COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDERS' MEETING OF MAY 13, 2004

Chairman’s Message 4

Managing and Auditing Bodies 6

Simplified Organizational Chart 7

Financial Highlights 8

Management Report from the Board of Directors 11

Report of the Chairman of the Board of Directors to the Shareholders’ Meeting 53

Consolidated Financial Statements 57 • Consolidated Highlights 59 • Consolidated Balance Sheet 60 • Consolidated Statement of Income 62 • Statement of Consolidated Cash Flow 63 • Notes to the Consolidated Financial Statements 64 • Report of the Statutory Auditors 126

3 CHAIRMAN’S MESSAGE

After the bursting of the Internet bubble in 2000 and the recession that followed in 2001 and 2002, 2003 was also marked by a rare combination of unfavorable factors: the war in Iraq, the SARS epidemic in Southeast Asia, the sharp decline in the currencies of our leading economic partners, very weak economic growth in Europe. Despite this environment, the Christian Dior Group turned in a very strong performance: • Operating income was up 9%, reaching an historic high of 2,213 million euros; • Net income from continuing operations up 49% and net earnings up 70%.

Remember that, as early as 2000, we took the measures that would enable us not only to weather the crisis, but to develop and gain market share despite difficult economic conditions. For this reason, our priority was the growth of our master brands and, with the cash flow they generate, the improvement of our financial position.

Christian Dior Couture again recorded one of the strongest performances in its sector. Sales revenues grew 6% and, excluding the impact of the 20% decline in the dollar and the 10% decline in the yen, growth would have been 15%. The policy we have successfully implemented for several years will be continued. In 2004, Christian Dior Couture again expects to post significant growth, both in revenues and in earnings.

For example, we will continue to strengthen our presence in Japan, the country at the core of our growth strategy. The network of boutiques acquired in 1997 has been restructured and expanded, and now totals 26 stores. Our first Dior building opened in Tokyo in the Omotesando district in December 2003 has been immensely successful with Japanese customers. Based on the success of this concept, we will open two new Dior boutiques in 2004, one in Tokyo in the Ginza district and the other in Osaka.

4 The success of John Galliano's creations has generated waiting lists for his designs throughout the world. Since the arrival of Hedi Slimane in 2000, we have strengthened our design teams in men's wear, and the Dior Homme concept we developed with him has achieved growing success worldwide. At the same time, we are focusing on the development of new women's shoes and jewelry and are quickly gaining market share.

Finally, we will continue the rapid expansion of our network of boutiques. The network doubled in four years to total 159 boutiques at year-end 2003, and we are planning for 200 stores by early 2006.

Our subsidiary LVMH also posted the best performance in the luxury product sector, while several of its competitors faced serious difficulties. The successes we achieved include the substantial increase in the operating margin of Wines and Spirits, which continued to increase the value of its portfolio of brands and the strength of its distribution networks; the exceptional performance of Louis Vuitton which broke its sales records worldwide and posted growth of 38% in dollars in the United States; the greater-than-sector growth of Perfumes and Cosmetics; Sephora's success in reaching its profitability target in the United States; the gains in productivity achieved by DFS generated profit; the growth in the young very promising brands like Marc Jacobs, Pucci, and BeneFit, which recorded extraordinary growth. Taking into account the special situation of the Watches and Jewelry business group, which is now in a phase of investment for the future and repositioning of its brands, all the businesses contributed to the strong growth in LVMH's operating margin from 16% to 18%.

At a time when the global economic context is improving—the American economy is growing rapidly and Europe shows signs of recovery—LVMH began 2004 in an excellent position to take advantage of the economic recovery.

We are continuing the strategy that has proven its effectiveness year after year: priority on the development of our major brands and the brands offering high potential, rigorous financial discipline, a focus on generating cash, continued disposal of non-strategic assets, and an emphasis on the quality and creativity of our products.

These prospects and developments that we have already initiated mean that we face the coming months with confidence, backed by the desire for excellence that exists among the employees of our Group. Once again, we have set a target of significant growth in operating income in 2004.

5 MANAGING AND AUDITING BODIES

BOARD OF DIRECTORS PERFORMANCE AUDIT COMMITTEE Bernard ARNAULT Eric GUERLAIN Chairman Chairman

Eric GUERLAIN Pierre GODE Vice Chairman Christian de LABRIFFE

Antoine BERNHEIM NOMINATING Denis DALIBOT AND COMPENSATION COMMITTEE Pierre GODE Christian de LABRIFFE Antoine BERNHEIM Raymond WIBAUX Chairman Directors Pierre GODE Eric GUERLAIN Raymond WIBAUX

MANAGEMENT AUDITORS

ERNST & YOUNG AUDIT Sidney TOLEDANO represented by Christian MOUILLON Chief Executive Officer

MAZARS & GUERARD represented by Denis GRISON

6 S IMPLIFIED O RGANIZATIONAL CHART AT D ECEMBER 31, 2003

Christian Dior*

100%

Christian Dior Couture

100% Financière Jean Goujon

42.5%

LVMH*

* Publicly traded company

7 F INANCIAL HIGHLIGHTS

Consolidated sales by business group (millions of euros)

Christian Dior Couture 3 % 4 % 4 % 523

18 % 17 % 17 % Wines and Spirits 2,116

Fashion and Leather Goods 4,149 29 % 32 % 33 %

Perfumes Consolidated sales by geographic 18 % and Cosmetics 18 % 18 % 2,181 destination Watches and Jewelry (millions of euros) 4 % 502 4 % 4 % France Selective Retailing 2,185 3,039 17 % 17 % 18 % 27 % 25 % 24 %

Other activities Europe (excluding France) and eliminations 2,323 1 % - 44 19 % 17 % 18 % 2001 2002 2003

United States 3,163

26 % 27 % 25 %

Japan Consolidated sales by currency 1,958 (millions of euros) 15 % 15 % 16 %

Asie (excluding Japan) Euro 1,711 4,157 15 % 14 % 16 % Other Markets 31 % 32 % 33 % 1,126 7 % 9 % 9 %

2001 2002 2003 US dollar 3,747

32 % 32 % 30 %

Yen 2,007

16 % 16 % 16 %

Pound sterling 4 % 4 % 4 % 537 5 % 4 % 4 % Hong Kong dollar 452 12 % 12 % 13 % Other currencies 1,566 2001 2002 2003

8 F INANCIAL HIGHLIGHTS

1999 2000 2001 2002 2003 millions of euros

Net sales by business group Christian Dior Couture 220 296 350 492 523 Wines and Spirits 2,240 2,336 2,232 2,266 2,116 Fashion and Leather Goods 2,295 3,202 3,612 4,207 4,149 Perfumes and Cosmetics 1,703 2,072 2,231 2,336 2,181 Watches and Jewelry 135 614 548 552 502 Selective Retailing 2,162 3,294 3,493 3,337 3,039 Other activities 3 53 101 (22) (44) Total 8,758 11,867 12,567 13,168 12,466

Percentage earned outside France 80% 85% 83% 83% 82%

Income from operations (1) 1,551 1,967 1,548 2,034 2,213

Net income from continuing operation – Group share before amortization of goodwill 295 320 75 287 428 Net income – Group share 264 251 (95) 178 303 euros

Net income from continuing operation per share before amortization of goodwill (2) 1.63 1.77 0.41 1.58 2.36 Total dividend per share (2) 1.05 1.17 1.17 1.23 1.31

millions of euros

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

Average workforce 39,259 48,524 54,463 55,314 56,815

(1) Adjusted retroactively to reflect reclassifications. (2) Adjusted to reflect the 4 for 1 stock split in July 2000.

9

M ANAGEMENT R EPORT FROM THE BOARD OF D IRECTORS

Ladies and Gentlemen, This report summarizes the significant events affecting the life of the Christian Dior Group in 2003. We shall review in order the consolidated results, the business picture by segment and your company’s performance.

I. CONSOLIDATED RESULTS The year 2003 was marked by a rare combination of unfavorable factors: war in Iraq, SARS, the decline in the dollar and the yen against the euro, and the absence of an economic recovery in Europe. In this context, the Christian Dior Group demonstrated excellent economic resistance. Net sales revenues totaled 12,466 million euros, down 5%; at constant exchange rates revenues were up 4.4%. The group's operating income was 2,213 million euros, an increase of 9% over 2002. This growth, much higher than growth in sales, reflects our control of all costs, which declined 8%. The ratio of operating income to sales was 18%, up 3 points over 2002. Consolidated net income from continuing operations before tax was 1,127 million euros, compared to 890 million euros in 2002, with group share at 428 and 287 million euros respectively. In addition to the growth in operating income already mentioned, this improvement primarily reflects the decline in financial expense due to the twofold impact of a reduction in the Group's debt and lower interest rates. Amortization of goodwill totaled 125 million euros (group share), up from 109 million in 2002; this change is the result of the exceptional amortization of the goodwill on the Laflachère group.

11 The net income was 837 million euros compared to 637 million in 2002, with the Group's share at 303 and 178 million respectively. millions of euros 2003 2002 Net sales 12,466 13,168 Operating income 2,213 2,034 Income from continuing operations before tax 1,127 890 Group share 428 287 Net income 837 637 Group share 303 178

In order to measure the performance of the Christian Dior Group in its current structure, pro forma accounts were prepared by moving up the effective date of all modifications to January 1, 2002.

The principal results were as follows: 2003 2002 millions of euros pro forma pro forma

Net sales 12,466 13,114 Income from operations before tax 1,258 1,077 Group share 484 360

The Group’s various business groups posted new growth in sales on a constant exchange bases in an economic environment that was hardly favorable, as was mentioned.

• Christian Dior Couture posted a 6% increase in its sales; this is related to the expansion of the network of boutiques, but also – and to an even greater degree – to internal growth.

• Organic growth for the Wines and Spirits group was 5%. At constant consolidation, sales in volume of champagne and cognac continued to expand.

• The Fashion and Leather Goods group recorded internal growth of 9% over the year. Driven by the very strong demand from local customers throughout the year, Louis Vuitton posted double-digit internal growth, which was particularly strong in the United States and China.

• Perfumes and Cosmetics recorded internal growth of 4% in 2003. This growth illustrates the success of the new perfumes introduced in the fall and the excellent vitality of Parfums Christian Dior.

• At the end of a difficult year for the world watch market, net sales for the Watches and Jewelry business group was stable on a like-for-like basis.

• Selective Retailing sales declined overall by 9%. DFS suffered from the impact of the war in Iraq and the SARS epidemic, while Sephora posted strong growth, particularly in the United States.

12 Net sales Operating income millions of euros 2003 2002 2003 2002

Christian Dior Couture 523 492 40 33 Wines and Spirits 2,116 2,266 796 750 Fashion and Leather Goods 4,149 4,207 1,311 1,280 Perfumes and Cosmetics 2,181 2,336 178 161 Watches and Jewelry 502 552 (48) (13) Selective Retailing 3,039 3,337 106 20 Other activities, eliminations and restatements (44) (22) (170) (197)

Total 12,466 13,168 2,213 2,034

In Christian Dior’s consolidated financial statements, LVMH’s accounts are restated to take into account differences in appraisal of brands recorded prior to 1990 in the consolidations of each of these companies. Consequently, the net results of LVMH are consolidated for 841 million euros compared to 831 million euros before restatement, and are included in the net income Group share of Christian Dior for 309 million euros compared to 312 million euros before restatement. It should also be noted that, since the assets sold by LVMH have a consolidation value that is greater in Christian Dior’s books than the value recorded at LVMH, the consolidated results from the sale are reduced by the same amount. The results by business groups shown below those published by LVMH, and are, therefore, not restated.

Investments Net investments totaled 809 million euros and include, first, the operational investments made for continuing operations in the amount of 556 million euros and, second, the non-recurring capital expenditures related to restructuring operations and acquisitions, including the purchase of the stock of the Laflachère group from the minority shareholders (42 M€), the acquisition of Chaumet Japan (27 M€), PCD gmbh (30 M€) and Seldico (29 M€), and the increase in the stake in Fendi (191 M€) and Rossimoda (33 M€). In contrast, the group also completed the sales of the inventories and licenses of Michael Kors, Kenneth Cole and Marc Jacobs (60 M€) and Canard Duchêne (40 M€).

Research and Development Research and development costs charged during the period amounted to 38 million euros in 2003 (36 in million in 2002). These amounts cover costs incurred in scientific research and new product development. Research and development costs, expanded to include “packaging” and “design” expenses, represented a charge of 41 million euros for 2003 (47 million in 2002).

Workforce The Group’s workforce increased by 2.7%, particularly from the effect of newly acquired companies, but also as a result of the internal growth of the most buoyant business sectors.

13 The average workforce of the fully consolidated companies was as follows: 2003 2002

Christian Dior Couture 1,855 1,501 Wines and Spirits 4,908 5,018 Fashion and Leather Goods 16,709 15,033 Perfumes and Cosmetics 13,010 12,994 Watches and Jewelry 2,309 2,301 Selective Retailing 17,123 17,289 Other activities 901 1,178 Total 56,815 55,314

II. RESULTS BY BUSINESS

1. Christian Dior Couture A - Highlights Financial year 2003 was marked by the following factors: • Continued growth in net sales. Christian Dior Couture posted net sales of 522.5 million euros, representing growth of 6% at current rates. At constant currency rates, this growth totaled 15%. This outstanding performance was achieved in a difficult economic environment, particularly in the first half, which was impacted by international events such as SARS and the war in Iraq. This growth is particularly remarkable since it was achieved on top of very strong growth in 2002 (+ 41%). Growth intensified in the 4th quarter, at a rate of 20% at constant exchange rates and 11% at current exchange rates. • Growth in profitability greater than growth in net sales. Operating income rose 21%, representing 8% of net sales compared with 7% in 2003. • Successful roll-outs of new product lines. Financial year 2003 confirmed the success of the product lines launched in previous years. Growth was particularly steady for women's shoes and for the Dior Homme ready-to-wear line. The success of the new permanent lines and the seasonal themes (Hardcore line, Logo Rose theme) was also responsible for a significant portion of the growth in net sales. • Continued expansion of the proprietary boutique networks. The network had 159 points of sale at December 31, 2003, up from 144 in 2002, an increase of 15 points of sale. ➤ Japan was the top priority for expansion in 2003: 5 points of sale were opened, including a “flagship” store in the Omotesando district in Tokyo, which devotes 800 m2 to the brand. ➤ In Europe, the network, which expanded with major new locations in 2002, was consolidated with new points of sale. ➤ In the Americas, the network added 2 new showcase points of sale: in Las Vegas (at the Bellagio) and in Saint Barthélémy in the Antilles. ➤ In Southeast Asia, Hong Kong continued to be a focus for growth with two new stores, one in the retail center on Peking Road and the other at the international airport.

14 B - Consolidated Results of the Couture Business Sales from the Couture business, 522.5 million euros grew by 6% compared to 2002. At a constant rate of exchange, sales would be 564 million euros, or a 15% increase compared to the previous year. The operating result was a profit of 40.1 million euros, up 21% over the previous year. Growth in net sales and rigorous cost control contributed to this increase. Very favorable currency hedges (which generated income of 9.6 million euros) and increases in retail prices offset the impact on the consolidated income statement of the decline in the US dollar, the yen and the Hong Kong dollar. The financial result was a charge of 5.7 million euros, down substantially from 2002 (9.3 million euros). The sharp decline in interest rates and the impact of the conversion rates reduced the interest charge. The tax expense was 8.8 million euros versus 5.3 million euros in 2002. This increase is the result of the significant improvement in the operating income of certain subsidiaries. All of these factors made it possible to record net income – Group share – of 18.3 million euros, up from a profit of 14.6 million euros in 2002. The share going to third parties was 2.1 million euros.

C - Analysis of the development by business sector % constant millions of euros 2003 2002 % rate

License royalties 18.6 21 -11 -7 Wholesale sales 106.6 102.64 12 Retail sales and other 397.3 368.18 17 Total 522.5 491.7 6 15

LICENSES Royalties from licenses by geographic region were as follows: % constant millions of euros 2003 2002 % rate

Europe 16.0 17.6 -10 -9 North America 2.4 3.1 -23 -5 Other 0.2 0.3 -33 -6 Total 18.6 21.0 -11 -7

The principal strategic licenses of Christian Dior Couture, i.e. the watches, eyeglasses and fantasy jewelry posted highly satisfactory growth that was comparable to or greater than the growth in the activities managed directly by the brand. Watches in particular launched extremely successful products, like Malice, Riva Sparkling and Chris 47. The end of the lingerie and hosiery licenses in 2002, as well as of the last Men's licenses in 2003, contributed to relative stability in net sales for licenses at constant currency rates.

15 WHOLESALE SALES Wholesale sales grew by 4%, a rate comparable to the general growth of the brand.

RETAIL SALES millions of euros 2003 2002 % % constant rate

Europe 185.5 163.51315 North America 64.4 65.5-216 Asia Pacific 144.7 136.66 20 Other 2.7 2.59 36 Total 397.3 368.1 8 17

In the retail network, all products contributed to the growth. Three lines developed in recent years made a particularly strong contribution. The Shoe segment, which reaped the benefits of recognized creativity, was very successful, both in the brand's own stores and in the shoe corners in department stores (including Harrods in London). Dior Homme, after a successful launch in the multi-brand network in 2002 and 2003, made significant progress in the boutiques of the network and also in the dedicated Men's sales spaces in department stores. Dior Jewelry, after the opening of the boutiques on avenue Montaigne and place Vendôme in Paris, gradually expanded in 2003 into the brand's network of existing boutiques, benefiting from the proximity of Dior products, in prestigious locations. The other product lines, such as women's ready to wear and leather goods also recorded strong growth with the very successful launch of permanent and seasonal coordinated lines: the Hardcore line, Curly. In the retail network, all geographic regions contributed to our growth. In Europe, which was the principal growth vector in 2002, new boutiques were added to the network in Saint Tropez, London and Birmingham. The major investments were made in Japan with the opening of five new points of sale, including one in the Omotesando district in Tokyo.

D - Outlook In 2004, growth in net sales is expected to continue at a steady rate. Profitability should also improve substantially, thanks to better productivity in the network. In addition, the risks of depreciation of the currencies against the euro have been advantageously hedged for 2004. Dior Homme will again be the priority growth vector in 2004, with the development of new product lines in ready to wear, shoes and the opening of Men's points of sale worldwide, both in department stores and in our own boutiques. The network should continue to expand: with a Men's boutique in the United States in Houston and New York; in the Ginza district in Tokyo and in Osaka, Japan; and, finally, on rue Royale in Paris, where we postponed opening a boutique until early 2004.

16 2. Wines and Spirits Group • Sales of the Wines and Spirits group were 2,116 million euros, a decline of 7% over 2002. Operating income reached 796 million euros, a 6% increase. • Internal growth for the Wines and Spirits businesses was 5%. On a constant consolidation basis, volume sales of champagne and cognac continued to increase. The operating margin improved significantly, based on excellent control of supply costs and increased operational efficiency, particularly in distribution. In a very volatile currency context, an effective currency hedging policy also contributed to this performance. • The vitality of the Moët & Chandon, Dom Pérignon and Veuve Clicquot champagne brands was particularly strong in the United Kingdom and Japan, a country that has confirmed its high potential. In the United States, Veuve Clicquot and Krug achieved remarkable growth. • Hennessy's strong growth continued in the United States where the brand strengthened its leadership position; excellent performances were recorded in China and Taiwan as well. In Japan, a market generally sluggish for cognac, Hennessy continued to dominate the premium segment and recorded the positive effects of its commercial relaunch strategy. Highlights: • Moët Hennessy continued to reinforce its distribution network, establishing two new distribution subsidiaries in Belgium and Australia. In the United States, the implementation of sales teams exclusively dedicated to Moët Hennessy brands with single distributors continued under excellent conditions in partnership with Diageo. • A new high prestige cognac, Ellipse, has just been created by Hennessy. Born from the melding of seven exceptional brandies, it will develop the brand's image of excellence with connoisseurs of rare cognac. Outlook: • In 2004, the Wines and Spirits brands will continue to focus on gaining market share in value and on growth in the premium and super-premium segments. A steady price policy will be maintained to limit the impact of unfavorable monetary fluctuations. • The investments of the champagne brands will be increased in Japan to take advantage of the rapid growth of this market. Hennessy will continue to invest heavily in the United States and in high-potential markets like China, Russia and Taiwan.

3. Fashion and Leather Goods • Net sales for the Fashion and Leather Goods group totaled 4,149 million euros, a decline of 1%. Operating income was 1,311 million euros, up 2%. • The Fashion and Leather Goods business group recorded internal growth of 9% over the full year. The increase in sales accelerated in the fourth quarter, with double-digit growth over the fourth quarter of 2002, which also posted strong growth. The operating margin was 32%, up 2 points over the previous year. • Buoyed by very strong demand from local customers throughout the year, Louis Vuitton recorded double-digit internal growth, which was particularly remarkable in the United States and China. The group broke historical sales records in December. With this performance, coupled with exceptional profitability, the world's leading luxury brand increased its lead in its market. • Among the other brands, Céline very clearly confirmed its new momentum, driven by the success of its Boogie and Poulbot bags. Loewe benefited from the success of its new products. Marc Jacobs, Pucci and Berluti achieved exceptional growth.

17 Highlights: • Louis Vuitton reaped the benefits of its strong innovative vitality. This included, in particular, the creative partnership of Marc Jacobs with Japanese artist Takashi Murakami for the leather lines Cherry Blossom, Multico and Eye Love Monogram, the launch of the Suhali line in goat's leather and the creation of the supple Cuir Epi. • Louis Vuitton expanded its media presence with two very strong promotional campaigns and continued to expand and renovate its retail network in all regions of the world. The brand established a presence for the first time in New Delhi, India. It also opened two new stores in China and a store with a new, very spectacular format in the Roppongi Hills district, the very center of night life in Tokyo. • Donna Karan continued to refocus on much more selective retailing and continued to improve the quality and coherency of its collections. A major project has been initiated to develop accessories. • Fendi recentered its activity on the most profitable sales and primarily focused its energies on new product development. Backed by an outstanding promotional campaign and by the success of its designs, the brand performed well in the second half in Europe and Asia. • Two talented designers joined the Group: Antonio Marras for Kenzo's ready-to-wear for women and Ozwald Boateng for Givenchy's ready-to-wear for men. Outlook: • In 2004, Louis Vuitton will pursue its policy of innovation with new leather products, the development of watches and the launch of a full line of jewelry. As in 2003, its activity will be backed by heavy media investments. In addition, throughout the year, there will be promotional campaigns to mark the 150th anniversary of the House, an opportunity to reaffirm its historical roots in tradition and innovation, and its exceptional expertise. • Louis Vuitton will continue to expand its retail network with new stores in Shanghai, Los Angeles and Tokyo (Ginza). Two new Louis Vuitton buildings will also open: after the 5th Avenue store in New York in 2004, it will be Paris' turn and then Hong Kong in 2005. • The brands currently in a development phase will continue their repositioning strategy, rigorously targeting their investments. Backed by strong managerial skills, they will continue to improve their organization, performance and profitability.

