch & Jewelry Japan KK
Australia Pty Ltd
Hong Kong Ltd
LVMH Watch & Jewelry Taiwan Ltd
India Pvt Ltd
(Shanghai) Commercial Co. Ltd
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 & Jewelry Italy SpA
Delano SA
Les Ateliers Horlogers LVMH SA
LVMH W&J Services (Suisse) SA
Fred Paris SA
Joaillerie de Monaco SA
Fred Inc
Fred London Ltd
Hublot SA
Bentim International SA
De Beers LV Ltd
Singapore
FC
44%
Tokyo, Japan
Melbourne, Australia
FC
FC
44%
44%
Hong Kong, China
FC
44%
Taipei, Taiwan
New Delhi, India
FC
FC
44%
44%
Shanghai, China
FC
44%
Paris, France
Bienne, Switzerland
Monte Carlo, Monaco
Seoul, South Korea
Le Locle, Switzerland
Milan, Italy
Paris, France
Monte Carlo, Monaco
Beverly Hills (California), USA (*)
Nyon, Switzerland
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
PC
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
22%
Madrid, Spain
Milan, Italy
Lisbon, Portugal
Warsaw, Poland
Alimos, Grèce
Bucharest, Romania
Monaco
Alimos, Grèce
Madrid, Spain
Nicosia, Cyprus
Istanbul, Turkey
Zagreb, Croatia
Belgrade, Serbia
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
PC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
33%
22%
22%
44%
43%
14%
22%
44%
22%
26%
22%
22%
Fribourg, Switzerland
Shanghai, China
Shanghai, China
Beijing, China
Hong Kong, China
Singapore
San Francisco (California), USA (*)
Paris, France
Paris, France
Paris, France
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
26%
60%
44%
36%
36%
44%
26%
44%
44%
44%
43%
44%
SELECTIVE RETAILING
Sephora SA
Sephora Luxembourg SARL
LVMH Iberia SL
LVMH Italia SpA
Sephora Portugal Perfumaria Lda
Sephora Pologne Spzoo
Sephora Marinopoulos SA
Sephora Marinopulos Romania SA
Sephora S.R.O.
Sephora Monaco SAM
Sephora Patras
Sephora Cosmeticos España
S+
Sephora Marinopoulos Cyprus Ltd
Sephora Unitim Kozmetik AS
Sephora Marinopoulos D.O.O.
Sephora Marinopoulos Cosmetics
D.O.O.
Sephora Nederland BV
Sephora Moyen Orient SA
Sephora Middle East FZE
Sephora Holding Asia
Sephora (Shanghai) Cosmetics Co. Ltd
Sephora (Beijing) Cosmetics Co. Ltd
Sephora Hong Kong
Sephora Singapore Pte Ltd
Sephora USA, Inc
Sephora Beauty Canada, Inc
Le Bon Marché SA
SEGEP SNC
Franck & Fils SA
Percentage
method
Companies
Registered office
DFS Holdings Ltd
DFS Australia Pty Ltd
Travel Retail Shops Pte Ltd
DFS European Logistics Ltd
DFS Group Ltd
DFS China Partners Ltd
DFS Hong Kong Ltd
Hong Kong International
Boutique Partners
TRS Hong Kong Ltd
Preferred Products Limited
DFS Okinawa KK
TRS Okinawa
JAL/DFS Co., Ltd
DFS Korea Ltd
DFS Seoul Ltd
DFS Cotai Limitada
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.
Saipan International Boutique Partners
DFS Palau Ltd
Difusi Information Technology &
Development Co. Ltd
DFS Information Technology
(Shanghai) Company Limited
Hainan DFS Retail Company Limited
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 India Private Ltd
DFS Vietnam (S) Pte Ltd
New Asia Wave International (S)
Pte Ltd
IPP Group (S) Pte Ltd
L Development & Management Ltd
DFS Group L.P.
LAX Duty Free Joint Venture 2000
Royal Hawaiian Insurance
Company Ltd
Hawaii International
Boutique Partners
JFK Terminal 4 Joint Venture 2001
DFS Guam L.P.
Guam International Boutique Partners
DFS Liquor Retailing Ltd
Twenty-Seven - Twenty Eight Corp.
TRS Hawaii LLC
TRS Saipan
TRS Guam
Hamilton, Bermuda
Sydney, Australia
Sydney, Australia
Hamilton, Bermuda
Delaware, USA
Hong Kong, China
Hong Kong, China
Hong Kong, China
FC
FC
EM
FC
FC
FC
FC
EM
27%
27%
28%
27%
27%
27%
27%
14%
Hong Kong, China
Hong Kong, China
Okinawa, Japan
Okinawa, Japan
Chiba, Japan
Seoul, South Korea
Seoul, South Korea
Macao, China
Delaware, USA
Nouméa, Nouvelle Calédonie
EM
FC
FC
EM
EM
FC
FC
FC
FC
FC
FC
FC
FC
EM
FC
12%
27%
27%
12%
11%
27%
27%
27%
27%
27%
27%
27%
27%
12%
26%
Koror, Palau
Shanghai, China
FC
FC
EM
FC
FC
27%
27%
14%
27%
27%
Shanghai, China
FC
27%
Hainan, China
Taipei, Taiwan
Taipei, Taiwan
Taipei, Taiwan
Singapore
Singapore
Singapore
Singapore
Singapore
FC
FC
FC
FC
FC
FC
FC
EM
EM
27%
27%
27%
27%
27%
27%
27%
12%
14%
Mumbai, India
Singapore
Singapore
FC
FC
FC
27%
19%
19%
Singapore
Hong Kong, China
Delaware, USA
Los Angeles (California), USA
Hawaii, USA
FC
EM
FC
FC
FC
19%
26%
27%
21%
27%
EM
14%
New York, USA
Tamuning, Guam
Tamuning, Guam
Delaware, USA
Delaware, USA
Tumon, Guam
FC
FC
EM
FC
FC
EM
EM
EM
22%
27%
14%
27%
27%
12%
12%
12%
2008 Annual Report
155
Companies
Registered office
Percentage
method
Tumon Entertainment LLC
Comete Guam Inc
Tumon Aquarium LLC
Comete Saipan Inc
Tumon Games LLC
Cruise Line Holdings Co
On Board Media, Inc
Starboard Cruise Services, Inc
Starboard Holdings Ltd
International Cruise Shops, Ltd
Vacation Media Ltd
STB S.r.l
Parazul LLC
Tamuning, Guam
Tamuning, Guam
Tamuning, Guam
Tamuning, Guam
Delaware, USA
Delaware, USA
Delaware, USA
Delaware, USA
Cayman Islands
Kingston, Jamaica
Florence, Italy
Delaware, USA
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
43%
44%
44%
44%
44%
44%
44%
44%
44%
44%
44%
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
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
44%
33%
44%
44%
44%
44%
44%
44%
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Paris, France
Kaag, Netherlands
Baarn, Netherlands
Paris, France
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
44%
44%
44%
44%
25%
40%
40%
44%
44%
44%
37%
29%
44%
29%
OTHER
DI Group SA
DI Services SAS
Radio Classique SAS
Les Editions Classique Affaires SARL
DI Régie SAS
SFPA SARL
La Fugue SAS
Les Echos SAS
Les Echos Formation SAS
Hera SAS
Les Echos Médias SNC
Percier Publications SNC
EUROSTAF - Europe Stratégie
Analyse Financière SAS
Investir Publications SAS
Investir Formation SARL
Compo Finance SARL
SID Développement SAS
SID Éditions SAS
Magasins de la Samaritaine SA
Royal Van Lent Shipyard BV
RVL Holding BV
Ufipar SAS
L Capital Management SAS
Sofidiv SAS
GIE LVMH Services
Moët Hennessy SNC
LVMH Services Ltd
Moët Hennessy Investissements
156
2008 Annual Report
Percentage
method
Companies
Registered office
LVMH Fashion Group SA
Moët Hennessy International SA
Creare SA
Creare Pte Ltd
Société Montaigne Jean Goujon SAS
Delphine SAS
LVMH Finance SA
Primae SA
Eutrope SAS
Flavius Investissements SA
LBD HOLDING SA
LV Capital 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
LVMH Finance Belgique
Sofidiv UK Ltd
Vuitton KK
Osaka Fudosan Company Ltd
LVMH Asia Pacific Ltd
LVMH Shanghai Management
and Consultancy Co, Ltd
LVMH South & South East Asia
Pte Ltd
Vuitton SA
Paris, France
Singapore
Paris, France
Paris, France
Paris, France
New York, USA (*)
New York, USA (*)
New York, USA (*)
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
FC
44%
29%
38%
38%
44%
44%
44%
44%
44%
44%
44%
44%
29%
44%
44%
New York, USA (*)
New York, USA (*)
Baarn, Netherlands
Baarn, Netherlands
FC
FC
FC
FC
44%
44%
44%
44%
Brussels, Belgium
Tokyo, Japan
FC
FC
FC
FC
44%
44%
44%
44%
Tokyo, Japan
Hong Kong, China
Shanghai, China
FC
FC
FC
44%
44%
44%
Singapore
FC
44%
Paris, France
FC
44%
(*) The address given corresponds to the company’s administrative headquarters;
the corporate registered office is located in the state of Delaware.
(1) Joint venture companies with Diageo: only the Moët Hennessy activity is
consolidated.
(2) The Group’s percentages of control and/or interest, (if and where applicable),
are not disclosed, the results of these companies being consolidated on the
basis of the Group’s contractual share of their business.
(3) Joint venture companies with LVMH.
FC: Full Consolidation.
PC: Proportional Consolidation.
EM: Equity Method.
6.Statutory Auditors’ report
Statutory Auditors’ report on the consolidated financial statements
MAZARS
ERNST & YOUNG Audit
Tour Exaltis
92400 Courbevoie
Statutory Auditors
Statutory Auditors
In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended
December 31, 2008, on:
• the audit of the accompanying consolidated financial statements of Christian Dior;
• the justification of our assessments;
• the specific verification required by French law.
The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these
financial statements based on our audit.
1. Opinion on the consolidated financial statements
We conducted our audit in accordance with the professional standards applicable in France; those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement. An audit includes verifying, by audit sampling and other selective testing procedures, evidence supporting the
amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used,
the significant estimates made by the management, and the overall financial statements presentation. We believe that the evidence
we have gathered in order to form our opinion is adequate and relevant.
In our opinion, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and results
of the consolidated group in accordance with IFRS as adopted by the European Union.
2008 Annual Report
157
2. Justification of assessments
In accordance with the requirements of Article L. 823-9 of French Commercial Code (Code de Commerce) relating to the justification
of our assessments, we bring to your attention the following matters:
• the valuation of brands, trade names and goodwill has been tested under the method described in Note 1.12 and in the general
context described in Note 1.1 of section 1 “Accounting policies of the Notes” to the consolidated financial statements. Based on
the afore mentioned, we have assessed the appropriateness of the methodology applied based on all estimates and reviewed the
data and assumptions used by the Group to perform these valuations;
• we have verified that Note 1.10 to the consolidated financial statements provides appropriate disclosure on the accounting
treatment of commitments to purchase minority interest securities as such treatment is not provided for by the IFRS framework
as adopted by the European Union.
These assessments were made in the context of the performance of our audit of the consolidated financial statements taken as a
whole, and, therefore, served in forming our audit opinion expressed in the first part of this report.
3. Specific verification
We have also verified the information given in the Group management report as required by French law.
We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.
MAZARS
ERNST & YOUNG Audit
Denis Grison
Jeanne Boillet
158
2008 Annual Report
Parent company financial statements
1. Balance sheet
2. Income statement
160
173
7. Company results over
the last five fiscal years
174
8. Statutory Auditors’ reports
175
162
3. Cash flow statement
163
4. Notes to the parent company
financial statements
164
5. Subsidiaries and investments 6. Investment portfolio, other investment
securities and short term investments
173
on the parent company financial statements
Statutory Auditors’ special report
on related party agreements and commitments
2008 Annual Report
175
177
159
Balance sheet
1.Balance sheet
Assets
2008
2007
2006
Notes
Gross
Depreciation,
amortization and
impairment
Intangible assets
2.1/2.2
57
57
-
-
-
2.1/2.2
368
368
-
6
31
2.8
3,981,750
3,981,750
3,841,876
3,841,839
6,066
10,726
(EUR thousands)
Investments
Net
Net
Net
Other investment securities
Loans
5
-
5
5
5
Other non-current financial assets
-
-
-
-
-
3,981,755
3,847,947
3,852,570
Non-current financial assets
2.1/2.2/2.8
3,981,755
3,982,180
425
3,981,755
3,847,953
3,852,601
5
-
5
14
14
8,172
-
8,172
-
-
613
-
613
4,703
4,343
199,924
73,050
126,874
193,301
174,879
159
-
159
396
71
2.3/2.7/2.8
208,873
73,050
135,823
198,414
179,307
Prepaid expenses
2.3
1,066
-
1,066
1,659
2,295
Bond redemption premiums
2.3
305
-
305
386
487
4,192,424
73,475
4,118,949
4,048,412
4,034,690
Non-current assets
Financial accounts receivable
Other receivables
Short term investments
Current assets
Total assets
160
2008 Annual Report
Balance sheet
Liabilities and equity
2008
2007
2006
Prior to
appropriation
Prior to
appropriation
Prior to
appropriation
363,454
363,454
363,454
Share premium account
2,204,623
2,204,623
2,204,623
Revaluation adjustment
16
16
16
36,345
36,345
36,345
-
-
-
80,630
51,872
80,630
Notes
(EUR thousands)
Share capital (fully paid up)
Legal reserve
Regulated reserves
Optional reserves
Retained earnings
(1)
Profit for the year
Interim dividends
1.6
Equity
2.4
2.5
28,183
5,785
43,227
309,976
337,626
184,250
(79,960)
2,943,267
(79,960)
2,919,761
(69,056)
2,843,489
611
227
570
Other bonds
201,176
274,908
274,918
Bank loans and borrowings
960,871
848,644
907,768
1,570
1,172
1,162,047
1,125,122
1,183,858
1,216
707
565
57
43
1,129
Miscellaneous loans and borrowings
Borrowings
Tax and social security liabilities
Other operating liabilities (1)
1,534
1,523
1,605
Operating liabilities
2,807
2,273
3,299
10,217
1,029
3,475
2.6/2.7/2.8
1,175,071
1,128,424
1,190,632
2.6
-
-
-
4,118,949
4,048,412
4,034,690
Other liabilities
Liabilities
Prepaid income
Total liabilities and equity
(1) Dividends attributable to treasury shares were reclassified under retained earnings in 2006, 2007 and 2008.
2008 Annual Report
161
Income statement
2.Income statement
2008
2007
2006
Services provided, other revenue
5
14
14
Net revenue
5
14
14
Other income and expense transfers
384
-
-
Operating income
389
14
14
5,760
6,972
4,939
35
57
51
Wages and salaries
384
-
-
Social security expenses
387
6
6
5
25
29
148
105
105
6,719
7,165
5,130
(6,330)
(7,151)
(5,116)
(EUR thousands)
Notes
Other purchases and external expenses
Taxes, duties and similar levies
Depreciation and amortization
Other expenses
Operating expenses
Operating profit (loss)
Net financial income (expense)
2.9
Exceptional income (expense)
Income taxes
Net profit
162
2008 Annual Report
2.10
2.11/2.12
312,151
327,429
171,907
305,821
320,278
166,791
(91)
(827)
103
4,246
18,175
17,356
309,976
337,626
184,250
Cash flow statement
3.Cash flow statement
2008
(EUR millions)
2007
2006
I - OPERATING ACTIVITIES
Net profit
Depreciation and amortization of fixed assets
Gain (loss) on sale of fixed assets
Cash from operations before changes in working capital
Change in current assets
Changes in current liabilities
Changes in working capital
Net cash from operating activities
II - INVESTING ACTIVITIES
Purchase of tangible and intangible fixed assets
Purchase of equity investments
Purchase of other non-current investments
Proceeds from sale of non-current financial assets
Net cash from (used in) investing activities
310
(17)
22
315
(3)
10
7
322
337
5
342
(4)
(4)
338
184
4
189
(2)
(2)
187
I
II
(140)
1
(139)
-
(385)
(385)
Capital increase
Changes in other equity
Proceeds from financial debt
Repayments in respect of financial debt
Change in inter-company current accounts
Net cash from (used in) financing activities
III
1
160
(123)
38
(59)
(59)
438
(3)
435
IV - DIVIDENDS PAID DURING THE YEAR
IV
(287)
(261)
(217)
(66)
193
127
18
175
193
20
155
175
18
20
III - FINANCING ACTIVITIES
Net increase (decrease) in cash and cash equivalents I + II + III + IV
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Net increase (decrease) in cash and cash equivalents
(66)
The net increase in cash and cash equivalents analyzes the changes in cash from one year to the next (after deducting bank overdrafts)
as well as cash equivalents comprised of short term investments, net of provisions for impairment.
2008 Annual Report
163
Notes to the parent company financial statements
4.Notes to the parent company financial statements
Amounts are expressed in thousands of euros unless otherwise indicated.
The balance sheet total as of December 31, 2008 was 4,118,949 thousand euros. These parent company financial statements were
approved for publication on February 5, 2009 by the Board of Directors.
Note 1 -Accounting policies and methods
The parent company financial statements have been prepared in
accordance with Regulation 99-03 dated April 29, 1999 of the Comité
de la Réglementation Comptable (Accounting Regulations Committee).
General accounting conventions have been applied observing
the principle of prudence in conformity with the following
basic assumptions: going concern, consistency of accounting
methods, non-overlap of financial periods, and in conformity
with the general rules for preparation and presentation of parent
company financial statements.
The accounting items recorded have been evaluated using the
historical cost method.
Pursuant to CRC Regulation 2008-15 of December 4, 2008,
modifying CRC Regulation 99-03 of April 29, 1999 relating
to the general chart of accounts, the Company has applied,
with retroactive effect as of December 31, 2007, the new rules
concerning the accounting treatment of share purchase or
share subscription option plans and bonus share plans granted
to employees. These new rules require that the provisions
recognized in relation to exercisable plans be apportioned over
their entire vesting periods. The retrospective application of this
new regulation resulted in a reduction in the provisions recognized
as of December 31, 2007, in the amount of 560 thousand euros,
offset by retained earnings. As the impact of this change in
accounting policy was not material, no pro forma information
will be presented.
1.1Intangible assets
Software is amortized using the straight-line method over one
year.
1.2Property, plant and equipment
Property, plant and equipment are depreciated on a straight-line
basis over the following estimated useful lives:
• miscellaneous general installations:
5 years;
• office and computer equipment:
3 years;
• furniture:
164
2008 Annual Report
10 years.
1.3Non-current financial assets
Equity investments as well as other non-current financial assets
are recorded at the lower of their acquisition cost or their value
in use. Impairment is recorded if their value in use is lower than
their acquisition cost.
The value in use of the equity investments is based on criteria
such as the value of the portion of the in the net asset value of
the companies involved, taking into account the stock market
value of the listed securities that they hold.
In the event of partial investment sale, any gains or losses are
recognized within net financial income/expense and calculated
according to the weighted average cost method.
1.4Accounts receivable and liabilities
Accounts receivable and liabilities are recorded at their face
value. An impairment provision is recorded if their net realizable
value, based on probability of their collection, is lower than
their carrying amount.
1.5Short term investments
Short term investments are valued at their acquisition cost. An
impairment provision is recorded if their acquisition value is
greater than their market value determined as follows:
• listed securities: average listed share price during the last
month of the year;
• other securities: estimated realizable value or liquidation
value.
A provision for losses is recorded for treasury shares under
balance sheet liabilities, to the extent that they are allocated to
exercisable option plans, apportioned where applicable over the
vesting period of the options, whenever the expected exercise
price is lower than the purchase price of the shares.
Gains or losses on the sale of treasury shares are recorded within
exceptional income/losses.
1.6Equity
In conformity with the recommendations of the Compagnie Nationale
des Commissaires aux Comptes (National Board of Auditors),
interim dividends are recorded as a deduction from equity.
1.7Provisions for contingencies and losses
The Company establishes a provision for definite and likely
contingencies and losses at the end of each financial period,
observing the principle of prudence.
Liabilities, accounts receivable and liquid funds in foreign
currencies are revalued on balance sheet at year-end exchange
rates. The difference resulting from the revaluation of liabilities
and accounts receivable in foreign currencies at the latter rate is
recorded in the “Translation adjustment”; it is recorded under
“Foreign exchange gains and losses” when it originates from the
revaluation of liquid funds, except in the case of bank accounts
matched with a loan in the same currency. In the latter case,
the revaluation follows the same procedure as for accounts
receivable and liabilities.
Provisions are recorded for unrealized losses unless hedged.
1.8Foreign currency transactions
1.9Net financial income (expense)
During the period, foreign currency transactions are recorded at
the rates of exchange prevailing on the date of transactions.
Net gains and losses on sales of short term investments comprise
expenses and income associated with sales.
Note 2 - Additional information relating to the balance sheet and income
statement
2.1Non-current assets
Increases
(EUR thousands)
Gross value
as of 01/01/2008
Decreases
Acquisitions, creations,
contributions, transfers
57
57
-
Disposals
Gross value
as of 12/31/2008
-
57
57
-
59
24
285
368
Concessions, patents, and similar rights (software)
Advances and downpayments on account for software
Intangible assets
• miscellaneous general installations
• transport equipment
• office and computing equipment
• furniture
• advances and payments on account
Investments
59
24
285
368
3,841,876
139,874 (1)
Loans
Other non-current financial assets
23,484
5
3,865,365
139,874
23,484 23,484
TOTAL
3,865,790
139,874
23,484
(2)
3,981,750
5
3,981,755
3,982,180
(1) Christian Dior SA subscribed to a capital increase of Christian Dior Couture during the 2008 fiscal year.
