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Fimalac
ANNUAL REPORT
2003
Fimalac2003
This present document is a translation of FIMALAC S.A. 2003 Annual Report. In the event that the frenchand english versions lead themselves to different interpretation, the french version alone is authentic.
CO N T E N T S
GROUP BUSINESS REVIEW
CHAIRMAN’S MESSAGE
PRESENTATION OF THE COMPANY AND THE GROUP
Key figures
History of the Group
Simplified Group structure as of December 31, 2003
Group businessesFitch RatingsFacomLBCCassinaClal-Msx
Significant events of the year
Management’s discussion and analysisComments on the consolidated financial statementsTransition to IFRSComments on the Company financial statements
DEPENDENCE FACTORS
EMPLOYEE INFORMATION
ENVIRONMENTAL REPORT
INVESTMENT STRATEGY
RISKS
Market risksLiquidity riskInterest rate riskCurrency riskEquities risk
Legal risks
Industrial and environmental risks
Insurance
Other contingencies
Liens on Fimalac assets
Report of the Chairman (article L.225-37, paragraph 6, of the Commercial Code)
Report of the Auditors on the Chairman's report
RECENT DEVELOPMENTS
Divestment of LBC
Repayment of the syndicated loan
2004 OUTLOOK
FINANCIAL CALENDAR
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2 2 0 0 3 A n n u a l R e p o r t
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CORPORATE GOVERNANCE
CORPORATE GOVERNANCE STRUCTURES
Board of Directors
Rules and procedures of the Board of DirectorsBoard of Directors’ internal rulesAssessment of Board performanceFrequency of Board meetingsCommittees of the Board
DIRECTORS’ INTERESTS
Directors’ compensation and benefits
Senior executive stock options
Funding of central services by Group companies
Cash pooling agreement
Other agreements entered into in prior years which remained in force in 2003
Agreements entered into in 2003
Loans and guarantees granted to directors
EMPLOYEE PROFIT-SHARING PLANS
Profit-sharing and incentive bonus agreements
Management stock options
FINANCIAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statements
Report of the Statutory Auditors on the consolidated financial statements
COMPANY FINANCIAL STATEMENTS
Financial statements of the Company (Fimalac)
Report of the Statutory Auditors on the financial statements
Statutory Auditors’ special report on regulated agreements
FEES PAID BY THE COMPANY TO THE AUDITORS AND MEMBERS OF THEIR
NETWORKS
32 0 0 3 A n n u a l R e p o r t
2 0 0 3 A n n u a l R e p o r t 4
GENERAL INFORMATION
LEGAL INFORMATION
INFORMATION ABOUT THE COMPANY'S CAPITAL
Capital stock
Stock options
Share equivalents
Authorized, unissued capital
Changes in capital over the last five years
OWNERSHIP STRUCTURE
MARKET FOR FIMALAC SHARES
Listings
Share performance over the last 18 months
Stock warrant performance since quotation
DIVIDENDS
Dividends paid over the last five years
Statute of limitations for dividends
FIVE-YEAR FINANCIAL SUMMARY
SHAREHOLDERS’ MEETING OF JUNE 8, 2004
REPORT ON THE PROPOSED RESOLUTIONS
STATUTORY AUDITORS’ SPECIAL REPORT ON THE EXTRAORDINARY RESOLUTIONS
TEXT OF THE PROPOSED RESOLUTIONS
STATEMENTS - AMF CHECKLIST
PERSON RESPONSIBLE FOR THE “DOCUMENT DE RÉFÉRENCE”
STATEMENT BY THE PERSON RESPONSIBLE FOR THE “DOCUMENT DE RÉFÉRENCE”
STATUTORY AUDITORS
STATEMENT BY THE STATUTORY AUDITORS
INFORMATION POLICY
AMF CHECKLIST
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Groupbusiness review
52 0 0 3 A n n u a l R e p o r t
Although the economic situation in France
during 2003 was one of the worst for many
years, Fimalac performed better than expected
thanks to a sharp improvement in operating
results in the second half. Like-for-like growth in
consolidated operating income accelerated from
0.9% in the first half to 4% for the full year. The
same trend was observed at the level of like-for-like
recurring income before tax, which climbed 10%
in the first six months and 15.8% over the year.
This good performance is testimony to the
Group's resilience in a lackluster economy,
and it also reflects the greater-than-expected
improvement in Fimalac’s financial position.
All of our operating companies made a
positive contribution to free cash flow, paving
the way for a €160 million reduction in
consolidated debt. The total corresponds
mainly to the €115 million decrease at Fitch.
However, Facom also played its part, despite
its earnings setback; the €44 million worth of
debt repaid during the year was in line with
the target that we had set for the business. This
represents a critical achievement, testifying to
our ability to react swiftly to changing
circumstances and fulfill our commitments to
shareholders.
All told, after taking into account the
proceeds from our successful share issue and
the various asset disposals carried out by the
parent company, consolidated net debt was
cut by €317 million last year, representing a
nearly one-third reduction.
✳ ✳ ✳
6 2 0 0 3 A n n u a l R e p o r t
CH A I R M A N ’S STAT E M E N T
72 0 0 3 A n n u a l R e p o r t
However, these good operating results were
overshadowed by the effects of three
unfavorable developments:
• Higher tax charge: Like-for-like recurring net
income contracted 3.9% compared with 2002,
due to a 48.4% increase in income tax.
• Fall in the dollar: Fitch, the largest contributor
to our revenues and earnings, reports its results
in dollars and the US currency’s steep slide
against the euro therefore inevitably impacted
our Group's reported results.
• Losses at Facom: The hand tools business
experienced an unprecedented drop in
production output, especially in France. This
was partly due to the unfavorable economic
environment. However, the main cause was the
competitive onslaught by manufacturers from
low-cost countries such as China, which is fast
becoming the world's workshop. To take into
account this new situation, which rapidly
gained in magnitude during 2003, we decided
to write off the unamortized Facom Tools
goodwill, in the amount of €248.7 million. As
a result, our Tools Division incurred an historic
loss of €306.1 million.
Our garage equipment business – Beissbarth –
also recorded larger-than-expected asset write-
downs following decisions to sell or close loss-
making subsidiaries and rationalize product
lines. Beissbarth ended the year with a net loss
of €45.2 million.
Due to these developments, the Group ended
the year with a net loss of €329.7 million.
✳ ✳ ✳
At the top of the list of achievements in 2003
is the outstanding performance of Fitch,
which broke all its records with revenues up
23.1% like-for-like to €402.9 million, and
operating income up 40% like-for-like to
€100 million.
Over the years, Fitch has steadily carved a
position as our foremost business, in terms
of both revenue growth and earnings
contribution.
✳ ✳ ✳
In 2003, thanks to Fitch and determined action
to pay down debt, our NAV rose significantly
despite the losses and asset write-downs in our
Facom division.
During the year, we continued to pull out of
businesses that do not contribute to free cash
flow. We completed our withdrawal from
Engelhard-Clal (precious metals processing)
and Clal-Msx (non-precious metals processing),
netting disposal proceeds of €60.5 million
which were used to pay down debt. We also
began looking for buyers for LBC's chemical
storage business. One Equity Partners LLC, the
Bank One Corporation private equity fund, has
made an irrevocable offer for our stake in LBC
at a price of €243 million, corresponding to
an enterprise value of €249.7 million for
100% of the business. The offer is subject
to the usual regulatory approvals and the deal
is expected to be closed before June 30 of
this year.
reviewing the organization of product
distribution and manufacturing operations, and
also by working with suppliers to bring down
purchasing costs.
• Continue to expand and develop Fitch’s
business, with a view to leveraging the
outstanding growth potential offered by the
rating market.
• On the financial front, the aim is to continue
creating value for shareholders. 2004 should
see a return to growth in like-for-like recurring
income after tax.
The positive fundamentals that were
strengthened throughout 2003 have positioned
Fimalac to confidently pursue renewed growth
in the future.
8 2 0 0 3 A n n u a l R e p o r t
Reflecting last year's robust operating
performance and the Board’s confidence in our
Group’s outlook, at the Annual Shareholders’
Meeting on June 8, we intend to recommend
paying a dividend per share of €0.95 (not
including the tax credit), unchanged from the
2002 dividend. Shareholders will be given the
choice between receiving the dividend in cash
or in stock.
My fellow shareholders, after discussing, clearly
and openly, all of the challenges of the past year,
I’d now like to conclude this message with our
priorities for 2004. These are to:
• Complete the divestment of LBC before June
30, 2004.
• Improve Facom’s underlying profitability. The
teams at Facom are determined to make the
company's products more competitive in the
current environment. To turn the business
around, action will be taken to boost sales
momentum and cut costs across the entire
organization, by driving down overheads, Marc Ladreit de Lacharrière
CH A I R M A N ’S STAT E M E N T
92 0 0 3 A n n u a l R e p o r t
10 2 0 0 3 A n n u a l R e p o r t
LBC
10%
Facom
45%
Other subsidiaries
3%
Fitch Ratings
32%
PRESENTATION OF THE COMPANY AND THE GROUP
KE Y F I G U R E S
2003 SALES
CONSOLIDATED SALES: €1,259.6m
Sales by business segment Sales by geographic area
Operating income(€ millions)
Consolidatedshareholders’ equity(€ millions)
2001 2002 2003 2001 2002 2003
158.8
193.6
825.7
977.0
Cassina
10%
Other
7%
France
25%
Rest of Europe
39%
United States
29%
137.9
542.9
112 0 0 3 A n n u a l R e p o r t
Ownership structureat December 31, 2003
Dividend per share(in €)
Fimalac share price 2003(in €)
Additional dividend:0.45
Ordinarydividend:0.95
2001 2002 2003
FITCH RATINGS 1,244 1,262 1,502
FACOM 3,993 4,124 3,988
LBC 581 591 596
CASSINA 494 471 455
CORE RATINGS 0 27 29
FIMALAC Headquarters 37 35 34
TOTAL 6,349 6,510 6,604
Employeesat December 31, 2003
2001 2002 2003
0.95 0.95
1.40
Fimalac share performance comparedwith the CAC 40 – basis 100 in 2003
Others 42.2%
(29.1% of voting rights)
Marc Ladreit de LacharrièreGroupe Marc de Lacharrière
and members of theshareholders’ pact: 57.8%
(70.9% of voting rights)
Fimalac118
SBF 120117
Worldword employees at December 31(based on current Group structure)
€24,6
Europe
77%
Rest of world
5%
Americas
18%
€28,8
12 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
HI S T O RY O F T H E G R O U P
Fimalac was formed out of Lille-Bonnières &
Colombes (LBC) which merged with Alsacienne
de Participations Industrielles (ALSPI) and
Comptoir Lyon Allemand-Louyot (CLAL) in June
1996 and then with Centenaire Blanzy in June
1998.
Lille-Bonnières & Colombes was founded in
1877. Until the end of the 1950s the company’s
business was the production and sale of oil and
oil by-products. It became a holding company
following the sale of its operating assets.
In the 1970s, the company’s investment policy
focused on building increasingly close ties with
Alsacienne de Constructions Mécaniques
(SACM), subsequently renamed Société
Alsacienne de Participations Industrielles
(ALSPI), by acquiring ownership interests in
Compagnie Industrielle Maritime (CIM),
Comptoir Lyon Allemand-Louyot (CLAL) and real
estate interests.
In the 1980s, the company concentrated on
managing its existing portfolio and ownership
interests.
In 1992, it sold its stake in CIM to Compagnie de
Suez and acquired the CIM Group’s chemicals
storage subsidiaries. These companies were
subsequently placed under the common owner-
ship of a holding company called LB Chimie.
In June 1996, Lille-Bonnières & Colombes, ALSPI
and CLAL merged to form Fimalac.
At the time of the ALSPI-CLAL merger, the main
assets held directly or indirectly by these com-
panies included Secap, specialized in franking
machines and mail processing systems,
Engelhard-Clal (50%), a precious metal proces-
sing joint venture set up with Engelhard Corpora-
tion in July 1995, Clal-Msx, a non-precious metal
processing company, Ruggieri, a pyrotechnics
company divested in March 1997, real estate
assets and precious metals inventory.
Lille-Bonnières & Colombes’s assets included LB
Chimie (renamed LBC in 1997), interests in ALSPI
and CLAL and a 61% stake in Centenaire Blanzy.
Centenaire Blanzy held interests in the real est-
ate sector through Sefimeg, the communications
sector, through Sofres, Valmonde and Journal
des Finances, and the Ibca ratings agency.
In June 1998, Centenaire Blanzy was merged into
Fimalac, following the late 1997/early 1998 sale
of Sefimeg, Sofres, Valmonde and Journal des
Finances, and the acquisition of Fitch in the
United States, paving the way for the creation
of the world’s third biggest rating agency,
Fitch-Ibca.
In April 1999, Fimalac made a successful public
tender offer for the Facom group, specialized in
hand tools and garage equipment and the parent
company of Cassina, the world’s no. 1 designer
furniture company(1).
In April 2000, Fitch made a successful public
tender offer for Duff & Phelps, the world’s fourth
largest rating agency(2). Then in October of the
same year, Fitch acquired Bankwatch, speciali-
zed in bank ratings. Over this period Fimalac
divested various non-strategic businesses, inclu-
ding the Facom subsidiary Clestra, specialized in
movable ceilings and walls, and the Secap subsi-
diary Anfa, specialized in office supplies. It also
began selling off the Engelhard-Clal businesses
and reduced its stake in the company to 49%.
132 0 0 3 A n n u a l R e p o r t
In 2001, Secap, specialized in franking machines,
was sold and divestment of the Engelhard-Clal
businesses continued.
No major divestments were made in 2002. The
main development initiatives concerned the
acquisition of Fitch Risk Management, in the
ratings business, and Cassina’s acquisition of
Illuminating Experiences.
The Group completed its withdrawal from the
Engelhard-Clal joint venture in December 2003
and Clal-Msx, the wholly-owned precious metal
processing subsidiary, was sold the same month.
(1) Source: internal data
(2) Source: information taken from main competitors’ annual reports.
14 2 0 0 3 A n n u a l R e p o r t
MarcLADREIT
DE LACHARRIÈRE
Groupe MARCDE LACHARRIÈRE
FIMALAC
57.84% members of theshareholders’ pact*(70.94% of voting rights)
CASSINA
96.6%
100%
100 %
PRESENTATION OF THE COMPANY AND THE GROUP
SIMPLIFIED GROUP STRUCTUREat December 31, 2003
* Includes shares held directly and indirectly by Marc Ladreit de Lacharrière. Shares representing 1.48% of the capital are held byFimalac.
LBC100%
FACOM
FITCH RATINGS
80%
Credit rating
Hand toolsGarage equipment
Bulk chemicalsstorage
High-end designerfurniture
152 0 0 3 A n n u a l R e p o r t
16 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
One State Street PlazaNew York, N.Y. 10004
2003 BUSINESS REVIEW
In 2003, Fitch Ratings continued to expand its
position as a provider of research and credit ratings
in global capital markets. Revenues grew 23.1% to a
record €402.9 million. Business growth was accom-
panied by an increase in employee numbers, to over
1,500 persons spread across 49 cities worldwide. The
company performed well in almost all world markets,
reaping the full benefit of its solid position in Struc-
tured Finance.
Fitch Ratings strives constantly to improve its rating
processes, leading to the formation in 2002 of new
teams of specialists in credit research, internal
consistency and ratings audit. Other improvements
to the rating process included the adoption of revised
criteria for assessing potential risks, and increased
emphasis on operational risks and short-term
liquidity. In 2003, new applications were developed
Fimalac, the Group's parent company, does not conduct any business operations. As the controlling
shareholder of the subsidiaries, it plays an active role in determining their overall strategies.
Stephen W. Joynt
Chairman
Chief Executive Officer
(€ millions) 2001 2002 2003
Consolidated revenues 340.9 378.0 402.9International revenues as a % of total 98.3% 97.4% 97.8%
Operating income (EBIT) 79.9 88.1 100.0% of total revenues 23.4% 23.3 % 24.8%
Employees 1,244 1,262 1,502Employees outside France as a % of total 97.2% 97.2% 97.3%
REVENUES
BY GEOGRAPHIC AREA
REVENUES
BY BUSINESS SEGMENT
France andcontinental Europe16%
Other, Americas
5%
United Kingdom11.3%
United States63.1%
2003
2003
Structuredfinance 52.8%
Other9.2%
Sovereigns/Public finance
7.9%
Other countries4.6%
France andcontinental Europe16%
Other, Americas
4.9%
United Kingdom11.1%
United States62.9%
2002 Other countries5.1%
Corporates30.1%
2002
Structured finance 48.1%
Other10.1%
Sovereigns/Public finance
9%Corporates32.8%
172 0 0 3 A n n u a l R e p o r t
to enhance coverage of the structured finance
market and the company bolstered its expertise
with a view to leveraging the rapid growth of the
European market.
OPERATING HIGHLIGHTS
◆ Expanded coverage of the structured
finance market
In 2003, there were 36% more global structured
finance issues than the year before. Faced with the
constant growth in these highly complex transac-
tions, investors must be able to keep a close watch
over the market and carefully weigh up each
investment opportunity. To meet this need, in 2003
Fitch launched CDO Surveillance Search giving
subscribers access to the Fitch Ratings database,
and the Vector CDO (collateralized debt obligation)
analysis model, which incorporates measurements
of industry data correlations and credit enhance-
ment discounts. Fitch scored a first in the market
with the launch of RMBS Deal Tracker, an online
service allowing investors to obtain information
about the pools of residential mortgages backing
the RMBS rated by the company, and in 2003 the
product was further enhanced.
◆ Credit derivatives
Credit derivatives represent one of the most
buoyant segments of the fixed income market.
Leveraging the considerable research resources
assigned to this complex market, Fitch Ratings
launched new credit derivative products and produ-
ced comprehensive credit research. For example, in
March 2003, the company published the results of
its first survey of around 200 financial institutions
worldwide, most of which regularly purchase pro-
tection in the form of credit derivatives and collate-
ralized debt obligations. The quality of the research
was recognized by regulators and professional
associations, who consulted Fitch Ratings as an
expert on the subject.
In December 2003, Fitch Ratings launched
FitchCDx.com, an integrated Internet platform
offering high level analyses and other information
closely tailored to the needs of credit derivative
users. FitchCDx.com combines on a single site all
Fitch Ratings credit derivatives research, giving
users easy access to a comprehensive array of data
and fundamental analyses.
◆ Fitch Risk Management
In line with its policy to expand Fitch Risk Manage-
ment’s skill sets, in 2003 Fitch Ratings acquired a
database used to support qualitative analyses of
financial institutions’ operational risks. 2003 also
saw the official launch of NetRisk, a specialty prac-
tice providing advisory support in the design, pricing
and underwriting of insurance policies covering capi-
tal market risks in North America and Europe, as well
as the management of the related claims. In addition,
Fitch Risk Management entered into a strategic
alliance with Ultimate Risk Solutions, Inc. to offer
property and casualty insurers state-of-the-art risk
management software and related services.
18 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
◆ Other investments
The European credit market is continuing to grow
faster than the markets in other regions. To partner
this growth, Fitch Ratings strengthened its pres-
ence in certain countries and increased its employee
numbers. In April 2003, the company completed
the acquisition, through Fitch Brazil, of Atlantic
Rating. The transaction has created Brazil’s largest
rating agency and given Fitch a solid presence in
the local market.
INTERNATIONAL ADVISORY
COMMITTEE
In January 2002, Fitch Ratings set up an internatio-
nal advisory committee to provide a prospective
view of the global economy and of developments in
the main international markets.
The committee is chaired by former French Presi-
dent Valéry Giscard d'Estaing, with Marc Ladreit de
Lacharrière as vice-chairman. Its members include:
◆ Rt Hon Kenneth Clarke QC MP, former
Chancellor of the Exchequer.
◆ Pt Lamberto Dini, former Prime Minister of
Italy, former Minister of Foreign Affairs.
◆ Laurent Fabius, former Prime Minister of
France, former Chair of the National Assembly, former
Minister of the Economy, Finance and Industry.
◆ Jacques de Larosière, former Governor of
Banque de France, former Director-General of the
International Monetary Fund.
◆ Helmut Maucher, Honorary Chairman of
Nestlé.
◆ Thomas Middlehoff, former Chairman and
CEO of the Bertelsmann Group.
◆ Michel Pebereau, Chairman of BNP Paribas.
◆ Jurgen Reiminitz, former member of the
Board of Directors of Commerzbank
◆ Felix Rohatyn, former US Ambassador to
France, former General Manager of Lazard Frères et
Compagnie.
◆ Sir David Scholey, former Chairman of UBS
Warburg.
◆ Lord Simon of Highbury, UK government
advisor, former Minister for Trade Promotion in
Europe and Competitiveness within the Depart-
ment of Trade and Industry, former Chairman of
British Petroleum.
◆ Excmo. Sr. D. Carlos Solchaga Catalan,
former Spanish Minister of Finance.
◆ Hans Tietmeyer, former Chairman of
Deutsche Bundesbank.
◆ Karel Van Miert, former European
Commissioner for Competition.
◆ Paul A. Volcker, former Chairman of the US
Federal Reserve Board.
MARKETS AND COMPETITION
At the beginning of 2003, the SEC announced
plans to conduct a study on the degree of
regulatory oversight to be applied to rating
agencies. On June 4, 2003, the SEC published a
concept release entitled “Rating Agencies and
the use of Credit Ratings under Federal
Securities Laws”, together with a request for
comments. Most respondents considered that
192 0 0 3 A n n u a l R e p o r t
Regulators (CESR). The regulation of rating
agencies is one of the areas in which the SEC
and the CESR plan to increase their
cooperation. In January 2004, the members of
the European Parliament’s Commission on
Economic and Monetary Affairs voted to accept
a draft resolution calling on European and
international regulators to issue specific
recommendations concerning the criteria to be
met to enhance the transparency of rating
agencies' activities and to examine the current
level of concentration of the rating industry.
When the report supporting this call has been
finalized, it will be submitted to the European
Commission to decide what action, if any,
should be taken.
In 2003, Fitch Ratings’ approximate penetration
rates in the main segments of the European
and North American markets were as follows
(in volume, sources: Securities Data Corporation,
Fitch estimates):
Corporates 49%
Insurance 64%
Financial institutions 80%
Public finance 73%
Structured finance 66%
Sovereign 98%
Total debt issues rated by Fitch 67%
ratings represent the simplest and most
appropriate system for assessing issuers'
creditworthiness and that the designation
Nationally Recognized Statistical Rating
Organization (NRSRO) represents the best
method of identifying rating agencies whose
ratings can be relied on for regulatory
purposes. Four global rating agencies are
currently designated as NRSROs – Fitch
Ratings, Standard & Poor’s, Moody’s and, since
2003, Dominion Bond Rating Service. The SEC
has not yet published its final conclusions.
The SEC intends to build closer relations
with the Committee of European Securities
Fitch Ratings' New York headquarters
20 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
RESULTS
Fitch Ratings had revenues of €402.9 million in
2003 compared to €378 million the previous
year. The 6.6% increase on a reported basis
reflects the impact of the dollar's steep slide
against the euro. Like-for-like growth – which is
more representative of underlying performance
– came to a very strong 23.1%.
The even faster growth in operating income is
testimony to Fitch’s outstanding performance in
2003. Last year’s €100 million was 13.5% up on
€88.1 million in 2002, including a like-for-like
increase of 40%.
Revenues in Europe rose sharply, fueled by
sustained demand in the structured finance
market. The RMBS (residential mortgage-
backed securities) market was particularly
buoyant in the first half of the year, but issuing
volumes fell back in the second half, partly as a
result of rising unemployment. As was the case
in 2002, CDOs (collateralized debt obligations)
represented the second largest market,
followed by ABSs backed by trade receivables.
The United Kingdom continued to be the largest
securitization market, while Italy held onto the
No. 2 spot in terms of issuing volume.
In the United States, the RMBS market
continued to expand rapidly throughout the
year, helped by low interest rates and rising
house prices. The public finance market was
sustained by the refinancing of 75% of the
10-year government bonds issued in 1993, for a
total of $155 billion. In the corporate bond
market, credit quality improved but was still
inadequate. In an environment shaped by very
low interest rates, investor interest turned to
the junk bond market which represented the
main growth driver.
Lastly, steady growth in the number of
subscribers to the online services offered on
www.fitchresearch.com also helped to
boost revenues.
OUTLOOK
In 2004, the US economic rebound should
stimulate the global economy, creating a more
favorable market for issuers. In the United
States, expectations of a gradual rise in interest
rates will impact issuing volumes across most
segments, particularly the RMBS, public finance
and corporate markets. With the volume of
new issues likely to be below last year’s high,
Fitch will focus on increasing market share and
tailoring pricing policies to market conditions in
order to maintain growth momentum.
In Europe, developments in the capital markets
will open up new growth opportunities. The IPO
market remains active, while infrastructure and
public finance needs are growing. Growth is
being further boosted by the process of innova-
tion that is shaping the securitization market.
212 0 0 3 A n n u a l R e p o r t
Fitch Ratings' London headquarters
Against this backdrop, Fitch Ratings aims to
stand in a class of its own and deliver above-
average revenue growth, thanks to its innovative
research products, investor training services
and secondary market data services.
22 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
OPERATING HIGHLIGHTS
The Facom Group is organized around two
businesses:
• FACOM TOOLS: hand tools marketed under
Facom and other brands that are specific to cer-
tain product and/or geographic markets.
• BEISSBARTH AUTOMOTIVE: garage equipment
marketed under the Beissbarth, Facom, Fog,
Sicam and Tecalemit brands.
Facom’s hand tools business was faced with the
twin challenges of falling sales and heightened
competition, with the entry in the European mar-
ket of manufacturers from low-cost countries such
as China. This change in the competitive landscape
significantly affected Facom’s position in the hand
tools market, especially in France.
6/8, rue Gustave Eiffel91420 MORANGIS
Thierry PATERNOTChairman and Chief Executive Officer
(€ millions) 2001 2002 2003
Consolidated sales 626.8 599.5 569.0Hand tools 463.4 442.3 412.3Garage equipment 163.4 157.2 156.6International salesas a % of total 58.4 % 59.5 % 59.4%
Operating income (EBIT) 61.4 27.4 8.3Hand tools 54.3 32.4 17.3Garage equipment 7.1 -5.0 -9.0as a % of total sales 9.8 % 4.6 % 1.5%
Employees 3,993 4,124 3,988Employees outside Franceas a % of total 44.0 % 43.0 % 44.0%
SALES
BY BUSINESS SEGMENT
2003
Hand tools72.5%
Garageequipment27.5%
2002
Hand tools74%
Garageequipment26%
SALES
BY GEOGRAPHIC AREA
Americas8%
Africa2%
Rest of euro zone31%
France41%
20032002
Rest ofEurope15%
Asia Pacific3%
Americas9%
Africa3%
Rest of euro zone30%
France40%
Rest ofEurope14%
Asia Pacific4%
232 0 0 3 A n n u a l R e p o r t
FACOM TOOLS
HAND TOOLS
Facom Tools reported 2003 sales of
€412.3 million, down 4.7% like-for-like on the
previous year.
Operating income came to €17.3 million compa-
red to €32.4 million in 2002, representing 4.1%
of sales versus 7.3%. With the variable cost
margin standing at just over 50%, the decline in
sales trimmed €17 million from operating
income; however, the impact was attenuated
somewhat by a reduction in fixed costs.
Facom Tools’ cash position improved by
€43 million, before taking into account the
€54.5 million debt waiver granted to its subsi-
diary Beissbarth Automotive Group. The impro-
vement stemmed mainly from action to reduce
working capital, as well as a more disciplined
approach to capital expenditure.
THE HAND TOOLS MARKETS
Facom Tools is present in all four segments of
the hand tools market:
◆ Manufacturing segment (35% of the Euro-
pean market), which continued to decline in
2003.
◆ Auto Repair Shops segment (20% of the
European market), where demand held firm
in 2003.
◆ Construction segment (25% of the European
market), which remained on a downward
trajectory in the early part of 2003 after
contracting sharply in 2002, but showed
signs of recovering in the second half. The
turnaround was fueled by a revival in new
construction and renovation activity, as well
as by the faster pace of adoption of new
techniques requiring new tools and equipment.Demonstration truck
Chrono Jet maintenanceworkstation
24 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
the impact of lackluster economic conditions
(the Italian market accounts for over 80% of
Usag sales).
◆ In other international markets, Facom brand
sales contracted by 6.3%. The weak dollar
reduced the contribution of markets in the
Far East, while in North Africa, payment pro-
blems led to the temporary suspension of
deliveries to certain major customers.
COMPETITION
Facom Tools is exposed to competition on
several fronts:
◆ In the major international markets, US
manufacturers represent the main source of
competition. These companies benefit from
high domestic volumes and in 2003, the weak
dollar gave them a competitive advantage in
export markets. Certain national manufactu-
rers – mainly German hand tool specialists –
also operate on an international scale.
◆ In Europe, national markets are served by a
fairly large number of specialist and non-
specialist domestic manufacturers.
◆ Manufacturers from low-cost countries are
making steady inroads into the major
markets, through private labels or impor-
ters/assemblers. The main source of compe-
tition is from Chinese and Central European
manufacturers.
In 2003, many competitors in European domestic
markets experienced a drop in sales and some
of them are currently in difficulty.
◆ Home Improvement segment (20% of the
European market). This market remained
buoyant in 2003 but hand tool sales grew
at a slower pace than other DIY products.
Growth in the market as a whole slackened
during the extended summer heat wave.
Facom Tools was adversely affected by lower
Manufacturing sales in Europe, especially
France and Italy. Sales trends by geographic
area can be summarized as follows:
◆ In France, Facom brand sales in the Manufac-
turing segment contracted 6.0%. Sales in the
Auto Repair Shop segment were also down
on 2002, due to the sharp fall in the number
of road accidents.
◆ In Europe, the Facom brand held up well in
the lackluster German and Belgian markets
and increased its sales in Spain.
◆ In the United States, sales held firm in dol-
lars, despite the strategic refocusing on the
SK brand and withdrawal from certain unpro-
fitable private-label markets. However, after
conversion into euros, sales were 16.7%
down on 2002.
◆ In the United Kingdom, sales fell by 10.9%,
including a 2% decline at constant exchange
rates. The downturn was due primarily to
reduced Manufacturing activity and lower
sales by the Sykes Pickavant brand which
has been refocused on diagnostic products.
The Britool and Facom brands both reported
higher sales.
◆ In Italy, Usag sales retreated 2.9%, reflecting
252 0 0 3 A n n u a l R e p o r t
PRODUCTS
In 2003, Facom Tools kept up its product deve-
lopment and innovation policy, with products
less than three years old accounting for 15% of
sales.
Examples of products launched in 2003 include:
◆ Facom Vision System battery-powered ins-
pection lamp with LED technology, providing
a very powerful source of light for up to four
hours. The impact-resistant lamp is extremely
robust and suitable for use in all conditions.
◆ Virax Visio Val, a device that allows mechanics
to view on a screen the internal condition of
pipework.
◆ MAP subscriptions marketed by Facom
and Sykes Pickavant, allowing auto repair
shops to receive CDRoms updating their
diagnostic equipment and vehicle data (new
models, new functions, enhancements, etc.).
DISTRIBUTION
Hand tool users generally purchase their tools
from specialist suppliers (industrial supplies,
auto part, electrical equipment and building
materials wholesalers, hardware stores and
home improvement stores). Facom Tools markets
its products via all of these channels. Some of
the distributors who have national and interna-
tional networks generally include in their sales
plan limited ranges of private label tools sourced
in Asia. Private labels are already a major feature
of the home improvement market and they are
now spreading to the professional markets.
New forms of distribution have emerged in
recent years:
◆ Catalog sales (industrial supplies, electro-
nic equipment, etc.)
◆ Sales by networks of traveling salesmen
specialized in a certain market segment
(assemblers or manufacturers).
Facom Tools has recently expanded its presence
in these new channels.
Facom's marketing policy has always revolved
around its catalog, the fleet of demonstration
trucks (54 in France and over 150 worldwide in
2004) and its partnerships with distributors. In
addition, agreements have been signed with
major European customers, notably in the manu-
facturing, automaking and aerospace sectors.
Facom UK has launched a credit card for indivi-
dual builders and auto mechanics, enabling
them to obtain six months instant credit from
their wholesaler.
Wireless model (light output: 500 Lux – 5-hour battery)
Facom Vision System inspectionlamp with LED technology
26 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
Product renewals and replacements in 2003
included:
◆ A revamped dynamometric tool range,
including three new products.
◆ A renewed pneumatic power tool offer.
◆ A comprehensive new range of bodywork
tools.
◆ A new screwdriver range, marketed under
the Usag brand.
Facom also continued to work with major custo-
mers to develop products closely tailored to
their needs, such as tools for manufacturers of
pipes made from new materials and rail track
laying tools. These concepts are subsequently
adapted to produce tools marketed under the
Group's own brands.
STRATEGIC REFOCUSING
In 2003, Facom Tools moved from a Europe-wide
organization by process to a market-focused
organization based on profit centers, as
follows:
◆ France (Facom France, Virax and Dubuis)
◆ Italy (Usag)
◆ United Kingdom (Facom UK)
◆ United States (SK)
◆ International sales and export subsidiaries.
Each unit has its own manager, its own sales
and marketing teams and its own finance and
administration team.
Marketing spend focused essentially on the
Facom and Usag brands, which are both ranked
No. 1 in their markets. The other brands were
repositioned in their respective segments,
corresponding to either geographic markets
(SK, Britool, Pastorino) or application markets
(Virax, Sykes Pickavant).
Following the 2002 industrial plan to enhance
plant specialization, a continuous product rene-
wal process was launched in 2003 to refocus
and rationalize the various ranges, in order
to bring down production costs while at the
same time preserving each brand's distinctive
characteristics.
COMMUNICATIONS
In 2003, Facom Tools kept up its strategy of
communicating directly with users, via:
◆ Product catalogs, including the Virax catalog
launched in June.
◆ Participation at trade fairs, including the last
EquipAuto fair where Facom Tools unveiled new
products and booked a large number of orders.
◆ Marketing materials for end-user customers,
including product brochures and technical
guides for the vehicle
body repair and truck
servicing sectors.
Facom joined forces
with the French
toymaker Berchet
to launch a Facom
workbench and
tool-set for chil-
dren in the lead-up
to Christmas 2003.
Child’s workbench
and tool-set
272 0 0 3 A n n u a l R e p o r t
This educational toy will go on full retail release in
2004 and help to familiarize a wide number of
future users with the Facom brand.
OUTLOOK FOR 2004
The outlook remains unsettled in France and
Europe, while a further depreciation in the
dollar could weaken returns from investments in
high-growth markets such as Asia. To overcome
these challenges, Facom Tools is pressing ahead
with initiatives to refocus and reposition the
company:
◆ As of January 2004, the sales force in France
was reorganized around customer segments
(namely, manufacturing, auto repair shops,
construction and home improvement) and
marketing teams were put in place to provide
local-level support. Facom Tools is increasing
its fleet of demonstration trucks to 54, from
38 in 2003, and will conduct, in France alone,
almost 100,000 visits to end-user customers
in the current year.
◆ R&D priorities are being focused on a smaller
number of areas in order to concentrate on
high-value applications with strong revenue
generating potential and innovative design
features. Major product lines to be added in
2004 include new ranges of screw adjustors
and specialty power tools. Design and ergo-
nomic features are also being enhanced.
◆ Marketing and sales efforts are being
strengthened in Western Europe.
◆ Additional sales staff are being hired in fast-
growing markets such as Central Europe and
Asia.
◆ Facom will once again create a major event in
the hand tools industry with the launch of
the 2004 edition of its catalogue.
◆ Cost-cutting programs are being pursued to
reduce fixed and variable costs, leverage
organizational efficiencies and boost profita-
bility.
As part of its efforts to streamline and focus
resources on core competencies, major brands
and priority markets, Facom UK divested its
United Kingdom-based tiling and home impro-
vement tools subsidiary, Vitrex, in January
2004.
Interior of a Facom demonstration truck
28 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
BEISSBARTH AUTOMOTIVE
GARAGE EQUIPMENT
In 2003, Beissbarth achieved further market
share gains in Europe and the rest of the world
despite the sluggish market conditions in Europe
and the decline in the US dollar which
dampened overseas sales growth.
BUSINESS REVIEW
Beissbarth sales totaled €156.6 million in
2003, representing a like-for-like increase of
3.8%. Operating losses deepened to €9.0 million
from €5.0 million in 2002, mainly due to the
impact of substantial non-recurring charges.
Excluding these charges, the company came
close to break-even at the operating level.
MARKETS AND COMPETITION
Beissbarth Automotive Group supplies automotive
diagnostic and repair equipment to a customer
base of independent repair shops, dealer
networks, specialized chains and vehicle
inspection stations. It provides a complete range
of equipment and systems for the inspection,
testing and servicing of cars and commercial
vehicles. Other areas of expertise include
vehicle safety systems, pollution control and
passenger comfort. In 2003, Beissbarth made
significant market share gains in Europe, notably
in France and Spain (with the Facom and Fog
brands), the United Kingdom (with Tecalemit
and Beissbarth) and in Austria. These results
were achieved in a difficult environment for the
auto repair sector, leading to equipment
replacement and repair shop opening plans
being radically scaled back. Many of the large
fast-fit chains put development projects
on hold.
Beissbarth continued to entrench its positions
in fast-growing international markets such as
China and the rest of Asia despite the weak US
dollar.
PRODUCT RANGE
Beissbarth is a specialist manufacturer of
wheel service and alignment equipment and
vehicle testing machines. Its offer also ranges
from basic equipment such as hoist systems to
servicing equipment covering such areas as
lubrication and air conditioning service.
Microline Easy, a new wheel
alignment consolefor “Easy line”
alignment
292 0 0 3 A n n u a l R e p o r t
In 2003, Beissbarth made upgrades to a
number of product lines. These included
enhancements to product ergonomics and
ease-of-use, designed to increase productivity
and provide a safer and more comfortable
working environment. Several new products,
among them a range of wheel alignment
consoles for the Beissbarth and Facom ranges,
were unveiled at the Equip’Auto trade show in
Paris, which took place in October 2003.
DISTRIBUTION
Beissbarth’s product range is mainly distributed
by automotive parts dealers and wholesalers
specialized in garage equipment. In 2003, the
group continued to increase the level of
marketing support provided to distributors by its
teams of demonstration engineers.
ORGANIZATION OF THE GROUP
In 2003, Beissbarth Automotive Group took
action to streamline its organization, reorganize
the workforce and simplify distribution
operations. A divestment program was initiated
in 2003 and will continue in the current year both
in Germany, with the sale of the distribution
subsidiary ACW, and in international markets,
with the sale of distribution subsidiaries in the
United States, Austria and Belgium to local
partners. This program has enabled the group to
shed a number of loss-making activities and
improve working capital management.
New management teams have been appointed to
take charge of the group and its German
subsidiaries.
OUTLOOK FOR 2004
Beissbarth Automotive Group achieved its
objectives for 2003, which included closing or
divesting loss-making units such as ACW and
Beissbarth USA; bringing working capital down
to a reasonable level; appointing a new
management team; refocusing R&D activities on
high-potential applications; strengthening
management control procedures; and preparing
the sales force and markets for price increases.
Beissbarth is on course to return to profit at the
operating level in 2004, despite a final year of
losses at the vehicle hoist system subsidiary
Zippo, which is currently being restructured.
30 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
5ter, rue du Dôme
75016 Paris
OPERATING HIGHLIGHTS
In 2003, 55,000 cubic meters of additional
capacity were commissioned in Antwerp, Lisbon
and Marseille, representing an almost 2.6%
increase in total capacity. Thanks to these invest-
ments, which came on stream while the chemical
industry was in a downturn, like-for-like revenues
were more or less stable compared with 2002,
although reported revenues were down due to the
fall in the US dollar. Capacity utilization and
throughput volumes were moderately lower than
the previous year.
Capital spending was limited to maintenance and
upkeep of existing facilities, compliance work and
modifications necessary to handle new products.
The 30,000 cubic meters of capacity which came
on stream in Santander in early 2004 was inclu-
ded in the 2002 investment program.
Work on the rail connection at Baton Rouge was
completed on schedule in late 2003 and the first
benefits of this investment will become apparent
in 2004.
Philippe MARACHEChairman and Chief Executive Officer
(€ millions) 2001 2002 2003
Consolidated sales 132.2 130.0 122.0International salesas a % of total 70.9 % 71.8 % 69.7%
Operating income (EBIT) 31.5 30.8 23.4as a % of total sales 23.8 % 23.7 % 19.2%
Employees 581 591 596Employees outside Franceas a % of total 60.3 % 62.3 % 61.7%
SALES
BY GEOGRAPHIC AREA
SpainPortugal6.7%
France30.4%
United States34.4%
BelgiumNetherlands28.5%
20032002
SpainPortugal6.8%
France28.2%
BelgiumNetherlands27.9%
United States37.1%
312 0 0 3 A n n u a l R e p o r t
BUSINESS REVIEW
LBC faced lackluster conditions in bulk chemical
storage markets in 2003 as the anticipated
economic recovery failed to materialize. In
addition, the fall in the dollar, which accelerated
as the year wore on, led many chemical
manufacturers to relocate production.
In response to this challenging economic
environment, many chemical manufacturers
also took steps to rationalize their storage
operations in order to reduce logistics costs.
As a result, overall capacity utilization dropped
to 92.6% compared with 94.3% in 2002 and
95.5% in 2001. Throughput volume declined by
3.3% to 19.05 million metric tons from 19.7
million metric tons in 2002. The amount of
chemicals handled was down 0.3% while the
volume of petroleum products fell by 28.8%.
The lower throughput affected substantially all
of LBC’s storage facilities, with falls of 4.6% in
France and 3.4% in the United States. Volumes
in Europe, excluding France, declined by a more
moderate 1.3% thanks to the additional storage
capacity at Antwerp.
Bitumen loading station at LBC Marseille Fos
32 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
The market evolves according to customers’ needs
and policies. Growth is driven by the steady rise in
chemical production, particularly in Asia and Latin
America where the chemical industry is expanding
rapidly. Overall, the largest customer accounted for
13.6% of LBC’s consolidated revenues in 2003, the
top five represented 38.9% and the top ten 57.4%.
Each of these customers may have a large number
of individual contracts for the storage of specific
products at different terminals.
RESULTS
Revenues eased back to €122 million from
€130 million in 2002, due to lower storage
activity and the dollar's steep slide against the
euro. At constant exchange rates, revenues
were largely unchanged compared with 2002,
at €130.3 million.