4. Perfumes and Cosmetics • Net sales for the Perfumes and Cosmetics group was 2,181 million euros, a decline of 7%. Operating income totaled 178 million euros, an increase of 11%. • Under difficult market conditions, the Perfumes and Cosmetics group posted internal growth of 4% in 2003, again higher than growth in the global market. The strong momentum of Parfums Christian Dior and the successful perfume launches last fall drove a strong acceleration in growth in the fourth quarter. • Growth in operating income was 11%. In a context of heavy promotional investments, this growth, which was greater than the growth in sales, reflects the success of all the French perfume brands in meeting their objectives for improved profitability. • The American brand BeneFit Cosmetics intensified its profitable development, with very strong growth in both its country of origin and in Great Britain, where it again confirmed the success it has enjoyed since it entered the country in 2001. Highlights: • Parfums Christian Dior continued strong growth. This growth, particularly intense in the last quarter, was driven by the performance of the perfume J'adore, sales of which continue to

18 increase five years after it was introduced, by the remarkable success of its new beauty care products, particularly Capture R60/80TM launched in January 2003, and its make-up collections. • In 2003, Guerlain began to benefit from the reorganization of its business operations the previous year. The first half was marked by the launch of a light version of its best-seller Shalimar. The brand recorded a very dynamic end of year, thanks to the excellent results for its major new perfume L'Instant de Guerlain, and returned to profitability. • Parfums Givenchy continued to renovate its offerings. To follow up on the success of its new perfume Very Irresistible, a brand new line of make-up, Givenchy Le Make Up, is now being deployed worldwide. Launched at the end of 2003 exclusively in Japan, this new, sophisticated and innovative line has enjoyed a very promising start-up. • Parfums Kenzo confirmed its momentum through a year filled with developments: the reintroduction of l'Eau de Kenzo and the opening of a sales space in the Pont Neuf building in Paris in the first half, extension of the Flower line, and the successful roll-out of the new men's fragrance KenzoAir in the second half of the year. Outlook: • In 2004, the Perfumes and Cosmetics group has again set a goal to achieve greater-than-market growth and improved operational profitability. The full year performances of the perfumes launched in the fall of 2003 will help meet this challenge. Expansion in new high-growth territories like Russia, China and Korea, along with continued strong growth in Japan, a country with a very high potential, are also favorable factors. • Growth in sales will be driven by a number of innovations backed by substantial promotional investments. These innovations include: the deployment of the new Le Make Up line from Givenchy in March, the creation of a new women's perfume from Christian Dior and a new men's fragrance from Guerlain in September.

5. Watches and Jewelry • Net sales for the Watches and Jewelry totaled 502 million euros, down 9%. • At the end of a difficult year for the global watch market, the Watches and Jewelry group maintained its net sales at the 2002 level on a like for like basis. The recovery in sales beginning in the summer generated organic growth in sales of 7% in the final quarter. TAG Heuer, Montres Dior and Chaumet achieved double-digit growth during this period. • The unfavorable currency trend (weakness of the dollar and yen, increase in the Swiss franc) heavily contributed to the decline in operating income. • The industrial capacity of the Watch Workshops in La Chaux-de-Fonds was doubled to meet the strong demand for Dior and Louis Vuitton watches. • In order to refocus on its master brands, LVMH signed an agreement in December for the sale of Ebel to the Movado group. Highlights: • The group focused its resources in strategic countries and on priority actions within each brand. Marketing investments were maintained and a number of products were successfully launched. • TAG Heuer launched the multi-function Microtimer, the Chrono 2000 Aquagraph and the Formula 1, a collection of watches and sports chronographs accessible to young and very active customers. The Autavia strengthened the line of legendary classics. A privileged partner of the auto racing world, the brand also successfully invested in the world of golf in partnership with the world's best golfer, Tiger Woods, who is now collaborating in the development of some new watch models.

19 • Montres Dior, which develops its models with the studios of the couture house, has continued its double-digit growth for three years in the extremely competitive fashion timepiece market. In 2003, the collection Dior Admit it, the new Chris 47 and the D de Dior watch drove sales significantly. • The 2003 designs from Zenith, the Chronomaster Open which reveals the heart of the El Primero movement, and the Chronomaster Star designed for women, were well received by customers and retailers. The brand grew substantially in Asia and the United States. Outlook • In 2004, the Watches and Jewelry brands will continue their policy of innovation and targeted development, as well as their cost-cutting efforts. • At the Basle watch trade show in April 2004, TAG Heuer and Zenith will unveil major watch innovations. Montres Dior will introduce a men's line designed by Hedi Slimane, Artistic Director for the Dior Homme lines. • TAG Heuer and Montres Dior will continue their expansion in China and India.

6. Selective Retailing • Net sales revenues for the Selective Retailing group totaled 3,039 million euros, down 9%. Operating income was 106 million euros compared with 20 million euros in 2002. • DFS sales were down from 2002. After a very buoyant trend early in the year, tourist flows were impacted by the war in Iraq and, in particular, by the SARS epidemic which suspended travel to Asia in the second quarter. Despite a recovery at year end, business in 2003 was lower than in previous years. In this context, DFS intensified its efforts to improve productivity and reduce costs. By absorbing the negative impact of the decline in net sales, the savings on administrative costs and the renegotiation of concession costs to adjust them to lower traveler traffic generated a positive result, as was already the case in 2002. • Miami Cruiseline benefited from the growth in the cruise market and, thanks to improved logistics and visibility on ships, significantly increased its performance in sales and profitability. • Sephora posted an excellent year in 2003 and fully achieved its objectives: Sephora Europe continued to improve net sales revenues and profitability; the American activities continued double-digit growth in dollars on a constant store basis and, for the first year, recorded positive operating income and cash flows. The brand is now in a position to finance its expansion.

Highlights: • In January 2003, DFS opened a new Galleria in Singapore. The two stores recently opened at the Okinawa airport in Japan were expanded. DFS is also preparing to open a new Galleria in Okinawa in 2005. • Sephora opened twelve stores in Europe and ten in the United States, expanding its worldwide network to 500 stores at December 31, 2003 (418 in Europe, 82 in the United States). • In Europe, Sephora continued its strategy of selective external growth. The brand also strengthened its leadership position in Poland, in partnership with the oldest selective perfume chain in the country. In Russia, the first store was opened in Moscow in December, within a partnership that will allow Sephora to expand its presence in this new, promising territory in Eastern Europe. Finally, the introduction of the Sephora customer loyalty card in France was highly successful. This customer loyalty initiative was repeated in Poland at year-end 2003. • In the United States, Sephora was named “Retailer of the year” for Beauty products.

20 Outlook: • In 2004, DFS should benefit from the recovery in tourism, which is still fragile in an uncertain geopolitical context. The top priority is to return to a positive sales trend in the largest stores in Hawaii, Hong Kong, Singapore and Guam. • Sephora will continue to develop its model for profitable growth both in the US and in Europe. The new store rate is expected to accelerate slightly, with about 20 new stores in Europe and 15 in the United States.

III. RESULTS OF CHRISTIAN DIOR S.A. Christian Dior S.A.’s earnings consist primarily of dividend income related to its stake in LVMH less the interest expense incurred to finance the investment. Net financial income totaled 123 million euros compared to 118 million euros in 2002. It consists of 137 million euros in dividends received from Financière Jean Goujon, 27 million euros in net interest expense, and a write-back of 13 million euros on provisions on its treasury stock. The tax savings recorded under the fiscal consolidation program totaled 9 million euros. Net income was 127 million euros compared to 113 million euros in 2002.

Appropriation of earnings: Euros • Net income: 127,407,175.01 Plus • Retained earnings: 143,951,604.44 Total income available for distribution: 271,358,779.45 We are recommending the following dividend to shareholders: • a dividend of 0.87 euro per share, plus a tax credit of 0.435 euro 158,102,531.76 per share*, which is a gross compensation of 1.305 euros • Retained earnings 113,256,247.69 Total 271,358,779.45

(*) for individuals Since an interim dividend of 0.28 euros per share was paid on December 4, 2003, the balance of 0.59 euros with tax credit of 0.295 euros per share will be paid on May 19, 2004. Since the shares held by the company at the time this dividend is paid do not pay dividends, the amount corresponding to the unpaid dividend would be posted to retained earnings.

Distribution of dividends We remind you that the dividends paid for the last three years and the corresponding tax credit are as follows (*): in euros Net Dividend Tax Credit Gross Dividend 2002 0.82 0.41 1.23 2001 0.78 0.39 1.17 2000 0.78 0.39 1.17

(*) for individuals

21 IV. SHAREHOLDERS Pursuant to Article L 233-13 of the Commercial Code and the information received pursuant to Articles L 233-7 and L 233-12 of said Code, the following table identifies shareholders who, to the company’s knowledge, hold over 5% of the company’s capital or voting rights:

As of December 31, 2003 As of December 31, 2002 SHAREHOLDERS Number % of % of Number % of % of of shares capital voting rights of shares capital voting rights Groupe Arnault SAS (*) 124,645,910 68.59 70.99 126,083,710 69.38 72.20 41, avenue Montaigne 75008 PARIS

(*) Directly or indirectly.

As of December 31, 2003, the company had 363,454,096 euros in capital stock, represented by 181,727,048 shares with a par value of 2 euros per share. There were 13,045,837 shares with double voting rights. Pursuant to Articles L 255-208 and L 255-209, paragraph 1, of the Commercial Code, we are also reporting that: • During the past year, the company bought back 514,800 of its own shares at an average price of 30.56 euros. These share purchases were made in order to allot them to employees who would be exercising stock options granted by the company. Moreover, 7,000 shares initially acquired for the purpose of equalizing the stock price were also allocated to these options. At year end, the number of shares held and allocated to stock option plans, was 3,160,000 for a net value of 103,008,286.64 euros. The par value is 2 euros. These shares represented 1.74% of the capital stock. • At year end, the company held 518,220 of its own shares for a net value of 19,389,048.62 euros. These shares were bought back to equalize the stock price. The par value is 2 euros. These shares represent 0.28% of the capital stock. By law, these shares do not carry voting rights.

V. BOARD OF DIRECTORS Directors: We are asking the Shareholders’ Meeting to: • elect Messrs. Antoine Berhneim and Raymond Wibaux as directors for the term of three years.

22 VI. FINANCIAL AUTHORITY GRANTED TO THE BOARD OF DIRECTORS BY THE SHAREHOLDERS' MEETING

Authorization to act on the Stock Market The Combined Ordinary and Extraordinary Shareholders’ Meeting of May 15, 2003 authorized the Board of Directors to acquire the company’s stock up to a maximum of 0.5% of its capital stock, with a maximum unit purchase price set at 90 euros per share. At this year’s shareholders’ meeting, you are being asked to renew this authority. The stock purchases may be made exclusively based on market situations or to counter market trends in order to moderate stock price fluctuations. The total number of shares the company may acquire would be limited to 0.5% of the capital stock as of January 1, 2004, and the maximum purchase price would be 90 euros per share and the minimum selling price would be 20 euros.

VII. AMENDMENT TO THE BYLAWS, TO HARMONIZE THEM WITH THE PROVISIONS OF THE FINANCIAL SECURITY ACT The Financial Security Act of August 1, 2003 made several changes to the provisions of the Commercial Code governing joint stock companies (sociétés anonymes). As a result, we are recommending that you amend the bylaws of the company to harmonize them with the new provisions. The changes made deal with: • Identification of shareholders (Article 8); • Membership of the Board of Directors (Article 9 ); • Powers of the Chairman of the Board (Article 15 point 1); • Notice to the Auditors (Article 16); • The prerogatives of the Shareholders’ Meeting (Article 19). In addition, we are recommending that the minimum number of shares which a member of the Board must own be increased to 200 (Article 10 paragraph 1).

23 VIII. INFORMATION ON COMPENSATION AND BENEFITS PAID TO COMPANY OFFICERS

Pursuant to the provisions of Article L 225-102-1 of the Commercial Code, we are reporting to you the total compensation (1) and benefits of any kind paid by the company and its subsidiaries. The following payments were received during the past financial year: Mr. Bernard ARNAULT, Chairman: • Compensation: 1,818,768 euros • Directors’ fees: 111,719 euros • Benefits in kind: none Mr. Eric GUERLAIN, Vice Chairman and Director: • Compensation: none • Directors’ fees: 9,263 euros • Benefits in kind: none Mr. Antoine BERNHEIM, Director: • Compensation: none • Directors’ fees: 135,713 euros • Benefits in kind: none Mr. Denis DALIBOT, Director: • Compensation: 352,318 euros • Directors’ fees: 58,860 euros • Benefits in kind: automobile Mr. Christian de LABRIFFE, Director: • Compensation: none • Directors’ fees: 9,263 euros • Benefits in kind: none Mr. Pierre GODE, Director: • Compensation: 2,301,226 euros • Directors’ fees: 66,548 euros • Benefits in kind: automobile Mr. Raymond WIBAUX, Director: • Compensation: none • Directors’ fees: 9,263 euros • Benefits in kind: none Mr. Sidney TOLEDANO, General Manager, non-director: • Compensation: 443,076 euros • Directors’ fees: none • Benefits in kind: automobile

(1) Amount received after deduction of payroll taxes, the CSG and the CRDS taxes at the flat rate of 5% and the income tax at the French marginal rate of 48.09%. Gross compensation represented approximately double the amounts mentioned.

24 IX. LIST OF POSITIONS OR OFFICES HELD IN ALL COMPANIES BY THE CORPORATE OFFICERS AND DIRECTORS Pursuant to Article L 225-102-1 of the Commercial Code, below is a report on all positions and offices held in any company by each of the company’s officers and directors during the past financial year as well as for the directors whose terms expire at the close of this shareholders’ meeting, and the list of offices and positions they have held over the five past years.

CHAIRMAN OF THE BOARD OF DIRECTORS Mr. Bernard ARNAULT - Born March 5, 1949 Date of first election: March 20, 1985 Term expires: Annual Shareholders’ Meeting called to approve the financial statements for fiscal 2004. Chairman and Chief Executive Officer of: • LVMH Moët Hennessy Louis Vuitton, SA, France • Montaigne Participations et Gestion, SA, France Chairman of the Board of Directors of Société Civile du Cheval Blanc, France. Chairman of Groupe Arnault SAS, France. Director of: • Christian Dior Couture, SA, France • LVMH Moët Hennessy Louis Vuitton (Japan) KK., Japan • Moët Hennessy Inc., United States Member of the Supervisory Board of Métropole Télévision "M6" , SA, France. Permanent representative of Montaigne Participations & Gestion, SA, Director of Financière Agache, France. Legal representative of Montaigne Participations et Gestion, SA, Chairman of Gasa Développement, SAS, France and of Financière Saint Nivard, SAS, France. Member of the Supervisory Board of Financière Jean Goujon, SAS, France.

CHIEF EXECUTIVE OFFICER (non-director) Mr. Sidney TOLEDANO - Born July 25, 1951 Date of first election: September 11, 2002 Term expires: Annual Shareholders’ Meeting called to approve the financial statements for fiscal 2004. Chairman and Chief Executive Officer of Christian Dior Couture, SA, France. Chairman of: • Fendi France, France • Bopel, Italy • Christian Dior Inc., United States • Christian Dior Italia S.r.l., Italy • Christian Dior Saipan, Saipan • Les Jardins d'Avron LLC, United States • Mardi S.p.a., Italy • Lucilla S.r.l., Italy.

25 Sole Director of Christian Dior Puerto Banus, Spain. Director of: • John Galliano, SA, France Director of: • Christian Dior Australia Pty Ltd, Australia • Christian Dior Couture Korea, Korea • Christian Dior Guam Ltd, Guam • Christian Dior Far East Ltd, China • Christian Dior Fashion (Malaysia) Sdn. Bhd., Malaysia • Christian Dior Hong Kong Ltd, China • Christian Dior KK, Japan • Christian Dior New Zealand, New Zealand • Christian Dior Singapore Pte, Singapore • Christian Dior Taiwan Ltd, Taiwan • Christian Dior UK Limited, United Kingdom • Fendi Adele S.r.l., Italy • Fendi Industria S.r.l., Italy • Fendi Italie S.r.l., Italy • Fendi SA, Luxembourg • Fendi S.r.l., Italy. Manager of: • CD Espanola, Spain • Christian Dior GmbH, Germany. Permanent representative of: • Christian Dior Couture, SA, Chairman of Les Jardins d’Avron, SAS, France • Christian Dior Couture, SA, Director of Christian Dior Belgium.

VICE CHAIRMAN AND DIRECTOR Mr. Eric GUERLAIN - Born May 2, 1940 Date of first election: June 29, 1994 Term expires: Annual Shareholders’ Meeting called to approve the financial statements for fiscal 2005. Chairman of the Board of Directors of Hydroélectrique d’Energie, France. Permanent representative of LVMH Fashion Group, Director of Guerlain SA, France.

DIRECTOR Mr. Denis DALIBOT - Born November 15, 1945 Date of first election: May 17, 2000 Term expires: Annual Shareholders’ Meeting called to approve the financial statements for fiscal 2005. Director – Chief Operating Officer of Financière Agache, SA, France.

26 Chairman of: • Agache Développement SAS, France • Europatweb, SA, France • FA Investissements, SAS, France • Montaigne Finance, SAS, France • Sifanor, SAS, France. Director of: • Bon Marché International, SA, France • Christian Dior Couture, SA, France Chief Financial Officer of Christian Dior, France. Executive Director of Omnium Lyonnais d’Etudes, SA, France. Permanent representative of: • Financière Agache, Director of Raspail Investissements, SA, France • Ufipar, Director of Le Jardin d’Acclimatation, SA, France • Christian Dior Couture, Director of Ateliers AS, SA, France. Manager of: • Kléber Participations, SARL, France • Montaigne Investissements, France • Groupement Foncier Agricole Dalibot, France.

DIRECTOR Mr. Christian de LABRIFFE - Born March 13, 1947 Date of first election: May 14, 1986 Term expires: Annual Shareholders’ Meeting called to approve the financial statements for fiscal 2005. Chairman of Transaction R, France. Managing Partner of Rothschild & Cie Banque, France. Managing Partner of Rothschild Gestion, France. Managing Partner of Rothschild & Cie, France. Member of the Supervisory Board of Financière Rabelais, France. Director of: • Christian Dior Couture, SA, France • Holding Financier Jean Goujon, France • Montaigne Rabelais, France • Paris Orléans, France • Rothschild Conseil International, France.

DIRECTOR Mr. Raymond WIBAUX - Born July 17, 1938 Date of first election: June 11, 1993 Term expires: Annual Shareholders’ Meeting called to approve the financial statements for fiscal 2003.

27 CURRENT DUTIES AND POSITIONS Chairman of the Board of Directors of Financière Joire Pajot Martin, France. Director of Participex, France. Permanent representative of: • Financière Joire Pajot Martin, Director of E.T.O., France • Stratefi Belgique, Director of Compagnie Textile et Financière, France

PREVIOUS DUTIES AND POSITIONS Director of: • CIPM (Consortium d'Investissement et de Placements Mobiliers), France • CIPM International, France • Cristal Finance Associés, France • Montaigne Participations & Gestion, SA, France • Recydem, France • Mosane, Belgium.

DIRECTOR Mr. Antoine BERNHEIM - Born September 4, 1924 Date of first election: May 14, 2001 Term expires: Annual Shareholders’ Meeting called to approve the financial statements for fiscal 2003.

CURRENT DUTIES AND POSITIONS Partner of Lazard LLC, United States. Chairman of the Board of Directors of Generali, Italy. Vice-Chairman of Bolloré Investissement, France. Director of: • Bolloré France, SA, France • Christian Dior Couture, SA, France • Ciments Français, France • Generali France Holding, France • LVMH Moët Hennessy Louis Vuitton, SA, France • Rue Impériale, France • AMB Generali Holding AG, Germany • BSI, Switzerland • Generali Holding Vienna AG, Austria • Intesa S.p.a., Italy • Mediobanca, Italy. Member of the Supervisory Board of Eurazeo, France.

PREVIOUS DUTIES AND POSITIONS Managing Partner of companies: • Maison Lazard et Cie, France • Partena, France.

28 Chairman of: • La France Participations et Gestion, France • Euralux, France • Generali, Italy. Vice-Chairman and Chief Executive Officer of Eurafrance, France. Vice-Chairman of Mediobanca, Italy. Director of: • Albatros Investissement, France • Aon France, France • Financière Agache, SA, France • Eridania-Beghin-Say, France • Financière et Industrielle Gaz et Eaux, France • La France Vie, France • Société Immobilière Marseillaise, France. Member of the Supervisory Board of Axa, France. Permanent representative of: • Eurafrance, Director of Financière et Industrielle Gaz et Eaux, France • Compagnie Financière Auxiliaire, Director of Bolloré Technologies, France • Compagnie Centrale de Placements, Director of Groupe André, France • La France Participations et Gestion, Director of Christian Dior, SA, France • La France Participations et Gestion, Director of Christian Dior Couture, SA, France • La France Participations et Gestion, Director of Financière Agache, SA, France.

DIRECTOR Mr. Pierre GODE - Born December 4, 1944 Date of first election: May 14, 2001 Term expires: Annual Shareholders’ Meeting called to approve the financial statements for fiscal 2004. Chairman and Chief Executive Officer of: • Financière Agache, SA, France • Raspail Investissements, SA, France. Member of the Board of Directors – Chief Executive Officer of LVMH Fashion Group, SA, France. Director – Acting Managing Director of Le Bon Marché, Maison Aristide Boucicaut, France. Executive Director of Groupe Arnault, SAS, France. Director of: • Christian Dior Couture, SA, France • Le Bon Marché International, SA, France • LVMH Moët Hennessy Louis Vuitton, SA, France

29 • Montaigne Participations et Gestion, SA, France • SA du Château d’Yquem, France • Société Civile du Cheval Blanc, France • Christian Dior Inc., United States • Fendi SA, Luxembourg • LVMH Moët Hennessy Louis Vuitton Inc., United States • LVMH Moët Hennessy Louis Vuitton (Japan) KK., Japan • LVMH Services Limited, Great Britain. Member of the Board of Directors of LVMH Services, GIE, France. Permanent representative of: • Financière Agache, Director of Parfums Christian Dior, SA, France • Le Bon Marché, Maison Aristide Boucicaut, Director of Franck & Fils, SA, France • Louis Vuitton Malletier, Director of Belle Jardinière, SA, France • LVMH Moët Hennessy Louis Vuitton, Director of DI Group, SA, France. Chairman of Financière Jean Goujon, SAS, France. Legal representative of Financière Agache, SA, Gérant de Sevrilux, SNC, France. Member of the Executive Committee of Sofidiv, SAS, France. Member of the Supervisory Board of Montaigne Finance, SAS, France. Manager of Redeg, SARL, France.

30 X. STOCK OPTION PLANS

STOCK OPTION PLANS • Options granted by the Christian Dior parent company Eight stock option plans were in effect at December 31, 2003. These plans have a term of ten years; under the plans, the options may be exercised after a period of three or five years after the opening date of the plans. In some circumstances, notably upon retirement from the company, this time requirement will be waived. Each of these plans stipulates that each option gives the right to buy one share.

STOCK OPTION PURCHASE PLANS:

Number Number of options Shareholders’ Number No. of Inc. Top Exercise of options in force ➂ meeting Plan of options bene- Corporate 10 price exercised authorization opened granted ➀ ficiaries Officers employees (EUR) ➁➂ in 2003 ➂ 31/12/2003 31/01/2004

05/30/1996 10/14/1996 94,600 21 40,000 50,500 25.95 17,200 265,200 265,200 05/30/1996 05/29/1997 97,900 22 50,000 43,000 32.01 17,200 372,400 372,400 05/30/1996 11/03/1998 98,400 23 65,000 28,200 18.29 96,500 295,100 295,100 05/30/1996 01/26/1999 89,500 14 50,000 38,000 25.36 – 358,000 356,000 05/17/2000 02/15/2000 100,200 20 65,000 31,000 56.70 – 400,800 400,800 05/14/2001 02/21/2001 437,500 17 308,000 121,000 45.95 – 437,500 437,500 05/14/2001 02/18/2002 504,000 24 310,000 153,000 33.53 – 504,000 504,000 05/14/2001 02/18/2003 527,000 25 350,000 143,000 29.04 – 527,000 527,000

➀ Number of options at the opening date of the plan, not restated for adjustment related to the one-for-four stock split of July 2000. ➁ Exercise prices prior to 1999 result from the conversion into euros of data originally denominated in francs. ➂ Adjusted because of the operation described in ➀.