(2) Christian Dior SA disposed of the interest it held in SNC Valmyfin during the 2008 fiscal year.
2008 Annual Report
165
2.2Amortizations and provisions on fixed assets and non-current financial assets
Positions and changes in the period
(EUR thousands)
Amortization
expense as of
01/01/2008
Appropriation
increases
Decreases
Amortization
expense as of
12/31/2008
57
57
-
-
57
57
Concessions, patents, and similar rights (software)
Intangible assets
Property, plant and equipment:
• miscellaneous general installations
• transport equipment
• office and computing equipment
• furniture
• Valmyfin partnership shares
59
24
279
362
6
6
-
59
24
285
368
17,418
17,418
4,863
4,863
22,281
22,281
-
TOTAL
17,837
4,869
22,281
425
2.3Analysis of accounts receivables by payment date
(EUR thousands)
Gross amount
Up to 1 year
More than 1 year
5
8,172
5
8,172
-
125
488
1,066
125
488
946
120
305
-
107
-
198
-
10,161
9,843
318
Current assets
State and other public authorities:
• income taxes
• value-added tax
• other
Social liabilities
Other accounts receivable
Prepaid expenses
Bond redemption premium (1)
TOTAL
(1) Bond redemption premiums are amortized on a straight-line basis over the life of the bonds.
166
2008 Annual Report
2.4Equity
A. Share capital
The share capital comprises 181,727,048 fully paid-up shares, each with a par value of 2 euros. 126,483,627 shares carry double
voting rights.
B. Changes in equity
(EUR thousands)
Equity as of December 31, 2007 (prior to appropriation of net profit)
Net profit for 2008
Dividends paid (balance for fiscal year 2007)
Interim dividends for fiscal year 2008
Impact of the change in accounting policy (1)
2,919,761
309,976
(207,071)
(79,960)
561
2,943,267
Equity as of December 31, 2008 (prior to appropriation of net profit)
(1) The impact of the change in accounting policy entailed by the application of CRC Regulation 2008-15 of December 4, 2008 was recognized under
retained earnings as of January 1, 2008. See Note 1.
Acquisition of treasury shares:
Year
2008
Number of shares purchased
Number of shares sold
76,132
(120,500)
2007
764,815
(1,535,696)
2006
444,582
(335,713)
2005
60,015
(74,387)
Purchase options granted by the Board of Directors to managers of the Company and its direct and indirect subsidiaries:
Authorization
from
Shareholders’
Meeting
Number of options granted
Plan
commencement
date
Number of
beneficiaries
Total (1)
Of which
company
officers
Of which,
the first ten
employees
Number
Number of
Exercise of options
options not
price exercised exercised as of
(EUR) (2) (3)
2008 (3) 12/31/2008 (3)
5/30/1996
5/30/1996
5/30/1996
5/30/1996
5/14/2001
5/14/2001
5/14/2001
5/14/2001
5/14/2001
11/03/1998 (4)
01/26/1999
02/15/2000
02/21/2001
02/18/2002
02/18/2003
02/17/2004
05/12/2005
02/15/2006
23
14
20
17
24
25
26
27
24
98,400
89,500
100,200
437,500
504,000
527,000
527,000
493,000
475,000
65,000
50,000
65,000
308,000
310,000
350,000
355,000
315,000
305,000
28,200
38,000
31,000
121,000
153,000
143,000
128,000
124,000
144,000
18.29
25.36
56.70
45.95
33.53
29.04
49.79
52.21
72.85 (5)
5/11/2006
5/11/2006
5/11/2006
09/06/2006
01/31/2007
05/15/2008 (7)
1
28
20,000
480,000
285,000
20,000
133,000
25
484,000
320,000
147,000
(1)
(2)
(3)
(4)
(5)
(6)
(7)
27,000
38,500
2,000
8,000
35,000
10,000
25,500
352,000
362,500
92,502
121,002
436,000
438,000
74.93
85.00
-
443,000
20,000
455,000
73.24 (6)
-
484,000
Number of options at the plan commencement date, not restated for adjustments relating to the 4-to-1 stock split in July 2000.
Exercise prices prior to 1999 result from the conversion into euros of data originally established in French francs.
Adjusted to reflect the transaction mentioned in (1) above.
Plan expired on November 3, 2007.
Exercise price for Italian residents: €77.16.
Exercise price for Italian residents: €73.47.
The value serving as the basis for the calculation of the mandatory 10% social security contribution, for the plan commencing on May 15, 2008,
was €19.025 per share, equivalent to 25% of the opening price of the Christian Dior share on May 15, 2008, the grant date for the options (€76.10).
2008 Annual Report
167
Each plan has a term of ten years. Share purchase options may be
exercised, depending on the plan, after the end of a period of three
to five years from the plan’s commencement date, and provided
that the beneficiary is actively employed by the Company when
the options are exercised. Under certain circumstances, specifically
in the case of retirement, this period does not apply.
For all plans, one option gives the right to one share.
Breakdown of treasury shares
Number of
securities
Gross carrying
amount
Impairment
Net book value
502-1 Shares available to be granted to employees and allocated
to specific plans
502-2 Shares available to be granted to employees
239,004
3,127,376
7,646,149
192,277,388
73,050,046
7,646,149
119,227,342
Total Treasury shares
3,366,380
199,923,537
73,050,046
126,873,491
(EUR thousands)
2.5Provisions for contingencies and losses
Amount as of
01/01/2008
Provisions of
period
Reversals of
period
Amount as of
12/31/2008
Provision for specific contingencies
Provision for losses (1)
227
-
384
-
227
384
TOTAL
227
384
-
611
(EUR thousands)
(1) Provision for losses with respect to share purchase option plans exercisable as of December 31, 2008, corresponding to the amount of the difference
between the purchase price of shares and the exercise price of options for the beneficiaries (see Note 1.5 “Accounting policies”).
2.6Breakdown of other liabilities
(EUR thousands)
Other bonds
Trade payables
Tax and social liabilities
Other operating liabilities
Other liabilities
Deferred income
TOTAL
Christian Dior SA carried out the following transactions:
• on November 3, 2006, a bond issue with a total nominal amount
of 150 million euros, maturing on November 3, 2011;
• on July 25, 2007, signature of a syndicated loan of 535 million
euros, maturing on July 25, 2012;
• on December 5, 2008, the redemption of a bond with a total
nominal amount of 123.5 million euros;
168
2008 Annual Report
Total
Less than 1 year From 1 to 5 years More than 5 years
201,176
960,871
1,216
57
1,534
10,217
-
1,176
245,871
1,216
57
1,534
10,217
-
200,000
715,000
-
-
1,175,071
260,071
915,000
-
• on December 12, 2008, a bond issue with a total nominal amount
of 50 million euros, maturing on December 12, 2011.
As customary clause for syndicated loans, the Company signed
commitments to maintain a percentage of interest and voting rights
for some subsidiaries, and to maintain a customary financing ratio.
2.7Accrued expenses and deferred income
(EUR thousands)
Accounts receivable
Liabilities
Other bonds
Tax and social liabilities
Other liabilities
Accrued expenses
Deferred income
1,176
12,170
1,094
57
5
195
478
-
582
-
2.8Items involving related companies
Balance sheet items
Items involving the companies
(EUR thousands)
Fixed assets
Investments
Current assets
Liabilities
Other liabilities
related (1)
connected to equity
investments (2)
3,981,750
-
5
8,172
10
-
966
9,635
-
(1) Companies that can be fully consolidated into one consolidated unit (eg: parent company, subsidiary, affiliate in consolidated group).
(2) Percentage control between 10 and 50%.
Income statement items
(EUR thousands)
Income
Expenses
Dividends received
Interest and similar expenses
430,546
394
696
2008 Annual Report
169
2.9 Financial income and expenses
2008
2007
Income from subsidiaries
Income from other securities and non-current investments
Other interest and similar income
Reversals and expenses transferred
Net gains on sales of short term investments
Financial income
Allowances to amortization and provisions
Interest and similar expenses
Net expenses on sales of short term investments
Financial expenses
430,546
5,123
9,429
3,928
5
449,031
78,398
58,482
136,880
376,867
5,123
8,048
2,062
392,100
4,761
59,910
64,671
Net financial income (expense)
312,151
327,429
2008
2007
1,371
1,371
22,281
23,652
4
4
23,484
255
23,739
23,743
1,107
1,107
343
1,450
2,277
2,277
2,277
(EUR thousands)
2.10 Exceptional income and expenses
(EUR thousands)
Income from management transactions
Other exceptional capital transactions
Income from capital transactions
Reversals and expenses transferred
Exceptional income
Exceptional expenses from management transactions
Expenses from management transactions
Net carrying amount of securities sold
Other non-recurring expenses on capital transactions
Expenses from capital transactions
Exceptional expenses
(91)
Exceptional income (loss)
(827)
2.11Income tax
2008
(EUR thousands)
Before tax
Tax
2007
After tax
Before tax
Tax
After tax
Exceptional income/(loss)
305,821
(91)
4,246 (*)
305,821
4,155
320,278
(827)
18,175
320,278
17,348
TOTAL
305,730
4,246
309,976
319,451
18,175
337,626
(*) Of which, income from subsidiaries under the tax consolidation agreement: 4,246 thousand euros.
170
2008 Annual Report
2.12 Tax position
Christian Dior SA is the parent company of a tax group
comprising certain of its French subsidiaries.
The additional tax saving or expense, in the amount of the
difference between the tax recognized by each of the companies
and the tax resulting from the determination of the taxable profit
of the group, is recognized by Christian Dior SA.
For 2008, the tax consolidation group included Christian Dior,
Christian Dior Couture, Jardins d’Avron, Financière Jean
Goujon, Sadifa, CD Investissements and Ateliers Modèles. The
tax consolidation group was not modified from the prior year.
The tax savings made in 2008 amounted to 4,246 thousand euros;
the amount of the savings in 2007 came to 17,958 thousand euros.
As of December 31, 2008, the ordinary loss of the Group
amounted to 199,360 thousand euros, and can be carried forward
indefinitely.
The tax position of these subsidiaries with respect to Christian
Dior, insofar as their remain part of the consolidation tax group,
remains identical to that which would have been reported if the
subsidiaries had been taxed individually.
Note 3 -Other information
3.1 Tax litigation
3.2 Financial commitments
A provision of 570 thousand euros has been kept in order to
cover the litigation risks following the tax audit for the years
1993 and 1994.
Hedging instruments
Christian Dior SA uses various interest-rate hedge instruments
on its own behalf that comply with its management policy. The
aim of this policy is to hedge against the interest rate risks on
existing debt, while ensuring that speculative positions are
not taken.
A bank guarantee, amounting to 570 thousand euros, was set
up in 1999.
This provision was partially reversed in 2007 by the amount of
the tax relief granted, i.e. 343 thousand euros.
The types of instruments outstanding as of December 31, 2008, the underlying amounts (excluding short term amounts) and market
values are broken down as follows:
Amount of underlyings
Maturity
(EUR thousands)
Fixed rate payer swaps
Fair value
2009
2010
2011
2012
2013
12/31/2008
-
360,000
-
-
-
(3,734)
Direct and indirect subsidiaries
3.4Compensation of management bodies
In 2008, Christian Dior SA withdrew from the guaranty that it
had provided for the renewal of a credit line that was instituted
in favor of Christian Dior Hong amounting to 7 million euros.
As of December 31, 2008, Christian Dior no longer provided
security in respect of any loans or credit facilities entered into
by its subsidiaries.
The gross amount of compensation of management bodies paid
to members of the management bodies for the 2008 fiscal year
was 105 thousand euros.
3.3Lease commitments
The Company has not made any commitments in the area of
leasing transactions.
2008 Annual Report
171
3.5 Statutory Auditors’ fees
2008
(EUR thousands)
Statutory audit
Other services relating directly
to the statutory audit assignment
TOTAL
2007
Ernst & Young
Audit
Mazars
Ernst & Young
Audit
Mazars
98
141
95
141
4
4
-
-
102
145
95
141
3.6 Identity of the companies consolidating the accounts of Christian Dior
Company name
Financière Agache
Groupe Arnault (Parent company of Financière Agache)
172
2008 Annual Report
Registered office
11, rue François 1er
41, avenue Montaigne
75008 PARIS
75008 PARIS
Investment portfolio, other investment securities and short term investments
5.Subsidiaries and investments as of December 31, 2008
Equity other than
share capital and
Share
excluding net
capital
profit
(EUR thousands)
% share
capital
held
Carrying amount
of share held
Gross
Loans and
advances
Net provided
Deposits
and Revenue
sureties excluding
granted
taxes
Net
profit
(loss)
Dividends
received
during the
year
- 330,765
330,491
A. Details involving
the subsidiaries and
investments below
1. Subsidiaries
Financière Jean Goujon 1,005,294
Sadifa
1,978,262
100.00%
3,478,680
3,478,680
7,977
-
81
1,424
99.66%
836
836
-
-
160,056
370,715
99.99%
502,159
502,159
-
-
50
-
100.00%
75
75
-
-
CD Investissements
(8)
-
488,965 (23,134)
60
100,056
-
(4)
-
B. General information
involving the other subsi
diaries and investments
None
6.Investment portfolio, other investment securities
and short term investments
(EUR thousands)
French investments
Financière Jean Goujon shares
Christian Dior Couture shares
Sadifa shares
CD Investissements shares
Equity investments (shares and partnership shares)
Number of
securities
Net book
value
62,830,900
10,003,482
5,019
5,000
3,478,680
502,159
836
75
3,981,750
(EUR thousands)
Treasury shares
Short term investments
Number of
securities
Net book
value
3,366,380
3,366,380
126,873
126,873
4,108,623
Total investments and short term investments
Number of treasury shares
TOTAL
At beginning
of period
Increase
Decrease
At end
of period
3,410,748
76,132
120,500
3,366,380
3,410,748
76,132
120,500
3,366,380
2008 Annual Report
173
Company results over the last five fiscal years
7.Company results over the last five fiscal years
(EUR thousands)
Share capital
Share capital
Number of ordinary shares outstanding
Maximum number of future shares to be created:
• through exercise of equity warrants
• through exercise of share subscription options
Operations and profit for the year
Revenue
Profit before taxes, employee profit-sharing, depreciation,
amortization and movements in provisions
Income taxes
Employee profit-sharing to be paid for the period
Profit after taxes, employee profit- sharing, depreciation,
amortization and movements in provisions
Profit distributed as dividends (1)
Earnings per share (EUR)
Earnings per share after taxes and employee profit-sharing
but before depreciation, amortization and provisions
Earnings per share after taxes and employee profit-sharing,
depreciation amortization, and movements in provisions
Gross dividend distributed per share (1) (2)
Employees
Average number of employees
Total payroll (EUR thousands)
Amount paid in respect of social security (EUR thousands)
2004
2005
2006
2007
2008
363,454
181,727,048
363,454
181,727,048
363,454
181,727,048
363,454
181,727,048
363,454
181,727,048
-
-
-
-
-
-
14
14
14
5
131,082
(12,773)
-
148,653
(17,943)
-
172,742
(17,356)
-
321,833
(18,175)
-
357,925
(4,246)
-
138,231
166,439
184,250
337,626
309,976
176,275
210,803
256,235
292,581
292,581
0.79
0.92
1.05
1.87
1.99
0.76
0.97
0.92
1.16
1.01
1.41
1.86
1.61
1.71
1.61
1
17
5
6
6
6
771
(1) Amount of the distribution resulting from the resolution of the Shareholders’ Meeting, before the effect of Dior treasury shares as of the date of
distribution. Board of Directors’ proposal for 2008.
(2) Before the effect of tax regulations applicable to beneficiaries and net, for the 2004 interim dividend, of the amount of the tax credit.
174
2008 Annual Report
8.Statutory Auditors’ reports
Statutory Auditors’ report on the parent company financial statements
MAZARS
ERNST & YOUNG Audit
Tour Exaltis
92400 Courbevoie
Statutory Auditors
Statutory Auditors
In accordance with our appointment as Statutory Auditors by your Annual General Meeting, we hereby report to you for the year
ended December 31, 2008 on:
• the audit of the accompanying financial statements of Christian Dior SA;
• the justification of our assessments;
• the specific procedures and disclosures required by law.
These financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial
statements, based on our audit.
1. Opinion on the financial statements
We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis or by other sampling methods, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well
as evaluating the overall financial statements presentation. We believe that the data we have collected is sufficient and appropriate
to be used as a basis for our opinion.
In our opinion, the financial statements give a true and fair view of the financial position and the assets and liabilities of the
Company as of December 31, 2008 and of the results of its operations for the year then ended, in accordance with French accounting
regulations.
Without qualifying the above opinion, we would draw attention to the following matter disclosed in Note 1 to the financial statements
relating to a change in accounting method arising from the application of regulation 2008-15 of the French Accounting Regulations
Board (Comité de la Réglementation Comptable) issued on December 30, 2008 with respect to the accounting treatment of share purchase
and subscription option plans and bonus share grants to employees.
2008 Annual Report
175
2. Justification of assessments
In accordance with Article L. 823-9 of the French Commercial Code (Code de commerce) governing the justification of our assessments,
we hereby report on:
Note 1.3 (“Accounting policies and methods”) to the financial statements which sets out the accounting principles and methods
applicable to non-current financial assets. In the context of our assessment of the accounting principles used by your Company, we
have verified the appropriateness of the above-mentioned accounting methods and that of the disclosures in the notes to the financial
statements and have ascertained that they were properly applied.
The assessments on these matters were performed in the context of our audit approach for the financial statements taken as a whole
and therefore contributed to the opinion expressed in the first part of this report.
3. Specific procedures and disclosures
We have also performed the procedures required by law.
We have no matters to report regarding:
• the fair presentation and consistency with the financial statements of the information given in the Board of Directors’ report and
in the documents addressed to shareholders with respect to the financial position and the financial statements;
• the fair presentation of the information given in the Board of Directors’ report on the compensation and benefits paid to relevant
Company Officers as well as commitments granted in their favor when they assumed, changed or terminated duties or subsequent
thereto. Furthermore, we report that, as indicated in the Board of Directors’ report, this information relates to compensation and
benefits paid or incurred by your Company and the companies which it controls.
Pursuant to the law, we have verified that the Board of Directors’ report contains the appropriate disclosures as to the identity of
and percentage interests and votes held by shareholders.
MAZARS
ERNST & YOUNG Audit
Denis Grison
Jeanne Boillet
176
2008 Annual Report
Statutory Auditors’ special report
on related party agreements and commitments
MAZARS
ERNST & YOUNG Audit
Tour Exaltis
92400 Courbevoie
Statutory Auditors
Statutory Auditors
In our capacity as Statutory Auditors of your Company, we hereby report on certain related party agreements and commitments.
Authorized agreements and commitments concluded in the year
In accordance with Article L. 225-40 of the French Commercial Code (Code de Commerce), we have been advised of certain related
party agreements and commitments which were authorised by your Board of Directors.
We are not required to ascertain the existence of any other agreements and commitments but to inform you, on the basis of the
information provided to us, of the terms and conditions of those agreements and commitments indicated to us. We are not required
to comment as to whether they are beneficial or appropriate. It is your responsibility, in accordance with Article R. 225-31 of the
French Commercial Code, to evaluate the benefits resulting from these agreements and commitments prior to their approval.
We performed those procedures which we considered necessary to comply with professional guidance issued by the French Institute of
Statutory Auditors (Compagnie nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures consisted
in verifying that the information provided to us is consistent with the documentation from which it has been extracted.
Agreement entered into with Groupe Arnault SAS
Directors involved
Messrs. Bernard Arnault, Pierre Godé and Denis Dalibot.
Nature and subject matter
Sub-lease agreement for a work of art.
Conditions
This agreement, authorized on May 15, 2008 by your Company’s Board of Directors, covers the lease of a work of art for an annual
lease payment of 540,000 euros exclusive of taxes, adjustable annually in line with movements in the 1-month EURIBOR rate,
with effect from January 1, 2008. The lease payment made by your Company for 2008, including insurance costs, amounted to
701,236.45 euros, including all taxes.
Agreements and commitments authorized in prior years and which remain current
during the year
In accordance with the French Commercial Code, we have been advised that the following agreements and commitments which
were approved in prior years remained current during the year.
2008 Annual Report
177
1. Agreements entered into with LVMH
Service agreement.
Conditions
This service agreement entered into with LVMH for the provision of legal services, particularly for corporate law issues and the
management of Christian Dior’s Securities Department, was maintained in 2008. Under this agreement, the compensation paid by
your Company in 2008 was 54,717 euros including taxes.
Financing operation.
Conditions
In 2003, your Board of Directors authorized the implementation of a financing operation for your Company, backed by a first-rate
banking institution, through a general partnership (société en nom collectif, SNC), with your Company and LVMH as partners. In
connection with this operation, this SNC subscribed for two bond issues carried out by your Company, totaling 123 million euros
and by LVMH, with each one of the partners committed to ensuring the conclusion of the operation on maturity based on a pro
rata of their respective stakes in the SNC.
This agreement was terminated in 2008, as both bonds had been redeemed. With respect to the 2008 fiscal year, your Company
paid interest in the amount of 5,692,607 euros and received a surplus payment upon the liquidation of the general partnership in
the amount of 1,202,810 euros.
2. Agreement entered into with Groupe Arnault SAS
Assistance agreement.