Lower revenues drove a 24% decline in operating
income to €23.4 million from €30.8 million in
2002. Excluding the currency effect, operating
income was down 14.6% to €26.3 million.
OUTLOOK FOR 2004
Contributions from additional capacity
commissioned in the year under review and
ongoing cost-containment initiatives should give
a moderate boost to operating margin in 2004.
LBC is also well placed to benefit from any upturn
in the chemical industry.
MARKETS AND COMPETITION
(SOURCE: LBC)
LBC’s main operations concern the bulk storage
of liquid chemicals. The company also provides
ancillary services, such as drum filling and
continuous in-line blending. It serves as a
critical link in the supply chain of the world’s
largest chemical manufacturers. LBC estimates
that the total market amounts to around 22
million cubic meters.
The critical success factors in this market are
location, capacity (available volume) and
throughput. A balanced market is achieved when
the service provider obtains a satisfactory price per
cubic meter while the customer pays an acceptable
price per metric ton. There tends to be little
seasonal fluctuation, except for specific products.
With storage capacity of 2.2 million cubic
meters, LBC is the second-largest independent
player in this market, behind Vopak. Other key
players, for whom this business is often only a
side-line, include Oiltanking, Kaneb, Kinder
Morgan, Odfjell and Stolt-Nielsen.
The Rotterdam terminal
332 0 0 3 A n n u a l R e p o r t
Via Busnelli 1
I - 20036 Meda MI
PROFILE
Cassina is an Italian company with a
well-established international reputation as one
of the world’s leading manufacturers of high-end
designer furniture.
As a designer and manufacturer, Cassina is best
known for its prestigious Cassina I Maestri and
Cassina Contemporanei collections, comprising
contemporary designs by illustrious names such
as Philippe Starck, Piero Lissoni and Hannes
Wettstein which are among the best-selling items
in its catalogue.
In recent years, Cassina has diversified by building
a lighting fixtures business around Nemo, Italiana
Luce, Meltemi and, most recently, Illuminating
Experiences in the United States. It has also set up
a Contract division, providing interior design
services for luxury hotels and high-end retail
chains. Cassina has a solid presence in international
markets where its collections are marketed by a
network of carefully selected specialty retailers
and franchise holders in Europe, Asia and North
America, and through prestigious showrooms in
Milan, Paris, Tokyo and New York.
Sandro MAGGINIChief Executive Officer
(€ millions) 2001 2002 2003
Consolidated sales 126.2 134.8 122.9International sales as a % of total 90.5 % 88.2 % 89.1%
Operating income (EBIT) 15.9 19.1 16.0as a % of total sales 12.6 % 14.2 % 13.0%
Employees 494 471 455Employees outside France as a % of total 98.6 % 96.8 % 96.5%
SALES
BY GEOGRAPHIC AREA
Italy20%
Rest ofEurope
47%
Asia13%
Rest of world1%
America19%
KAMI Sofa by Patrick Jouin
20032002
Furniture72%
Lighting18%
Other(Contract)10%
Italy20%
Rest ofEurope
51%
Asia9%
Rest of world2%
America18%
SALES
BY BUSINESS SEGMENT
20032002
Other(Contract)14%
Lighting18%
Furniture68%
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
HOLA chairs by Hannes Wettstein
OPERATING HIGHLIGHTS
Cassina continued to refurbish and expand its
showrooms and sales outlets in 2003.
In Paris, a new showroom was opened on boulevard
Saint Germain. With 600 sq.m of selling space, it is
one of the company's largest showrooms and pre-
sents the complete Cassina range to customers. In
Milan, the Via Durini showroom was refurbished
during the year. Work to refurbish the New York show-
room has started and will be completed by summer
2004. In Japan, the company has completed its
expansion program and now has six showrooms in
the country’s largest cities.
Cassina presented a raft of new furniture and lighting
products at trade shows in 2003, including Milan and
Dallas. The new lighting products should make a
growing contribution to sales in the current year. The
Contract division recorded a 30% increase in reve-
nues from interior design services for luxury goods
and upscale fashion retailers, and signed contracts
at the end of the year with two major customers,
Lancôme and Dior, which should lead to higher
revenues in the second half of the current year.
MARKETS AND COMPETITION
(SOURCES: CASSINA AND C.S.I.L.)
There are no official or detailed statistics available
on the upscale designer furniture segment.
According to a survey of the European market
published by CSIL Milano, the furniture industry
research institute, the high-end segment accounts
for 10% of total furniture sales in the region by
value. No estimates are available for the share of
contemporary design within this total.
According to the same source, Cassina is one of
the industry leaders. Its has eight main
competitors in Europe, including four in Italy, two
in France, one in Switzerland and one in Germany.
In this business, the key markets are Italy,
Germany, France, Switzerland, the United States,
the Benelux countries and Japan. The Far East is an
emerging market, where Cassina is also present.
Over the past five years, Cassina has built market
share, thanks in particular to acquisitions in Italy
and the United States, and has also made
significant inroads into the lighting fixtures
business.
The new showroom on boulevard Saint-Germain in Paris
2 0 0 3 A n n u a l R e p o r t 35
The company’s policy is to exercise tight control
over its brand. No manufacturing or distribution
licenses are granted to other companies, with the
sole exception of Japan where Cassina has a
longstanding association with a historic partner.
Cassina’s largest customer generated 6% of 2003
sales, the top five accounted for 14% and the top
ten for 16%.
BUSINESS REVIEW
Cassina posted sales of €122.9 million in 2003
compared with €134.8 million the previous
year, representing a decline of 7.7% like-for-
like. This setback was largely due to the dismal
economic situation in Germany, the Benelux
countries and Switzerland, which had negative
impacts on furniture sales as well as on demand
for lighting fixtures.
In contrast, sales in Japan were particularly
encouraging. This was also the case for
Illuminating Experiences, the lighting
subsidiary in the United States, and of Alias,
which is specialized in metal furniture. Overall,
the sharp increase in Contract division revenues
helped to offset the fall-off in furniture sales.
RESULTS
Operating income came to €16.0 million
compared with €19.1 million in 2002. The year-
on-year decline was contained at 15% (9% on a
like-for-like basis) thanks to the aggressive
action taken in the first half of the year to
contain costs. Operating margin held up well at
13% of sales.
OUTLOOK FOR 2004
Although the outlook remains unsettled in the
furniture and lighting sectors, and the euro’s
strength against international currencies casts
a shadow on overseas markets, Cassina expects
sales to resume an upward trajectory in 2004,
largely thanks to the introduction of new
lighting and furniture ranges.
In the early part of 2004, Cassina will introduce
two new lines by world-renowned designers: a
new modular sofa concept by Philippe Starck,
and a furniture line by Charlotte Perian for the
Maestri collection.
ARA lamps by Ilaria Marelli
36 2 0 0 3 A n n u a l R e p o r t
PRESENTATION OF THE COMPANY AND THE GROUP
GR O U P B U S I N E S S E S
As explained in the section “Significant events
of the year”, Clal-Msx was divested at end-
December for a consideration of €6.1 million.
In view of the timing of the transaction, Clal-
Msx was consolidated over the full year but was
excluded from the consolidated balance sheet
at December 31, 2003.
Taking into account the results recorded by the
subsidiary in 2003, the net effect on the Group
of this disposal was a loss of €5.9 million.
(€ millions) 2001 2002 2003
Consolidated sales 70.9 59.8 41.5International sales as a % of total 51.5 % 51.1 % 59.0%
Operating income (EBIT) 5.2 3.3 2.4as a % of total sales 7.3 % 5.5 % 5.8%
Employees 234 237 228
Clal-Msx was a wholly-owned subsidiary of
Fimalac specialized in non-precious metal proces-
sing, laminates, wiredrawn products and coin
blanks.
372 0 0 3 A n n u a l R e p o r t
FACOM GROUP: A SIGNIFICANT
DETERIORATION IN RESULTS
IN A DIFFICULT ENVIRONMENT
◆ Facom Tools (hand tools)
The Facom Group’s hand tools business had a
difficult year, especially in France. The falloff in
demand coincided with the entry in the European
market of manufacturers from low-cost countries
such as China, significantly weakening Facom’s
competitive position in the hand tools market.
The 6.8% drop in sales to €412.3 million from
€442.3 million – including 4.7% like-for-like* –
was one of the largest of recent years. In France,
sales were down 6% like-for-like, with even
sharper falls being recorded for ordinary tools.
Lower sales volumes severely eroded operating
income, which contracted to €17.3 million from
€32.5 million despite energetic action to cut
overheads. In addition, Facom Tools incurred net
exceptional expenses of €40 million, corresponding
mainly to write-downs of logistics assets in France.
◆ Beissbarth Automotive (garage equipment)
Beissbarth, Facom’s wholly-owned garage
equipment subsidiary, improved its marketing
performance. Although sales were virtually
unchanged on a reported basis, at €156.6 million,
versus €157.2 million, they grew 3.8% like-for-like.
However, larger-than-expected write-downs were
recorded on operating and non-operating assets,
in connection with the closure or divestment of
loss-making units and the rationalization of
product lines.
These charges weighed heavily on Beissbarth’s
results. Operating losses deepened to €9 million
from €5 million in 2002 and the company also
incurred net exceptional expense of €31.1 million,
reflecting unit closure and divestment costs and
provisions, as well as write-downs to take account
of technical and quality problems encountered by
the Zippo subsidiary.
◆ Facom Group: lower debt
Despite the difficult environment and deteriorating
results, Facom Tools and Beissbarth both made
headway in paying down debt. At December 31,
2003, Facom Group net debt stood at €165 million
versus €209 million the year before. The €44
million reduction was attributable to improved
working capital management, with tight control
over receivables and inventories.
◆ Facom Group: new valuation leading to
the full write-down of the remaining
Facom Tools goodwill
The disappointing performance of the hand tools
business led us to review the carrying value of our
investment in Facom, taking into account:
PRESENTATION OF THE COMPANY AND THE GROUP
S I G N I F I C A N T E V E N T S O F T H E Y E A R
* Like-for-like changes are calculated after excluding the effects
of acquisitions and disposals and changes in exchange rates.
38 2 0 0 3 A n n u a l R e p o r t
◆ The current situation in the hand tools markets,
which are considerably less buoyant than in
June 1999 when the company was acquired.
◆ Emerging competition in the European market
from manufacturers from low-cost countries,
which escalated rapidly in 2003.
We deliberately chose to base our valuation on
conservative assumptions. As explained in the
section of this report dealing with the 2003
consolidated financial statements, it was
performed using the discounted cash flows
method – backed up by tests to measure
sensitivity to changes in assumptions – and also
on the basis of peer group and stock market
comparisons. In light of the values obtained, we
decided to write down in full the unamortized
Facom goodwill, in the amount of €248.7 million.
This decision is consistent with our policy of
valuing assets on a conservative basis.
All told, the Facom Group ended the year with a
net loss of €351.3 million, on the back of a €75.2
million loss in 2002.
FITCH RATINGS: A BANNER YEAR
After two very good years in 2001 and 2002, in
both the United States and Europe, Fitch turned
in an outstanding performance in 2003 with
revenues at a record high.
The company enjoyed strong growth in almost all
world markets and all segments of the rating
business, led by Structured Finance where Fitch
has built a solid position backed by an equally
solid reputation. In this complex area requiring
high-level technical expertise, Fitch won the
confidence of a growing number of investors
looking for transparent information, by developing
innovative tools and publishing high quality
research.
In the United States, the CDO (collateralized debt
obligation) and CMBS (collateralized mortgage-
backed securities) markets expanded very rapidly
throughout the year and Fitch also garnered
substantial revenues in the public finance market.
In Europe, where the rating market is less mature,
Fitch made solid advances in the Structured Finance
segment, helped by strong demand for ratings of
mortgage-backed securities, collateralized debt
obligations and receivables-backed securities.
In 2003, Fitch also actively pursued its diversification
into the credit risk management market through
Fitch Risk Management (FRM). Highlights of the
year included FRM’s acquisition of the IC2 First
database, which presents a strong qualitative
approach to analyzing operational risks faced by
banking institutions, and the launch of NetRisk
Insurance Services (NetRisk), a specialty practice
providing advisory support in the design, pricing,
underwriting, and claims adjustment of insurance
policies written on financial institution and capital
market risks.
PRESENTATION OF THE COMPANY AND THE GROUP
S I G N I F I C A N T E V E N T S O F T H E Y E A R
392 0 0 3 A n n u a l R e p o r t
Fitch ended the year with revenues of $455.5
million (€402.9 million), compared with $356.1
million (€378 million) in 2002, an increase of
6.6%. On a comparable structure basis and
excluding the currency effect – particularly the
weak dollar and British pound – revenues were up
by a very strong 23.1%.
Operating income rose at an even faster 13.5%, to
€100 million from €88.1 million. The like-for-like
increase was an exceptional 40%. Operating
margin climbed to 24.8% in 2003 from 23.3% the
previous year.
The considerable amounts of cash generated by
Fitch were used to pay down the debt taken on to
finance the major development initiatives under-
taken in 2000. At December 31, 2003, outstanding
borrowings represented only €137 million, compared
to €252 million at the previous year-end.
CASSINA: A RESILIENT
PERFORMANCE IN 2003 IN A LACKLUSTER MARKET
A world leader in high-end designer furniture,
Cassina posted sales of €122.9 million in 2003
compared to €134.8 million the previous year,
down 8.8% based on reported figures and 7.7%
like-for-like.
This represented a fairly limited decline, in a year
of depressed activity in businesses associated
with the luxury goods sector, testifying to
Cassina’s strong resilience thanks to the brand’s
excellent reputation.
Cassina reaped the benefits of its recent
successful diversification into the high-end
lighting market, while remaining one of the
prestige brands in its core designer furniture
business. In France, a new showroom was opened
in Paris in October last year, which should help to
strengthen Cassina's position in the French
market.
Operating income came to €16 million compared
to €19.1 million in 2002. The year-on-year decline
was limited to 16%, thanks to determined action
taken in the first half of the year to contain costs.
Operating margin held up well at 13% of sales.
LBC: LOWER REVENUES;PLANNED DIVESTMENT
In September 2003, we announced that we
were in the process of negotiating the sale of LBC.
This company had been generating satisfactory
profits for several years but consumed
considerable amounts of cash, due to the
investment needed to develop the business and
maintain storage facilities. The decision to sell
LBC was made in order to focus resources on
businesses that generate larger amounts of
free cash flow.
40 2 0 0 3 A n n u a l R e p o r t
On March 25, 2004, we announced that we had
accepted an offer for LBC from One Equity Partners
LLC, based on an enterprise value of €243 million
net of minority interests. The offer is subject to the
usual regulatory approvals and the deal should be
finally closed before June 30, 2004.
The more difficult conditions in the chemicals
industry in 2003 led to a 3.3% decline in
throughput, affecting substantially all LBC
storage facilities in both Europe and the United
States. The average capacity utilization rate
remained high, however, at 92.6% versus 94.3% in
2002, representing a satisfactory performance in
last year's more difficult economic environment.
LBC’s reported revenues contracted 6.2% to
€122 million from €130 million. However, this
was essentially due to the fall in the dollar – at
constant exchange rates, revenues were more or
less unchanged compared to 2002.
Operating income came to €23.4 million versus
€30.8 million, representing a fall of 24% based
on reported figures and 14.6% like-for-like. As
expected, operating margin was weakened by
higher insurance and payroll costs.
At December 31, 2003, LBC’s net debt stood at
€106 million compared to €112 million at the
previous year-end.
PARENT COMPANY
TRANSACTIONS
◆ Share issue
Fimalac carried out a €100 million share issue, for
cash, between February 6 and 19, 2003. A total of
5,268,382 new shares were issued at a price of
€19 per share, with pre-emptive rights for existing
shareholders on a 1-for-6 basis. The new shares
carried rights to the 2002 dividend.
A stock warrant was attached to each new share,
exercisable on the basis of three warrants per share
at a price of €25. The warrants have a four-year life.
The issue was taken up in full. Fimalac’s principal
shareholder, Groupe Marc de Lacharrière (repres-
enting the shareholders acting in concert)
contributed €75 million and Clymene contributed
€7 million. Shares taken up by the public and
institutional shareholders amounted to around
€18 million, representing over 50% of the actual
free float. The new shares and stock warrants
(“BASA”) were quoted on the Premier Marché of
Euronext Paris SA as from March 10, 2003.
Groupe Marc de Lacharrière and Clymene
exercised their pre-emptive subscription rights
over €100 million worth of shares, helping to limit
total share issuance costs to €1.5 million.
PRESENTATION OF THE COMPANY AND THE GROUP
S I G N I F I C A N T E V E N T S O F T H E Y E A R
412 0 0 3 A n n u a l R e p o r t
In view of the borrowings carried in Clal-Msx’s
balance sheet, the transaction had the effect of
reducing Group debt by €10.5 million. However, it
also led to the recognition of a €5.9 million loss in
the 2003 consolidated financial statements.
SIGNIFICANT REDUCTION IN DEBT
One of the highlights of 2003 was the significant
€317 million reduction in consolidated net debt
to €661 million at December 31, 2003 from €978
million at end-2002.
In € millions Dec. 31, 2002 Dec. 31, 2003
Debt (1,056) (745)
Due to companies accounted for by the equity method (30) -
Cash and cash equivalents 108 84
Net debt (978) (661)
Changes in net debt by company:
Decrease (+)/ In € millions Dec. 31, 2002 Dec. 31, 2003 Increase (-)
Fitch (252) (137) + 115
Facom Group (209) (165) + 44
LBC (112) (106) + 6
Cassina (16) (21) - 5
Parent Company and other (389) (232) + 157
Net debt (978) (661) + 317(decrease)
This reduction in debt represents one of the positive
developments of the past year. The improved gearing
gives the Group considerably more headroom, even
before taking into account the effects of the LBC
disposal currently underway.
◆ Sales of treasury stock
Responding to strong demand among intern-
ational institutional investors, Fimalac sold all of
the shares held in treasury stock, mainly in
October 2003. The net proceeds from sales of
treasury stock during the entire year amounted to
some €48 million. At December 31, 2003, Fimalac
held shares representing 1.5% of capital, for
allocation on exercise of management and
employee stock options.
◆ Withdrawal from Engelhard-Clal
In December 2003, Fimalac completed its
withdrawal from Engelhard-Clal, a precious metals
processing joint-venture that was 49%-owned by
the Group. In recent years, Engelhard-Clal had
sold its main businesses and its remaining
operations were marginal. The transaction netted
cash proceeds of €50 million and led to the
recognition of a €17 million exceptional gain in
the 2003 consolidated accounts.
◆ Divestment of Clal-Msx
Also in December 2003, Fimalac sold wholly-
owned Clal-Msx, specialized in non-precious
metals processing. In 2003, Clal-Msx had
revenues of €41.5 million and operating income
of €2.4 million, compared to €59.8 million and
€3.3 million respectively in 2002.
42 2 0 0 3 A n n u a l R e p o r t
COMMENTS ON THE
CONSOLIDATED FINANCIAL
STATEMENTS
◆ Changes in scope of consolidation
There were few changes in scope of consolidation
in 2003 and their impact was limited.
Newly-consolidated companies
2002
◆ Illuminating Experiences, acquired by
Cassina in March 2002.
◆ Fitch Risk Management, acquired between
May and July 2002.
◆ C o r e R a t i n g s , a c q u i r e d b y F i m a l a c
Investissements in the second half of 2002.
◆ Top Line, a small company acquired by
Facom Tools in June 2002.
2003
No material acquisitions were made in 2003.
Companies removed from the scope of
consolidation
2002
No material companies were removed from the scope
of consolidation in 2002.
2003
◆ The US subsidiary of Beissbarth, divested in
March 2003.
◆ Clal-Msx, divested by Fimalac at the end of
December 2003. In view of the timing of the
transaction, Clal-Msx was consolidated over
the full year, but was excluded from the
consolidated balance sheet at December 31,
2003.
◆ Engelhard-Clal, previously 49% owned and
accounted for by the equity method, following
Fimalac’s withdrawal from the joint venture at
the end of December 2003.
Year-on-year comparisons
To facilitate year-on-year comparisons, the following
discussion of consolidated results includes details
of the impact of the main changes in scope of
consolidation.
◆ Currency effects
Several major subsidiaries present their financial
statements in local currency. The dollar’s slide
against the euro adversely affected LBC’s
contribution to consolidated results after
conversion into euros, while Fitch’s contribution
was affected by the weakness of both the dollar
and the British pound. These currency effects are
also mentioned in the following discussion, to
facilitate comparisons between 2002 and 2003.
◆ Consolidated sales
Consolidated sales amounted to €1,259.6 million in
2003 compared to €1,302.7 million in 2002. The 3.3%
decline was essentially due to the sharp fall in the
dollar and the British pound against the euro. The
breakdown of consolidated sales by company is
PRESENTATION OF THE COMPANY AND THE GROUP
MA N A G E M E N T ’S D I S C U S S I O N A N D A N A LY S I S
432 0 0 3 A n n u a l R e p o r t
presented in note 4.17 to the consolidated financial
statements.
Operations outside France accounted for 75.4%
of total sales in 2003, with the United States
contributing around 28.5%.
Like-for-like sales – determined on a comparable
structure and exchange rate basis – rose by 3.4%.
The effect of changes in structure and exchange
rates is analyzed below:
In € millions 2002 2003
Reported sales 1,302.7 1,259.6 - 3.3%- Currency effect + 90.0
- Changes in structure - 5.3 - 8.5
Like-for-like sales 1,297.4 1,341.1 + 3,4%
The breakdown of like-for-like sales by company is as
follows:
In € millions 2002 2003
Facom 594.8 579.8 - 2.5%
Hand tools 442.3 421.5 - 4.7%
Garage equipment 152.5 158.3 + 3.8%
Fitch 377.5 464.7 + 23.1%
LBC 130.0 130.3 + 0.2%
Cassina 134.8 124.4 - 7.7%
Other companies (*) 60.3 41.9 - 30.5%
Like-for-like sales 1,297.4 1,341.1 + 3.4 %
The increase in sales reflects the very strong 23.1%
growth in revenues at Fitch, which offset the 2.5%
decline in Facom sales. Cassina experienced a
7.7% falloff in sales, but ended the year with a
robust fourth quarter performance. LBC’s revenues
remained more or less flat compared with 2002.
◆ Consolidated operating income
Consolidated operating income contracted 13.2%
to €137.9 million from €158.8 million in 2002, due
mainly to changes in structure and adverse
currency effects. The breakdown by company is
provided in note 4.18 to the consolidated financial
statements. On a like-for-like basis, operating
income was 4% higher, as shown below:
In € millions 2002 2003
Reported sales 1,302.7 1,259.6
Operating expense (1,143.9) (1,121.7)
Reported operating income 158.8 137.9 - 13.2%- Currency effect + 20.8
- Changes in structure + 0,6 + 7.1
Like-for-like operating income 159.4 165.8 + 4.0%
Changes in like-for-like operating income by
company were as follows:
In € millions 2002 2003
Facom 27.5 7.8
Hand tools 32.5 16.8
Garage equipment (5.0 (9.0)
Fitch 88.1 123.3
LBC 30.8 26.3
Cassina 19.1 17.4
Other companies (*) (6.1) (9.0)
Like-for-like operating income 159.4 165.8 + 4.0%
Fitch was the star performer, with operating income
up 40% like-for-like, while Facom experienced a
further marked decline in profitability.
(*) Including Clal-Msx: €59.8 million in 2002 and €41.5 million
in 2003.
(*) Including Clal-Msx: €(3.3) million in 2002 and €(2.4) million
in 2003.
44 2 0 0 3 A n n u a l R e p o r t
◆ Operating income after interest
In € millions 2002 2003
Reported operating income 158.8 137.9
Net interest expense (57.0) (46.8) + 17.9%
Reported operating income after interest 101.8 91.1 - 10.5%
- Currency effect + 18.2
- Changes in structure + 0.6 + 9.3
Like-for-like operating incomeafter interest 102.4 118.6 + 15.8%
Like-for-like operating income after interest –
corresponding to recurring income – rose 15.8%,
reflecting the healthy level of underlying
operating income and the significant fall in Group
interest costs. The after-tax figure (excluding
minority interests) was slightly down on 2002,
however, due to the higher relative tax charge.
In € millions 2002 2003
Reported operating income after interest 101.8 91.1-
Tax on recurring income (38.2) (46.7)
Minority interests (5.1) (4.7)
Reported recurring income after tax 58.5 39.7 - 32.1%
- Currency effect + 12.3
- Changes in structure + 0.6 + 4.8
Like-for-like recurring incomeafter tax 59.1 56.8 - 3.9%
◆ Consolidated net income (loss)
The significant €329.7 million net loss incurred in
2003 was essentially due to asset impairment
charges booked by Facom and the total write-
down of the Facom goodwill in the consolidated
accounts.
in € millions 2002 2003
Recurring income before tax 101.8 91.1
Non-recurring expense (32.1) (83.5)
Income (losses) of companies
accounted for by the equity method 0.7 (20.7)
Corporate income tax (41.0) (45.4)
Minority interests (4.1) (3.3)
Net income (loss) before amortization of goodwill 25.3 (61.8)
Amortization of goodwill (57.5) (267.9)
Net loss (32.2) (329.7)
Non-recurring items
In 2003, the Group incurred net non-recurring
expenses of €83.5 million, corresponding mainly
to the €84.2 million in impairment charges
recorded by the Facom Group.
Facom Tools recorded net non-recurring expenses
of €53 million, including €31.9 million in write-
downs of logistics assets in France.
Beissbarth had net non-recurring expenses of
€31.1 million, related to the closure or sale of
loss-making units, and write-downs of hoist
business assets. In 2002, the carrying value of the
Beissbarth brands was written down by €28.4
million.
Companies accounted for by the equity method
The €20.7 million loss reported under this caption
in 2003 mainly concerns Engelhard-Clal. Fimalac
withdrew from this joint venture at the end of the
PRESENTATION OF THE COMPANY AND THE GROUP
MA N A G E M E N T ’S D I S C U S S I O N A N D A N A LY S I S
452 0 0 3 A n n u a l R e p o r t
Application of this multi-criteria approach yielded
a fairly wide range of impairment values, from €86
million to €251 million. We deliberately chose to
adopt a conservative approach by writing down
the unamortized goodwill in full. At €248.7
million, the impairment charge was at the high end
of the range and also exceeded the impairment
calculated by the discounted cash flows method.
TRANSITION TO IFRS
Under European Union rules, we will be required
to prepare consolidated financial statements in
accordance with IFRS as from 2005, with 2004
comparatives presented on the same basis.
In October 2003, we set up a specialist working
group made up of finance and accounting staff
from the parent company and the operating
subsidiaries, to perform a detailed analysis of the
impacts of the changeover to IFRS. The aim was to
measure the main potential impacts on the
consolidated financial statements, identify
possible implementation issues and any
necessary changes to accounting and financial
reporting systems. This work is still in progress
and some impacts cannot be assessed because
the standards concerned have not yet been
finalized. The final action plan will be drawn up
during the second half of this year.
At this stage, no major implementation problems
or essential system changes have been identified.
The main issues identified to date are as follows:
year. The loss was covered by a provision reversal,
included in non-recurring items. All told, after
taking into account this reversal, Fimalac realized
a net profit of €17 million on the transaction.
Goodwill amortization
Amortization of goodwill, net of badwill written
back to the income statement, amounted to
€267.9 million in 2003 compared to €57.5 million
the previous year, which included a €32 million
write-down of Beissbarth goodwill.
The 2003 figure includes a €248.7 million charge
to write off the unamortized Facom Tools goodwill.
This charge was recorded after valuing the
Group's interest in Facom Tools and testing the
related goodwill for impairment, taking into
account the current difficult situation in the
hand tools market and the company’s reduced
competitiveness in the face of accelerating
globalization.
Facom Tools was valued using the discounted cash
flows method, based on realistic assumptions
concerning sales volumes, a four-year projection
period, a terminal value corresponding to a
reasonable multiple of operating income and an
8% discount rate. The analysis was backed by
tests to measure sensitivity to changes in
assumptions.
Other valuation methods were also applied,
including peer group comparisons (mainly quoted
US companies), and comparisons of valuations
produced by financial analysts. Recent transactions
in the sector are rare and not representative.
46 2 0 0 3 A n n u a l R e p o r t
◆ Intangible assets
Certain development costs incurred by Facom and
Cassina that are currently charged to the income
statement will have to be capitalized if certain
conditions are fulfilled. Certain intangible assets
carried in the balance sheet of Fitch will probably
have to be reclassified as goodwill.
◆ Property, plant and equipment
The valuation of certain large items of production
equipment at Facom and Cassina is currently being
reviewed. It may also be necessary to revalue the
Fimalac and Cassina headquarters buildings.
◆ Inventories
Certain allowances for slow-moving inventories
will be replaced by impairment charges based on
probable realizable value.
◆ Employee benefits
An comprehensive review of employee benefits
(stock options, pensions, other post-retirement
benefits) is currently underway and it is probable
that certain adjustments will be necessary to
standardize the accounting treatment of these plans.
◆ Financial instruments
The standard on financial instruments is still
subject to change and it is therefore difficult at
this stage to assess its impact. There may be
certain impacts on currency and interest rate
hedging instruments.
COMMENTS ON THE COMPANY
FINANCIAL STATEMENTS
Fimalac’s revenues consist mainly of dividends
received from subsidiaries, as follows:
In € millions 2002 2003
Financière Boulogne Technologies(ex Financière Secap) 40.2 43.8
Fimalac Investissements 14.6 29.0
LBC 6.7 7.1
Minerais & Engrais - 21.1
Other companies 0.4 0.5
61.9 101.5
The main ordinary changes concern interest
expense, which contracted to €29 million from
€37.4 million, reflecting the significant improvement
in the Company’s financial position.
Recurring income after tax rose to €78 million
from €30.2 million.
The Company incurred net non-recurring expense
of €434.4 million, after tax, as opposed to non-
recurring income of €42.2 million in 2002. The
2003 figure includes €431.5 million in write-
downs of the Company’s interests in Fimalac
Investissements, the parent company of the Facom
Group, and Société des Cadres Facom, to reflect
the impairment charge recorded in the Group
accounts.
As a result of these significant charges, the
Company ended the year with a net loss of
€356.44 million as opposed to net income of
€72.4 million in 2002.
PRESENTATION OF THE COMPANY AND THE GROUP
MA N A G E M E N T ’S D I S C U S S I O N A N D A N A LY S I S
472 0 0 3 A n n u a l R e p o r t
DE P E N D E N C E FA C T O R S
We consider that the Group is not materially
dependent on any patents, licenses, supply,
manufacturing, sales or financial contracts, new
industrial processes, suppliers or government
agencies.
2001 2002 2003
Fitch Ratings 1,244 1,262 1,502
Facom 3,993 4,124 3,988
LBC 581 591 596
Cassina 494 471 455
Core Ratings 0 27 29
Fimalac headquarters 37 35 34
Total 6,349 6,510 6,604
All Group entities in France have signed a 35-hour
week agreement or implement the 35-hour week
provisions of the applicable collective bargaining
agreement.
48 2 0 0 3 A n n u a l R e p o r t
EM P L O Y E E I N F O R M AT I O N
France Outside France Total Asia / Pacific Americas Europe Africa /Other
Facom 2,232 1 756 3,988 48 230 3,706 4
Fitch Ratings 40 1 462 1,502 111 780 415 196
LBC 228 368 596 0 143 453 0
Cassina 16 439 455 0 22 433 0
Core Ratings 7 22 29 0 0 29 0
Fimalac headquarters 34 0 34 0 0 34 0
Total 2,557 4,047 6,604 159 1,175 5,070 200
◆ Employees by geographic area at December 31, 2003
FI T C H RAT I N G S
At December 31, 2003, Fitch Ratings had 1,502
employees. The company is not faced with any
specific hiring problems. Working hours vary from
one country to another, according to local laws and
practices. The company is organized in accordance
with client needs and local employment laws.
FA C O M
Facom employee numbers at December 31, 2003
break down as follows:
Employees at Dec. 31, 2003 Permanent Fixed-term TOTAL
France 2,181 52 2,233
Outside France 1,718 37 1,755
Total 3,899 89 3,988
◆ Change in total number of employees worldwide between December 31, 2001 and 2003
(current Group structure)
492 0 0 3 A n n u a l R e p o r t
made to implement the audit recommendations.
The frequency of workplace accidents across the
entire Facom group retreated by 11.5% in 2003,
and the severity rate fell 21.8%.
Training budgets exceed the amounts required by
law. Training programs focus on information
technology, office systems and new manufacturing
and product technologies.
A plan has been launched to make Facom more
competitive. Operations have been reorganized
around strategic business areas to bolster the
group’s market presence, and action is being
taken to steadily bring down costs by streamlining
organization structures and decision-making
processes.
LBC
LBC had 596 employees as of December 31, 2003.
Very few employees work part time and only six were
employed under fixed-term contracts at end-2003.
The work force is extremely stable. Nineteen
employees were terminated in 2003, representing
3.2% of the total. Nine employees were
terminated due to misconduct and seven because
they were not capable of performing their tasks
(including two terminated during their trial
period). The halting of outsourcing service in
Of the total number of employees, 56% are based
in France, 37% in other European countries and
7% in the rest of the world, mainly the United
States. Managers represent 13% of the total, other
white-collar workers represent 43% and blue-
collar workers 44%. Women represent 25% of the
workforce. Facom complies with the principles of
equal treatment between men and women in all
aspects of its human resources policies.
Across the Facom group, permanent employees
declined by 3.3% compared with 2002 and
employees under fixed-term contracts fell 42%.
Temporary staff use was cut by 47% in volume and
38% in value, with the biggest decline observed in
France, despite stable absenteeism rates.
A restructuring plan involving seven jobs was
launched at BGI (Laissey facility), to adjust
employee numbers to the shift in production
towards cold casting.
Working hours vary according to local legislation.
In France, where the group has implemented the
35-hour week legislation, the number of hours’
overtime fell sharply in 2003 compared with the
previous year.
Meeting high standards of health and safety and
protecting the environment figure among the
group’s core concerns. An audit of these areas was
performed in 2001 and investments have been
50 2 0 0 3 A n n u a l R e p o r t
EM P L O Y E E I N F O R M AT I O N
Rotterdam led to the termination of three
employees. LBC is faced with hiring problems at
terminals, particularly in Rotterdam and Houston,
due to high local levels of employment and compe-
tition from other companies. The resignation rate
is low – the 13 employees who resigned in 2003
represented just 2.2% of the workforce.
LBC experiences peaks in activity which are difficult
to manage. In addition, the terminals are located in
ports and stay open round the clock to receive
ships. As a result, part of the workforce is required
to work nights. Employees work overtime only when
necessary due to activity levels. All overtime work is
in compliance with local labor laws and regulations.
Outside labor is used only for services that do not
correspond to LBC’s core business, such as
surveillance and cleaning. The cost of outside labor
was €1.6 million in 2003, representing 4.5% of the
total payroll. Of the total, €1.3 million concerned
the use of temporary staff for outsourcing
operations planned when the Rotterdam terminal
was acquired, including plastic film production
which was discontinued at the end of 2003.
No downsizing or restructuring plans are in
progress, with the exception of three layoffs due
to the halting of plastic film production
outsourcing in Rotterdam.
LBC and its subsidiaries are organized on the basis
of customer needs, in compliance with local labor
laws. The 2003 absenteeism rate was 4%, including
0.5% due to lost-time accidents.
Total wages and salaries amounted to €26.9
million in 2003 compared with €27.5 million the
previous year. The payroll tax rate increased to
32.7% in 2003 from 31.3% in 2002.
LBC has 80.5 female employees, representing
13.5% of the total workforce. LBC and its
subsidiaries comply with the principle of equal
treatment of all employees working in the group.
CA S S I N A
As of December 31, 2003, Cassina had 455
employees. Eighteen employees were hired during
the year, including 15 permanent employees and
three under fixed-term contracts.
A total of 18,518 hours’ overtime were worked during
2003. Use of outside labor represented 69 persons.
The company is not faced with any particular
hiring problems.
Working hours vary according to local legislation,
with a 40-hour week in Italy and a 35-hour week in
France. Part-time employees work 20 to 30 hours
per week.
512 0 0 3 A n n u a l R e p o r t
The absenteeism rate, based on hours worked,
stands at 8.9%. The main reasons are sick leave
(4.4%), maternity leave (1.8%) and unpaid leave
(1.3%).
Payroll costs – including payroll taxes – totaled
€19.3 million, up 4.1% over 2002.
Employee relations are governed by a national
bargaining agreement and a corporate agreement.
Cassina complies fully with health and safety laws
and periodic audits are conducted by specialist
consultants. Training is organized for security
personnel.
Cassina has 20 disabled employees, including 4 in
administrative positions and 16 in the production
area, corresponding to compulsory hirings. The
company makes voluntary grants to organizations
specialized in finding work for the disabled and
people on the margins of society.
Use of external labor totaled 26,000 hours in
2003. All subcontracting work complies with
International Labor Organization standards and
principles.
52 2 0 0 3 A n n u a l R e p o r t
EN V I R O N M E N TA L R E P O RT
FIMALAC (PARENT COMPANY)
Fimalac owns or has owned in the past three former
manufacturing sites which are polluted. The currently-
owned sites are in Mulhouse, eastern France, and
Fontenay Trésigny, to the east of Paris. The previously-
owned site is in Bornel, to the north of Paris.
Various regional government orders have been issued,
requiring Fimalac to deal with the soil and subsurface
water pollution. Fimalac is in the process of rehabilitating
the Mulhouse site and has commissioned pollution
tests and a simplified risk assessment at Bornel.
At Fontenay Trésigny, investigations are underway
to assess subsurface water pollution levels and a
detailed risk assessment will be launched shortly.
The production activities that caused the pollution
have been discontinued and no environmentally-
dangerous substances are currently being discharged
at any of the sites (as defined in Article 1 of the
government order of April 30, 2002 setting out the
disclosure requirements concerning discharges referred
to in Article L.225-102-1 of the Commercial Code).
FA C O M
Facom plays close attention to protecting the
environment at its production and distribution
facilities. Each facility has an Environment Officer –
reporting to the facility manager – responsible for
implementing the Facom group’s overall policy and
submitting regular reports to Facom headquarters.
Facom’s ongoing action plans and the formalities
undertaken to obtain new permits for certain
facilities following the industrial restructuring are
driving continuous improvement, ensuring that
Facom complies with all applicable standards and
regulations governing mechanical metalworking –
the group’s main business – painting and surface
treatment operations. The ultimate aim is to
undertake a certification process.
Research is conducted to develop technically
feasible, cost-effective methods to control and
reduce discharges and emissions, and solutions are
implemented that take into account manufacturing
imperatives. In 2003, a total of €549 thousand was
invested in France to this end, representing an
increase of 19% over 2002.
Energy and raw materials consumption at the French
facilities in 2003 was as follows: €1.67 million for
electricity, €0.14 million for water, €1 million for
natural gas and €7.5 million for steel. These figures
are not materially different from those for 2002.
A program to systematically eliminate PCBs is
underway at all facilities.
In 2003, Facom was not required to pay any
compensation for environmental damage and no
material legal proceedings are in progress.
All of Facom’s international manufacturing
subsidiaries are subject to the same overall policy,
as tailored to comply with local regulations.
532 0 0 3 A n n u a l R e p o r t
LBC
LBC’s business consists of storing bulk chemicals and
health, safety and environmental concerns are
therefore an integral part of its general policy to offer
customers a high quality service.
The terminals are listed facilities and as such are
subject to regular audits and inspections by
environmental agencies and other authorities,
focusing mainly on health, safety and environmental
risks. Chemical storage does not in itself give rise to
any pollution risk. However, an accident could result
in considerable pollution and environmental damage,
and LBC’s core priority is therefore accident prevention.
Each facility has a quality, health, safety and
environment officer or department reporting directly
to facility management. This officer or department is
responsible for compliance issues, as well as for
procedures and training. All new hires are trained in
preventing and dealing with the risks inherent in the
facility’s activities. At the terminals, particular
emphasis is placed on training internal and external
workers in security and environmental protection
procedures. In 2003, the group commissioned
independent compliance audits at its various
terminals, backed by soil pollution tests.
These audits did not reveal the need to incur any
material compliance costs, or soil clean-up costs –
based on current regulations – except at the Antwerp
terminal where the necessary provisions were
booked in 2001.
LBC’s business is heavily regulated and all of its
facilities have emergency procedures to deal with
accidents. These procedures include acting in coordination
with neighboring facilities, the fire services, the port
authorities and environmental agencies. Drills and
simulations are conducted at regular intervals, to test
the effectiveness of these procedures.
In 2003, LBC invested €3.6 million in health, safety
and environment projects, out of a total routine
capital expenditure budget of €10.2 million.
LBC is committed to maintaining good relations
with local communities at each of its terminals. The
company is in constant contact with government agencies,
port authorities and local associations concerning
safety at the terminals and environmental protection.
Raw materials consumption by LBC is very limited.
Water purchases by the group in 2003 amounted to
€0.3 million. The products stored by LBC need to be
either kept warm or cooled. Warming and cooling
systems are powered by electricity, gas, steam or
fuel oil. In 2003, the related purchases totaled €2.5
million, €1.5 million, €0.4 million and €1.5 million,
respectively. Where possible, gas-powered systems
are used. The main raw material used by the group is
nitrogen, to keep the tanks inert. Nitrogen purchases
in 2003 amounted to €1.2 million.
LBC’s activities do not generate any environmentally
dangerous discharges or emissions. The three main
types of discharges and emissions are steam (natural
54 2 0 0 3 A n n u a l R e p o r t
EN V I R O N M E N TA L R E P O RT
evaporation of stored products), waste water (used to
wash out tanks and equipment) and accidental
pollution (due to leaks in the storage tanks or the
pipework). When accidental pollution occurs, the
products are recovered. If any products seep into the
ground (tanks not set into concrete foundations), the
polluted soil is decontaminated before being re-used.
The terminals that are equipped with waste-water
treatment plants do not discharge any polluted water
into the environment. In all other cases, LBC uses
subcontractors to decontaminate waste water.
Steam emissions depend on the type of product
stored. Certain terminals are equipped with steam
recovery and treatment units. Steam emissions from
tanks not equipped with recovery and treatment units
do not exceed the limits set in the applicable regulations.