• Options granted by its subsidiaries

STOCK OPTION PLANS FOR EXISTING SHARES GRANTED BY LVMH:

Number Number of options Shareholders’ Number No. of Inc. Top Exercise of options in force ➁ meeting Plan of options bene- corporate 10 price exercised authorization opened granted ➀ ficiaries officers employees (EUR) ➁ in 2003 ➁ 31/12/2003 31/01/2004

05/15/2003 01/21/2004 2,747,475 907 930,000 470,000 55.70 ––2,747,475

31 STOCK OPTION PLANS FOR EXISTING SHARES GRANTED BY LVMH:

Number Number of options Shareholders’ Number No. of Inc. Top Exercise of options in force ➁ meeting Plan of options bene- corporate 10 price exercised authorization opened granted ➀ ficiaries officers employees (EUR) ➁ in 2003 ➁ 31/12/2003 31/01/2004 05/25/1992 03/17/1993 49,681 548 21,000 5,850 15.40 56,017 –– 05/25/1992 03/16/1994 139,031 364 118,300 5,800 17.84 17,845 1,576,835 – 05/25/1992 06/17/1994 1,250 1 – 1,250 17.68 7,565 –– 05/25/1992 03/22/1995 256,903 395 96,000 57,500 20.89 14,350 417,520 415,485 06/08/1995 05/30/1996 233,199 297 105,000 46,500 34.15 46,785 714,935 710,835 06/08/1995 05/29/1997 233,040 319 97,500 46,000 37.50 40,480 1,028,740 983,530 06/08/1995 01/29/1998 269,130 346 97,500 65,500 25.92 251,530 1,014,315 968,340 06/08/1995 03/16/1998 15,800 4 – 15,800 31.25 16,500 70,400 70,400 06/08/1995 01/20/1999 320,059 364 97,000 99,000 32.10 26,275 1,657,760 1,645,730 06/08/1995 09/16/1999 44,000 9 5,000 39,000 54.65 – 220,000 210,000 06/08/1995 01/19/2000 376,110 552 122,500 81,000 80.10 – 1,879,550 1,879,550 05/17/2000 01/23/2001 2,649,075 786 987,500 445,000 65.12 – 2,606,075 2,604,475 05/17/2000 03/06/2001 40,000 1 – 40,000 63.53 – 40,000 40,000 05/17/2000 05/14/2001 1,105,877 44,669 – ➃ 66.00 – 1,105,877 1,105,877 05/17/2000 05/14/2001 552,500 4 450,000 102,500 61.77 – 552,500 552,500 05/17/2000 09/12/2001 50,000 1 – 50,000 52.48 – 50,000 50,000 05/17/2000 01/22/2002 3,284,100 993 1,215,000 505,000 43.30 ➂ – 3,276,500 3,266,500 05/17/2000 05/15/2002 8,560 2 – 8,560 54.83 – 8,560 8,560 05/17/2000 01/22/2003 3,213,725 979 1,220,000 495,000 37.00 ➂ – 3,213,725 3,205,025

➀ Number of options on the opening date of the plan, not restated for adjustments related to the bonus allotments of July 1994 and June 1999 and the five-for-one stock split of March 1994 and July 2000. ➁ Adjusted because of the operations described in ➀. ➂ The exercise price for Italian residents for the plans opened on January 22, 2002 and January 22, 2003 were 45.70 € and 38.73 € respectively. ➃ 25 options were granted to each beneficiary.

32 • Options granted to each corporate officer by the company and any Group company:

Exercise Expiration Grantor Date Number price date Beneficiaries company of plan of options (euros) of plan B. Arnault Christian Dior 02/18/2003 220,000 29.04 02/17/2013 LVMH 01/22/2003 600,000 37.00 01/21/2013 D. Dalibot Christian Dior 02/18/2003 25,000 29.04 02/17/2013 P. Godé Christian Dior 02/18/2003 65,000 29.04 02/17/2013 LVMH 01/22/2003 200,000 37.00 01/21/2013 S. Toledano Christian Dior 02/18/2003 40,000 29.04 02/17/2013

• Options exercised by each corporate officer during the financial year:

Exercise price Beneficiaries Grantor company Number of shares (euros) D. Dalibot Christian Dior 4,000 25.95 D. Dalibot Christian Dior 8,000 32.01 D. Dalibot Christian Dior 14,000 18.29 P. Godé Christian Dior 60,000 18.29 P. Godé LVMH 47,000 25.92

• Options granted during the financial year by the company or any Group company to the ten non-officer/director employees holding the largest number of options:

Exercise price Grantor company Date of plans Total number of options (euros) Christian Dior 02/18/2003 143,000 29.04 LVMH 01/22/2003 495,000 37.00

33 • Options granted during the financial year by the company or any Group company to the ten non-officer/director employees holding the largest number of options: Weighted average Grantor company Date of plans Total number of options exercise price (euros) LVMH 03/17/1993 9,075 15.40 LVMH 06/17/1994 7,565 17.84 LVMH 05/30/1996 15,200 34.15 LVMH 05/29/1997 11,000 37.50 LVMH 01/29/1998 135,550 25.92 LVMH 03/16/1998 16,500 31.25 LVMH 01/20/1999 5,500 32.10 Christian Dior 10/14/1996 13,200 25.95 Christian Dior 05/29/1997 9,200 32.01 Christian Dior 11/03/1998 22,500 18.29

34 XI. ENVIRONMENTAL IMPACTS OF THE BUSINESS

1. Scope of reporting of environmental indicators

The reporting of environmental indicators, established in 1999 in a few companies, was expanded again in 2003. This reporting now covers: • Companies with production operations (Christian Dior Couture, Wines & Spirits, Perfumes & Cosmetics, Fashion & Leather Goods, Watches & Jewelry): the production sites and warehouses owned and operated by these companies; • Businesses without production operations (Selective Retailing): the French boutiques of Sephora, as well as La Samaritaine and Le Bon Marché; • Principal administrative sites located in France. The scope of the reporting changed in 2003 as a result of the following: • Sale of certain brands or businesses, including Canard Duchêne and Cava Spain; • Consolidation of the French administrative sites of the Holding company, Sephora, Hennessy, Chandon Estates, Moët & Chandon, Veuve Clicquot Ponsardin, Louis Vuitton Malletier, Celine, Guerlain, Parfums Givenchy; • Improved reporting, which allowed the inclusion of sites not included in 2002: Château d’Yquem, three Loewe sites, two subsidiaries of Hennessy and Rossimoda. In 2003, reporting was performed on 380 sites (306 sites in 2002). Only 20 sites are still excluded; however, their impacts on the environment were not significant in terms of the impacts at the Group level. The reporting does not include: • Environmental impacts (water, energy, etc.) of the administrative buildings not mentioned above, and the boutiques operated directly or under a franchise in the Perfumes & Cosmetics and Fashion & Leather Goods business groups; • Effects of the vehicle fleets owned by the Group and used for employee travel; • Energy use related to the shipping of merchandise performed exclusively by outside service providers. Pursuant to Decree No. 2002-221 of February 20, 2002, the “New Economic Regulations Act”, the following sections indicate only the nature and magnitude of the relevant significant impacts of the business.

2. Consumption of water resources, raw materials and energy Water consumption: Water consumption is analyzed on the basis of the following uses: •“Process” needs: the use of water for cleaning operations (vats, products, machinery, floors), air conditioning, employees, etc. The water used for these purposes generates waste water. • Agricultural needs: the use of water for vine irrigation outside France, as irrigation is not used in France. In this context, water is taken directly from the natural environment to be used for irrigation. Water use from one year to the next is closely linked to weather changes.

35 (in m3) 2003 2002 % change Process needs 1,551,420 1,784,003 (13) Agricultural needs (vine irrigation) 995,847 560,626 44 (*)

(*) Increase due to the inclusion in 2003 of the consumption from: Cape Mentelle, Cloudy Bay, Newton, Mountadam, Bodega Chandon Argentina.

The consumption of water used for “process” needs declined by 13% from 2002 to 2003, the result of many water-saving measures adopted: • Le Bon Marché and La Samaritaine replaced a waste water air conditioner with a closed- circuit air conditioner; La Samaritaine also installed a new automated water management system; in total, more than 100,000 m3 of water were saved. • In the Champagne brands and at Hennessy, the technical optimizations (closed-system bottle washers) and the operators' good practices continued to reap benefits in 2003: they led to a 26% reduction in water use.

(in m3) Process needs % change Christian Dior Couture 11,515 (4) Wines and Spirits 520,036 (26) Perfumes and Cosmetics 438,368 (6) Fashion and Leather Goods 106,428 4 Watches and Jewelry 24,642 4 Selective Retailing 428,278 (24) Holding 22,152 ND Total 1,551,419 (13)

The use of water for the irrigation of vineyards outside France is absolutely necessary for the life of the vines in California, Argentina, Australia and New Zealand. This practice is closely controlled by local authorities which issue permits for taking water, and the Group has also adopted measures to limit water use: • Rain water recovery at Domain Chandon California, Domain Chandon Australia, Mountadam, Bodega Chandon Argentina; reuse of retreated waste water at Domain Chandon Carneros, California; recovery of run-off through the creation of artificial lakes in Newton; • Implementation of protocols to measure and specify water needs: analyses of soil and leaf humidity, visual inspections of the vines, adaptation of the supply based on the needs of each parcel (Mountadam, Domain Chandon Australia); • Generalized use of drip irrigation: between 73 and 100% of the vineyard areas are now covered by this practice; • Weather forecasting to ensure optimal use of irrigation (weather stations at Domain Chandon California); • Periodic verifications of the irrigation systems to avoid leaks; • Use of “low-flow irrigation” which both limits water use and improves the quality of the grapes, since the size of the vine concentrates aromas and color.

36 Energy consumption: Energy consumption refers to the total energy sources used internally (i.e., for which combustion takes place on the Group's site: fuel for generators, butane, propane, natural gas) and externally (for which combustion takes place outside the site: electricity, steam). The Group's energy consumption declined by 7% in 2003.

Energy consumption in MWh 2003 2002 % change Christian Dior Couture 2,946 3,178 (7) Wines & Spirits 101,110 103,208 (2) Perfumes & Cosmetics 104,707 94,177 10 Fashion & Leather Goods 54,120 93,566 (74) Watches & Jewelry 8,771 8,679 1 Selective Retailing 87,519 88,025 (1) Holding 5,185 ND ND Total 364,358 390,833 (7)

For 2003, the distribution of energy resources was as follows: in MWh Electricity Natural gas Fuel oil Other Christian Dior Couture 2,259 –– 687 Wines & Spirits 45,189 40,436 12,018 3,466 Perfumes & Cosmetics 45,676 49,575 9,456 0 Fashion & Leather Goods 30,617 17,676 1,449 4,379 Watches & Jewelry 3,067 2,940 2,764 0 Selective Retailing 71,157 6,343 114 9,905 Holding 4,575 0 0 610 Total 202,540 116,970 25,801 19,047

In 2003, Veuve Clicquot Ponsardin launched a project to rationalize energy use on its principal production site. The first improvement initiatives were to: • Combine the boilers to avoid installed excess capacities and improve regulation; • Decommission obsolete boilers; • Replace fuel oil facilities with natural gas facilities. In 2003, two out of three fuel oil boilers were decommissioned, which was offset by reconsolidation into one of two principal boilers, recovery of the heat from combustion gases, and the addition of a natural gas boiler. The gains in energy use expected are about 25%.

37 Consumption of raw materials: The criterion used to define consumption of raw materials is the quantity in tons of packaging used; the table below shows consumption by type of packaging in 2003:

Packaging placed Paper – Other packaging (in tons) on the market Glass corrugated Plastics Metal materials Christian Dior Couture 202 – 200 2 –– Wines and Spirits 106,113 95,111 9,437 248 640 677 Perfumes and Cosmetics 18,988 8,538 3,681 4,960 1,128 681 Fashion and Leather Goods 2,533 – 2,530 3 –– Watches and Jewelry 214 1 147 16 9 42 Selective Retailing 576 36 423 117 –– Total 128,626 103,686 16,418 5,346 1,777 1,400

Because of the diversity of the Group's operations, the common criterion used to measure the consumption of raw materials is, in effect, the quantity of primary and secondary packaging placed on the market to be used by consumers: • Christian Dior Couture: boutique bags, sacks, boxes, etc. • Wines & Spirits: bottles, cardboard, capsules, etc. • Perfumes & Cosmetics : flask, box, etc. • Fashion & Leather Goods: boutique bags, sacks, boxes, etc. • Watches & Jewelry: packaging for boxes and cases, etc. • Selective Retailing: boutique bags, envelopes, boxes, etc. For Sephora, the figures include all packaging of Sephora brand products sent to consumers throughout the world. Packaging used for shipping is excluded from this analysis.

3. Land use conditions, air, water and ground emissions that seriously impact the environment

3.1 Land use Soil pollution related to former industrial facilities (production of Cognac and Champagne, manufacture of trunks) is not significant. The most recent production sites are generally established on former agricultural land with no historical pollution. Finally, the production activities of the Group’s companies make little use of the land, beyond grape growing. The practice of integrated viticulture, a method that combines technological advances with a respect for traditional methods, covers all stages in the life of a vineyard. In use for several years by the Wines & Spirits business group, it was expanded this year. In addition to its own vineyards, which are all integrated, Veuve Clicquot continued to partner with its grape suppliers in this process: for four years, all suppliers who want to can find the technical assistance necessary from an agronomy engineer, hired full-time to act as a relay between the Champenoises technical authorities and the vineyards working with Veuve Clicquot. Thus, as was the case last year, 80% of the vineyards are covered. In 2002 and 2003, a research project was conducted in partnership with INSEAD designed to evaluate the contribution of the “sustainable development” approach to the company's development strategy. Focused on the grape supply, this project resulted in the implementation of an improvement plan based on three factors: innovation, communication and environment.

38 3.2 Greenhouse gas emissions Given the Group's operations, the only significant environmental emissions are greenhouse gas emissions.

Estimated greenhouse gas emissions in tons of equivalent CO2 (carbon dioxide) correspond to the emissions from the energy consumption sites, as defined in paragraph 2. They include direct emissions (combustion on site) and indirect emissions (from the production of electricity used by the sites). Like the reduction in energy consumption from 2002, these greenhouse gas emissions declined by 10%.

CO2 emissions % change Direct CO2 Indirect CO2 in 2003 over 2002 emissions emissions Christian Dior Couture 323 (11) – 323 Wines and Spirits 19,477 (4) 12,160 7,317 Perfumes and Cosmetics 15,768 11 11,963 3,805 Fashion and Leather Goods 11,012 (63) 4,946 6,066 Watches and Jewelry 1,792 16 1,329 463 Selective Retailing 8,817 (6) 1,303 7,514 Holding 455 ND – 455 Total 57,644 (10) 31,701 25,943

In the framework of its project to rationalize boilers, Veuve Clicquot Ponsardin is projecting a 10% reduction in direct greenhouse gas emissions in 2 years, or 262 tons of equivalent CO2 less than currently. In an effort to improve knowledge of its environmental impact, Hennessy has established a protocol to measure the greenhouse gas emissions of its distillery boilers. Above and beyond any regulatory requirement, this voluntary approach will provide a better description of the boiler discharges and, based on the results, a definition of vectors for improvement. Hennessy has continued to focus on the shipping of its products by ship and by rail, a shipping method that emits 1/85th of the greenhouse gases generated by aircraft: 90% in kilometer tons of the Hennessy products were shipped by this method. Louis Vuitton Malletier launched two major initiatives to reduce the environmental impact of product shipments: • Shipping rather than air transport. At year-end 2003, 30% of the volume of leather products were shipped by sea; the objective is to reach at least 50% by the end of 2004. • Combined rail/road shipping for the link between the Barbera workshop in Spain and the logistics center in Cergy. This method generated a reduction of 105,400 tons of CO2 in comparison with road transport over the year.

3.3 Water emissions The Group's operations have little impact on water quality. The only emissions that may be considered are water discharges of substances contributing to eutrophication by Wines and Spirits and Perfumes and Cosmetics. Eutrophication is the excessive proliferation of algae and aquatic plants due to an overload of nutritive elements into the water (particularly phosphorus), resulting in reduced oxygenation of the water, which is harmful to the environment. The parameter used is the chemical oxygen demand (COD), calculated after treatment of the effluents at company-owned stations or at outside stations with which the sites have agreements. The following operations are considered to be treatment: common effluent disposal, private effluent disposal (aeration tank), land application.

39 (tons/year) COD after treatment Wines & Spirits 51.0 Perfumes & Cosmetics 33.3 Total 84.3

At the Guerlain site in Chartres, an effluent treatment station was built and commissioned in 2003. It consists of a homogenization and biological treatment basin followed by a methanization mechanism that provides a COD purification rate greater than 90%. Château d’Yquem has installed a new treatment station for its winemaking and waste water effluent.

3.4 Waste The efforts of the Group companies in waste sorting and recovery continued: on the average, 82% of the wastes were recycled, up from 72% in 2002. Recycled wastes are wastes for which the final destination is one of the following: reuse (use of waste for the same purpose for which the product was initially designed); recycling (direct reintroduction of waste into the production cycle from which it came as total or partial replacement of a unworked raw material); incineration with energy recovery, which means recover of the energy resulting from the combustion of the waste in the form of electricity or heat. The term recycling also includes organic recovery which consists of controlled land application of wastes composed of organic material in order to fertilize soils.

Hazardous Incinerated Waste produced wastes (*) Reused Recycled with recovery Total recovered (tons) (tons) (%) (%) (%) (%) Christian Dior Couture 154 – – 52 34 86 Wines and Spirits 13,958 130 14 76 1 91 Perfumes and Cosmetics 8,574 574 (**) 1 35 42 78 Fashion and Leather Goods 3,704 47 1 32 22 55 Watches and Jewelry 159 9 – 3 72 75 Selective Retailing 4,452 15 – 33 53 86 Holding 2 –– 100 – 100 Total (tons) 31,003 775

(*) wastes that require sorting and treatment separate from so-called “household” waste (cardboard, plastics, wood, paper, etc.). (**) Some products, removed from production, are treated in the hazardous waste system to avoid any violation and are therefore classified as such.

4. Measures taken to limit harm to the ecological balance, the natural environment, and protected animal and plant species The Fashion & Leather Goods activities have established procedures to reinforce compliance with the CITES international convention. This convention, through a system of import and export permits, fights overexploitation resulting from international trade in certain endangered animal and plant species.

40 In the Perfumes and Cosmetics branch, the laboratories question their partners about the biodiversity and bioavailability of each new plant studied. In their operations, the companies in the business group are committed to not using plants that are protected, rare or endangered, but primarily plants that are commonly used or cultivated specifically for their needs.

5. Existence within the Group of environmental departments to train and inform employees about the environment, resources devoted to reducing risks for the environment, and an organization established to deal with pollution accidents. In 1992, LVMH created its environmental department and Bernard Arnault confirmed its commitment in 2001 by signing the “Environmental Charter”. This Charter asks each Brand of the Group undertake to implement an effective environmental management system, that it reflect collectively on the environmental challenges related to its products, manage risks, and use the best environmental practices. In 2003, Bernard Arnault signed the United Nations Global Pact. This initiative launched by UN Secretary General Kofi Annan commits signatories to the application and promotion of nine principles of human rights, labor and the environment. The Group's environmental department, which reports to the Chief Financial Officer, a member of the executive committee and, since 2003, the Vice-President for the Environment, and the Vice President for general services at Christian Dior Couture are responsible for: • Directing the environmental policy of the Group’s companies, based on the LVMH Charter (cf. paragraph 6), • Providing regulatory and technical oversight, • Creating management tools, • Helping the companies to prevent risks, • Training and increasing employee awareness at every hierarchical level, • Defining and consolidating the environmental indicators, • Working with the various parties involved (associations, rating agencies, public authorities, etc.). The environmental agents of the companies of the Group meet within the “LVMH Environmental Commission” led by the Group's Department of the Environment. They have quarterly meetings and communicate by a Group Environmental Intranet accessible to everyone. A bilingual version of this Intranet was developed in 2003. Last year, the companies in almost all business groups expanded their programs to train and increase employee awareness. These programs increased by 43% in number of hours, totaling 8,359 hours in 2003. In 2003, all employees of Hennessy, Moët & Chandon and Veuve Clicquot Ponsardin received an environmental awareness guide entitled “For the environment and the future”, prepared by the Environmental Commission. This guide lists the “green” actions to be performed at home and in the workplace to limit everyone's impact on the environment: energy savings, waste sorting, limit on the use of polluting transportation (aircraft and trucks), reduction in noise. For example, Moët & Chandon organized programs to increase environmental awareness for 563 persons, all positions and departments combined (Marketing, Human Resources, Operations, Administration, etc.). With a total of more than 1,700 hours in 2003, they were part of an effort to increase the awareness of all Moët & Chandon employees, which continued from 2002 to early 2004.

41 In addition, the sustainable development week from June 2-6 2003 was an opportunity for a number of environmental awareness campaigns in the Group: • Holding company: environmental awareness sessions on the themes: “impact of the Group's products on the environment” and “the environment in the Group's products”; • Moët & Chandon: displays, conferences, communications; • Parfums Christian Dior: games-competition on the Saint Jean de Braye site; • Parfums Kenzo : communication on the environment on the Intranet. At the logistics platform for Fashion and Leather Goods, a variety of compliance projects were completed to hold water to fight fires. The principal Moët & Chandon fermenting room built a retention system to prevent the direct discharge of waste water into community networks in the event of a leak or accidental spill. At the Beauvais production site of Parfums Givenchy, the unloading zone was also placed in a retention area and a deoiling tank was installed for the parking area. In the environmental area, the Group also agrees to: • Apply a precautionary approach to deal with problems affecting the environment; • Undertake initiatives to promote greater environmental responsibility; • Encourage the development and the distribution of environmentally friendly technologies.

6. Evaluation or certification approaches Each company must be locally responsible and must, pursuant to the LVMH Environmental Charter, develop and implement its environmental management system, notably by defining its own environmental policy and by setting environmental objectives (1). Each company has available the LVMH self-evaluation guide and can, if it wishes, have its system ISO 14001 or EMAS certified. In 1998, Hennessy was the first company in the world to earn this distinction in the Wines and Spirits sector, which has been renewed since then and is valid for all its sites. In December 2003, the Louis Vuitton Malletier workshop in Barbera, Spain earned ISO 14001 certification, as did all sites of the Krug and Veuve Clicquot Ponsardin companies in February 2004. Since fiscal year 2002, the annual environmental reporting has been audited by the Environmental and Sustainable Development Department of Ernst & Young.

7. Measures taken to ensure compliance of operations with legislative and regulatory provisions To ensure this follow-up, the Group’s companies are regularly audited, whether by outside third parties, insurers, or by internal auditors, which allows them to keep their plan up to date. In 2003, 20 environmental audits were conducted on the sites, which is 7 more than the previous year. An audit corresponds to a control performed on one or more sites of the same company on all environmental issues that may be present on the site: waste, water, energy and environmental management.

(1) See the results for the 2003 objectives and the 2004 objectives in the 2004 LVMH annual report.