Conditions
A service agreement concerning financial services, the management of cash requirements and surpluses, accounting methods, tax,
financial engineering, and human resources and personnel management assistance has been concluded between your Company and
Groupe Arnault SAS. In this respect, your Company paid a total of 3,523,055.16 euros net of tax to Groupe Arnault SAS for the
fiscal year ended December 31, 2008.
3. Agreement entered into with Mr. Sidney Toledano
Nature, subject matter and conditions
Agreement specifying the consideration to be awarded to Mr. Sidney Toledano conditioned upon his observance of the non-compete
clause contained within his employment contract. In the event of his departure, he would receive, for a period of twenty-four months,
a payment equivalent to the monthly average of the gross salary he earned over the twelve months preceding his departure.
MAZARS
ERNST & YOUNG Audit
Denis Grison
Jeanne Boillet
178
2008 Annual Report
Resolutions for the approval of
the Combined Shareholders’
Meeting of May 14, 2009
• Ordinary resolutions
180
• Extraordinary resolutions
182
• Statutory Auditors’ report on the proposed decrease in share capital by the cancellation of shares purchased
187
• Statutory Auditors’ report on the issue of shares and securities with the retention
or cancellation of preferential subscription rights
188
• Statutory Auditors’ special report on the granting of share subscription or purchase options
to employees or executive officers of the Group
190
2008 Annual Report
179
Resolutions
Resolutions for the approval of the Combined
Shareholders’ Meeting of May 14, 2009
Ordinary resolutions
First resolution
(Approval of the financial statements of the parent company)
The Shareholders’ Meeting, after examining the report of the
Board of Directors, the report of the Chairman of the Board
and the report of the Statutory Auditors, hereby approves the
financial statements of the parent company for the fiscal year
ended December 31, 2008, including the balance sheet, income
statement and notes, as presented to the Meeting, as well as
the transactions reflected in these statements and summarized
in these reports.
Second resolution
(Approval of the consolidated financial statements)
The Shareholders’ Meeting, after examining the report of the
Board of Directors and the report of the Statutory Auditors,
hereby approves the consolidated financial statements for the
fiscal year ended December 31, 2008, including the balance
sheet, income statement and notes, as presented to the Meeting,
as well as the transactions reflected in these statements and
summarized in these reports.
Third resolution
(Approval of related party agreements)
The Shareholders’ Meeting, after examining the special report of
the Statutory Auditors on the related party agreements described
in Article L. 225-38 of the French Commercial Code, hereby
declares that it approves said agreements.
Fourth resolution
(Allocation of net profit – Determination of dividend)
The Shareholders’ Meeting, on the recommendation of the Board
of Directors, decides to allocate and appropriate the distributable
profit for the fiscal year ended December 31, 2008 as follows:
Amount available for distribution (EUR)
• Net profit:
plus
• Retained earnings before appropriation:
Amount available for distribution:
309,976,093.49
28,183,337.41
338,159,430.90
Proposed appropriation
• Gross dividend distribution of 1.61 euros per share:
• Retained earnings:
292,580,547.28
45,578,883.62
Total
338,159,430.90
The total gross dividend amounts to 1.61 euro per share. Taking
into account the interim dividend of 0.44 euro per share paid
on December 2, 2008, the balance of 1.17 euro will be paid out
on May 25, 2009.
With respect to this dividend distribution, individuals whose
tax residence is in France will be entitled to the 40% deduction
provided under Article 158 of the French Tax Code.
(EUR)
2007
2006
2005
180
2008 Annual Report
Finally, should the Company hold any treasury shares at the
time of payment of this balance, the corresponding amount of
unpaid dividends shall be allocated to retained earnings.
As required by law, the Shareholders’ Meeting observes that the
gross dividends per share paid out in respect of the past three
fiscal years were as follows:
Gross dividend (1)
Allowance (2)
1.61
1.41
1.16
0.644
0.564
0.496
Resolutions
Fifth resolution
Tenth resolution
(Ratification of the co-optation of Mr. Renaud Donnedieu
de Vabres as Director)
(Renewal of the term of office of Mr. Jaime de Marichalar
y Sáenz de Tejada as Director)
The Shareholders’ Meeting hereby decides to ratify the co-optation
of Mr. Renaud Donnedieu de Vabres as Director, to replace
Mr. Raymond Wibaux, deceased. Mr. Renaud Donnedieu de
Vabres shall serve as Director for the remaining term of office of
his predecessor, thus until the end of the Ordinary Shareholders’
Meeting convened in 2010 to approve the financial statements
for the previous fiscal year.
The Shareholders’ Meeting, noting that Mr. Jaime de Marichalar
y Sáenz de Tejada’s term of office expires on this date, hereby
reappoints him as a Director for a three-year term that shall
expire at the end of the Ordinary Shareholders’ Meeting convened
in 2012 to approve the financial statements for the previous
fiscal year.
Sixth resolution
(Renewal of the term of office of Mr. Éric Guerlain as
Director)
The Shareholders’ Meeting, noting that Mr. Éric Guerlain’s
term of office expires on this date, hereby reappoints him as a
Director for a three-year term that shall expire at the end of the
Ordinary Shareholders’ Meeting convened in 2012 to approve
the financial statements for the previous fiscal year.
Seventh resolution
(Renewal of the term of office of Mr. Antoine Bernheim as
Director)
Eleventh resolution
(Renewal of the term of office of Mr. Alessandro Vallarino
Gancia as Director)
The Shareholders’ Meeting, noting that Mr. Alessandro Vallarino
Gancia’s term of office expires on this date, hereby reappoints
him as a Director for a three-year term that shall expire at the
end of the Ordinary Shareholders’ Meeting convened in 2012 to
approve the financial statements for the previous fiscal year.
Twelfth resolution
(Appointment of a principal Statutory Auditor)
The Shareholders’ Meeting, noting that Mr. Antoine Bernheim’s
The Shareholders’ Meeting, noting that the term of office of
Ernst & Young Audit as a principal Statutory Auditor expires
at the end of this Shareholders’ Meeting, hereby decides to
appoint Ernst & Young et Autres as a principal Statutory
auditor, for a six-year term that shall expire at the end of the
Eighth resolution
Thirteenth resolution
(Renewal of the term of office of Mr. Denis Dalibot as
Director)
(Appointment of an alternate Statutory Auditor)
The Shareholders’ Meeting, noting that Mr. Denis Dalibot’s
Ninth resolution
(Renewal of the term of office of Mr. Christian de Labriffe
as Director)
The Shareholders’ Meeting, noting that Mr. Christian de Labriffe’s
Mr. Dominique Thouvenin as an alternate Statutory Auditor
expires at the end of this Shareholders’ Meeting, hereby decides to
appoint Auditex as an alternate Statutory Auditor, for a six-year
term that shall expire at the end of the Ordinary Shareholders’
Meeting convened in 2015 to approve the financial statements
for the previous fiscal year.
Fourteenth resolution
(Reappointment of a principal Statutory Auditor)
Mazars as a principal Statutory Auditor expires at the end
of this Shareholders’ Meeting, hereby decides to renew this
appointment, for a six-year term that shall expire at the end of
the Ordinary Shareholders’ Meeting convened in 2015 to approve
2008 Annual Report
181
Resolutions
Fifteenth resolution
(Reappointment of an alternate Statutory Auditor)
Mr. Guillaume Potel as an alternate Statutory Auditor expires at
the end of this Shareholders’ Meeting, hereby decides to renew
this appointment, for a six-year term that shall expire at the end
of the Ordinary Shareholders’ Meeting convened in 2015 to
approve the financial statements for the previous fiscal year.
Sixteenth resolution
(Share repurchase)
The Shareholders’ Meeting, having examined the report of the
Board of Directors, authorizes the latter to acquire Company
shares, pursuant to the provisions of Articles L. 225-209 et
seq. of the French Commercial Code. It thus authorizes the
implementation of a share repurchase program.
In particular, the shares may be acquired in order (i) to provide
market liquidity services (purchases/sales) under a liquidity
contract set up by the Company; (ii) to cover stock option
plans, the granting of bonus shares or any other form of share
allocation or share-based payment, in favor of employees or
officers either of the Company or of an affiliated undertaking
as defined under Article L. 225-180 of the French Commercial
Code; (iii) to cover securities giving access to the Company’s
shares, notably by way of conversion, tendering of a coupon,
reimbursement or exchange or (iv) to be retired or (v) held so
as to be exchanged or presented as consideration at a later date
for external growth operations.
The purchase price per share may not exceed 130 euros. In the
event of a capital increase through the capitalization of reserves
and the granting of bonus shares as well as in cases of either a
stock split or a reverse stock split, the purchase price indicated
above shall be adjusted by a multiplying coefficient equal to the
ratio of the number of shares making up the Company’s share
capital before and after the operation.
The maximum number of securities that may be issued shall not
exceed 10% of the share capital, with the understanding that
this limit shall apply to the amount of the share capital that shall
be adjusted, where applicable, in order to take into account any
transactions having an impact on the share capital subsequent
to the date of this Meeting. As of December 31, 2008, this limit
corresponds to 18,172,704 shares. The maximum total amount
dedicated to these purchases may not exceed 2.4 billion euros.
The shares may be acquired by any appropriate method on the
market or over the counter, including the use of derivatives,
as well as through block purchases or as part of an exchange.
Pursuant to the provisions of Articles L. 225-209 et seq. of the
French Commercial Code, the shares thus acquired may be resold
by the Company by any means, including block sales.
All powers are granted to the Board of Directors to implement
this authorization. The Board may delegate such powers in
order to place any and all buy and sell orders, enter into any and
all agreements, sign any document, file all declarations, carry
out all formalities and generally take any and all other actions
required in the implementation of this authorization.
This authorization, which replaces the authorization granted by
the Combined Shareholders’ Meeting of May 15, 2008, is hereby
granted for a term of eighteen months as of this date.
Extraordinary resolutions
Seventeenth resolution
(Authorization to reduce the share capital)
The Shareholders’ Meeting, having examined the report prepared
by the Board of Directors and the special report prepared by
the Statutory Auditors,
1.authorizes the Board of Directors to reduce the share capital
of the Company, on one or more occasions, by cancelling the
shares acquired pursuant to the provisions of Article L. 225209 of the French Commercial Code;
2.sets the maximum amount of the capital reduction that may
be performed under this authorization over a twenty-four
month period to 10% of the Company’s current capital;
3.grants all powers to the Board of Directors to perform
and record the capital reduction transactions, carry out all
required acts and formalities, amend the Bylaws accordingly,
and generally take any and all other actions required in the
implementation of this authorization;
4.grants this authorization for a period of eighteen months as
of the date of this Meeting;
182
2008 Annual Report
5.decides that this authorization shall replace that granted by
the Combined Shareholders’ Meeting of May 15, 2008.
Eighteenth resolution
(Delegation of authority to increase the share capital with
preferential subscription rights)
The Shareholders’ Meeting, having examined the report
presented by the Board of Directors and the special report of
the Statutory Auditors and pursuant to the provisions of the
French Commercial Code, in particular Articles L. 225-129,
L. 225-129-2 and L. 228-92, hereby,
1.delegates to the Board of Directors the authority to increase
the Company’s share capital, on one or more occasions, in
such amounts and at such times as it may deem fit:
a) either by way of a public offering, on the French and/or
international market, whether denominated in euros or in
any other currency or accounting unit based on a basket of
currencies, with preferential subscription rights for existing
shareholders, of ordinary shares and/or any other investment
Resolutions
securities, including subscription or acquisition warrants issued
on a standalone basis, giving either immediate or future access,
at any time or on a predetermined date, to the Company’s
share capital or conferring entitlement to debt securities, by
subscription, whether in cash or by offsetting receivables,
through conversion, exchange, repayment, tendering of a
coupon or in any other manner, with the understanding that
debt securities may be issued with or without guarantees, in
forms, at such rates and under such terms and conditions as
the Board of Directors shall deem appropriate,
b) or through the incorporation into share capital of all or a
portion of unappropriated retained earnings, reserves, or
additional paid-in capital, whose capitalization is permitted
by law and by the Company’s Bylaws, and through the
allotment of ordinary bonus shares or through an increase
in the par value of existing shares,
with the understanding that the issuance of preference shares
is excluded from the scope of this delegation;
2.grants this delegation of authority for a period of twenty-six
months as of the date of this Meeting;
3.decides, should the Board of Directors make use of this
delegation of authority, that:
a) the maximum nominal amount of capital increases that may
be effected, whether immediately or over time, on the basis of
the issuance of the shares or investment securities described
under item 1.a) above shall be equal to eighty (80) million
euros, with the understanding that against such amount there
shall be applied the nominal amount of any capital increase
resulting or likely to result over time from issues decided
under the 19th, 21st and/or 22nd resolutions submitted for
the approval of shareholders at this Meeting,
with the understanding that the abovementioned ceiling
shall be supplemented, where applicable, by the nominal
amount of shares that may be issued in the event of further
financial transactions, in order to protect the rights of holders
of investment securities giving access to the Company’s
share capital, as provided by law,
b) the maximum nominal amount of capital increases referred
to under item 1.) above that may be effected shall not exceed
eighty (80) million euros, it being indicated that the amount
of such capital increases shall be added to the amount of
the ceiling referred to under item 3.a) above;
delegation of authority, that if subscriptions in respect of
pro rata entitlements and, where applicable, subscriptions in
respect of applications by qualifying shareholders that may be
reduced by decision of the Board, do not absorb the entirety
of an issue of securities, the Board of Directors may have
recourse, subject to the terms set forth by law and in the order
it shall determine, to any of the options provided pursuant
to Article L. 225-134 of the French Commercial Code, and
in particular may offer to the general public all or a portion
of the unsubscribed shares and/or investment securities;
5.takes note that in the event of the exercise of this delegation
of authority, the decision to issue investment securities giving
access to the Company’s share capital shall entail, in favor
of the holders of the issued securities, the express waiver by
shareholders of their preferential right to subscribe to the shares
to which the investment securities so issued shall give access;
6.takes note that this delegation of authority entails the granting
to the Board of Directors of all necessary powers, including the
option to delegate such powers to the Chief Executive Officer,
in order to implement this delegation of authority, in accordance
with the terms set forth by law, and in particular in order to:
• in the event of the incorporation into share capital of unappropriated
retained earnings, reserves, or additional paid-in capital:
-- determine the amount and nature of the reserves to be
incorporated into the capital, determine the number of new
shares to be issued and/or the amount in which the existing
par value of the shares comprising the share capital shall be
increased, set the date, even with retroactive effect, from
which the new shares shall have dividend rights or the date
on which the increase in the par value shall take effect,
-- decide that fractional rights may not be traded, that the
corresponding shares shall be sold and that the proceeds of
the sale shall be allotted to the holders of the rights;
• in the event of issuance of shares and/or other investment
securities giving access to the capital or conferring entitlement
to debt securities:
-- decide upon the amount to be issued, the issue price, as well
as the amount of the premium that may, where applicable,
be charged upon issuance,
-- determine the dates and terms of the issuance, the nature, form and
features of the securities to be issued, which may be subordinated
or unsubordinated, perpetual or redeemable, bear interest at a
fixed and/or variable rate, or produce capitalized interest and
may be repaid with or without a premium, or be amortized,
-- determine the mode of payment of the shares and/or securities
issued or to be issued,
-- determine, where applicable, the terms of exercise of the
rights attaching to the securities issued or to be issued and, in
particular, determine the date, even with retroactive effect, from
which the new shares shall have dividend rights, as well as any
and all other terms and conditions of completion of the issuance,
-- determine the terms under which the Company may, where
applicable, have the right to acquire or exchange on the stock
market, at any time or during specific periods, the securities
issued or to be issued, whether or not these securities are to
be retired, in accordance with applicable laws,
-- provide for the option to suspend, where applicable, the
exercise of the rights attaching to such securities for a period
not to exceed three months,
-- at its sole discretion, apply the expenses of the share capital
increases against the amount of the corresponding premiums
and deduct from that amount any sums necessary in order
to increase the legal reserve to one-tenth of the new capital
following each increase,
-- make all adjustments required in accordance with applicable
laws and regulations and determine the terms ensuring, where
2008 Annual Report
183
Resolutions
applicable, the protection of the rights of holders of investment
securities giving future access to the Company’s share capital,
-- record the completion of each capital increase and amend the
Bylaws accordingly;
• execute any agreement, take any action, and complete any and
all formalities required for the issuance and financial service
of any securities issued under this delegation of authority and
for the exercise of any rights attaching thereto;
Nineteenth resolution
(Delegation of authority to increase the share capital without
preferential subscription rights)
The Shareholders’ Meeting, having examined the report presented
by the Board of Directors as well as the special report of the
Statutory Auditors and pursuant to the provisions of the French
Commercial Code, in particular Articles L. 225-129-2, L. 225135 et seq. and L. 228-92, hereby,
1.delegates to the Board of Directors the authority to issue,
on one or more occasions, in such amounts and at such
times as it may deem fit, by way of a public offering or an
offering provided for under item II of Article L. 411-2 of the
Monetary and Financial Code, on the French market and/or
international market, of ordinary shares and/or investment
securities, whether denominated in euros or in any other
currency or accounting unit based on a basket of currencies,
including any subscription or acquisition warrants issued on a
standalone basis, giving access to the Company’s share capital,
whether immediately or over time, at any time or at a fixed
date, or conferring entitlement to debt securities, whether
by subscription in cash or by offsetting receivables, through
conversion, exchange, repayment, tendering of a coupon or in
any other manner, with the understanding that debt securities
may be issued with or without guarantees, in forms, at rates,
and under terms and conditions that the Board of Directors
shall deem appropriate, and that the issuance of preference
shares is excluded from the scope of this delegation;
3.decides that in the event of the exercise of this delegation of
authority by the Board of Directors:
a) the maximum nominal amount of capital increases that
may be effected, directly or indirectly, on the basis of the
issuance of the shares or investment securities addressed
under item 1. above shall be equal to eighty (80) million
euros, with the understanding that against such amount there
shall be applied the nominal amount of any capital increase
resulting or likely to result over time from issues decided
under the 18th, 21st and/or 22nd resolutions submitted for
the approval of shareholders at this Meeting,
b) to the above ceiling, there shall be added, where applicable,
the nominal amount of the shares to be issued, if any, in the
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2008 Annual Report
event of further financial transactions, in order to protect, in
accordance with provisions of law, the rights of holders of
investment securities giving access to the share capital,
c) furthermore, in the event of an offering provided for under
item II of Article L. 411-2 of the Monetary and Financial
Code, the number of securities that may be issued per year
shall not exceed 20% of the Company’s share capital;
4.decides to exclude the preferential right of shareholders to
subscribe to any shares or other investment securities that
may be issued under this resolution, while leaving the Board
of Directors free to grant to shareholders, for such period and
under such terms as it shall determine in accordance with the
provisions of Article L. 225-135 of the French Commercial
Code and for all or part of any issuance made, a non-negotiable
priority subscription right that shall be exercised in proportion
to the number of shares held by each shareholder, and that may
be supplemented by subscriptions in respect of applications
by qualifying shareholders that may be reduced by decision
of the Board, with the understanding that, at the end of the
priority period, any unsubscribed securities shall be offered
for subscription by the general public;
5.takes note that in the event of the exercise of this delegation of
authority, the decision to issue investment securities giving access
to the Company’s share capital shall entail, in favor of the holders
of the issued securities, the express waiver by shareholders
of their preferential right to subscribe to capital securities to
which the investment securities so issued shall give access;
6.decides that the amount of the consideration, accruing and/or
to accrue at a later date to the Company, for each of the shares
issued or to be issued under this delegation of authority, taking
into account, in the event of the issue of standalone share
subscription warrants, the issue price of such warrants, shall
be at least equal to the minimum price set forth in legislative
and regulatory provisions in force at the time of the issuance;
7.takes note that this delegation of authority entails the grant
to the Board of Directors of the powers attributed under item
6 of the 18th resolution with the right to delegate the same to
the Chief Executive Officer;
Twentieth resolution
(Delegation of authority to increase the amount of an issue where
demand for securities is in excess of the original amount offered)
by the Board of Directors and the special report prepared by the
Statutory Auditors, hereby decides that in the event of an issue
approved under the delegation granted to the Board of Directors by
virtue of the 18th and 19th resolutions presented above, the number
of shares to be issued may, if demand for securities is in excess of
the original amount offered, be increased under the conditions
and within the limits provided under Articles L. 225-135-1 and
R. 225-118 of the French Commercial Code, in accordance
with the ceilings indicated in the abovementioned resolutions.