LBC and its subsidiaries comply with all the laws
and regulations governing their activities. In the
European Union and the United States, facilities are
subject to regular inspections by the regulatory
authorities or insurers, in order to identify the main
environmental and other risks. LBC complies with the
recommendations made by the inspectors and takes
all necessary action to reduce environmental risks.
In 2003, LBC was not ordered by the courts to pay
any compensation for environmental damage and no
material claims or legal proceedings for environmental
damage were received.
LBC subsidiaries in all countries are subject to the
same health, safety and environmental protection
rules as the group’s French terminals, adapted as
required to comply with local regulations.
Maintaining high standards of quality, safety and
hygiene and protecting the environment form an
integral part of LBC’s overall policy.
CA S S I N A
In 2003, Cassina’s operations consumed 1.8 million
Kwh of electricity, 12,000 cubic meters of water,
86,000 cubic meters of methane and 2,000 hundred-
weight of heating fuel (diesel, heating oil, fuel oil).
Production activities do not give rise to any pollution
risk. Periodic emissions audits are performed by
specialist consultants and national environmental
agencies can also perform audits.
A compliance officer has been appointed at each
Cassina group company in Italy, to ensure – with the
assistance of outside consultants – that all legal
requirements are met.
The activities of the international sales subsidiaries
do not generate any pollution risks.
No provisions for environmental risks have been
booked and no guarantees have been given in this
regard. No compensation has been paid for
environmental damage.
552 0 0 3 A n n u a l R e p o r t
Fimalac’s business portfolio is now focused on
companies operating in two sectors – Fitch Ratings in
rating services and Facom in hand tools and garage
equipment. The Group also owns 80% of Cassina, a
designer furniture company.
The main priorities for the Group’s investment
strategy in each of these businesses can be
summarized as follows:
◆ Fitch Ratings has gradually carved a position for
itself as the Group’s leading business, in terms of
both revenue growth and earnings contribution.
The strategy for Fitch consists of expanding and
developing the business to leverage as fully as
possible the strong growth potential offered by
the ratings sector. The global consolidation of the
ratings industry that has taken place in recent
years has now more or less run its course and
future development will come primarily from
organic growth, investment in niche segments of
the ratings market and expansion into ratings-
related services.
◆ Facom will adopt a highly selective approach to
acquisition opportunities. The main short-term
priority is to improve the group's profitability.
Total research and development expenditure by the
Fimalac Group in 2003 came to €14.2 million versus
€16.3 million the previous year.
IN V E S T M E N T S T R AT E G Y
56 2 0 0 3 A n n u a l R e p o r t
Management believes it has made adequate provisions
for all risks that could significantly impair the
financial position or earnings of the Company and the
Group. All of the provisions carried in the balance
sheet comply with the requirements of the new
accounting standards on the treatment of liabilities.
MA R K E T R I S K S
◆ Liquidity risk
At December 31, 2003
Characteristics Fixed or Total Maturityof debt floating (€m) 1 to 5
rate < 1 year years > 5 years
Money market securities* Floating 300.0 300.0Bank borrowings Floating 444.9 235.2 192.4 17.3
a - Totaloutstandingdebt 744.9 535.2 192.4 17.3b- Confirmed, undrawn lines of credit 229.0 29.0 200.0
(*) Commercial paper backed by confirmed undrawn lines of
credit (amounts indicated in (b)).
Risks arising from debt covenants
On April 11, 2000, the Group obtained a €1,155
million syndicated line of credit. The outstanding
balance on this line of credit as of December 31, 2003
was as follows:
Fimalac €256 million
(not utilized as of December 31, 2003)
Fitch €163 million ($206 million at 1.263)
Total €419 million
The loan agreement does not include any rating
triggers. However, it does include an acceleration
clause based on the following ratios:
Net Net Interestdebt-to-equity debt-to-Ebitda cover
(maximum) (maximum) (minimum)
December 31, 2003 1.00 4.25 2.75
June 30, 2004 1.00 4.00 3.00
December 31, 2004 1.00 3.75 3.50
Following the sharp reduction in Group debt in 2003,
this syndicated line of credit – which was obtained to
finance the acquisitions of Facom and Duff & Phelps –
is currently in the process of being repaid, without
waiting for the proceeds from the sale of LBC. Fimalac
and Fitch have obtained specific facilities to cover
their remaining debt, as follows:
◆ Fimalac: €180 million undated credit facility,
which will be repaid using the proceeds from the
LBC transaction.
◆ Fitch: $225 million 6-year facility with a 2-year
repayment moratorium.
The loan agreement for the $225 million facility
obtained by Fitch includes an acceleration clause
based on the following ratios:
Net Net Net cash flow/debt-to-equity debt-to-Ebitda fixed charges
(maximum) (maximum) (minimum)
June 30, 2004 1.20 2.80 1.20
December 31, 2004 1.20 2.80 1.20
These ratios will be steadily lowered over the remaining
period of the loan.
The Group also has confirmed lines of credit granted by
individual banks. These facilities do not include any
rating triggers but the following ratios apply in certain
cases:
RI S K S
572 0 0 3 A n n u a l R e p o r t
Maturity Amount (€m) Ratios
2004 70 No acceleration clause
2005 15 Net debt-to-equity > 1.25
2006 30 See syndicated loan above
Total 115
Sensitivity to changes in interest rates:
◆ Net position to be rolled over within 1 year
after hedging: €301.1m
◆ 100 bps change in interest rates:
(below cap) 1%
◆ Impact on net interest expense: €3.0m
◆ Currency risk
The Group’s exposure to currency risks is very limited
due to the virtual absence of cash flows in foreign
currencies. The main risks concern intercompany
treasury transactions and are systematically hedged.
The instruments used to hedge currency risks are as
follows:
– Forward sales of currencies
+ Forward purchases of currencies
+/– Currency swaps
– Purchases of puts
+ Sales of calls matched by purchases of puts (collars)
◆ Interest rate risk
At December 31, 2003
Characteristics of debt Total Maturity1 to 5
< 1year years > 5 years
Money market securities 300.0 300.0Bank borrowings 444.9 444.9Total interest bearing liabilities(€ millions) 744.9 744.9Cash and cash equivalents 83.8 83.8Total interest bearing assets (€ millions) 83.8 83.8
Net position before hedging (= net debt) 661.1 661.1
% 100% 100%
Swap - 250.0 250.0Cap - 110.0 110.0Off-balance sheet instruments (hedges)* - 360.0 360.0
Net position after hedging (= net debt) 661.1 301.1 360.0
% 100% 46% 54%
* Not including swaps that form an integral part of structured finance
instruments, such as subordinated perpetual loans.
58 2 0 0 3 A n n u a l R e p o r t
RI S K S
USD GBP
($m) (£m)
Cash inflows 35.4Cash outflows 0.0 0.0
Future cash flows 35.4 0.0
Commodities transactionsCash and cash equivalents 1.7Short-term intercompany loans 42.1 1,4Assets 43.9 1.4
Short-term bank borrowingsShort-term intercompany borrowings - 23.5Liabilities - 23.5
Net position before hedging 55.7 1.4
Forward sales of currencies - 42.1Forward purchases of currencies 17.0Purchases of collars(purchased put/sold call) - 35.0Hedging transactions - 60.1
Net position after hedging - 4.4 1.4
◆ Equities risk
Equities risk mainly concerns Fimalac shares held by
the Company, as follows:
◆ 549,668 Fimalac shares valued at €12,644 million
at December 31, 2003, held for allocation on
exercise of stock options and carried under
“Marketable receivables”.
The sensitivity of earnings to a 10% decline in the
share price is as follows: based on the average
December 2003 share price of €28.91, a 10% change
in price would have a €1.59 million impact on
earnings (549,668 x €2.89).
LE G A L R I S K S
◆ Fitch Ratings
Fitch Ratings is designated as a Nationally Recognized
Statistical Rating Organization (NRSRO) under
federal securities laws in the United States. This
“label” was applied by the Securities and Exchange
Commission (SEC) for the first time in 1975 to
designate agencies whose ratings of debt securities
issuers are widely recognized. Fitch Ratings was one
of the first three rating agencies to be granted the
NRSRO designation in 1975.
In 2003, the Securities and Exchange Commission
(SEC) and other United States and international
regulators continued to focus on the role and function
of credit rating agencies in the international capital
markets.
In April 2003, a committee of the U.S. House of
Representatives conducted a hearing into the use
of credit ratings and the credit rating agencies
in response to a report issued by the SEC on the
role and function of rating agencies. The
hearings featured testimony from SEC officials,
representatives of rating agencies, investors and
academics. Stephen W. Joynt, President and Chief
Executive Officer of Fitch Ratings, represented Fitch
at those hearings.
In June 2003, the SEC issued a so-called concept
release soliciting the public's views on issues relating
592 0 0 3 A n n u a l R e p o r t
to the credit rating agencies and the use of credit
ratings in U.S. securities laws. The concept release
solicited comments from the public on the SEC’s
recognition process and criteria, competition in the
ratings business and a variety of other topics related
to the function of rating agencies and the use of
ratings by the capital markets.
The resulting recommendations are not expected to
have a material impact on Fitch Ratings’ business.
In addition to the activities in the U.S., credit rating
agencies and credit ratings have been the focus of
increased interest by international organizations and
regulators outside of the U.S., particularly in Europe.
The proposal of the new Basel Capital Accord (the
so-called Basle II process), in which credit ratings
issued by credit rating agencies can be used by banks
to determine the appropriate amount of capital to
hold, also has increased the level of discussion about
the use of ratings and rating agencies in the
worldwide arena.
In the summer of 2003, The International
Organization of Securities Commissions (IOSCO), the
international organization of securities regulators,
formed a task force to study the use of credit ratings
and credit rating agencies.
In September 2003, the IOSCO task force issued a
report on the activities of the credit rating agencies,
together with principles for the activities of credit
rating agencies. The principles’ stated purpose is to
provide guidance for securities regulators, ratings
agencies and others interested in how rating
agencies operate and how ratings are used by market
participants. The principles focus on issues
substantially similar to the issues addressed by the
SEC in the Concept Release. The principles are not a
form of regulation and IOSCO is not a regulatory
body. IOSCO has stated that they propose to await
further consideration of the issues concerning rating
agencies in the major jurisdictions before considering
a preferred method to implement the principles.
IOSCO has also stated that it proposes to review
developments in this area within 18 months of its
report.
The principles generally address the integrity of
the ratings process, confidentiality, policies and
procedures to address conflicts and preserve
independence and the disclosure of ratings and
ratings methodologies. Fitch Ratings believes that
the way in which it currently conducts its business
substantially conforms to the IOSCO principles.
Accordingly, the adoption of these principles by
international securities regulators will not have a
material impact on Fitch’s operations or financial
position.
In Europe, a committee of the European Parliament
began work on a report on the role and methods of
rating agencies in the spring of 2003 (the
Parliamentary Report). The committee held hearings,
in which Fitch Ratings participated, in connection
with its report in November 2003. The Parliamentary
60 2 0 0 3 A n n u a l R e p o r t
RI S K S
Report, which was issued in January 2004, generally
covers the same issues as the SEC Concept
Release and the IOSCO report and principles. The
Parliamentary Report recommends that the European
Parliament adopt a resolution instructing the
European Commission to submit by July 2005 an
“assessment of the need for appropriate legislative
proposals to deal with the issues” relating to rating
agencies. The resolution was passed by the European
Parliament on February 10, 2004. Fitch Ratings expects
the European Commission to begin the assessment
required by the resolution in the near future.
Although the ultimate outcome of that assessment is
unclear, Fitch Ratings does not believe that any
proposal by the European Commission based on the
Parliamentary Report or the IOSCO principles, if
adopted, will have a material impact on its operations
or financial position.
◆ Facom
Facom and some of its hand tools subsidiaries offer
customers a lifetime warranty on the majority of
their products. This warranty is an essential sales
argument among professional users. The related
costs are provided for in the financial statements.
◆ LBC
As bulk chemicals storage companies, LBC and its
subsidiaries are subject to permit requirements in the
jurisdictions in which the terminal facilities are
located. These permits may be withdrawn in the
event of any breach of safety or environmental
regulations. LBC and its subsidiaries hold all the
permits required to operate their terminals and
comply with all the laws and directives currently in
force.
◆ Pending litigation
To the best of Management’s knowledge, there are no
exceptional events, claims or litigation in progress or
pending that could have a material adverse effect on
the business, assets, financial position or earnings of
the Company and the Group.
IN D U S T R I A L A N D
E N V I R O N M E N TA L R I S K S
Potential environmental risks – corresponding mainly
to pollution – are evaluated on a case by case basis,
as new information develops, by internal and/or
external specialists as well as in the course of
environmental audits which are regularly performed
at the Group’s industrial sites. The Group pays
particular attention to environmental matters, both in
the case of acquisitions and disposals and with
regard to its subsidiary LBC, and generally works with
specialized external consultants.
More detailed information is provided in the
“Environmental report” above.
612 0 0 3 A n n u a l R e p o r t
IN S U R A N C E
The Fimalac Group contracts insurance cover from
independent insurers and uses customary insurance
policies to protect against property losses, business
interruption, third-party liability, environmental risks
and the liability of corporate officers and executives.
The total amounts of insurance cover are as follows:
Property and casualty
and business interruption €1,183m
Liability €308m
Pollution €17m
Management liability €41m
Total €1,549m
OT H E R C O N T I N G E N C I E S
The Group’s main subsidiaries operate in extremely
competitive industrial sectors, whether in hand tools
and garage equipment (Facom), the ratings sector
(Fitch Ratings), chemical storage (LBC), or high-end
contemporary furniture (Cassina). Competitors range
from powerful multinationals, in the case of Facom
and Fitch Ratings, to highly specialized niche players,
in that of LBC and Cassina. Competitive challenges
may include price cutting by rivals seeking to expand
market share along with new products, services and
technological innovations.
LIENS ON FIMALAC ASSETS
Value of Total of % Type of lien Start date pledged the balance of total
of lien asset (a) sheet item (b) (a)/(b)
€ thousands
Intangible assets None
Property, plant and equipment None
Investments Feb. 2000 1,263,550 1,600,497 78.9%
REPORT OF THE CHAIRMAN
(ARTICLE L.225-37, PARAGRAPH 6,
O F T H E CO M M E R C I A L CO D E )
◆ Preparation and organization of Board
meetings
Information about the preparation and organization
of Board meetings is provided in the corporate
governance section of this report.
◆ Internal control procedures
A. – Fimalac Group internal control objectives
The Fimalac Group’s internal control procedures are
designed to obtain assurance that:
◆ All management actions and transactions
conform to the Group’s overall strategy, as
decided by the Board of Directors, and comply
with the applicable laws and regulations, as well
as the Group’s internal standards, rules and
corporate values.
◆ The behavior of Group employees complies with
the above requirements, and the information
62 2 0 0 3 A n n u a l R e p o r t
RI S K S
submitted to the Board of Directors and disclosed to
shareholders and other external parties is fairly stated.
One of the aims of the system of internal control is to
prevent and manage the risks of error and fraud.
However, no system of internal control can provide
absolute assurance that risks of errors and fraud have
been completely eliminated or brought under control.
Internal control in the Fimalac Group extends across
all subsidiaries. These companies operate in different
businesses and responsibility for internal control
therefore lies with the companies at the head of each
business line and their Boards of Directors. Fimalac’s
control extends only to monitoring compliance with
Group strategy and overseeing the financial
performance of each business.
The Auditors have issued a report on the section
of this report describing the procedures for the
preparation and processing of financial and
accounting information. The following description
therefore focuses on describing the procedures
concerning financial and accounting information
prepared for shareholders.
B. – An internal control system tailored to the
Group’s specific organization structure
The organization of the Fimalac Group’s internal
control system mirrors its management organization:
Internal controls embedded in operations – Each
function within the various Group businesses is
responsible for defining an internal control system
that enhances the execution of transactions, protects
the business’s assets and manages the risks
associated with the business. The decentralization of
the accounting and finance functions strengthens the
accountability of the subsidiaries' chief executives for
the reliability of financial data.
A full set of delegations of authority – Management of
the Fimalac Group is based on an extensive system of
delegations of authority, backed by controls to
ensure that these delegations are not exceeded. The
aim is to make each manager accountable for the
implementation of Group policies, as well as for the
execution of the decisions and strategies of the Board
of Directors and compliance with local laws and
regulations.
The principle of segregation of tasks – This principle
applies mainly to operating and finance functions.
Most Group units have their own finance function,
which contributes to measuring performance, as well
as providing assurance about the reliability of
information and initiating management reporting
systems. The consolidation department performs
controls and consistency tests on financial and
accounting data, using computerized reporting
applications and procedures based on Concept
software.
The Chairman of the Fimalac Board of Directors also
acts as Chief Executive Officer, with responsibility for
managing the Group. The bylaws do not contain any
632 0 0 3 A n n u a l R e p o r t
clauses restricting the powers of the Chairman, who
is nevertheless bound by the Board of Directors'
internal rules.
The main internal control structures are as follows:
The Boards of Directors of the subsidiaries – In each
Fimalac subsidiary, the Board of Directors determines
the company's strategy and oversees its
implementation. The Board reviews all issues
concerning the company's efficient operation and
makes decisions on all matters requiring Board
approval. The Board performs all controls and
procedures that it considers necessary. Before each
meeting, the directors receive all the information
required to enable them to exercise their judgment
and they also have the right to obtain all documents
that they consider useful. Fimalac representatives sit
on the Boards of most subsidiaries.
The Fimalac Audit Committee is responsible for
informing the Fimalac Board of Directors of its
opinion on the annual and interim financial
statements. Assisted by the external auditors, the
Audit Committee reviews the financial statements
and the accounting policies applied. The Committee
ensures that it is informed of all material risks and
off-balance sheet commitments. It obtains assurance
that the auditor independence rules are complied
with.
Group Financial Control – The Financial Control
Department monitors actual performance compared
with the budget, forecasts and cash schedules. It also
ensures that financial reporting procedures followed
by the Group businesses are appropriate.
The external auditors – In connection with their
audit and in accordance with their professional
standards, the external auditors – mainly the
PricewaterhouseCoopers network and Cagnat –
review the accounting and internal control systems
that have an impact on the representations
underlying the financial statements. They certify that
the financial statements have been prepared in
accordance with generally accepted accounting
principles in order to produce accurate financial
information which is fairly stated. They present an
annual summary of their audit findings to the Group
Finance Department and the Audit Committee.
Wherever possible, the subsidiaries are audited by
the local offices of the Group auditors, to guarantee a
consistent approach.
The Group’s range of businesses and the frequent
changes in the scope of consolidation make it difficult
to issue internal standards applicable across the
entire organization. The Group therefore relies on the
accounting and financial rules issued by the
individual businesses to ensure that financial
information for each business is fairly stated. The
consolidated financial statements are prepared
according to French generally accepted accounting
principles.
64 2 0 0 3 A n n u a l R e p o r t
RI S K S
C. – Continuous implementation of internal control
Control activities are managed and implemented on a
continuous basis. The adequacy of controls and any
action to address risks more effectively are verified in
real time.
The budget process – The Group has set up a
decentralized budget process, implemented at the
lowest level in the organization, with the aim of
increasing the accountability of the subsidiaries’
chief executives for meeting budget objectives.
Performance in relation to objectives is monitored at
monthly meetings of the Management Committees
organized by business and held at Fimalac
headquarters. This process represents the cornerstone
of the system to measure the performance of the
profit and decision-making centers.
Information and approval system – The business and
financial reporting systems are backed by
applications that generate daily cash reports, as well
as requests for approval of investment and
divestment projects, requests for loan guarantees
and banking or customers signature authority.
D. – A constant drive to strengthen internal control
The main initiatives launched or completed in 2003 to
strengthen internal control were designed to embed
management controls more deeply in systems to
analyze the operating performance of the various
businesses – particularly the hand tools and garage
equipment division – in order to provide Group
management with the necessary insight about the
measures needed to restore these businesses’
profitability.
◆ Restrictions on the powers of the Chief
Executive Officer decided by the Board of
Directors
The restrictions on the powers of the Chief Executive
Officer decided by the Board of Directors are defined
in Article 1 of the Board of Directors’ internal rules,
which is reproduced in full in the Corporate
Governance section.
652 0 0 3 A n n u a l R e p o r t
This is a free translation into English of the statutory auditors’ report issued in the French language and is provided solely for the convenience
of English-speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional
auditing standards applicable in France.
To the shareholders
In our capacity as Statutory Auditors of Fimalac and in application of Article L.225-235, final paragraph, of the
Commercial Code, we present below our report on the report prepared by the Chairman of Fimalac in application of
Article L.225-37 of the Commercial Code for the year ended December 31, 2003.
Under the responsibility of the Board of Directors, the Company’s management is required to define and implement
adequate and efficient internal control procedures. In his report, the Chairman of the Board of Directors is required
to comment on the conditions applicable for the preparation and organization of the work carried out by the Board
of Directors and the internal control procedures implemented within the Company.
Our responsibility is to report to shareholders our comments on the information contained in the Chairman’s report
concerning the internal control procedures related to the preparation and processing of accounting and financial
information.
We conducted our work in accordance with the professional guidelines applicable in France. Those guidelines require
that we perform procedures to assess the fairness of the information given in the Chairman’s report about internal
control procedures related to the preparation and processing of accounting and financial information. These
procedures included:
◆ Reviewing the internal control objectives, general organization and procedures related to the preparation and
processing of accounting and financial information, as described in the Chairman’s report.
◆ Reviewing the work underpinning the information given in the Chairman's report.
Based on our procedures, we have no matters to report concerning the information about the Company’s internal
control procedures related to the preparation and processing of accounting and financial information, as contained
in the report of the Chairman of the Board of Directors prepared in accordance with Article L.225-37, final paragraph,
of the Commercial Code.
Paris, April 14, 2004
The Statutory Auditors
Cagnat & Associés Xavier Aubry
JACQUES CAGNAT PARTNER OF PRICEWATERHOUSECOOPERS AUDIT
REPORT OF THE AUDITORS ON THE CHAIRMAN’S REPORT
DIVESTMENT OF LBC
◆ Press release dated March 15, 2004
Fimalac – Proposed divestment of LBC
Fimalac has received from One Equity Partners LLC an
irrevocable commitment to acquire LBC S.A. based
on an enterprise value, net of minority interests, of
€243 million, and has given exclusive negotiation
rights to One Equity Partners LLC for a certain period.
Fimalac will shortly be calling a meeting of officials of
the European Works Council and will inform the Board
of Directors at the meeting scheduled for tomorrow,
March 16.
The sale of LBC S.A. could be completed in the second
quarter of 2004, provided that the necessary
authorizations are obtained in France and the United
States.
One Equity Partners LLC is Bank One Corporation’s
private equity fund. Bank One Corporation is one of
the world’s fifty largest banks, with total assets of
$325 billion.
◆ Press release dated March 25, 2004
Fimalac accepts One Equity Partners LLC’s offer
for LBC
After informing the Works Councils of LBC, the
officials of its European Works Council and its Board
of Directors, Fimalac has accepted the offer to acquire
LBC made by One Equity Partners LLC based on an
enterprise value, net of minority interests, of €243
million.
The transaction has been submitted to the
competition authorities in France and the United
States for approval and should be completed before
the end of the first half of 2004.
REPAYMENT OF THE
SYNDICATED LOAN
Following the sharp reduction in Group debt in 2003,
the syndicated loan used to finance the acquisition of
Facom and Duff & Phelps is in the process of being
repaid, without waiting to collect the proceeds from
the sale of LBC. Fimalac and Fitch have obtained
specific loans to cover their remaining debt.
66 2 0 0 3 A n n u a l R e p o r t
RE C E N T D E V E L O P M E N T S
672 0 0 3 A n n u a l R e p o r t
◆ To complete the sale of LBC before June 30, 2004.
◆ To improve the Facom Group’s profitability.
Facom's teams are determined to bring to the fore
the fundamental qualities of the group’s products.
Facom’s recovery will be driven by a more dynamic
marketing policy and ongoing efforts to cut costs
throughout the organization. The group will be
focusing on overheads, product distribution costs
and the organization of manufacturing operations,
and will also be calling on suppliers to seek ways
of bringing down their prices.
◆ To continue extending and developing Fitch’s
businesses, with the aim of leveraging the
outstanding growth potential offered by the
rating market.
◆ On the financial front, Fimalac is committed to
continuing to create value for shareholders. The
target for 2004 is to increase recurring income
compared with 2003.
Thanks to the robust fundamentals developed over
2003, we are looking to the future with confidence.
2004 O U T L O O K
Annual Shareholders’ Meeting, June 8, 2004 at
3:00 p.m. at Pavillon Gabriel, Paris.
FI N A N C I A L C A L E N D A R
Board meeting to approve the interim financial
statements, September 21, 2004.
FIMALAC HAS FOUR PRIORITIES FOR 2004
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692 0 0 3 A n n u a l R e p o r t
CorporateGovernance
70 2 0 0 3 A n n u a l R e p o r t
Directors are elected for renewable four-year
terms of office. Each director must hold at least
five registered shares.
BOARD OF DIRECTORS
◆ Basis of the Company’s General
Management
Under article L.225-51-1 of the Commercial Code,
the Company is managed either by the Chairman
of the Board of Directors or by another individual
appointed by the Board, who has the title of Chief
Executive Officer (Directeur Général).
On June 4, 2002 the Board of Directors decided
that Marc Ladreit de Lacharrière, the Chairman of
the Board of Directors, would also act as Chief
Executive Officer for the remainder of his term of
office as director.
◆ Members of the Board of Directors
The Board of Directors has ten members:
Marc LADREIT de LACHARRIÈRE
Chairman and Chief Executive Officer
Véronique MORALI
Chief Operating Officer
Pascal CASTRES SAINT-MARTIN
Georges CHARPAK
David DAUTRESME
Arnaud LAGARDÈRE
Philippe LAGAYETTE
Bernard MIRAT
Bernard PIERRE
Fimalac Participations, represented
by Pierre BLAYAU
The membership of the Board is structured to
enable the Group to fully leverage both the
experience and the independence of its directors.
Directors are elected for a four-year term.
In accordance with the recommendations of the
Bouton report on corporate governance a director is
deemed to be independent when he or she has no
relationship of any kind with the company, its group
or the management of either that is such as to color
his or her judgment. Six of Fimalac’s directors are
independent in accordance with this definition:
Pierre Blayau, Pascal Castres Saint-Martin, Georges
Charpak, David Dautresme, Arnaud Lagardère,
Philippe Lagayette.
The Company does not have any directors elected
by employees.
Arnaud Lagardère and Philippe Lagayette, were
appointed to the Board on May 23, 2003, subject
to ratification by shareholders at the Annual
General Meeting of June 8, 2004. During the
CORPORATE GOVERNANCE STRUCTURES
712 0 0 3 A n n u a l R e p o r t
meeting, shareholders will also be asked to re-
elect as directors Fimalac Participations, Marc
Ladreit de Lacharrière, Philippe Lagayette and
Véronique Morali.
There are also six non-voting directors (censeurs)
on Fimalac’s Board, all of whom are independent
directors with the exception of Michel Castres
Saint-Martin:
René BARBIER de la SERRE
Michel CASTRES SAINT-MARTIN
Henri LACHMANN
Jean-Charles NAOURI
Etienne PFLIMLIN
Edouard de ROYÈRE
Non-voting directors are elected for a two-year
term.
◆ Information about directors
and non-voting directors
Marc LADREIT de LACHARRIÈRE
Chairman and Chief Executive Officer
Born on November 6, 1940; age: 63.
First elected: June 14, 1990 (Director)
April 21, 1993 (Chairman)
Re-elected: June 7, 2000
Current term expires at the close of the 2004
Annual General Meeting
Number of shares held
at December 31, 2003: 721,587
Biographical details
After graduating from Ecole Nationale
d’Administration, Marc Ladreit de Lacharrière
began his career with Banque de Suez et de
l'Union des Mines which merged with Banque de
l'Indochine to form Indosuez. In 1976, when he
held the position of Investment Banking Director,
he left Indosuez to join L’Oréal as Chief Financial
Officer, rising to the position of Vice-Chairman
and Chief Executive Officer. In March 1991, he left
L’Oréal to set up his own company, Fimalac.
Directorships and executive positions held in 2003:
Chairman and Chief Executive Officer
Fimalac
Chairman of the Board of Directors
Fitch Ratings (USA)
Fimalac Inc. (USA)
Honorary Chairman
Comité National des Conseillers du Commerce
Extérieur de la France
Director
L’Oréal
Casino
Renault
Cassina (Italy)
Member of the Advisory Committee
Banque de France
Managing partner
Groupe Marc de Lacharrière
72 2 0 0 3 A n n u a l R e p o r t
Manager
Fimalac Participations
Member of the Board of the following
philanthropic organizations
Conseil Artistique des Musées Nationaux
Fondation Bettencourt Schueller
Fondation Nationale des Sciences Politiques
Louvre Museum
Véronique MORALI
Chief Operating Officer and director
Born on September 12, 1958; age: 45
First elected: April 24, 2001
Current term expires at the close of the 2004
Annual General Meeting
Number of shares held at December 31, 2003:
13,792
Biographical details
After graduating from Ecole Nationale de
l’Administration, Véronique Morali joined the
French civil service (Inspection Générale des
Finances) in 1986. She left the civil service in 1990
to join Fimalac, where she has successively held
the positions of Manager, Special Projects, Deputy
Chief Operating Officer and, currently, Chief
Operating Officer and member of the Board.
Directorships and executive positions held in 2003:
Chairman and Chief Executive Officer
Fimalac Investissements
Director
Cassina (Italy)
Core Ratings Ltd (UK)
Eiffage
Fimalac
Fitch Ratings (USA)
Fimalac Inc. (USA)
Fitch Risk Management
Minerais & Engrais
Tesco Plc (UK)
Valeo
Permanent representative of Fimalac
Facom
Permanent representative of Fimalac Inc.
Fitch France SA
Sole director
FCBS Gie
Manager
Pandour
Silmer
Pascal CASTRES SAINT-MARTIN
Director
Director of Sanofi-Synthelabo
Born on April 12, 1936; age: 67
First elected: June 26, 1998
Re-elected: June 4, 2002
Current term expires at the close of the 2006
Annual General Meeting
Number of shares held at December 31, 2003: 74
CORPORATE GOVERNANCE STRUCTURES
732 0 0 3 A n n u a l R e p o r t
Biographical details
Pascal Castres Saint-Martin is a graduate of the
HEC business school.
Between 1962 and 1979, he held various
management positions with Banque Générale
Industrielle La Hénin (now renamed Banque
Indosuez).
In 1979, he joined L’Oréal as Legal Director. He
subsequently held the positions of Chief Financial
Officer and General Counsel, Vice-President
responsible for General Management and
Administration, and deputy Chief Executive
Officer. He retired in 1999.
Directorships and executive positions held in 2003:
Chairman
Le Portefeuille Diversifié
Chairman of the Supervisory Board
Groupe Marc de Lacharrière
Director
Fimalac
Sanofi Synthelabo
Seb
Member of the Supervisory Board
Arc International
Chairman of the Fimalac Selection, Nominations
and Remunerations Committee
Georges CHARPAK
Director
Holder of the Nobel Prize for Physics
Born on August 1, 1924; age: 79
First elected: June 18, 1997
Re-elected: June 5, 2001
Current term expires at the close of the 2005
Annual General Meeting
Number of shares held at December 31, 2003: 25
Biographical details
Georges Charpak arrived in France in 1931 and
studied at the Ecole des Mines de Paris.
He joined the CNRS and the Collège de France
nuclear chemistry laboratory in 1947.
After completing his thesis in 1954, he began
conducting research into particle physics, working
at CERN in Geneva from 1959 to 1992. During this
period, he won the Nobel Prize for Physics. He
went on to study physics instruments used in
biology and medicine, within a company he set up,
named Biospace.
Directorships and executive positions held in 2003:
Director
Biospace Instruments
Biospace Mesure
Fimalac
Molecular Engines Laboraties (MEL)
David DAUTRESME
Director
Senior Advisor at Lazard Frères
Born on January 5, 1934; age: 70
First elected: June 4, 2003
Current term expires at the close of the 2007
74 2 0 0 3 A n n u a l R e p o r t
Annual General Meeting
Number of shares held at December 31, 2003:
7,133
Biographical details
1958-1960: Officer in charge of Algerian Affairs
1960-1962: Ecole Nationale d’Administration
1962-1966: Auditor, then Advisor with the Cour
des Comptes (National Audit Office)
1966-1967: Comptroller, Caisse des Dépôts et
Consignations
1967-1968: Member of the staff of Michel Debré,
Minister of the Economy and Finance
1968-1982: Under Director, deputy director,
director, deputy Chief Executive Officer, Crédit
Lyonnais
1982-1986: Chairman and Chief Executive Officer,
Crédit du Nord
1986-2000: Managing Partner, Banque Lazard
Frères et Cie
Since 2001: Senior Advisor at Lazard Frères and
manager of DD Finance.
Directorships and executive positions held in 2003:
Chairman
Parande Développement (Euris Group)
Director
Axa Investment Managers
Fimalac
Rue Impériale
Member of the Supervisory Board
Axa
Casino
Club Méditerranée
Non-voting director
Lazard Frères Banque
Groupe Go Sport
Manager
DD Finance
Member of the Axa Audit Committee
Chairman of the Casino Audit Committee
Member of the Fimalac Audit Committee
Arnaud LAGARDÈRE
Director
Managing Partner of Lagardère SCA
Born on March 18, 1961; age: 43
First elected: May 23, 2003
Current term expires at the close of the 2007
Annual General Meeting
Number of shares held at December 31, 2003: 5
Biographical details
After graduating from Université Paris-Dauphine,
Arnaud Lagardère began his career in 1987
working for his father, Jean-Luc Lagardère. He
successively held the positions of Vice-Chairman
of the Supervisory Board of Banque Arjil, Head of
Emerging Businesses and Electronic Media at
Matra and Chief Executive Officer of Lagardère SA.
In 1994, he became Chairman and Chief Executive
Officer of Grolier Inc. in the United States, where
CORPORATE GOVERNANCE STRUCTURES
752 0 0 3 A n n u a l R e p o r t
Hachette Filipacchi Medias
Lagardère Ressources SAS
Lagardère Sociétés
LVMH-Moët Henessy Louis Vuitton
Société d’agences et de Diffusion
Member of the Supervisory Board
T.Online International AG
Virgin Stores SA
Permanent representative of Hachette SAS
SEDI TV-TEVA (management board)
Permanent representative of Lagardère Active
Publicité
Lagardère Active Radio International
Manager
Lagardère Élevage
Lagardère Active Publicité
Nouvelles Messageries de la Presse – N.M.P.P.
Co-manager
I.S.-9
Member
Fondation Hachette
Member of the Fimalac Selection, Nominations
and Remunerations Committee
Philippe LAGAYETTE
Director
Director of JP Morgan & Cie SA
Born on June 16, 1943; age: 60
First elected: May 23, 2003
Current term expires at the close of the 2007
Annual General Meeting
Number of shares held at December 31, 2003: 5
he lived with his family for four years. Since his
return to France in 1998, he has focused on the
Group's media division, which he has reorganized
and strengthened.
Directorships and executive positions held in 2003:
Chairman and Chief Executive Officer
Hachette SA (Lagardère Media)
Lagardère Capital & Management
Chairman
Lagardère Active SAS
Lagardère Active Broadband SAS
Lagardère Images SAS
Lagardère SAS
Deputy Chairman
Lagardère Active Broadcast
Chairman of the Board of Directors
Eads Participations B.V.
European Aeronautic Defence & Space Company –
Eads Nv
Lagardère Thématiques
Vice-Chairman of the Supervisory Board
Arjil & Compagnie SCA
Vice-Chairman and Chief Operating Officer
Arjil Commanditée – ARCO
Chief Executive Officer
Lagardère Thématiques
Director
Canal Satellite
Fimalac
France Telecom
Hachette Distribution Services
Hachette Livre
76 2 0 0 3 A n n u a l R e p o r t
Biographical details
Philippe Lagayette is a graduate of Ecole
Polytechnique and Ecole Nationale d’Administration
1970: French civil service (Inspection Générale des
Finances)
1974: Treasury department of the Ministry of the
Economy and Finance
1980: Under Director in the Inspection Générale
des Finances
1981: Director in the staff of the Minister of the
Economy and Finance
1984: Deputy Governor of Banque de France
1992-1997: Chief Executive Officer of Caisse des
Dépôts et Consignations
Since July 20, 1998, Philippe Lagayette has been
running JP Morgan’s operations in France, as
Chairman and Chief Executive Officer of JP Morgan
et Cie SA, the French subsidiary of the JP Morgan
Chase Group. He is President of Institut des
Hautes Etudes Scientifiques (research in
mathematics and theoretical physics) and
President of the French American Foundation.
Directorships and executive positions held in 2003:
Director
JP Morgan & Cie SA
Eurotunnel
Fimalac
La Poste
Member of the Supervisory Board
PPR
Member of the Fimalac Audit Committee
Bernard MIRAT
Director
Non-voting director of Cholet Dupont (holding
company)
Born on July 3, 1927; age: 76
First elected: April 21, 1993
Re-elected: June 4, 2002
Current term expires at the close of the 2006
Annual General Meeting
Number of shares held at December 31, 2003: 25
Biographical details
Bernard Mirat holds degrees in law and literature,
and is a graduate of Institut d’Etudes Politiques de
Paris and Ecole Nationale d’Administration.
1955-1959: Assistant to senior management of
Société d’Optique et de Mécanique de Haute
Précision
1961-1987: Deputy Company Secretary of
Compagnie des Agents de Change
1988-1991: Deputy Managing Director
1966-1983: Professor at Ecole des Hautes Etudes
Commerciales
1991-1992: Vice-Chairman and Chief Executive
Officer, Société des Bourses Françaises
1993-1999: Advisor to the Fimalac Group
1993-1999: Chairman and Chief Executive Officer
of Ibca Notation SA, renamed Fitch-Ibca
Since 1999: Advisor to Cholet-Dupont
CORPORATE GOVERNANCE STRUCTURES
772 0 0 3 A n n u a l R e p o r t
the Alcatel-Alsthom Group where he held
management positions in various subsidiaries,
including Chairman and CEO of Saft (batteries)
and Alcatel Câbles (underground and underwater
power and telecommunications cables). He
subsequently joined the Group management team,
with responsibility for technical, industrial and
international operations.
He left Alcatel-Alsthom in 1996 to become Chairman
and CEO of the franco-american joint venture
Engelhard-Clal.
Directorships and executive positions held in 2003:
Chairman and Chief Executive Officer
Engelhard-Clal Ltd (UK)
Fremapi
H. Drijfhout & Zoon’s (Netherlands)
Holdec MP
Orbitec
Semp SA (Spain)
Chairman
Engelhard-Clal SAS
Director
Clal-Msx
Engelhard-Clal (Australia)
Engelhard-Clal LP (Hong-Kong)
Engelhard-Clal LP (Singapore)
Fimalac
Hiperinver SA Platecxis
Platecxis (Spain)
Soldaduras DE Plata Industrial
Member of the Supervisory Board
Groupe Marc de Lacharrière
Chairman of the Fimalac Audit Committee
Directorships and executive positions held in 2003:
Director
Fimalac
Fitch France SA
Minerais & Engrais
Member of the Supervisory Board
GT Finance
Lagardère SCA
Non-voting director
Holding Cholet Dupont
Auditor
FCBS Gie
Member of the Lagardère SCA Audit Committee
Bernard PIERRE
Director
Chairman and Chief Executive Officer of Fremapi
Born on January 9, 1939; age: 65
First elected: June 18, 1997
Re-elected: June 5, 2001
Current term expires at the close of the 2005
Annual General Meeting
Number of shares held at December 31, 2003:
14,704
Biographical details
After graduating from Ecole Polytechnique, Bernard
Pierre began his career with the Direction Technique
des Armements Terrestres, the government army
weapons development and manufacturing agency,
where he held positions in the areas of both
engineering and manufacturing. In 1973, he joined
78 2 0 0 3 A n n u a l R e p o r t
FIMALAC PARTICIPATIONS
Director
First elected: April 30, 1996
Re-elected: June 7, 2000
Current term expires at the close of the 2004
Annual General Meeting
Number of shares held at December 31, 2003:
271,045
Director
Fimalac
Pierre BLAYAU
Permanent representative of Fimalac Participations
Chairman and Chief Executive Officer of Géodis
Born on December 14, 1950; age: 53
First appointed: April 30, 1996
Re-appointed: June 7, 2000
Current appointment expires at the close of the
2004 Annual General Meeting
Biographical details
Pierre Blayau is a graduate of Ecole Normale
Supérieure de Saint Cloud and of Institut d'Etudes
Politiques de Paris, where he earned a post-
graduate degree in German studies. After
graduating from Ecole Nationale d'Administration,
he joined the French civil service (Inspection des
Finances). He subsequently moved to the Saint
Gobain Group, where he held various positions
including Chairman of Pont-à-Mousson and
Director of the Mechanical Pipework Division.
In 1993, he joined the Pinault-Printemps-Redoute
Group as Chairman of the Management Board. His
positions included Chairman of FNAC (1994-1995)
and Chairman of La Redoute (1994).
As Chairman of Moulinex, from 1996 to 2000, he
was responsible for masterminding the Moulinex-
Brandt merger.
Currently Chairman of Géodis, Pierre Blayau was
named advisor to the Chairman of SNCF and
member of the SNCF Executive Committee in April
2003.
Directorships and executive positions held in 2003:
Chairman and Chief Executive Officer
Géodis
Director
Ligue de Football Professionnel
Zust Ambrosetti SpA
Member of the Supervisory Board
S.I. Finance
Transports Bernis
Permanent representative of Géodis
Bourgey Montreuil
Calberson
Géodis Logistics
Géodis Overseas France
Teisa
Permanent representative of Fimalac
Participations
Fimalac
CORPORATE GOVERNANCE STRUCTURES
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René BARBIER de LA SERRE
Non-voting director
Director of Sanofi-Synthélabo
Born on July 3, 1940; age: 63
First elected: June 4, 2002 (as non-voting director)
Term expires: 2004
Biographical details
René Barbier de la Serre is a graduate of Ecole
Polytechnique, Manufactures de l’Etat engineering
school and Institut d’Etudes Politiques de Paris
(IEP). He began his career in 1963 with Banque de
l'Union Européenne. In 1973, he moved to Crédit
Commercial de France, where he held a variety of
positions including Vice Chairman and Chief
Executive Officer, Financial Services (1993-1999)
and Advisor to the Chairman (1999-2000). During
the same period, he was also Chairman of Conseil
des Bourses de Valeurs (1994-1996) and then of
Conseil des Marchés Financières (1996-1998), the
French securities regulator.