42 This figure does not include the many compliance audits that may deal with a specific regulatory or environmental issue—waste sorting for example—conducted periodically by the Group companies on their sites. Since 2003, these audits have been supplemented by a review of environmental regulatory compliance by insurance companies, which included an environmental element during fire engineering inspections on the sites of Group companies; about 30 inspections were conducted in 2003. The principal measures to achieve compliance with environmental legislation and regulations in 2003 were: • Construction of an effluent treatment station on the Guerlain Chartres site; • Construction of a retention system for the fermentation room at Moët & Chandon to prevent direct discharge of waste water into community water networks in the event of a leak or accidental spill.

8. Expenditures made to prevent environmental impact of the business Environmental expenditure items were recognized in accordance with the recommendations of the opinion of the National Accounting Board (CNC). Operating expenses and investments were reported for each of the following items: • Protection of the air and climate; • Management of waste water; • Waste management; • Protection and cleanup of the soil, water tables and surface water; • Battle against noise and vibrations; • Protection of biodiversity and landscape; • Protection against radiation; • Research and development; • Other environmental activities. In 2003, the expenditures related to environmental protection broke down as follows: • Operating expenses: 5.3 million euros • Capital expenditures: 2.3 million euros.

9. Amount of the provisions and guarantees for risks and indemnities paid during the year pursuant to a court judgment

The amount of 1.1 million euros was provisioned in 2003 for environmental risks for the cleanup of two historical industrial sites. No indemnity was paid under a court ruling on environmental aspects.

10. Objectives assigned by the Group to its international subsidiaries Whatever its geographic location, each subsidiary is asked to apply the Group's environmental policy as defined by the Charter, which requires the establishment of environmental targets for each subsidiary.

43 XII. CORPORATE DATA FOR THE GROUP

Total workforce The average number of employees for the Christian Dior Group in 2003 was 56,815 men and women, 60% of whom work outside France.

Breakdown by business group:

Christian Dior Couture 1,855 3.3% Wines and Spirits 4,908 8.6% Fashion and Leather Goods 16,709 29.4% Perfumes and Cosmetics 13,010 22.9% Watches and Jewelry 2,309 4.1% Selective Retailing 17,123 30.1% Other 901 1.6% Total 56,815 100%

Distribution by geographic region

France 20,424 35.9% Europe 11,142 19.6% North America 10,686 18.8% South America 1,631 2.9% Japan 4,265 7.5% Total 56,815 100%

Breakdown of employees in France by socio-professional category

Managers 20.3% Technicians and Supervisors 15.7% Office and Clerical 37.1% Laborers 26.9% Total 100%

Hiring policy The hiring policy of the Group’s companies is based on professional qualifications, and depending on the positions to be filled, prior experience and knowledge of foreign languages. In France, in 2003 LVMH hired 2,091 persons under open-ended contracts and 4,868 persons under fixed term contracts. The seasonal sales peak during the year-end holidays and grape harvests are two important reasons for using fixed term contracts.

44 Breakdown of recruitment by business group

Christian Dior Couture 4.2% Wines and Spirits 23.1% Fashion and Leather Goods 6.1% Perfumes and Cosmetics 9.3% Watches and Jewelry 0.4% Selective Retailing 56.7% Other 0.2% Total 100%

These recruitments are to some extent in line with departures. Excluding Selective Retailing, traditionally characterized by a high turnover rate, in 2003 there were 1,141 departures of employees under open-ended contracts, 34% of which were resignations.

Overtime The annual volume of overtime per employee does not exceed fifty hours.

Work week In France, all of the companies signed agreements at the end of 1999 or early 2000 pertaining to the application of the 35-hour work-week law. These provisions were implemented within a very short period of time and with no particular social conflict. In 2003, 80% of the workforce in France, which is about 16,000 employees, were concerned by work schedule adjustments. They included:

Employees with variable hours/adjusted 53% Employees eligible for paid leave 17% Part-time employees: less than 20 hours 5% Part-time employees: between 20 and 30 hours 9% Part-time employees: more than 30 hours 2% Employees on 2 x 8 over the year 5% Employees on short-period 2 x 8 5% Employees working at night 1% Beneficiaries of Parental Leave 3%

Employee absenteeism (open-ended and fixed-term contracts) and reasons The absentee rate was 6.8% in France.

45 Compensation and changes The average monthly gross compensation of employees in France working under open-ended employment contracts, working over the entire year in 2003, was as follows:

Average monthly gross compensation in 2003 Employees concerned (in euros) % fewer than 1,500 28 from 1,500 to 2,250 32 from 2,250 to 3,000 19 more than 3,000 21

Total 100

Fringe benefits and outside labor in France The total weight of the costs for personnel provided by service or temporary work providers was relatively low, and represented 11% of the payroll.

Incentives, profit-sharing and employee savings plans All French companies have an Incentive, Profit-sharing or Employee Savings Plan. These plans represented a total of 73.7 million euros: millions of euros

Profit-sharing 41.7 Incentives 26.0 Employer contribution to employee savings plans 6.0

Total 73.7

In 2001, LVMH implemented a world-wide stock options plan and, under that plan, allocated 25 options to 44,669 Group employees. The parity was one share for one option.

Professional equality The companies of the Christian Dior Group have a significant percentage of female employees. On the average for France, women represent two-thirds of Group employees.

Percentage of women working under open-ended employment contracts in France based on socio-professional categories:

Managers 53.2% Technicians and Supervisors 68.9% Office and clerical 74.1% Laborers 64.4%

Total 66.4%

46 This breakdown between men and women is also the case in recruitment. Thus, 67% of the 7,000 persons recruited in 2003 are women. The breakdown based on socio-professional categories is as follows:

Managers 56% Technicians and Supervisors 77% Office and clerical 73% Laborers 50%

Total 67%

Two out of three graduates recruited are women.

Professional relations and report on collective agreements In France, the Group's companies have works committees, employee delegates and Health and Safety Committees. The Group’s Committee was established in 1985. In 2003, employees representatives participated in more than 1,486 meetings.

Works Committee 624 Employee Representatives 417 Health and Safety Committee 200 Other 245

Total 1,486

In particular, these meetings resulted in the signing of 82 Enterprise Agreements (agreements within the framework of annual negotiations on wages and hours, incentives and profit sharing, etc.).

Health and safety conditions In 2003, there were 601 work-related or commuting accidents in France with loss of work, which translates to 15,422 work days lost.

Breakdown of accidents with work loss, by business group: Number of accidents

Christian Dior Couture 18 Wines and Spirits 118 Fashion and Leather Goods 89 Perfumes and Cosmetics 144 Watches and Jewelry 7 Selective Retailing 223 Other 2 Total 601

47 12.4 million euros were invested in Health and Safety in France. These sums included expenses for occupational medicine, personal protective equipment (gloves, goggles, etc.), programs for improving the safety and health of people: compliance, signage, protection, etc. The total amount of these expenses and investments represented 2.1% of the gross payroll. More than 5,000 persons were trained in security in the Group's companies in France.

Training Jobs in the luxury products industry are characterized by the acquisition and development of specific expertise that requires years of training. Managers must devote a large portion of their time to training mid-level management in the management techniques specific to our jobs. A major portion of the training is conducted in the workplace every day and is not included in the indicators presented below. The training investment made in 2003 by the companies of the LVMH Group in France represented an amount of 25.4 million euros, or 4.2% of the total payroll. The average training investment per full-time equivalent person was 1,279 euros. This amount resulted in the completion of 52,534 days of training. 41% of the employees benefited from at least one day of training over the year. Moreover, nearly 1,639 employees participated in an orientation or integration session.

Hiring and employment of handicapped workers In France, handicapped personnel represent 2% of the total work force. Services that are subcontracted in France to Work Aid Centers represent a total of about 1.9 million euros.

Social activities In 2003 in France, the various companies of the Dior Group allotted a budget of nearly 10 million euros to social and cultural activities: contributions to Works Committees to organize trips, form photography or painting clubs, libraries of books and DVDs, sports groups or health programs, etc. All additional services, catering costs and subsidies to the Works Committee represented a total of 77 million euros. In this context, the following payments were made: millions of euros

Death and disability 7 Retirement 41 Membership organizations 7 Food service expenses for personnel 9 Subsidies for Works Committees 13

Total 77

48 Subcontracting Most the products sold by Christian Dior are “made in France” and most of its production operations are in France: Christian Dior Couture, Louis Vuitton, Moët & Chandon, Parfums Christian Dior, etc. Most of the Group’s subcontractors are located in France and Italy, which facilitates Christian Dior’s compliance with the provisions of the basic conventions of the International Labor Organization. (See also: The Businesses of the Group).

Territorial impact of the businesses on jobs and regional development Dior practices a policy to maintain and develop jobs. There were no significant mass layoffs in 2003. The major companies of the Group—Christian Dior Couture, Hennessy, Moët & Chandon, Veuve Clicquot, Louis Vuitton, Parfums Christian Dior, etc. are located in France’s regions, and are vital players in the growth of jobs in their respective regions: for example, Louis Vuitton recently established workshops in Sainte-Florence and Ducey. Whether in Saint Jean de Braye, near Orléans, in Champagne or in Cognac, where several of our companies have been established for a long time, our companies maintain close relationships and communication with local authorities, particularly in the areas of education, culture and employment.

Relations with employment associations and educational institutions The Group has developed a number of partnerships with management schools, particularly engineering schools, but also with design schools and the schools specializing in the trades specific to our businesses (leather, textiles, etc.). The Group’s principal companies participate several times a year in presentations on the campuses of these schools. Senior executives of the Group are involved in teaching several programs. The Group’s hiring policy includes initiatives to support young people without degrees as well as economically disadvantaged people. Thus, Veuve Clicquot Ponsardin has partnerships with the ANPE for receiving young people for job-training programs. Moët & Chandon belong to the “Companies and Handicap” club. Louis Vuitton has agreements for employing people with long-term illness at its facilities. More than 250 qualification, apprenticeship or work-and-training contracts were signed last year. In addition, Christian Dior Couture was given an opportunity to conduct a training session in France for nearly 200 students.

Compliance with international agreements Taking into consideration, in each decision, the person, his or her freedom and dignity, professional development and health, are the pillars of a doctrine of responsibility to which all of the Group’s companies subscribe. Likewise, all of the companies in the Group have policies and practices concerning respect for equal opportunity and treatment (sex, race, religion, political opinion, etc.) as defined in the conventions of the International Labor Organization. This culture and these practices also lead to respect for freedom of association, respect for persons, and prohibits child labor as well as forced labor.

49 XIII. EXCEPTIONAL EVENTS AND DISPUTES

In the ordinary course of its business, the Group is a party to various proceedings involving trademarks, protection of intellectual property rights, protecting selective retailing networks, licensing agreements, employee relations, tax audits and other matters inherent in its business. The Group believes that the provisions recognized on the balance sheet for these risks, litigation and disputes known or in-process at the closing date are sufficient to cover any unfavorable outcome, so that the consolidated financial position would not be significantly affected in the event of an unfavorable outcome. Concerning the dispute between LVMH and Morgan Stanley: In a summons dated October 30, 2002, LVMH filed suit against Morgan Stanley in the Paris Commercial Court, to obtain reparations for the prejudice cause by false declarations and biased analyses and publications distributed by this bank against LVMH. Our company has provisionally claimed an indemnity of 100 million euros from Morgan Stanley to remedy the injury. In a judgment issued on January 12, 2004, the Paris Commercial Court found that these actions constituted negligence, ordered Morgan Stanley to pay LVMH 30 million euros for the prejudice and appointed Mr. Didier Kling as expert to find and calculate all elements related to certain items of the prejudice. Morgan Stanley has filed an appeal against the lower court ruling; however, this ruling included provisional execution and did not suspend the orders issued or interrupt the expertise process. This process is currently under way and LVMH will soon present to the expert documentation in support of the damages caused by the Bank, the total amount of which, even now when it is being calculated, is very substantial.

XIV. IMPLEMENTATION OF IFRS (International Financial Reporting Standards)

Pursuant to European Regulations No. 1606/2002 and in accordance with the IFRS 1 standard for the adoption of IFRS as accounting reference, the consolidated financial statements of the Group for the year ending December 31, 2005 will be prepared in accordance with the IFRS in force on December 31, 2005, with comparative data for fiscal year 2004 prepared in accordance with the same standards. This will mean the preparation, as of the date of transition between the French accounting reference and the IFRS standards (January 1, 2004), of an opening balance sheet under IFRS, with the impacts of the change in standards essentially charged to shareholders' equity on that date. In this context, the Group established at the end of 2002-early 2003 a project for the implementation of the IFRS standards intended to identify the differences between French accounting standards and the IFRS, to measure the changes to be made to the information systems affected, the training of the various participants, the schedule for deployment, and the schedule for production in 2004 of the accounting information under both systems.

1. Summary description of the IFRS project Generally, in order to ensure the homogeneity and the harmonization of the accounting practices and the schedule for application, the project is being directed by a central team that manages and coordinates all the businesses and companies making up the Group for preliminary studies, diagnostics, training and application. Subject to possible changes in the

50 existing IFRS standards, the diagnostic phase, both with respect to the differences in accounting treatment and the impact on the information systems, should be completed around mid-May 2004. The earlier preliminary study phase identified the significant structural standards, particularly for systems application, which will ensure the appropriate allocation of resources over the diagnostic period. For the same reasons, the training phase for the teams began in 2003, with most of it conducted in the first half of 2004. The changes to be made to the accounting, reporting, management or financial systems vary substantially depending on the business, the standards, and the complexity of the existing systems. Modifications to the central systems began in 2003. The reporting systems within the Group or within each company will be updated in 2004, based on a calendar that will allow the Group to meet the objectives for financial publication and updating management databases.

2. Principal differences identified Certain important standards and interpretations, which will apply on December 31, 2005, are currently being published by the IASB. This includes, in particular, the IFRS 3 standards on enterprise combinations, IAS 36 on the impairment of assets, and IAS 38 on intangible assets. Moreover, some standards, although they have been published, have not yet been approved by the European Union. This includes IFRS 2 on payments in stock and IAS 32/39 on financial instruments. Some of these standards impact the Group directly; the recent or non-definitive nature of the texts does not allow us to identify or measure definitively, as of today's date, the impacts of the changeover to the IFRS standards. Concerning the rules for impairment of assets, the Group is currently analyzing whether there are differences between the rules currently applied under French standards and the rules that will result from the standards being published. IFRS 1 includes specific provisions for the first application of the IFRS and a number of options. These are being studied by the Group: they involve in particular the possibility of revaluing certain tangible assets at January 1, 2004, whether or not to restate the enterprise combinations that have occurred between the formation of LVMH in 1988 and January 1, 2004; they also deal with the resetting to zero of the actuarial variances related to pension commitments and translation reserves recorded in shareholders' equity. Finally, the other standards currently being published or approved which could have an impact for the Group include IFRS 2 on the accounting of payments in shares, which apply to stock options plans for the Group's employees, and the standard on financial instruments, depending on whether or not it is approved as it stands. At this stage, the Group has, however, identified differences between the valuation and accounting methods defined by the IFRS standards, on the basis of the standards or proposed standards published at the end of 2003, and the accounting principles and methods currently used by the Group. These differences are described below.

2.1 Presentation of financial statements The presentation of the consolidated income statement will be modified by the following reclassifications: • Other income and expenses, net, will be split between other operational income and expenses (operating income) and other financial income and expenses (financial income);

51 • Charges for depreciation and amortization of goodwill, if applicable, will be transferred as operating income; • Certain commercial charges will be deducted from net sales revenues because of their economic nature as discount or rebate. The presentation of the balance sheet should not be significantly affected; it already integrates the notions of short-term/long-term or operating/non-operating cycles.

2.2 Other differences identified

Brands The French accounting standard does not stipulate mandatory amortization of trademarks; under the IFRS standards, trademarks are amortized when they are considered to have a defined life span. The Group must identify in its portfolio of brands the trademarks that can now be amortized.

Deferred taxes Contrary to what was stipulated by the provisions of CRC Regulation 99-02 governing consolidated statements, the IAS 12 standard requires the recognition of deferred tax liabilities for all intangible assets recognized at the time of the accounting of enterprise combinations, including those combinations that are not amortized, particularly the brand names.

Goodwill Contrary to what was required under French accounting standards by CRC Regulation 99-02, the future standard on enterprise combinations no longer requires the systematic amortization of goodwill.

Hedging instruments The effects of the revaluation at market value of existing hedging instruments at the closing date, allocated to future cash flows, will be recorded under shareholders' equity; the revaluation at spot value is today recorded on the assets and liabilities of the balance sheet.

Treasury shares All the LVMH treasury shares, in particular those allocated to option plans for employees, which are currently recognized as assets on the consolidated balance sheet, will have to be recorded directly as a reduction of shareholders' equity, including net capital gains or losses, if any, realized on sales.

52 R EPORT OF THE C HAIRMAN OF THE B OARD OF D IRECTORS TO THE S HAREHOLDERS' M EETING OF MAY 13, 2004

This report, prepared in accordance with the provisions of Article L. 225-37 of the Commercial Code, is intended to describe the conditions for the preparation and organization of the work of the Board of Directors of the Company and the internal control procedures established by the Company.

1. PREPARATION AND ORGANIZATION OF THE WORK OF THE BOARD OF DIRECTORS The Board of Directors has developed a Charter that specifies the membership, missions, operation and responsibilities of the Board. The Board of Directors has two committees, whose members, role and mission are defined by internal rules.

Board of Directors: As the strategic body of the Company, the priority objectives of the Board are to increase the value of the company, adopt the major strategic directions and monitor implementation, verify the reliability and fair presentation of the information about the Company, and protect the corporate assets. The Christian Dior Board of Directors guarantees respect for its rights to each of the shareholders of the Company and ensures that they satisfy all their duties. The Board is composed of 7 members, 4 of whom are independent and free of any interest with respect to the Company. No director holding a management position within the Company holds an office in a company which has an executive who is a member of the Board of Directors of Christian Dior. In financial year 2003, the Board of Directors met 3 times on a written notice from the Chairman sent to each of the directors at least one week before the date of the meeting. The attendance rate of the directors at meetings was an average of 81%. The Board of Directors closed the accounts for financial year 2002, and decided on the documents submitted for the approval of the annual shareholders' meeting, certain conventions with related companies and the adoption of an option plan. The documents and information required by the Board to perform its mission were provided to the directors for each meeting. The Board of Directors has not placed any limitation on the powers of the Chief Executive Officer.

Performance Audit Committee: The primary missions of the Audit Committee are to ensure compliance of the accounting principles applied by the company with generally accepted principles and to review the corporate and consolidated accounts before they are submitted to the Board of Directors.

53 The Committee is composed of three directors, two of whom are independent. The members and the Chairman of the Committee are appointed by the Board of Directors. The Audit Committee met twice during 2003, with at least two members present. All meetings were held with the auditors, the Chief Financial Officer and the Vice-President for Accounting of the Company and the Vice-President for Accounting of the principal subsidiary LVMH. The primary work of the Committee was the review of the corporate and consolidated statements and the appointment of a new auditor.

Nominating and Compensation Committee: The primary duties of the Nominating and Compensation Committee are to issue: - Recommendations for the distribution of the directors' fees paid by the company and for the compensation, in-kind benefits and stock options of the Chairman of the Board of Directors, the Chief Executive Officer, and the Chief Operating Officer or Officers of the Company; - Opinions on candidates for directors, advisors and management positions in its principal subsidiaries, and on the compensation and in-kind benefits allocated to the directors and advisors of the Company by the group or its subsidiaries, and on the compensation and incentive packages, both fixed and variable, immediate and deferred, for group executives. The committee is composed of 4 members, 3 of whom are independent. The members and Chairman of the Committee are appointed by the Board of Directors. The Committee met once during 2003 with all members present. It issued recommendations concerning compensation and the granting of stock options to the Chairman of the Board and the Chief Executive Officer and issued opinions on the compensation awarded to certain directors by the group or its subsidiaries.

2. INTERNAL CONTROL PROCEDURES The purpose of the internal control procedures in force at Christian Dior is: • First, to ensure that management actions, operations completed, and the behavior of the employees, fall within the framework defined by the strategies adopted for the activities of the company by the corporate governing bodies, applicable laws and regulations, and by the values, standards and internal rules of the company; • Second, to verify that the accounting, financial and management information transmitted to the corporate governing bodies of the company fairly present the business and position of the company. One of the objectives of the internal control system is to prevent and control risks resulting from the company's activity and the risks of errors or fraud, particularly in the accounting and financial areas. Like any system of control, it cannot, however, absolutely guarantee the complete elimination of these risks. Internal control at Christian Dior takes into account the specific structure of the Group. Christian Dior is a holding company that holds two principal assets: a 42.5% interest in LVMH and a 100% stake in Christian Dior Couture. LVMH is a publicly traded company, whose Chairman is also the Chairman of Christian Dior, and several Directors are members of the Board of both companies; Christian Dior Couture has a Board of Directors with a structure similar to the Board of Christian Dior.

54 The section devoted to internal control will discuss the procedures for Christian Dior Couture and the holding company Christian Dior, the procedures for LVMH are described in the report filed by LVMH; it should be consulted in addition to this report.

Christian Dior Couture Christian Dior Couture carries out a business for the design, production and international distribution for all products of the brand. It also operates a distribution business in various markets through its 29 subsidiaries. In this double role, internal control is exercised directly over Christian Dior Couture SA and in an supervisory capacity over all the subsidiaries. Internal procedures exist in each legal entity. These procedures govern, in particular, signature powers, asset monitoring, expenditure commitments, cost vouchers, the opening of customer accounts, rates, management of press collections, etc. Contractual commitments are subject to preliminary review and authorization by the Legal Department. In 2003, all the procedures related to points of sale were reviewed and combined in a special manual for boutique operations which will be implemented in 2004 when new software to manage points of sale is deployed.

Christian Dior S.A.

1. The internal control environment As indicated previously, Christian Dior S.A. is a holding company whose assets are essentially limited to two lines of equity interests in Christian Dior Couture and LVMH. This activity within Christian Dior is primarily dedicated to: • Protecting legal ownership of these two lines of securities; • Exercising the rights and powers enjoyed by a majority shareholder, i.e.: - Representation on the boards and at the shareholders' meetings of the subsidiaries; - Collection of the dividends paid by the subsidiaries; - Control of the economic performance of the subsidiaries; • Given the status of Christian Dior as a publicly traded company, provide full financial information in compliance with the texts in force. Given the limited number of tasks as described above and its consolidation within a Group that has the expertise necessary for its Administration, Christian Dior uses the specialized services of the Group in the areas inherent in a holding activity, which are the legal, financial and accounting areas. An assistance agreement has been established with Montaigne Participations et Gestion, one of the leading companies of the Arnault Group. With respect to services outside the Group, the Shareholders' Meeting of Christian Dior has appointed two leading firms as Auditors; one of these firms also performs the same functions at Christian Dior Couture and LVMH.

2. Control of risks Key elements of the internal control procedures. Given the company's activity, the internal control systems are primarily designed to prevent risks of error and fraud in the accounting and financial areas. The following principles guide our organization:

55 • Very limited and very specific delegations of powers known to counterparties, sub- delegations reduced to a minimum; • Legal control before the signing of contracts; • Separation of the organization of expenditures and payment; • Secured payments; • Procedural rules known to potential users; • Integrated databases (a single entry for all users); • Frequent controls (both internal and external).