Resolutions
Twenty-first resolution
Twenty-second resolution
(Delegation of authority to increase the share capital in
connection with a public exchange offer)
(Delegation of authority to increase the share capital in
connection with contributions in kind)
Commercial Code, in particular Articles L. 225-129, L. 225-148
and L. 228-92, hereby,
Commercial Code, in particular Articles L. 225-129, L. 225-147
and L. 228-92, hereby,
1.delegates to the Board of Directors the authority to increase
the Company’s share capital, on one or several occasions, at
such times as it may deem fit, through the issue of shares or of
any investment securities giving access to the share capital or
conferring entitlement to debt securities provided the underlying
securities are shares, as consideration for shares contributed
to a public exchange offer for the shares of another company
that are admitted to trading on a regulated market, as defined
under Article L. 225-148 of the French Commercial Code;
1.delegates to the Board of Directors such powers as are
necessary in order to increase the share capital, on one or
more occasions, at such times as it may deem fit, through the
issue of shares or investment securities giving access to the
Company’s share capital or conferring entitlement to debt
securities provided that the underlying securities are shares,
as consideration for contributions in kind granted to the
Company and consisting of shares or investment securities
giving access to the Company’s share capital, in cases where
the provisions of Article L. 225-148 of the French Commercial
Code do not apply;
3.decides that the maximum nominal amount of capital increases
that may be decided under this resolution shall be equal to
eighty (80) million euros, with the understanding that against
such ceiling there shall be applied the nominal amount of any
capital increase resulting, or likely to result over time, from
issues decided under the 18th, 19th and/or 22nd resolutions
submitted for the approval of shareholders at this Meeting,
and that to this ceiling shall be added, where applicable, the
nominal amount of the shares to be issued in the event of
further financial transactions, in order to protect the rights of
holders of investment securities giving access to the Company’s
share capital, as provided by law;
delegation of authority, including the option to sub-delegate
this authority within the limits set forth by law, that the Board
or its sub-delegatee shall have full powers to carry out all
necessary measures, particularly in order to:
• approve the list of securities tendered in the exchange, approve
the terms of the issuance, the exchange ratio and where applicable
the amount of the residual cash balance to be paid as well as to
determine the terms and conditions of the issuance, whether in
connection with a public exchange offer, an alternative takeover
bid or tender offer, a public offering covering the acquisition
or exchange of the relevant securities against settlement in
securities and cash, or a principal takeover bid (OPA) or
exchange offer (OPE) combined with a subsidiary OPE or OPA,
• determine the date from which the new shares shall carry
dividend rights,
• apply where applicable any expenses arising in connection
with capital increases against the amount of the contribution
premiums and deduct from such amount the sum required
in order to bring the legal reserve to one-tenth of the new
capital after each increase,
• amend the Bylaws accordingly;
3.decides that the total number of shares that may be issued in
connection with capital increases decided under this resolution
shall not exceed 10% of the Company’s share capital, with
the understanding that the ceiling for the nominal amount
of any capital increase decided under this resolution shall
be set such that the cumulative total of the nominal amount
of this capital increase together with those of any capital
increases already decided under this resolution as well as
under the 18th, 19th and/or 21st resolutions submitted for the
approval of shareholders at this Meeting, shall not exceed
eighty (80) million euros, and that this ceiling of eighty
(80) million euros shall not include the nominal amount of
the shares to be issued, if any, in the event of further financial
transactions, in order to protect the rights of holders of
investment securities giving access to the Company’s share
capital, as provided by law;
delegation of authority, including the option to sub-delegate
this authority within the limits set forth by law, that the Board
or its sub-delegatee shall have full powers to carry out all
necessary measures, particularly in order to:
• approve the Contribution Auditor’s report and the valuation
of the contribution,
• determine the date from which the new shares shall carry
dividend rights,
• apply where applicable any expenses arising in connection
with capital increases against the amount of the contribution
premiums and deduct from such amount the sum required
in order to bring the legal reserve to one-tenth of the new
capital after each increase,
• amend the Bylaws accordingly;
2008 Annual Report
185
Resolutions
Twenty-third resolution
(Authorization to grant options to purchase or subscribe to
shares to executive officers and employees of the Group)
Statutory Auditors, hereby,
1.authorizes the Board of Directors, pursuant to the provisions
of Articles L. 225-177 et seq. of the French Commercial Code,
to grant, in one or more operations, to employees or executive
officers of the Company and of any affiliated undertakings, as
defined under Article L. 225-180 of the French Commercial Code,
options conferring the right either to subscribe to new shares in the
Company, to be issued as part of a capital increase, or to purchase
existing shares repurchased by the Company, in particular with
the aim of stabilizing the share price, it being understood that
the total amount of options granted under this authorization
may not confer entitlement to a number of shares representing
more than 3% of the Company’s share capital as of this date;
2.takes note that this authorization comprises an express waiver
by shareholders, in favor of the beneficiaries of options, of their
preferential right to subscribe to the shares that shall be issued as
the options are exercised and that it will be implemented under the
terms and conditions laid down by applicable laws and regulations
in force on the commencement of the granting of options;
3.decides that the subscription or purchase price of shares shall
be determined by the Board of Directors on the date when the
option is granted within limits authorized by the provisions
in force on such date and that, in any event, this price may
not be lower than the average share price during the twenty
trading days prior to this date, with the understanding that,
in the case of options to purchase shares, this price may not
be lower that the average purchase price of the shares to be
granted upon the exercise of these options.
The subscription or purchase price of shares under option may not
be modified except under the circumstances set forth by law, on the
occasion of securities transactions or other financial operations,
in which case the Board of Directors shall apply an adjustment,
pursuant to regulations, to the number and price of shares under
option in order to take into account the impact of these operations;
4.decides that the exercise period of options shall be determined
in accordance with provisions in force on the grant date and
shall last a maximum of ten years;
5.grants full powers to the Board of Directors under the limits
set forth above in order to:
• determine the terms of the plan(s) and the conditions under
which options shall be granted, conditions which may include
clauses prohibiting the immediate resale of all or a portion of
the shares, although the compulsory holding period may not
exceed three years from the exercise of an option,
• decide upon the grant date or dates,
• draw up the list of beneficiaries of options,
• complete, either directly or through an intermediary, all acts
and formalities serving to finalize the capital increase or
increases that may be carried out under the authorization
that may be decided under this resolution,
• amend the Bylaws accordingly and generally take any and all
necessary steps in the implementation of this authorization;
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2008 Annual Report
6.takes note that the Board of Directors shall inform the Ordinary
Shareholders’ Meeting of any operations carried out under
this resolution, indicating the number and price of options
granted and their beneficiaries, as well as the number of shares
subscribed or purchased;
7.grants this authorization for a period of thirty-eight months
as of the date of this Meeting;
Twenty-fourth resolution
(Amendment of Bylaws)
The Shareholders’ Meeting, having examined the report
presented by the Board of Directors, hereby decides to amend
the Company’s Bylaws to ensure compliance with the new
requirements enacted by Law 2008-776 on the Modernization
of the Economy (LME) of August 4, 2008, specifically by
amending Articles 10 and 17 to read as follows:
“Article 10
…
Second subparagraph:
If, at the time of its appointment, a member of the Board of
Directors does not own the required number of shares or if,
during its term of office, it ceases to be the owner thereof, it shall
dispose of a period of six months to purchase such a number
of shares, in default of which it shall be automatically deemed
to have resigned.”
“Article 17
…
Shareholder participation
Subparagraphs 1 through 12 remain unchanged
Subparagraph 13:
Shareholders have as many votes as they hold shares. However,
a voting right equal to twice the voting right attached to other
shares with respect to the portion of the share capital that they
represent, is granted to:
• all fully paid-up registered shares for which evidence of
registration under the name of the same shareholder, over a
period of least three years, may be demonstrated,
• registered shares allocated to a shareholder in the event of
a capital increase through the capitalization of reserves,
unappropriated retained earnings, or issue premiums, by
virtue of this shareholder’s entitlement to benefit from this
right in respect of existing shares.
This double voting right shall automatically lapse in the case of
registered shares being converted into bearer shares or conveyed
in property. However, any transfer by right of inheritance, by
way of liquidation of community property between spouses
or deed of gift inter vivos to the benefit of a spouse or an heir
shall neither cause the acquired right to be lost nor interrupt the
abovementioned three-year qualifying period. This is also the
case for any transfer due to a merger or spin-off of a shareholding
company.”
Last subparagraph: unchanged
Resolutions
Statutory Auditors’ report on the proposed decrease in share capital
by the cancellation of shares purchased (seventeenth resolution)
MAZARS
ERNST & YOUNG Audit
Tour Exaltis
92400 Courbevoie
Statutory Auditors
Statutory Auditors
As Statutory Auditors of Christian Dior SA and pursuant to Article L. 225-209, paragraph 7 of the French Commercial Code
(Code de commerce) on the decrease in share capital by the cancellation of a company’s own shares, we hereby report on our assessment
of the terms and conditions of the proposed decrease in share capital.
We performed the procedures that we deemed necessary in accordance with the professional guidelines of the French Institute of
Statutory Auditors (Compagnie nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures consisted
in reviewing the fairness of the reasons for and conditions of the proposed decrease in share capital.
This transaction is part of the purchase by your Company of its own shares, within a limit of 10% of its share capital, in accordance
with Article L. 225-209 of the French Commercial Code. Furthermore, this purchase authorization is proposed for approval at your
Shareholders’ Meeting and would be effective for a period of eighteen months.
Your Board of Directors requests the delegation of all powers, for a period of eighteen months, to cancel all shares purchased
following the granting of authority by your Company for the purchase of its own shares, within the limit of 10% of its share capital,
and during a period of 24 months starting from the date of this Shareholders’ Meeting.
We have no comment to make as to the terms and conditions of the proposed share capital decrease, it being indicated that prior
approval, by your Shareholders’ Meeting, for the purchase by your Company of its own shares, is required as proposed in the
sixteenth resolution.
MAZARS
ERNST & YOUNG Audit
Denis Grison
Jeanne Boillet
2008 Annual Report
187
Resolutions
Statutory Auditors’ report on the issue of shares and securities
with the retention or cancellation of preferential subscription
rights (eighteenth, nineteenth, twentieth, twenty-first and twentysecond resolutions)
MAZARS
ERNST & YOUNG Audit
Tour Exaltis
92400 Courbevoie
Statutory Auditors
Statutory Auditors
As Statutory Auditors of your Company and pursuant to the engagement set forth in the French Commercial Code (Code de commerce)
and notably Articles L. 225-129-2, L. 225-135, L. 225-136, L. 225-138 and L. 228-92, we hereby report to you on the proposed
delegation of powers to the Board of Directors to perform various issues of shares and securities, which are subject to adoption by
the shareholders.
Your Board of Directors proposes, based on its report:
• that shareholders delegate to it, with the option of sub-delegating such authorization, for a period of 26 months, the power to
decide the following transactions and set the final terms and conditions of these issues and, when necessary, asks that you waive
your preferential subscription rights:
-- the authority to issue, on one or more occasions, through a public offering, ordinary shares and any and all securities, including
stock subscription or purchase options issued separately, conferring immediate or future access, at any time or on a fixed date, to
the Company’s share capital or conferring entitlement to the grant of debt instruments with retention of preferential subscription
rights (eighteenth resolution),
-- the authority to issue, on one or more occasions, through a public offering or through an offering within the meaning of paragraph II
of Article L. 411-2 of the French Monetary and Financial Code (Code monétaire et financier) ordinary shares and/or any and all
securities, including stock subscription or purchase options issued independently, conferring immediate or future access, at any
time or on a fixed date, to the Company’s share capital or conferring entitlement to the grant of debt instruments with cancellation
of preferential subscription rights (nineteenth resolution);
• that shareholders delegate to it, with the option of sub-delegating such authorization, for a period of 26 months, the authority to
decide the terms and conditions of an issue of shares or securities conferring access to the Company’s share capital or conferring
entitlement to the grant of debt instruments subject to the primary security being a share in consideration for the securities
transferred to the Company as part of a share exchange bid with another company listed on a regulated market within the meaning
of Article L. 225-148 of the French Commercial Code (twenty-first resolution);
• that shareholders delegate to it, for a period of 26 months, the authority to decide the terms and conditions of an issue of shares
or securities conferring access to the Company’s share capital or conferring entitlement to the grant of debt instruments subject
to the primary security being a share in consideration for contributions in kind granted to the Company and comprised of equity
securities or securities conferring access to the Company’s share capital up to a maximum of 10% (twenty-second resolution).
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2008 Annual Report
Resolutions
The total par value amount of potential share capital increases likely to be performed, immediately or in the future, and resulting
from the issue of shares or securities may not exceed 80 million euros, it being specified that the overall ceiling applies to capital
increases resulting from issues decided pursuant to eighteenth, nineteenth, twenty-first and/or twenty-second resolutions submitted
to your approval in the current Meeting.
The number of securities to be created as part of the implementation of the delegations of power referred to in the eighteenth and
nineteenth resolutions may be increased in accordance with the conditions set forth in Articles L. 225-135-1 of the French Commercial
Code within the above-mentioned overall maximum ceiling, if you approve the twentieth resolution.
Pursuant to Articles R. 225-113, R. 225-114 and R. 225-117 of the French Commercial Code, the Board of Directors will issue a
report in which it will express its opinion on the fair presentation of the quantified information extracted from the accounts, on the
proposed cancellation of preferential subscription rights and on certain other information concerning these transactions, contained
in this report.
We performed the procedures that we deemed necessary in accordance with the professional guidelines of the French Institute
of Statutory Auditors (Compagnie nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures
consisted in verifying the content of the Board of Directors’ report on these transactions and the conditions governing the issue
price of shares to be issued.
Subject to a subsequent review of the terms and conditions of proposed issues, we have no comments on the terms and conditions
governing the determination of the issue price of equity securities to be issued presented in the Board of Directors’ report in
connection with the nineteenth resolution.
Furthermore, as the report does not include information on the terms and conditions governing the determination of the issue price
of securities to be issued pursuant to the eighteenth, twenty-first and twenty-second resolutions, we cannot express an opinion on
the issue price calculation inputs.
As the issue price of equity securities to be issued has not yet been set, we do not express an opinion on the final conditions under
which the issues will be performed and, as such, on the proposed cancellation of preferential subscription rights submitted for your
approval in the nineteenth resolution.
In accordance with Article R. 225-116 of the French Commercial Code, we will issue an additional report on the performance by
your Board of Directors of any issues with cancellation of preferential subscription rights or of any issues of securities conferring
access to the Company’s share capital and/or entitlement to the grant of debt instruments.
MAZARS
ERNST & YOUNG Audit
Denis Grison
Jeanne Boillet
2008 Annual Report
189
Resolutions
Statutory Auditors’ special report on the granting of share subscription
or purchase options to employees or executive officers of the Group
(twenty-third resolution)
MAZARS
ERNST & YOUNG Audit
Tour Exaltis
92400 Courbevoie
Statutory Auditors
Statutory Auditors
As Statutory Auditors of your Company and pursuant to the engagement set forth in Articles L. 225-177 and R. 225-144 of French
Commercial Code (Code de Commerce), we hereby report to you on the proposed granting of share subscription or purchase options to
employees or executive officers of the Company and of related companies as defined in Article L. 225-180 of the French Commercial
Code.
It is the responsibility of the Board of Directors to prepare a report on the reasons for granting stock subscription or purchase options
and the proposed terms and conditions governing the determination of the subscription or purchase price. Our role is to express an
opinion on the proposed terms and conditions governing the determination of the subscription or purchase price.
We performed the procedures that we deemed necessary in accordance with the professional guidelines of the French Institute
of Statutory Auditors (Compagnie nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures
consisted in verifying that the proposed terms and conditions governing the determination of the subscription or purchase price are
presented in the Board of Directors’ report, comply with the legal provisions, provide shareholders with explanations and do not
appear obviously inappropriate.
We have no comments on the proposed terms and conditions.
MAZARS
ERNST & YOUNG Audit
Denis Grison
Jeanne Boillet
190
2008 Annual Report
General information
1. History of the Group
2. General information regarding
the parent company and its share capital
192
194
2.1 General information regarding
the parent company
194
2.2 Information regarding the capital
195
2.3 Analysis of share capital and voting rights 196
3.1 Charter of the Board of Directors
3.2 Internal rules of the Performance
Audit Committee
3.3 Internal rules of the Nominations and
Compensation Committee
3.4. Bylaws (draft version)
4. Stock market information
4.1
4.2
4.3
4.4
Share capital
Dior share price
Bonds issued by Christian Dior
Price trend of the Christian Dior share and
volume of stock traded in Paris
4.5 Five-year review of dividends
4.6 Payment of dividend
4.7 Stock market capitalization
4.8 Change in share capital
4.9 Per share performance
4.10Market for issuer’s shares
4.11Dividends paid per share in fiscal years
2004, 2005, 2006, 2007 and 2008 198
198
199
201
202
211
211
211
211
5. Main locations and properties
215
5.1 Production
5.2. Distribution
5.3 Administrative sites and
investment property
215
216
6. Supply sources and subcontracting
6.1
6.2
6.3
6.4
6.5
6.6
Champagne and wines
Cognac and spirits
Fashion and leather goods
Perfumes and cosmetics
Watches and jewelry
7. Statutory Auditors
217
218
218
218
219
219
220
220
221
7.1 Name and term
7.2 Fees paid in 2008
221
221
8. Statement of the Company Officer
responsible for the annual financial report
222
212
212
213
213
213
213
214
214
2008 Annual Report
191
General information
History of the Group
1.History of the Group
1905
Birth of Christian Dior in Granville (Normandy, France), on January 21.
1946
Backed by Marcel Boussac, Christian Dior founds his own couture house, in a private house at 30, avenue Montaigne in Paris.
1947
On February 12, Christian Dior presents the 90 models of his first collection on six mannequins. The “Corolle” and “Huit” lines are
very quickly rechristened “New Look”. Parfums Christian Dior is founded, headed by Serge Heftler Louiche. Dior names the first
perfume “Miss Dior” in honor of his sister Catherine. Pierre Cardin begins at Christian Dior, as the “leading man” in the workshop.
He remains there until 1950.
1948
In November, a luxury ready-to-wear house is established in New York at the corner of 5th Avenue and 57th Street, the first of its
kind. Creation of Christian Dior Parfums New York.
1949
Launch of the perfume “Diorama”. By marketing Dior stockings in the United States, the brand creates the licensing system.
1950
License for neckties. All accessories follow. Within three years, this system will be copied by all the couture houses.
1952
The Christian Dior brand consolidates its presence in Europe by creating Christian Dior Models Limited in London. Agreement
with the House of Youth in Sydney for exclusive Christian Dior New York models. Exclusive agreement with Los Gobelinos of
Santiago, Chile for the Christian Dior Paris Haute Couture collections.
1955
At age 19, Yves Saint Laurent becomes Christian Dior’s first and only assistant. Opening of the Grande Boutique at the corner of
avenue Montaigne and rue François 1er. Launch of Dior lipstick. A line of beauty products will follow.
1957
Christian Dior succumbs to a heart attack while convalescing at Montecatini on October 24. Yves Saint Laurent is named to provide
artistic direction for the brand.
1960
Called up for National Service, Yves Saint Laurent leaves Dior after completing six collections. Marc Bohan succeeds him. He is
34 years old.
1961
Marc Bohan presents his first collection, “Slim Look” under the Dior label.
1962
Yves Saint Laurent opens his own couture house.
1963
Launch of the perfume “Diorling”.
1966
Launch of the men’s fragrance “Eau Sauvage”.
1967
Philippe Guibourgé, assistant to Marc Bohan, creates the “Miss Dior” line, the first Dior women’s ready-to-wear line in France.
Opening of the “Baby Dior” boutique.
1968
Launch of the Christian Dior Coordinated Knits line. The Dior perfume company is sold to Moët Hennessy. Frédéric Castet assumes
management of the Fashion Furs Department - Christian Dior Paris.
1970
Creation of the Christian Dior Monsieur line. At Parly II, a new Christian Dior boutique is decorated by Gae Aulenti.
1972
Launch of the perfume “Diorella”.
1973
Creation in France of the ready-to-wear fur collection, which will then be manufactured under license in the United States, Canada,
and Japan.
1978
Bankruptcy of the Marcel Boussac group, whose assets, under the authorization of the Paris Trade Court, are purchased by the
Willot Group.
1979
Launch of the perfume “Dioressence”.
1980
Launch of the men’s fragrance “Jules”.
1981
The Willot group declares bankruptcy.
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2008 Annual Report
General information
History of the Group
1984
A group of investors, led by Bernard Arnault, takes control of the former Willot Group.
1985
Bernard Arnault becomes Chairman and Chief Executive Officer of Christian Dior. Launch of the perfume “Poison”.
1987
The Paris Fashion Museum dedicates an exhibition to Christian Dior, on the fortieth anniversary of his first collection.
1988
Through its subsidiary Jacques Rober, held jointly with the Guinness group, Christian Dior takes a 32% equity stake in the share
capital of LVMH. The share capital of Christian Dior is offered to French and foreign institutional investors who subscribe to a
capital increase of 3.3 billion francs in a private placement.
1989
Gianfranco Ferré joins Christian Dior as creator of the Haute Couture, Fashion Furs, and Women’s ready-to-wear collections.
His first Haute Couture collection is awarded the Dé d’Or. Opening of a boutique in Hawaii. Jacques Rober’s stake in LVMH is
increased to 44%.
1990
Opening of boutiques in Los Angeles and New York. LVMH’s stake is increased to 46%.
1991
Listing of Christian Dior on the spot market, and then the monthly settlement market of the Paris stock exchange. Launch of the
perfume “Dune”.
1992
Patrick Lavoix is named artistic Director of “Christian Dior Monsieur”. Relaunch of “Miss Dior”.
1994
A revision of agreements with Guinness has the effect of increasing Christian Dior’s consolidated stake in LVMH from 24.5% to
41.6%.
1995
The Couture line is transferred to a wholly-owned subsidiary that takes the corporate name “Christian Dior Couture”.
1996
John Galliano becomes creator of Christian Dior Couture.
1997
Christian Dior Couture takes over the network of 13 boutiques operated under franchise by its Japanese licensee, Kanebo.
1998
Christian Dior Couture takes over the direct marketing of ready-to-wear and women’s accessories in Japan after terminating its
licensing agreement with Kanebo.
1999
Launch of the perfume “J’adore”.
Creation of a new business group, Fine Jewelry, whose collections are created by Victoire de Castellane.
2001
In January 2001, Hedi Slimane, new creator of the “Homme” line, presents his first collection based on a new contemporary
masculine concept.
Launch of the men’s fragrance “Higher”.