Directorships and executive positions held in 2003:
Chairman
Tawa UK Ltd (UK)
Director
Crédit Lyonnais
Sanofi Synthelabo
Schneider Electric
Chief Executive Officer
Harwanne Compagnie de Participations
Industrielles et Financières SA (Switzerland)
Member of the Supervisory Board
Euronext NV (Netherlands)
Compagnie Financière E. de Rothschild Banque
Compagnie Financière Saint-Honoré
Pinault Printemps Redoute
Non-voting director
Fimalac
Nord Est
Michel CASTRES SAINT-MARTIN
Non-voting director
Director of LBC
Born on May 21, 1926; age: 77
First elected: June 17, 1996
Re-elected: June 4, 2002
(as non-voting director)
Term expires: 2004
Biographical details
1952-1964: Director of the Port of Marseille
1964-1967: Marché d'intérêt national – Gare
routière de Rungis
1968-1981: Compagnie Financière de Suez –
Director, private equity
1980-1994: Compagnie Industrielle Maritime
1972-1994: Alspi and LBC
Directorships and executive positions held in 2003:
Director
LBC
Auditor
FCBS Gie
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Non-voting director
Fimalac
Henri LACHMANN
Non-voting director
Chairman and Chief Executive Officer of Schneider
Electric Industries SA
Born on September 13, 1938; age: 65
First elected: December 3, 2002 (as non-voting director)
Term expires: 2004
Biographical details
Graduate of Ecole des Hautes Etudes Commerciales (1961)
French Chartered Accountant
1963: Auditor then Audit Manager, Arthur Andersen
1970: Director, Business Plans and Budgets, then
Chief Executive Officer, Compagnie Industrielle et
Financière de Pompey
1976: Chief Operating Officer of Forges de
Strasbourg, a subsidiary of Pompey
1983-1998: Chairman and Chief Executive Officer of
Forges de Strasbourg and Chief Operating Officer of
Pompey
1999: Chairman and Chief Executive Officer of
Schneider Electric Industries SA
Directorships and executive positions held in 2003:
Chairman and Chief Executive Officer
Schneider Electric
Director
Ansa
Finaxa and various other subsidiaries of the Axa Group
Vivendi Universal
Member of the Supervisory Board
Axa
Groupe Norbert Dentressangle
Non-voting director
Fimalac
Member of the Steering Committee of Institut de
l'Entreprise
Jean-Charles NAOURI
Non-voting director
Chairman of Groupe Euris
Born on March 8, 1949; age: 55
First elected: June 4, 2002 (as non-voting director)
Term expires: 2004
Biographical details
11976: Deputy government auditor (inspecteur
adjoint des finances)
1980: Under director in the Treasury Department
of the Ministry of the Economy and Finance
General Secretary of various interministerial
committees (CIDISE, CODIS, FSAI, Comité inter-
ministériel pour la création d'emplois dans les
zones de conversion industrielle).
1982: Director in the staff of the Minister of Social
Affairs and National Solidarity
1984: Director in the staff of the Minister of the
Economy, Finance and the Budget
1986: Head of special projects in the Treasury
Department of the Ministry of the Economy,
Finance and Privatization.
CORPORATE GOVERNANCE STRUCTURES
812 0 0 3 A n n u a l R e p o r t
Biographical details
Graduate of Ecole Polytechnique and Ecole
Nationale d’Administration, honorary advisor to
the Cour des Comptes (National Audit Office),
Etienne Pflimlin is Chairman of Crédit Mutuel
Centre Est in Strasbourg and Banque Fédérative
du Crédit Mutuel, National Chairman of Crédit
Mutuel and Chairman of the Supervisory Board of
CIC. He is also a member of the Executive
Committee of Fédération Bancaire Française and,
in Brussels, of the European Association of
Cooperative Banks.
Directorships and executive positions held in 2003:
Chairman of the Board of Directors
Banque Fédérative du Crédit Mutuel
Caisse Centrale du Crédit Mutuel
Caisse de Crédit Mutuel Esplanade
Caisse Fédérale du Crédit Mutuel Centre Est Europe
Confédération Nationale du Crédit Mutuel
Fédération du Crédit Mutuel Centre Est
Chairman of the Supervisory Board
Banque de l’Économie du Commerce et de la
Monétique
Crédit Industriel et Commercial
Éditions Coprur
Société Alsacienne de Publications “L’Alsace”
Société d’Études et de Réalisation pour les
Équipements Collectifs – Soderec
Chairman
Le Monde Entreprises
Director
Assurances du Crédit Mutuel Vie et Iard
Directorships and executive positions held in 2003:
Chairman
Groupe Euris
Chairman and Chief Executive Officer
Rallye
Chairman of the Board of Directors
Casino, Guichard-Perrachon
Euris
Finatis
Director
Crédit Commercial de France
Continuation Investments NV
Member of the Supervisory Board
Groupe Marc de Lacharrière
Non-voting director
Fimalac
Managing Partner
Rothschild & Compagnie Banque
Manager
SCI Penthièvre Seine
SCI Penthièvre Neuilly
Member of the Fimalac Selection, Nominations
and Remunerations Committee
Etienne PFLIMLIN
Non-voting director
Chairman of Banque Fédérative du Crédit Mutuel
Born: October 16, 1941; age: 62
First elected: June 4, 2002 (as non-voting director)
Term expires: 2004
82 2 0 0 3 A n n u a l R e p o r t
Assurances du Crédit Mutuel Vie-SFM
Groupe des Assurances du Crédit Mutuel
Société Française d’Édition de Journaux et
d’Imprimés Commerciaux “L’Alsace”
Member of the Supervisory Board
Le Monde
le Monde et Partenaires Associés
Société Éditrice du Monde
Non-voting director
Fimalac
Permanent representative of CIC
Banque Scalbert Dupont
Crédit Industriel d’Alsace et de Lorraine
Crédit Industriel de Normandie
Crédit Industriel de l’Ouest
Société Bordelaise de CIC
Permanent representative of Banque Fédérative
du Crédit Mutuel
Crédit Mutuel Finance
Permanent representative of Fédération du Crédit
Mutuel Centre Est Europe
Euro Information
Sofedis
Edouard de ROYÈRE
Non-voting director
Honorary Chairman of Air Liquide
Born on June 26, 1932; age: 71
First elected: June 4, 2002 (as non-voting director)
Term expires: 2004
Biographical details
Graduate of Ecole Supérieure de Commerce de
Paris
Edouard de Royère’s early career was spent
with Crédit Lyonnais and Union Immobilière et
Financière. In 1966, he joined Air Liquide,
becoming Vice President and Deputy Chief
Executive Officer in 1979, Vice Chairman in 1982
and Chairman and Chief Executive Officer in 1985,
a position he held until his retirement in 1995.
Directorships and executive positions held in 2003:
Chairman
Ansa
Honorary Chairman
Air Liquide
Director
Groupe Danone
L’Oréal
Sodexho Alliance
Member of the Supervisory Board
Air Liquide
Non-voting director
Fimalac
Member of the Fimalac Selection, Nominations
and Remunerations Committee
CORPORATE GOVERNANCE STRUCTURES
832 0 0 3 A n n u a l R e p o r t
RULES AND PROCEDURES OF
THE BOARD OF DIRECTORS
◆ Board of Directors’ Internal Rules
The Board of Directors’ Internal Rules were
adopted on December 18, 2001, and amended on
October 6, 2003 and March 16, 2004. The current
version is as follows:
Preliminary Comment
These internal rules of the Fimalac Board of
Directors replace the rules approved by the Board
on December 18, 2001.
I. Role and responsibilities of the Board of
Directors
The Directors and Non-voting Directors shall each
contribute their business skills and experience.
They have a duty of vigilance and shall freely
exercise their judgment in all matters. They shall
participate independently in the decisions or work
of the Board of Directors and, where applicable,
the Committees of the Board, according to their
personal judgment of the issues.
In addition to the matters that fall within the
competence of the Board of Directors pursuant to
the applicable laws and regulations, which include
deciding the Company’s strategy and exercising
oversight of the Company’s activities, the Board
shall be responsible for approving transactions
that have a material impact on the Group’s
structure, including acquisitions and divestments
for a net amount in excess of €75 million, as well as
transactions or agreements giving rise to a material
commitment for the Company or the Group. The
Board shall also be responsible for approving the
reports of the Audit Committee and the Selection,
Nominations and Remunerations Committee.
Any acquisition of a direct or indirect interest in
a newly-formed or existing holding company
incorporated in a low tax country or a tax haven
must be submitted to the Audit Committee for
prior approval, whatever the amount of the
proposed investment. If appropriate, the Audit
Committee shall immediately notify the Directors
of the proposed transaction. Additionally, the
Audit Committee shall report to the Board of
Directors, each year, on the transactions
submitted for its review during the year.
II. Activities of the Board of Directors
A. Calling meetings of the Board of Directors
Meetings of the Board of Directors shall be called
by the Chairman.
If the Chairman is prevented from calling a Board
meeting, the meeting may be called by the Vice
Chairman if one has been appointed.
If the Board has not met for over two months, or in
an emergency, a group of directors representing at
least one-third of the Board members may call a
Board meeting with a specific agenda.
In accordance with the law and the Company’s
C. Meetings of the Board of Directors
The Board of Directors shall meet as regularly as
necessary in the interests of the Company. At least
four meetings shall be held each year.
The dates of the following year’s meetings shall
be set at the latest during the final meeting of
the previous year, other than for extraordinary
meetings.
Whenever necessary, the Board of Directors may
invite non-Board members to attend its meetings,
including line managers concerned by the issues
discussed by the Board.
D. Participation by videoconference
As allowed by the applicable laws and regulations
and the final paragraph of Article 16 of the bylaws,
Directors who participate in Board meetings using
videoconferencing facilities shall be considered
as being physically present for the purpose of
calculating the quorum and voting majority.
Participation by videoconference shall not be
allowed, however, at meetings called to decide the
appointment or removal from office of the
Chairman and Chief Executive Officer or the Chief
Operating Officers, or their remuneration, to
approve the financial statements of the Company
and the Group, or to draw up the Board of
Directors’ management report on the activities of
the Company and the Group.
The technical characteristics of the video
conferencing facilities must be such that the
proceedings of the meeting are broadcast without
interruption.
84 2 0 0 3 A n n u a l R e p o r t
bylaws, Board meetings may be called by any
appropriate method, including orally. Notice of
meeting may be sent or given to Directors by the
Secretary of the Board. Except in special
circumstances, notice of meeting shall be sent at
least eight days prior to each meeting. The notice
of meeting shall stipulate the meeting venue,
which may be the Company’s headquarters or any
other location.
B. Information given to directors
At the time of his or her election and during his or
her term of office, each Director or Non-voting
Director shall receive any training that he or she
considers necessary to fulfill his or her duties.
Such training will be organized, proposed and
paid for by the Company.
The Company shall regularly give all of the
Directors and Non-voting Directors any and all
relevant information, favorable or otherwise,
including articles published in the press and
analysts’ research reports.
The Directors and Non-voting Directors shall
ensure that they have all information that they
consider essential to permit the Board of Directors
to fulfill its role and responsibilities. They must
ask for any such information that is not given to
them. Requests for such information shall be
made to the Chairman and Chief Executive Officer,
who shall be required to give to each member of
the Board of Directors any and all documents and
information needed to permit them to fulfill their
role and responsibilities.
CORPORATE GOVERNANCE STRUCTURES
of the Board. Their members shall be appointed by
the Board and may or may not be Directors.
The Board of Directors has set up an Audit
Committee and a Remunerations and Stock
Options Committee. This latter committee’s remit
was extended on October 6, 2003 to include
nominations, and its name has been changed to
the Selection, Nominations and Remunerations
Committee.
A. Audit Committee
The Audit Committee shall have at least three
members, all of whom shall be independent
Directors, recognized as such according to the
independence rules set forth in the Sarbanes-
Oxley Act. All of the members of the Audit
Committee shall be competent in financial or
accounting matters.
The Audit Committee shall draw up its own rules,
describing its remit and rules of procedure. These
rules shall be submitted for approval to the Board
of Directors which shall have sole responsibility
for determining the Committee's broad remit.
The Audit Committee’s reports to the Board of
Directors shall be sufficiently detailed to ensure
that the Board is fully informed. Each Director and
Non-voting Director shall receive a copy of the
Committee’s reports.
B. Selection, Nominations and Remunerations
Committee
The Selection, Nominations and Remunerations
Committee shall have at least two members, who
Before the proceedings begin, a search shall be
carried out to ensure that there are no intruders,
microphones or other devices that could result in
the unauthorized disclosure of the exchanges
between Board members.
E. Minutes
Other than in exceptional circumstances, a draft of
the minutes of the last Board meeting shall be
sent to the Directors and Non-voting Directors at
the latest with the notice of the following meeting.
The minutes shall list the names of Directors who
took part in the proceedings by videoconference.
They shall also describe any technical incidents
during the videoconference which disrupted the
proceedings.
At each location other than the meeting venue, the
Director participating by videoconference shall
sign a loose attendance sheet for his or herself
and for any Director that he or she is representing
by proxy. The Secretary to the Board shall attach
said sheet to the attendance register and shall
obtain any available evidence of the Director’s
participation by videoconference.
III. Committees of the Board
Article 90 of the Decree of March 23, 1967
and the final paragraph of Article 24 of the
bylaws authorize the Board of Directors to
set up committees responsible for making
recommendations to the Board on specific
matters. These committees represent an extension
852 0 0 3 A n n u a l R e p o r t
86 2 0 0 3 A n n u a l R e p o r t
CORPORATE GOVERNANCE STRUCTURES
shall be either Directors or Non-voting Directors.
At least half of the members must be independent
Directors. The Chairman and Chief Executive
Officer shall attend meetings of the Committee to
review selection and nomination issues.
The Selection, Nominations and Remunerations
Committee shall draw up its own rules, describing
its remit and rules of procedure. These rules
shall be submitted for approval to the Board of
Directors which shall have sole responsibility for
determining the Committee's broad remit.
For selection and nomination issues, the
Committee shall make recommendations to the
Board of Directors concerning the membership
of the Board, the search for potential candidates
for election to the Board and the desirability of
proposing sitting Directors for re-election.
For remuneration issues, the Committee shall
make recommendations to the Board concerning
executive Directors’ compensation and stock
option grants. The Committee shall be informed of
the general compensation and benefits policies of
the Company and its subsidiaries, as well as of the
compensation and benefits awarded to the
Chairmen of the main subsidiaries, and shall be
entitled to obtain all information that it considers
necessary in this regard. The Committee shall
draw up a presentation document for the Board of
Directors.
The Selection, Nominations and Remunerations
Committee’s reports to the Board of Directors
shall be sufficiently detailed to ensure that the
Board is fully informed. Each Director and Non-
voting Director shall receive a copy of the
Committee’s reports.
IV. Obligations of the directors and non-voting
directors
A. General principle
Each Director and Non-voting Director shall be
familiar with the Company's bylaws, the rules
applicable to sociétés anonymes administered by
a Board of Directors and the rules governing the
possession and use of insider information.
B. Protecting the Company's interests
The Directors shall act in all circumstances in the
Company’s interests.
Directors shall notify the Board of Directors of any
actual or potential conflicts of interests and shall
refrain from taking part in any decisions where
such a conflict exists or may exist.
C. Obligation of diligence
The Directors and Non-voting Directors shall devote
the necessary time and attention to their duties.
They shall limit the number of directorships held in
order to be available.
They shall undertake to participate in all Board
meetings, if necessary by videoconference, unless
they have serious and valid reasons for being
absent, to participate in all Shareholders’ Meetings
to the extent possible, and to participate in all
meetings of Committees of the Board of which they
are members. Any Director or Non-voting Director
872 0 0 3 A n n u a l R e p o r t
who fails to attend more than half of the meetings of
the Board of Directors shall be obliged to resign
from the Board.
D. Obligation of discretion and confidentiality
The Directors and Non-voting Directors shall not
comment personally, outside meetings of the
Board, on the matters discussed during Board
meetings. All communications to third parties
outside the Company shall be issued in the name
of the Board of Directors as a whole, generally in
the form of press releases intended to inform the
public.
Each Director and Non-voting Director shall be
bound by an obligation of confidentiality that
extends beyond the obligation of discretion
provided for in the fifth paragraph of Article L.225-
37 of the Code de Commerce, covering all
information obtained in his or her capacity as
Director or Non-voting Director that is not publicly
available.
Any Director or Non-voting Director who fails to
comply with the obligation of discretion provided
for in Article L.225-37 of the Code de Commerce
will be required to resign. If he or she refuses to
resign, a resolution will be presented at the next
Shareholders’ Meeting to remove said Director or
Non-voting Director from office.
E. Stock market ethics
1. Principles
Individual Directors, permanent representatives of
corporate Directors and Non-voting Directors shall
comply with the provisions of Article L.465-1 of the
Code Monétaire et Financier and Commission des
Opérations de Bourse règlement 90-08 with
respect to all insider information that comes into
their possession in the course of their duties.
Each Director, permanent representative of a
corporate Director or Non-voting Director shall be
personally responsible for assessing whether any
information that comes into their possession
qualifies as insider information, determining
whether said information may or may not be used
or disclosed to any other party, and whether or not
he or she may validly carry out transactions in the
Company’s shares, directly or indirectly, on the
strength of said information.
2. Temporary ban on share transactions
Directors and Non-voting Directors are prohibited
from carrying out any transactions on the
Company’s shares during the period preceding the
publication of inside information and it is
recommended that they also refrain from carrying
out any such transactions during the thirty days
preceding the announcement of the Company’s
annual and interim results.
3. Obligation to report transactions on the
Company’s shares
Pursuant to Commission des Opérations de
Bourse recommendation 2002-01, each individual
Director or permanent representative of a
corporate Director shall report to the Company
any and all transactions on the Company’s shares
88 2 0 0 3 A n n u a l R e p o r t
CORPORATE GOVERNANCE STRUCTURES
V. Remuneration of the Directors and Non-voting
Directors
The Directors and Non-voting Directors shall be paid
attendance fees. The total fees will be decided
by the Annual Shareholders’ Meeting and the
allocation of said total will be decided by the Board
of Directors.
Part of the total shall be allocated among the
Directors and Non-voting Directors and part shall
be used to pay an additional fee to Directors and
Non-voting Directors who are members of the
Committees of the Board. The fee awarded to each
Non-voting Director shall represent two-thirds of the
fee awarded to each Director. Half of the fee, paid in
June, will be fixed and the other half, paid in January
of the following year, will vary depending on the
individual's attendance record at Board Meetings
held during the year concerned.
VI. Annual assessment of the Board’s
performance
Part of at least one Board meeting per year shall
be devoted to reviewing the Board’s performance.
In addition, a formal assessment shall be drawn
up at least once every three years. The
assessment may be conducted by an independent
Director, with the assistance of an outside advisor.
Shareholders shall be informed every year, in the
Annual Report, of the results of the performance
review and of any action taken as a result thereof.
carried out directly or through a representative,
for his or her own account or for the account of
a third party under a portfolio management
contract. All transactions carried out on the
accounts of the Director or the permanent
representative by his or her spouse or by a person
holding power of attorney shall also be disclosed.
Details of said transactions carried out during the
first or second half of the calendar year must be
sent to the Company in writing no more than one
month after June 30 or December 31.
Any Director who does not report any transactions
within the above one-month period shall be
assumed not to have carried out any transactions
during the preceding six months.
4. Specific bans
Individual Directors, permanent representatives of
corporate Directors and Non-voting Directors are
prohibited from carrying out bed-and-breakfast
transactions on the Company's shares and from
purchasing or selling options or other derivative
instruments on the Company's shares.
F. Minimum shareholding
Each Director must hold, no later than 18 months
after the date of his or her election to the Board
for the first time, a number of shares of the
Company representing the equivalent of one
year’s Director’s fees.
892 0 0 3 A n n u a l R e p o r t
VII. Amendments to the internal rules
These internal rules may be amended by decision
of the Board of Directors.
◆ Assessment of Board performance
The Board of Directors assessed its performance
for the first time at the meeting on March 16,
2004. The vast majority of members consider
that the Board complies with corporate
governance rules and regulations and ethical
standards, and are satisfied with the Board’s
procedures, the information given to directors
and the procedures of the Committees of the
Board.
◆ Frequency of Board meetings
The Board meets at least four times a year, and
more frequently if necessary in the interests of the
Company. In 2003, seven meetings were held, on
January 27, March 11, May 23, June 4, September 9,
October 6 and December 16. The average
attendance rate at these meetings was 77%.
◆ Committees of the Board
The Board of Directors set up an Audit Committee
and a Selection, Nominations and Remunerations
Committee (originally called the Remunerations
and Stock Options Committee) a number of years
ago. These Committees have drawn up their own
internal rules, which were approved by the Board
of Directors on October 6, 2003.
Audit Committee
The members of the Audit Committee are Bernard
Pierre, the Committee chairman, and David
Dautresme and Philippe Lagayette, both
independent directors. The Committee’s role is to
give an opinion to the Board on the financial
statements of the Company and the Group and it
therefore meets twice a year prior to the Board of
Directors’ review of the interim and annual
financial statements.
The Committee reviews the financial statements
as a whole, the accounting principles and policies,
the external audit scope, the companies included
in or excluded from the scope of consolidation,
material risks and off-balance sheet commitments,
and any financial, accounting or risk management
issues.
Any acquisition of a direct or indirect interest in an
existing or future holding company established in
a tax haven must be disclosed to the Audit
Committee at the first meeting held after the
90 2 0 0 3 A n n u a l R e p o r t
CORPORATE GOVERNANCE STRUCTURES
transaction date, whatever the amount invested. If
appropriate, the Audit Committee will bring the
matter to the immediate attention of the Board of
Directors; otherwise the Committee will report to
the Board once a year on all such transactions
disclosed to it during the previous twelve months.
The Audit Committee has not been informed of
any such transaction and, to the best of Fimalac’s
knowledge, no Group companies hold any direct
or indirect interests in any holding companies
based in tax havens.
The Audit Committee met twice in 2003, with a
100% attendance rate.
Selection, Nominations and Remunerations
Committee
The current members of this Committee are Pascal
Castres Saint-Martin, Arnaud Lagardère (both
independent directors), and Jean-Charles Naouri
and Edouard de Royère (independent non-voting
directors). The Committee is chaired by Pascal
Castres Saint-Martin. The Committee’s terms of
reference are described in the Board of Directors’
Internal Rules reproduced above.
The Committee met once in 2003. Three of the
members attended the meeting and the fourth
signed the minutes of the meeting, as
confirmation of his agreement.
912 0 0 3 A n n u a l R e p o r t
DIRECTORS’COMPENSATION ANDBENEFITS
Marc LADREIT de LACHARRIÈRE
Compensation and benefits
The compensation received by Marc Ladreit de
Lacharrière includes both a fixed portion and a variable
portion which is primarily linked to the Group’s
financial results and to his personal involvement in
leading the organization.
His compensation is decided by the Board of Directors
based on the recommendation of the Selection,
Nominations and Remunerations Committee, which in
turn is based on a report by PricewaterhousCoopers
Audit containing details of all compensation and
benefits paid to the Group’s Chairman and Chief
Executive Officer by Fimalac and its various
subsidiaries. The following table shows the fixed and
variable compensation paid to Marc Ladreit de
Lacharrière in 2003 by the French and foreign
companies in the Group:
Total in € (2003)
A) Fixed compensation
Basic salary (*) 1,442,869.80
Benefits in kind 528.00
Directors' fees 14,912.50
1,458,310.30
B) Variable compensation (**) 907,728.08
Total compensation (A+B) 2,366,038.38
% fixed 61.6%
% variable 38.4%
100.0%
(*) Including € 442,869.80 in the United States(**) Including € 732,728.08 in the United States
The total gross compensation paid in 2003 to Marc
Ladreit de Lacharrière amounted to €2,366,038.38
compared with €3,433,427.46 in 2002, representing
a decrease of 31.1%.
His fixed compensation, consisting mainly of his
basic salary, amounted to €1,458,310.30 versus
€1,562,351.06. The 6.7% year-on-year decline
stemmed mainly from the unfavorable currency effect
on amounts paid in the United States.
His variable compensation fell by 51.5% to
€907,728.08 from €1,871,076.40. Variable
compensation paid by the parent company, Fimalac,
is calculated by reference to the Group’s pre-tax
recurring income, excluding the contribution of Fitch,
for the previous year. In 2003, Marc Ladreit de
Lacharrière waived a significant proportion of this
variable compensation for 2002, in light of the
substantial asset write-downs recorded in 2003,
mainly concerning the Company’s interest in Facom.
The variable compensation paid by Fimalac was
therefore 84.8% below the previous year’s amount.
The variable compensation paid by Fitch is based on
this subsidiary’s prior year operating income. Despite
Fitch's outstanding performance in 2003, the amount
of this compensation rose by only 1.7%, partly
because it was based on the previous year's income
and partly as a result of the negative impact on the
calculation base of the dollar’s slide against the euro.
All told, the fixed compensation received by Marc
Ladreit de Lacharrière in 2003 represented 61.6% of
his total compensation versus 45.5% in 2002, while
the variable portion fell to 38.4% from 54.5%.
Lastly, in 2003, Marc Ladreit de Lacharrière received
DI R E C T O R S ’ I N T E R E S T S
92 2 0 0 3 A n n u a l R e p o r t
DI R E C T O R S ’ I N T E R E S T S
fixed compensation of €158,632 in his capacity as
managing partner of Groupe Marc de Lacharrière, the
controlling shareholder of Fimalac (information
disclosed in compliance with Act no. 2003-706 dated
August 1, 2003).
Stock options
Stock options granted during the year by Fimalac or
other Group companies: none
Stock options exercised during the year: none.
Relations between the principal shareholder and Fimalac
The agreement with Groupe Marc de Lacharrière
authorizing the Company to use the Fimalac name
remained in force in 2003. The Fimalac name is
owned by Marc Ladreit de Lacharrière. No license fee
was paid under this agreement in either 2003 or
2002.
Groupe Marc de Lacharrière contributes to the
Group's central costs which are paid by the FCBS Gie
intercompany partnership, as explained below.
In addition, Groupe Marc de Lacharrière may
perform studies or provide advice in connection with
the Group’s development strategy and related
operations. No such services were provided in 2003.
Lastly, Groupe Marc de Lacharrière, along with Marc
Ladreit de Lacharrière and Fimalac Participations,
gave a commitment to underwrite the €100 million
share issue carried out by Fimalac in March 2003,
enabling Fimalac to save the €1.5 million (net of tax)
in fees that would have been payable if the issue had
been underwritten by a bank. Groupe Marc de
Lacharrière provided a capital injection of €72.3
million. Changes in the number of Fimalac shares
pledged to the banks by Groupe Marc de Lacharrière
are as follows:
Holder of the shares As of December 15, 2003 As of December 31, 2003 As of April 8, 2004
Crédit Lyonnais 5,372,132 14.57% 4,106,074 11.03% 2,921,105 7.85%
Crédit Agricole Indosuez 4,230,102 11.47% 3,470,435 9.32% 2,990,522 8.03%
Banque Fédérative
du Crédit Mutuel (*) 4,572,427 12.40% 4,572,427 12.28% 3,333,333 8.96%
14,174,661 38.44% 12,148,936 32.63% 9,244,960 24.84%
(*) Registered shares held by an authorized custodian
932 0 0 3 A n n u a l R e p o r t
Véronique MORALI
Compensation and benefits
The compensation paid to Véronique Morali is
decided by the Board of Directors, based on the
recommendation of the Selection, Nominations and
Remunerations Committee. The fixed and variable
compensation paid to Véronique Morali in 2003 by
the French and foreign companies of the Group was
as follows:
Total in € (2003)
A) Fixed compensation
Basic salary (*) 372,943.29
Benefits in kind 2,211 .00
Directors’ fees 14,912.50
390,066.79
B) Variable compensation 144,827.00
Total compensation (A+B) 534,893.79
% fixed 72.9%
% variable 27.1%
100.0%
(*) Including €64,519.29 in the United States
Véronique Morali’s fixed compensation – consisting
mainly of basic salary – contracted by 5.9% in 2003,
due mainly to an unfavorable currency effect. Her
variable compensation, which is paid in full by the
parent company, Fimalac, amounted to €144,827 in
2003, representing a decrease of 36.7% compared
with 2002.
Lastly, in 2003, Véronique Morali received fixed
compensation of €77,106 from Groupe Marc de
Lacharrière, the controlling shareholder of Fimalac
(information disclosed in compliance with Act no.
2003-706 dated August 1, 2003).
Stock options
Stock options granted during the year by Fimalac or
other Group companies: none
Stock options exercised during the year:
Number of shares acquired Price in € Expiry date Plan
10,115 14.85 June 18, 2003 1997/1
2,872 16.12 June 18, 2003 1997/2
Pascal CASTRES SAINT-MARTIN received €14 912,5
in attendance fees in 2003.
Georges CHARPAK received €14,912.50 in attendance
fees in 2003.
Bernard MIRAT received €16,437.50 in attendance
fees in 2003.
Bernard PIERRE received €14,912.50 in attendance
fees in 2003.
During the fourth quarter of 2003, Engelhard-Clal
SAS sold all of its remaining industrial activities to
Fremapi, a company managed and controlled by
Bernard Pierre, for €2 million. An independent expert,
Dominique Ledouble, issued a fairness opinion on the
terms of the transaction, which was approved by
Fimalac’s Board of Directors at its meetings of October 6
and December 16, 2003. Bernard Pierre did not take
part in the corresponding votes.
The transaction enabled the partners in Engelhard-
Clal – Fimalac and Engelhard Corp. – to wind up their
94 2 0 0 3 A n n u a l R e p o r t
DI R E C T O R S ’ I N T E R E S T S
joint venture. Fimalac has recovered full management
control of its share of the cash generated by the wind-
up in the amount of approximately €50 million.
Bernard Pierre also received fees of €5,262,245
from Engelhard-Clal under a profit-related bonus
arrangement set up in July 2001. The fee was
calculated on the basis of the cash derived from
liquidating Engelhard-Clal’s business.
Pierre BLAYAU received received €14,912.50 in
attendance fees in 2003.
SENIOR EXECUTIVE STOCK
OPTIONS
Details of options exercised by Véronique Morali
are presented above.
FUNDING OF CENTRAL
SERVICES BY GROUP
COMPANIES
On January 1, 1997, the Fimalac Group set up an
intercompany partnership of which all Group
companies are members. The partnership exists to
fund the Group’s central services and provide the
resources required to facilitate, develop and improve
the business and results of its members.
To this end, the partnership provides services
and advice to Group companies in the areas
of administration, financial and management
accounting, auditing, legal affairs and internal and
external communications as well as consulting
activities. The partnership allocates expenses among
Group companies at cost, in accordance with the
guidelines established in internal rules accepted by
all the companies concerned.
Although this organization is not governed by
article L.225-38 of the Commercial Code, Fimalac
has elected to include its membership of the
intercompany partnership in the scope of agreements
governed by this article, in accordance with the
principles of corporate governance.
Contributions by Fimalac to the intercompany
partnership amounted to approximately €2.2 million,
excluding tax, in 2003.
The cost allocation key used to prepare the 2004
budget has been determined by applying the rules
set out in the appendix to the intercompany
partnership’s internal rules. On that basis,
Fimalac’s estimated contribution for 2004 will be
approximately €2.2 million, plus VAT. This amount
may be adjusted to take into account any
amendments to the budget or of any changes in the
membership of the intercompany partnership.
952 0 0 3 A n n u a l R e p o r t
CASH POOLING AGREEMENT
Since October 1, 1999, Fimalac has operated a cash
pooling system on behalf of the majority of Group
companies, in the best interests of all participating
entities. Under the system, Fimalac makes advances
to subsidiaries to meet their short-term cash needs,
while subsidiaries with surplus cash loan the
amounts in question to Fimalac. Fimalac also
negotiates all short-term bank loans and overdraft
facilities and invests surplus cash in interest-bearing
instruments.
Although this organization is not governed by article
L.225-38 of the Commercial Code, Fimalac has
elected to include the cash pooling agreement in the
scope of agreements governed by this article, in
accordance with the principles of corporate
governance.
Outstanding balances under the cash pooling
agreement at December 31, 2003 were as follows:
Borrowings Interest paid
Catrimmo €6,431,615.32 €151,823.98
Clal US €10,977,814.91 €281,565.16
Facom Développement €28,380,954.52 €495,080.99
Fimalac Investissements €28,143,316.96 €1,174,408.53
Financière Boulogne Technologies €39,555,242.07 €1,484,448.35
Fitch Ratings Limited €8,000,000.00 €9,284.44
Minerais & Engrais €274,248,208.52 €6,700,426.33
Rhenameca €28,547,271.38 €669,064.91
S.I.F.S. €761,476.55 €17,358.43
Fitch Information Inc. $3,000,000.00 $88,795.28
Fitch Ratings Limited $11,000,000.00 $124,704.40
Loans Interest received
Core Ratings SAS €628,913.45 €13,420.69
Facom €54,135,157.43 €393,513.90
LBC €18,131,315.52 €524,077.69
Sefi SNC €11,062,471.39 €541,330.11
Société de Cadres Facom €7,955,912.60 €242,981.81
Core Ratings Ltd £1,410,769.43 £40,744.16
Facom UK £0 £3,807.12
Fimalac Inc. $10,000,000.00 $273,968.84
Fitch Inc. $22,506,314.91 $1,810,002.84
96 2 0 0 3 A n n u a l R e p o r t
DI R E C T O R S ’ I N T E R E S T S
OTHER AGREEMENTS
ENTERED INTO IN PRIOR
YEARS WHICH REMAINED IN
FORCE IN 2003
With Michel Castres Saint-Martin, Henri Lachmann
and Bernard Mirat
As members of the Audit Committee in 2002, Michel
Castres Saint-Martin, Henri Lachmann and Bernard
Mirat each received additional fees of €1,525.
With Groupe Marc de Lacharrière
See “Directors’ Interests” above.
With Bernard Pierre
The agreement covering the December 2002 sale of
a 1% interest in Engelhard-Clal to Bernard Pierre
included a three-year earn-out clause. The earn-out
payment totaled €26,393.98.
With Engelhard-Clal SAS
In 2002, Engelhard-Clal SAS granted Fimalac a 2-year
loan for a maximum amount of €30 million. Interest
is payable on the loan at three-month Euribor less
25 basis points.
AGREEMENTS ENTERED INTO
DURING THE YEAR
Engelhard-Clal SAS granted Fimalac a 2-year loan for
a maximum amount of €30 million. Interest is
payable on the loan at three-month Euribor less 25
basis points. At December 31, 2003, the outstanding
balance on the loan was €20 million.
LOANS AND GUARANTEES
GRANTED TO DIRECTORS
None.
972 0 0 3 A n n u a l R e p o r t
PROFIT-SHARING AND INCENTIVE
BONUS AGREEMENTS
None.
MANAGEMENT STOCK OPTIONS
Options granted by Fimalac orother Group companies to theten employees who received thegreatest number of options
Options granted by Fimalac orother Group companies exercisedduring the year by the tenemployees who exercised thegreatest number of options
(*) $59.01 if the options are exercised in connection with an IPO
91,623181,83535,528
$80.23€9.39
€12.40
€9.17 €14.85 €16.12
€8.33
Fitch 2003Cassina 2003
Nemo 2003
Fimalac 1995Fimalac 1997/1Fimalac 1997/2
Cassina 2000
18,1952,529
42,431157,575
Optionsgranted/exercised Price Plan
EM P L O Y E E P R O F I T-S H A R I N G P L A N S
*
98 2 0 0 3 A n n u a l R e p o r t
992 0 0 3 A n n u a l R e p o r t
Financialreport
100 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (FIMALAC GROUP) AT DECEMBER 31
(in € thousands)
FIXED ASSETS
Goodwill note 4.1 654,376 476,622 177,754 471,822 513,817
Intangible assets note 4.3 886,222 76,091 810,131 938,818 1,094,137
Property, plant and equipment note 4.4 839,528 528,414 311,114 375,571 383,788
Investments note 4.5 53,988 29,204 24,784 12,305 12,772
Companies accounted note 4.6 8,979 8,979 82,526 102,055for by the equity method
Total fixed assets 2,443,093 1,110,331 1,332,762 1,881,042 2,106,569
CURRENT ASSETSInventories and work-in-progress note 4.7 179,271 28,934 150,337 207,484 211,197
Prepayments to suppliers 1,761 1,761 1,228 2,138
Operating receivables note 4.9 308,832 19,529 289,303 321,035 354,674
Other receivables note 4.9 124,672 335 124,337 123,905 149,746
Marketable securities note 4.8 24,505 3,371 21,134 21,440 38,857
Cash 62,710 62,710 86,740 75,368
Total current assets 701,751 52,169 649,582 761,832 831,980
TOTAL ASSETS 3,144,844 1,162,500 1,982,344 2,642,874 2,938,549
ASSETS Amortizationdepreciation 2003 2002 2001
Note Cost and provisions Net Net Net
1012 0 0 3 A n n u a l R e p o r t
(in € thousands)
SHAREHOLDERS’ EQUITY
Capital 163,774 139,085 138,368
Additional paid-in capital 433,594 354,228 438,389
Retained earnings 392,736 442,031 245,068
Group consolidated income / (loss) for the year (329,711) (32,172) 153,641
Other (117,401) (77,437) 1,532
Total shareholders’ equity note 4.10 542,992 825,735 976,998
Minority interests note 4.10 39,998 41,286 49,675
Quasi-equity note 4.11 40,448 51,182 60,887
Provisions for contingencies and charges note 4.12 137,586 176,653 239,578
LIABILITIES
Bank borrowings note 4.13 744,907 1,056,475 1,119,589
Customer prepayments 422 489 2,937
Accounts payable 294,485 309,274 342,434
Accruals and other liabilities 181,506 181,780 146,451
Total liabilities 1,221,320 1,548,018 1,611,411
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,982,344 2,642,874 2,938,549
Net assets per share (€) (excluding treasury stock) 14.59 27.98 33.29
LIABILITIES AND SHAREHOLDERS’ EQUITYNote 2003 2002 2001
102 2 0 0 3 A n n u a l R e p o r t
(in € thousands)
Sales note 4.17 1,259,599 1,302,717 1,434,229
Other operating revenues 19,736 68,990 80,276
Materials cost of sales (561,012) (636,820) (721,917)
Personnel costs (466,788) (460,069) (467,916)
Other operating expenses (12,461) (17,656) (17,213)
Taxes other than on income (13,638) (14,536) (17,882)
Depreciation, amortization and provisions (87,557) (83,864) (95,957)
Operating income note 4.18 137,879 158,762 193,620
Interest income 20,332 20,191 24,133
Interest expense (67,115) (77,169) (121,351)
Interest (expense)/income, net note 4.14 (46,783) (56,978) (97,218)
Operating income after interest 91,096 101,784 96,402
Non-recurring (expense)/income, net note 4.15 (83,463) (32,050) 114,373
Current and deferred taxes note 4.16 (45,467) (41,022) (50,728)
Net income/(loss) of consolidated companies (37,834) 28,712 160,047
Income/(losses) from companies accounted for by the equity method (20,676) 709 6,917
Net (additions to)/reversals of amortization and provisions – goodwill (267,947) (57,496) (9,212)
Net income/(loss) before minority interests note 4.18 (326,457) (28,075) 157,752
Minority interests 3,254 4,097 4,111
Consolidated net income/(loss) note 4.18 (329,711) (32,172) 153,641
Basic net earnings/(loss) per share (€) (including treasury stock) (9.15) (1.02) 4.89
Diluted net earnings/(loss) per share (€) (including treasury stock) (8.69) (1.02) 4.87
Note 2003 2002 2001
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS(FIMALAC GROUP)
1032 0 0 3 A n n u a l R e p o r t
Cash and cash equivalents at January 1, 2003 (*) 54,822 113,348 132,174
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) of consolidated companies (305,781) (28,749) 150,876
Elimination of expenses and income with no impact on cash flow
Depreciation, amortization and provisions 390,600 110,295 9,126
(Gains) losses from disposals 11,903 11,415 (102,260)
Subsidies and deferred taxes (19,179) 4,619 5,274
Cash flow from operations 77,543 97,580 63,016
Changes in working capital
Inventories and work-in-progress 38,483 8,430 33,572
Receivables, payables and other 30,602 5,759 17,264
Net cash provided by operating activities 146,628 111,769 113,852
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of intangible assets (3,086) (32,097) (36,643)
Acquisitions of property, plant and equipment (47,894) (73,749) (83,593)
Acquisitions of investments (5,446) (41,261) (25,078)
Proceeds from disposals of fixed assets 66,847 44,324 261,273
Net cash of subsidiaries acquired and divested during the year 51,347 1,014 4,288
Other movements (845) 387 6,232
Net cash provided by/(used in) investing activities 60,923 (101,382) 126,479
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in bank borrowings (255,796) (23,961) (239,014)
Increase in shareholders’ equity 105,359 6,516 1,466
Dividends paid (32,910) (42,416) (26,785)
Other movements (27) 424 510
Net cash used in financing activities (183,374) (59,437) (263,823)
Effect of exchange rate changes on cash and cash equivalents and other (6,554) (9,476) 4,666
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 2003 (*) 72,445 54,822 113,348
(*) Cash and cash equivalents correspond to marketable securities and cash plus/minus the net balance of current accounts and minusbank overdrafts.
(in € thousands)
2003 2002 2001
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS(FIMALAC GROUP)
104 2 0 0 3 A n n u a l R e p o r t
The consolidated financial statements of the
Fimalac Group have been prepared in accordance
with French generally accepted accounting
principles, including standard CRC 99-02.
SIGNIFICANT EVENTS
OF THE YEAR
TRANSACTIONS CARRIED OUT BY FIMALAC
Share issue
Between February 6 and 19, 2003, Fimalac issued
5,268,382 shares, increasing capital stock by
€100.1 million. A stock warrant was attached to
each of these shares, entitling the holder to
purchase existing shares or subscribe for new
shares. The warrants are exercisable over four
years on the basis of 3 warrants per share at a
price of €25.
Sale of Fimalac’s stake in ENGELHARD CLAL
In December 2003, Fimalac completed its
withdrawal from the Engelhard-Clal joint venture,
in which it held a 49% stake. The impact on the
consolidated financial statements was a net gain
of €17 million. The net total includes the Group’s
share in the net loss of the former Engelhard-Clal,
accounted for by the equity method, amounting
to €21 million, and a reversal of provisions
concerning investment-related risks, recorded
under non-recurring items.