Legal and operational control over the subsidiaries exercised by the parent company: ➤ Control of holdings The securities held in subsidiaries is the subject of quarterly checking between the Accounting Department of the Company and the securities departments of the relevant companies. ➤ Operational control Christian Dior's operational control over its subsidiaries is exercised through: • Legal bodies, Boards of Directors and Shareholders' Meetings at which the Company is systematically represented; • Management information that allows the executives of the Christian Dior company to intervene in the process to define objectives and monitor implementation: - Three-year plans and annual budgets; - Monthly reporting and reconciliation of actuals to budgets and an analysis of the variances; - Quarterly meetings to analyze performance with the subsidiary's management.

3. Internal control for the preparation of the parent company's financial and accounting information The corporate and consolidated financial statements are covered by specific instruments and an information feedback system that will process full information within the appropriate deadlines. The exhaustive controls performed at sub-consolidation levels (LVMH and Dior Couture) guarantee the integrity of the information. The financial information intended for the financial markets (financial analysts, investors, individual shareholders, market authorities) is provided under the control of the Finance Division. This information is in strict compliance with the market rules in force, particularly the principal of equal treatment of investors.

56 CONSOLIDATED STATEMENTS

57

C ONSOLIDATED H IGHLIGHTS

millions of euros 1999 2000 2001 2002 2003

Net sales 8,758 11,867 12,567 13,168 12,466 Income from operations * 1,551 1,967 1,548 2,034 2,213 Income before income taxes * 1,415 1,652 597 1,264 1,622 Income from continuing operations, group share, before amortization of good will 295 320 75 287 428 Net income – Group share 264 251 (95) 178 303

* Adjusted retroactively to reflect reclassifications.

euros

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

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

millions of euros

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

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

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

* Adjusted retroactively to reflect reclassifications.

59 C ONSOLIDATED B ALANCE S HEET AT D ECEMBER 31 (in millions of euros)

ASSETS Notes 2003 2002 2001

Current assets Cash and cash equivalents 3 855 855 834 Marketable securities 3 232 61 623 Treasury shares 4 549 641 1,143 Trade receivables and related accounts 5 1,423 1,373 1,577 Net deferred taxes 455 558 503 Inventories and work in progress 6-27 3,517 3,522 3,727 Other receivables and prepaid expenses 7 1,235 1,315 1,534

Total current assets 8,266 8,325 9,941 Fixed assets Long-term financial assets Equity interests 8 52 71 81 Other long-term investments 9 1,252 1,233 1,705 Other financial assets 357 522 478 1,661 1,826 2,264 Tangible assets 10 6,653 6,855 7,120 Depreciation (2,678) (2,614) (2,489) 3,975 4,241 4,631

Goodwill 11 4,691 4,628 4,406 Amortization (1,496) (1,224) (1,115) 3,195 3,404 3,291

Brands and other intangible assets 12 9,223 9,368 9,392 Depreciation and amortization (518) (362) (291) 8,705 9,006 9,101

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

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

60 2003 2003 2002 2001 after before after after LIABILITIES Notes assignment assignment assignment assignment Short-term liabilities Financial liabilities, current portion 13 871 871 360 340 Short term financial liabilities 13 2,038 2,038 3,114 4,447 Bank overdrafts 13 429 429 504 603 3,338 3,338 3,978 5,390

Trade payables and related accounts 1,688 1,688 1,484 1,450 Other liabilities 14 2,541 2,436 2,746 2,763 4,229 4,124 4,230 4,213 Total short-term liabilities 7,567 7,462 8,208 9,603

Long-term deferred taxes 21 160 160 127 171 Medium and long-term liabilities Repackaged notes 13 158 158 222 284 Financial debt, less current portion 13 4,307 4,307 4,555 5,402 Other medium and long-term liabilities and provisions 15 1,136 1,136 1,151 1,322 Total medium and long-term liabilities 5,601 5,601 5,928 7,008

Minority interests 16 8,700 8,700 8,746 8,658 Shareholders’ equity Capital 363 363 363 363 Consolidated reserves 3,678 3,531 3,534 3,493 Cumulative translation adjustment (267) (267) (104) (68) Income for the period 0 303 –– Interim dividend paid 0 (51) ––

Shareholders’ equity, group share 16 3,774 3,879 3,793 3,788 Total shareholders’ equity 12,474 12,579 12,539 12,446

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

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

61 C ONSOLIDATED S TATEMENT OF I NCOME (in millions of euros, except for earnings per share expressed in euros)

Notes 2003 2002 2001

Net sales 19-27-28 12,466 13,168 12,567 Cost of sales (4,350) (4,712) (4,764) Gross margin 8,116 8,456 7,803 Design expenses 0 (31) (25) Marketing and selling expenses (4,647) (4,924) (4,743) General and administrative expenses (1,256) (1,467) (1,487)

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

Financial income 19 (269) (333) (499) Dividends from unconsolidated interests 18 8 16 Other income and expenses, net 20 (340) (445) (468) Income before income taxes 1,622 1,264 597

Income taxes 21 (496) (356) (194) Income (loss) from investments in equity companies 8 1 (18) (42) Net income before amortization of goodwill and unusual items 1,127 890 361 (Group share: 2003: 428; 2002: 287; 2001: 75)

Amortization of goodwill 22 (290) (253) (159) Net income before unusual items 837 637 202 (Group share: 2003: 303; 2002: 178; 2001: 5)

Unusual items 23 0 0 (199) Net income 837 637 3 Minority interests (534) (459) (98) Net income – Group share 303 178 (95)

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

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

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

62 S TATEMENT OF C ONSOLIDATED C ASH F LOW (in millions of euros) 2003 2002 2001

I - OPERATING ACTIVITIES Net income – group share 303 178 (95) Minority interests in net income 534 459 98 Elimination of income from companies accounted for by the equity method (1) 18 42 Dividends received from equity companies 6 (1) 4 Amortization and net long-term and short-term provisions 1,056 700 1,672 Net gain (loss) on sale of fixed assets or treasury shares 63 174 (837) Cash flow 1,961 1,528 884 Change in current assets (230) 117 (403) Change in short-term liabilities 127 309 47 Change in working capital requirements (103) 426 (356) Net cash from operating activities ➀ 1,858 1,954 528

II - INVESTING ACTIVITIES Acquisition of intangible assets (74) (88) (135) Acquisition of property, plant & equipment (565) (538) (949) Acquisition of equity interests (36) (51) (417) Change in debt on fixed-assets (148) (53) 244 Disposal of non-financial fixed assets 105 203 149 Reclassification of equity interests as marketable securities 0 0 (677) Disposal of unconsolidated equity interests 13 92 2,122 Change in other long-term financial assets 10 (185) (181) Impact of changes in consolidation scope (114) (160) (895) Net cash from investing activities ➁ (809) (780) (739)

III - FINANCING ACTIVITIES Proceeds from issuance of common stock 70 13 42 Issuance of bonds and other financial debt 1,843 661 2,337 Principal repayments on short-term borrowings and long-term debt (2,216) (2,404) (2,477) Change in current accounts (251) (84) 318 Change in listed securities (170) 182 880 Net cash from financing activities ➂ (724) (1,632) 1,100

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

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

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

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

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

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

The statement of cash flows shows the change in cash (net of bank overdrafts) and cash equivalents consisting of short-term investments that can be readily converted into cash, excluding, since January 1, 2001, listed securities. The reconciliation between cash at the close of the period, as shown in the statement of cash flows, and the cash items on the balance sheet is presented in note 12.

63 N OTES TO THE C ONSOLIDATED F INANCIAL S TATEMENTS

NOTE 1 - SIGNIFICANT EVENTS AND CHANGES IN THE GROUP CONSOLIDATION

In 2003:

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

Fashion and Leather Goods • During the year, LVMH increased its stake in Fendi from 67% to 84% for 191 million euros; this investment resulted in the recognition of additional goodwill in the amount of 73 million euros. • In February 2003, LVMH increased its interest in Rossimoda, the Italian manufacturer of high-end shoes, from 45% to 97%; the total investment of 56 million euros was recognized as goodwill in the amount of 43 million euros.

Perfumes and Cosmetics • In December 2003, LVMH sold its Bliss skincare centers and cosmetics for 15.5 million euros, and the licenses held by LVMH for the Michael Kors, Marc Jacobs, and Kenneth Cole perfume brands were sold during the year for a total amount of 59 million euros. • LVMH raised its stake in the Laflachère group (La Brosse and Dupont) from 57% to 99%; the 42 million euro investment resulted in additional goodwill of 48 million euros. • Finally, the stake in the Acqua di Parma group, which was 50%, was increased to 100%, a 9 million euro investment.

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

Other activities • The auction house l’Etude Tajan was sold at the end of 2003 for a nominal amount. • The joint venture formed with diamond merchant De Beers (see financial year 2001) was consolidated proportionately as of financial year 2003; prior to that period, it was accounted for using the equity method. The companies acquired or sold were consolidated or deconsolidated respectively on the date of completion of the operation.

64 In 2002:

Wines and Spirits • In July 2002, LVMH purchased a 40% interest in Millennium Import LLC, a producer of high end vodkas distributed under the Belvédère and Chopin brands, for USD 76 million. The interest in Millennium was consolidated by the equity method as of that date. This transaction was accounted for on the balance sheet as an intangible asset of USD 71 million, amortized over 15 years, representing the perpetual license Millennium holds for the distribution of these brands in the United States. • In May 2002, the Group sold the Pommery brand for 152 million euros. This sale also included the administrative and production sites, the wine cellars, the inventories and the distribution contracts, excluding the vineyards. The Pommery activities have not been consolidated since that date.

Fashion and Leather Goods • Donna Karan International Inc., “DKI,” purchased in December 2001 (see below: changes in consolidation for the 2001 financial year) was fully consolidated as of January 1, 2002. The total investment in Gabrielle Studio and DKI was allocated to the Donna Karan brand for 494 million euros; the consolidated goodwill of USD 224 million will be amortized over 20 years. • During the financial year, LVMH strengthened its interest in the Fendi group, increased from 51% to 67%. This investment for 196 million euros generated additional goodwill of 75 million euros. • The Emilio Pucci group, purchased in 2001 for 38 million euros, was fully consolidated as of January 1, 2002. The investment was allocated to the Pucci brand for 17 million euros. The consolidated goodwill will be amortized over 20 years. • Finally, LVMH increased its interest in Thomas Pink from 70% to 100%, an investment of 28 million euros.

Perfumes and Cosmetics • In December 2002, the group sold the Hard Candy and Urban Decay brands for USD 1 million, which could change over the next three years because of an indexing clause; the 2002 results for these entities were included in the consolidated income until their sale.

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

In 2001:

Wines and Spirits • At the end of 2000, the Group acquired 60% and 90% respectively of the Newton (Napa Valley, California) and MountAdam (Eden Valley, South Australia) winegrowing estates for 34.5 million euros. These interests were fully consolidated over the full year in 2001.

65 Fashion and Leather Goods • In January 2001, pursuant to an agreement signed in December 2000, LVMH acquired all of the stock of American company Gabrielle Studio, owner of the Donna Karan New York brand, for USD 405 million. Moreover, in March 2001, LVMH established with Donna Karan International Inc. (DKI), a company traded on the New York Stock Exchange, which holds the exclusive operating license for the Donna Karan brand, a merger project in which LVMH would contribute to DKI its stake in Gabrielle Studio and an offer from LVMH to purchase almost all the capital of DKI at a price of USD 10.75 per share, representing a total of USD 185 million. This project was approved by DKI’s Shareholders’ Meeting of November 27, 2001. Following this operation, LVMH holds 100% of the preferred stock and 89.40% of the common stock of the new Donna Karan group. Gabrielle Studio was fully consolidated for the entire fiscal year while the stake in Donna Karan International was only as of 2002. The USD 405 million investment in Gabrielle Studio was fully allocated to the value of the Donna Karan New York brand. • In December 2001, LVMH's 25.50% stake in Fendi was increased to 51%; LVMH acquired Prada's interest in the joint venture originally formed for this investment. This operation represented an additional investment of 295 million euros, 255 million of which will be paid over a 4-year period. Most of this amount, i.e. 404 million euros (206 million euros attributable to the Group) was allocated to the value of the Fendi brand; 136 million euros were recorded as goodwill to be amortized over 30 years. The Fendi investment has been consolidated on a proportionate basis since July 2000; at December 31, 2001, Fendi’s balance sheet was fully consolidated.

Perfumes and Cosmetics • The Group’s 65% interest in American cosmetics company Fresh, acquired in September 2000 for 18 million euros, has been fully consolidated since January 1, 2001.

Selective Retailing • In January 2001, LVMH acquired 55% of the Paris department store La Samaritaine for 256 million euros, including 88 million euros through a reserved capital increase. The amount of the investment primarily reflected real estate holdings estimated at 471 million euros (182 million euros for the group share, after deferred taxes). The goodwill on this investment, including brand value, is 57 million euros, to be amortized over 20 years. La Samaritaine has been fully consolidated since January 1, 2001.

Watches and Jewelry • In January 2001, LVMH and the De Beers group signed an agreement to form a 50/50 joint venture. This agreement was approved by the European Commission in July. Starting in 2002, this company had an exclusive license for the world-wide sale of diamond jewelry in a network of stores to be created under the “De Beers” name. Since July 2001, this joint venture has been accounted for using the equity method.

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

66 In November 2001, within the framework of a memorandum of understanding signed in July, PPL’s UK activities and the operations of British auction company Bonhams & Brooks merged within a joint entity 49.9% held by PPL, with PPL retaining control of its international activities. The transfer of de Pury & Luxembourg Art to Phillips resulted in goodwill of 54 million euros, added to the initial goodwill of 95 million euros. De Pury & Luxembourg Art has been fully consolidated in Phillips since January 1, 2001; as of November 2001, the stake in the joint venture with Bonhams & Brooks has been accounted for on the equity basis. • In December 2001, the group’s 50% stake in the luxury product Internet site eLuxury was increased to 99.99%, through subscription to a capital increase. This operation resulted in goodwill of 45 million euros, corresponding to the value of the customer base and prior site development costs. This interest was accounted for by the equity method over 2001; it was fully consolidated on December 31, 2001. • In January 2001, the sub-group Télématique Victoire Multimédia was transferred to the Jet Multimédia group in exchange for 479,125 shares in Jet Multimédia with a guaranteed price. This disposal resulted in a gross capital gain of 25 million euros

* * *

Pro forma data and impact on cash flow: Pro forma simplified income statements are presented below for financial years 2002 and 2003 on the basis of the following assumptions: • 2002 disposals and acquisitions are considered to have been made at January 1, 2002; • In cases of a disposal in 2003, a comparable number of months of operations is used in 2002 and 2003; • In cases where minority interests were acquired in 2003, these operations are deemed to have been made in 2002. These pro forma data do not necessarily represent the results that would have effectively been recorded in the consolidated statements if the operations described had taken place on the date stated. Moreover, they cannot be used to forecast future trends in consolidated results. 2003 2002 millions of euros pro forma pro forma

Net sales 12,466 13,114 including - Christian Dior Couture 523 492 - Wines and Spirits 2,116 2,237 - Fashion and Leather Goods 4,149 4,224 - Perfumes and Cosmetics 2,181 2,285 - Watches and Jewelry 502 552 - Selective Retailing 3,039 3,337 Income from operations 2,213 2,046 Income before income taxes 1,607 1,440 Net income from continuing operations before amortization of goodwill, group share 423 360 Net income before unusual items, group share 298 248

67 The net decrease in balance sheet items resulting from changes in consolidation in the year breaks down as follows: millions of euros

Brands and other intangible assets (7) Shareholders’ equity (27) Goodwill 188 Minority interests (69) Net tangible assets 8 Net financial debt 253 Net current assets (57) Other debts at more than one year 5 Other assets 14 Other debts at less than one year (16) 146 146

The impact of the changes in consolidation on the Group’s cash flow, as shown in the consolidated statement of cash flows, net of the cash flow of the companies purchased or sold and net of deferred payments on these acquisitions, was 209 million euros (160 million euros in 2002). This figure in 2003 primarily represents the effects of the increase in LVMH's interests in Fendi (191 million euros), Rossimoda (57 million euros) and La Brosse & Dupont (42 million euros); it also represents the deferred payments for Fendi securities acquired previously, i.e. 86 million euros. On the other hand, disposals contributed 160 million euros; this amount primarily reflects the sale of Hine and Canard-Duchêne, and the sale of the Michael Kors, Marc Jacobs, and Kenneth Cole perfume licenses. In 2002, this primarily included the investments in Fendi (196 million euros), Millennium (77 million euros), Thomas Pink (28 million euros), and the positive impact of the disposal of certain Pommery assets (152 million euros).

NOTE 2 - ACCOUNTING PRINCIPLES - RULES - METHODS The consolidated financial statements of the Christian Dior group are prepared in accordance with generally accepted accounting principles in France, defined by the law of January 3, 1985 and Regulation 99-02 from the Accounting Regulatory Commission published on June 22, 1999; these principles have been consistently applied over the last three financial years. The basic accounting principles used to prepare these financial statements are described below.

2.1 - Principles of consolidation The accounts of companies in which Christian Dior has direct or indirect exclusive control are fully consolidated. The accounts of companies in which Christian Dior has joint control are consolidated using the proportionate method. For the companies owned jointly with the Diageo group, only those parts of the balance sheet and statement of income relating to LVMH group activity are included in the accompanying financial statements (see note 2.15). Investments in companies in which Christian Dior has a significant direct or indirect influence are accounted for using the equity method. The Group does not exercise exclusive or joint control, or significant de facto influence over entities or structures in which no legal stake is held (“ad hoc entities”). The list of the companies included in the scope of consolidation is presented in note 29.

68 2.2 - Foreign currency translation, hedging of exchange and interest rate risks a - Currency translation The accounts of foreign companies are converted as follows: • at the exchange rate at year end for balance sheet items; • at the average rates of the financial year for statement of income items. Translation adjustments from the application of these rates have been recorded in shareholders’ equity under “Foreign currency translation.” b - Currency transactions Foreign currency transactions executed by the consolidated companies are converted into their functional currency at the currency rates on the date of the transactions. Receivables and liabilities denominated in foreign currencies are converted at the currency rates on December 31: unrealized currency gains and losses resulting from this conversion are recorded on the income statement, unless they result from the conversion of loans in currencies or other instruments allocated to hedge long-term investments in the same currency: in this case, they are recorded under shareholders' equity as “currency translation adjustments.” Exchange gains and losses resulting from the conversion of transactions or intra-group receivables and liabilities in foreign currencies, or their elimination, are recorded in the income statement, unless they come from long-term intra-group financing operations that can be classified as quasi-investment securities: in this case, they are recorded under shareholders' equity as “translation adjustments.” c - Currency contracts and options Forward currency contracts, currency options and related contracts still active at closing are revalued at the prices at December 31. Unrealized gains and losses from this conversion are: • Either recorded in the income statement as adjustments on unrealized gains or losses on the hedged assets or liabilities to which these instruments were allocated; • Or deferred, if they have been assigned to hedge operations in the following financial year; • Or booked as income if they have not been assigned. Deferred unrealized gains and losses are included in “Other current assets” and “Other liabilities.” d - Hedging Currency gains and losses arising from hedges on an underlying commercial asset are recorded as operating income or expenses, except for premiums and discounts of forward contracts, which are recorded on a prorated basis as financial income or expenses. The impact of currency hedges with a financial underlying asset or non-allocated exchange instruments is recognized as financial income or expense. e - Interest rate hedging Gains and losses from interest rate hedging contracts (swap contracts, CAP, forward rate agreements, collars, etc.) are accounted for on a prorated basis over the period of the related contracts. If interest rate “swaps” mature after the maturity of the operations hedged, where applicable, the unrealized losses at year end are recorded in the income statement. The unrealized gains are not recorded.

69 2.3 - Brands and other intangible assets Intangible assets are recorded as assets at their purchase price plus goodwill, if any. Only the acquired brands that are well-known and individually identifiable are recorded as assets, using their value at the time of purchase. This value is not amortized. The book value and current value of brands are determined for each accounting period, using the procedures described in note 12. When the book value of a brand becomes permanently greater than its current value, a set-aside for depreciation is made for the amount of the difference. Expenses incurred to create a new brand or to develop an existing one are recorded under expenses. Other intangible assets are amortized over their estimated useful lives: • leasehold acquisition rights term of the lease • software 1 to 5 years

2.4 - Goodwill and related intangible assets Goodwill is defined as the difference between the purchase price of the securities of consolidated companies and the Group’s share in their net assets on the purchase date. This calculation is made after the net assets of the acquired company have been restated according to Group accounting principles and after revaluation to fair value, when fair value differs from net book value on the purchase date. The value of certain intangible assets, such as brands, market share, or business goodwill are not reported separately from goodwill. Goodwill is recorded depending on whether it is positive or negative, under “Goodwill” on the asset side or under “Contingencies” on the liabilities side. For the changes in group consolidation since fiscal 2000, goodwill has been recorded in the operating currency of the acquired company. It was previously recorded in euros. Goodwill is amortized over periods ranging from 5 to 40 years, depending on their estimated duration when first consolidated. This estimation refers to the purchased company in its own market, in terms of positioning, age and geographic location. Business goodwill acquired under French law is amortized over a period that may not exceed 18 years. The book value and current value of goodwill are determined using the procedures described in note 12. When the book value of goodwill becomes permanently greater than its current value, a set-aside equal to the difference is made for amortization.

2.5 - Tangible assets Tangible assets are generally recorded in the consolidated balance sheet at their acquisition cost. This includes goodwill, if any. Assets acquired under financial lease agreements are recorded as fixed assets on the basis of the present value of future rents and the resulting financial liability is simultaneously recorded in liabilities. Tangible assets are depreciated principally according to the straight-line method at rates based on the estimated useful lives below: • Buildings 20 to 50 years • Plant and equipment 3 to 20 years • Retail improvements 3 to 10 years • Vineyards 18 to 25 years • Other assets 3 to 10 years

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

2.6 - Financial assets Unconsolidated investments are recorded at cost. In case of a difference considered to be permanent between the utility value of such a Group investment and its book value, a provision for depreciation in this amount is booked. The utility value of investments is measured based on criteria such as the value of the Group’s share in net assets, the stock price or the outlook for earnings and cash flow. These criteria are weighted for the effects on the Group of holding the investments, in terms of strategy or synergies with existing businesses.

2.7 - Inventories and work in progress Inventories are recorded at the lower of cost or market value. Cost price is determined either using the weighted average cost method or the first-in first-out (FIFO) method. Considering the aging process for champagne and cognac, these inventories are often held for more than one year. However, in line with industry practice, they are classified as current assets. Financial fees are not taken into account in the evaluation of inventories.

2.8 - Trade accounts receivable and other receivables Receivables are recorded at their face value. An allowance for write-down is established when the inventory value is less than book value, based on the probability of recovery.

2.9 - Treasury shares Treasury shares are recorded at acquisition cost. Shares held under French market regulations governing stock price adjustments, shares held for employee stock option plans and shares held by subsidiaries on a short-term basis are recorded as assets in the balance sheet. Shares held on a long-term basis or for the purpose of future cancellation or exchange are deducted from shareholders’ equity, including the realized capital gains and losses. When the market value of the shares, calculated as described in 2.10 below, becomes less than the acquisition price, a provision for depreciation equal to the amount of the difference is recorded. For shares allocated to option plans, the calculation of depreciation is made on a per-plan basis when the corresponding options are assumed to be exercisable (market value of the share greater than the option exercise price), and in relation to the average cost price for all plans in question when they are assumed to be non-exercisable (market value of the share less than the option exercise price). Moreover, when the value of the shares allocated to option plans, net of depreciation, is greater than the exercise price stipulated by each of the plans, a provision for charges is recorded for the amount of the difference.