Opening of the Fine Jewelry boutique at Place Vendôme, created under the supervision of Victoire de Castellane.
2002
Launch of the perfume “Addict”.
2003
Opening of a flagship boutique in the Omotesando district (Tokyo).
2004
Opening of a flagship boutique in the Ginza district (Tokyo).
2005
Celebration of the centennial of Christian Dior’s birth.
Launch of the perfumes “Miss Dior Chérie” and “Dior Homme”.
2006
Christian Dior Couture directly takes over the activity of its Moscow agent and opens a boutique in the GUM department store.
2007
Celebration of the 60th anniversary of the creation of Maison Dior (1947). Kris Van Assche, the new creator of the menswear line,
presents his first collections.
2008
Major exhibition organized in Beijing, in association with Chinese artists, to celebrate the brand’s entrance into the Chinese
marketplace.
2008 Annual Report
193
General information
General information regarding the parent company and its share capital
2.General information regarding the parent
company and its share capital
2.1 General information regarding the parent company
2.1.1 Role of the parent company
within the Group
Christian Dior SA is a holding company whose assets consist
primarily of investments in Christian Dior Couture (wholly
and directly owned) and in LVMH (42.4% ownership interest)
via Financière Jean Goujon SAS, a wholly owned subsidiary
of Christian Dior.
2.1.2 General information
The complete text of the Bylaws is presented in §3 “Corporate
Governance” below.
Corporate name (article 3 of the Bylaws): Christian Dior
Registered office (article 4 of the Bylaws): 30, avenue Montaigne
75008 Paris. Telephone: +33 1 44 13 22 22
Legal form (Article 1 of the Bylaws): Société anonyme (limited
liability company)
Jurisdiction (Article 1 of the Bylaws): the Company is governed
by French law.
Register of Commerce and Companies: the Company is
registered in the Paris Register of Commerce and Companies under
number 582 110 987. APE code (company activity code): 7010Z.
Date of incorporation - Term (Article 5 of the Bylaws): Christian
Dior was incorporated on October 8, 1946 for a term of 99 years,
which expires on October 7, 2045, unless the Company is
dissolved early or extended by a resolution of the Extraordinary
Shareholders’ Meeting.
Location where documents concerning the Company may
be consulted: the Bylaws, financial statements and reports, and
the minutes of Shareholders’ Meetings may be consulted at the
registered office at the address indicated above.
2.1.3 Additional information
The complete text of the Bylaws is presented in §3 “Corporate
Governance” below.
Corporate purpose (Article 2 of the Bylaws): the taking and
management of interests in any company or entity, whether
commercial, industrial, or financial, whose direct or indirect
activity involves the manufacture and/or dissemination of prestige
products, through the acquisition, in any form whatsoever,
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2008 Annual Report
of shares, corporate interests, bonds, or other securities or
investment rights.
Fiscal year (Article 24 of the Bylaws): from January 1 until
December 31.
Statutory distribution of profits (Article 26 of the Bylaws): the
Shareholders’ Meeting then has the authority to deduct such
sums as it deems appropriate, either to be carried forward to
the following fiscal year, or to be applied to one or more general
or special reserve funds, whose allocation or use it will freely
determine. Any remaining balance is to be distributed among all
shareholders in the form of a dividend, prorated in accordance
with the share capital represented by each share.
Shareholders’ Meetings (articles 17 to 23 of the Bylaws):
Shareholders’ Meetings are convened and held under the
conditions provided by the laws and decrees in effect.
Rights, preferences and restrictions attached to shares
(Articles 6, 8, 17 and 30 of the Bylaws): all shares belong to the
same category, whether issued in registered or bearer form.
Each share gives the right to a proportional stake in the ownership
of the Company’s assets, as well as in the sharing of profits and
of any liquidation surplus.
A voting right equal to twice the voting right attached to the
other shares is granted to registered shares for which evidence
of registration under the name of the same shareholder for a
continuous period of three years may be demonstrated. This
right was granted by the Extraordinary Shareholders’ Meeting
of June 14, 1991 and may be removed by a decision of the
Extraordinary Shareholders’ Meeting, after ratification by a
Special Meeting of beneficiaries of this right.
Declaration of thresholds (Article 8 of the Bylaws): independently
of legal obligations, the Bylaws stipulate that any individual or
legal entity that becomes the owner of a fraction of capital
greater than or equal to 1% shall notify the total number of
shares held to the Company. This obligation applies each time
the portion of capital owned increases by at least 1%. It ceases
to apply when the shareholder in question reaches the threshold
of 60% of the share capital.
Shares required to modify the rights of shareholders: the
Bylaws do not contain any stricter provision governing changes
in shareholders’ rights than those required by the law.
Provisions governing changes in the share capital: the Bylaws
do not contain any stricter provision governing changes in the
share capital than those required by the law.
General information
2.2 Information regarding the capital
2.2.1 Share capital - Classes of shares
As of December 31, 2008, the Company’s share capital was
363,454,096 euros, consisting of 181,727,048 fully paid-up
shares with a par value of 2 euros each.
The shares issued by the Company are all of the same class.
Among these 181,727,048 shares, 126,483,627 conferred double
voting rights as of December 31, 2008.
2.2.2 Authorized share capital
As of December 31, 2008, the Company had 206,194,859 shares of
authorized share capital with a par value of 2.00 euros each.
2.2.3 Status of delegations and authorizations granted to the Board of Directors
General delegations of authority
Issue price
determination
method
Use
40 million euros
20,000,000 shares (2) (3)
Free
None
July 9, 2009
40 million euros
(26 months) (1) 20,000,000 shares (2) (3)
Based on
regulations in force
None
Free
None
Free
None
Authorization
date
Type
Capital increase with preferential subscription May 10, 2007
rights (ordinary shares, investment securities
(8th resolution)
giving access to the share capital,
and incorporation reserves)
Capital increase without preferential
May 10, 2007
subscription rights (ordinary shares,
(9th resolution)
investment securities giving access
to the share capital)
Capital increase in connection
May 10, 2007
with complex transactions:
(10th resolution)
• public exchange offer
Expiry/
Duration
Amount authorized
July 9, 2009
(26 months) (1)
July 9, 2009
(26 months) (1)
• contribution in kind
40 million euros
20,000,000 shares (2) (3)
10% du capital
18,172,704 shares (2)
(1) A resolution renewing this authorization will be presented to the Shareholders’ Meeting of May 14, 2009. See §8.2 of the management report of the Board of Directors.
(2) Maximum nominal amount. The nominal amount of any capital increase decided in application of other delegations of authority or issues reserved for
employees mentioned below would be offset against this amount.
(3) Amount may be increased subject to the limit of 15% of the initial issue in the event that the issue is oversubscribed (Shareholders’ Meetings of May 10,
2007, 11th resolution).
Employee share ownership
Type
Authorization date
Expiry/
Duration
Amount authorized/
Number of shares
Exercise price
Use as of
determination method December 31, 2008
Average share price
• granted:
over the 20 trading days
984,000
preceding the grant • available to be granted:
date (3)
4,467,811
N/A
None
Share subscription or
purchase options
May 11, 2006
(14th resolution)
July 10, 2009
(38 months) (1)
3% of share capital
5,451,811 shares
Allocation of bonus shares
May 15, 2008
(11th resolution)
May 15, 2008
(12th resolution)
July 14, 2011
(38 months)
July 14, 2010
(26 months)
1% of share capital
1,817,270 shares (2)
3% of share capital
Average share price
5,451,811 shares (2) over the 20 trading days
preceding the grant date
Maximum discount: 30%
Capital increase reserved for
employees who are members
of a Corporate Savings Plan
None
(1) A resolution renewing this authorization will be presented to the Shareholders’ Meeting of May 14, 2009. See §8.2 of the management report of the
Board of Directors.
(2) These issues would be offset against the maximum nominal amount of the capital increases decided in application of the above delegations of authority.
(3) Maximum authorized discount: 20%. Moreover, with regard to share purchase options, the price shall not be lower than 80% of the average price of
shares to be remitted by the Company when such options are exercised.
2008 Annual Report
195
General information
Type
Authorization date
Maximum purchase price per share: 130 euros
Reduction of capital through
the retirement of shares purchased
under the repurchase program
May 15, 2008
(9th resolution)
May 15, 2008
(10th resolution)
Expiry/Duration
Amount authorized
Use
November 14, 2009
(18 months) (1)
November 14, 2009
(18 months) (1)
18,172,704 shares
10% of capital by
24 month period
18,172,704 shares
None
None
(1) A resolution renewing this authorization will be presented to the Shareholders’ Meeting of May 14, 2009. See §8.2 of the management report of the
Board of Directors.
2.2.4 Shareholder identification
Article 8 of the Bylaws authorizes the Company to set up a shareholder identification procedure.
2.2.5 Non-capital securities
The Company has not issued any non-capital securities.
2.2.6 Securities giving access to the Company’s capital
No securities giving access to the Company’s capital are outstanding as of December 31, 2008.
2.2.7 Three-year summary of changes in the Company’s share capital
Type of transaction
2006
2007
2008
Par value issued
Issuance
premium
Successive amounts
of share capital
(EUR thousands)
(EUR thousands)
(EUR)
Cumulative number
of company shares
-
-
363,454,096
363,454,096
363,454,096
181,727,048
181,727,048
181,727,048
No shares created
No shares created
No shares created
Par value
per share
(EUR)
2.00
2.00
2.00
2.3 Analysis of share capital and voting rights
2.3.1 Share ownership as of
December 31, 2008
As of December 31, 2008, the Company’s share capital comprised
181,727,048 shares. Of this total, taking into account shares held as
treasury shares, voting rights were attached to 178,360,668 shares,
including 126,483,627 with double voting rights.
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2008 Annual Report
As of that date, 97,464,752 shares were in pure registered form
(of which 3,366,380 were treasury shares).
32,495,513 shares were in administered registered form.
51,766,783 shares were bearer shares.
As of December 31, 2008, 198 registered shareholders held at
least 100 shares.
General information
Shareholders
Groupe Arnault (2)
Other
Total
Number of
shares
Number of
voting rights (1)
% of
capital
% of
voting rights
126,174,170
55,552,878
181,727,048
250,799,880
57,410,795
308,210,675
69.43
30.57
100.00
81.37
18.63
100.00
(1) Theoretical total number of voting rights. As of December 31, 2008, the total number of voting rights net of shares without voting rights was
304,844,295. As of December 31, 2008, there were 3,366,380 treasury shares without voting rights.
(2) Groupe Arnault SAS, which is controlled by the family of Mr Bernard Arnault, is the ultimate holding company of Christian Dior.
To the Company’s knowledge:
• no other shareholder held 5% or more of the Company’s
share capital or voting rights, either directly, indirectly, or
acting in concert;
As of December 31, 2008, members of the Executive Committee
and of the Board of Directors held directly, personally and in
the form of registered shares less than 0.2% of the Company’s
share capital and voting rights.
• no shareholders’ agreement or any other agreement constituting
an action in concert existed involving at least 0.5% of the
Company’s share capital or voting rights.
During the fiscal year ended December 31, 2008 and as of
February 20, 2009, no public tender or exchange offer nor price
guarantee was made by a third party involving the Company’s shares.
2.3.2 Changes in share ownership during the last three fiscal years
December 31, 2008
Shareholders
Number of
shares
December 31,2007
% of % voting
capital rights (1)
Number of
shares
December 31, 2006
% of % voting
capital rights (1)
Number of
shares
% of % voting
capital rights (1)
Groupe Arnault
Of which:
- Semyrhamis
- Financière Agache and related
companies
Treasury shares
Free float – registered
shares
Free float – bearer shares
126,174,170
69.43
81.37
126,023,237
69.35
81.32
125,630,157
69.13
81.17
107,982,000
59.42
70.07
107,982,000
59.42
70.07
107,982,000
59.42
70.05
18,192,170
3,366,380
10.01
1.85
11.30
1.09
18,041,237
3,410,748
9.93
1.88
11.25
1.11
17,648,157
4,181,629
9.71
2.30
11.12
1.36
1,968,175
50,218,323
1.08
27.64
1.25
16.29
1,902,040
50,391,023
1.04
27.73
1.22
16.35
1,991,546
49,923,716
1.10
27.47
1.28
16.19
TOTAL
181,727,048
100.00
100.00
181,727,048
100.00
100.00
181,727,048
100.00
100.00
(1) Theorectical voting rights.
2.3.3 Pledges of pure registered shares by
main shareholders
The Company is not aware of any pledge of pure registered
shares by the main shareholders.
2.3.4 Natural persons or legal entities
that may exercise control over
the Company
As of December 31, 2008, Groupe Arnault controlled 69.43%
of share capital and 81.37% of voting rights. Groupe Arnault
SAS, which is controlled by the family of Mr Bernard Arnault,
is the ultimate holding company of Christian Dior.
Mr. Bernard Arnault is Chairman of the Board of Directors
of Christian Dior.
2008 Annual Report
197
General information
3.Corporate governance
3.1 Charter of the Board of Directors
The Board of Directors is the strategy body of the Company
Christian Dior. The competence, integrity and responsibility
of its members, clear and fair decisions reached collectively,
and effective and secure controls are the ethical principles that
govern the Board.
The key priorities pursued by Christian Dior’s Board of Directors
are enterprise value creation and the defense of the Company’s
interests.
Christian Dior’s Board of Directors acts as guarantor of the
rights of each of its shareholders and ensures that shareholders
fulfill all of their duties.
The Company adheres to the Code of Corporate Governance
for Listed Companies published by AFEP and MEDEF.
Each of these elements contributes to preserving the level of
enterprise performance and transparency required to retain the
confidence of shareholders and partners in the Group.
3.1.1 Structure of the Board of Directors
The Board of Directors shall have a maximum of 12 members, a
third of whom are appointed from among prominent independent
persons with no interests in the Company.
In determining whether a Director may be considered as
independent, the Board of Directors refers to the criteria set
forth in the AFEP/MEDEF Code of Corporate Governance
for Listed Companies.
The number of Directors or permanent representatives of legal
entities from outside companies, in which the Chairman of the
Board of Directors or any Director serving as Chief Executive
Officer or Managing Director holds an office, shall be limited
to two.
3.1.2 Mission of the Board of Directors
The principal missions of the Board of Directors are to:
• ensure that the Company’s interests and assets are
protected;
• define the broad strategic orientations of the Company and the
Group and ensure that their implementation is monitored;
• select the Company’s management structure;
• appoint the Chairman of the Board of Directors, Chief
Executive Officer and Managing Directors;
• control the Company’s management;
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2008 Annual Report
• approve the Company’s annual and half-yearly financial
statements;
• verify the quality, reliability and accuracy of the
information about the Company and the Group provided
to shareholders;
• disseminate the collective values that guide the Company and
its employees and that govern relationships with consumers
and with partners and suppliers of the Company and the
Group;
• promote a policy of economic development consistent
with a social and citizenship policy based on concepts that
include respect for human beings and the preservation of the
environment in which it operates.
3.1.3 Operations of the Board of Directors
The Board of Directors shall hold at least three meetings a year.
Any individual who accepts the position of Director or
permanent representative of a legal entity appointed as Director
of the Company shall agree to attend Board of Directors’ and
Shareholders’ Meetings regularly.
On the recommendation of the Board’s Nominations and
Compensation Committee, repeated unjustified absenteeism
by a Director may cause the Board of Directors to reconsider
his appointment.
So that members can fully perform their duties, the Chairman
of the Board of Directors, the Directors holding the positions
of Chief Executive Officer or Managing Director, and the
other Directors must report to the Board of Directors any and
all significant information they need to perform their duties as
members of the Board.
Decisions by the Board of Directors shall be made by simple
majority vote and are adopted as a board.
If they deem appropriate, the independent Directors may meet
without the other members of the Board of Directors.
For special or important issues, the Board of Directors may
appoint several Directors to form one or more committees.
Each member of the Board of Directors shall act in the interests
and on behalf of all shareholders.
Once each year, the Board of Directors evaluates its procedures
and informs shareholders as to its conclusions in a report presented
to the Shareholders’ Meeting. In addition, at least once every
three years, a fully documented review of the work of the Board,
its organization and its procedures is conducted.
General information
3.1.4 Responsibilities
The members of the Board of Directors shall be required to
familiarize themselves with the general and specific obligations
of their office, and with all applicable laws and regulations.
The members of the Board of Directors shall be required to
respect the confidentiality of any information of which they
may become aware in the course of their duties concerning the
Company or the Group, until such information is made public
by the Company.
The members of the Board of Directors agree not to trade in
the Company’s shares, either directly or indirectly, for their own
account or on behalf of any third parties, based on information
disclosed to them in the course of their duties that is not known
to the public. Moreover, members of the Board of Directors who
are beneficiaries of share option plans instituted by the Company,
undertake not to exercise all or a portion of their options during
the ten stock market trading days prior to the publication of the
annual or half-yearly consolidated financial statements.
The Directors agree to:
• warn the Chairman of the Board of Directors of any
instance even potential, of a conflict of interest between
their duties and responsibilities to the Company and their
private interests and/or other duties and responsibilities;
• abstain from voting on any issue that concerns them directly
or indirectly;
• inform the Chairman of the Board of Directors of any operation
or agreement entered into with any Christian Dior Group
company to which they are a party;
• provide details to the Chairman of the Board of Directors of
any formal investigation, conviction in relation to fraudulent
offenses, any official public incrimination and/or sanctions, any
disqualifications from acting as a member of an administrative,
management or supervisory body imposed by a court as well
as of any bankruptcy, receivership or liquidation proceedings
to which they have been a party.
The Chairman of the Board of Directors shall apprize the Audit
and Performance Committee upon receiving any information
of this type.
3.1.5 Compensation
The Shareholders’ Meeting shall set the total amount of Directors’
fees to be paid to the members of the Board of Directors.
This amount shall be distributed among all members of the Board
of Directors and the advisors, if any, on the recommendation of
the members of the Directors’ Nominations and Compensation
Committee, taking into account their specific responsibilities on
the Board (e.g. chairman participation on committees created
within the Board).
The Directors’ Nominations and Compensation Committee also
have the capacity to recommend that all or part of the Directors’
fees be allocated based on the attendance rate of the members
at the meetings of the Board of Directors.
Exceptional compensation may be paid to some Directors for
any special assignments and on the basis of the leadership role
they assume. The amount shall be determined by the Board of
Directors and reported to the Company’s Statutory Auditors.
3.1.6 Scope of application
This Charter shall apply to all members of the Board of Directors
and the Advisory Board. It must be given to each candidate for
the position of Director and to each permanent representative
of a legal entity before they take office.
3.2 Internal rules of the Performance Audit Committee
A specialized committee responsible for auditing performance
operates within the Board of Directors, acting under the exclusive,
collective responsibility of the Board of Directors.
The Board of Directors shall appoint a Chairman of the Committee
from among its members. The maximum term of the Chairman
of the Committee is five years.
3.2.1 Structure of the Committee
Neither the Chairman of the Board of Directors nor any
Director performing the duties of Chief Executive Officer or
Managing Director of Christian Dior may be a member of the
Committee.
The Performance Audit Committee shall be made up of at
least three Directors, two thirds of whom shall be independent
Directors. Its members shall be appointed by the Board of
Directors.
A Director may not be appointed as a member of the Committee
if he or she comes from a company for which an Christian
Dior Director serves as a member of a committee comparable
in function.
2008 Annual Report
199
General information
3.2.2 Role of the Committee
The principal missions of the Committee are to:
• review the parent company and consolidated financial
statements, before they are submitted to the Board of Directors;
• verify the relevance and permanence of the accounting policies
and principles adopted by the Company and the transparent
application of such policies and principles;
• verify the existence, pertinence, application, efficiency and
effectiveness of internal procedures in this area;
• analyze the risks incurred by the Company and the Group and
significant off-balance sheet commitments of the Company
and the Group;
• analyze changes in consolidation scope, debt, and foreign
exchange or interest rate hedging;
• review the findings and recommendations of the Statutory
Auditors;
• be aware of major agreements entered into by any Group
companies and any agreements involving one or more Group
companies with one or more third-party companies in which
a Director of the Christian Dior parent company is also a
senior executive or principal shareholder;
• assess any instances of conflict of interest that may affect a
Director and recommend suitable measures to prevent or
correct them;
• monitor the process for preparing financial information and
verify the quality of this information.
The Committee oversees the procedure for the selection of the
Company’s Statutory Auditors and submits its recommendations
to the Board of Directors.
The Committee issues an opinion on the fees paid to Statutory
Auditors, as well as those paid to the network to which they
belong, by the Company and the companies it controls or
is controlled by, whether in relation to their statutory audit
mission or other related assignments. It examines the risks to
the independence of Statutory Auditors.
The Committee may also make recommendations to the
management on general priorities and guidelines for Internal
Audit.
3.2.3Operating procedures of
the Committee
A Director’s agreement to serve on the Committee shall imply
that he will devote the necessary time and attention to his duties
on the Committee.
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2008 Annual Report
The Committee shall meet at least twice a year, without the
Chairman of the Board of Directors or any Directors serving
as Chief Executive Officer or Managing Director, before the
Board of Directors’ meetings in which the agenda includes
a review of the annual and half-yearly parent company and
consolidated financial statements.
If necessary, the Committee may be required to hold special
meetings, when an event occurs that may have a significant effect
on the parent company or consolidated financial statements.
Any document submitted to the Committee in connection with
its responsibilities shall be considered confidential as long as it
has not been made public by the Company.
The proceedings of the Committee are confidential and shall
not be discussed outside the Board of Directors.
Decisions of the Committee shall be made by simple majority
vote and shall be deemed to have been reached as a board.