Sale of CLAL-MSX
In December 2003, Fimalac sold Clal-Msx. The
impact of this transaction on the consolidated
financial statements represented a net loss of €5.9
million (after taking into account Clal-Msx's 2003
net income of €2.5 million).
Divestment of LBC
The decision to divest LBC was announced in
September 2003, when Fimalac entered negotiations
with a view to selling this subsidiary. The
negotiations were not completed by the end of 2003,
but in March 2004, Fimalac received an irrevocable
offer to acquire LBC, which it subsequently accepted
(see Note 4.23, “Subsequent events“). The carrying
amount of LBC’s assets was adjusted at December 31,
2003 to reflect the valuations in process at the year
end.
Disposals of treasury stock
Fimalac has sold all of its available treasury stock,
mostly in October 2003. At the year-end, the
Group held 549,668 Fimalac shares (classified as
marketable securities), representing 1.48% of the
capital. These shares are being held for allocation
on exercise of stock options granted to certain
executives and other employees.
TRANSACTIONS CARRIED OUT BY OPERATING
COMPANIES
FACOM
Write-down of residual goodwill relating to
Facom Tools in an amount of €248.7 million
In view of Facom Tools’ decline in sales and
competitiveness, the Group decided to write down
the company’s residual goodwill in an amount of
€248.7 million, based on the multi-criteria
valuation approach described in Note 1.8. In
addition, the intangible assets related to the
Facom sub-group were written down in an amount
of €15.2 million.
Net non-recurring expense of Facom Tools and
Beissbarth
Net non-recurring expense recorded by Facom
Tools in 2003 primarily concerned the supply
chain management system in France, in an amount
of €31.9 million. Beissbarth recorded €31.3
million in net non-recurring expense, related
to site closures and disposals, as well as to
impairment and other provisions recorded
concerning the vehicle hoisting systems business.
NOTE 1 - BASIS OF CONSOLIDATIONAND SUMMARY OF SIGNIFICANTACCOUNTING POLICIES
1.1. BASIS OF CONSOLIDATION
All significant companies controlled directly
or indirectly by the Fimalac Group are fully
consolidated. Exclusive control is considered to be
exercised in cases where the Group holds, directly
or indirectly, at least 50% of the capital.
Companies where the Group holds, directly or
indirectly, more than 40% of the voting rights, or is
in a position to appoint the majority of the
members of the Board of Directors or equivalent,
and when no other shareholder holds, directly
or indirectly, a higher percentage of the voting
rights, are also considered as being exclusively
controlled. Companies over which the company
exercises significant influence without having
exclusive control are accounted for by the equity
method. Significant influence is considered to be
exercised in cases where 20% to 50% of the voting
rights are held by the Group.
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2003(in € thousands)
1052 0 0 3 A n n u a l R e p o r t
1.2. CLOSING DATE
The consolidated financial statements have been
prepared on the basis of individual company
accounts or interim accounts at December 31.
1.3. ADJUSTMENTS AND ELIMINATIONS
To permit comparison, the accounts of consol-
idated companies are adjusted in accordance with
the accounting principles set forth below. All
significant intercompany balances and gains
or losses on intercompany transactions are
eliminated in consolidation.
1.4. FOREIGN CURRENCY TRANSLATION
1. Foreign currency receivables and debts
Receivables and debts denominated in foreign
currencies are translated at official year-end
exchange rates. For French companies, a foreign
currency is any currency other than the euro; for
foreign subsidiaries, a foreign currency is any
currency other than that used for their financial
statements. Unrealized gains and losses arising from
translation are recorded in the income statement.
2. Financial statements of foreign subsidiaries
The balance sheets of foreign subsidiaries are
translated into euro at official year-end exchange
rates and their income statements at average
exchange rates for the year. Differences arising on
translation are included in consolidated share-
holders’ equity under “Cumulative translation
adjustment”.
The exchange rates against the euro used are as follows:
2003 2003 2002 2001Currency year-end average year-end year-end
rate rate rate rate
US dollar 0.7918 0.8855 0.9536 1.1347
Livre sterling 1.4188 1.4460 1.5373 1.6434
1.5. LEGAL REVALUATION
The impact of the 1976 legal revaluation of assets
has been eliminated in consolidation. Earlier
revaluations did not have a material impact and
have therefore not been restated.
1.6. RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed in
the period in which they incurred. Research and
development costs for 2003 amounted to €16,322
thousand. Research and development costs
capitalized by subsidiaries are expensed in full
in the consolidated financial statements, in
accordance with Group accounting policies.
1.7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost,
net of accumulated depreciation. Depreciation is
calculated by the straight-line or reducing balance
method over the estimated useful lives of the
assets in question, as follows:
Buildings: 10 to 40 years (straight line)
Fixtures and fittings: 5 to 10 years (straight-line)
Plant and equipment: 5 to 10 years (straight-line
or reducing balance)
LBC Group storage tanks: tanks, pipework and
pipelines: 20 years (straight-line)
LBC Group storage tanks: tanks, pipework and
pipelines: 10 years (straight-line)
Vehicles: 4 to 5 years (straight-line)
Office equipment and furniture: 5 to 10 years
(straight-line or reducing balance)
Additions to property, plant and equipment are stated
at cost. Significant assets acquired under finance
leases are capitalized and depreciated over their
estimated useful lives. An obligation in the same
amount is recorded as a liability.
1.8. GOODWILL AND OTHER INTANGIBLE ASSETS
The difference between the cost of an investment
and the Group’s equity in the underlying net
assets as of the date of acquisition or
consolidation, is allocated to identifiable assets
(purchased goodwill, trademarks, land and
buildings) or liabilities on the basis of fair values
and any unallocated balance is classified as
goodwill. Positive goodwill is included in
intangible assets and amortized over 10 to 40
years, depending on the sector. Negative goodwill,
or badwill, is written back to income over a period
of 10 years, unless it is qualified as a contingency
provision, in which case the provision is adjusted
to reflect changes in the level of risk.
Amortization periods:
- Hand tool companies (Facom): 40 years, except
for some indirect subsidiaries for which goodwill
is amortized over periods ranging from 10 to 30
years. Write-down in full of residual goodwill
allocated to Facom’s Hand Tools Operations (see
“Significant events of the year”).
- High-end furniture business (Cassina): 40 years,
with a few exceptions for some smaller
subsidiaries specialized mainly in the lighting
sector for which goodwill is amortized over 20
years.
- Rating business (Fitch Ratings): 20 years. Partial
write-down of operations relating to analyzing
and managing credit risk, carried out by Fitch
Risk Management, a subsidiary of Fitch Ratings.
- Chemical storage (LBC): 20 years.
106 2 0 0 3 A n n u a l R e p o r t
No write-downs were required for residual
goodwill concerning the rating, furniture and
lighting, and chemical storage businesses, given
the good performance and outlook of these
activities.
Write-down of residual goodwill relating to Facom
Tools
Earnings of the tools business are currently
contracting against the backdrop of difficult market
conditions and fierce competition stemming from
ever-increasing globalization. As a result, in 2003
Fimalac carried out an impairment test on Facom
Tools based on a multi-criteria valuation approach.
The first method was based on future cash flows.
The assumptions used take into account a realistic
estimate of changes in volumes sold over a 4-year
period, a terminal value calculated using a
reasonable multiple of operating income, and
a discount rate of 8%. Other valuation methods
were also used, including comparisons with the
company’s main competitors, and valuations from
analysts’ or consultants’ valuation panels or from
financial analysts. Based on this multi-criteria
valuation, Fimalac wrote down the full amount of
the residual goodwill relating to Facom Tools,
totaling €248.7 million.
Valuation of intangible assets of the rating
business (Fitch Ratings)
At December 31, 2003, intangible assets of the
rating business totaled €515 million. This amount
is principally attributable to the acquisition of
Fitch in December 1997, followed by Fitch’s own
acquisition of Duff & Phelps and Bankwatch (by
Fitch Ratings) in 2000. As rating is a service
business, the companies have few tangible assets.
Intangible assets are valued principally by
reference to the companies’ capacity to generate
income based on their know-how, the quality of
their research teams, their technical expertise,
brand recognition (Fitch Ratings) and the
companies’ ability to acquire and build market
share. The valuation is based on a five-year
strategic and financial plan which is reviewed on
an annual basis. At each year-end, the carrying
value of these intangible assets is assessed by
reconciling the results generated by the companies
with the five-year plan. A provision for impairment
in value is recorded for any material difference
between actual figures and the five-year plan,
calculated on the basis of market values. Based on
these valuations, purchased goodwill related to
Fitch Ratings has not been written down in the
consolidated financial statements at December 31,
2003. An impairment test was carried out on Fitch
Risk Management, specialized in credit risk
management, resulting in a partial write-down of
goodwill and intangible assets relating to this
company in the amount of €7.6 million.
Valuation of the “Hand Tools” trademarks
In June 1999, at the time of the acquisition of
Facom, Virax and Bost, a firm of independent
experts valued the three trademarks at €202.7
million overall, including €182.9 million for
Facom. The valuation of Facom Tools at December
31, 2003 resulted in residual goodwill being
written down in full, in the amount of €248.7
million. No write-down of the Facom brand was
required, but the other “Hand Tools” trademarks
were written down by €15.2 million.
LBC Houston (formerly PetroUnited) purchased
goodwill
The valuation of purchased goodwill at December
31, 2003, based on storage capacity and projected
future earnings, is in line with that determined
at the time of acquisition of PetroUnited in 1998.
Consequently, purchased goodwill has not been
written down in the consolidated financial
statements at December 31, 2003.
Details of fair value adjustments to intangible
assets and property, plant and equipment are
provided in Note 4.3 for intangible assets and Note
4.4 for property, plant and equipment.
1.9 - INVESTMENTS
Investments in non-consolidated companies are
stated at cost. Provision is made in the case of any
permanent impairment in value, determined based
on the Group’s equity in the underlying net assets,
investment yield, earnings projections and
development potential. In the case of quoted
shares, account is taken of representative stock
market prices.
1.10 - INVENTORIES AND RECEIVABLES
Inventories and work-in-progress
Inventories are stated at the lower of cost and
market. Raw materials are valued by the FIFO (first
in, first out) method. Other work-in-progress and
finished product inventories are valued at cost,
comprising raw materials purchase costs, labor,
direct production costs and a portion of burden.
Operating receivables
Operating receivables are stated at their nominal
value. Provision is made for any risk of non-
recovery.
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1072 0 0 3 A n n u a l R e p o r t
1.11 - MARKETABLE SECURITIES
Marketable securities are stated at cost. Provisions
for impairment in value are calculated on a case by
case basis, to cover the difference between their
average cost and stock market price or probable
realizable value.
1.12 - NET ASSET VALUE AND EARNINGS PER
SHARE
Net assets per share are determined on the basis
of the number of shares outstanding at the year
end. At December 31, 2003, the calculation was
based on the number of shares making up the
Company’s share capital, i.e. 37,221,464. At
December 31, 2002, the calculation was based on
the 29,510,709 shares outstanding at that date,
less the 2,099,584 shares held in treasury stock,
representing 6.64% of the capital. These treasury
shares were all sold during 2003.
Net earnings per share are determined by
reference to the average number of shares
outstanding during the year, i.e. 36,019,762
shares in 2003.
In 2002 the average number of shares outstanding
during the year, including treasury stock, was
31,515,393.
1.13 - INCOME TAXES
The tax charge comprises:
- income taxes currently payable, net of dividend
and other tax credits set off against the tax due;
- deferred taxes arising from timing differences
between the recognition of certain items of
income and expense for consolidated financial
reporting and tax purposes, determined by the
liability method. In accordance with the principle
of prudence, net deferred tax assets, determined
company by company, are recognized only to the
extent that it is probable that the asset will be
recovered in the foreseeable future.
Exceptional 3% surtax
This surtax has been included in the tax rate used
to calculate all deferred tax assets and liabilities.
The 3.3% “contribution sociale” surtax has also
been taken into account in the tax rate, subject to
certain conditions. Deferred taxes expected to
reverse in 2004 have been calculated using a rate
of 35.43%.
1.14 - SUPPLEMENTARY PENSIONS AND
RETIREMENT BONUSES
Group companies and their employees make
contributions to various compulsory pension schemes.
The funds are managed by independent bodies and
Group companies have no other pension obligations.
Obligations resulting from the optional supplementary
pension schemes are covered by provisions or
insurance policies. The Group’s liability for statutory
retirement bonuses not funded under insured plans
is included in provisions for charges. The estimated
liability is determined on an actuarial basis, in
accordance with the recommendations of the
French Institute of Accountants (Ordre des Experts
Comptables), using assumptions related to:
- salary on retirement;
- payroll tax rate;
- vested benefit obligations based on years of
service;
- mortality rate;
- staff turnover rate;
- discount rate.
1.15 - OTHER PROVISIONS
Other provisions correspond to identified conting-
encies and charges. At the year-end, provisions
are analyzed on a case-by-case basis and may be
reversed or additional provisions may be set up.
108 2 0 0 3 A n n u a l R e p o r t
NOTE 2 - SCOPE OF CONSOLIDATION
2.1. LIST OF CONSOLIDATED COMPANIES
FIMALAC 100.00 100.00 Parent 100.00 100.00 Parent 97, rue de Lille - 75007 Paris (France) company company-Siren n° 542044136
CLAL-MSX Divested 100.00 100.00 FullRoute du Ménillet - 60540 Bornel (France)Siren n° 400723516
CLAL-MSX ITALIA Divested 100.00 100.00 FullVia Moresi 5 - 20123 Milan (Italy)
CLAL US 100.00 100.00 Full 100.00 100.00 Full97, rue de Lille - 75007 Paris (France)
LBC 100.00 100.00 Full 100.00 100.00 Full5 ter, rue du Dôme - 75016 Paris (France)Siren n° 314841636
LBC HOUSTON LP 100.00 100.00 Full 100.00 100.00 Full11666 Port Road - SeabrookTexas 77586 (USA)
LBC SOTRASOL 99.88 99.88 Full 99.88 99.88 Full5 ter, rue du Dôme - 75016 Paris (France)Siren n° 542057500
LBC SOGESTRAN 50.00 50.00 Proportional 50.00 50.00 ProportionalRoute de la Chimie76700 Gonfreville-l’Orcher (France)
LBC MARSEILLE 99.99 99.99 Full 99.99 99.99 FullRte du Port-Pétrolier - 13117 Lavera (France)Siren n° 588113810
LBC NANTES 99.89 99.89 Full 99.89 99.89 Full103, quai E.-Cormerais - 44800 St-Herblain (France)Siren n° 303217483
LBC ANTWERPEN 100.00 100.00 Full 100.00 100.00 FullHaven 275 Léon Bonnetweg 282030 Antwerp (Belgium)
FINANCIÈRE GTS 100.00 100.00 Full 100.00 100.00 FullHaven 275 Léon Bonnetweg 282030 Antwerp (Belgium)
LBC TANQUIPOR 71.11 71.11 Full 71.11 71.11 FullParque Industriel Do Bareiro2830 Bareiro (Portugal)
LBC TERQUISA 56.29 56.29 Full 56.29 56.29 FullSanta Cruz de Marcenado 3128015 Madrid (Spain)
LBC TERLIQ 78.14 100.00 Full 78.14 100.00 FullValle des Escombreras30353 Cartagena - Murcia (Spain)
LBC ROTTERDAM 100.00 100.00 Full 100.00 100.00 FullOude Maasweg 43197 Botlek - Rotterdam (Netherlands)
2003 2002
Name and address – Siren no. % Interest % voting Consolidation % Interest % voting Consolidation rights method rights method
LBC subsidiaries % Interest % voting Consolidation % Interest % voting Consolidation held by LBC rights method held by LBC rights method
held by LBC held by LBC
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1092 0 0 3 A n n u a l R e p o r t
RHÉNAMÉCA 100.00 100.00 Full 100.00 100.00 Full97, rue de Lille - 75007 Paris (France)Siren n°722007960
FINANCIÈRE SECAP 99.97 99.97 Full 99.97 99.97 Full21, Quai Alphonse-le-Gallo92102 Boulogne-Billancourt (France)Siren n° 343693701
2003 2002
Name and address – Siren no. % Interest % voting Consolidation % Interest % voting Consolidation rights method rights method
FINANCIÈRE PORTEFOIN (EX.ENGELHARD CLAL) 100.00 100.00 Full 49.00 49.00 Equity97, rue de Lille75007 Paris
SIFMP 100.00 100.00 Full45, rue de Paris93100 Noisy le Sec (France)
CLAL UK 100.00 100.00 FullDavis Road ChessingtonSurrey KT91TD (UK)
H.DRIJFHOUT & ZOON’S 45.00 45.00 EquityKeienberjwej 12 1101Amsterdam (Netherlands)
MINERAIS & ENGRAIS 100.00 100.00 Full 100.00 100.00 Full97, rue de Lille - 75007 Paris (France)Siren n° 562124529
SNC SEFI 100.00 100.00 Full 100.00 100.00 Full97, rue de Lille - 75007 Paris (France)Siren n° 381887231
CATRIMMO 100.00 100.00 Full 100.00 100.00 Full97, rue de Lille - 75007 Paris (France)Siren n° 351983176
FIMALAC INC 100.00 100.00 Full 100.00 100.00 Full1 State Street PlazaNew York 1004 (USA)
Financière Portefoin subsidiaries % Interest % voting rights Consolidation % Interest % voting rights Consolidation held by held by method held by held by method
FIN.PORT. FIN.PORT. FIN.PORT. FIN.PORT.
FITCH RATINGS INC 96.57 96.57 Full 96.57 96.57 Full1 State Street PlazaNew York 1004 (USA)
FITCH CENTROAMERICANA, S.A. 95.27 95.27 Full 90.92 90.92 FullAvenida Samuel LewisEdicio Comosa . piso 10 (Panama)
FITCH COSTA RICA CALIFICADORA S.A. 96.57 96.57 Full 96.57 96.57 FullEdificio Plaza Mayor 3erSan Jose (Costa Rica)
FITCH RISK MANAGEMENT 100.00 100.00 Full 100.00 100.00 FullOne State Street PlazaNew York 1004 (USA)
FITCH INFO 100.00 100.00 Full 100.00 100.00 Full1 State Street PlazaNew York 1004 (USA)
FITCH RATINGS LTD 96.57 96.57 Full 96.57 96.57 FullEldon House - 2, Eldon StreetLondon (UK)
Fimalac Inc subsidiaries % Interest % voting rights Consolidation % Interest % voting rights Consolidation held by held by method held by held by method
FIMALAC INC FIMALAC INC FIMALAC INC FIMALAC INC
110 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fitch Ratings Ltd subsidiaries % Interest % Voting rights held Consolidation % Interest % Voting rights held Consolidationheld by Fitch by Fitch Ratings Ltd method held by Fitch by Fitch Ratings Ltd method
Ratings Ltd Ratings Ltd
FITCH FRANCE SA 100.00 100.00 Full 100.00 100.00 Full
FITCH AMR (France) Merged Full 100.00 100.00 Full
FITCH DEUTSCHLAND GMBH (Germany) 100.00 100.00 Full 100.00 100.00 Full
FITCH ITALIA SPA (Italy) 96.83 96.83 Full 96.83 96.83 Full
FITCH POLSKA SA (Poland) 92.00 92.00 Full 88.60 88.60 Full
FITCH RATINGS ESPANA SA (Spain) 100.00 100.00 Full 100.00 100.00 Full
FITCH RATINGS (Turkey) 99.99 99.99 Full 99.99 99.99 Full
FITCH IBCA SOUTH AFRICA (Pty) Ltd 100.00 100.00 Full 100.00 100.00 Full
INTER ARAB RATING CY EC 100.00 100.00 Full 60.00 60.00 Full(United Arab Emirates)
NILE RATINGS COMPANY SAE (Egypt) 95.00 95.00 Full
MAGHREB RATING (Tunisia) 99.73 99.73 Full
FITCH HOLDING AG (Switzerland) 100.00 100.00 Full 100.00 100.00 Full
FITCH IBCA SOVEREIGN RATINGS LTD (UK) 100.00 100.00 Full 100.00 100.00 Full
IBCA INSURANCE RAT.LTD (UK) 100.00 100.00 Full 100.00 100.00 Full
ASIA
FITCH AUSTRALIA PTY LTD 100.00 100.00 Full 100.00 100.00 Full
FITCH SINGAPORE PTE LTD 99.99 99.99 Full 99.99 99.99 Full
FITCH HONG KONG LIMITED 99.00 99.00 Full 99.00 99.00 Full
THOMSON RATINGS PHILIPPINES INC 100.00 100.00 Full 100.00 100.00 Full
FITCH RATING INDIA PRIVATE LIMITED 71.90 71.90 Full 67.00 67.00 Full
LATIN AMERICA
FITCH CHILE HOLDING SA 99.90 99.90 Full 99.90 99.90 Full
FITCH CHILE CALIFICADORA DE RIESGO LTD 81.22 81.22 Full 81.22 81.22 Full
FITCH MEXICO SA 66.00 66.00 Full 57.50 57.50 Full
FITCH BRAZIL LIMITADA 100.00 100.00 Full 100.00 100.00 Full
FITCH ARGENTINA CALIFICADORA DE RIESGO 100.00 100.00 Full 100.00 100.00 Full
DUFF & PHELPS DE VENEZUELA 74.38 74.38 Full 74.38 74.38 Full
OTHER (Equity method)
FITCH RATING LTD (Thailand) 49.90 49.90 Equity 39.90 39.90 Equity
CHENGXIN CREDIT RATING AGENCY (China) 30.00 30.00 Equity 30.00 30.00 Equity
APOYO & ASOCIADOS Y CIA LTD (Peru) 20.00 20.00 Equity 20.00 20.00 Equity
CALIFICAD. RIESGOS BANKWATCH (Ecuador) 40.00 40.00 Equity 40.00 40.00 Equity
1112 0 0 3 A n n u a l R e p o r t
2003 2002
Name and address – Siren no. % Interest % voting Consolidation % Interest % voting Consolidation rights method rights method
Fimalac Investissements subsidiaries % Interest % voting rights Consolidation % Interest % voting rights Consolidationheld by held by method held by held by method
FIMALAC INVEST. FIMALAC INVEST. FIMALAC INVEST. FIMALAC INVEST.
SOCIÉTÉ DES CADRES FACOM 100.00 100.00 Full 100.00 100.00 Full97, rue de Lille - 75007 Paris (France)
FIMALAC INVESTISSEMENTS 100.00 100.00 Full 100.00 100.00 Full97, rue de Lille - 75007 Paris (France)Siren n° 552012965
FACOM DÉVELOPPEMENT 100.00 100.00 Full 100.00 100.00 Full97, rue de Lille - 75007 Paris (France)Siren n° 341269512
S I F S 100.00 100.00 Full 100.00 100.00 Full97, rue de Lille - 75007 Paris (France)Siren n° 318785656
CORE RATINGS LTD 100.00 100.00 Full 80.00 80.00 Full6 Lloyds AvenueLondon (UK)
CORE RATINGS SAS 100.00 100.00 Full 80.00 80.00 Full2, rue de la Roquette75011 Paris (France)
CASSINA SPA 80.00 80.00 Full 80.00 80.00 FullVia L. Busnelli 1 - 20036 Meda (Italy)
Cassina subsidiaries % Interest % voting rights Consoldidation % Interest % voting rights Consolidationheld by held by method held by held by methodCASSINA CASSINA. CASSINA CASSINA
KUTEK - MONZA (Italy) 60.00 60.00 Full 60.00 60.00 Full
ALIAS - GRUMELLO DEL MONTE (Italy) 100.00 100.00 Full 100.00 100.00 Full
MECCANICA VALBONA - MEDA ( Italy) 100.00 100.00 Full 100.00 100.00 Full
CASSINA SA - PARIS (France) 100.00 100.00 Full 100.00 100.00 Full
CASSINA INC - NEW YORK (USA) 100.00 100.00 Full 100.00 100.00 Full
NEMO SPA - MEDA ( Italy) 100.00 100.00 Full 100.00 100.00 Full
ITALIANA LUCE AMERICA INC - HAMDEN (USA) 100.00 100.00 Full 100.00 100.00 Full
ILLUMINATING EXPERIENCES LLC 80.00 80.00 Full 80.00 80.00 FullHIGHLAND PARK (USA)
ARTELUX SA - TREMBLAY (France) 51.00 51.00 Full 51.00 51.00 Full
112 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2003 2002
Name and address – Siren no. % interest % voting Consolidation % interest % voting Consolidationrights method rights method
FACOM 100.00 100.00 Full 100.00 100.00 Full6/8 rue Gustave Eiffel - 91420 Morangis (France)Siren n° 328630645
FACOM FAR EAST SINGAPORE 100.00 100.00 Full 100.00 100.00 FullFACOM GMBH - MUNCHEN (Germany) 100.00 100.00 Full 100.00 100.00 FullFACOM BELGIQUE - ZAVENEM (Belgium) 100.00 100.00 Full 100.00 100.00 FullFACOM NORDEN - SUNDS (Denmark) 100.00 100.00 Full 100.00 100.00 FullFACOM TOOLS LTD - CHERTSEY (UK) 100.00 100.00 Full 100.00 100.00 FullFACOM GEREEDSCHAPPEN BV - VIANEN (Netherlands) 100.00 100.00 Full 100.00 100.00 FullFACOM SA/AG - FRIBOURG (Switzerland) 100.00 100.00 Full 100.00 100.00 FullFACOM HERRAMIENTAS SRL - MADRID (Spain) 100.00 100.00 Full 100.00 100.00 FullFACOM TOOLS INC - CHICAGO (USA) Merged 100.00 100.00 FullSK HAND TOOLS - CHICAGO (USA) 100.00 100.00 Full 100.00 100.00 FullFACOM INVESTMENT LTD - CANNOCK (UK) 100.00 100.00 Full 100.00 100.00 FullAUTO TOOLS LTD - CANNOCK (UK) 100.00 100.00 Full 100.00 100.00 FullSYKES PICKAVANT PLC - CANNOCK (UK) 100.00 100.00 Full 100.00 100.00 FullSYKES PICKAVANT LTD - CANNOCK (UK) 100.00 100.00 Full 100.00 100.00 FullVITREX LTD - CANNOCK (UK) 100.00 100.00 Full 100.00 100.00 FullBRITOOL LTD - CANNOCK (UK) 100.00 100.00 Full 100.00 100.00 FullCOFICOM - MORANGIS (France) Merged 100.00 100.00 FullB G I - ARBOIS (France) 100.00 100.00 Full 100.00 100.00 FullD E L A - MORANGIS (France) 100.00 100.00 Full 100.00 100.00 FullVIRAX - EPERNAY (France) 100.00 100.00 Full 100.00 100.00 FullPIAULE PAROLAI EQUIPT - FEUQUIERES-EN-VIMEU (France) 100.00 100.00 Full 100.00 100.00 FullVIDMAR - LA MURE (France) Divested 100.00 100.00 FullS E E G - BRIE-COMTE-ROBERT (France) 100.00 100.00 Full 100.00 100.00 FullUTENSILERIE ASSOCIATE SPA - MONVALLE (Italy) 100.00 100.00 Full 100.00 100.00 FullPIETRO PASTORINO SPA - COCQUIO (Italy) 100.00 100.00 Full 100.00 100.00 FullCOMEC SPA - FANO (Italy) 100.00 100.00 Full 100.00 100.00 FullFACOM AUTOMOTIVE TOOLS GMBH - MUNCHEN (Germany) 100.00 100.00 Full 100.00 100.00 FullFACOM AUTOMOTIVE TOOLS SRL - CORREGGIO (Italy) 100.00 100.00 Full 100.00 100.00 FullBEISSBARTH GMBH - MUNCHEN (Germany) 100.00 100.00 Full 100.00 100.00 FullINES ELEKTRONIK SYSTEMENT - MUHLDORF (Germany) 100.00 100.00 Full 100.00 100.00 FullU. Kasse - MUNCHEN (Germany) 100.00 100.00 Full 100.00 100.00 FullBEISSBARTH USA INC - NASHVILLE (USA) 100.00 100.00 Full 100.00 100.00 FullBEISSBARTH LTD - NOTTINGHAM (UK) 100.00 100.00 Full 100.00 100.00 FullBEISSBARTH ITALIA SRL - FORMIGINIE (Italy) 100.00 100.00 Full 100.00 100.00 FullBEISSBARTH BULGARIA GMBH - SOFIA (Bulgaria) 100.00 100.00 Full 100.00 100.00 FullBEISSBARTH BELGIUM BVBA - ZAWENTEM (Belgium) 100.00 100.00 Full 100.00 100.00 FullBEISSBARTH GESMBH - WIEN (Austria) 100.00 100.00 Full 100.00 100.00 FullBEISSBARTH PTY LTD - THOMASTOWN (Australia) 100.00 100.00 Full 100.00 100.00 FullSICAM SRL - CORREGGIO (Italy) 100.00 100.00 Full 100.00 100.00 FullAUTO CONSULT - FRANKFURT (Germany) 100.00 100.00 Full 100.00 100.00 FullLEV - PLYMOUTH (UK) 100.00 100.00 Full 100.00 100.00 FullZIPPO (Italy) 100.00 100.00 Full 100.00 100.00 FullTECALEMIT - PLYMOUTH (UK) 100.00 100.00 Full 100.00 100.00 FullFFB - MYENNES (France) 100.00 100.00 Full 100.00 100.00 FullDUBUIS (France) 100.00 100.00 Full 100.00 100.00 FullSEMA (France) 100.00 100.00 Full 100.00 100.00 FullPPE LISTA (JV France/Switzerland) 50.00 50.00 Proportional 50.00 50.00 ProportionalSTRATEC EZY (France) 100.00 100.00 Full 100.00 100.00 FullTOP LINE (France) 50.00 50.00 Proportional 50.00 50.00 ProportionalFACOM POLOGNE (Poland) 100.00 100.00 Full 100.00 100.00 Full
FACOM Subsidiaries % interest % voting rights Consolidation % interest % voting rights Consolidationheld by FACOM held by FACOM method held by FACOM held by FACOM method
1132 0 0 3 A n n u a l R e p o r t
Full consolidation Equity method consolidation of Financière PORTEFOIN OF ENGELHARD CLAL DIVESTMENT OF CLAL MSX
2003 2002 2003 2002
ASSETS
Fixed assets 20,475 80,395 4,796
o/w companies accounted for by the equity method 7,596 80,395 0
Current assets 12,756 26,209
LIABILITIES AND SHAREHOLDERS’ EQUITYProvisions 5,335 3,152
Liabilities 6,910 10,584
IMPACT OF CHANGES IN GROUP STRUCTURE ON THE FIMALAC GROUPCONSOLIDATED BALANCE SHEET(in €thousands)
NOTE 3 - PRO FORMA INFORMATION
CHANGES IN SCOPE OF CONSOLIDATION
The Group did not make any significant acquisitions
during 2003.
Further to the sale by Engelhard-Clal of the bulk of
its manufacturing operations, Fimalac now holds
100% of the company, which was previously 50%
held by Engelhard Corp. Engelhard-Clal – which has
now become Financière Portefoin – holds 45% of
HDZ which is accounted for by the equity method,
as well as various non-material residual assets. The
Financière Portefoin sub-group – which was
previously accounted for by the equity method –
was fully consolidated as of December 31, 2003.
In December 2003, Fimalac sold its wholly-owned
subsidiary, Clal-Msx. The consolidated financial
statements of Fimalac do not include Clal-Msx’s
assets and liabilities at December 31, 2003 but do
include the company’s results of operations for the
year.
Pro forma information
The changes in Group structure relating to the full
consolidation of Financière Portefoin and the sale of
Clal-Msx, had a relatively limited impact on the
consolidated financial statements. The main items
concerned are set out in the table below.
114 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - ANALYSIS OF BALANCE SHEET AND INCOME STATEMENT ITEMS
(in € thousands) 2000 Increase Decrease Translation 2001adjustments and other
Goodwill
Cost 653,572 34,077 (7,202) 5,312 685,759
Amortization 100,369 24,627 (464) 47,410 171,942
Net 553,203 9,450 (6,738) (42,098) 513,817
2002
(in € thousands) 2001 Increase Decrease Translation 2002adjustments and other
Goodwill
Cost 685,759 40,923 (4,046) (52,345) 670,291
Amortization 171,942 75,558 (253) (48,778) 198,469
Net 513,817 (34,635) (3,793) (3,567) 471,822
(1) Including:• Illuminating Experiences (Cassina) in an amount of €4,269 thousand.• Fitch Risk Management in an amount of €34,620 thousand.(2) Includes
the write-down in full of goodwill on Beissbarth’s garage equipment business, in an amount of €31,987 thousandand the write-down of Minerais & Engrais goodwill in the amount of €9,275 thousand.
2003
(in € thousands) 2002 Increase Decrease Translation 2003adjustments and other
Goodwill
Cost 670,291 266 (200) (15,981) 654,376
Amortization 198,469 283,002 (4,849) 476,622
Net 471,822 (282,736) (200) (11,132) 177,754(1)o/w goodwill write-downs:
• Facom (hand tools) 248,770• Fitch Risk Management 5,473
NOTE 4.1 - GOODWILL
Movements in goodwill:
2001
(1)
(2)
(1)
1152 0 0 3 A n n u a l R e p o r t
Goodwill and accumulated amortization at December 31, 2003 by company:
(in € thousands) Amortization Cost at December Accumulated Net at Decemberperiod 31, 2003 amortization at 31, 2003
December 31, 2003
Goodwill
Facom Tools (Hand Tools) 30 and 40 years 372,715 (372,715) -
Cassina 20 and 40 years 95,848 (17,589) 78,259
Fitch Ratings 20 years 100,364 (33,808) 66,556
Fitch Risk Management 5 to 10 years 29,245 (12,424) 16,821
Core Ratings 1,098 (1,098) -
Lbc 20 years 37,205 (21,087) 16,118
Parent companies and other 20 years 17,901 (17,901) -
654,376 (476,622) 177,754
Badwill:
2001
(in € thousands) 2000 Increase Decrease 2001
Fimalac / Rhénaméca 62,365 - (15,514) 46,851
Other 12 - - 12
Badwill 62,377 - (15,514) 46,863
2002
(in € thousands) 2001 Increase Decrease 2002
Fimalac / Rhénaméca 46,851 - (14,972) 31,879
Other 12 - (2) 10
Badwill 46,863 - (14,974) 31,889
2003
(in € thousands) 2002 Increase Decrease 2003
Fimalac / Rhénaméca 31,879 3,417 (14,085) 21,211
Other 10 - (2) 8
Badwill 31,889 3,417 (14,087) 21,219
116 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in € thousands) 2000 Increase Decrease Changes in Translation Mergers and 2001Group structure adjustments other
Intangible assets
Cost 1,082,870 17,931 (1,806) (7,889) 40,461 (11,505) 1,120,062
Amortization and provisions 22,899 5,224 (1,001) 18 30 (1,245) 25,925
Net 1,059,971 12,707 (805) (7,907) 40,431 (10,260) 1,094,137
2002
(in € thousands) 2001 Increase Decrease Changes in Translation Mergers and other 2002Group structure adjustments
Intangible assets
Cost 1,120,062 9,456 (741) 157 (123,022) (14,799) 991,113
Amortization and provisions 25,925 34,286 (119) 13 (221) (7,589) 52,295
Net 1,094,137 (24,830) (622) 144 (122,801) (7,210) 938,818
(1) Including €28,387 thousand corresponding to the write-down in full of Beissbarth garage equipment trademarks.
2003
(in € thousands) 2002 Increase Decrease Changes in Translation Mergers and other 2003Group structure adjustments
Intangible assets
Cost 991,113 2,487 (2,650) (446) (109,215) 4,933 886,222
Amortization and provisions 52,295 21,209 (2,508) (440) (238) 5,773 76,091
Net 938,818 (18,722) (142) (6) (108,977) (840) 810,131
(1) Including €15,245 thousand corresponding to the partial write-down of Facom subsidiaries’ trademarks.
NOTE 4.3 - INTANGIBLE ASSETS
Movements in intangible assets:
2001
(1)
(1)
NOTE 4.2 - BREAKDOWN OF INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
(in € thousands) Intangible assets Property, plant and equipment
2003 2002 2001 2003 2002 2001
Facom 221,827 237,951 268,906 64,596 94,542 91,683Fitch Ratings 516,924 624,735 735,536 23,999 26,486 30,775LBC 25,519 30,769 35,721 179,434 225,357 231,341Cassina 45,856 45,357 53,923 15,330 13,484 14,258Financière Portefoin - - - 12,520 - -Clal-Msx - 6 51 - 4,779 5,403Core Ratings 5 - - 118 112 -Parent companies - - - 15,117 10,811 10,328 Total 810,131 938,818 1,094,137 311,114 375,571 383,788
1172 0 0 3 A n n u a l R e p o r t
Currency 2002 Acquisitions Impairment Translation adjustment 2003
Fitch Ratings purchased goodwill
Fitch Inc acquisition $83,743 79,854 (13,549) 66,305
Duff & Phelps acquisition $507,464 483,897 (82,102) 401,795
Bankwatch acquisition $47,561 45,352 (7,695) 37,657
Fitch Ltd acquisition £6,516 10,017 (772) 9,245
Fitch Ratings sub-total 619,120 - - (104,118) 515,002
LBC purchased goodwill
LBC Houston acquisition(formerly PetroUnited) $30 800 29,370 (4,983) 24,387
Hand tools trademarks
Facom Tools 182,939 182,939
Usag 25,711 25,711
Other Facom subsidiaries’ trademarks 25,951 (15,245) 10,706
Hand tools sub-total 234,601 - (15,245) - 219,356
Other trademarks
Cassina 38,527 38,527
TOTAL 921,618 - (15,245) (109,101) 797,272
Breakdown of fair value adjustments related to intangible assets:
Intangible assets at cost:
(in € thousands) 2002 Increase Decrease Changes in Translation Mergers 2003Group structure adjustments and other
Start-up costs 2,416 - (12) (5) - (317) 2,082
R&D costs 9 397 (46) - - 2,416 2,776
Patents, trademarks 314,543 961 (883) (441) (319) 7,196 321,057
Purchased goodwill 654,518 (990) (109,105) 408 544,831
Other 19,627 1,129 (719) 209 (4,770) 15,476
Total 991,113 2,487 (2,650) (446) (109,215) 4,933 886,222
Amortization and provisions:
(in € thousands) 2002 Increase Decrease Changes in Translation Mergers 2003Group structure adjustments and other
Start-up costs 2,305 (44) (5) 1 (196) 2,061
R&D costs - 289 (46) - - 2,523 2,766
Patents, trademarks 39,169 16,862 (843) (435) (120) 6,065 60,698
Purchased goodwill 1,285 - (1,014) - - - 271
Other 9,536 4,058 (561) - (119) (2,619) 10,295
Total 52,295 21,209 (2,508) (440) (238) 5,773 76,091
118 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Breakdown of property, plant and equipment by category (at cost):
(in € thousands) 2002 Increase Decrease Changes in Translation Mergers and 2003Group structure adjustments other (1)
Land 38,356 (2,061) (102) (3,952) 417 32,658
Buildings and improvements 158,402 5,531 (5,877) (2,412) (6,239) 22,126 171,531
Plant and equipment 537,991 15,846 (13,782) (9,968) (24,284) 20,052 525,855
Leased plant and equipment 2,826 1 (2) 2,825
Other property, plant and equipment 79,323 5,215 (4,583) (460) (2,925) 309 76,879
Other leased assets 2,405 3,383 (57) (756) (1,820) 3,155
Assets under construction 37,006 17,882 (679) (1,778) (29,524) 22,907
Payments on account 4,022 36 (55) (87) (198) 3,718
Total 860,331 47,893 (26,357) (13,765) (39,936) 11,362 839,528
(1) Primarily reflecting the full consolidation of Financière Portefoin at December 31, 2003
NOTE 4.4 - PROPERTY, PLANT AND EQUIPMENT
Movements in property, plant and equipment:
2001
(in € thousands) 2000 Increase Decrease Changes in Translation Mergers 2001Group structure adjustments and other
Property, plant and equipment
Cost 908,980 83,593 (15,089) (132,103) 13,340 (4,392) 854,329
Depreciation and provisions 529,573 55,090 (10,972) (104,425) 5,914 (4,639) 470,541
Net 379,407 28,503 (4,117) (27,678) 7,426 247 383,788
2002
(in € thousands) 2001 Increase Decrease Changes in Translation Mergers 2002Group structure adjustments and other
Property, plant and equipment
Cost 854,329 74,055 (21,408) 377 (43,240) (3,782) 860,331
Depreciation and provisions 470,541 53,616 (15,661) 246 (20,477) (3,505) 484,760
Net 383,788 20,439 (5,747) 131 (22,763) (277) 375,571
2003
(in € thousands) 2002 Increase Decrease Changes in Translation Mergers 2003Group structure adjustments and other
Property, plant and equipment
Cost 860,331 47,893 (26,357) (13,765) (39,936) 11,362 839,528
Depreciation and provisions 484,760 99,218 (25,000) (9,131) (19,819) (1,614) 528,414
Net 375,571 (51,325) (1,357) (4,634) (20,117) 12,976 311,114
Currency 2001 Acquisitions Impairment Translation adjustment 2003
Land
LBC Houston acquisition $12,927 12,327 - - (2,092) 10,235
Breakdown of fair value adjustments to property, plant and equipment:
1192 0 0 3 A n n u a l R e p o r t
NOTE 4.5 - INVESTMENTS
2001
(in € thousands) 2000 Increase Decrease Changes in Translation Mergers and 2001Group structure adjustments other(1)
Cost 140,843 2,528 (87,328) (923) 733 130 55,983 Provisions 48,904 9,799 (16,129) - 637 - 43,211 Net 91,939 (7,271) (71,199) (923) 96 130 12,772
2002
(in € thousands) 2001 Increase Decrease Changes in Translation Mergers and 2002(1) Group structure adjustments other
Cost 55,983 1,910 (16,779) 7 (362) 537 41,296 Provisions 43,211 1,431 (15,571) - (78) (2) 28,991 Net 12,772 479 (1,208) 7 (284) 539 12,305
(1) Corresponds primarily to the sale of Team Partners Group shares
Cost €15,663 thousandProvision €14,860 thousand
2003
(in € thousands) 2002 Increase Decrease Changes in Translation Mergers and 2003(1) (2) Group structure adjustments other
Cost 41,296 15,160 (5,274) 31 (390) 3,165 53,988 Provisions 28,991 3,295 (2,962) (190) 70 29,204 Net 12,305 11,865 (2,312) 31 (200) 3,095 24,784
(1) Corresponds primarily to a carry back credit in an amount of €13,023 thousand.(2) Corresponds primarily to the sale of Team Partners Group shares.Cost €2,988 thousandProvision €2,839 thousand
Depreciation and provisions:
(in € thousands) 2002 Increase Decrease Changes in Translation Mergers and 2003Group structure adjustments other(1)
Land 324 15 (66) (6) 100 367
Buildings and improvements 73,703 6,529 (7,078) (1,511) (2,100) 4,661 74,204
Plant and equipment 375,989 67,140 (14,144) (6,743) (15,838) (5,122) 401,282
Leased plant and equipment 2,805 9 (1) 2,813
Other property, plant and equipment 30,401 7,476 (3,777) (368) (1,600) (32) 32,100
Other leased assets 1,120 840 (25) (275) (1,221) 439
Assets under construction 418 13,625 (418) 13,625
Payments on account 3,584 3,584
Total 484,760 99,218 (25,000) (9,131) (19,819) (1,614) 528,414
(1) Primarily reflecting the full consolidation of Financière Portefoin at December 31, 2003.(2) o/w LBC (see note 4.15).(3) Corresponding to write-downs relating to Facom’s supply chain management system in France.