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

71 Shares of mutual funds, cash mutual funds and similar securities are valued at their published net asset value. Market value for traded securities is determined by reference to the average price quoted on the related stock exchange during the last month of the year, translated at the year-end exchange rate if applicable. Market value of non-traded securities is based on their estimated realizable value. The calculation is made by line of securities, without offsetting between the gains and loss recorded. In case of partial sale of an investment, the FIFO or weighted average price methods are used to determine the gain or loss to be recognized.

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

2.12 - Bond issues Bond issue costs and redemption premiums on convertible bonds are recorded as financial costs over the life of the bond. Provisions for redemption premiums are funded annually and recorded under “Financial debt.” Issue premiums on bonds issued above par are deducted from issuance costs. The issuance costs of subordinated securities are amortized over 15 years.

2.13 - Design costs - Research and development costs As of January 1, 2003, design costs are included in the “cost of sales” line. Research and development costs, including packaging costs, are recorded as expenses in the year in which they are incurred.

2.14 - Income taxes, deferred taxes Deferred income taxes arise out of timing differences between the net book assets of consolidated companies as reported in the consolidation and the amount resulting from the application of tax rules. These are recorded based on the known tax situation at the end of the year. Tax savings from carried-over fiscal deficits are recorded as deferred taxes only when their recovery is deemed probable. Taxes that would become payable in the event that retained earning of subsidiaries are distributed are set aside if such a distribution is probable.

2.15 - Recognition of income • Net sales revenues The net sales revenues of the Group include both retail sales in the Group's stores and “wholesale” sales to distributors and agents.

72 Retail sales come basically from Selective Retailing and the following lines: Fashion and Leather Goods , certain brands of Perfumes and Cosmetics, and Watches and Jewelry. These sales are recorded at the time of purchase by the customers. “Wholesale” sales come from Wines and Spirits activities and from certain brands of Perfumes and Cosmetics or Watches and Jewelry. These sales are recorded when ownership is transferred, that is, upon shipping.

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

• Product repurchase agreements Companies in the Perfumes and Cosmetics division, and to a lesser extent in Fashion and Leather Goods, repurchase unsold or outdated products from their customers or distributors. Reserves are funded on a percentage of realized sales revenue and margin to cover the costs of such repurchased or destroyed products. • Re-invoiced shipping and transportation costs Shipping and transportation costs re-billed to customers are included in net sales, because the associated expenses were recorded under commercial expenses. • Marketing cooperation agreements and product rights It is common usage, especially in the marketing of Wines and Spirits, to pay for product reference rights or to participate in advertising agreements with the distributor. These expenses are recorded as commercial costs and not as a reduction of net sales.

2.16 - Other income and expenses The primary business of the Group is the management and development of its brands and stores. Operating income derives from these activities, whether they involve recurring or non-recurring operations, main or incidental. Other income and expenses reflects income statement items which may not be inherent to the Group’s operating activity, because of their nature or frequency. Significant amounts of other income and expenses are recorded as unusual items. Income before taxes is equivalent to the notion of “Net income of consolidated companies.” Net income is income net of taxes, excluding goodwill amortization expense and before unusual items.

2.17 - Earnings per share Earnings per share are calculated based on the weighted average number of common shares outstanding during the year. Fully diluted earnings per share are computed as described above, plus the weighted average number of shares assuming the exercise of all outstanding options. This calculation takes into account the corresponding reduction in interest expense and the tax effect.

73 2.18 - Pensions, retiree medical costs and other commitments to current or retired employees When retirement indemnities, pensions, medical costs and other commitments are covered by contributions paid by the companies of the Group to outside organizations which assume the commitment for the payment of the allocations or the reimbursement of medical costs, these contributions are recognized as expenses for the year in which they are due; no liability is shown on the balance sheet. When the consolidated companies pay pensions, medical costs and other liabilities directly, the related total actuarial commitment appears as a provision on the balance sheet. Changes to this commitment are recorded as expenses for the period. When this commitment is covered, in whole or in part, by funds paid by the companies of the group to financial agencies, the amount of these dedicated investments is deducted on the balance sheet from the actuarial commitment. The actuarial commitment is calculated on the basis of valuations specific to each country and to each company of the group; these valuations include assumptions for salary increases, inflation, life expectancies, employee turnover and return on dedicated investments. The cumulative effects of the actuarial differences are amortized when they exceed 10% of the total gross commitment of dedicated financial assets or of the market value of the dedicated financial assets at year end. These differences are amortized beginning in the year following their determination, over the residual average working life of the employees concerned.

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

74 NOTE 3 - MARKETABLE SECURITIES, CASH AND CASH EQUIVALENTS

A - Marketable securities millions of euros 2003 2002 2001

Units of traded or non-traded SICAV and FCP 223 50 455 Traded marketable securities 24 28 202 Provision for depreciation (15) (17) (34) Marketable securities 232 61 623

Portfolio market value 235 62 692

B - Cash and cash equivalents millions of euros 2003 2002 2001

Term deposits, greater than 3 months 51 76 9 Term deposits, less than 3 months 109 107 73 Ordinary bank accounts 695 672 752 Cash and cash equivalents 855 855 834 Including restricted accounts 6 45

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

Marketable securities (units of SICAV and FCP, net) 33 Cash and cash equivalents 855 Bank overdrafts (429) Net cash and cash equivalents 459

75 NOTE 4 - TREASURY SHARES At December 31, 2003: • LVMH held 11,973,630 shares, 11,828,630 of which were allocated to stock option plans and the remainder, i.e., 145,000 shares, to stock price equalization. • Dior held 3,678,220 shares, 3,160,000 of which were allocated to stock option plans and the remainder, i.e., 518,220 shares, to stock price equalization. LVMH and DIOR stock portfolios are allocated as follows

2003 2003 2002 2001 millions of euros Number Amount Less than 1 year: • option plans 14,988,630 530 329 271 • marketable securities: - gross amount 663,220 27 449 1,217 - provision for depreciation – (8) (137) (345) 15,651,850 549 641 1,143 - Provisions for risks and contingencies – (4) (4) (4) Net portfolio value 15,651,850 545 637 1,139

In 2003, the following transactions were executed in Dior’s stock portfolio: Stock price equalization stock option or short-term investment plans millions of euros Number Amount Number Amount As of December 31, 2002 525,220 17 2,769,100 79 Purchases ––514,800 16 Sales ––(130,900) (3) Reclassification (7,000) – 7,000 – Change in provisions – 2 – 11 As of December 31, 2003 518,220 19 3,160,000 103

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

76 NOTE 5 - TRADE RECEIVABLES & RELATED ACCOUNTS millions of euros 2003 2002 2001

Gross 1,517 1,507 1,680 Provision for depreciation (94) (134) (103)

Net value 1,423 1,373 1,577

NOTE 6 - INVENTORIES AND WORK-IN-PROGRESS millions of euros 2003 2002 2001

Aging wines and brandies 1,787 1,683 1,707 Other raw materials and products in process 398 464 462 2,185 2,147 2,169

Merchandise 616 842 921 Finished products 1,311 1,146 1,243 1,927 1,988 2,164

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

Provision for depreciation (595) (613) (606)

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

See also note 27 – Information by business groups.

NOTE 7 - OTHER RECEIVABLES & PREPAID EXPENSES millions of euros 2003 2002 2001

Currency hedging operations 428 215 246 State - corporate income tax ––47 - other taxes and duties 263 243 243 Trade accounts: advances and down payments 61 132 204 Prepaid expenses 217 212 229 Other receivables net 266 513 565

Net value 1,235 1,315 1,534

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

77 NOTE 8 - EQUITY INTERESTS A - Value of equity investments millions of euros 2003 2002 2001 Bonhams & Brooks PS&N Ltd (United Kingdom) 37 37 41 De Beers LV Ltd (United Kingdom) (1) – 9 16 e-Luxury.com Inc (United States) (2) ––– Millennium Import LLC (United States) 4 7 – Other investments 11 18 24 Total 52 71 81

B - Income (loss) from investments in equity companies (included in the value of equity investments) millions of euros 2003 2002 2001 Bonhams & Brooks PS&N Ltd NS (4) – De Beers LV Ltd (1) – (9) (4) e-Luxury.com Inc (2) – – (31) Millennium Import LLC 4 2 – Other investments (3) (7) (7) Total 1 (18) (42)

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

At December 31, 2003, the data on the principal equity investments were as follows: millions of euros Net sales Net income Total assets Shareholders’ equity Bonhams & Brooks PS&N Ltd (*) 60.2 (0.7) 114.8 58.0 Millennium Import LLC (*) 57.7 9.0 50.3 18.6

(*) provisional data

NOTE 9 - OTHER LONG-TERM INVESTMENTS millions of euros 2003 2002 2001

Gross value Provisions Net Net Net

• Bouygues SA (France) Securities 819 (314) 505 537 737 • LVMH treasury shares 455 (51) 404 362 318 • Other interests 466 (123) 343 334 650

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

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

Bouygues SA (France) 4.6 % 505 6 6,192 450 425 Tod's Spa (Italie) 3.5 % 47 – 402 26 37 Interests in various Internet funds ND 27 – ND ND – (USA) (1) Project Sloane Ltd “Joseph” (UK) (1) 10 % 7 1 62 –– Interparfums Inc. (USA) (1) 18 % 14 – 77 10 29 Other interests – 49 1 –– – Investments less than 20% 649 8

Pechel Industries SAS (France) 40 % 33 10 103 31 – L Capital FCPR (France) (1) 44 % 117 – 120 (5) – SFMI Micromania SA (France) (1) 35 % 15 – 37 9 – Sociedad Textil Lonia SA (Spain) (1) 25 % 9 – 17 2 – Other interests – 1 ––––

Investments between 20% and 50% 175 10

Other investments 24 –

Investments greater than 50% 24 –

LVMH treasury shares 404 – TOTAL 1,252 18

(1) The accounting data shown are prior to December 31, 2003. The figures for year-end 2003 were not available at the time of this report. (2) Average of December 2003 market prices.

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

Investment in Bouygues The LVMH group has an interest in Bouygues, managed as part of the Group’s portfolio. In that context, the prospects for a rise in the value of this investment must be assessed over the medium term. At December 31, 2000, this investment was included in the short-term investment portfolio. Therefore, it was reclassified on June 30, 2001 as a long-term investment, after deducting the block sold in July 2001 (2,650,000 shares). A depreciation has been booked for value of the stake in Bouygues, which was calculated based on criteria that take into account the durable decline in valuation by the market of the stocks in the media and telecommunications sector.

79 Gucci investment Between 1999 and 2001, LVMH was involved in a dispute with the Pinault Printemps- Redoute (PPR) and Gucci groups. This dispute concerned the validity of two reserved capital increases, on February 18 and March 19, 1999, which reduced LVMH’s stake in Gucci from 34.4% to about 20%. In September 2001, the PPR, Gucci and LVMH groups settled this dispute through a transactional agreement providing for the following: - the purchased by PPR from LVMH in October 2001 of 8.6 million Gucci shares at USD 94 per share, a total of USD 806 million (897 million euros) ; - the distribution by Gucci in December 2001 of an exceptional dividend of USD 7 per share, which represented, based on the residual LVMH stake on this date, receipts of USD 81 million (90 million euros); - the launch by PPR in March 2004 of a tender offer for all the Gucci stock at a price of USD 101.5 per share. In December 2001, LVMH sold its residual interest of 11.6 million shares to Crédit Lyonnais worth USD 1,037 million (about USD 89.60 per share), or 1,150 million euros. The share sale contract contains an “earn-out” provision entitling LVMH to an additional payment until March 2004 depending on the price of a Gucci share and dividends paid by Gucci during this period. LVMH’s total capital gains on the sale of 20.1 million Gucci shares totaled 774 million euros, and 864 million euros when the exceptional dividend is taken into account.

80 NOTE 10 - TANGIBLE ASSETS millions of euros 2003 2002 2001 Gross Amorti- Net Net Net value zation value value value Property 973 (9) 964 873 924 Vineyards 430 (54) 376 499 501 Buildings 1,681 (597) 1,084 1,368 1,547 Technical facilities, equipment and tools 2,749 (1,600) 1,149 448 581 Other tangible assets 820 (418) 402 1,053 1,078

Total 6,653 (2,678) 3,975 4,241 4,631 Including fixed assets financed by capital 298 (123) 175 216 249 or long-term leases

The changes in tangible assets for financial year 2003 break down as follows: millions of euros Gross Amorti- Net value zation value Balance at December 31, 2002 6,855 (2,614) 4,241 Acquisitions 560 – 560 Disposals, decommissioning (359) 163 (196) Allocations to amortization – (415) (415) Impact of changes in consolidation 5 10 15 Impact of currency fluctuations (408) 178 (230)

Balance at December 31, 2003 6,653 (2,678) 3,975 including acquisitions financed by capital 2 or long-term leases Acquisitions of Tangible Assets primarily represent investments in the retail networks of Louis Vuitton, Sephora and DFS and renovation work on property held by La Samaritaine.

81 NOTE 11 - GOODWILL millions of euros 2003 2002 2001

Currency Amortization Gross Depre- Net Net Net period value ciation value value value Amor- tization DFS 20 1,996 (769) 1,227 1,321 1,415 Sephora 5 to 20 589 (155) 434 471 504 Louis Vuitton 40 350 (58) 292 302 311 Fendi 20 424 (53) 371 323 218 La Brosse & Dupont 25 114 (47) 67 55 57 La Samaritaine 20 59 (9) 50 53 54 Rossimoda 10 43 (4) 39 –– Other (< 40 million euros) 390 (197) 193 193 188

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

Miami Cruiseline USD 20 251 (51) 200 270 340 Donna Karan USD 20 181 (18) 163 203 – Millennium USD 15 57 (5) 52 66 – e-Luxury USD 3 32 (21) 11 25 45 Other (< 30 million euros) Divers 130 (60) 70 86 129

Goodwill in foreign currencies 651 (155) 496 650 514

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

Business Goodwill 75 (49) 26 36 30

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

The goodwill on Sephora includes the value of selective retailing brands in Perfumes and Cosmetics: “Sephora”, present in several European countries, as well as “Carmen”, “Laguna” and “Boïdi” in Italy, and “Beauty Shop” (Marinopoulos Group) in Greece. The goodwill on Louis Vuitton does not represent a price paid for acquiring the brand, because this was developed by the Group. It is the result of successive acquisitions of minority interests in the various legal structures of the Louis Vuitton sub-group. DFS Goodwill: The successive global crises that have occurred since the takeover of DFS by LVMH—the economic crisis in Southeast Asia, the attacks on the World Trade Center—each had substantial temporary impacts on the business and earnings of DFS. In addition, the economic situation in Japan, the major changes in this country, and the yen/dollar parity in 2001 reduced the number of Japanese tourists, the leading customers of DFS, and their purchasing power.

82 In order to determine both the durable drop in business activity and profitability of DFS, and the greatest income swings compared to what was expected when the Group acquired DFS, it was decided in 2001: - To take an exceptional charge of 323 million euros, bringing the net book value of goodwill to a level that can be justified by discounted future cash flows; - To reduce the total amortization period for goodwill from 40 years to 20 years. The net book value on December 31, 2001 of 1,415 million euros will thus be amortized by 1/15th.

Valuation methods for goodwill are the same as those described in note 3 for brands. The changes in the net balance of goodwill over the period break down as follows:

Gross Depreciation Net millions of euros value Amortization value Balance at December 31, 2002 4,549 (1,181) 3,368

Allocations to amortization and provisions – (293) (293) Impact of changes in consolidation 184 4 188 Impact of currency fluctuations (120) 23 (97) Other 3 – 3

Balance at December 31, 2003 4,616 (1,447) 3,169

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

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

83 NOTE 12 - BRANDS AND OTHER INTANGIBLE ASSETS millions of euros 2003 2002 2001

Gross Depre- Net Net Net value ciation value value value Amorti- zation

Brands (*) 8,681 (221) 8,460 8,771 8,861 Leasehold rights 212 (73) 139 137 141 Other 330 (224) 106 98 99 Total 9,223 (518) 8,705 9,006 9,101

(*) Brands break down as follows: millions of euros 2003 2002 2001

Currency Gross Depre- Net Net Net value ciation value value value Amorti- zation Louis Vuitton 2,058 – 2,058 2,058 2,058 Hennessy 1,067 – 1,067 1,067 1,067 Moët 732 – 732 732 732 Parfums Christian Dior 610 – 610 610 610 Guerlain 441 – 441 441 441 Fendi 809 (2) 807 807 809 Céline 351 (70) 281 281 351 Veuve Clicquot 244 – 244 244 244 Parfums Givenchy 152 – 152 152 152 Loewe 122 – 122 122 122 Château d'Yquem 108 – 108 108 108 Krug 100 – 100 100 100 Other (< 100 M€) 343 (25) 318 326 370 Total brands in euros 7,137 (97) 7,040 7,048 7,164

Tag Heuer CHF 796 – 796 854 837 Donna Karan New York USD 410 – 410 494 460 Ebel CHF 117 (117) – 125 123 Other (< 100 M€) 221 (7) 214 250 277 Total brands in currencies 1,544 (124) 1,420 1,723 1,697 TOTAL 8,681 (221) 8,460 8,771 8,861

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

84 The brands are primarily valued by the cash flows method, i.e. based on the provisional cash flows attributable to the brand. However, other methods are used to correct the valuations resulting from projected cash flows: the royalties method, which gives the brand a value equal to the capitalization of the royalties which must be paid to use it; the margin differential method, which applies only to cases where it is possible to measure the revenue generated by a brand compared to an unbranded product; the replacement cost method for an equivalent brand, especially in terms of advertising expenses; finally, the comparison method, which uses multiples of net sales and income from transactions involving similar brands or multiple markets applicable to the activities concerned. The provisional data used in the cash flows method come from the budgets and plans established by the management of the company that uses the brand; the provisional cash- flows are discounted and, if necessary, weighted on the basis of the probability of the occurrence of each of the scenarios used. The discount rate used integrates the rate of return expected by an investor in the business field concerned and the risk premium appropriate to that business. At the end of 2003, these calculations were made on the basis of the following parameters: - The growth rate to infinity used in determining provisional cash flows was most often 2%; the brand positioning in its market, its maturity or growth potential in some cases justified a percentage a half point higher or lower. - The discount rates used, differentiated on the basis of the business and the risk specific to the brand, were as follows:

Wines and Spirits 6.0%

Other luxury brands 8.0% to 8.5%

Selective Retailing 7.0%

The same methods are used to value goodwill. The change in the value of the brands on the balance sheet over the year breaks down as follows:

Gross Depreciation Net millions of euros value Amortization value

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

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

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

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

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

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

85 NOTE 13 - BORROWINGS AND FINANCIAL DEBT

A - Analysis of the financial debt by type

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

Long-term financial debt millions of euros 2003 2002 2001

Undated notes (TDI) 158 222 284

Bonds and EMTN 3,345 3,129 3,766 Capital and long-term leases 110 129 167 Borrowings from credit institutions 727 1,086 1,246 Draws on long-term lines of credit 125 211 223 Other long-term borrowings and financial debt 4,307 4,555 5,402

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

Financial debt under one year millions of euros 2003 2002 2001

Bonds and EMTN 768 166 188 Capital leases and long-term leases 14 16 11 Other loans and lines of credit 89 178 141 Short-term portion of long-term debt 871 360 340 Bonds and EMTN 101 –– Treasury notes 445 1,447 2,837 Other borrowings and lines of credit 1,492 1,667 1,610 Bank overdrafts 429 504 603 Other financial debt 2,467 3,618 5,050

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

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

B - Undated notes (TDI) millions of euros Nominal interest 2003 2002 2001

EUR 762,000,000; 1990 6-month Euribor + 0.45 % 98 147 195 EUR 222,000,000; 1992 9.70% 60 75 89 Total 158 222 284

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

86 As an ordinary unsecured debt, the TDIs since that date are legally redeemable only in cases of court-ordered liquidation or the early dissolution of the LVMH company, except in cases of merger or split. Although they are undated, the TDIs are recorded on the balance sheet for an amount that will be progressively reduced to nil value at the end of 15 years, because of agreements with third parties. In accordance with these agreements, and in return for an initial lump sum payment by LVMH, the third-party companies have promised to hold or to repurchase the notes from note holders after a 15-year period, and have agreed to relinquish any rights to interest on these notes after that time. Under these arrangements: - The TDIs have been recorded in the balance sheet at nominal value at the time of issue, after deducting the aforementioned payments; these notes are amortized every year by the amount of income generated by the investments the third-party companies make with these payments; - the consolidated income from each year funds the interest expense paid on the nominal value, after deducting the amortization.

C - Bonds and EMTN millions of euros Maturity Nominal interest 2003 2002 2001 EUR 750,000,000; 2003 2010 5.00% 750 –– EUR 500,000,000; 2001 2008 6.125% 500 500 500 EUR 850,000,000; 2001 2004 5.375% 708 850 850 EUR 600,000,000; 2000 2005 5.75% 600 600 600 EUR 800,000,000; 1999 2006 5.00% 800 800 800 FRF 1,300,000,761; 1998 indexed 2005 1.00% 33 71 198 FRF 1,500,000,000; 1996 2002 5.25% ––229 EUR 100,000,000; 2003 2008 4.61% 100 –– Public issues 3,491 2,821 3,177 in euros 433 312 770 in foreign currencies 290 162 207 Private placements EMTN 723 474 977 Total bonds and EMTN 4,214 3,295 4,154

In 2003, Christian Dior completed a public bond issue in the amount of 100 million euros, with a maturity of 5 years and a 4.61% coupon; this issue was converted at the time of the issue by a swap into a variable rate issue. In 2003, LVMH completed a bond issue in the amount of 750 million euros, with a maturity of 7 years and a 5% coupon; this issue was converted at the time of the issue by a swap into a variable rate issue. The private placements and public bond issues completed since May 2000 were performed as part of the EMTN (Euro Medium Term Notes) issue program with a ceiling of 5 billion euros. As of December 31, 2003, the outstanding amount of the issue completed under this program totaled 2,745 million euros.

87 D - Breakdown of debt by maturity The breakdown of the debt by maturity was as follows at December 31, 2003: millions of euros 31/12/2003 Years 2004 3,338 2005 1,136 2006 1,264 2007 174 2008 973 After 918 Total 7,803

At December 31, 2003, the irrevocable lines of credit not used totaled 3.8 billion euros. In particular, the long-term lines totaled 1.7 billion euros. Because of these commitments, a fraction of the current portion of long-term debt was maintained under long-term debt, representing 178 million euros. Moreover, because of the existence of renewal authorizations, a portion of the short-term debt was reclassified as long-term borrowings and financial debt, representing 125 million euros at December 31, 2003 (573 and 579 million euros at December 31, 2002 and 2001 respectively).

E - Breakdown of debt by currency At December 31, 2003, the breakdown of the debt by issue currency, after taking into account the hedging instruments issued simultaneously or after the issue, break down as follows as of December 31, 2003: millions of euros After taking into At issue account the hedging Currency instruments

Euro 6,717 5,852 US dollar 247 285 Swiss franc 5 951 Yen 576 497 Hong Kong dollar 54 33 Singapore dollar 67 6 Other currencies 137 179 Total 7,803 7,803

Generally, the currency structure of the debt is intended to cover net assets in currencies coming from the acquisitions of companies outside the euro zone. All the bonds in foreign currencies (see note 13 - C) resulted in the signing of swaps transforming them into borrowings in euros. See note 19 for the details of the debt hedging instruments at December 31, 2003.