The proceedings of each Committee meeting shall be recorded
in minutes of the meeting.
3.2.4 Prerogatives of the Committee
The Committee shall report on its work to the Board of Directors.
It shall submit to the Board its findings, recommendations and
suggestions.
The Committee may request any and all accounting, legal
or financial documents it deems necessary to carry out its
responsibilities.
At its request, and without the Chairman of the Board, the Chief
Executive Officer or any Managing Director of Christian Dior
being present, the Committee may interview the executives
and managers in the Company responsible for preparing the
financial statements and for conducting the internal audit, as
well as the Statutory Auditors.
3.2.5 Compensation of Committee
members
The Committee members and its Chairman may receive a special
director’s fee, the amount of which shall be determined by the
Board of Directors and charged to the total financial package
allocated by the Shareholders’ Meeting.
General information
3.3 Internal rules of the Nominations and Compensation Committee
A specialized committee responsible for the nomination and
compensation of Directors operates within the Board of Directors,
acting under the exclusive, collective authority of the Board
of Directors.
3.3.1 Structure of the Committee
The Board’s Nominations and Compensation Committee shall
be made up of at least three Directors and/or Advisors. The
majority of its members shall be independent. Its members shall
be appointed by the Board of Directors.
The Board of Directors shall appoint a Chairman of the Committee
from among its members.
Neither the Chairman of the Board of Directors, nor any Director
serving as Chief Executive Officer or Managing Director of
Christian Dior, or who are compensated by any Christian Dior
subsidiary, may be a member of the Committee.
A Director may not be appointed as a member of the Committee
if he or she comes from a company for which an Christian Dior
Director serves as a member of a committee comparable in function.
3.3.2 Role of the Committee
After undertaking its own review, the Committee is responsible for
issuing opinions on applications and renewals for the positions of
Director and Advisor, making certain that the Company’s Board
of Directors includes prominent independent persons outside
the Company. In particular, it discusses the independence of
Board members with respect to applicable criteria.
The Committee’s opinion may also be sought by the Chairman
of the Board of Directors or by any Directors serving as Chief
Executive Officer or Managing Director, on potential members
of the Group’s Executive Committee or candidates for senior
management positions at the Company or Christian Dior Couture.
It is the consultative body responsible for defining the measures to
be taken in the event that such an office falls prematurely vacant.
After review, the Committee shall make recommendations on
the distribution of Directors’ fees paid by the Company.
The Committee shall make recommendations on the compensation,
benefits in kind, bonus shares and share purchase and subscription
options granted to the Company’s Chairman of the Board of
Directors, Chief Executive Officer and Managing Director(s). In
this capacity, it issues recommendations regarding the qualitative
and quantitative criteria on the basis of which the variable portion
of compensation for executive officers shall be determined as
well as the performance conditions applicable to the exercise of
options and the definitive allocation of bonus shares.
It adopts positions on any supplemental pension schemes
established by the Company in favor of its senior executives
and issues recommendations on any retirement benefits that
might be paid to a particular executive officer upon leaving
the Company.
The Committee shall issue an opinion on the compensation
and benefits in kind granted to the Company’s Directors and
advisors by the Group or its subsidiaries, and on the fixed or
variable, immediate or deferred compensation and incentive
plans for the Group’s senior executives. It expresses its opinion
on the general policy for the allocation of options and bonus
shares within the Group.
The Committee shall prepare a statement summarizing the
Directors’ fees actually paid to each Director.
The Committee shall prepare a draft report every year for the
Shareholders’ Meeting, which it shall submit to the Board of
Directors, on the compensation of senior executive officers, any
bonus shares granted to them in the previous year as well as
any stock options granted or exercised by said officers in the
same period. The report shall also list the ten employees of the
Company that received and exercised the most options.
3.3.3Operating procedures of the
Committee
A Director’s agreement to serve on the Committee implies that
he will devote the necessary time and energy to his duties on
the Committee.
The Committee shall meet whenever necessary, either at the
initiative of the Chairman of the Board of Directors, or the
Director serving as Chief Executive Officer, or of two Committee
members.
The proceedings of the Committee are confidential and shall
not be discussed outside the Board of Directors.
Decisions by the Committee shall be made by simple majority
vote and shall be deemed to have been reached as a board.
3.3.4 Prerogatives of the Committee
The Committee shall report on its work to the Board of Directors.
It shall submit to the Board its findings, recommendations and
suggestions.
Members of the Committee may request any and all available
information that they deem necessary for the purposes of carrying
out their responsibilities.
Any unfavorable opinion issued by the Committee on any
proposal must be substantiated.
3.3.5Compensation of Committee
members
The members and Chairman of the Committee may receive a
special director’s fee, the amount of which shall be determined
by the Board of Directors and charged to the total financial
package allocated by the Shareholders’ Meeting.
2008 Annual Report
201
General information
3.4.Bylaws (draft version)
The Bylaws presented hereafter incorporate the changes proposed
to the Shareholders’ Meeting of May 14, 2009.
Part I
Legal form, Corporate name, Corporate purpose,
Registered office and Duration
Article 1 - Legal form
Christian Dior SA, first established in the form of a limited liability
partnership under the terms of a private agreement concluded
on October 8, 1946 in Paris, filed on October 18, 1946 with the
clerk of the Paris commercial court and published in the Journal
Spécial des Sociétés Françaises par Actions of October 18, 1946, was
transformed into a joint-stock corporation (société anonyme)
without creating a new legal entity, following a decision of the
Extraordinary Meeting of Partners held on December 21, 1979.
It is governed by all applicable laws as well as the regulations
established hereinafter and it shall also be governed by any laws
and regulations that may enter into effect in future.
Article 2 - Corporate purpose
The Company’s purpose, in France and in any other country,
is the taking and management of interests in any company or
entity, whether commercial, industrial, or financial, whose
direct or indirect activity involves the manufacture and/or
dissemination of prestige products, through the acquisition, in
any form whatsoever, of shares, corporate interests, bonds, or
other securities or investment rights.
It may be transferred to any other place within the same
French administrative district (département) or any neighboring
administrative district pursuant to a decision of the Board of
Directors subject to the ratification of said decision by the next
Ordinary Shareholders’ Meeting, and to any other place pursuant
to a resolution of the Extraordinary Shareholders’ Meeting.
Agencies, branch offices, warehouses and retail outlets may be
established in any place and in any country, by simple resolution
of the Board of Directors, which may later relocate or close
these entities at its discretion.
Article 5 - Duration
The duration of the Company is ninety-nine years, starting from
its date of incorporation, on the eighth day of October, in the
year one thousand nine hundred and forty-six.
Part II
Share capital and company shares
Article 6 - Share capital
The share capital of the Company is 363,454,096 euros, consisting
of 181,727,048 fully paid-up shares with a par value of 2 euros
each, all of which belong to the same category.
The Company issued 4,351,808 shares further to the contribution by
the various shareholders of Djedi Holding SA of 5,159,349 shares
held in absolute ownership and 206,374 shares held in bare ownership
in the said company, valued at 1,958,313,600 French francs.
It may also pursue direct or indirect equity investment in any
industrial or commercial operations by creating new companies,
contributions, subscriptions, or purchases of shares or corporate
interests, merger, takeover, joint venture, or other method.
Article 7 - Changes in the share capital
More generally, it may also engage in any commercial, financial,
and industrial activities and those involving real and moveable
assets, in such a way as to facilitate, favor, or develop the
Company’s activity.
The Shareholders’ Meeting may delegate the authority or powers
necessary to effect such a change to the Board of Directors.
Article 3 - Corporate name
Payment for the shares
The name of the Company is:
Christian Dior
In all legal instruments or documents issued by the Company and
addressed to third parties, this name must always be immediately
preceded or followed by the words “société anonyme” or the
initials “SA”, which should appear legibly, and by the disclosure
of the amount of the share capital.
Article 4 - Registered office
The address of the Company’s registered office is: 22, avenue
Montaigne, F-75008 Paris, FRANCE.
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The share capital may be increased or decreased by a resolution
of the Extraordinary Shareholders’ Meeting, as provided by law.
Article 8 - Company shares
Shares subscribed in cash must be paid up, upon subscription, in
an amount equivalent to at least one-quarter of their par value,
plus, where applicable, the entirety of the issue premium. The
remainder shall be called by the Board of Directors within a
maximum period of five years.
Payment for shares may be made by offsetting against liquid
and demandable receivables due from the Company.
Shareholders shall be informed of calls for funds at least
fifteen days in advance, either by a notice inserted in a legal
gazette published where the registered office is located or by
registered letter with acknowledgment of receipt sent to each
shareholder.
General information
Shares allocated in the form of a contribution in kind or by
way of the capitalization of unappropriated retained earnings,
reserves or issue premiums as well as shares the amount of which
results, in part, from an incorporation of reserves, unappropriated
retained earnings or issue premiums and in part, from a cash
payment, must be fully paid up upon issue.
Any late payment for shares incurs, automatically and without
prior formal notice, an interest charge due to the Company,
calculated at the legal rate in commercial matters as of the
payment date, plus three percentage points.
Form of the shares
Fully paid-up shares may be in registered or bearer form, at the
discretion of the shareholder.
When the owner of the shares is not a French resident, as defined
in Article 102 of the French Civil Code, any intermediary may
be registered on behalf of such owner. Such registration may
be made in the form of a joint account or several individual
accounts, each corresponding to one owner.
At the time such account is opened through either the issuing
company or the financial intermediary authorized as account
holder, the registered intermediary shall be required to declare,
under the terms and conditions laid down by decree, its capacity
as intermediary holding shares on behalf of another party.
Transfer of the shares
Shares are freely negotiable, unless as prohibited by applicable
laws or regulations, in particular as regards shares with payments
in arrears and contributing shares.
Registered shares are transferred via inter-account transfer
based on the instructions of the account holder or his or her
legal representative.
Indivisibility
Shares are indivisible as far as the Company is concerned. Joint
holders of shares shall be required to be represented vis-à-vis
the Company by only one of the joint holders or by a mutually
agreed permanent representative.
Rights attached to the shares
Ownership of a share automatically implies acceptance of
these Bylaws and of all resolutions passed by Shareholders’
Meetings.
Each share entails the right to take part, as provided by law
and these Bylaws, in Shareholders’ Meetings and in votes on
resolutions.
Each share entitles the holder to a share of corporate profits
and assets proportional to the number of outstanding shares,
in consideration of the par value of the shares.
All shares currently comprising, or that shall comprise in future,
the Company’s share capital are equivalent for tax purposes.
Accordingly, each share shall entitle the holder, as much during
the active existence of the Company as in the event of liquidation,
to the payment of the same net amount at the time of any
distribution or redemption, such that all taxes or tax exemptions
relating to said distribution or redemption shall be consolidated,
without distinction between the shares.
The liability of shareholders is limited to the amount of their
contribution to the Company’s share capital.
Under no circumstances may a shareholder’s heirs,
representatives or creditors apply for seals to be placed on
or initiate proceedings against the Company’s property and
assets, request the division or public sale by auction of the same,
nor interfere in any way with the actions of the Company’s
management. These individuals must refer to the Company’s
schedules of assets and liabilities and must respect the decisions
of Shareholders’ Meetings.
Crossing of shareholding threshold
Any legal entity or natural person who comes to possess a
number of shares representing more than 1% of the Company’s
share capital shall notify the Company no later than eight days
after the crossing of this threshold and each time that a further
threshold of 1% is crossed. However, this obligation shall cease
to be applicable when the portion of capital held is equal to or
greater than 60% of the Company’s share capital.
In the event of a failure to comply with this disclosure
obligation, the shares in excess of the percentage that should
have been declared shall be deprived of their voting rights at
any Shareholders’ Meeting to be held within a period of three
months following the date on which proper notification is made,
provided that a request to this effect has been recorded in the
minutes of the Shareholders’ Meeting by one or more shareholders
holding at least 5% of the Company’s share capital.
Identifiable bearer shares
In order to identify the holders of securities, the Company is
entitled to request, at any time, at its own expense, that the
central custodian of financial instruments provide the name, or
in the case of a legal entity, the Company name, the nationality,
the year of birth or incorporation, and the address of the
holders of shares conferring the right to vote, immediately or
at some point in the future, at its own Shareholders’ Meetings,
as well as the number of shares held by such natural persons
or legal entities and the restrictions, if any, which may exist
upon the shares.
In light of the list sent by the aforementioned body, the Company
shall be entitled to request information concerning the owners
of the shares listed above, either through the intervention of
that body, or directly, under the same terms and conditions
and subject to the penalties stipulated in Article L. 228-3-2 of
the French Commercial Code, of the persons appearing on that
list and who might be, in the Company’s opinion, registered on
behalf of third parties.
When they act as intermediaries, such persons shall be required to
disclose the identity of the owners of such shares. This information
shall be provided directly to the authorized financial intermediary
holding the account, who shall, in turn, be responsible for
communicating it to the issuing company or the aforementioned
body, as applicable.
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Part III
Chapter I: Corporate governance
Article 9 - Composition of the Board of Directors
Subject to the exceptions provided by law, the Company is
administered by a Board of Directors composed of at least
three and no more than twelve members, appointed by the
Shareholders’ Meeting for a term of office lasting three years.
A legal entity may be appointed as a Director but is required, at
the time of its appointment, to designate an individual who shall
serve as its permanent representative on the Board of Directors.
The term of office of a permanent representative is the same as
that of the legal entity director he or she represents and must be
reconfirmed at each renewal of the latter’s term of office.
When the legal entity dismisses its permanent representative, it
must at the same time provide for its replacement, and must send
notification to the Company, by registered letter, of this dismissal
as well as the identity of the new permanent representative.
The same provision applies in case of death or resignation of
the permanent representative.
A Director’s appointment shall terminate at the close of the
Ordinary Shareholders’ Meeting convened to approve the
accounts of the preceding fiscal year and held in the year during
which the term of office of said Director comes to an end.
However, in order to allow a renewal of the terms which is as
egalitarian as possible and in any case complete for each period
of three years, the Board of Directors will have the option to
determine the order of retirement of the Directors by the impartial
selection in a Board Meeting of one-third of the Directors each
year. Once the rotation has been established, renewals will take
place according to seniority.
Nobody being more than eighty-five years old shall be appointed
Director if, as a result of his or her appointment, the number
of Directors who are more than eighty-five years old would
exceed one-third of the members of the Board. The number of
members of the Board of Directors who are more than eighty-five
years old may not exceed one-third, rounded to the next higher
number if this total is not a whole number, of the Directors in
office. Whenever this limit is exceeded, the term in office of the
oldest appointed member shall be deemed to have expired at
the close of the Ordinary Shareholders’ Meeting convened to
approve the financial statements of the fiscal year during which
the limit was exceeded.
Directors may be re-elected indefinitely. They may be revoked at
any time by decision of the Ordinary Shareholders’ Meeting.
A Director appointed to replace another Director shall serve
as Director only for the remainder of the predecessor’s term
of office.
Article 10 - Shares held by Directors
Each member of the Board of Directors must own at least two
hundred (200) shares of the Company for the entire duration
of his, her or its term of office.
If, when appointed, a member of the Board of Directors does
not own the required number of shares, or if the member ceases
to own this required number at any point in his, her or its term
of office, the member shall be allowed a period of six months to
purchase a sufficient number of shares, failing which he, she or
it shall be automatically considered to have resigned.
Article 11 - Organization of the Board of Directors
The Board of Directors shall elect a Chairman, who must be an
individual, from among its members. It shall determine his term
of office, which cannot exceed that of his office as Director.
The Chairman of the Board of Directors cannot be more than
seventy-five years old. Should the Chairman reach this age limit
during his term of office, his appointment shall be deemed to
have expired at the close of the Ordinary Shareholders’ Meeting
convened to approve the financial statements of the fiscal year
during which the limit was reached. Subject to this provision,
the Chairman of the Board may always be re-elected.
In case of temporary disability or death of the Chairman, the
Board may temporarily delegate a Director to perform the duties
of the Chairman. In case of temporary disability this delegation
is granted for a limited duration and is renewable. In case of
death it is granted until the election of the new Chairman.
The Board of Directors may also appoint a secretary, who may
or may not be chosen from among the members of the Board.
Article 12 - Operation of the Board of Directors
1.The Board meets as often as required by the interests of
the Company and is convened by its Chairman on his own
initiative, or if he is not also the Chief Executive Officer, at
the request of the Chief Executive Officer or the Director
temporarily delegated to perform the duties of Chairman.
If the Board of Directors has not met for more than two months,
a meeting may also be convened by any group of Directors,
representing at least one-third of the members of the Board,
who shall indicate the agenda of the meeting.
In case of death or resignation of one or more Advisors, the
Board of Directors may, between two Shareholders’ Meetings,
make provisional appointments, subject to their ratification by
the next Ordinary Shareholders’ Meeting.
Meetings are held at the registered office or at any other
location specified in the convening notice. Meetings of the
Board are chaired by the Chairman of the Board of Directors,
or by the Director temporarily designated to perform the
duties of Chairman or, if unavailable, by another Director
selected by the Board of Directors.
When the number of members of the Board of Directors falls
below the statutory minimum, the remaining Directors must
immediately convene an Ordinary Shareholders’ Meeting in order
to supplement the membership of the Board of Directors.
Notice is served in the form of a letter sent to each Director,
at least eight days prior to the meeting; it shall mention the
agenda of the meeting as set by the person(s) convening the
meeting. However, the Board may meet without notice upon
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verbal notice and the agenda may be set at the opening of the
meeting if all Directors in office are present or represented or
when it is convened by the Chairman during a Shareholders’
Meeting.
Any Director may give a proxy to another Director, even
by letter or cable, to represent him and vote on his behalf on
resolutions of the Board of Directors, for a specific meeting.
However, each Director may only dispose of one proxy
during the meeting.
An attendance register shall be kept and signed by all the
Directors attending each meeting.
2.The Board may validly act only if at least one-half of its
members are present.
Directors who participate in Board meetings by means of
videoconferencing or other telecommunication methods under
the conditions defined by the internal rules and regulations of
the Board of Directors shall be deemed to be present for the
purposes of calculating the quorum and majority. However,
actual presence or representation shall be necessary for any
Board resolutions relating to the preparation of the parent
company financial statements and consolidated financial
statements, and to the drafting of the management report
and the report on the Group’s management.
Decisions are made by a majority of the votes of members
present or represented. In the event of a tie vote, the Chairman’s
vote is the deciding vote.
3.Proceedings of the Board of Directors shall be officially
recorded in the form of minutes in a special numbered and
initialed minute book kept at the registered office, or on
separate sheets, consecutively numbered and initialed.
These minutes shall be signed by the Chairman of the meeting
and by a Director. If the Chairman of the meeting is unavailable,
they may be signed by two Directors.
The production of abstracts or copies of the minutes to a
meeting shall serve as sufficient justification of the number
of Directors in office and their presence or representation by
proxy at the meeting.
To be valid, copies or abstracts of the minutes of the meeting
shall be certified by the Chairman of the Board of Directors,
the Chief Executive Officer, the Secretary, the Director
temporarily delegated to perform the duties of Chairman, or
by a representative duly authorized to that effect.
In its relations with third parties, the Company is bound even
by acts of the Board of Directors falling outside the scope of the
corporate purpose, unless it demonstrates that the third party
knew that the act exceeded such purpose or that it could not
have ignored it given the circumstances, it being specified that
mere publication of the Bylaws is not sufficient proof thereof.
The Board of Directors performs such monitoring and verifications
as it deems appropriate. Each Director receives all necessary
information for completing his assignment and may request any
documents he deems useful.
The Board of Directors distributes among its members the total
amount of attendance fees voted by the Shareholders’ Meeting.
The decisions of the Board of Directors shall be carried out either
by the Chief Executive Officer or by any person specifically
appointed by the Board for that purpose.
Furthermore, the Board may grant one of its members or any
third parties, whether shareholders or not, any special offices
for one or more specific purposes, with or without the option,
for the persons so appointed, to themselves delegate, whether
in full or in part, the performance of these duties.
It may also resolve to create committees responsible for studying
such issues as it may submit thereto for examination.
Article 14 - Remuneration of the Directors
The Shareholders’ Meeting may allocate to the Directors in
remuneration for their services a fixed sum as attendance fees,
the amount of which is to be included in the overhead expenses
of the Company.
The Board shall divide the amount of these attendance fees
among its members as it deems fit. In particular, it may decide
to allow Directors who serve on committees a greater portion
of these fees.
It may also allow exceptional remuneration for specific duties
or offices assigned to Directors.
These payments shall be subject to the legal provisions applicable
to agreements requiring the prior authorization of the Board
of Directors.
Article 14 b - Advisors
Article 13 - Powers of the Board of Directors
Between one and three Advisors may be appointed, each for
a term of no longer than three years, although they may be
re-elected. Their appointment or dismissal is subject to the
same rules as those applying to Directors. However, Advisors
need not be shareholders and as such are not subject to rules
relating to the holding of multiple appointments as Directors
or to similar positions.
The Board of Directors sets guidelines for the Company’s
activities and shall ensure their implementation. Subject to the
powers expressly granted to the Shareholders’ Meetings and
within the limits of the corporate purpose, it addresses any
issue relating to the Company’s proper operation and settles
the affairs concerning it through its resolutions.
Advisors are convened to the meetings of the Board of Directors,
in which they have a consultative vote. The remuneration
paid to Advisors is determined each year by the Board of
Directors and is set off from the total attendance fees allocated
by the Shareholders’ Meeting to the members of the Board of
Directors.
In the event of the liquidation of the Company, these copies
or abstracts shall be validly certified by a single liquidator.