Investments by category:
Net 2003 Net 2002 Net 2001
Investments in non-consolidated companies and other long-term investments* 8,887 9,371 10,309
Advances to non-consolidated companies 252 357 429
Loans 856 821 386
Other 14,789 1,756 1,648
24,784 12,305 12,772
The increase in other investments in 2003 corresponds to a €13,022 thousand carryback credit which has been assignedto a bank as security for a €13,000 thousand loan to Fimalac.
(2)
(3)}
120 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4.6 - COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD
2001
Shareholders’ Income Carrying value atCompanies accounted for by the equity method equity at Dec.31, 2001 Dec.31, 2001
Miscellaneous subsidiaries of Fitch Ratings - - 2,529Engelhard-Clal 203,198 12,754 99,526
102,055
2002
Shareholders’ Income Carrying value at Companies accounted for by the equity method equity at Dec.31, 2002 Dec.31, 2002
Miscellaneous subsidiaries of Fitch Ratings - - 2,132Engelhard-Clal 164,142 1,038 80,394
82,526
2003
Shareholders’ Income Carrying value atCompanies accounted for by the equity method equity at Dec.31, 2003 Dec.31, 2003
Miscellaneous subsidiaries of Fitch Ratings - - 1,383HDZ (held by Financière Portefoin) 16,880 990 7,596
8,979HDZ is a 45%-owned subsidiary of Financière Portefoin.
Key figures for HDZ, the main company accounted for by the equity method:
Assets Liabilities and shareholders’ equity Statement of income
Fixed assets 4,561 Shareholders’ equity 16,880 Sales 5,046
Current assets 20,634 Provisions for contingencies 224 Operating income before interest 818
Cash 166 Liabilities 8,257 Operating income after interest 1,157
25,361 25,361 Net income 990
Other long-term investments:
(in € thousands) Net at December 31, 2003
Korea Management Consulting & Credit Rating Corp. 3,002
Cassina Japan 1,471
Le Monde Presse 1,175
Le Monde ORA equity notes 1,000
Biospace 289
Other(1) 1,950
Total other long-term investments 8,887
(1) including shares in FCBS Gie representing an amount of 762 thousand
FCBS is an intercompany partnership set up to pool certain common expenses, such as personnel and administrativecosts. FCBS bills all of these costs to the Group companies. Its results, which are generally close to break-even, are alloca-ted to Fimalac.
(*) Movements in investments in non-consolidated companies and other long-term investments can be analyzed as follows:
(in € thousands) 2002 Increase Decrease Changes in Translation Mergers 2003Group structure adjustments and other
Cost 24,562 101 (3,884) 43 (283) 1,952 22,491
Provisions 15,191 1,418 (2,901) (117) 13 13,604
Net 9,371 (1,317) (983) 43 (166) 1,939 8,887
€
1212 0 0 3 A n n u a l R e p o r t
NOTE 4.9 - ACCRUALS AND OTHER ASSETS
(in € thousands) Cost Provisions Net Net Net2003 2002 2001
Trade receivables (1) 308,832 19,529 289,303 321,035 354,674
Other operating receivables
Accrued taxes, personnel costs and related receivables 20,835 - 20,835 42,103 54,497
Other receivables 14,933 335 14,598 9,335 5,384
Prepaid expenses 9,555 - 9,555 6,410 9,626
Deferred charges 3,623 - 3,623 6,757 10,108
Sub-total: other operating receivables 48,946 335 48,611 64,605 79,615
Conversion losses 15 - 15 400 540
Deferred tax assets 75,711 - 75,711 58,900 69,591
Total other receivables 124,672 335 124,337 123,905 149,746 (1) Primarily short-term receivables
NOTE 4.10 - SHAREHOLDERS’ EQUITY
The share capital is made up of 37,221,464 shares of common stock with a par value of €4.40 each, all fully paid-up.
Changes in consolidated shareholders’ equity in 2001
(in € thousands) Capital Additional Retained Income for Cumulative trans- Treasury Total sharehol-stock paid-in capital earnings the year lation adjustment stock ders’ equity
Shareholders’ equity at Jan. 1, 2001 137,956 441,650 167,469 99,972 17,079 (47,474) 816,652
Issuance of shares 412 536 - - - - 948
Acquisition/disposal of treasury stock - - - - - 6,876 6,876
Income for the year - - - 153,641 - - 153,641
Dividends paid - (3,797) 77,806 (99,972) - - (25,963)
Translation adjustments - - - - 25,051 - 25,051
Other - - (207) - - - (207)
Shareholders’ equity at Dec. 31, 2001 138,368 438,389 245,068 153,641 42,130 (40,598) 976,998
NOTE 4.7 - INVENTORIES AND WORK-IN-PROGRESS(in € thousands) Net Net Net
2003 2002 2001
Raw materials 42,138 61,896 65,326
Work-in-progress 15,189 24,127 30,905
Finished products 93,010 121,461 114,966
150,337 207,484 211,197
NOTE 4.8 - MARKETABLE SECURITIES(in € thousands) 2003 2002 2001
Cost 24,505 25,209 42,773
Provisions 3,371 3,769 3,916
Net 21,134 21,440 38,857
Stock market or fair value 21,867 23,314 44,138
Marketable securities consist mainly of the following: (in € thousands)
• Fimalac shares held for allocation on exercise of stock options 13,964
• Investment funds 3,022
• Other unlisted and money market securities 2,912
• Money market securities 1,236
122 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Changes in consolidated shareholders’ equity in 2002
(in € thousands) Capital Additional Retained Income (loss) Cumulative trans- Treasury Total sharehol-stock paid-in capital eamings for the year lation adjustment stock ders’ equity
Shareholders’ equity at Jan. 1, 2002 138,368 438,389 245,068 153,641 42,130 (40,598) 976,998
Issuance of shares 717 4,439 - - - - 5,156
Income/(loss) for the year - - - (32,172) - - (32,172)
Dividends paid - - 113,270 (153,641) - - (40,371)
Translation adjustments - - (6,852) - (78,969) - (85,821)
Reclassification of long-term (88,600) 88,600 - - - -capital gains reserves
Effect of change of method, - 2,039 - - - 2,039new liabilities standard
Other (94) - - - (94)
Shareholders’ equity at Dec. 31, 2002 139,085 354,228 442,031 (32,172) (36,839) (40,598) 825,735(1) Including change in cumulative translation adjustment related to Engelhard-Clal (accounted for by the equity method)(2) Net impact related to reversals in the opening balance sheet of provisions not complying with the newstandard, as follows:
Reversals of provisions for pension obligations 2,760
Tax effect (974)
net 1,786
Restructuring provisions at the time of acquisition of FACOM 4,046
Adjustment to opening shareholders’ equity less corresponding accumulated amortization of goodwill (3,793)
net 253
Total impact on shareholders’ equity 2,039
Changes in consolidated shareholders’ equity in 2003
(in € thousands) Capital Additional Retained Income/(loss) Cumulative trans- Treasury Total sharehol- stock paid-in capital earning for the year lation adjustement stock ders equit
Shareholders’ equity at Jan. 1, 2003 139,085 354,228 442,031 (32,172) (36,839) (40,598) 825,735
Issuance of shares 24,689 80,554 - - - - 105,243
Acquisition/disposal of treasury stock - - 4,538 - - 40,598 45,136
Income/(loss) for the year - - - (329,711) - - (329,711)
Dividends paid - - (64,678) 32,172 - - (32,506)
Translation adjustments - - 1,986 - (80,562) - (78,576)
Other - (1,188) 8,859 - - - 7,671
Shareholders’ equity at Dec. 31, 2003 163,774 433,594 392,736 (329,711) (117,401) - 542,992(1) Elimination of gains on disposals of treasury stock(2) Including change in cumulative translation adjustment related to Engelhard-Clal (accounted for by theequity method)(3) Including:
Allocation to the legal reserve 1,188Fair value adjustments further to the full consolidation of Financière Portefoin 7,400
Changes in consolidated shareholders’ equity (Minority interests)
(in € thousands) 2003 2002 2001
Minority interests at Jan. 1 41,286 49,675 46,427
Income for the year 3,254 4,097 4,111
Effect of changes in Group structure and other changes (824) (8,450) (694)
Issuance of shares - 180 -
Translation adjustments (3,070) (3,154) 929
Dividends paid (648) (1,062) (1,098)
Minority interests at Dec. 31 39,998 41,286 49,675
(1)
(2)
(1)
(2)
(3)
1232 0 0 3 A n n u a l R e p o r t
NOTE 4.12 - PROVISIONS FOR CONTINGENCIES AND CHARGES
(in € thousands) 2003 2002 2001
Provisions for contingencies and charges 116,367 144,764 192,715
Provisions for badwill (see note 4.1) 21,219 31,889 46,863
137,586 176,653 239,578
Movements in provisions for contingencies and charges :
(in € thousands) At January Increase Decrease (used Decrease Other At December 1, 2003 provisions) (unused movements 31, 2003
provisions)(1)
Claims and litigation 5,385 4,146 (1,275) (1,908) (304) 6,044
Customer warranties 11,098 8,251 (4,736) (3,751) 10,862
Exchange losses 93 94 (67) (26) 94
Environmental risks 15,497 (176) (1,500) 1,000 14,821
Real estate risks 70 (20) 50
Vendors’ warranties 20,098 957 (2,735) (5,963) 12,357
Risks related to investments 42,914 170 (25,802) (17,013) 269
Other provisions for contingencies 8,052 1,120 (6,799) 2,388 4,761
Pension obligations 25,140 12,164 (2,984) 1,370 35,690
Provisions for restructuring 12,375 5,581 (2,693) (981) (13) 14,269
Stock option plan costs 249 2,148 (249) 2,148
Other provisions for charges 3,793 13,014 (1,359) (159) (287) 15,002
Total provisions for contingencies and charges 144,764 47,645 (48,895) (27,524) 377 116,367
(1) Principally representing changes in Group structure (full consolidation of Financière Portefoin and sale of Clal Msx).(2) Including a reversal of the full amount of the provision for contingencies relating to shares in Engelhard-Clal 36,576 thousandSee: "Significant events of the year – sale of Fimalac’s stake in Engelhard-Clal"
(3) Including an addition to provisions relating to defined benefit pension plans to cover any difference between the value of the plan assets and the Group’s long-term obligations to the employees concerned 9,110 thousand(4) Facom France’s supply chain management system 10,191 thousand
NOTE 4.11 - QUASI EQUITY
Perpetual subordinated debt
In 1992, Fimalac Investissements (formerly Facom SA) obtained a perpetual subordinated loan for €152.4
million. An initial interest payment (zero coupon) of €33.6 million was made immediately. This amount bears
interest.
The loan does not have a fixed maturity date and Fimalac Investissements does not have any repayment
obligations, except following the occurrence of certain specific events including liquidation of the company. In
the event of liquidation of the company, the loan will be subordinate in ranking for repayment purposes to all
other debts of Fimalac Investissements.
In view of the characteristics of the loan, which is equivalent to equity, it is included in quasi-equity in an
amount of €40.4 million, corresponding to the principal amount less the zero coupon and the interest earned
on the zero coupon.
Interest expense based on the original amount of the loan (€152.4 million), totaling €5,271 thousand, is
recorded in the income statement, together with the interest income earned from the investment of the zero
coupon, in an amount of €10,734 thousand.
(2) (2)
(3)
(4)
€
€
€
124 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Provisions for restructuring
Provisions for restructuring concern measures to refresh the Facom age pyramid and the restructuring of Facom’s
hand tools manufacturing operations decided in 1999. The measures were launched in 2001 in all entities concerned
and were largely completed by 2003.
Provisions for investment-related risks
In 2002 these primarily included a provision for impairment in value of Engelhard-Clal shares, whose carrying value
was written down to probable realizable value. As Fimalac completed the sale of this 49%-owned joint-venture in
December 2003, the restated provision was reversed in full in the 2003 financial statements.
NOTE 4.13 - BANK BORROWINGS
By maturity
(in € thousands) 2003 2002 2001
Amounts due within one year 516,914 669,545 542,971
Amounts due between one and five years 210,720 361,476 538,345
Amounts due beyond five years 17,273 25,454 38,273
Total 744,907 1,056,475 1,119,589
Structure of bank borrowings
Analysis of borrowings by currency EUR USD
Floating rate 554,074 241,021
Bank borrowings converted into euros (in € thousands)
Floating rate 733,566
Accrued interest 11,341
Total bank borrowings 744,907
Bank borrowings are at floating rates. However, the Group has hedged interest rate risks to obtain a fixed or capped
rate of interest on approximately 55% of outstanding borrowings.
A 100 basis point increase or decrease in interest rates would have an impact of €3 million on interest expense.
Risks arising from debt covenants:
On April 11, 2000, the Group obtained a €1,155 million syndicated loan. Following the €100 million share issue, draw-
downs on this line of credit as of December 31, 2003 were as follows:
(in € thousands)
Fimalac 256.0
Fitch Ratings 163.0
Total 419.0
This line of credit includes accelerating clauses applicable if certain financial ratios are not met. However, as descri-
bed in note 4.23 “Subsequent Events”, the Group is currently in the process of repaying the syndicated loan.
1252 0 0 3 A n n u a l R e p o r t
NOTE 4.14 - INTEREST INCOME AND EXPENSE
(in € thousands) 2003 2002 2001
Interest incomeInvestment income 12 33 732
Income from other marketable securities 62 651 2,436
Other interest income 14,467 14,308 14,216
Reversals of provisions and expense transfers 1,481 337 3,190
Exchange gains 4,030 3,617 2,359
Net gains on disposals of marketable securities 280 1,245 1,200
Total 20,332 20,191 24,133
Interest expenseAmortization and provisions 6,050 129 11,908
Interest expense 54,413 69,416 104,671
Interest on debts under finance leases 92 260 187
Exchange losses 6,002 5,811 2,985
Net losses on disposals of marketable securities 451 1,486 1,577
Total interest expense 67,008 77,102 121,328
Joint venture income/(losses) (107) (67) (23)
Net interest expense (46,783) (56,978) (97,218)
NOTE 4.15 - NON-RECURRING INCOME AND EXPENSE
(in € thousands) 2003 2002 2001
Income from/(expense on) revenue transactions (63,712) (30,861) (105,716)
Income from/(expense on) capital transactions 12,099 (9,553) 136,441
Reversals of/(charges to) provisions, expense transfers (31,850) 8,364 83,648
Total non-recurring income and expense (83,463) (32,050) 114,373
Non-recurring income and expense breaks down as follows:
(in € thousands) Net2003
Facom Tools
Supply chain management equipment (31,867)
Provisions for pension plans (see note 4.12) (9,110)
Write-down of Facom subsidiaries’ trademarks (15,245)
Beissbarth, including
USA closure (6,664)
Zippo (11,062)
Restructuring (3,924)
ACW closure (6,051)
Lbc
Write-down of property, plant and equipment (34,067)
Fimalac
Reversal of provision for Ruggiéri guarantee 5,523
Sale of Clal-Msx (8,425)
Sale of stake in Engelhard-Clal 34,593
Miscellaneous amounts concerning subsidiaries 2,836
Total net non-recurring income and expense (83,463)
(4) This gain on the sale of Engelhard-Clal was partly offset by Fimalac’s €20,994 thousand share in the net loss incurred by the company,which was accounted for by the equity method (see “Significant Events of the Year” and note 4.12).
(1)
(2)
(3)
(4)
126 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4.16 - INCOME TAX
(in € thousands) 2003 2002 2001
Current taxes 64,533 36,299 45,394
Deferred taxes (19,066) 4,723 5,334
Total 45,467 41,022 50,728
2003 tax proof:
(in € thousands) Recurring income Non-recurring items Total
Income 91,096 (83,463) 7,633
Theoretical tax 35.43% 32,275 (29,571) 2,704
Actual tax 46,694 (1,227) 45,467
Difference 14,419 28,344 42,763
Differences in foreign tax rates 9,980 (1,589) 8,391
Differences in tax rates 0
Transactions taxed at a reduced rate (31) (31)
Other (50) - (50)
Unrecognized deferred taxes 4,092 16,947 21,039
Permanent differences 397 13,017 13,414
14,419 28,344 42,763
Net deferred taxes recorded in the balance sheet can be analyzed as follows:
2003 2002 2001
Untaxed provisions (806) (2,269) (2,291)
Depreciation (13,830) (14,549) (15,988)
Fixed assets (3,782) (5,419) (5,419)
Long-term capital gains (7,646) (7,646) (10,374)
Other (981) (857) (30)
Provisions 30,454 22,598 34,714
Inventories 3,422 3,024 2,245
Acquisition costs/Deferred charges (249) (218) (207)
Deferred revenues 19,215 18,977 20,297
Timing differences 8,158 5,250 3,542
Ordinary and evergreen tax losses 21,613 20,191 22,498
Total net deferred taxes (1) 55,568 39,082 48,987(1) This breaks down as:Deferred tax assets 75,711 58,900 69,591
Deferred tax liabilities (20,143) (19,818) (20,604)
55,568 39,082 48,987
Unrecognized deferred tax assets relating to tax loss carry forwards (primarily concerning the French tax group)
amounted to €37.8 million at December 31, 2003.
(in € thousands)
1272 0 0 3 A n n u a l R e p o r t
NOTE 4.17 - CONSOLIDATED SALES
Sales by business segment
(in € thousands)) 2003 2002 2001
FacomHand tools 412,329 442,305 463,339Garage equipment 156,634 157,202 163,419
Fitch Ratings 402,884 377,992 340,939LBC 121,982 130,014 132,158 Cassina 122,896 134,782 126,198Clal-Msx 41,536 59,841 70,855 Sécap - - 90,355
1,258,261 1,302,136 1,387,263 Core Ratings 910 127 -Parent companies 428 454 46,966 Total sales 1,259,599 1,302,717 1,434,229
Sales by geographic area
(in € thousands) 2003 2002 2001
Euroland
France 309,796 332,597 424,814
Other Euroland countries 320,185 340,483 346,893
Rest of Europe 166,993 162,517 197,179
North America 363,051 363,351 368,851
Asia-Pacific 56,099 55,080 47,905
Other 43,475 48,689 48,587
Total sales 1,259,599 1,302,717 1,434,229
International sales, in % 75.4% 74.5% 70.4%
NOTE 4.18 - ANALYSIS OF OPERATING INCOME AND NET INCOME (LOSS)
(in € thousands) Operating income Net income (loss) before minority interests Net income (loss)2003 2002 2001 2003 2002 2001 2003 2002 2001
Facom hand tools& garage equipment 8,320 27,499 61,462 (351,358) (75,501) 4,819 (351,358) (75,501) 3,939
Fitch Ratings 99,970 88,111 79,856 47,614 42,080 12,298 44,901 39,725 11,278
LBC 23,440 30,846 31,459 6,308 13,860 11,675 5,675 13,502 10,770
Cassina 15,993 19,073 15,890 (2,090) 6,647 5,751 (1,998) 5,131 4,403
Clal-Msx 2,383 3,348 5,201 2,494 575 2,231 2,494 575 2,231
Sécap - - 11,229 - - 6,327 - - 6,476
Engelhard-Clal - - - (20,676) 509 6,250 (20,676) 509 6,250
150,106 168,877 205,097 (317,708) (11,830) 49,351 (320,962) (16,059) 45,347
Core Ratings (1,734) (649) - (2,136) (669) - (2,136) (535) -
Parent companies (10,493) (9,466) (11,477) (6,613) (15,576) 108,401 (6,613) (15,578) 108,294
Total 137,879 158,762 193,620 (326,457) (28,075) 157,752 (329,711) (32,172) 153,641
128 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4.19 - EMPLOYEES
Average number of employees during the year:
2003 2002 2001
Management 1,454 1,376 1,177
Supervisors 2,869 2,833 2,909
Other 2,510 2,543 2,749
Total 6,833 6,752 6,835
NOTE 4.20 - REMUNERATION OF CORPORATE OFFICERS
Compensation payable to directors and officers in 2003 in remuneration of services rendered to the Group
amounted to €2,975.4 thousand. No loans or advances have been granted to directors or corporate officers by
Group companies.
NOTE 4.21 - OFF BALANCE SHEET COMMITMENTS
(in € thousands) 2003 2002 2001
COMMITMENTS GIVENGuarantees 92,846 138,747 173,502
Future minimum lease payments – equipment leases 1,377 3,580 1,989
Other commitments given 48,508 32,338 3,161
Collateralized debtsCollateralized debts 16,212 19,384 21,665Pledged securities 163,104 297,988 338,000
Total commitments given 322,047 492,037 538,317
COMMITMENTS RECEIVEDOther commitments received (1) 376,884 407,051 403,857
Total commitments received 376,884 407,051 403,857
(1) including undrawn credit lines 371,245 402,001 403,857
The Group has signed commercial leases for the premises used by Fitch (mainly in London and New York) as
well as offices used by Cassina. At December 31, 2003, future minimum payments due under these leases, over
the period 2004 to 2015, totaled €128,854 thousand.
Contractual commitments Total Due within Due between Due beyond one year one and five years five years
Commitments related to bank borrowings (4.13) 744,907 516,914 210,720 17,273Commitments related to finance leases 1,282 1,118 120 44Non-cancelable operating leases 128,854 15,652 54,610 58,592Call options 71,623 4,540 67,083 0Other long-term commitments 2,401 1,213 1,188 0
Total 949,067 539,437 333,721 75,909
No material off-balance sheet commitments have been omitted from the above two tables, in accordance with
French generally accepted accounting principles.
Schedule of contractual commitments
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NOTE 4.22 - FINANCIAL FUTURES RISK
The Group uses financial instruments to hedge its exposure to interest rate and currency risks. No financial
instruments are used for speculative purposes.
The Company has purchased a tunnel representing a nominal amount of US$35 million maturing in June 2004
which provides for the sale of US dollars at a rate of between US$1.137/€1 and US$1.20/€1. The sensitivity of
the Group’s financial statements to changes in the exchange rate of the dollar — the only foreign currency
used to a significant extent by the Group — primarily concerns Fitch and LBC in the United States and, to a
lesser degree, Facom and Cassina. The impact of a 10% increase or decrease in the value of the dollar would
be as follows:
• Impact on sales: +/- 2.9%
• Impact on operating income before interest: +/- 6.2%
• Impact on operating income after interest: +/- 8.1%
• Hedging of interest rate risks
The Group uses swaps, forward rate agreements,
collars and caps to hedge its exposure to interest
rate risks.
Outstanding amounts at December 31, 2003
(€ millions) Amount
Interest rate swaps 250
Caps 110
• Currency risks
The Group’s exposure to currency risks is very
limited due to the virtual absence of cash flows
in foreign currencies. The main risks concern
intercompany treasury transactions and cash
flows and are systematically hedged by spot and
forward purchases and sales of foreign currencies
(currency swaps). The financial instruments used
consist of forward sales and purchases of foreign
currencies:
Outstanding amounts at December 31, 2003
(€ millions) USD EUR
Forward sales of foreign currencies 42.1 35.1
Forward purchases of foreign currencies 17.0 13.7
NOTE 4.23 - SUBSEQUENT EVENTS
• Planned divestment of LBC
After informing the Works Councils of LBC and further
to a meeting of the company’s European Works
Council and its Board of Directors, on March 25, 2004
Fimalac announced that it had accepted an offer from
One Equity Partners LLC to acquire LBC based on an
enterprise value net of minority interests of €243
million. The completion of this transaction is subject
to the approval of the competition authorities in both
France and the United States, which is expected to be
given by the end of first-half 2004.
• Repayment of Fimalac’s syndicated credit line
Following the significant reduction in the Group’s
debt in 2003, the syndicated credit line obtained to
finance the acquisition of Facom and then Duff &
Phelps will soon be repaid in full, without tapping
into the proceeds from the sale of LBC. Fimalac and
Fitch will subsequently obtain specific financing to
cover their residual debt.
130 2 0 0 3 A n n u a l R e p o r t
CONSOLIDATED FINANCIAL STATEMENTS
RE P O RT O F T H E STAT U T O RY AU D I T O R SO N T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
This is a free translation into English of the Statutory Auditors’ report
issued in the French language and is provided solely for the
convenience of English speaking readers. The Statutory Auditors’
report includes information specifically required by French law in all
audit reports, whether qualified or not, and this is presented below
the opinion on the consolidated financial statements. This
information includes an explanatory paragraph discussing the
Statutory Auditors’ assessments of certain significant accounting
and auditing matters. These assessments were considered for the
purpose of issuing an audit opinion on the consolidated financial
statements taken as a whole and not to provide separate assurance
on individual account captions or on information taken outside of the
consolidated financial statements. This report, together with the
Statutory Auditors’ report addressing financial and accounting
information in the Chairman’s report on internal control, should be
read in conjunction with, and construed in accordance with, French
law and professional auditing standards applicable in France.
To the shareholders,
In compliance with the assignment entrusted to us by
the Annual General Meeting, we have examined the
accompanying consolidated financial statements of
Fimalac for the year ended December 31, 2003.
The consolidated financial statements have been
approved by the Board of Directors. Our role is to
express an opinion on these financial statements
based on our audit.
1. OPINION ON THE CONSOLIDATED FINANCIAL
STATEMENTS
We conducted our audit in accordance with the
professional standards applicable in France. Those
standards require that we plan and perform the audit
to obtain reasonable assurance about whether the
consolidated financial statements are free from
material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
present fairly the results of operations for the year
ended December 31, 2003 and the financial position
and assets of the Group at that date, in accordance
with French generally accepted accounting principles.
2. JUSTIFICATION OF OUR ASSESSMENTS
In accordance with the requirements of article
L.225-235 of the French Commercial Code (Code de
Commerce) relating to the justification of our
assessments, introduced by the French Financial
Security Act of August 1, 2003 and which came into
effect for the first time this year, we draw to your
attention the following matters:
- Note 1.8 to the consolidated financial statements
describes the accounting rules and methods relating
to goodwill. It also details the write-downs recorded
during the year. As part of our assessment of the
accounting rules and principles applied by Fimalac,
we verified that the above accounting methods and
information disclosed in the notes to the consolidated
financial statements were appropriate and ensured
that they had been applied correctly.
- Fimalac recordes provisions to cover certain risks, as
described in Notes 1.15 and 4.12 to the consolidated
financial statements. Our procedures consisted of
assessing the data and assumptions underlying these
estimates and reviewing the calculations carried out
by Fimalac. As part of our assessment of these
estimates, we ensured that the assumptions used and
ensuing valuations were reasonable.
3. SPECIFIC VERIFICATION
We have also examined the information about the
Group given in the Directors’ report. We are satisfied
that the information given in the Directors’ report is
fairly stated and agrees with these consolidated
financial statements.
Paris, April 14, 2004
The Statutory Auditors
XAVIER AUBRY CAGNAT & ASSOCIÉS
PARTNER OF PRICEWATERHOUSECOOPERS AUDIT JACQUES CAGNAT
1312 0 0 3 A n n u a l R e p o r t
132 2 0 0 3 A n n u a l R e p o r t
COMPANY FINANCIAL STATEMENTS
BALANCE SHEETS AT DECEMBER 31 (Fimalac)
FIXED ASSETS
Intangible assets - - - - -
Property, plant and equipment
Land 1,112 - 1,112 1,127 1,127
Buildings 1,437 1,434 3 5 7
Other 2,493 2,468 25 28 32
Sub-total 5,042 3,902 1,140 1,160 1,166
Investments
Investments in subsidiaries and affiliates 1,637,164 471,240 1,165,924 1,608,525 1,596,271
Advances to subsidiaries and affiliates - - - - -
Other long-term investments 1,065 951 114 44,034 45,377
Loans 15,070 - 15,070 10,793 10,259
Other non-current assets 13,051 - 13,051 28 -
Sub-total 1,666,350 472,191 1,194,159 1,663,380 1,651,907
Total I 1,671,392 476,093 1,195,299 1,664,540 1,653,073
CURRENT ASSETS
Accounts receivable 119,236 47 119,189 88,922 150,209
Marketable securities 16,728 1,592 15,136 16,696 27,874
Cash 9,445 - 9,445 786 3,834
Prepaid expenses 218 - 218 626 609
Total II 145,627 1,639 143,988 107,030 182,526
Deferred charges 907 - 907 2,455 3,526
Translation adjustments - - - - 63
Total assets (I+II) 1,817,926 477,732 1,340,194 1,774,025 1,839,188
ASSETS 2003 2002 2001Cost Amortization,
depreciation Net Net Netand provisions
(in € thousands)
1332 0 0 3 A n n u a l R e p o r t
LIABILITIES AND SHAREHOLDERS’ EQUITY 2003 2002 2001
SHAREHOLDERS’ EQUITY
Capital stock 163,774 139,085 138,368
Additional paid-in capital 434,272 354,905 439,067
Revaluation reserve - - -
Reserves:
Legal reserve 16,227 13,837 13,796
Special long-term capital gains reserve 137,809 137,809 40,664
Other 56,725 52,596 51,453
Retained earnings 40,526 5,974 2,255
(Loss) / income for the year (356,408) 72,389 51,558
Investment subsidies - - -
Untaxed provisions 136 136 136
Total I 493,061 776,731 737,297
PROVISIONS FOR CONTINGENCIES AND CHARGES
Total II 20,977 22,556 46,194
LIABILITIES
Bank borrowings 327,884 422,300 355,483
Other borrowings 495,630 549,382 682,459
Accrued taxes and personnel costs 275 1,585 16,213
Other liabilities 2,367 1,471 1,542
Deferred income - - -
Total III 826,156 974,738 1,055,697
Translation adjustments - - -
Total liabilities and shareholders’ equity (I+II+III) 1,340,194 1,774,025 1,839,188
(in € thousands)
134 2 0 0 3 A n n u a l R e p o r t
COMPANY FINANCIAL STATEMENTSSTATEMENTS OF OPERATIONS (Fimalac)
(in € thousands)
2003 2002 2001
Operating incomeReal estate revenues 86 42 36
Metals lending - - 49
Metals sales - - 46,500
Other revenues 4,205 569 774
Income from portfolio securities 102,266 63,046 121,095
Income from loans and other receivables 3,816 3,074 5,699
Net income from disposals of marketable securities 275 1,197 825
Other investment income 834 762 334
Reversals of provisions for contingencies and charges 689 3,794 690
Reversals of provisions against current assets 11 1,516 272
Reversals of provisions against marketable securities 450 1,653 37
Total I 112,632 75,653 176,311
Operating expensesChange in inventories - - 45,365
Taxes other than on income 347 823 101
Personnel costs 378 4,259 3,731
Other expenses 6,597 7,562 7,702
Amortization and depreciation 1,076 1,078 2,613
Charges to provisions against current assets - 1 -
Charges to provisions against marketable securities 930 627 1,798
Charges to provisions for contingencies and charges 332 62 678
Interest expense 28,979 37,386 53,770
Other financial expenses 307 1,092 316
Net losses on disposals of marketable securities 446 1,486 892
Tax on operating income (4,789) (8,952) (8,452)
Total II 34,603 45,424 108,514
Operating income - Total III (I-II) 78,029 30,229 67,797
Non-recurring incomeIncome from revenue transactions - 176 29
Gains on disposals of investments 4,857 - 648
Reversals of provisions against investments 31,769 29,897 1,449
Reversals of provisions for contingencies and charges 2,136 17,823 3,999
Total IV 38,762 47,896 6,125
Non-recurring expenseExpenses on revenue transactions 2,023 190 8,140
Losses on disposals of investments 5,523 13,105 6
Charges to provisions against investments 463,050 5,519 9,772
Charges to provisions for contingencies and charges 1,391 176 9,252
Tax on non-recurring income 1,212 (13,254) (4,806)
Total V 473,199 5,736 22,364
Net non-recurring (expense)/income - Total VI (IV-V) (434,437) 42,160 (16,239)
Net (loss)/income - Total VII (III+VI) (356,408) 72,389 51,558
1352 0 0 3 A n n u a l R e p o r t
COMPANY FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
(in € thousands)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of Fimalac for the year ended December 31, 2003 have been prepared in accordance
with French generally accepted accounting principles (1999 general chart of accounts), including the
principles of prudence, consistency, segregation of accounting periods and going concern.
In order to reflect more accurately the Company’s operations, the presentation of the income statement differs
in some respects compared with that prescribed in the French general chart of accounts.
The main differences are as follows:
• Net financial income has been included in operating income in the statement of income, in light of Fimalac’s
role as parent company.
• The proceeds from the disposal of investments have been netted off against the book value of the
investments, to show the net gain or loss, rather than presenting the disposal proceeds under income and
the book value of the investments as an expense.
• Changes in provisions for impairment in value of investments in subsidiaries and other investments are
qualified as non-recurring items and not as operating items.
• Information in the notes is presented in thousands of euro, unless otherwise specified.
1) Significant events of the year
Business developments
• In March 2003, Fimalac carried out a share issue, thereby increasing capital stock by €100.1 million;
• As in 2002, shareholders were offered the opportunity of receiving payment of dividends in stock.
This led to a €5.4 million increase in capital stock;
• The Company sold a substantial portion of its treasury stock for €48.3 million;
• The Company sold its interest in Clal-Msx for €6.1 million;
• The Company decided to cancel part of the revolving portion of its syndicated loan facility, for an amount of €49 million.
Results for the year
• The valuation of sub-group Fimalac Investissements was carried out in accordance with the principles
defined in Note 1-3. This led the Company to record a €431.5 million provision for impairment in value.
• The value of Financière Portefoin (formerly Engelhard-Clal) has been adjusted to the company’s net asset
value. This resulted in a €25.3 million provision reversal.
• The sale of treasury stock generated a €4.5 million gain, while the sale of Clal-Msx generated a loss of
€2.6 million.
136 2 0 0 3 A n n u a l R e p o r t
COMPANY FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
2) Intangible assets and property, plant and equipment
Fixed assets are stated at cost, with the exception of assets acquired before December 31, 1976, which are
stated at revalued cost. Amortization and depreciation are calculated over the estimated useful lives of assets,
as follows:
Software 1 year (Straight-line)
Buildings 20 years (Straight-line)
Plant and equipment 5 to 10 years (Reducing balance)
Fixtures and fittings, office furniture 10 years (Straight-line)Vehicles and office equipment 5 years (Straight-line or where permited,
reducing balance)
3) Investments
Investments are stated at the lower of cost and market value. The cost of investments acquired before Decem-
ber 31, 1976 corresponds to revalued cost. Investments are divided into three categories as follows:
• Investments in companies in which Fimalac owns at least 10% of the capital and/or exercises significant influence
are classified as investments in subsidiaries and affiliates. Provisions for impairment in value are determined
based on the Company’s equity in the underlying net assets (or revalued net assets), investment yield, earnings
yield and development potential.
• Advances to subsidiaries and affiliates. Provisions for impairment in value are determined based on the financial
position of the companies concerned.
• Other long-term investments, corresponding to investments in companies in which Fimalac owns less than 10% of
the capital and/or in which the Company does not exercise any influence.
A provision for impairment in value is recorded if the average December share price is less than cost, in the case of
quoted securities, and if the probable realizable value is less than cost, in the case of unquoted securities.
4) Receivables and debts
Receivables are stated at their nominal value. Provision is made when the fair value of receivables is less than
the book value. Receivables and debts denominated in foreign currency are converted at the year-end
exchange rate or the hedging rate, where applicable.
5) Marketable securities
A provision for impairment in value is recorded only in respect of securities for which the average stock market
price for the last month of the year, in the case of quoted securities, or the net asset value at year-end, in the
case of pooled investment vehicles, is less than cost.
6) Deferred charges
Deferred charges consist of debt issuance costs and are amortized over the life of the debt.
7) Tax consolidation
A tax group was set up as of January 1, 1997 between Fimalac and certain French subsidiaries.
Companies divested during the year are removed from the tax group and eligible French companies acquired
during the year are added to the tax group.
Under the group relief agreement, each company in the tax group accounts for taxes as if it was taxed on a
stand-alone basis. As head of the tax group, the Company benefits immediately from any tax savings arising
from utilization of the tax losses of subsidiaries in the tax group and is required to pass on those savings to
the subsidiaries concerned when they return to profit.
1372 0 0 3 A n n u a l R e p o r t
NOTE 2 - FIXED ASSETS
2.1 - MOVEMENTS IN FIXED ASSETS
Cost at Cost at Jan.1, 2003 Acquisitions Disposals Dec. 31, 2003
Intangible assets - - - -Property, plant and equipment
Land 1,127 - (15) 1,112
Buildings and improvements 1,444 - (7) 1,437
Other property, plant and equipment 2,493 - - 2,493
Assets under construction - - - -Sub-total 5,064 - (22) 5,042Investments
Investments in subsidiaries and affiliates 1,645,584 307 (8,727) 1,637,164
Advances to subsidiaries and affiliates - - - -
Other long-term investments 47,886 - (46,821) 1,065
Loans 10,793 4,863 (586) 15,070
Other non-current assets (1) 28 13,023 - 13,051Sub-total 1,704,291 18,193 (56,134) 1,666,350TOTAL 1,709,355 18,193 (56,156) 1,671,392
(1) This item includes a €13,022 thousand carryback credit which has been assigned to a bank as security for a €13,000 thousand loan to Fimalac.
2.2 - AMORTIZATION AND DEPRECIATION
Balance at Balance atJan.1, 2003 Increase Decrease Dec. 31, 2003
Intangible assets - - - -
Buildings and improvements 1,439 2 (7) 1,434
Other property, plant and equipment 2,465 3 - 2,468TOTAL 3,904 5 (7) 3,902
2.3 - PROVISIONS FOR IMPAIRMENT IN VALUE
Balance at Balance atJan.1, 2003 Increase Decrease Dec.31, 2003
Investments in subsidiaries and affiliates 37,059 463,050 (28,869) 471,240
Other long-term investments 3,852 - (2,901) 951
Loans - - - -TOTAL 40,911 463,050 (31,770) 472,191
Provisions for impairment in value relating to “Investments in subsidiaries and affiliates” mainly concern
Fimalac Investissements shares (€422,890 thousand), Société des Cadres Facom shares (€8,655 thousand)
and Financière Boulogne Technologies shares (€31,195 thousand).
Movements in provisions during 2003 are described in Note 10.
NOTE 3 - DEFERRED CHARGES
Balance at Balance atJan.1, 2003 Increase Decrease Dec.31, 2003
Debt issuance costs 2,455 - (1,548) 907TOTAL 2,455 - (1,548) 907
Amortization for the year amounted to €1,071 thousand. In addition, €477 thousand in debt issuance costs related
to the syndicated loan facility were wrritten off following cancellation of part of the revolving portion of the loan
facility.
138 2 0 0 3 A n n u a l R e p o r t
COMPANY FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
NOTE 6 - SHAREHOLDERS’ EQUITY
6.1 - CAPITAL
At December 31, 2003, the Company’s capital amounted to €163,774 thousand, divided into 37,221,464 shares
of common stock with a par value of €4.40.
During the year, the capital was increased by:
• €23.2 million following the issuance of 5,268,382 shares in connection with the capital increase carried out
in March 2003;
• €1.2 million following the issuance of 265,858 shares following the payment of dividends in stock;
• €0.3 million following the exercise of 76,142 stock options.
Under the buyback plans, the latest of which was authorized by the Annual General Meeting of June 4, 2003,
the Company holds 549,668 Fimalac shares, representing 1.48% of the capital.
NOTE 4 - ACCOUNTS RECEIVABLE
MATURITIES
Gross Due within one Due beyond oneyear year
Non current assets
Advances to subsidiaries and affiliates - - -
Loans 15,070 543 14,527
Deposits and guarantees 13,051 - 13,051
Current assets
Payments on account 43 43 -
Trade accounts receivable 62 1 61
Due to Group companies 118,085 118,085 -
Prepaid and recoverable taxes 1,013 1,013 -
Other receivables 33 33 -
TOTAL 147,357 119,718 27,639
The currency risks on loans denominated in US dollars granted to foreign subsidiaries in the amount of €35,029 thousand are
hedged. Loans and advances carry a floating rate. A 1% increase or decrease in interest rates would have the effect of increasing
or reducing interest income by €1.3 million.
NOTE 5 - MARKETABLE SECURITIES
ALSO SEE “LIST OF INVESTMENTS”Book value Fair value
At January 1, 2003 17,808 17,669Acquisitions for the year 649,688Disposals for the year (650,768)At December 31, 2003 16,728 17,707
Marketable securities at December 31, 2003 include 549,668 Fimalac shares, representing 1.48% of capital,
acquired at a cost of €12,644 thousand. These shares are being held for allocation on exercise of stock options
granted to certain executives and other employees. The stock market value of these shares was €14,685
thousand at December 31, 2003 (value based on the average share price in December 2003 or the option
exercise price, if lower).
1392 0 0 3 A n n u a l R e p o r t
6.2 - ADDITIONAL PAID-IN CAPITAL AND RESERVES
The net increase in additional paid-in capital from €354,905 thousand to €434,272 thousand reflects the
above share issues, related expenses amounting to €1,429 thousand, and the transfer of €1,188 thousand to
the legal reserve following the capital increase of March 2003.
The movements in the legal reserve, the special long-term capital gains reserve, treasury stock and retained
earnings correspond to appropriations decided at the Annual General meeting of June 4, 2003 (fourth
resolution), as well as to the transactions described above, and to the appropriation of €2,529 thousand in
unpaid dividends on treasury stock.