88 F - Breakdown of debt by rate The breakdown of the debt by rate as of December 31, 2003 is as follows: millions of euros Before impact After impact of hedging of hedging Currency instruments instruments

Variable rate 3,153 3,908 Capped variable rate - 1,680 Fixed rate 4,650 2,215 Total debt 7,803 7,803

G - Average cost of the debt The average cost of the debt, after taking into consideration the hedging instruments, was 3.6% for financial year 2003 (3.8% for 2002).

H - Liquidity risks In addition to local liquidity risks, which are generally not significant, the Group's exposure to liquidity risk may be assessed through the amount of its short-term net financial debt, which is 2.3 billion euros, or the outstanding amount of its treasury note program, which is 0.4 billion euros. With respect to the possible non-renewal of these loans, the Group has undrawn, confirmed lines of credit in the amount of 3.8 billion euros. Thus, the Group's liquidity is based on the size of its investments, on the magnitude of its long-term financing, on the diversity of its investor base (bonds and short-term paper), and on the quality of its bank relations, whether or not these are reflected in confirmed lines of credit.

Covenants In line with the general practice for syndicated loans, the Group has signed covenants to meet certain financial ratios. Historically based on the net debt to equity ratio, these commitments now involve the coverage of net debt by financial flows for the year.

Confirmed lines of credit not drawn At December 31, 2003, the total outstanding amount of undrawn confirmed lines of credit was 3.8 billion euros.

Guarantees and real sureties At December 31, 2003, the amount of the financial debt secured by real sureties was not significant.

89 NOTE 14 - OTHER LIABILITIES millions of euros 2003 2002 2001 Foreign currency hedging – deferred gains and losses 322 247 276 Personnel charges 413 377 358 State and local authorities: income and other taxes 284 245 196 Customers: advances and installments paid 93 119 116 Deferred payments on tangible assets or long-term investments 148 156 235 Provisions for restructuring 134 108 171 Other provisions for risks and contingencies 228 286 202 Provisions for returned stock 81 97 116 Prepaid income 133 45 20 Other liabilities 705 1,066 1,073 Total 2,541 2,746 2,763

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

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

Other Changes in (including Dec. 31, consoli- translation Dec. 31, 2002 Increases Used Reversed dation differences) 2003 Provisions for restructuring 108 74 (33) (2) – (13) 134 Provisions for risks and contingencies 286 80 (73) (30) 2 (37) 228 Provisions for returned products 97 48 (54) (8) – (2) 81 Total 491 202 (160) (40) 2 (52) 443 including the impact on: • Income from operations – 85 – (31) ––– • Net financial income – 20 ––– –– • other – 97 – (9) –––

90 NOTE 15 - OTHER MEDIUM AND LONG-TERM LIABILITIES AND PROVISIONS millions of euros 2003 2002 2001 Provisions for retirement plans, medical expenses and similar liabilities (1) 202 179 258 Provisions for risks and contingencies 555 480 548 Reorganization allowance 66 80 160 Provisions for employee profit-sharing (2) 56 51 50 Deferred payments for equity investments 146 182 114 Other liabilities 111 179 192 Total 1,136 1,151 1,322

(1) Since January 1, 2002, the dedicated placements to cover commitments no longer appear under assets on the balance sheet, but are deducted from the amounts of the provisions funded; at December 31, 2001, dedicated placements shown under assets on the balance sheet were 81 million euros. (2) French companies only, pursuant to legal requirements.

- Provisions for pensions, medical costs and related commitments are discussed in note 26. - The provisions for risks and contingencies represent the estimate of the effects on holdings from risks, litigation, and disputes that exist or are probable, which result from the Group's activities: these risks are international in a regulatory framework that is often imprecise, which varies according to the country and over time, and applies to areas as varied as the contents of products or calculation of taxes. In 2003, provisions for risks and contingencies and for restructuring changed as follows:

Other Changes in (including Dec. 31, consoli- translation Dec. 31, 2002 Increases Used Reversed dation differences) 2003 Provisions for risks and contingencie 480 99 (32) (29) 5 32 555 Provisions for restructuring 80 14 (16) - - (12) 66 Total 560 113 (48) (29) 5 20 621 including: • Income from operations – 12 – (5) ––– • other – 101 – (24) –––

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

A - Capital Stock On December 31, 2003, capital stock consisted of 181,727,048 shares (including 13,045,837 shares with double voting rights). No shares were created in 2003. In 2001, 2002 and 2003, Christian Dior respectively acquired 461,664, 490,200 and 514,800 of its own shares and sold 88,000 in 2001, 26,164 in 2002 and 130,900 in 2003. The Board of Directors granted the following stock options for a total of 3,390,900 shares: • At its meeting of October 14, 1996: 378,400 shares at a unit price of 25.95 euros per share, to be exercised between December 1, 1999 and November 30, 2006 to the company’s executives and executives of subsidiaries and sub-subsidiaries; • At its meeting of May 29, 1997: 391,600 shares at a unit price of 32.01 euros per share, to be exercised between May 30, 2002 and May 29, 2007 to the company’s executives and executives of subsidiaries and sub-subsidiaries; • At its meeting of November 3, 1998: 393,600 shares at a unit price of 18.29 euros per share, to be exercised between November 4, 2003 and November 3, 2008 to the company’s executives and executives of subsidiaries and sub-subsidiaries; • At its meeting of January 26, 1999: 358,000 shares at a unit price of 25.36 euros per share, to be exercised between January 25, 2004 and January 24, 2009 to the company’s executives and executives of subsidiaries and sub-subsidiaries; • At its meeting of February 15, 2000: 400,800 shares at a unit price of 56.70 euros per share, to be exercised between February 15, 2005 and February 14, 2010 to the company’s executives and executives of subsidiaries and sub-subsidiaries; • At its meeting of February 21, 2001: 437,500 shares at a unit price of 45.95 euros per share, to be exercised between February 21, 2004 and February 20, 2011 to the company’s executives and executives of subsidiaries and sub-subsidiaries; • At its meeting of February 18, 2002: 504,000 shares at a unit price of 33.53 euros per share, to be exercised between February 18, 2005 and February 17, 2012 to the company’s executives and executives of subsidiaries and sub-subsidiaries. • At its meeting of February 18, 2003: 527,000 shares at a unit price of 29.04 euros per share, to be exercised between February 18, 2006 and February 17, 2013 to the company’s executives and executives of subsidiaries and sub-subsidiaries;

92 B - Change in shareholders’ equity and minority interests millions of euros 2003 2002 2001

Group Minority Group Minority Group Minority

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

Result for the year 303 534 178 459 (95) 97 Dividends and interim dividends distributed (51) (291) (51) (222) (51) (369) Change in currency translation adjustments of the financial statements of the foreign companies (166) (258) (36) (86) (4) 5 Impact of capital increases –– – – 4 – Changes in consolidation – (43) – (96) – 393 Change in LVMH treasury shares 3 12 9 33 51 158 Other (3) – 1 – –– At December 31 before appropriation 3,879 8,700 3,889 8,746 3,877 8,658 Balance of Christian Dior SA dividend (paid in June) (105) – (96) – (89) – At December 31 after appropriation 3,774 8,700 3,793 8,746 3,788 8,658

C - Foreign exchange differences The currency translation differences recorded in shareholders' equity at December 31, 2003, and the change over the year, net of the effects of hedging of net assets in currencies, break down as follows: millions of euros At December 31, 2003 Change

US Dollar (290) (143) Hong Kong Dollar (30) – Yen (21) (2) Argentine Peso (18) – Swiss Franc 71 (11) Euro 39 – Other (18) (10) Total (267) (166)

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

93 NOTE 17 - STOCK OPTION PLANS

Start No. No. Purchase No. Number of Meeting date of options of price of options options not date of the plan (1) bene- (in euros) exercised exercised at ficiaries (2) (3) in 2003 (2) December 31, 2003 (2) LVMH May 25, 1992 Mar 17, 1993 49,681 548 15.40 56,017 – May 25, 1992 Mar 16, 1994 139,031 364 17.84 17,845 1,576,835 May 25, 1992 June 17, 1994 1,250 1 17.68 7,565 – May 25, 1992 Mar 22, 1995 256,903 395 20.89 14,350 417,520 June 8, 1995 May 30, 1996 233,199 297 34.15 46,785 714,935 June 8, 1995 May 29, 1997 233,040 319 37.50 40,480 1,028,740 June 8, 1995 Jan 29, 1998 269,130 346 25.92 251,530 1,014,315 June 8, 1995 Mar 16, 1998 15,800 4 31.25 16,500 70,400 June 8, 1995 Jan 20, 1999 320,059 364 32.10 26,275 1,657,760 June 8, 1995 Sept 16, 1999 44,000 9 54.65 – 220,000 June 8, 1995 Jan 19, 2000 376,110 552 80.10 – 1,879,550 May 17, 2000 Jan 23, 2001 2,649,075 786 65.12 – 2,606,075 May 17, 2000 Mar 6, 2001 40,000 1 63.53 – 40,000 May 17, 2000 May 14, 2001 1,105,877 44,669 66.00 – 1,105,877 May 17, 2000 May 14, 2001 552,500 4 61.77 – 552,500 May 17, 2000 Sep 12, 2001 50,000 1 52.48 – 50,000 May 17, 2000 Jan 22, 2002 3,256,700 968 43.30 – 3,249,100 May 17, 2000 Jan 22, 2002 27,400 25 45.70 27,400 May 17, 2000 May 15, 2002 8,560 2 54.83 – 8,560 17, 2000 Jan 22, 2002 3,155,225 941 37.00 – 3,155,225 May 17, 2000 Jan 22, 2002 58,500 38 38.73 – 58,500 Sous Total LVMH 477,347 19,433,292 Christian Dior May 30, 1996 Oct 14, 1996 94,600 21 25.95 17,200 265,200 May 30, 1996 May 29, 1997 97,900 22 32.01 17,200 372,400 May 30, 1996 Nov 3, 1998 98,400 23 18.29 96,500 295,100 May 30, 1996 Jan 26, 1999 89,500 14 25.36 – 358,000 May 17, 2000 Feb 15, 2000 100,200 20 56.70 – 400,800 May 14, 2001 Feb 21, 2001 437,500 17 45.95 – 437,500 May 14, 2001 Feb 18, 2002 504,000 24 33.53 – 504,000 May 14, 2001 Feb 18, 2003 527,000 25 29.04 – 527,000 Sous Total Christian Dior 130,900 3,160,000 Total 608,247 22,593,292

(1) Number of options at the issuance of the plan, not restated to reflect the subsequent adjustments resulting from the one-for-ten bonus share allotments in July 1994 and June 1999, the five-for-one splits in March 1994 and July 2000, for LVMH, and the four-for-one split in July 2000 for Dior. (2) Adjusted to reflect the transactions referred to in (1) above. (3) Figures prior to 1999 were converted into euro from data originally recorded in francs.

94 Number of options 2003 2002 2001

Options outstanding at January 1 19,471,509 15,993,732 12,148,265 Options granted 3,735,525 3,801,860 4,834,952 Options exercised (608,247) (268,923) (985,410) Options that have become void (5,495) (55,160) (4,075)

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

(1) incl. 19,433,292 LVMH shares 3,160,000 Christian Dior shares (2) incl. 16,702,409 LVMH shares 2,763,900 Christian Dior shares granted to current plans and 5,200 Christian Dior shares allocated to future plans (3) incl. 13,725,832 LVMH shares 2,267,900 Christian Dior shares

95 NOTE 18 - RESEARCH AND DEVELOPMENT COSTS Research and development costs amounted to 38 million euros in 2003 (36 million in 2002; 27 million in 2001). These amounts cover costs incurred in scientific research and new product development. Research and development costs extended to “packaging” and “design” amounted to 41 million euros in 2003 (47 million euros in 2002; 37 million euros in 2001).

NOTE 19 - FINANCIAL INCOME millions of euros 2003 2002 2001 Financial expenses (329) (526) (728) Financial income 49 194 222 Income from sale of short-term securities (1) 9 (33) Depreciation allowance for short-term securities – (3) 17 Foreign exchange income 12 (7) 23

Total (269) (333) (499) including financial expenses paid during the period (306) (535) (702)

A - Exposure to market risks and hedging the currency risk 1 - In the Group’s French companies, foreign currency risks relate mainly to commercial transactions (net sales in foreign currency) and, to a lesser extent, to financial operations (investments, foreign currency financing).

Commercial operations: some Group subsidiaries realize a considerable portion of their commercial transactions in foreign currency. For example, 2003 sales revenues were earned in the following currencies: millions of euros Valeur % Euros 4,157 33 US dollars 3,747 30 Yens 2,007 16 Hong Kong dollars 452 4 Pounds Sterling 537 4 Other currencies 1,566 13

Net sales 12,466 100

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

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

96 Various financial instruments are used to hedge against exchange rate risk, such as foreign currency swaps, futures contracts and currency options. In accordance with the currency translation methods stated in the accounting principles (note 2-2), the hedging instruments used are assigned either to trade receivables or liabilities, or to estimated transactions for the following year. The unrealized gains or losses from translation revalued at the December 31 exchange rate are: • Recorded in the income statement when they concern hedging instruments assigned to receivables or liabilities; • Deferred if they are designated as hedges for transactions for the following period. The nominal amounts of the hedges outstanding at December 31, 2003, classified by year of allocation and by type of hedging instrument and valued at the market value on the basis of the currency rates at December 31, 2003, are as follows: millions of euros Nominal amounts of the contracts Market Contracts hedging commercial risks 2003 2004 2005 and 2006 Total value (1)

Forward currency contracts (2) USD 269 57 53 379 27 JPY 32 (2) – 30 – Other 41 99 12 152 2 342 154 65 561 29 Exchange swaps (2) USD 54 ––54 6 JPY (114) 17 – (97) (1) CHF 1,013 ––1,013 – Other 65 ––65 5 1,018 17 – 1,035 10 Currency swaps (2) USD –– (19) (19) (3) JPY – (19) (40) (59) (11) Other –– (86) (86) (5) – (19) (145) (164) (19) Options purchased Put USD 1 838 24 863 86 Put JPY – 235 – 235 23 Other – (6) – (6) – 1 1,067 24 1,092 109 Tunnels Seller USD 54 277 132 463 88 Seller JPY 113 228 – 341 26 Other – 75 23 98 9 167 580 155 902 123 Accruals inc. USD 10 64 – 74 41 inc. JPY 6 75 – 81 30 16 139 – 155 71

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

97 2 - The portion of consolidated net income excluding unusual items representing results of subsidiaries that prepare their accounts in pounds sterling, yen, US dollars and currencies pegged to the dollar totaled 176 million euros. A 10% fluctuation in the exchange rate of these currencies would have an impact of 75 million euros on the consolidated operating income and 18 million euros on consolidated net income.

B - Hedging the rate risk The Group manages the rate risk related to the global net financial debt. The objective of the management policy conducted is to protect earnings from a rapid and significant increase in interest rates. In this context, the Group uses firm rate derivatives (swaps) or options (caps and floors). The notional amount of the hedges outstanding at December 31, 2003, classified by type and maturity, and their market value on that date, break down as follows: millions of euros

Notional amounts of the contracts Maturity Market < 1 year 1 to 5 years > 5 years Total value (1)

Rate swaps - fixed payer EUR – 1,394 – 1,394 (70) USD 119 79 – 198 – Other ––––– 119 1,473 – 1,592 (70) Rate swaps - variable payer EUR 915 2,326 811 4,052 188 Other ––––– 915 2,326 811 4,052 188 Rate swaps - variable/variable EUR 600 1,050 – 1,650 (27) USD 59 653 – 712 (19) CHF 94 –– 94 6 Other ––––– 753 1,703 – 2,456 (40) Caps bought EUR 350 1,695 – 2,045 6 USD 534 59 – 593 – CHF 94 –– 94 – Other ––––– 978 1,754 – 2,732 6 Tunnels (caps bought and floors sold) EUR 300 2,125 – 2,425 3 Other ––––– 300 2,125 – 2,425 3 Floors sold EUR 50 365 – 415 (6) Other ––––– 50 365 – 415 (6)

(1) Income/(expense)

98 C - Hedging the equity risk As the investment policy of the Group is to acquire interests over time, the portfolio of unconsolidated equity interests is not hedged.

D - Summary table of market values

2003 2002 Book Fair Book Fair millions of euros value value value value

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

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

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

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

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

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

NOTE 20 - OTHER INCOME AND EXPENSES In 2003: • Other income and expenses represent restructuring expenses of 127 million euros, losses on disposals completed or in progress totaling 139 million euros, and 77 million euros in exceptional depreciation of assets; other income and expenses also include net proceeds of 55 million euros from the sale of LVMH shares and changes in provisions on these securities, as well as an additional depreciation of 33 million euros on the Bouygues stake. The restructurings involve the various businesses of the Group: including the streamlining of the distribution networks of Wines and Spirits, primarily in Europe; in Perfumes and Cosmetics, an increased selectivity of points of sale, primarily in the United States; the closing or resizing of industrial units in Italy and Switzerland by the Watches and Jewelry branch; and, finally, the transfer from San Francisco to Singapore and Hong Kong of the administrative operations and management of DFS.

99 The brands and operations sold are described in Note 1 – Changes in consolidation; the losses from disposals result primarily from the provision funded for the sale of the Ebel brand and assets which is currently in progress. The depreciation of assets affects primarily the assets acquired under long-term leases, for which the lease payment have become greater than the market value.

In 2002: • Other income and expenses include the following: a net capital gain of 55 million euros from the sales of the Pommery, Hard Candy and Urban Decay brands, various real estate assets and the investments in Fininfo and Grand Marnier; a supplemental provision of 200 million euros for the Bouygues securities; a non-recurring write-down of assets for 116 million euros, including 41 million euros for inventories and 55 million euros for intangible assets. Other income and expenses also include net income of 17 million euros from the sales of LVMH shares and changes to the reserves for these securities, and a total of 161 million euros primarily related to provisions for the costs of restructuring the distribution network of Moët Hennessy in certain countries, to the complete divesting of Phillips capital and to the closing of some shops.

In 2001: • Other income and expenses include the profits from the LVMH stock portfolio: 39 million euros in capital gains from sales, and 343 million euros from a write-down reserve for securities held at year end. This items also includes accelerated depreciation of inventories of POS promotional articles in the Perfumes and Cosmetics branch, and the write-down of various assets, especially shares of unconsolidated investments.

NOTE 21 - INCOME TAXES millions of euros 2003 2002 2001 Current taxes (377) (502) (456) Deferred taxes (119) 146 262 Total (496) (356) (194)

In 2000, French companies were subject to a current tax surcharge of 13%, which was reduced to 9.3% in 2001 and to 6.3% in 2002 and 2003. This surtax resulted in 2003 in an additional charge of 23 million euros (10 million euros in 2002; 8 million euros in 2001). At December 31, 2003, deficit carry forwards not yet used, which did not result in deferred tax assets, totaled 1,785 million euros (1,926 million euros in 2002 and 1,903 million euros in 2001), including a deficit of 309 million euros originating during the year (685 million euros in 2002 and 693 million euros in 2001). Tax sharing agreements allow certain French companies of the Group to combine their taxable results to determine the overall tax expense for which only the parent company is fully liable. The adoption of this procedure allowed the Christian Dior group to record a tax savings of 304 million euros at December 31, 2003 (325 million euros in 2002; 313 million euros in 2001).

100 Main components of deferred taxes: • On the statement of income millions of euros 2003 2002 2001 Deferred foreign exchange gains and losses – (2) (21) Intra-group margin included in the inventories 9 4 2 Valuation changes (1) 16 7 Provisions for risks and contingencies and depreciation of assets 34 5 (20) Consolidation restatements and other temporary differences (1) 9 12 31 Unrealized capital gains and losses 52 8 27 Deficits carried forward/(used) (222) 103 246 Impact of tax rate changes ––(10) Deferred tax (expense)/income (119) 146 262

• On the balance sheet millions of euros 2003 2002 2001 Intra-group margin included in the inventories 151 144 153 Valuation changes (284) (280) (271) Provisions for risks and contingencies and depreciation of assets 133 93 95 Consolidation restatements and other temporary differences (1) 30 34 26 Unrealized capital gains and losses 110 58 48 Losses carried forward 153 376 248 Other 2 6 33 Net deferred income taxes 295 431 332 including: short-term deferred tax credit 455 558 503 long-term deferred tax liability (160) (127) (171)

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

101 Taxes deferred for more than one year are not discounted because of the random nature of the repayment. Analysis of the difference between the effective tax rate and the French statutory tax rate: The reconciliation between the French statutory tax rate applied to French companies and the effective tax rate recorded in the consolidated financial statements breaks down as follows:

(as % of income before tax ) 2003 2002 2001

French statutory tax rate 33.3 33.3 33.3 • Temporary tax surcharge applicable to French companies 1.0 0.8 3.3 • Effect of differences between foreign and French tax rates (0.3) (1.1) (5.1) • Deficits of subsidiaries or from fiscal consolidations (3.5) (4.4) (2.1) • Effect of differences between consolidated taxable results and results taxable at a reduced rate (0.3) (1.2) 2.1 • Impact of withholding 0.4 0.8 1.0 Effective tax rate 30.6 28.2 32.5

NOTE 22 - AMORTIZATION OF GOODWILL millions of euros 2003 2002 2001 Companies consolidated by: • Full consolidation (240) (251) (151) • Equity method (4) (2) (8)

Current amortization (244) (253) (159) Unusual amortization (46) –– Total (290) (253) (159)

Unusual amortization in 2003 refers primarily to the partial depreciation of goodwill on Laflachère for 30 million euros and on Acqua di Parma for 12 million euros. See also note 23 “Unusual items” for the unusual write-offs recorded in this account.

102 NOTE 23 - UNUSUAL ITEMS

In 2001, unusual items included income of 864 million euros from Gucci, including a capital gain of 774 million euros from the sale of these Gucci shares and an exceptional dividend of 90 million euros recorded during the fourth quarter of the year (see note 9 - Interest in Gucci). Negative unusual items included a restructuring provision of 446 million euros, including 385 million euros for selective retailing. Exceptional asset depreciation or amortization expenses of 480 million euros were also recorded: they included 323 million euros for DFS goodwill, 82 million euros for the Bouygues investment, and 60 million euros for media and telecommunications investments. The accounts reflected an expense of 141 million euros related to the sale of Phillips, de Pury & Luxembourg to its current management. This expense mainly corresponds to the full amortization of the goodwill.

NOTE 24 - COMMITMENTS AND CURRENT LITIGATION

A - Purchase commitments millions of euros 2003 2002 2001 Grapes, wines and distilled alcohol 456 429 413 Industrial or commercial assets 81 104 80 Equity interests 470 (1) 756 975

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

In the Wines and Spirits business group, some companies have contractual agreements with various local growers to supply a portion of their future requirements for grapes, light wine and distilled alcohol. Depending on the business, these commitments are based on contractual terms or the latest known prices and anticipated yields. They primarily cover the years 2004 and 2005. The commitments to purchase investment shares represent contract commitments entered into by the Group to purchase minority interests in consolidated subsidiaries or additional interest in unconsolidated subsidiaries, or additional payments of the price of realized transactions. These amounts do not include the effects of the Memorandum of Understanding of January 20, 1994 between LVMH and Diageo, under which LVMH agreed to purchase at Diageo's request its 34% of Moët Hennessy, with 6-months notice, for an amount equal to 80% of its value on the date of this request. On the date of the Memorandum, the Diageo investment in Moët Hennessy was assessed at more than 1.2 billion euros.