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General information
Chapter II: Management of the Company
Article 15 - Chairman of the Board of Directors and
General Management
I - Chairman of the Board of Directors
The Chairman of the Board of Directors chairs the meetings
of the Board, and organizes and directs its work, for which he
reports to the Shareholders’ Meeting. He ensures the proper
operation of the corporate bodies and verifies, in particular, that
the Directors are capable of fulfilling their assignments.
The Board shall determine the compensation to be paid to the
Chairman.
II - General Management
1 - Choice between the two methods
of General Management
The Company’s General Management is performed, under his
responsibility, either by the Chairman of the Board of Directors,
or by another individual appointed by the Board of Directors
and bearing the title of Chief Executive Officer, depending upon
the decision of the Board of Directors choosing between the
two methods of exercising the General Management function.
It shall inform the shareholders thereof in accordance with the
regulatory conditions.
When the Company’s General Management is assumed by the
Chairman of the Board of Directors, the following provisions
relating to the Chief Executive Officer shall apply to him.
2 - Chief Executive Officer
The Chief Executive Officer may or may not be chosen from
among the Directors. The Board sets his term of office as well as
his compensation. The age limit for serving as Chief Executive
Officer is sixty-five years. Should the Chief Executive Officer
reach this age limit, his term of office shall be deemed to have
expired at the close of the Ordinary Shareholders’ Meeting
convened to approve the financial statements of the fiscal year
during which the limit was reached.
The Chief Executive Officer may be dismissed at any time by the
Board of Directors. If the dismissal is decided without just cause,
it may give rise to damages, unless the Chief Executive Officer
assumes the duties of Chairman of the Board of Directors.
The Chief Executive Officer is vested with the most extensive
powers to act under any circumstances on behalf of the Company.
He exercises such powers within the limits of the corporate
purpose, and subject to the powers expressly granted by law to
the Shareholders’ Meeting and to the Board of Directors.
He shall represent the Company in its relations with third parties.
The Company is bound even by acts of the Chief Executive
Officer falling outside the scope of the corporate purpose,
unless it demonstrates that the third party knew that the act
exceeded such purpose or could not have ignored it given the
circumstances, it being specified that mere publication of the
Bylaws is not sufficient to establish such proof.
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The provisions of the Bylaws or decisions of the Board of
Directors limiting the powers of the Chief Executive Officer
are not binding on third parties.
3 - Managing Directors
Upon the proposal of the Chief Executive Officer, the Board of
Directors may appoint one or more individuals responsible for
assisting the Chief Executive Officer, with the title of Managing
Director, for whom it shall set the compensation.
The number of Managing Directors may not exceed five.
Managing Directors may be dismissed at any time by the Board
of Directors, upon the proposal of the Chief Executive Officer.
If the dismissal is decided without just cause, it may give rise
to damages.
When the Chief Executive Officer ceases to exercise his duties
or is prevented from doing so, the Managing Directors remain
in office with the same powers until the appointment of the
new Chief Executive Officer, unless resolved otherwise by
the Board.
In agreement with the Chief Executive Officer, the Board of
Directors sets the scope and duration of the powers granted to
Managing Directors. With regard to third parties, they shall
have the same powers as the Chief Executive Officer.
The age limit for eligibility to perform the duties of Managing
Director is sixty-five years. Should a Managing Director reach
this age limit during his term of office, his appointment shall be
deemed to have expired at the close of the Ordinary Shareholders’
Meeting convened to approve the financial statements of the
fiscal year during which the limit was reached.
Chapter III: Company audit
Article 16 - Statutory Auditors
The Company shall be audited by one or more Statutory Auditors
appointed by the Ordinary Shareholders’ Meeting.
One or more alternate Statutory Auditors shall also be
appointed.
The term of office for a Statutory Auditor is six years, expiring
following the Ordinary Shareholders’ Meeting convened to
approve the financial statements for the sixth fiscal year.
Statutory Auditors may be removed from office by the
Shareholders’ Meeting in the event of negligence or inability.
They are required to attend meetings of the Board of Directors
convened to approve the annual or interim financial statements
of the preceding fiscal year as well as all Shareholders’
Meetings.
The remuneration paid to Statutory Auditors is determined in
accordance with applicable regulatory procedures.
A Statutory Auditor appointed to replace another shall remain
in office only until the expiration of the term of office of his or
her predecessor.
General information
Part IV
Shareholders’ Meetings
Chapter I: General provisions
Article 17
Impact of decisions
Shareholders’ Meetings deemed to be duly convened and held
represent all shareholders. Decisions taken during Shareholders’
Meetings, in accordance with the law and the provisions of these
Bylaws, shall be binding for all shareholders, even those who
are absent, indisposed or dissenting.
Convening notices
Shareholders meet each year, within six months of the account
closing, in an Ordinary Shareholders’ Meeting.
Other Shareholders’ Meetings, either Ordinary Shareholders’
Meetings held on an extraordinary basis or Extraordinary
Shareholders’ Meetings, may be convened at any time during
the year.
Convening notices are sent to shareholders at least fifteen days
prior to the planned date of the Shareholders’ Meeting. This
period is reduced to six days for Shareholders’ Meetings convened
on second notice and for postponed meetings.
Meetings are convened by way of a notice inserted in a newspaper
authorized to publish legal announcements in the administrative
district where the registered office is located and, in addition,
if the Company’s shares are publicly traded, in the Bulletin
d’Annonces Légales Obligatoires. Shareholders who have held
registered shares for at least one month on the date a convening
notice is published shall be invited to attend the Shareholders’
Meeting by letter.
If all shares are held in registered form, the publication of a
convening notice may be replaced by an invitation, sent at the
Company’s expense, in the form of a simple letter addressed to
each shareholder.
Procedures followed for convening notices are independent of
any preliminary notices sent to shareholders, in the form and
within the deadlines laid down by law, relating to any requests
they may have filed for the inclusion of proposed resolutions
in the agenda of a Shareholders’ Meeting.
Attendance at Shareholders’ Meetings
The Shareholders’ Meeting is made up of all shareholders,
irrespective of the number of shares they own.
The right to attend and vote at Shareholders’ Meetings is
subject to the registration of the shareholder in the Company’s
share register.
A shareholder is entitled to attend and vote at any Meeting
provided that the shares held are registered in the name of the
shareholder or intermediary authorized to act on his or her
behalf as of the fourth business day preceding the Meeting at
midnight, Paris time, either in the accounts of registered shares
maintained by the Company or in the accounts of bearer shares
maintained by the officially authorized financial intermediary.
The recording or registration of bearer shares is certified by a
statement delivered by the financial intermediary authorized
as account holder.
Holders of shares shall not be admitted to Shareholders’ Meetings
with respect to the shares not paid up within a period of thirty
calendar days from the notice issued by the Company. These
shares shall be subtracted when calculating the quorum.
A shareholder can always be represented by another shareholder
who is not deprived of voting rights or by his or her spouse;
for this purpose, the proxy must demonstrate his or her
authorization.
Shareholders may address their proxy form and/or their voting
form for any Meeting, in accordance with applicable laws
and regulations, either by mail or, if decided by the Board of
Directors, by electronic transmission. Pursuant to the provisions
of Article 1316-4, paragraph 2 of the French Civil Code, in
the event of the use of an electronically submitted form, the
shareholder’s signature shall make use of a reliable identification
process that ensures the link with the document to which it is
attached.
A shareholder having voted by mail or by electronic transmission,
sent a proxy or requested an admittance card or certificate
stating the ownership of shares may not select another means
of taking part in the Meeting.
Any shareholder not deprived of voting rights may be appointed
as a proxy by another shareholder in order to be represented
at a Meeting.
Any intermediary who meets the requirements set forth in
paragraphs seven and eight of Article L. 228-1 of the French
Commercial Code may, pursuant to a general securities
management agreement, transmit to a Shareholders’ Meeting
the vote or proxy of a shareholder, as defined in paragraph
seven of that same article.
Before transmitting any proxies or votes to a Shareholders’
Meeting, the intermediary registered pursuant to Article L. 228-1
of the French Commercial Code shall be required, at the request
of the issuing company or its agent, to provide a list of the
non-resident owners of the shares to which such voting rights
are attached. Such list shall be supplied as provided by either
Article L. 228-2 or Article L. 228-3 of the French Commercial
Code, whichever is appropriate.
A vote or proxy issued by an intermediary who either is
not declared as such, or does not disclose the identity of the
shareholders, may not be counted.
Legal representatives of legally incapacitated shareholders, and
natural persons representing shareholders that are legal entities,
shall take part in Meetings regardless of whether or not they
personally are shareholders.
Shareholders have as many votes as they hold shares. However,
a voting right equal to twice the voting right attached to other
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General information
shares with respect to the portion of the share capital that they
represent, is granted:
• to all fully paid-up registered shares for which evidence of
registration under the name of the same shareholder, over a
period of least three years, may be demonstrated;
• to registered shares allocated to a shareholder in event of
increase of the capital through the capitalization of reserves,
or unappropriated retained earnings, or issue premiums, by
virtue of this shareholder’s entitlement to benefit from this
right in respect of existing shares.
This double voting right shall automatically lapse in the case of
registered shares being converted into bearer shares or conveyed
in property. However, any transfer by right of inheritance, by
way of liquidation of community property between spouses
or deed of gift inter vivos to the benefit of a spouse or an heir
shall neither cause the acquired right to be lost nor interrupt the
abovementioned three-year qualifying period. This is also the
case for any transfer due to a merger or spin-off of a shareholding
company.
When a Works Council exists within the Company, two of its
members, appointed by the Council, may attend Shareholders’
Meetings. At their request, their opinions must be heard on
the occasion of any vote requiring the unanimous approval of
shareholders.
An attendance sheet is drawn up and initialed by the shareholders
present, and certified as accurate by the Officers of the
Meeting.
Proceedings of the Shareholders’ Meeting shall be officially
recorded in the form of minutes in a special numbered and
initialed minute book kept at the registered office, or on separate
sheets, consecutively numbered and initialed.
These minutes shall be signed by the Officers of the Meeting.
Copies or abstracts of the minutes shall be validly certified by the
Chairman of the Board of Directors, by a Director temporarily
delegated to perform the duties of the Chief Executive Officer,
or by the Secretary of the Meeting.
Chapter II: Ordinary Shareholders’ Meetings
Article 19 - Powers
The Ordinary Shareholders’ Meeting shall hear the reports
prepared by the Board of Directors, its Chairman, and the
Statutory Auditors. It also reviews the financial statements
prepared by the Company.
The Meeting discusses, approves, amends or rejects the financial
statements submitted. It decides upon the distribution and
appropriation of profits.
Article 18 - Convening and conduct of Shareholders’
Meetings
It decides upon any amounts to be allocated to reserve funds.
It also determines the amounts to be withdrawn from reserves
and decides upon their distribution.
Shareholders’ Meetings shall be convened as provided by
law.
It determines the total amount of attendance fees to be allocated
to the members of the Board of Directors.
Meetings are held at the registered office or at any other place
mentioned in the convening notice.
It appoints, replaces, re-elects or dismisses Directors.
In accordance with the conditions set by applicable legal and
regulatory provisions, and pursuant to a decision of the Board of
Directors, Shareholders’ Meetings may also be held by means of
videoconference or through the use of any telecommunications
media allowing the identification of shareholders.
It appoints the Statutory Auditors and examines their special
report.
A Shareholders’ Meeting is chaired by the Chairman of the
Board of Directors or, in his absence, by the Vice Chairman
of the Board of Directors or, in the absence of both of these
individuals, by a member of the Board of Directors appointed
by the Board for that purpose. If no such person has been
appointed, the Meeting elects its Chairman.
The agenda of the Meeting shall be set, in the usual course of
events, by the person(s) convening the Meeting.
The two Members of the Meeting present, having the greatest
number of votes, and accepting that role, are appointed as
Scrutineers.
The Officers of the Meeting appoint a Secretary, who may but
need not be a shareholder.
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2008 Annual Report
It ratifies any appointments of Directors made on a provisional
basis by the Board of Directors.
It hears all proposals that do not fall within the exclusive remit
of the Extraordinary Shareholders’ Meeting.
Article 20 - Quorum and majority
In order to pass valid resolutions, the Ordinary Shareholders’
Meeting, convened upon first notice, must consist of shareholders,
present or represented, holding at least one-fifth of total voting
shares.
When convened upon second notice, the deliberations of an
Ordinary Shareholders’ Meeting shall be valid regardless of
the number of shares represented.
The resolutions of the Ordinary Shareholders’ Meeting are
approved by a majority of the votes held by the shareholders
present or represented.
General information
Chapter III: Extraordinary Shareholders’ Meetings
Part V
Article 21 - Powers
The Extraordinary Shareholders’ Meeting may amend the
Bylaws in any of its provisions and it may also decide upon the
transformation of the Company into a company having any
other legal form.
However, in no event, unless by unanimous decision of the
shareholders, may it increase the duties of the latter, nor may
it violate the principle of equal treatment of all shareholders,
except in the case of transactions resulting from a duly completed
regrouping of shares.
1.In order to pass valid resolutions, the Extraordinary
Shareholders’ Meeting, convened upon first notice, must
consist of shareholders, present or represented, holding at
least one-fourth of total voting shares. The deliberations of
an Extraordinary Shareholders’ Meeting convened upon
second notice or held as a result of the postponement of the
meeting convened upon second notice shall be valid provided
it consists of shareholders holding at least one-fifth of total
voting shares.
The resolutions of the Extraordinary Shareholders’ Meeting
shall be adopted by a two-thirds majority of the votes of the
shareholders present or represented.
2.When deciding upon or authorizing the Board of Directors
to effect a capital increase through the incorporation of
reserves, unappropriated retained earnings, or issue premiums,
resolutions are passed subject to the quorum and majority
conditions of Ordinary Shareholders’ Meetings.
3.A capital increase effected by way of an increase in the
par value of shares to be paid up in cash, or through the
offsetting of receivables, requires the unanimous approval
of shareholders, representing the entirety of shares making
up the share capital.
Chapter IV: Constitutive Shareholders’ Meetings
Constitutive Shareholders’ Meetings, which are those convened
to approve contributions in kind or benefits in kind, shall pass
valid resolutions subject to the quorum and majority conditions
of Extraordinary Shareholders’ Meetings.
At these Meetings, neither the contributor nor the beneficiary
may vote, on his or her own behalf or as a proxy. His or her
shares shall not be taken into account when calculating the
quorum and majority.
Article 24 - Fiscal year
Each fiscal year has a duration of twelve months beginning on
January 1 and ending on December 31.
Article 25 - Company accounts
Regular accounts shall be kept of the Company’s operations in
conformity with the law and normal commercial practice.
At the end of each fiscal year, the Board of Directors shall draw
up the schedule of the assets and liabilities existing as of the
balance sheet date as well as the annual accounts. The amount
of commitments in the form of sureties, guarantees or collateral
shall be mentioned in the balance sheet.
The Board of Directors shall also draw up a management
report.
All of these documents shall be made available to the Statutory
Auditors in accordance with applicable laws and regulations.
Article 26 - Distributable earnings
1.The net proceeds of each fiscal year, minus general expenses
and other expenses incurred by the Company, including all
amortization, depreciation and provisions, represents the net
profit or loss of the fiscal year.
2.From the net profit for each fiscal year, minus prior losses,
if any, an amount equal to at least one-twentieth must be
deducted and allocated to the formation of a “legal reserve”
fund. This deduction is no longer required when the amount
of the legal reserve has reached one-tenth of the share capital
of the Company. It is resumed when, for any reason, the legal
reserve falls below this fraction.
3.Distributable earnings consist of the remaining balance, plus
any profits carried forward.
From these distributable earnings:
The Shareholders’ Meeting may deduct the necessary amounts
for allocation to the special reserve for long-term capital gains,
as provided for by current tax provisions, if other legal or
optional reserves do not allow such contribution at the time
the allocation is taxable in order to defer payment at the full
corporate income tax rate applicable to long-term capital gains
realized during the year.
The Shareholders’ Meeting may then deduct from the balance
such sums as it deems appropriate, either to be carried forward
to the following fiscal year, or to be applied to one or more
general or special reserve funds, whose allocation or use it shall
freely determine.
2008 Annual Report
209
General information
Any remaining balance shall be distributed among all shareholders
in the form of a dividend, prorated in accordance with the share
capital represented by each share.
The Shareholders’ Meeting convened to approve the year’s
financial statements may grant each shareholder, upon the
proposal of the Board of Directors, in relation to all or part
of the dividend distributed, a choice between payment of the
dividend in cash or in shares. The Board of Directors has the
same authority for the distribution of interim dividends.
4.Except in the case of a capital reduction, no distribution
may be made to shareholders when net assets are or would
subsequently become less than the total share capital.
Part VI
Transformation, Dissolution, Extension,
Liquidation and Litigation
Article 27 - Transformation
The Company may be transformed into a company having a
different legal form provided that, at the time of the transformation,
it has been in existence for at least two years and the balance
sheets of its first two years of existence have been approved by
the shareholders.
Any transformation of the Company must be decided upon and
published as provided by law.
Article 28 - Net assets amounting to less than one-half
of the share capital
If, as a consequence of losses showed by the Company’s accounts,
the net assets (“capitaux propres”) of the Company are reduced
to below one-half of the share capital of the Company, the
Board of Directors shall, within four months from the approval
of the accounts showing such loss, convene an Extraordinary
Shareholders’ Meeting in order to decide whether the Company
ought to be dissolved before its statutory term.
If the dissolution is not resolved, the Company must, no later
than the end of the second fiscal year following the fiscal year
during which the losses were established, reduce its share capital
by an amount at least equal to the losses which could not be
charged to reserves if, by the conclusion of the aforementioned
period, the net assets have not been replenished to an amount
at least equal to one-half of the share capital.
In either case, the resolution adopted by the Shareholders’
Meeting shall be published, in accordance with the law.
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2008 Annual Report
Article 29 - Premature dissolution and extension
An Extraordinary Shareholders’ Meeting may at any time declare
the premature dissolution of the Company or, at the expiration
of the Company’s term of existence, its extension.
At least one year prior to the expiration of the Company’s term of
existence, the Board of Directors shall convene an Extraordinary
Shareholders’ Meeting, in order to decide whether the Company’s
term ought to be extended.
Article 30 - Liquidation
Upon the expiration of the Company’s term of existence or in
the event of its premature dissolution, the Shareholders’ Meeting
shall decide the methods of liquidation and appoint one or several
liquidators whose powers it shall determine.
The appointment of the liquidator(s) terminates the office of
the Directors and that of the Statutory Auditors.
During the period of the liquidation, the Shareholders’ Meeting
shall retain the same powers as those it exercised during the
existence of the Company.
The net proceeds of the liquidation, after payment of liabilities,
shall be used first for the repayment of the amount paid up on
shares that has not already been repaid to shareholders by the
Company, with the balance divided among all the shares.
The shareholders are convened at the end of the liquidation in
order to decide on the final accounts, to discharge the liquidators
from liability for their acts of management and the performance
of their office, and to formally acknowledge the termination of
the liquidation process. The conclusion of the liquidation shall
be published as provided by law.
Article 31 - Litigation and election of domicile
Any litigation that may arise, during the term of existence of
the Company or its liquidation, either between the shareholders
and the Company, or among the shareholders themselves, with
respect to company activities, shall be heard by the competent
courts with jurisdiction over the location of the Company’s
registered office.
To this end, all shareholders must elect domicile within the same
area of jurisdiction as the registered office and all summons or
notices shall be validly served at this domicile.
Where no such domicile is elected, summons and notices
shall be validly served before the Procureur de la République
(French public prosecutor) at the Tribunal de Grande Instance
(French civil court) that has jurisdiction over the location of
the registered office.
General information
Stock market information
4.Stock market information
4.1 Share capital
As of December 31, 2008, Dior’s share capital amounted to 363,454,096 euros, consisting of 181,727,048 shares with a par value of
2 euros. The number of shares remained unchanged during 2008.
4.2 Dior share price
The financial crisis that began at the end of the first half of 2007
continued to spread and deepen in 2008. Initially impacting
mainly the credit markets and banking institutions, the troubled
climate underwent a change in shape and magnitude following
the demise of Lehman Brothers in September 2008. This major
failure exacerbated an already difficult economic situation
around the world, leading to a general loss of confidence and
paralysis in the financial markets, forcing some categories of
investors to sell off their assets. There were serious repercussions
for share prices, consumer behavior and corporate strategies.
Economic conditions worsened considerably in the United States,
Europe and Japan as well as in emerging markets. Against this
backdrop, equity markets, following several consecutive years
of growth – five in Europe – experienced one of the steepest
declines ever recorded.
In this difficult environment, the Christian Dior share price, after
having risen by 11% in 2007, declined by 55% as of December 31,
2008. In comparison, over the same period, the European
indexes DJ Euro Stoxx and Euronext 100 fell by 46% and
45%, respectively, while the Dow Jones industrial average lost
34% of its value.
Christian Dior’s closing share price on December 31, 2008
was 40.25 euros. As of the same date, Christian Dior’s market
capitalization was 7.3 billion euros. Christian Dior is a component
of the Euronext 100 and DJ Euro Stoxx stock exchange
indexes. Christian Dior’s shares are listed on Compartment A
of Euronext Paris (Reuters: DIOR.PA, Bloomberg: CD i-FP,
ISIN: FR0000130403).
In addition, negotiable options based on the Christian Dior
share are traded on Euronext-Liffe.