6.3 - STOCK OPTION PLANS
The Company has granted stock options to certain officers and managers.
6.4 – SHARES WITH STOCK WARRANTS ATTACHED
A stock warrant was attached to each of the 5,268,382 shares issued in March 2003. These warrants are
exercisable for new or existing Fimalac shares on the basis of 3 warrants per share.
At December 31, 2003, 5,266,015 warrrants were outstanding, exercisable for 1,755,338 shares.
If all of these warrants were to be exercised, this would have the effect of increasing the Company’s capital by
4.72%.
Grantor Date of Board Exercise period Number of options meeting outstanding
Fimalac 17/12/98 by tranche up to December 17, 2004 99,667
Fimalac 24/04/01 by tranche up to April 24, 2007 76,950
Fimalac 18/12/01 by tranche up to December 18, 2007 248,338
Fimalac 03/12/02 by tranche up to December 18, 2007 124,713
Total number of purchase options exercisable for one share 549,668
At December 31, 2003, the situation was as follows:
NOTE 7 - PROVISIONS FOR CONTINGENCIES AND CHARGES
Type of provision Balance at Increase Decrease Decrease Change of Balance atJanuary 1 (used (unused method December
2003 provisions) provisions) 31, 2003
Provisions for contingencies and chargesProvision for pensions 1,090 - (160) - - 930
Provision for taxes 1,277 - (1,277) - - -
Decontamination of leased former industrial sites 6,631 - (75) - - 6,556
Real estate risks 70 - - (20) - 50
Industry risks 1,062 - (25) - - 1,037
Taxes
(See Note 11-1) 6,495 - (283) - - 6,212
Other 5,931 1,246 (359) (626) - 6,192Total 22,556 1,246 (2,179) (646) - 20,977
“Provisions for pension obligations and statutory retirement bonuses” includes the Company’s obligations for
pensions payable to former Group managers.
Other provisions mainly correspond to vendors’ warranties.
140 2 0 0 3 A n n u a l R e p o r t
COMPANY FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
NOTE 8 - MATURITIES OF DEBT
MATURITIES OF DEBT
Total Due within Due between Due beyond1 year 1 and 5 years 5 years
Bank borrowingsBank loans 313,000 300,000 13,000 -Bank overdrafts 10,864 10,864 - -Accrued interest 4,020 4,020 - -Other borrowingsOther debts 333 305 - 28Due to Group companies 495,297 495,297 - -Accrued taxes and personnel costs 275 275 - -Other liabilities 2,367 2,367 - -TOTAL 826,156 813,128 13,000 28
Bank loans break down as €300 million in commercial paper and €13 million relating to a five-year loan.
The revolving portion of the Company’s syndicated loan and bilateral credit lines are being used as security
for the commercial paper program. Bank borrowings are at floating rates. Part of the interest rate risk on these
borrowings is hedged by the following instruments:
• fixed rate swap on €168 million,
• caps on €55 million.
A 100 basis point increase or decrease in interest rates would have the effect of increasing or reducing interest
expense by €6.5 million.
NOTE 9 - OPERATING INCOME
Operating income increased from €75,653 thousand in 2002 to €112,632 thousand in 2003.
The increase is primarily attributable to the rise in income from portfolio securities from €63,046 thousand to
€102,266 thousand. This in turn was due to the increase in dividends paid by Fimalac Investissements and the
fact that Minerais & Engrais returned to making dividend payments.
Income from portfolio securities breaks down as follows:
Income from portfolio securities 2003 2002
Fimalac Investissements 29,029 14,588
LBC 7,081 6,665
Minerais & Engrais 21,094 -
Clal-Msx 503 490
Financière Boulogne Technologies 43,811 40,198
Long-term investments - -
Long-term investments 748 1,105
TOTAL 102,266 63,046
Loan interest, mainly from loans to subsidiaries, rose from €3,074 thousand in 2002 to €3,816 thousand in
2003. After-tax operating expenses totaled €34,603 thousand compared with €45,424 thousand the previous
year.
The decrease is mainly due to:
• a decline in other expenses, from €7,562 thousand in 2002 to €6,597 thousand in 2003;
• a decrease in personnel costs, from €4,259 thousand in 2002 to €378 thousand in 2003, primarily due to
the decline in compensation paid to the Chairman and to movements in related provisions.
• the decrease in interest on borrowings, which amounted to €28,979 thousand compared with €37,386
thousand in 2002.
The tax benefit of €4,789 thousand versus €8,952 thousand in 2002 corresponds to group relief.
1412 0 0 3 A n n u a l R e p o r t
NOTE 10 - NON-RECURRING ITEMS
Non-recurring income primarily consists of:
o gains on sales of shares, including €4,538 thousand in proceeds from the disposal of treasury stock;
o reversals of provisions for impairment in value of investments for €31,769 thousand (of which €25,263
thousand for impairment of Financière Portefoin).
Non-recurring expense includes:
• €5,523 thousand in losses from disposals (of which €2,839 thousand covered through reversals of
provisions);
• €463,050 thousand in charges to provisions for impairment in value of investments (including €431,545
thousand relating to the Fimalac Investissements sub-group);
• a tax benefit on non-recurring items of €1,212 thousand.
NOTE 11 - INCOME TAX
11.1 - INCOME TAX ANALYSIS
Net income Recurring income Net non-recurring expenseTax rate of33,33% Tax rate of19% Tax rate of33,33% Tax rate of19%
Income before tax (359,985) 73,240 - (433,225) -Income tax 3,577 4,789 - (1,212) -Net income (356,408) 78,029 - (434,437) -
78,029 (434,437)
Two surtaxes of 3% and 3.3% are levied in France in addition to the standard tax rate.
The tax benefit on recurring income corresponds to group relief. Group relief gives rise to a deferred liability
for Fimalac, as parent company of the tax group, which is included in “Provisions for contingencies and
charges” in the amount of €6,212 thousand.
11.2 - UNRECOGNIZED DEFERRED TAXES
Nature of timing differences Assets Liabilities
Unrecognized deferred tax assetsIncome taxed in current year, not yet accounted for
Unrealized gains on pooled investment vehicles - -
Charges for the year, deductible in subsequent years
“Contribution sociale” surtax - -
Unrecognized deferred tax liabilitiesUntaxed provisions - -
Rollover relief
Gains on which taxation has been deferred (former CLAL) - 9,837
(Financière Portefoin and CLAL-US shares)
Merger gains (formerly ALSPI) - 79(Mulhouse land)
Unrecognized deferred tax assets and liabilities have been calculated at the standard income tax rate plus the
3% and 3.3% surtaxes.
NOTE 13 - OFF-BALANCE SHEET COMMITMENTS
Commitments received
Undrawn credit lines 371,245
Other -
Commitments given
Guarantees in favor of Group companies 82,862
Pledged securities (1) 163,104
Other 31,344
(1) This amount corresponds to the syndicated loan facility used by Fitch Inc., representing US$206 million.
The commitment may be increased by a maximum amount of €256 million if the revolving portion of the
syndicated loan is used.
Foreign currency transactions:
Forward purchases of foreign currencies (US dollars) 13,690
Forward sales of foreign currencies (US dollars) 35,130
The Company has purchased a tunnel representing a nominal amount of US$35 million maturing in June 2004
which provides for the sale of US dollars at a rate of between US$1.137/€1 and US$1.20/€1.
Interest-rate transactions (notional value):
Interest-rate transactions (notional value): 19,843
Swaps (floating rate payer / fixed rate receiver) 168,000
Caps 55,000
No material off-balance sheet commitments have been ommitted from the above tables, in accordance with
French generally accepted accounting principles.
142 2 0 0 3 A n n u a l R e p o r t
COMPANY FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
NOTE 12 - RELATED PARTY TRANSACTIONS
Balance sheet Assets Liabilities
Investments in subsidiaries and affiliates 1,165,634
Other non-current assets 15,069
Other receivables 118,083
Borrowings 495,297
Statement of income Expense Income
Other revenues 229
Income from subsidiaries and affiliates and other long-term investments 101,518
Income from loans and other receivables 3,816
Reversals of provisions for impairment in value of investments 28,869
Interest expense 12,581
Charges to provisions for impairment in value of investments 448,340
1432 0 0 3 A n n u a l R e p o r t
NOTE 14 - REMUNERATION OF DIRECTORS AND OFFICERS
Board of Directors 223
Corporate officers 1,175
NOTE 15 - SUBSEQUENT EVENTS
In March 2004, the Company accepted an offer from One Equity Partners Llc for its stake in LBC, based on an
enterprise value of €243 million net of minority interests. The completion of this transaction is subject to the
approval of the competition authorities in both France and the United States.
Following the significant reduction in its debt, the Company intends to cancel its syndicated loan facility and
set up a new credit line.
144 2 0 0 3 A n n u a l R e p o r t
COMPANY FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
NOTE 17 - SUBSIDIARIES AND AFFILIATES
Company Capital stock Reserves
A – Investments with a book value in excess of 1% of the capital of Fimalac
1) Subsidiaries (at least 50%-owned)
FIMALAC INVESTISSEMENTS S.A. 43,956 277,398
97, rue de Lille - 75007 Paris
CLAL US EURL 14,918 (3,835)
97, rue de Lille - 75007 Paris
MINERAIS & ENGRAIS S.A.R.L 243,980 168,145
97, Rue de Lille - 75007 Paris
FINANCIÈRE BOULOGNE TECHNOLOGIES SARL 29,212 8,792
97, rue de Lille - 75007 Paris
LBC S.A. 63,525 67,107
5 ter, rue du Dôme - 75116 Paris
FINANCIÈRE PORTEFOIN S.A.S 32,171 17,827
97, rue de Lille - 75007 Paris
RHENAMECA S.A. 22,728 3,719
97, rue de Lille - 75007 Paris
SOCIÉTÉ DE CADRES FACOM SARL 2,160 1,241
97, rue de Lille - 75007 Paris
2) Affiliates (10% to 50%-owned)
B – Other subsidiaries and affiliates
1) Subsidiaries not included in section A
French subsidiaries - -
Foreign subsidiaries - -
2) Affiliates not included in section A
French affiliates - -
Foreign affiliates - -
* Including investment income.
1452 0 0 3 A n n u a l R e p o r t
% interest Book value of investment Outstanding Guarantees 2003 sales 2003 net Dividendsloans granted provided by income (loss) received in
by Fimalac by Fimalac 2003Cost Net
97,87 % 944,677 521,787 - - 2,234 (*) (17,855) 29,029
100,00 % 14,864 11,083 - - 282 (*) 444 -
99,99 % 295,139 295,139 - - 6,875 (*) 4,515 21,094
99,99 % 69,199 38,004 - - 1,484 (*) 2,498 43,811
99,99 % 113,747 113,747 18,131 - 14,022 (*) 4,024 7,081
99,99 % 69,246 69,068 - 6,820 83,594 (*) (25,677) -
99,99 % 25,250 25,250 - - 669 (*) 4,359 -
99,99 % 12,027 3,372 7,956 - 631 (*) (288) -
- 2,060 869 10,793 - - - -
- - - - - - - -
- 3,348 - - - - - -
- 87,607 87,607 25,643 74,266 - - -
146 2 0 0 3 A n n u a l R e p o r t
LI S T O F I N V E S T M E N T S
Number of Book value securities (in € thousands)
1) Principal investmentsI) Subsidiaries and affiliates
Listed - -
Unlisted
Biospace 2,455 290
Cashware 8,857 -
Clal US 97,500 11,083
F.c.b.s. Gie 4,499,993 577
Financière Boulogne Technologies 1,825,443 38,004
Financière Portefoin 3,574,568 69,068
Fimalac Investissements 10,755,137 521,787
Fitch Inc. 824,738 87,607
LBC 4,165,593 113,747
Minerais & Engrais 5,082,925 295,139
Rhenameca 2,525,295 25,250
Sefi 99 -
Société de cadres Facom 119,998 3,372
Total A 1,165,924
II) Other long-term investmentsListed
Team Partners group 19,608 33Unlisted
Ogif 22,617 48
Ucepart 215 30
Total B 111
III) Marketable securitiesListed
Fimalac 549,668 12,114Unlisted
Investment funds 3,022
Total C 15,136
Total A + B + C 1,181,171
2) Investments with a book value of less than €15 thousand 3
Carrying value 1,181,174
1472 0 0 3 A n n u a l R e p o r t
REPORT OF THE STATUTORY AUDITORSON THE FINANCIAL STATEMENTS(Y E A R E N D E D DE C E M B E R 31, 2003)
This is a free translation into English of the Statutory Auditors’ report
issued in the French language and is provided solely for the
convenience of English speaking readers. The Statutory Auditors’
report includes information specifically required by French law in all
audit reports, whether qualified or not, and this is presented below
the opinion on the financial statements. This information includes
an explanatory paragraph discussing the Statutory Auditors’
assessments of certain significant accounting and auditing matters.
These assessments were considered for the purpose of issuing an
audit opinion on the financial statements taken as a whole and not to
provide separate assurance on individual account captions or on
information taken outside of the financial statements.
This report, together with the Statutory Auditors’ report addressing
financial and accounting information in the Chairman’s report on
internal control, should be read in conjunction with, and construed in
accordance with, French law and professional auditing standards
applicable in France.
To the shareholders,
In compliance with the assignment entrusted to us by
the Annual General Meeting, we hereby report to you,
for the year ended December 31, 2003, on:
- our audit of the accompanying financial statements
of Fimalac;
- the justification of our assessments;
- the specific verifications and information required by
law.
These financial statements have been approved by the
Board of Directors. Our role is to express an opinion
on these financial statements based on our audit.
1. OPINION ON THE FINANCIAL STATEMENTS
We conducted our audit in accordance with
professional standards applicable in France. Those
standards require that we plan and perform the audit
to obtain reasonable assurance about whether
the financial statements are free from material
misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements present fairly
the results of operations for the year ended December
31, 2003 and the financial position and assets of the
Company at that date, in accordance with French
generally accepted accounting principles.
2. JUSTIFICATION OF OUR ASSESSMENTS
In accordance with the requirements of article
L.225-235 of the French Commercial Code (Code
de Commerce) relating to the justification of our
assessments, introduced by the French Financial
Security Act of August 1, 2003 and which came into
effect for the first time this year, we draw to your
attention the following matters:
Note 1 to the financial statements describes the
Company’s accounting rules and methods, notably
those relating to investments in subsidiaries. As part
of our procedures, we verified that these accounting
methods were appropriate and ensured that they had
been applied correctly.
The assessments were made in the context of our
audit of the financial statements, taken as a whole,
and therefore contributed to the formation of the
unqualified opinion expressed in the first part of this
report.
3. SPECIFIC VERIFICATIONS AND INFORMATION
We have also performed the specific verifications
required by law in accordance with professional
standards applicable in France.
We are satisfied that the information given in the
Directors’ report and the documents sent to the
shareholders on the financial position and financial
statements is fairly stated and agrees with those
financial statements.
In accordance with the law, we have verified that all
information concerning the identity of shareholders is
given in the Directors’ report.
Paris, April 14, 2004
The Statutory Auditors
CAGNAT & ASSOCIÉS XAVIER AUBRY
JACQUES CAGNAT PARTNER OF PRICEWATERHOUSECOOPERS AUDIT
2 0 0 3 A n n u a l R e p o r t148
STAT U T O RY A U D I T O R S ’ S P E C I A L R E P O RT
O N R E G U L AT E D A G R E E M E N T S
(year ended December 31, 2003)
This is a free translation into English of the Statutory Auditors’ report
issued in the French language and is provided solely for the
convenience of English speaking readers. This report should be read
in conjunction with, and construed in accordance with, French law
and professional auditing standards applicable in France.
To the shareholders,
In our capacity as Statutory Auditors of Fimalac, we
are required to report to shareholders on regulated
agreements.
1. AGREEMENTS AUTHORIZED DURING THE
YEAR
In application of Article L 225-40 of the French
Commercial Code (Code de Commerce) we have been
informed of the agreements authorized in advance by
the Board of Directors.
Our responsibility does not include identifying any
undisclosed agreements. We are required to report to
shareholders, based on the information provided,
about the main terms and conditions of agreements
that have been disclosed to us, without commenting
on their relevance or substance. Under the provisions
of Article 92 of the decree of March 23, 1967, it is the
responsibility of shareholders to determine whether
the agreements are appropriate and should be
approved.
We conducted our review in accordance with the
standards of our profession applicable in France.
Those standards require that we carry out the
necessary procedures to verify the consistency of the
information disclosed to us with the source
documents.
Director concerned:
Bernard PIERRE
At its March 11, 2003 meeting, the Board of Directors
approved a €30 million loan from Engelhard-Clal
S.A.S. The life of the loan is two years. Interest is
payable on the loan at three-month Euribor less a
0.25% discount. This authorization is in addition to
that granted by the Board of Directors on September
17, 2002 for the same amount, i.e. €30 million, under
the same terms and conditions concerning the life of
the loan and interest rate. The outstanding balance at
December 31, 2003 relating to these two loans was
€49,352,083. Interest paid during the year came to
€846,623.77.
2. AGREEMENTS ENTERED INTO DURING PRIOR
YEARS WHICH REMAINED IN FORCE IN 2003
In application of the decree of March 23, 1967 we
were also informed of the agreements entered into
during prior years which remained in force in 2003.
With Michel Castres Saint-Martin, Henri
Lachmann and Bernard Mirat
As members of the Audit Committee, Michel Castres
Saint-Martin, Henri Lachmann and Bernard Mirat
received additional fees of €1,525.
With Groupe Marc de Lacharrière
The trademark sub-licensing agreement to permit the
Company to adopt its new corporate name remained
in force during the year ended December 31, 2003. No
fees are paid under this sub-license.
With F.C.B.S. GIE (Groupement d’Intérêt Économique)
The Company is a member of the F.C.B.S.
intercompany partnership, the purpose of which is to
develop and enhance the business and results of the
partners. The fee paid by the Company in this respect
for 2003 totaled €2,177,178 (excluding VAT).
With direct and indirect subsidiaries
Cash pooling agreement according to which the
Company manages the Group’s cash in line with
market conditions.
1492 0 0 3 A n n u a l R e p o r t
The balances outstanding at December 31, 2003 were
as follows:
BorrowingsNet interest paid
Catrimmo € 6,431,615.32 151,823.98
Clal Us € 10,977,814.91 281,565.16
Facom Développement € 28,380,954.52 495,080.99
Fimalac Investissements€ 28,143,316.96 1,174,408.53
Financière Boulogne € 39,555,242.07 1,484,448.35Technologies
Minerais & Engrais € 274,248,208.52 6,700,426.33
Rhenameca € 28,547,271.38 669,064.91
SIFS € 761,476.55 17,358.43
Fitch Ratings Ltd € 8,000,000.00 9,284.44
Fitch Ratings Ltd $ 11,000,000.00 124,704.40
Fitch Information Inc $ 3,000,000.00 88,795.28
Loans Net interest received
Core Ratings SAS € 628,913.45 13,420.69
Facom € 54,135,157.43 393,513.90
LBC € 18,131,315.52 524,077.69
Société de Cadres Facom € 7,955,912.60 242,981.81
Séfi Snc € 11,062,471.39 541,330.11
Facom Uk £ 0.00 3,807.12
Core Ratings Ltd £ 1,410,769.43 40,744.16
Fimalac Inc $ 10,000,000.00 273,968.84
Fitch Inc $ 22,506,314.91 1,810,002.84
With Bernard Pierre
The December 2000 agreement concerning the sale
of 1% of the capital of the Engelhard-Clal joint venture
by Fimalac to Bernard Pierre includes a three-year
earn-out clause.
The amount of the earn-out totaled €26,393.98.
Paris, April 14, 2004
The Statutory Auditors
CAGNAT & ASSOCIÉS XAVIER AUBRY
JACQUES CAGNAT PARTNER OF PRICEWATERHOUSECOOPERS AUDIT
150 2 0 0 3 A n n u a l R e p o r t
FEES PAID BY THE COMPANY TO THE AUDITORSAND MEMBERS OF THEIR NETWORKS
PRICE CAGNAT PRICE CAGNAT
WATERHOUSE & WATERHOUSE &COOPERS % ASSOCIÉS % COOPERS % ASSOCIÉS %
Audit
Statutory audit and contractual audits 1,268 202 1,221 213
Other engagements 38 58 22
Sub-total: Audit 1,306 75% 202 100% 1,279 56% 235 94%
Other services
Legal and tax advisory services 434 917 1
IT services 36 0
Internal audit services 0 0
Other 12 32 13
Sub-total: Other services 446 25% 0 0% 985 44% 14 6%
Total 1,752 100% 202 100% 2,264 100% 249 100%
2003 2002
1512 0 0 3 A n n u a l R e p o r t
Information General
152 2 0 0 3 A n n u a l R e p o r t
LE G A L IN F O R M AT I O N
Company name — Headquarters
Company name: Fimalac
Headquarters: 97, rue de Lille - 75007 Paris - France
Legal form and governing law
Société anonyme
Fimalac is governed by the laws of France.
Date of incorporation and term
Incorporated: May 9, 1877
Term: December 31, 2034
Corporate purpose (article 2 of the bylaws)
The purpose of the Company is to conduct any and
all industrial, commercial, financial, securities and
real estate operations and any and all service
activities.
The Company may also acquire interests in any
French or foreign company or venture, by forming
any French or foreign company or venture, by
purchasing or subscribing to shares, bonds or other
securities and rights of ownership, by participating
in mergers or other business combinations or by any
other means.
It may also perform any treasury transactions with
related companies, as authorized by current
legislation.
Companies Register
542 044 136 R.C.S. Paris
APE Code: 741 J
Consultation of legal documents
The bylaws, minutes of general meetings and
other company documents are available for
consultation at the Company’s headquarters.
Fiscal year
The Company’s fiscal year starts on January 1 and
ends on December 31.
Appropriation of income
(article 33 of the bylaws)
Income or loss for the year corresponds to net
revenues for the year less overheads and all other
expenses, including charges to depreciation,
amortization, allowances and reserves.
Five percent of net income for each year is credited
to the legal reserve until such time as the legal
reserve represents one-tenth of capital stock.
Further annual transfers are made on the same
basis if the legal reserve falls to below one-tenth
of capital stock, whatever the reason. The
following amounts are then deducted from the
balance of net income, plus retained earnings
brought forward from the prior year and any
reserves to be distributed, in the order indicated:
1) A non-cumulative first dividend in an amount
corresponding to 5% of the paid-up value of
shares.
2) Any amounts that the General Meeting decides
to appropriate to any extraordinary, general or
special reserves or to carry forward, based on
the recommendation of the Board of Directors.
Any balance remaining is distributed to
shareholders in the form of an additional
dividend. Cash dividends are payable by check or
bank transfer, or by post-office check or transfer
or sent to the shareholder at his, her or its address
recorded in the Company’s register. The General
Meeting may offer shareholders the option of
receiving all or part of the final dividend or any
interim dividend in the form of shares, subject to
compliance with the law.
General Meetings
• Notice of Meeting (article 26 of the bylaws)
General Meetings are called and conduct business
in accordance with the law. The meetings are held
on the day and at the time and place indicated in
1532 0 0 3 A n n u a l R e p o r t
the notice of meeting. They may be held outside the
town in which the Company has its headquarters.
General meetings may be called verbally and
without notice if all the shareholders are present
or represented.
• Participation (article 28 of the bylaws)
All shareholders may attend general meetings in
person or by proxy in accordance with the
conditions laid down by law subject to the
provision of proof of their identity and ownership
of shares, as follows:
1) Ownership of registered shares is evidenced
by an entry in the shareholders’ name in the
share register kept by the Company or its
registrar.
2) Holders of bearer shares are required to file a
certificate issued by the bank or broker that
keeps their share account, in accordance with
the applicable regulations, stating that sale of
the shares has been blocked up to the date of
the meeting.
These formalities must be completed at least five
days prior to the date of the meeting. However, the
Board of Directors may reduce or waive this
period, provided that the reduction or waiver
applies to all shareholders.
To be entitled to participate in General Meetings,
shareholders must own or represent by proxy at
least one share fully paid up to the extent called.
Shareholders may give proxy to their spouse or to
another shareholder.
• Quorum – Voting rights (article 30 of the bylaws)
(Double voting rights were introduced at the
General Meeting of June 20, 1985.)
The quorum is calculated at Ordinary and
Extraordinary General Meetings on the basis of all
shares that are issued and outstanding, and at
Special General Meetings, on the basis of all the
shares in the relevant class, less any shares
stripped of voting rights in application of the law.
Each shareholder has a number of voting rights
prorated to the par value of the shares held or
represented by proxy, without limitation.
The following shares carry double voting rights:
a) All fully paid-up shares registered in the name
of the same holder for at least two years.
b) All bonus shares paid up by capitalizing
reserves, income or additional paid-in capital,
that are attributed in respect of registered
shares carrying double voting rights.
Double voting rights are automatically stripped
from any registered shares that are converted into
bearer shares or sold. Registered shares are not
stripped of double voting rights and the two-year
qualifying period continues to run following the
transfer of shares included in the estate of a
deceased shareholder, or in connection with the
settlement of the marital estate, or an inter vivos
gift to a spouse or a relative in the direct line of
succession.
Postal votes may be cast in accordance with the
provisions of the applicable laws and regulations.
Resolutions are adopted by a straight majority of
the votes cast by shareholders present or
represented by proxy at Ordinary General
Meetings, and by a two-thirds majority of the
votes cast by shareholders present or represented
by proxy at Extraordinary General Meetings.
• Disclosure thresholds (article 9 of the bylaws)
(The 2% threshold was added to the bylaws by the
Extraordinary General Meeting held on June 17,
1996).
Any shareholder whose direct or indirect interest
increases to above or falls below 2% of the
Company’s capital or voting rights is required to
inform the Company within fifteen days. In the
case of failure to comply with these disclosure
154 2 0 0 3 A n n u a l R e p o r t
LE G A L IN F O R M AT I O N
rules, at the request of one or more shareholders
holding at least 2% of the Company’s capital or
voting rights, the undisclosed shares will be
stripped of voting rights at all shareholders’
meetings held within two years of the date on
which the omission is rectified. The request and
the decision of the general meeting must be
recorded in the minutes of the meeting. This 2%
threshold is in addition to the legal disclosure
thresholds of one-twentieth, one-tenth, one-fifth,
one-third, half and two-thirds of the capital or
voting rights.
1552 0 0 3 A n n u a l R e p o r t
CAPITAL STOCK
◆ Capital stock at December 31, 2003
The Company’s capital stock amounted to
€163,774,441.60 at December 31, 2003, divided
into 37,221,464 fully paid up shares with a par
value of €4.40, all in the same class.
◆ Treasury stock
The Annual and Extraordinary General Meeting of
June 26, 1998 authorized the Board of Directors to
implement a share buyback program, as described
in an information memorandum approved by
the Commission des Opérations de Bourse on
November 12, 1998 under number 98-875.
This authorization was renewed at the Annual and
Extraordinary General Meetings of June 5, 2001,
June 4, 2002 and June 4, 2003.The new share buy-
back programs are described in information
memoranda approved by the Commission des
Opérations de Bourse on May 15, 2001 under num-
ber 01-557, May 15, 2002 under number 02-563
and May 13, 2003 under number 03-407, respecti-
vely.
2,112,102 shares were sold under the buyback pro-
gram described in the information memorandum
approved by the Commission des Opérations de
Bourse on May 13, 2003. Total proceeds from
these sales amounted to €48,187,417.78. No
shares were bought back under the program.
During 2003, 960 shares with a par value of €4.40
were bought back at an average price of €21.83,
and 2,112,102 shares were sold at an average
price of €22.99. The related transaction costs
amounted to €374,913.67.
At December 31, 2003, the Company held 549,668
of its own shares, representing 1.48% of the total
capital of 37,221,464 shares. The shares were
purchased at a total cost of €12,644,442.29. All of
these 549,668 shares are being held for attribu-
tion on exercise of stock options granted by the
Board of Directors on December 17, 1998, May 28,
1999, April 24, 2001, December 18, 2001 and
December 3, 2002. At December 31, 2003, no
shares were held directly or indirectly by any of
Fimalac’s subsidiaries. No shares were canceled
during the year.
At the Annual General Meeting of June 8, 2004
shareholders will be invited to grant the Board of
Directors an authorization to carry out a further
share buyback program with a maximum purchase
price of €50 per share and a minimum sale price
of €12 per share.
IN F O R M AT I O N A B O U T T H E
CO M PA N Y ’S C A P I TA L
156 2 0 0 3 A n n u a l R e p o r t
IN F O R M AT I O N A B O U T T H E CO M PA N Y ’S C A P I TA L
STOCK OPTIONS
Fimalac stock options
1995 plan 1997/1 plan 1997/2 plan 1998 plan 2001/1 plan 2001/2 plan 2002 planSubscription Subscription Subscription Purchase Purchase Purchase Purchase
options options options options options options options
Date of AGM June 10, 1993 June 18, 1997 June 18, 1997 June 26, 1998 May 28, 1999 May 28, 1999 June 4, 2002
Date of Board meeting June 22, 1995 June 18, 1997 June 18, 1997 Dec. 17, 1998 April 24, 2001 Dec. 18, 2001 Dec. 3, 2002
Total number of options 83,343 6,862 33,959 31,350 86,600 249,200 124,800granted including:- to directors and officers 62,445 5,862 14,728 17,500 50,000 150,000 80,000- to the top ten employeegrantees 19,896 1,000 19,231 13,850 26,800 82,000 35,700
Start of exercise period June 22, 1995 June 18, 1997 June 18, 1997 Dec. 17, 1998 April 24, 2001 Dec. 18, 2001 Dec. 3, 2002
Expiry of exercise period June 22, 2003 June 18, 2003 June 18, 2003 Dec. 17, 2004 April 24, 2007 Dec. 18, 2007 Dec. 3, 2008
Exercise price €9.17 €14.85 €16.12 €18.79 €35.38 €38.93 €27.33
Exercise terms in 5 equal in 4 graduated in 4 graduated in 4 graduated in 4 graduated in 4 graduated in 4 graduated tranches tranches tranches tranches tranches tranches tranches
Options exercised in 2003 18,195 12,644 45,303 7,587 0 0 0
Options cancelled in 2003 0 0 0 0 403 806 403
Number of options outstanding at December 31, 2003 0 0 0 99,667 76,950 248,338 124,713
Stock option plans set up by other Group companies
FIMALAC INVEST. FIMALAC INVEST. FITCH RATINGS FITCH RATINGS FITCH RATINGS
1995/2 plan 1998 plan 2001 plan 2002 plan 2003 plan
Date of AGM June 3, 1992 June 4, 1997 - - -
Date of Board Meeting Sept. 20, 1995 Feb. 4, 1998 - - -
Number of options granted 47,923 46,142 1,618,869 291,623 208,00
Number of grantees - - 274 127 117
Start of exercise period Sept. 20, 1995 Feb. 4, 1998 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2005
Expiry of exercise period Sept. 19, 2003 Feb. 3, 2006 Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2007
Exercise price €41.61 €59.81 $54.67 (1) $63.91 (2) $80.23 (3)
Options exercised in 2003 134 3,489 0 0 0
Options cancelled in 2003 2,264 0 0 116,500 88,000
Number of options outstanding at December 31, 2003 0 4,566 1,618,869 175,123 120,000
(1) $27.50 if options exercised in connection with an IPO (2) $36.74 if options exercised in connection with an IPO(3) $59.01 if options exercised in connection with an IPO
1572 0 0 3 A n n u a l R e p o r t
CASSINA CASSINA CASSINA CASSINA ALIAS
2000 plan 2001 plan 2002 plan 2003 plan 2001 plan
Date of GM Dec. 15, 2000 Dec. 15, 2000 Dec. 15, 2000 Dec. 15, 2000 Dec. 17, 2001
Date of Board Meeting Dec. 31, 2000 July 27, 2001 May 20, 2002 May 13, 2003 Dec. 17, 2001
Number of options granted 157,575 217,847 233,954 181,835 15,462
Number of grantees 2 2 2 2 3
Start of exercise period Dec. 31, 2003 July 31, 2004 July 31, 2005 July 31, 2006 Dec. 31, 2004
Expiry of exercise period Dec. 31, 2005 July 31, 2006 July 31, 2007 July 31, 2008 Dec. 31, 2006
Exercise price €8.33 €8.46 €9.06 €9.39 €43.20
Options exercised in 2003 157,575 0 0 0 0
Options cancelled in 2003 0 0 0 0 5,154
Number of options outstanding at December 31, 2003 0 217,847 233,954 181,835 10,308
ALIAS NEMO NEMO NEMO
2002 plan 2001 plan 2002 plan 2003 plan
Date of GM Dec. 17, 2001 Dec. 17, 2001 Dec. 17, 2001 Dec. 17, 2001
Date of Board Meeting May 20, 2002 Dec. 17, 2001 May 20, 2002 May 13, 2003
Number of options granted 16,452 34,587 19,736 35,528
Number of grantees 3 4 4 4
Start of exercise period July 31, 2005 Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2006
Expiry of exercise period July 31, 2007 Dec. 31, 2006 Dec. 31, 2007 Dec. 31, 2008
Exercise price €43.80 €8.50 €11.10 €12.40
Options exercised in 2003 0 0 0 0
Options cancelled in 2003 5,484 0 0 0
Number of options outstanding at December 31, 2003 10,968 34,587 19,736 35,528
SHARE EQUIVALENTS
In March 2003, the Company carried out a
€100,099,258 share issue (including premiums).
A stock warrant was attached to each of the
5,268,382 new shares. The terms of the
transaction are described in the information
memorandum approved by the Commission des
Opérations de Bourse on January 30, 2003 under
no. 03-029.
The stock warrants (“BASA”) are exercisable for
new or existing Fimalac €4.40 par value shares on
AUTHORIZED, UNISSUED CAPITAL
a three-to-one basis, at an exercise price of €25
each. The warrants are exercisable at any time
until December 31, 2006.
As of December 31, 2003, 2,367 warrants had been
exercised, leading to the issuance of 789 new
shares, and 5,266,015 warrants were outstanding.
If all of these warrants had been exercised as of
December 31, 2003, this would have had the effect
of increasing the Company's capital by 4.7%.
Authorizations to issue Date of meeting Par value in € millionsshares and share equivalents giving authorization (2) Available as of
Authorized Used in 2003 Dec. 31, 2003
Issue of shares and share equivalents (*) AGM June 4, 2002 230 23.2 206.8including:
Issues without pre-emptivesubscription rights AGM June 4, 2002 150 - 150
Issue of debt securities convertible, redeemable or otherwiseexchangeable for shares AGM June 4, 2002 600 - 600
Share issues paid up by capitalizing income, retained earnings or additional paid-in capital AGM June 4, 2002 300 - 300
(*) Except for preferred stock, non-voting preferred stock and investment certificates.
All of the above authorizations expire on August 4, 2004.
158 2 0 0 3 A n n u a l R e p o r t
IN F O R M AT I O N A B O U T T H E CO M PA N Y ’S C A P I TA L
1592 0 0 3 A n n u a l R e p o r t
Year Change in Change in New capital New number capital stock number of shares of shares
As of December 31, 1998 131,045,025.83 6,139,993
1999 Capitalization of reserves 4,034,820.18 0 135,079,846.00 6,139,993Shares issued on exercise of stock options 2,724,392.00 123,836 137,804,238.00 6,263,829
2000 5-for-1 stock split 0 25,055,316 137,804,238.00 31,319,145Shares issued on exercise of stock options 151,914.40 34,526 137,956,152.40 31,353,671
2001 Shares issued on exerciseof stock options 411,747.60 93,579 138,367,900.00 31,447,250
2002 Stock dividend 405,675.60 92,199 138,773,575.60 31,539,449Shares issued on exerciseof stock options 311,713.60 70,844 139,085,289.20 31,610,293
2003 Issue of shares withstock warrants 23,180,880.80 5,268,382 162,266,170.00 36,878,675Stock dividends 1,169,775.20 265,858 163,435,945.20 37,144,533Shares issued on exercise of stock options 335,024.80 76,142 163,770,970.00 37,220,675Shares issued on exercise of stock warrants 3,471.60 789 163,774,441.60 37,221,464
CHANGES IN CAPITAL OVER THE LAST FIVE YEARS
160 2 0 0 3 A n n u a l R e p o r t
Shareholder As of December 31, 2003 As of December 31, 2002 As of December 31, 2001 Number % % Number % % Number % %of shares interest voting of shares interest voting of shares interest voting
rights rights rights
Marc Ladreit de Lacharrière 721,587 1.94 2.44 614,315 1.94 2.65 1,437,315 4.57 6.01
Fimalac Participations 271,045 0.73 0.92 232,325 0.73 1.02 893,750 2.84 3.82
Groupe Marc de Lacharrière 19,986,531 53.70 67.58 16,739,454 52.96 70.99 15,736,094 50.04 66.58
Treasury stock 549,668 1.48 - 2,660,810 8.42 - 2,533,139 8.06 -
Sub-total 21,528,831 57.84 70.94 20,246,904 64.05 74.36 20,600,298 65.51 76.41shareholders acting in concert
Public, including: 15,692,633 42.16 29.06 11,363,389 35.95 25.34 10,846,952 34.49 23.59
- JP Morgan Chase Investor Services 1,632,342 4.13 2.98 1,632,342 5.16 3.58 - - -
- CDR Participations 188,535 0.51 0.34 1,116,866 3.53 2.45 1,562,018 4.97 3.33
- Caisse des Dépôts et Consignations 1,060,837 2.85 1.94 1,051,450 3.33 2.30 958,450 3.05 2.05
- Fidelity Group 1,884,372 5.06 3.45 - - - - - -
Total 37,221,464 100.00 100.00 31,610,293 100.00 100.00 31,447,250 100.00 100.00
To the best of the Company’s knowledge, no other shareholders own — directly or indirectly, or acting in
concert — over 2% of the capital or voting rights. There are no shareholders’ agreements.
Non-resident shareholders represented approximately 22.7% of the Company’s capital stock at December 31,
2003, 13.6% at December 31, 2002 and 10.2% at December 31, 2001.
OW N E R S H I P S T R U C T U R E
Since 1987 the Company has been authorized by
its bylaws to ask Euroclear for information about
the identity of holders of bearer shares. The
Company performs such checks regularly. The most
recent one was requested on December 31, 2003,
at which date the Company had approximately
15,000 shareholders.
The Company is also informed of the identity of its
major shareholders as a result of a combination of
legal measures and provisions of the bylaws which
require shareholders to disclose any increase or
reduction in the number of shares or voting rights
held to above or below 2% (threshold specified in
the bylaws) or 5%, 10%, 20%, 33%, 50% or 66%
(thresholds prescribed by law).
On September 16, 2003, FMR Corp. and Fidelity
International Limited informed the Company
that mutual funds managed by their subsidiaries
had increased their combined interest in the
Company’s capital to above the 5% disclosure
threshold on September 15, 2003, following share
purchases on the market. The 1,950,306 shares
held on behalf of these funds as of the disclosure
date represented 5.24% of Fimalac’s capital.
1612 0 0 3 A n n u a l R e p o r t
Shareholders acting in concert
Marc Ladreit de Lacharrière, Fimalac Participations
and Groupe Marc de Lacharrière held 56.36% of the
Company’s capital and 70.94% of voting rights at
December 31, 2003, including 47.86% of the capital
in the form of shares with double voting rights.
The concert results from the controlling interest
held by Marc Ladreit de Lacharrière in Fimalac
Participations, since 1992, and in Groupe Marc de
Lacharrière, since 1989.
On October 21, 2003, the proportion of capital held in
treasury was reduced to below 5% following the sale
of Fimalac shares on the market. As of that date,
627,278 shares were held in treasury, representing
1.69% of the capital. Marc Ladreit de Lacharrière did
not cross any disclosure thresholds in 2003, through
either his direct or indirect interests. The sharehol-
ders acting in concert continue to hold over half of the
capital and over two-thirds of voting rights.
Directors’ interests
As of December 31, 2003, Fimalac’s directors and offi-
cers held 2.8% of the Company’s capital.
Employee share ownership
To the best of the Company’s knowledge, Fimalac
employees held less than 1% of the capital at
December 31, 2003.
Liens on registered shares
See “Directors’ interests” above.
162 2 0 0 3 A n n u a l R e p o r t
LISTINGS
SHARE PERFORMANCE OVER THE LAST 18 MONTHS
The Company’s shares are listed on the Premier
Marché of Euronext Paris SA as follows:
- Continuous trading market
- ISIN and Euronext code: FR 0000037947
- Mnemonic: FIM
Fimalac shares are eligible for the deferred
settlement system (SRD). They are not listed on
any other stock markets. Shares issued on or after
January 1 are not entitled to the dividend paid out
of net income for the previous year. During the
period from January 1 to the ex-dividend date,
these shares are quoted under the ISIN code
FR0010047852. This category includes shares
issued on exercise of stock warrants during the period.
The stock warrants issued in March 2003 are listed
on the Premier Marché of Euronext Paris SA as
follows:
- Continuous trading market
- Category: 31
- ISIN and Euronext code: 0000341109
- Mnemonic: FIMBS
MA R K E T F O R F I M A L A C S H A R E S
Year Month Number of shares traded, Value of shares traded, High and low share pricesincluding off-market including off-market
transactions transactions High Low(in € millions) (in €) (in €)
2002October 1,065,394 28.09 34.78 23.66November 1,021,275 28.20 29.32 25.00December 951,597 24.63 24.70 27.30
Total 2002 3,038,266 80.92
2003
January 286,463 7.04 26.07 20.76February 868,309 16.36 22.77 17.70March 679,266 11.91 18.94 16.11April 408,775 7.62 21.40 16.60May 1,019,546 24.03 24.68 20.75June 486,182 11.63 25.78 22.05July 1,236,643 30.47 25.94 23.70August 639,266 15.36 24.51 23.35September 675,296 15.85 24.80 22.20October 3,155,261 72.29 25.20 22.23November 1,000,541 26.79 27.94 24.00December 528,585 15.20 30.00 27.50
Total 2003 10,984,133 254.55
2004
January 866,332 25.97 31.14 28.50February 752,034 22.65 32.01 28.00March 837,480 26.70 33.09 30.00
Source: EURONEXT Paris SA
1632 0 0 3 A n n u a l R e p o r t
DIVIDENDS
STOCK WARRANT PERFORMANCE SINCE QUOTATION
Year Month Number of warrants traded, Value of warrants traded, High and low warrant pricesincluding off-market including off-market
transactions transactions High Low(in € millions) (in €) (in €)
2003March 187,402 144,592 0.96 0.70April 50,198 71,587 1.99 0.80May 48,295 101,596 2.47 1.73June 24,485 146,896 2.65 2.11July 55,754 136,693 2.80 2.21August 18,175 40,773 2.70 2.20September 25,485 62,093 2.60 2.06October 12,714 29,269 2.46 2.10November 69,539 202,981 3.05 2.46December 70,637 199,372 3.00 2.64
Total 2003 562,684 1,136,852
2004
January 64,099 179,835 2.97 2.65February 54,238 150,476 2.97 2.50March 63,686 194,210 3.40 2.90
Source: EURONEXT Paris SA
DIVIDENDS PAID OVER THE LAST
FIVE YEARS
The last five Annual General Meetings, held on May
28, 1999, June 7, 2000, June 5, 2001, June 4, 2002
and June 4, 2003 respectively, approved the payment
of the following dividends:
Year Total (in €) Dividend per share (in €)
1998 16,884,981 2.75
1999 23,301,444 3.72
2000 28,218,304 0.90
2001 44,026,150 1.40 (*)
2002 35,034,741 0.95
(*) €0.95 ordinary dividend and €0.45 additional dividend.