B - Securitization of trade receivables millions of euros 2003 2002 2001

Receivables from the Dailly 260 260 266 incl.: risk of non-collection retained by LVMH (112) (100) (108) Net financing mobilized 148 160 158

103 C - Deposits, pledges and other guarantees millions of euros 2003 2002 2001

Deposits and pledges 33 43 66 Mortgages and sureties 5 95 278 Other guarantees 38 49 155 Guarantees given 76 187 499 Guarantees received 11 12 15

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

D - Lease and similar commitments At December 31, 2003, the number of stores operated by the Group worldwide, particularly for the Fashion and Leather Goods and Selective Retailing groups, was 1,751 (1,670 in 2002; 1,617 in 2001). In many countries, the leases on these stores carry minimum amounts, particularly when the leases contains an indexing clause based on revenues; this is the case for royalties paid under airport concessions. In addition, the leases may also include nonadjustable minimum terms. The Group also finances part of its equipment through simple, long-term operating leases. Lastly, some capital assets or manufacturing equipment were acquired or refinanced through finance-lease or lease-back agreements. At December 31, 2003, future non-cancelable commitments arising from these contracts broke down as follows: millions of euros 2003 2002 2001

Simples leases 2,429 2,387 2,092 Concession royalties 617 916 1,041 Off-balance sheet leasing commitments 3,046 3,303 3,133 Royalties on capital and long-term leases 429 531 192 Interest included in the royalties from capital and long-term leases (305) (387) (14) Liabilities from capital and long-term leases on the balance sheet 124 144 178 Current value of lease commitments 3,170 3,447 3,311

The rents incurred during the period for the leasing agreements (net of sub-leases) were as follows: millions of euros 2003 2002 2001 Minimum rents 368 334 509

104 E - Commitment schedule at December 31, 2003 Total less than 2 to 4 to beyond millions of euros 1 year 3 years 5 years 5 years Commitments to purchase materials 456 244 106 56 50 Commitments to purchase assets 81 69 7 5 – Commitments to purchase securities (*) 470 158 120 52 140 Receivables from Dailly sale 148 148 ––– Lease and similar commitments: - Simple leases 2,429 387 654 552 836 - Concession fees 617 171 240 81 125 - Capital lease fees (incl. 305 representing interests) 429 14 29 22 364 Deposits, pledges and other guarantees given 76 38 24 2 5

(*) When the maturity of a commitment is conditional, it is considered to mature beyond 5 years. F - Other commitments To the knowledge of the Group, there are no off-balance sheet commitments other than those described above. G - Possible liabilities and current disputes In the ordinary course of its business, the Group is a party from time to time to legal proceedings and claims involving trademarks and intellectual property, selective retailing agreements, licensing, employee relations, tax audits and other matters incidental to its business. The Group estimates that the provisions included in the balance sheets related to litigation and disputes known or in-process at the closing date are sufficient to cover any unfavorable outcome, so that the Group financial position would not be significantly affected.

NOTE 25 - EVENTS AFTER CLOSING

In February 2004, the sale of Ebel was finalized.

In March 2004: - LVMH increased its interest in Donna Karan from 89% to 98% for the amount of USD 43.8 million; - Finally, Moët Hennessy's stake in Millennium was increased by 40% to 70%, in consideration for a payment of USD 107 million.

105 NOTE 26 - EMPLOYEE INFORMATION Payroll charges totaled 2,261 million euros (2,336 million in 2002; 2,310 million in 2001). The average number of employees in 2003 was 56,815 (55,314 in 2002; 54,463 in 2001). At December 31, the staffing of fully consolidated companies was as follows:

By business group 2003 2002 2001 Christian Dior Couture 2,004 1,728 1,383 Wines and Spirits 4,757 4,801 5,089 Fashion and Leather Goods 17,177 16,323 13,402 Perfumes and Cosmetics 13,082 13,006 13,087 Watches and Jewelry 2,255 2,366 2,233 Selective Retailing 18,091 18,243 18,542 Other activities 880 1,074 1,443 Total 58,246 57,541 55,179

By geographic region 2003 2002 2001 France 20,201 20,990 20,399 Europe (excluding France) 11,646 10,871 10,194 U.S.A. 13,106 13,050 12,235 Japan 4,402 4,043 3,591 Asia Pacific 8,891 8,587 8,760 Total 58 246 57,541 55,179

By category 2003 2002 2001 Laborers 9,156 9,084 9,116 Wage earners 33,899 32,710 31,730 Supervisors 5,870 5,735 5,066 Managers 9,321 10,012 9,267 Total 58,246 57,541 55,179

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

106 Expenses and provisions for retirements, medical costs and similar liabilities

• Expenses for the year millions of euros 2003 2002 2001 Cost of the services rendered 40 34 24 Impact of the discounting 18 15 15 Expected return on dedicated placements (7) (6) (7) Amortization of actuarial differences 1 3 4 Plan changes 16 – 7 Expense for the year 68 46 43

• Analysis of the commitment millions of euros 2003 2002 2001 Discounted value of the rights 433 373 301 Market value of dedicated placements (192) (149) (113) Items not recognized (34) (38) (4)

Net commitment 207 186 184 incl.: Other long-term liabilities 202 179 177 Other liabilities less than one-year 8 7 7 Long-term financial assets (3) –– Total 207 186 184

• The changes in the commitments break down as follows:

Discounted Market Items Net value values of the not commit- millions of euros of entitlements placement recognized ments

Balance at December 31, 2002 373 (149) (38) 186 Expense for the year 58 (7) 17 68 Benefits paid to beneficiaries (19) 8 – (11) Increase in dedicated placements – (25) – (25) Impact of exchange rate changes (21) 5 – (16) Impact of changes in consolidation –––– Transfers (1) 29 (24) – 5 Other (including actuarial differences and changes in treatment) 13 – (13) –

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

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

107 The actuarial assumptions used to estimate the commitments in the principal countries where the commitments are located, are as follows: Discount rate 2.50% in Japan, 4.50% in France, 6.00% in the United States Expected long-term rate of return on investments 4.00% in Japan, 4.50% in France, 8.75% in the United States Rate of increase of salaries 2.00% to 4.00%

NOTE 27 - INFORMATION SPECIFIC TO BUSINESS GROUPS 1. Net sales millions of euros 2003 2002 2001

Christian Dior Couture 523 492 350 Wines and Spirits 2,116 2,266 2,232 Fashion and Leather Goods 4,149 4,207 3,612 Perfumes and Cosmetics 2,181 2,336 2,231 Watches and Jewelry 502 552 548 Selective Retailing 3,039 3,337 3,493 Other activities, eliminations and restatements (44) (22) 101 Total 12,466 13,168 12,567

2. Income from operations millions of euros 2003 2002 2001

Christian Dior Couture 40 33 (5) Wines and Spirits 796 750 676 Fashion and Leather Goods 1,311 1,280 1,274 Perfumes and Cosmetics 178 161 149 Watches and Jewelry (48) (13) 27 Selective Retailing 106 20 (213) Other activities, eliminations and restatements (170) (197) (360) Total 2,213 2,034 1,548

3. Balance Sheet Assets millions of euros 2003 2002 2001

Christian Dior Couture 809 747 676 Wines and Spirits 5,084 4,822 5,244 Fashion and Leather Goods 6,092 6,245 5,371 Perfumes and Cosmetics 2,446 2,450 2,543 Watches and Jewelry 1,444 1,657 1,662 Selective Retailing 4,189 4,477 5,054 Other activities, eliminations and restatements 5,738 6,404 8,678 Total 25,802 26,802 29,228

108 4. Inventories millions of euros 2003 2002 2001 Christian Dior Couture 113 103 75 Wines and Spirits 1,999 1,912 2,018 Fashion and Leather Goods 468 462 395 Perfumes and Cosmetics 228 225 282 Watches and Jewelry 188 196 194 Selective Retailing 483 524 590 Other activities, eliminations and restatements 38 100 173 Total 3,517 3,522 3,727

The eliminations correspond to the cancellation of the amount resulting from intra-group operations. As the activities of the Internet site e-Luxury.com were reclassified from the “Other businesses" group to the “Fashion and Leather Goods” group in 2003, and the activities of Sephora.com were reclassified in 2002 from the “Other businesses” group to “Selective Retailing”, the earlier data have been restated to make them comparable.

NOTE 28 - INFORMATION BY GEOGRAPHIC REGION millions of euros 2003 2002 2001 Group and non-Group export sales of French companies 3,752 3,851 3,742 Exports as a percentage of the sales of French companies 65% 65% 65% Percentage of consolidated net sales earned outside France 82% 83% 83%

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

1. Net sales millions of euros 2003 2002 2001 France 5,767 5,938 5,770 Europe (excluding France) 2,641 2,551 2,426 U.S.A. 2,882 3,737 3,228 Japan 1,893 1,890 1,825 Asia (excluding Japan) 1,203 1,988 2,101 Other countries 1,455 489 569 Total 15,841 16,593 15,919 Eliminations (3,375) (3,425) (3,352) Total 12,466 13,168 12,567

109 2. Income from operations millions of euros 2003 2002 2001 France 1,237 1,210 1,238 Europe (excluding France) 49 78 31 U.S.A. 198 8 (369) Japan 395 392 334 Asia (excluding Japan) 301 313 289 Other countries 33 33 25 Total 2,213 2,034 1,548

3. Balance sheet assets millions of euros 2003 2002 2001 France 15,351 15,549 17,206 Europe (outside France) 4,458 4,256 4,262 U.S.A. 3,142 3,989 4,436 Japan 844 773 675 Asia (excluding Japan) 1,529 1,810 2,056 Other countries 478 425 593 Total 25,802 26,802 29,228

4. Balance sheet liabilities (excluding shareholders' equity and minority interests) millions of euros 2003 2002 2001 France 9,583 9,929 12,096 Europe (outside France) 1,067 1,167 1,314 U.S.A. 923 1,206 1,425 Japan 743 696 572 Asia (excluding Japan) 803 1,076 1,209 Other countries 104 93 77 Total before appropriation 13,223 14,167 16,693 Dividends paid 105 96 89 Total after appropriation 13,328 14,263 16,782

110 NOTE 29 - LIST OF CONSOLIDATED COMPANIES IN 2003 All the companies below are fully consolidated except for those indicated by the number (2), which are consolidated under the equity method and those indicated by (1), which are consolidated on a proportionate basis. PERCENTAGE COMPANIES HEAD OFFICE Control Interest Christian Dior Couture Christian Dior Couture SA Paris, France 100% 100% S.A.M. Christian Dior Monaco 100% 100% Christian Dior GmbH Munich, Germany 100% 100% Christian Dior, Inc. New York, U.S.A. 100% 100% Christian Dior Retail - UK Ltd London, United Kingdom 100% 100% Christian Dior (Suisse) SA Geneva, Switzerland 100% 100% Les Jardins d’Avron Paris, France 100% 100% Mardi SpA Badia e Settimo, Italy 50% 50% Ateliers AS (2) Pierre Bénite, France 25% 25% Christian Dior Far East Hong Kong 100% 100% Christian Dior Fashion Malaysia Kuala-Lumpur, Malaysia 100% 100% Christian Dior Malaysia Ltd Kuala-Lumpur, Malaysia 100% 100% Christian Dior Hong Kong Hong Kong 100% 100% Christian Dior Taiwan Taipei, Taiwan 90% 90% Christian Dior Singapore Singapore 100% 100% Christian Dior Saipan Saipan, NMI 100% 100% Christian Dior Australia Sydney, Australia 100% 100% Christian Dior New Zealand Auckland, New Zealand 100% 100% Christian Dior (Thailand) Bangkok, Thailand 100% 100% Christian Dior KK Tokyo, Japan 100% 100% Christian Dior Couture Korea Ltd Seoul, South Korea 100% 100% Christian Dior Guam Ltd Agana, Guam 100% 100% Montaigne Española Barcelona, Spain 100% 100% CD do Brazil Sao Paulo, Brazil 100% 100% CD Italia Milan, Italy 100% 100% Christian Dior Belgique Brussels, Belgium 100% 100% Bopel Spa Milan, Italy 70% 70% Christian Dior Indonesia Jakarta, Indonesia 80% 80% CD Puerto Banus Puerto Banus, Spain 75% 75% JA LLC New York, United States 100% 100% Jean Rose II Saint Tropez, France 100% 100% Lucilla Sieci, Italy 51% 51% CD Ceska Prague, Czech Republic 100% 100% Wines and Spirits Champagne Moët & Chandon SCS Epernay, France 42% 28% Champagne Ruinart SA Rheims, France 42% 28% (2) Company consolidated under the equity method

111 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

112 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

Fashion and Leather Goods Louis Vuitton Malletier SA Paris, France 42% 42% Société des Ateliers Louis Vuitton SNC Paris, France 42% 42% Société Louis Vuitton Services SNC Paris, France 42% 42% Sté des Magasins Louis Vuitton France SNC Paris, France 42% 42% Louis Vuitton Monaco SA Monte Carlo, Monaco 42% 42% LVMH Fashion Group UK Ltd. London, United Kingdom 42% 42% Louis Vuitton Deutschland GmbH Düsseldorf, Germany 42% 42% Louis Vuitton España SA Madrid, Spain 42% 42% (2) Company consolidated using the equity method (3) Joint venture with Diageo: only the Moët Hennessy activity is consolidated

113 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

114 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

115 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

116 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

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

117 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

118 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

119 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

Watches and Jewelry TAG Heuer International SA Luxembourg, Luxembourg 42% 42% TAG Heuer SA Marin, Switzerland 42% 42% LVMH Relojeria & Joyeria España SA Madrid, Spain 42% 42% LVMH Montres & Joaillerie France SA Paris, France 42% 42% LVMH Watch & Jewelry Italy Holding SpA Milan, Italy 42% 42% TAG Heuer Central Europe GmbH Bad Homburg, Germany 42% 42% Timecrown Ltd Manchester, United Kingdom 42% 42% LVMH Watch & Jewelry UK Ltd Manchester, United Kingdom 42% 42% Ebel Ltd Manchester, United Kingdom 42% 42% Tag Heuer Ltd Manchester, United Kingdom 42% 42% LVMH Watch & Jewelry USA (Inc) Springfield, (New Jersey), U.S.A. 42% 42% (2) Company consolidated using the equity method

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

121 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

Watches and Jewelry (continued) PLD Private Label Development SA La Chaux-de-Fonds, Switzerland 42% 42% Fred Paris SA Paris, France 42% 42% SAM Joaillerie de Monaco Monte Carlo, Monaco 42% 42% Fred Genève SA Geneva, Switzerland 42% 42% Fred Joaillier, Inc. Beverly Hills (California), U.S.A.(*) 42% 42% Fred Londres Ltd. London, United Kingdom 42% 42% Benedom France SARL Paris, France 42% 42% Selective Retailing Sephora SA Boulogne Billancourt, France 42% 42% Sephora France SA Saran, France 42% 42% Plus Beau Moins Cher SARL Levallois Perret, France 42% 32% Sephora Luxembourg SARL Luxembourg, Luxembourg 42% 42% Sephora España Perfumerias SL Madrid, Spain 42% 42% Sephora Italia SpA Milan, Italy 42% 42% Sephora Portugal Perfumeria Lda Lisbon, Portugal 42% 42% Sephora Pologne S.p.z.o.o. Warsaw, Poland 42% 32% Sephora Deutschland GmbH Bad Homburg, Germany 42% 42% Sephora UK London, United Kingdom 42% 42% Clab Srl Milan, Italy 42% 42% Sephora Marinopoulos SA Athens, Greece 42% 21% Beauty Shop Romania SA Bucharest, Romania 42% 21% Spring Time Cosmetics SA Athens, Greece 42% 11% Sephora Tchéquie SRO Prague, Czech Republic 42% 42% Kanel SA Athens, Greece 42% 21% Sephora Monaco SAM Monaco 42% 42% Sephora US LLC Delaware, U.S.A. 42% 42% LVMH Selective Distribution Group LLC San Francisco (California), U.S.A. 42% 42% Magasins de la Samaritaine SA Paris, France 42% 24% DFS Holdings Limited Hamilton, Bermuda, U.S.A. 42% 26% DFS Australia Pty. Limited Sydney, Australia 42% 26% DFS Australia Superannuation Pty Ltd. Sydney, Australia 42% 26% DFS New Caledonia Sarl Nouméa, New Caledonia 42% 26% DFS Group Limited Hamilton, Bermuda, U.S.A. 42% 26% DFS European Logistics Limited Hamilton, Bermuda, U.S.A. 42% 26% DFS Saipan Limited Saipan, Marianas Islands 42% 26% Kinkaï Saipan L.P. Saipan, Marianas Islands 42% 26% Commonwealth Investment Company, Inc. Saipan, Marianas Islands 41% 25% Duty Free Shoppers Hong Kong Limited Kowloon, Hong Kong, China 42% 26% DFS China Partners Limited Kowloon, Hong Kong, China 42% 26% (2) Company consolidated using the equity method

122 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

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

123 PERCENTAGE COMPANIES HEAD OFFICE Control Interest

Selective Retailing (continued) Tumon Aquarium LLC Tamuring, Guam 42% 42% Comete Saipan Inc. Saipan NMI 42% 42% Cruise Line Holdings Co Delaware, U.S.A. 42% 42% International Cruise Shop Cayman Islands 42% 42% Starboard Holdings Ltd Delaware, U.S.A. 42% 42% Cruise Management International Inc. Miami (Florida), U.S.A. 42% 42% On-Board Media Inc. Miami (Florida), U.S.A. 42% 42% Starboard Cruise Services Inc. Miami (Florida), U.S.A. 42% 42% Fort Lauderdale Partnership Ft Lauderdale, U.S.A. 32% 32% Miami Airport Duty-Free Joint Venture Miami (Florida), U.S.A. 28% 28% Sephora.com Inc. San Francisco (California), U.S.A. 42% 42% Other activities DI Group SA Paris, France 42% 42% DI Services SAS Paris, France 42% 42% Imprimerie Desfossés SARL Paris, France 42% 42% Tribune Desfossés SAS Paris, France 42% 42% Radio Classique SAS Paris, France 42% 42% Les Editions Classiques Affaires SARL Paris, France 42% 42% System TV SA Boulogne Billancourt, France 42% 42% DI SAS Paris, France 42% 42% SFPA SARL (Connaissance des Arts) Paris, France 42% 42% D2I SAS Paris, France 42% 42% Investir Publications SAS Paris, France 42% 42% Investir Formation SARL Paris, France 42% 42% Compo Finance SARL Paris, France 42% 42% SID Presse SARL Paris, France 42% 42% SID Développement SAS Paris, France 42% 42% SID Editions SAS Paris, France 42% 42% SID Magazine SA Paris, France 42% 42% SOFPA SA Lausanne, Switzerland 42% 42% Bonhams Brooks PS & N Limited London, United Kingdom 21% 21% De Beers LV Ltd (2) London, United Kingdom 21% 21% SCI du 30 de l’avenue Hoche Boulogne Billancourt, France 42% 41% Société Civile Jacques Gaillard Boulogne Billancourt, France 42% 42% Ufipar SAS Boulogne Billancourt, France 42% 42% L Capital Management SAS Boulogne Billancourt, France 42% 42% Sofidiv SAS Boulogne Billancourt, France 42% 42% GIE LVMH Services Boulogne Billancourt, France 42% 36% Moët Hennessy SNC Boulogne Billancourt, France 42% 28% LVMH Fashion Group SA Paris, France 42% 42% (2) Company consolidated using the equity method

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

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

125 REPORT OF THE STATUTORY AUDITORS FOR THE YEAR ENDED DECEMBER 31, 2003

MAZARS & GUERARD ERNST & YOUNG AUDIT Le Vinci Faubourg de l'Arche 4, allée de l’Arche 11, Allée de l'Arche 92075 Paris La Défense 92400 Courbevoie

Statutory Auditors Member of Compagnie Régionale Member of Compagnie Régionale de Paris de Paris

To the shareholders of the Christian Dior Company, Ladies and Gentlemen: In carrying out the audit assigned to us by your general shareholders’ meeting, we reviewed the consolidated financial statements of the Christian Dior Company for the fiscal year ended December 31, 2003, as they appear in this report. The consolidated financial statements were drawn up by the Board of Directors. Our respon- sibility is to express an opinion on these financial statements based on our audits.

I. Opinion on the consolidated financial statements We conducted our audits in accordance with auditing standards generally accepted in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, by sampling, evidence supporting the amounts and disclosures in the financial sta- tements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the assets, the financial position and the results of all the companies conso- lidated into Christian Dior.

II - Justification of our assessments Pursuant to the provisions of Article L. 225-235 of the French Commercial Code governing the justification of our assessment, as introduced by the Financial Security Act of August 1, 2003 and applicable for the first time to that financial year, we provide you with the fol- lowing information: Brands and goodwill are valued using the method described in note 3 to the financial sta- tements. We assessed the legitimacy of the methodology used, which was based on a set of estimates, and reviewed the data and assumptions used by the Group and its advisors t make these valuations. We assessed the reasonableness of these estimates on these bases. The assessments we made are part of our audit of the consolidated financial statements in their entirety and, therefore, contributed to the formation of our opinion without reserva- tion as expressed in the first part of this report.

126 III. Specific verification Furthermore, we have also verified the information relating to the Group provided in the mana- gement report, in accordance with accounting principles generally accepted in France. We have no observation to make as to their sincerity or consistency with the consolidated finan- cial statements.

Paris, April 20, 2004

The Statutory Auditors

MAZARS & GUERARD ERNST & YOUNG AUDIT Denis Grison Christian Mouillon

127 REPORT OF THE AUDITORS PREPARED PURSUANT TO THE LAST SECTION OF ARTICLE L. 225-235 OF THE FRENCH COMMERCIAL CODE CONCERNING THE REPORT OF THE CHAIRMAN OF THE BOARD OF CHRISTIAN DIOR CONCERNING THE INTERNAL CONTROL PROCEDURES IMPLEMENTED FOR THE PREPARATION AND TREATMENT OF ACCOUNTING AND FINANCIAL INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2003

MAZARS & GUERARD ERNST & YOUNG AUDIT Le Vinci Faubourg de l'Arche 4, allée de l’Arche 11, Allée de l'Arche 92075 Paris La Défense 92400 Courbevoie

Statutory Auditors Member of Compagnie Régionale Member of Compagnie Régionale de Paris de Paris

To the shareholders of the Christian Dior Company, Ladies and Gentlemen, In our capacity as auditors of the Christian Dior company, and pursuant to the provisions of the last section of Article L. 225-235 of the French Commercial Code, we are presenting our report on the report prepared by the Chairman of your Company pursuant to the provisions of Article L. 225-37 of the Commercial Code for the year ended December 31, 2003. Under the responsibility of the Board of Directors, it is the responsibility of Management to define and implement adequate and effective internal control procedures. It is the responsibility of the Chairman to report, primarily, on the conditions for the preparation and organization of the work of the Board of Directors and the internal control procedures established within the Company. It is our responsibility to inform you of our comments concerning the information provided in the Chairman's report concerning the internal control procedures for the preparation and statement of the accounting and financial information. We have performed our work in accordance with generally accepted professional standards in France. Those standards require that we conduct our verification in order to assess the fair presentation of the information provided in the Chairman's report concerning the internal control procedures for the preparation and statement of the accounting and financial information. Those efforts consisted in: - Reviewing the objectives and the general organization of the internal control, as well as the internal control procedures for the preparation and statement of the accounting and financial information presented in the Chairman's report; - Review the work underlying all information as provided in the report.

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

Paris, April 20, 2004

The Statutory Auditors

MAZARS & GUERARD ERNST & YOUNG AUDIT Denis Grison Christian Mouillon

129