4.3 Bonds issued by Christian Dior
Bonds issued by Christian Dior that were outstanding on December 31, 2008 are listed for trading as shown below:
Bonds listed in Brussels
Amount
outstanding
Year of
issue
Year of
maturity
Interest rate
(in currency)
EUR
150,000,000
2006
2011
4.25
EUR
50,000,000
2008
2011
5.875
Currency
2008 Annual Report
(in %)
211
General information
4.4 Price trend of the christian dior share and volume of stock traded
in Paris
90
80
70
60
50
40
1,000,000
30
20
500,000
10
0
4.5 Five-year review of dividends
(*) Proposed to the Shareholders’ Meeting of May 14, 2009.
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2008 Annual Report
0
General information
4.6 Payment of dividend
The dividend of 1.61 euros (before impact of the tax regulation applicable to beneficiaries) will be paid at the Company’s corporate
headquarters on May 25, 2009, less the interim dividend of 0.44 euros distributed on December 2, 2008.
4.7 Stock market capitalization
As of December 31 (EUR millions)
• 2006
• 2007
• 2008
14,674
16,337
7,315
4.8 Change in share capital
Number of shares as of December 31, 2007
Shares created
Number of shares as of December 31, 2008
181,727,048
181,727,048
4.9 Per share performance
(EUR)
2008
2007
2006
Diluted Group share of net earnings
Dividend
Change compared to previous year
Highest share price (during market trading)
Lowest share price (during market trading)
Share price as of December 31 (closing share price)
Change compared to previous year
4.43
1.61
88.99
30.18
40.25
-55%
4.86
1.61
+14%
97.97
79.10
89.90
+11%
4.41
1.41
+22%
87.15
69.00
80.75
+8%
2008 Annual Report
213
General information
4.10 Market for issuer’s shares
The Company’s shares are listed on Eurolist (Compartment A) of Euronext Paris.
Trading volumes and amounts on the Paris bourse, and price trend over the last 18 months
Opening price
1st day (EUR)
Closing price
last day (EUR)
89.97
88.22
94.00
91.15
89.75
74.12
71.60
69.98
74.19
77.50
65.28
69.80
72.37
54.02
48.20
36.22
40.50
39.08
89.74
93.95
89.37
89.90
73.81
72.31
70.11
73.82
77.71
65.50
69.40
72.80
53.07
47.23
36.10
40.25
39.06
39.785
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
Highest* share Lowest* share
price (EUR)
price (EUR)
90.14
94.48
94.50
91.15
89.99
77.60
72.55
74.33
79.50
77.87
70.40
74.15
75.46
54.14
51.50
41.85
44.28
45.06
83.73
88.22
82.68
85.50
64.54
71.40
64.63
64.75
73.56
65.14
59.00
67.60
51.48
37.78
30.18
33.63
34.60
37.31
Trading
volume
Value of share
capital traded (EUR)
3,347,264
4,286,184
6,052,418
4,580,923
7,618,302
4,254,933
3,611,247
5,325,309
4,616,482
3,967,217
4,152,865
3,238,918
5,198,337
11,090,893
7,851,626
6,025,671
5,383,332
4,433,542
290,918,818
394,446,604
530,557,770
402,627,716
578,953,535
314,833,426
248,130,407
370,719,259
353,765,475
284,444,195
271,573,896
230,137,612
336,367,607
504,258,718
296,588,719
231,339,881
208,969,836
183,015,515
(*) Share price during market trading.
4.11Dividends paid per share in fiscal years 2004, 2005, 2006, 2007
and 2008 (EUR)
Year
2008 (3)
2007
2006
2005
2004
Dividend
1.61
1.61
1.41
1.16
0.97
Tax credit (1)
0.16 (2)
Tax allowance (1)
0.644
0.644
0.564
0.496
0.325
(2) Attached to the interim dividend of 0.32 per share paid on December 2, 2004. For individuals, half the amount of the dividend balance of 0.65 euros
will be used in the income tax assessment.
(3) Proposed to the Shareholders’ Meeting of May 14, 2009. Dividend before impact of the tax regulation applicable to beneficiaries.
Pursuant to current laws in France, dividends and interim dividends uncollected within five years become void and are paid to the
French state.
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2008 Annual Report
General information
Main locations and properties
5.Main locations and properties
5.1 Production
5.1.1 Wines and Spirits
The vineyards in France and abroad owned by the Group are as follows:
2008
(in hectares)
France:
Champagne name
Cognac name
Yquem
Other countries:
California (United States)
Argentina
Australia, New Zealand
Brazil
Spain
In the table above, the number of hectares owned is determined
exclusive of surfaces not used for viticulture. The difference
between the total number of hectares owned and the number
of hectares under production represents areas that are planted,
but not yet productive, and areas that are not yet planted.
The Group also owns industrial and office buildings, wineries,
cellars, warehouses, and visitor and customer centers for
each of its main Champagne brands or production operations
in France, California, Argentina, Australia, Spain, Brazil
and New Zealand, as well as distilleries and warehouses in
Cognac, the United Kingdom and Poland. The total surface
area is approximately 755,000 square meters in France and
230,000 square meters abroad.
Please note the disposal of the whisky warehouses and production
units in Scotland in 2008.
5.1.2 Fashion and Leather Goods
Louis Vuitton owns eighteen leather goods production facilities
located primarily in France, although some significant workshops
are also located near Barcelona in Spain, in San Dimas, California
and in Romania (the latter facility only makes components for
shoes and leather goods). The Company owns its warehouses and
logistics centers in France but leases warehouse space abroad.
The total surface area of production facilities and warehouses
owned is approximately 190,000 square meters: please note that
part of a logistics center in the Paris area was sold in 2008.
2007
Total
Of which under
production
Total
Of which under
production
1,805
246
190
1,684
179
98
1,788
220
190
1,671
185
98
473
1,369
594
232
51
364
903
475
59
41
464
1,369
543
232
-
320
820
400
62
-
Fendi owns its own manufacturing facility near Florence in
Italy.
Celine also owns manufacturing and logistics facilities near
Florence in Italy.
Berluti’s shoe production factory in Ferrare in Italy is owned
by the Group.
Rossimoda owns its office premises and its production facility
in Stra and Vigonza in Italy.
The other facilities utilized by this business group are either leased
or included within manufacturing subcontracting agreements.
5.1.3 Perfumes and Cosmetics
Buildings located near Orleans in France housing the Research
and Development operations of Perfumes and Cosmetics as well
as the manufacturing and distribution of Parfums Christian Dior
are owned by Parfums Christian Dior and occupy a surface area
of 122,000 square meters.
Guerlain owns its two manufacturing centers in Chartres and
Orphin (France), for a total surface area of approximately
27,000 square meters.
Parfums Givenchy owns its two plants in France, one in Beauvais
and the other in Vervins, which also handles the production of
Givenchy and Kenzo product lines, corresponding to a total
2008 Annual Report
215
General information
surface area of 19,000 square meters. The Company also owns
distribution facilities in Hersham, England.
La Brosse et Dupont owns production facilities, warehouses,
and office space in France and Poland, for a total surface area
of about 50,000 square meters.
5.1.4 Watches and Jewelry
TAG Heuer leases all of its manufacturing facilities in La Chauxde-Fonds and the Jura region of Switzerland.
Zenith owns the Manufacture, which houses its movement and
watch manufacturing facilities in Le Locle, Switzerland. All of
its European warehouses are leased.
Hublot owns its production facilities and its office premises.
The facilities operated by this business group’s remaining brands
– Chaumet, Fred, De Beers and Montres Dior – are leased.
5.1.5 Christian Dior Couture
In association with its Italian partners, Christian Dior Couture
operates five production units for leather goods and footwear
in Florence, Milan, and Padua.
For Bijoux Fantaisie, Christian Dior Couture has a state-of-theart production workshop at Pforzheim, Germany.
Baby Dior, reacquired by the Group in 2006, operates production
facilities at Redon (Ille-et-Vilaine) and in Thailand.
5.2.distribution
Retail distribution of the Group’s products is most often carried
out through exclusive boutiques. Most of the stores in the Group’s
retail network are leased and only in exceptional cases does the
Group own the buildings that house its stores.
Louis Vuitton owns certain buildings that house its stores in
Tokyo, Guam, Hawaii, Seoul, Taipei, Sydney, Rome, Genoa,
Cannes and Saint-Tropez, for a total surface area of approximately
10,000 square meters.
Celine and Loewe also own the buildings housing some of their
stores in Paris and Spain.
Except avenue Montaigne, Madrid, Saint-Tropez, Tokyo
(Omotesando district), the stores wholly operated by Christian
Dior Couture and located in prime areas in most of the world’s
major cities are leased from independent owners. Christian Dior
owns a logistics center in Blois.
In the Selective Retailing business group:
• Le Bon Marché and Franck et Fils own the buildings in Paris
that house their department stores, corresponding to a total
sales area of about 70,000 square meters;
• DFS owns its stores in Waikiki (Hawaii), Tumon Bay (Guam)
and Saipan.
As of December 31, 2008, the Group’s store network breaks down as follows:
(in number of stores)
France
United States
Japan
Other
TOTAL
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2008 Annual Report
2008
2007
2006
355
650
576
296
555
119
329
565
502
292
471
110
312
495
434
316
424
93
2,551
2,269
2,074
General information
(in number of stores)
2008
2007
2006
Fashion and Leather Goods: Louis Vuitton
Other brands
Sub-total Fashion and Leather Goods
Watches and Jewelry
Selective Retailing:
Sephora
Other
Sub-total Selective Retailing
Other
237
425
665
1,090
62
104
898
155
1,053
5
221
390
599
989
55
90
756
153
909
5
215
368
586
954
48
82
621
149
770
5
TOTAL
2,551
2,269
2,074
5.3 Administrative sites and investment property
The Group owns its headquarters located at 11-17, rue
François 1er, and 28-30, avenue Montaigne. The headquarters
of the main Christian Dior Couture subsidiaries outside France
are leased.
Lastly, the Group owns investment property, for the most part
located in Paris and mainly in the vicinity of the Samaritaine
and Le Bon Marché department stores, for a total surface area
of approximately 50,000 square meters.
Most of the Group’s administrative buildings are leased, with
the exception of the headquarters of certain brands, particularly
those of Louis Vuitton, Parfums Christian Dior and Zenith.
A redevelopment project encompassing the group of properties
previously used for the business operations of the Samaritaine
department store has been submitted for the approval of the
Paris mayor’s office.
The Group holds a 40% stake in the Company owning the building
housing the headquarters of LVMH on avenue Montaigne in
Paris. The Group also owns three buildings in New York (total
surface area of about 19,000 square meters) and a building in
Osaka (about 5,000 square meters) that house the offices of
subsidiaries.
2008 Annual Report
217
General information
Supply sources and subcontracting
6.Supply sources and subcontracting
6.1 Champagne and wines
The Group owns 1,684 hectares of champagne under production,
which provide a little more than one-fourth of its annual needs.
In addition, the Group companies purchase grapes and wines
from wine growers and cooperatives on the basis of multi-year
agreements; the largest supplier of grapes and wines represents
less than 15% of total supplies for the Group’s brands. Until
1996, a theoretical price was published by the industry; to this
were added specific premiums negotiated individually between
the wine growers and the merchants. After the first four-year
agreement signed in 1996, another industry agreement was signed
between the Companies and the wine growers of Champagne in
the spring of 2000 covering the four harvests from 2000 through
2003, which confirmed the desire to limit upward or downward
fluctuations in grape prices. A new industry agreement was
signed in the spring of 2004 by the Companies and the wine
growers of Champagne covering the five harvests from 2004 to
2008. This agreement sets new rules in order to ensure greater
security for the payment to the wine growers and to achieve
better control of price speculations.
For about ten years, the wine growers and the merchants have
established a qualitative reserve that will allow them to cope
with variable harvests. The surplus inventories “stockpiled”
this way can be sold in years with a poor harvest. These wines
“stockpiled” in the qualitative reserve provide a certain security
for future years with smaller harvests.
For the 2008 harvest, the Institut National des Appellations d’Origine
(INAO – French organization charged with regulating controlled
place names) set the maximum yield for the Champagne
appellation at 12,400 kg/ha. This maximum yield represents
the maximum harvest level that can be made into wine and
sold under the Champagne appellation. In 2006, the INAO
redefined the legal framework for the “stockpiled” reserves
previously mentioned. It is now possible to harvest grapes
beyond the marketable yield within the limits of a ceiling called
“plafond limite de classement (PLC)”, the highest permitted yieldper-hectare. This ceiling is determined every year within the
limits of the maximum total yield now set at 15,500 kg/ha. This
additional harvest is stockpiled in reserve, kept in vats and used
to complement poorer harvests. The maximum level of this
stockpiled reserve is set at 8,000 kg/ha.
The 2008 harvest reached the marketable ceiling of 12,400 kg/
ha, with grapes harvested beyond this limit supplementing the
stockpiled reserve quota, without exceeding the maximum yield,
up to the level of about 14,000 kg/ha. A release of 1,200 kg/ha
from this stockpiled reserve was carried out in 2008. The price
paid for each kilogram of grapes in the 2008 harvest ranged
between 4.90 euros and 5.80 euros depending on the vineyard,
a 5% increase compared to 2007.
Dry materials (bottles, corks, etc.) and all other elements
representing containers or packaging are purchased from nonGroup suppliers.
The Champagne Houses used subcontractors primarily for bottle
handling and storing operations; these operations represented
approximately 35 million euros.
6.2 Cognac and spirits
Hennessy owns 179 hectares. The Group’s vineyard has remained
virtually stable since 2000, after 60 hectares of vines were cleared
in 1999 as part of the industry plan implemented in 1998. The
objective of the plan was to reduce the production area through
premiums offered for clearing and assistance given to wine
growers to encourage them to produce wines other than those
used in the preparation of cognac.
Most of the wines and eaux-de-vie that Hennessy needs for its
production are purchased from a network of approximately
2,500 independent producers, with whom the Company ensures
the preservation of exceptional quality. Purchase prices for wine
and eaux-de-vie are established between the Company and each
producer based on supply and demand. In 2008, the price of
wines from the harvest remained stable for the Fins Bois, after
a 7% increase in 2007.
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2008 Annual Report
With an optimal inventory of eaux-de-vie, the Group can manage
the impact of price changes by adjusting its purchases from
year to year.
Hennessy continued to control its purchase commitments for
the year’s harvest, and diversify its partnerships to prepare its
future growth in various qualities.
Like the Champagne and Wine businesses, Hennessy obtains
its dry materials (bottles, corks and other packaging) from nonGroup suppliers. The barrels and casks used to age the cognac
are also obtained from non-Group suppliers.
Hennessy makes only very limited use of subcontractors for
its core business.
General information
6.3 Fashion and leather goods
In Fashion and Leather Goods, manufacturing capacities
and the use of subcontracting vary significantly, depending
on the brand.
The fifteen leather goods manufacturing shops of Louis Vuitton
Malletier, eleven in France, three in Spain and one in the United
States, provide most of the brand’s production. All development
and production processes for Louis Vuitton’s entire footwear
line are handled at its site in Fiesso d’Artico, Italy. Louis Vuitton
uses third parties only to supplement its manufacturing and
achieve production flexibility.
Fendi and Loewe also have leather workshops in their country
of origin and in Italy for Celine, which cover only a portion
of their production needs. Generally, the subcontracting used
by the business group is diversified in terms of the number of
subcontractors and is located primarily in the country of origin
of the brand: France, Italy and Spain.
Overall, the use of subcontractors for Fashion and Leather
Goods operations represented about 35% of the cost of sales
in 2008.
Louis Vuitton Malletier depends on outside suppliers for
most of the leather and raw materials used in manufacturing
its products. Even though a significant percentage of the
raw materials is purchased from a fairly small number of
suppliers, Louis Vuitton believes that these supplies could be
obtained from other sources, if necessary. In 2004, recourse
to a balanced portfolio of suppliers also limited dependence
on specific suppliers. After a diversification program launched
in 1998 to Norway and Spain, the portfolio of suppliers was
expanded to include Italy in 2000. For Louis Vuitton, the
leading supplier of hides and leathers represents about 20%
of its total supplies of these products.
Fendi is in a similar situation, except for some exotic leathers
for which suppliers are rare.
Finally, for the various companies, the fabric suppliers are
often Italian, but on a non-exclusive basis.
The designers and style departments of each company ensure
that manufacturing does not generally depend on patents or
exclusive expertise owned by third parties.
6.4 Perfumes and cosmetics
The five French production centers of Guerlain, Givenchy and
Christian Dior provide almost all the production for the four
major French brands, including Kenzo, both in fragrances, and
in make-up and beauty products. Make Up For Ever also has
sufficient manufacturing capacities in France to cover its own
needs. Only the newer American companies, Loewe perfumes
and Acqua di Parma subcontract most of the manufacturing
of their products.
In 2008, manufacturing subcontracting represented overall
about 9% of the cost of sales for this activity, plus approximately
8 million euros for logistical subcontracting.
Dry materials, such as bottles, stoppers and any other items that
form the containers or packaging, are acquired from suppliers
outside the Group, as are the raw materials used in the finished
products. In certain cases, these materials are available only from
a limited number of French or foreign suppliers.
The product formulas are developed primarily in the SaintJean de Braye laboratories, but the Group can also acquire or
develop formulas from specialized companies, particularly for
perfume essences.
2008 Annual Report
219
General information
6.5 Watches and jewelry
With its five Swiss workshops or manufactures, located in Le
Locle and in La Chaux de Fonds, the Group provides almost
the entire assembly of the watches and chronographs sold under
the TAG Heuer, Zenith, Montres Dior, Chaumet, Fred and
Hublot brands. In its watchmaking shop, Zenith also designs
and manufactures the mechanical movements El Primero and
Elite that made this brand famous.
In this business, subcontracting represented overall only 7% of
the cost of sales in 2008.
Because of the very high quality requirements, the components
assembled are obtained from a limited number of suppliers,
primarily Swiss, with the exception of the leather for the watch
bands. In 2008, the industrial subsidiary Cortech in Switzerland
manufactured a significant portion of the cases meeting the
production needs of TAG Heuer and Zenith.
Even though the Group can, in certain cases, use third parties
to design its models, they are most often designed in its own
studios.
Production capacities and the use of subcontracting vary
significantly, depending on the products involved.
Overall for this business, subcontracting represented about
48% of the cost of sales.
In Leather Goods, Christian Dior Couture may enlist the services
of companies outside the Group to increase its production capacity
and ensure greater flexibility in its manufacturing processes.
In the ready-to-wear and fine jewelry sectors, the Company is
supplied solely through outside companies.
220
2008 Annual Report
General information
Statutory Auditors
7.Statutory Auditors
7.1 Name and term
Current terms of office
Statutory Auditors
ERNST & YOUNG AUDIT
Tour Ernst & Young
92037 Paris La Défense Cedex
represented by Mrs. Jeanne Boillet
MAZARS
Tour Exaltis
61, rue Henri Regnault
92400 - Courbevoie
represented by Mr. Denis Grison
Mr. Dominique Thouvenin (alternate)
Tour Ernst & Young
92037 Paris La Défense Cedex
Mr. Guillaume Potel (alternate)
Tour Exaltis
61, rue Henri Regnault
92400 - Courbevoie
Start date of
first term
Date
appointed
End
of term
May 29, 1997
May 15, 2003
fiscal year 2008
May 15, 2003
May 15, 2003
fiscal year 2008
May 29, 1997
May 15, 2003
fiscal year 2008
May 15, 2003
May 15, 2003
fiscal year 2008
7.2 Fees paid in 2008
Ernst & Young Audit
(EUR thousands)
2008
Audit
Statutory audit, certification, audit of the individual
company and consolidated financial statements:
• Christian Dior
• Fully-consolidated subsidiaries
Other services relating directly to the statutory
audit assignment:
• Christian Dior
• Fully-consolidated subsidiaries
Subtotal
Other services provided by the firms
to fully-consolidated subsidiaries
• Legal, tax, employee-related
• Other
Subtotal
TOTAL
Mazars
2007
2008
2007
Amount
%
Amount
%
Amount
%
Amount
%
98
10,732
1
82
95
10,527
1
84
141
776
15
85
141
908
13
87
4
873
11,707
7
90
497
11,119
4
89
4
921
100
1,049
100
1,159
207
1,366
9
1
10
1,255
93
1,348
10
1
11
-
-
-
-
13,073
100
12,467
100
921
100
1,049
100
2008 Annual Report
221
General information
Statement of the Company Officer Responsible for the annual financial report
8.Statement of the Company Officer Responsible
for the annual financial report
We declare that, to the best of our knowledge, the financial statements have been prepared in accordance with applicable accounting
standards and provide a true and fair view of the assets, liabilities, financial position and profit or loss of the parent company and
of all consolidated companies, and that the management report presented on page 9 gives a true and fair picture of the business
performance, profit or loss and financial position of the parent company and of all consolidated companies as well as a description
of the main risks and uncertainties faced by all of these entities.
In their report on the parent company financial statements for the year ended December 31, 2008, the Statutory Auditors highlighted
a change in accounting policy, pursuant to CRC (Comité de la Réglementation Comptable) Regulation 2008-15 published on December 30,
2008 (as disclosed in the introduction to Note 1 of the notes to the parent company financial statements). This change relates to the
accounting treatment of share purchase or share subscription option plans and bonus share plans.
Paris, April 17, 2009
Under delegation from the Chief Executive Officer
Florian OLLIVIER
Chief Financial Officer
For further information:
Tel.: +33 1 44 13 24 98 Fax: +33 1 44 13 27 86
Website: www.dior-finance.com
222
2008 Annual Report
2008 Annual Report
223
224
2008 Annual Report
Design and production:
Copyright: Karl LAGERFELD
30, avenue Montaigne – Paris 8e

2008 annual report - Christian Dior Finance

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