A five-for-one stock split was carried out following a
resolution adopted at the Annual General Meeting
on June 7, 2000.
STATUTE OF LIMITATIONS FOR
DIVIDENDS
Unless stipulated otherwise in the bylaws, divi-
dends that have not been claimed within five years
are time-barred and are paid over to the State.
164 2 0 0 3 A n n u a l R e p o r t
FIVE-YEAR FINANCIAL SUMMARY(in €)
Description 1999 2000 2001 2002 2003
I) Capital at December 31
a) Capital 137,804,238 137,956,152 138,367,900 139,085,289 163,774,442
b) Number of shares issued (*) 6,263,829 31,353,671 31,447,250 31,610,293 37,221,464
c) Number of convertible bonds - - - - 1,755,338
d) Number of stock options 54,689 239,994 146,415 75,571 -
II) Results of operations
a) Operating revenues (excluding VAT) 57,257,808 84,778,080 175,092,775 68,689,029 111,483,118
b) Income (loss) before tax, amortization, depreciation and provision expense (8,347,644) 12,380,230 60,970,478 2,962,025 71,739,032
c) Income tax (**) (5,943,786) (11,633,452) (13,257,990) (22,205,467) (3,576,815)
d) Net income (loss) 14,800,231 26,723,953 51,557,749 72,388,962 (356,408,158)
e) Distributed income 23,301,444 28,218,304 40,026,150 35,034,741 35,360,391
III) Earnings per share
a) Income (loss) after tax, before amortization, depreciation and provision expense (0.38) 0.77 2.36 0.80 2.02
b) Net income (loss) 2.36 0.85 1.64 2.29 (9.58)
c) Distributed income 3.72 0.90 1.40 0.95 0.95
IV) Employee information
a) Number of employees 5 2 1 1 1
b) Total payroll 1,877,148 2,245,349 3,115,018 2,163,447 358,002
c) Total benefits 668,421 530,295 616,282 449,168 20,369
(*) Five-for-one stock split in June 2000.(**) Corrzsponding to a taxe benefit.(***) Dividend recommended for approval by the Annual General Meeting, payable on all shares including new shares issued in March 2003.
(***)
(***)
1652 0 0 3 A n n u a l R e p o r t
Shareholders’Meeting
of June 8, 2004
166 2 0 0 3 A n n u a l R e p o r t
REPORT ON THE PROPOSED RESOLUTIONS
Approval of the 2003 financial statements
(First and second resolution)
Shareholders are invited to approve the Directors’
report, the Auditors’ reports and the financial
statements of the Company and the Group for the
year ended December 31, 2003.
Auditors’ special report
(Third resolution)
Shareholders are invited to approve the agreements
referred to in the Auditors’ special report.
Appropriation of results, stock dividend alternative
(Fourth and fifth resolutions)
The Board of Directors recommends that the net
loss for the be appropriated as follows:
Amounts available for appropriation:
Net loss for the year €(356,408,157.79)
Retained earnings brought forward from prior years €40,526,322.34
Transfer from additional paid-in capital (merger premium) €9,442,354.34
Transfer from additional paid-in capital (premium on shares issued for cash) €89,136,140.93
Transfer from additional paid-in capital (premium on shares issued in payment for assets) €208,735,673.66
Reversal of treasury stock reserve €43,928,057.32
Total €35,360,390.80
Appropriations:
Statutory dividend €8,188,722.08
Additional dividend €27,171,668.72
Total €35,360,390.80
The total dividend will amount to €35,360,390.80.
The net dividend payable on each of the 37,221,464
shares outstanding and carrying rights to the 2003
dividend will amount to €0.95. Including the tax
credit of €0.475 attributable to shareholders
eligible for a 50% tax credit, the total revenue per
share will amount to €1.425. The dividend will be
payable from June 10, 2004.
Dividends for the last three years were as follows
(information provided in accordance with Article
243 bis of the French tax code):
Year Net Tax credit Grossdividend 50 % dividend
2000 0.90 0.45 1.35
2001 1.40(*) 0.70 2.10
2002 0.95 0.475 1.425
(*) €0.95 ordinary dividend and €0.45 additional dividend.
As provided for in Article 34 of the Company’s
bylaws, the Board of Directors is recommending
that shareholders be offered the option of receiving
all or part of their dividends in newly-issued
common shares carrying dividend rights as from
January 1, 2004. Shares issued in payment of
dividends will be issued at a price equal to 90%
of the average of the opening prices quoted for
Fimalac shares over the twenty trading days
preceding the date of the Annual Shareholders’
Meeting, less the net dividend.
Ratification of appointments to the Board
(Sixth and seventh resolutions)
Shareholders are asked to take note of the
resignations from the Board of Henri Lachmann and
Sperans, and to ratify the appointment as directors
of Arnaud Lagardère and Philippe Lagayette,
decided by the Board at its meeting of May 23,
2003.
Re-election of directors
(Eighth to eleventh resolutions)
The terms as directors of Fimalac Participations,
Marc Ladreit de Lacharrière, Philippe Lagayette and
Véronique Morali expire at the close of the
Shareholders’ Meeting. They are standing for re-
election for a further four-year term, in accordance
with the stipulations of Article 14, first paragraph,
of the bylaws.
Directors’ attendance fees
(Twelfth resolution)
The aggregate amount of attendance fees paid by
the Company to the Board of Directors for 2002 was
set at €226,000. In view of the appointments to the
Board made in 2003, we recommend increasing this
to €252,000 for 2004 and subsequent years.
1672 0 0 3 A n n u a l R e p o r t
Authorization to buy back shares
(Thirteenth resolution)
In accordance with Article L.225-209 of the
Commercial Code, the Board of Directors is seeking
a new 18-month authorization to buy back Fimalac
shares representing a maximum of 10% of the
Company’s capital. According to this authorization,
shares may be purchased on one or more
occasions, by any appropriate means, on the
open market or otherwise, including by block
purchases and the use of derivative instruments.
The authorization may be used, inter alia:
a) To stabilize the Company’s share price by
trading against the market.
b) To purchase or sell shares based on market
opportunities.
c) To purchase shares for allocation on exercise of
stock options granted to officers and employees
of the Company and/or its subsidiaries.
d) To purchase shares to be held, sold or transferred
by any appropriate method, including in
exchange for shares of another company in
connection with external growth transactions.
e) To purchase shares for attribution on redemption,
conversion, exchange or exercise of share
equivalents.
f ) Subject to adoption of the seventeenth
resolution, to buy back and cancel shares, in
order to increase earnings per share.
The Board of Directors recommends that the
maximum purchase price be set at €50 and the
minimum sale price at €12 per share, the same
amounts as under the previous authorization.
Details of the share buyback program are provided
in an information memorandum approved by the
Autorité des Marchés Financiers, which is available
upon request from the Company’s headquarters.
Authorization to issue shares
(Fourteenth and fifteenth resolutions)
Shareholders are asked to renew the 26-month
authorizations given to the Board at the Shareholders’
Meeting of June 4, 2002 to increase the capital, on
one or several occasions, by issuing shares or share
equivalents to be paid up in cash or by capitalizing
reserves, income or additional paid-in capital.
The renewed authorization will remain in force for
26 months. The aggregate par value of shares
issued for cash under this authorization may not
exceed €230 million and that of shares paid up by
capitalizing reserves, income or additional paid-in
capital may not exceed €300 million. The maximum
face value of debt securities convertible, redeemable
or exercisable for shares issued under this
authorization may not exceed €600 million.
The fifteenth resolution concerns the issue of
shares and share equivalents without pre-emptive
rights for existing shareholders. The purpose of
this resolution is to allow the Company to take
advantage of opportunities arising in the French
and international financial markets.
Authorization to carry out an employee share issue
(Sixteenth resolution)
The first paragraph of section VII of Article
L.225-129 of the Commercial Code stipulates that in
connection with any share issue, the Extraordinary
Shareholders’ Meeting must vote on a proposed
employee share issue governed by Article L.443-5
of the Labor Code.
The Board of Directors is therefore seeking a 2-year
authorization to increase the capital by a maximum
of €4.4 million — not including any adjustments
made in accordance with the law — by issuing
shares or share equivalents to employees who are
members of an employee stock ownership plan
(PEE).
Authorization to reduce the capital by canceling
shares held in treasury stock
(Seventeenth resolution)
The Board of Directors is seeking the renewal of the
18-month authorization given at the Extraordinary
Shareholders’ Meeting of June 4, 2003 (tenth
resolution) to reduce the capital on one or several
occasions, by canceling all or some of the shares
held by the Company. The number of shares that
may be cancelled in any given 24-month period may
not exceed 10% of the capital, in accordance with
Article L.225-209 of the Commercial Code.
The capital reduction will correspond to the par
value of the canceled shares. The difference
168 2 0 0 3 A n n u a l R e p o r t
RE P O RT O N T H E P R O P O S E D R E S O L U T I O N S
between the purchase price of the shares and their
par value will be charged to the “Treasury stock
reserve” and, if necessary, to the merger premium.
The purpose of this authorization is to allow
shareholders to benefit from an increase in
earnings per share.
Amendment of Article 21, third paragraph, of the
bylaws concerning the powers of the Chairman of
the Board, to comply with the new provisions of
the law
(Eighteenth resolution)
Shareholders will be asked to vote to amend Article
21, third paragraph, of the bylaws, to comply with
the provisions of Article L.225-51 of the Commercial
Code, as amended by the Act of August 1, 2003
(“Loi de sécurité financière”), by deleting the
stipulation that the Chairman represents the Board
of Directors.
Powers to carry out formalities
(Nineteenth resolution)
The Board of Directors is requesting that full
powers be given to carry out all the formalities
relating to this Meeting.
1692 0 0 3 A n n u a l R e p o r t
This is a free translation into English of the Statutory Auditors’
report issued in the French language and is provided solely for the
convenience of English speaking readers. This report should be
read in conjunction with, and construed in accordance with, French
law and professional auditing standards applicable in France.
To the shareholders
In our capacity as Auditors of Fimalac, we present
below our special reports on the following matters:
1. Authorization to issue shares and share
equivalents (fourteenth and fifteenth resolutions).
2. Authorization to carry out an employee share
issue (sixteenth resolution).
3. Authorization to reduce the capital by canceling
shares held in treasury stock (seventeenth
resolution).
1. Authorization to issue shares and share
equivalents
(Fourteenth and fifteenth resolutions)
As required by Articles L.225-135, L.228-92 and
L.228-95 of the Commercial Code, we present below
our report on the authorizations sought by the
Board of Directors to increase the capital by issuing
shares and share equivalents.
The authorizations concern the following:
• Issue of shares and share equivalents, with
preemptive subscription rights (fourteenth
resolution)
• Issue of shares and share equivalents, without
pre-emptive subscription rights (fifteenth resolution)
As explained in its report, the Board of Directors is
seeking full powers to decide the terms and
conditions of these issues and, in the authorization
sought in the fifteenth resolution, is asking
shareholders to waive their pre-emptive
subscription rights.
We have reviewed the proposed issues and
performed all the procedures that we considered
necessary, in accordance with the standards of our
profession. Those standards require that we
perform procedures to verify the proposed method
of determining the issue price of the shares and
share equivalents.
The issue price of the shares and share equivalents
has not yet been fixed and we therefore cannot and
do not express any opinion on the final terms and
conditions of these issues or on the proposal made
to shareholders in the fifteenth resolution to waive
their pre-emptive subscription rights. The principle
of such waiver is, however, logical in the case of
transactions such as the ones shareholders are
being invited to approve.
As required by Article 155-2 of the Decree of March
23, 1967, we will issue a further report when the
Board of Directors carries out the proposed issues.
2. Authorization to carry out an employee share
issue
(Sixteenth resolution)
As required by Article L.225-138 of the Commercial
Code, we present below our report on the proposed
employee share issue, for a maximum of €4,400,000
excluding premiums. The shares will be offered to
the employees or executive directors of the
Company and French and foreign related companies
within the meaning of Article L.225-180 of the
Commercial Code, who are members of an employee
stock ownership plan (PEE) set up by the Company.
As explained in its report, the Board of Directors is
seeking full powers to decide the terms and
conditions of the issue, subject to compliance
with the provisions of article L.443-5 of the Labor
Code, and is asking shareholders to waive their
pre-emptive subscription rights.
We have reviewed the proposed issues in
accordance with the standards of our profession.
Those standards require that we perform
procedures to verify the proposed method of
determining the issue price of the shares.
STATUTORY AUDITORS’ SPECIAL REPORTON THE EXTRAORDINARY RESOLUTIONS
170 2 0 0 3 A n n u a l R e p o r t
STATUTORY AUDITORS’ SPECIAL REPORTON THE EXTRAORDINARY RESOLUTIONS
Pending our review the final terms and conditions of
the proposed share issue, we have no comments to
make concerning the method to be used to set the
issue price, as described in the Directors’ report.
The issue price of the shares has not yet been fixed
and we therefore cannot and do not express any
opinion on the final terms and conditions of the
issue or on the proposal made to shareholders to
waive their pre-emptive subscription rights. The
principle of such waiver is, however, logical in the
case of transactions such as the one shareholders
are being invited to approve.
As required by Article 155-2 of the Decree of March
23, 1967, we will issue a further report when the
Board of Directors carries out the proposed issue.
3. Authorization to reduce the capital by canceling
treasury stock
(Seventeenth resolution)
As required by Article L.225-209, paragraph 4, of the
Commercial Code dealing with the cancellation of
treasury stock, we present below our report setting
out our assessment of the underlying reasons for
the proposed capital reduction and the related
terms and conditions.
We have performed all the procedures that we
considered necessary in accordance with the
standards of our profession. Those standards
require that we perform procedures to assess the
reasonableness of the underlying reasons for the
proposed capital reduction and the related terms
and conditions.
The proposal relates to the buyback, by the
Company, of up to 10% of its own shares in
accordance with Article L.225-209, paragraph 4, of
the Commercial Code. The authorization to carry out
a buyback program is the subject of the thirteenth
resolution of this meeting and would be given for a
period of 18 months.
The Board of Directors is seeking an 18-month
authorization to cancel shares purchased under the
authorization to carry out a buyback program. The
number of shares canceled in any 24-month period
will not exceed 10% of the capital.
We have no matters to report concerning the
underlying reasons for the proposed capital
reduction – which will be dependent on
shareholders authorizing the proposed share
buyback program – or the related terms and
conditions.
Paris, April 14, 2004
The Statutory Auditors
CAGNAT & ASSOCIÉS XAVIER AUBRY
JACQUES CAGNAT PARTNER OF PRICEWATERHOUSECOOPERS AUDIT
1712 0 0 3 A n n u a l R e p o r t
ORDINARY RESOLUTIONS
First resolution
(Approval of the reports of the Board of Directors
and the Auditors and of the consolidated financial
statements for the year ended December 31, 2003)
The Shareholders’ Meeting, having considered the
report of the Board of Directors and the Auditors’
report and the consolidated financial statements,
approves the transactions referred to in these
reports and the consolidated financial statements
for the year ended December 31, 2003, showing a
net loss of €329,711 thousand.
Second resolution
(Approval of the reports of the Board of Directors
and the Auditors and of the Company financial
statements for the year ended December 31, 2003)
The Shareholders’ Meeting, having considered the
report of the Board of Directors and the Auditors’
report and the financial statements, approves the
transactions referred to in these reports and the
financial statements for the year ended December
31, 2003 showing a net loss of €356,408,157.79.
Third resolution
(Approval of agreements referred to in the
Auditors’ special report)
The Shareholders’ Meeting, having considered the
Auditors’ special report issued in accordance with
Article L.225-40 of the Commercial Code, approves
the agreements referred to therein.
Fourth resolution
(Appropriation of results)
The Shareholders’ Meeting:
1°) Approves the recommendation of the Board of
Directors concerning the appropriation of the
net loss for the year, as follows:
Amounts available for appropriation
Net loss for the year €(356,408,157.79)
Retained earnings brought forward from prior years €40,526,322.34
Transfer from additional paid-in capital (merger premium) €9,442,354.34
Transfer from additional paid-in capital (premium on shares issued for cash) €89,136,140.93
Transfer from additional paid-in capital (premium on shares issuedin payment for assets) €208,735,673.66
Reversal of treasury stock reserve €43,928,057.32
Total €35,360,390.80
Appropriations:
Statutory dividend €8,188,722.08
Additional dividend €27,171,668.72
Total €35,360,390.80
2°) Resolves that the net dividend payable on each of
the 37,221,464 shares outstanding and carrying
rights to the 2003 dividend will amount to €0.95.
Including the tax credit of €0.475 attributable to
shareholders eligible for a 50% tax credit, the total
revenue per share will amount to €1.425.
3°) Resolves that the dividend will be payable from
June 10, 2004. Dividends on shares held in
treasury stock at that date will be credited to
retained earnings, following determination by the
Board of Directors of the number of shares
concerned.
4°) Notes, in accordance with Article 243 bis of the
French Tax Code, that dividends for the last three
years were as follows:
Year Net Tax credit Grossdividend 50% dividend
2000 0.90 0.45 1.35
2001 1.40(*) 0.70 2.10
2002 0.95 0.475 1.425
(*) €0.95 ordinary dividend and €0.45 additional dividend.
Fifth resolution
(Stock dividend alternative)
The Shareholders’ Meeting resolves that:
1°) Each shareholder will have the option of receiving
all or part of the dividend either in cash or in shares
carrying dividend rights as from January 1, 2004.
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TE X T O F T H E P R O P O S E D R E S O L U T I O N S
2°) This option will cover the entire dividend payable,
i.e. €0.95 per share.
3°) Shares issued in payment of dividends will be
issued at a price equal to 90% of the average of
the opening prices quoted for Fimalac shares over
the twenty trading days preceding the date of the
Annual Shareholders’ Meeting, less the net
dividend.
4°) Shareholders wishing to receive their dividend in
shares shall have one month from the Annual
Shareholders’ Meeting to formulate their request
to the paying agents. Any shareholder who has not
exercised his or her option within this period will
receive the total dividend in cash.
5°) Any shareholder may exercise his or her option on
all or part of the dividend payable.
6°) If the amount of the dividend to which the
shareholder is entitled does not correspond to a
whole number of shares, he or she shall indicate
— when exercising the option — if he or she
wishes to receive either the lower number of
shares with the difference in cash, or the higher
number of shares, in which case the balance shall
be payable in cash when the option is exercised.
7°) Except for differences in cum-rights dates, the new
shares will rank pari passu with all existing shares.
8°) The Board of Directors shall have full powers to
carry out all operations related to the payment
of stock dividends and the resulting increase in
capital, and to amend the bylaws to reflect the
new capital.
Sixth resolution
(Ratification of the appointment as director of Arnaud
Lagardère)
The Shareholders’ Meeting notes the resignation from
the Board of Henri Lachmann and ratifies the
appointment of Arnaud Lagardère as director, to fill
the vacant seat, decided by the Board at its meeting
on May 23, 2003.
Arnaud Lagardère will hold office for the remainder of
his predecessor’s term, expiring at the close of the
Annual Shareholders’ Meeting to be called in 2005 to
approve the 2004 financial statements.
Seventh resolution
(Ratification of the appointment as director of
Philippe Lagayette)
The Shareholders’ Meeting notes the resignation from
the Board of Sperans and ratifies the appointment of
Philippe Lagayette as director, to fill the vacant seat,
decided by the Board at its meeting on May 23, 2003.
Philippe Lagayette will hold office for the remainder of
his predecessor’s term, expiring at the close of the
Annual Shareholders’ Meeting called in 2004 to
approve the 2003 financial statements.
Eighth resolution
(Re-election as director of Fimalac Participations)
The Shareholders’ Meeting re-elects Fimalac
Participations as director for a four-year term expiring at
the close of the Annual Shareholders’ Meeting to be
called in 2008 to approve the 2007 financial statements.
Ninth resolution
(Re-election as director of Marc Ladreit de
Lacharrière)
The Shareholders’ Meeting re-elects Marc Ladreit de
Lacharrière as director for a four-year term expiring at
the close of the Annual Shareholders’ Meeting to
be called in 2008 to approve the 2007 financial
statements.
Tenth resolution
(Re-election as director of Philippe Lagayette)
The Shareholders’ Meeting re-elects Philippe
Lagayette as director for a four-year term expiring
at the close of the Annual Shareholders’ Meeting to
be called in 2008 to approve the 2007 financial
statements.
Eleventh resolution
(Re-election as director of Véronique Morali)
The Shareholders’ Meeting re-elects Véronique Morali
as director for a four-year term expiring at the close of
the Annual Shareholders’ Meeting to be called in 2008
to approve the 2007 financial statements.
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Twelfth resolution
(Determination of directors’ attendance fees)
The Shareholders’ Meeting sets at €252,000 the
attendance fees payable to the Board of Directors for
2004 and all subsequent years until a new resolution
is voted.
Thirteen resolution
(Authorization to buy back shares)
The Shareholders’ Meeting, having considered the
report of the Board of Directors and the information
memorandum approved by the Autorité des Marchés
Financiers:
1) Authorizes the Board of Directors or – by delegation
– the Chairman and Chief Executive Officer, to
buy back up to 3,722,146 Fimalac shares with a
par value of €4.40, for a maximum amount of
€186,107,300, in accordance with Article L.225-209
of the Commercial Code.
2) Sets the maximum purchase price at €50 and the
minimum sale price at €12.
3) Resolves that this authorization may be used, inter
alia, for the following purposes:
a) To stabilize the Company’s share price by
trading against the market.
b) To purchase or sell shares based on market
opportunities.
c) To purchase shares for allocation on exercise of
stock options granted to directors and officers
and employees of the Company and/or its
subsidiaries,
d) To purchase shares to be held, sold or transferred
by any appropriate method, including in
exchange for shares of another company in
connection with external growth transactions.
e) To purchase shares for attribution on
redemption, conversion, exchange or exercise
of share equivalents.
f ) Subject to adoption of the seventeenth
resolution, to buy back and cancel shares, in
order to increase earnings per share.
4°) Resolves that the shares may be purchased, sold,
transferred or exchanged by any appropriate
means, on the open market or otherwise, including
through block purchases or the use of derivative
instruments, including written put options and the
issuance of negotiable securities but excluding
call options, provided that their use does not
significantly increase the volatility of the share price.
5°) Resolves that in the case of a bonus share issue
paid up by capitalizing reserves, or of a stock split
or reverse stock split, the above prices will be
adjusted based on the ratio between the number
of shares outstanding before and after the
operation.
6°) Resolves that any dividends payable on Fimalac
shares held by the Company under this
authorization will be credited to retained earnings.
7°) Sets at 18 months the duration of this
authorization, which supersedes that given by the
eighth resolution of the Shareholders Meeting of
June 4, 2003.
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TE X T O F T H E P R O P O S E D R E S O L U T I O N S
EXTRAORDINARY RESOLUTIONS
Fourteenth resolution
(Authorization to the Board of Directors to increa-
se the capital by issuing shares and share equiva-
lents on one or several occasions, to be paid up in
cash or by capitalizing additional paid-in capital,
reserves or income)
The Extraordinary Shareholders’ Meeting, having
considered the report of the Board of Directors and
the Auditors’ special report:
1°) Authorizes the Board of Directors to increase the
capital on one or several occasions:
a) By issuing, for cash or without consideration,
any and all marketable securities convertible,
redeemable, exchangeable or otherwise exer-
cisable for shares, including stand-alone warrants
but excluding preferred stock, non-voting
preferred stock and investment certificates.
b) By issuing shares to be paid up by capitalizing
reserves, income, additional paid-in capital
or other capitalizable items.
2°) Resolves that the authorization to issue shares
and share equivalents given in 1 a) automatical-
ly implies the waiver, by existing shareholders,
of their pre-emptive right to subscribe for the
shares to be issued on conversion, redemption
or exercise of share equivalents.
3°) Resolves that:
a) The maximum par value of the shares issued
directly or indirectly under the authorization
given in 1 a) may not exceed €230 million and
the maximum par value of shares issued
under 1 b) may not exceed €300 million.
These two amounts are cumulative and do
not include the par value of any shares to be
issued to protect the rights of existing hol-
ders of share equivalents.
b) The maximum face value of debt securities
convertible, redeemable or exercisable for
shares issued under this authorization may
not exceed €600 million.
4°) Resolves that share equivalents issued under
the above authorization may be denominated in
euro or in foreign currency or in any other mone-
tary unit determined by reference to a basket of
currencies, within the limit of the authorized
ceiling in euro or the equivalent in foreign cur-
rency or monetary units at the issuance date.
5°) Resolves that debt securities may pay interest at
any fixed, floating, adjustable or indexed rate,
on any basis that is not in breach of the law, and
that their redemption price may be determined
on any basis that is not in breach of the law,
including according to an indexing process or
with a fixed or variable premium, said premium
being in addition to the €600 million ceiling.
6°) Resolves that for securities issued with preemp-
tive subscription rights:
a) If certain shareholders elect not to exercise
this right, the Board of Directors may offer
the unsubscribed securities to the other share-
holders, with each shareholder having the
right to acquire the number of securities
applied for unless the issue is oversubscribed
in which case the securities will be allocated
pro rata to shareholders’ existing interests.
b) That any securities not taken up by share-
holders exercising their pre-emptive rights as
described above may be offered to the public.
7°) Gives full powers to the Board of Directors to:
a) Carry out the issues authorized above, deter-
mine the amount and terms of each issue, as
well as the type and form of the securities to be
issued, set the price and other terms of the
issues provided that the amount received by
the Company for each share issued without
pre-emptive subscription rights is at least equal
to the minimum amount prescribed by law.
b) Set the retroactive or future date from which
the new shares will carry dividend rights.
c) Decide that in the case of shares paid up by
capitalizing reserves, income or additional
paid-in capital, shareholders’ rights shall be
non-transferable, that rights to fractions of
shares shall be non-transferable and the
corresponding shares will be sold.
d) If appropriate, limit the amount of issues
carried out under these authorizations to the
value of the subscriptions received, place on
record the resulting capital increases and
amend the bylaws to reflect the new capital.
e) If appropriate, charge the securities issuance
costs against related premiums and deduct
1752 0 0 3 A n n u a l R e p o r t
from the premium the amount required to
raise the legal reserve to one tenth of the new
capital after each capital increase.
f ) Enter to any and all underwriting and
other agreements related to the issues, the
quotation and the servicing of the securities.
g) Generally take all necessary action in accor-
dance with the applicable laws and regula-
tions related to the issues.
8°) Sets at 26 months the duration of this authori-
zation, which supersedes that given by the
fourteenth resolution of the Extraordinary
Shareholders’ Meeting of June 4, 2002.
Fifteenth resolution
(Ceiling for capital increases resulting from the
issuance of shares and share equivalents without
pre-emptive subscription rights under the four-
teenth resolution)
The Extraordinary Shareholders’ Meeting, having
considered the report of the Board of Directors and
the Auditors’ special report:
1°) Authorizes the Board of Directors to increase
the capital on one or several occasions, by
issuing shares and share equivalents, including
stand-alone warrants, as provided for in para-
graph 1 a) of the fourteenth resolution, without
pre-emptive subscription rights.
2°) Resolves that the maximum par value of the
shares issued directly or indirectly under this
authorization may not exceed €150 million and
the maximum face value of debt securities
convertible, redeemable or exercisable for
shares issued under this authorization may not
exceed €400 million. These ceilings and those
set in the fourteenth resolution are not cumula-
tive.
3°) Resolves that share equivalents issued under
the above authorization may be denominated in
euro or in foreign currency or in any other mone-
tary unit determined by reference to a basket of
currencies, within the limit of the authorized
ceiling in euro or the equivalent in foreign cur-
rency or monetary units at the issuance date.
4°) Resolves that the Board of Directors may offer
shareholders a non-transferable priority right to
subscribe for all or part of the issues carried out
under this authorization, for a period and on
terms to be decided by the Board.
5°) Resolves that this authorization automatically
implies the waiver, by existing shareholders,
of their pre-emptive right to subscribe for the
shares to be issued on conversion, redemption
or exercise of share equivalents.
6°) Gives the Board of Directors the same powers to
carry out these issues as those defined in the
fourteenth resolution.
7°) Sets at 26 months the duration of this authori-
zation, which supersedes that given by the
fifteenth resolution of the Extraordinary Share-
holders’ Meeting of June 4, 2002.
Sixteenth resolution
(Authorization to carry out an employee share issue)
The Extraordinary Shareholders’ Meeting, having
considered the report of the Board of Directors and
the Auditors’ special report, resolves, in accordance
with Article L.225-129, section VII, of the Commer-
cial Code:
1°) To authorize the Board of Directors to increase
the capital, on one or several occasions, by a
maximum aggregate amount of €4,400,000 —
not including any adjustments to be made in
compliance with the law — by issuing shares
and share equivalents to the employees or exe-
cutive directors of the Company and any French
and foreign related companies within the mea-
ning of Article L.225-180 of the Commercial
Code, who are members of an employee stock
ownership plan (PEE) set up by the Company.
2°) To cancel shareholders’ pre-emptive right to
subscribe to these issues.
3°) That the Board of Directors may decide to issue
shares or share equivalents without consideration,
provided that the total resulting benefit, as well
as any matching contributions by the Company
and any share discount do not exceed the limits
set in the applicable laws or regulations.
4°) That the new shares will not be offered at a
price in excess of the average of the opening
prices quoted over the twenty trading days pre-
ceding the date of the Board decision setting
the opening date of the subscription periods or
at a discount of more than 20% on this average.
176 2 0 0 3 A n n u a l R e p o r t
TE X T O F T H E P R O P O S E D R E S O L U T I O N S
5°) That the characteristics of any share equivalents
issued under this authorization will be determined
by the Board of Directors in accordance with the
applicable regulations.
6°) To give full powers to the Board of Directors to:
a) Set the terms of any issue of bonus shares or
other share equivalents.
b) Decide on the amount, price and other terms
and conditions of issue.
c) Set the opening and closing dates of the sub-
scription period.
d) Set the period granted to participants to sett-
le the subscription price of the shares or share
equivalents, within the limits prescribed by law.
e) Set the retroactive or future cum rights date
of the new shares or share equivalents.
f ) Set the terms and conditions of transactions
carried out under this authorization and obtain
the quotation of the new securities on any market.
g) Place on record the capital increases resulting
from the subscription of shares, amend the
bylaws to reflect the new capital, carry out –
directly or through a representative – all oper-
ations and formalities related to the capital
increase and, at the Board’s discretion, charge
the share issuance costs against the related
premiums and deduct from the premium the
amount necessary to increase the legal reserve
to 10% of the new capital after each issue,
carry out all filing and other formalities with any
organizations and generally do what is necessary.
7°) To set at two years, the duration of this authori-
zation which supersedes that given in the six-
teenth resolution of the Shareholders’ Meeting
of June 4, 2002.
Seventeenth resolution
(Authorization to reduce the capital by canceling
shares held in treasury stock)
The Extraordinary Shareholders' Meeting, having
considered the report of the Board of Directors and
the Auditors’ special report:
1°) Authorizes the Board of Directors, in accordance
with Article L.225-209 of the Commercial Code,
to reduce the capital on one or several occa-
sions by canceling all or some of the shares held
in treasury stock.
2°) Gives full powers to the Board of Directors to:
a) Carry out the capital reduction or reductions
and determine the amount or amounts thereof,
provided that the capital is not reduced by
more than 10% in any 24-month period, and
set the terms and conditions of the operation.
b)Resolve any opposition to the capital reduc-
tion or reductions.
c) Charge the difference between the purchase
price of the canceled shares and their par
value to the “Treasury stock reserve” account
and, if necessary, against the “Merger premium”
account.
d) Amend the bylaws to reflect the new capital
and carry out any necessary publication or
other formalities.
e) Delegate all necessary powers to implement
the Board’s decisions.
3°) Sets at 18 months the duration of this author-
ization, which supersedes that given by the
tenth resolution of the Extraordinary Share-
holders’ Meeting of June 4, 2003.
Eighteenth resolution
(Amendment of Article 21, third paragraph, of the
bylaws concerning the powers of the Chairman of
the Board, to comply with the new provisions of the
law)
The Extraordinary Shareholders’ Meeting, having
considered the report of the Board of Directors,
resolves to amend the third paragraph of Article 21
of the bylaws to read as follows:
“The Chairman of the Board of Directors organizes
and leads meetings of the Board, and reports on
the Board’s decisions to the Shareholders’ Meeting.
He or she oversees the efficiency and effectiveness
of corporate governance structures and obtains
assurance that directors are able to independently
exercise their judgment.”
Nineteenth resolution
(Powers to carry out formalities)
The Extraordinary Shareholders’ Meeting gives full
powers to the bearer of an original or duplicate
copy of the minutes of the present Meeting, or of
an extract thereof, to carry out all necessary
formalities.
1772 0 0 3 A n n u a l R e p o r t
Statements,AMF checklist
178 2 0 0 3 A n n u a l R e p o r t
STAT E M E N T S , AMF C H E C K L I S T
PERSON RESPONSIBLE FOR THE“DOCUMENT DE RÉFÉRENCE”
Marc Ladreit de Lacharrière
Chairman and Chief Executive Officer
STATEMENT BY THE PERSON RESPONSIBLE FOR THE “DOCUMENT DE RÉFÉRENCE”
To the best of my knowledge, the information
contained in this document is correct and includes
all information required to allow investors to form
an opinion on the assets and liabilities, business,
financial position, results and outlook of the
Company. No information has been omitted that
would be likely to alter an investor's opinion.
Paris, April 19, 2004
Chairman and Chief Executive Officer
Marc Ladreit de Lacharrière
STATUTORY AUDITORS
Statutory Auditors
• CAGNAT & ASSOCIÉS, 22 rue de Madrid, 75008 Paris
(represented by Jacques Cagnat)
First appointed: June 11, 1987
Term renewed: May 28, 1999
Term expires: 2005 Annual Shareholders’ Meeting
• Xavier Aubry, partner at PRICEWATERHOUSECOOPERS
AUDIT, Tour AIG, 34 place des Corolles,
92908 La Défense 2
First appointed: June 17, 1996
Term renewed: June 4, 2002
Term expires: 2008 Annual Shareholders’ Meeting
Substitute Statutory Auditors
• Philippe Cagnat,
First appointed: June 11, 1987
Term renewed: May 28, 1999
Term expires: 2005 Annual Shareholders’ Meeting
• PRICEWATERHOUSECOOPERS AUDIT,
32 rue Guersant, 75017 Paris
First appointed: June 17, 1996
Term renewed: June 4, 2002
Term expires: 2008 Annual Shareholders’ Meeting
STATEMENT BY THE STATUTORYAUDITORS
This is a free translation into English of the Statutory Auditors'
statement issued in the French language and is provided solely for the
convenience of English speaking readers.
In our capacity as Statutory Auditors of Fimalac (the
Company) and as required by regulation COB 98-01,
we have examined in accordance with French
professional standards the information about the
financial position and the historical accounts
included in the “document de référence”.
The “document de référence” is the responsibility
of the Company’s Chairman and Chief Executive
Officer, Marc Ladreit de Lacharrière. Our respons-
ibility is to express an opinion on the fairness of the
information about the financial position and the
accounts contained in the document.
Our procedures, which were performed in
accordance with French professional standards,
consisted of assessing the fairness of the
information about the financial position and the
accounts and verifying that this information agrees
with the audited financial statements, reading the
other information contained in the “document de
1792 0 0 3 A n n u a l R e p o r t
référence” in order to identify any material
inconsistencies with the information about the
financial position and the accounts, and reporting
any manifestly incorrect information that came to
our attention, based on our overall knowledge of
the Company, as acquired during our audit. The
“document de référence” does not contain any
forward-looking information determined according
to a structured process.
We also audited the financial statements of the
Company and the Group for the years ended
December 31, 2001, 2002 and 2003, as approved by
the Board of Directors, in accordance with French
generally accepted auditing standards. We issued
an unqualified opinion on these financial
statements and our reports did not contain any
emphasis of matter.
In accordance with Article L.225-235 of the
Commercial Code requiring the auditors to explain
the basis of their opinion, which is applicable for
the first time this year pursuant to the Act of August
1, 2003 (“Loi de Sécurité Financière”), in our reports
on the financial statements of the Company and the
Group, we stated that our audit opinion was based
in part on the following information:
• Opinion on the financial statements of the
Company
Note 1 to the financial statements describes the
Company’s accounting rules and methods, notably
those relating to investments in subsidiaries.
As part of our procedures, we verified that these
accounting methods were appropriate and ensured
that they had been applied correctly.
• Opinion on the financial statements of the Group
Note 1.8 to the consolidated financial statements
describes the accounting rules and methods
relating to goodwill. It also details the write-
downs recorded during the year. As part of our
assessment of the accounting rules and principles
applied by Fimalac, we verified that the above
accounting methods and information disclosed in
the notes to the consolidated financial statements
were appropriate and ensured that they had been
applied correctly.
Fimalac records provisions to cover certain risks,
as described in Notes 1.15 and 4.12 to the
consolidated financial statements. Our procedures
consisted of assessing the data and assumptions
underlying these estimates and reviewing the
calculations carried out by Fimalac. As part of our
assessment of these estimates, we ensured that
the assumptions used and ensuing valuations
were reasonable.
The assessments were made in the context of our
audit of the financial statements of the Company
and the Group, taken as a whole, and therefore
contributed to the formation of the unqualified
opinions expressed in the first part of our reports
on those financial statements.
Based on the procedures described above, we
have nothing to report with respect to the fairness
of the information about the financial position and
the historical financial statements contained in
the “document de référence”.
Paris, April 19, 2004
The Statutory Auditors
CAGNAT & ASSOCIÉS XAVIER AUBRY
JACQUES CAGNAT PARTNER OF PRICEWATERHOUSECOOPERS AUDIT
180 2 0 0 3 A n n u a l R e p o r t
STAT E M E N T S – AMF C H E C K L I S T
INFORMATION POLICY
Name and address of the persons responsible for
information
Véronique Morali
Chief Operating Officer
Tel: +33 (0)1.47.53.61.75
Fax: +33 (0)1.47.53.61.83
Robert Gimenez
Tel: +33 (0)1.47.53.61.68
Fax: +33 (0)1.47.53.61.57
Website
www.fimalac.com
In application of regulation COB 98-01, the “document de référence” was filed with the Autorité des
Marchés Financiers on April 20, 2004. It may be used in connection with a financial transaction
only in conjunction with an information memorandum approved by the Autorité des Marchés Financiers.
1812 0 0 3 A n n u a l R e p o r t
182 2 0 0 3 A n n u a l R e p o r t
STAT E M E N T S – AMF C H E C K L I S T
Information Page
STATEMENT BY THE PERSON RESPONSIBLE FOR THE “DOCUMENT DE RÉFÉRENCE”
AND THE STATUTORY AUDITORS
Statement by the person responsible for the “document de référence” 178
Statement by the Statutory Auditors 178
Information policy 180
GENERAL INFORMATION
Regulations applicable to the issuer 152 and 153
CAPITAL
Double voting rights and other specific features 153 and 154
Authorized, unissued capital 158
Share equivalents 158
Changes in capital over the last five years 159
MARKET FOR FIMALAC SECURITIES
18-month share performance 162 and 163
Dividends 163
CAPITAL AND VOTING RIGHTS
Current ownership structure 160
Changes in ownership structure 160
Shareholders’ agreements 160
THE GROUP’S BUSINESS
Organization (parent company/subsidiary relations, information on subsidiaries) 16 to 36
Key consolidated figures 10 and 11
Segment information 16, 22, 30, 33
(by business, by geographic area and/or by country)
The issuer’s markets and competitive positioning 19, 23, 28, 32, 34, 35
Investment strategy 55
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Information Page
RISK ANALYSIS
RISK FACTORS 56 to 60
Market risks (liquidity, interest and exchange rates, equity portfolio) 56 to 58
Specific business-related risks 61
(dependence on suppliers, customers, subcontractors, contracts, manufacturing processes, etc.)
Legal risks 58 to 60
(specific regulations, patents and licenses, material claims and litigation, exceptional events, etc.)
Industrial and environmental risks 60
INSURANCE AND COVERAGE OF RISKS 61
ASSETS, FINANCIAL POSITION AND RESULTS
Consolidated financial statements and Notes 100 to 130
Fees paid to the Statutory Auditors and members of their networks 150
Parent Company financial statements and Notes 132 to 147
CORPORATE GOVERNANCE 69 to 97
Board of Directors and Committees of the Board 70 to 90
Board Committees 89 and 90
Directors and officers 91 to 94
(compensation and benefits in kind, options granted and exercised, equity warrants)
Options granted to and exercised by the top-ten employee grantees 97
Regulated agreements 93 to 96, 148 and 149
RECENT DEVELOPMENTS AND OUTLOOK
Recent developments 66
Outlook 67
DIVALI Creative office - Stratégie visuelle38, rue de Turenne - 75003 Paris - FranceTel: +33 1 40 29 46 46e.mail: divali@imaginet.fr
Photos: © Fimalac, Facom, Fitch, LBC, Cassina
“Société anonyme” with a capital of € 163,774,441.60Head office: 97, rue de Lille - 75007 Paris - France
Registered under n°. 542 044 136 RCS ParisPhone: +33 (1) 47 53 61 50 - Fax: +33 (1) 47 53 61 57
www.fimalac.com
Fimalac
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