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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

6

10

10

12

14

16

16

22

30

33

36

37

42

42

45

46

47

48

52

55

56

56

56

57

57

58

58

60

61

61

61

61

65

66

66

66

67

67

2 2 0 0 3 A n n u a l R e p o r t

70

70

83

83

89

89

89

91

91

94

94

95

96

96

96

97

97

97

100

100

130

132

132

147

148

150

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

152

155

155

156

158

158

159

160

162

162

162

163

163

163

163

164

166

169

171

178

178

178

178

180

182

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%


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


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 %


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


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



◆ 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



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




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



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



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



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.


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



5ter, rue du Dôme

75016 Paris


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



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.


(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%


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%



HOLA chairs by Hannes Wettstein


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.


(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



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%


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:


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.



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.



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


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:


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:


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:


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


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.


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



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:


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.



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

68 2 0 0 3 A n n u a l R e p o r t

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


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



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:


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



Number of shares held at December 31, 2003:

13,792


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.



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




Number of shares held at December 31, 2003: 74


732 0 0 3 A n n u a l R e p o r t


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.


Chairman

Le Portefeuille Diversifié

Chairman of the Supervisory Board


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







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.


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



74 2 0 0 3 A n n u a l R e p o r t



7,133


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.


Chairman

Parande Développement (Euris Group)

Director

Axa Investment Managers

Fimalac

Rue Impériale


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





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


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


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


Philippe LAGAYETTE

Director

Director of JP Morgan & Cie SA

Born on June 16, 1943; age: 60

First elected: May 23, 2003




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.



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


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


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


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.


Director

JP Morgan & Cie SA

Eurotunnel

Fimalac

La Poste


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







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


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.



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



Chairman of the Fimalac Audit Committee


Director

Fimalac

Fitch France SA

Minerais & Engrais


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






14,704


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






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


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.



Géodis

Director

Ligue de Football Professionnel

Zust Ambrosetti SpA


S.I. Finance

Transports Bernis

Permanent representative of Géodis

Bourgey Montreuil

Calberson

Géodis Logistics

Géodis Overseas France

Teisa

Permanent representative of Fimalac

Participations

Fimalac


792 0 0 3 A n n u a l R e p o r t

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


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.


Chairman

Tawa UK Ltd (UK)

Director

Crédit Lyonnais

Sanofi Synthelabo

Schneider Electric


Harwanne Compagnie de Participations

Industrielles et Financières SA (Switzerland)


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



(as non-voting director)

Term expires: 2004


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


Director

LBC

Auditor

FCBS Gie

80 2 0 0 3 A n n u a l R e p o r t

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


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



Schneider Electric

Director

Ansa

Finaxa and various other subsidiaries of the Axa Group

Vivendi Universal


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


Term expires: 2004


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.


812 0 0 3 A n n u a l R e p o r t


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.



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


Chairman

Groupe Euris


Rallye


Casino, Guichard-Perrachon

Euris

Finatis

Director

Crédit Commercial de France

Continuation Investments NV



Non-voting director

Fimalac

Managing Partner

Rothschild & Compagnie Banque

Manager

SCI Penthièvre Seine

SCI Penthièvre Neuilly



Etienne PFLIMLIN

Non-voting director

Chairman of Banque Fédérative du Crédit Mutuel

Born: October 16, 1941; age: 62


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”


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


Term expires: 2004


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.


Chairman

Ansa

Honorary Chairman

Air Liquide

Director

Groupe Danone

L’Oréal

Sodexho Alliance


Air Liquide

Non-voting director

Fimalac




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.


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


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.


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.


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


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


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


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


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


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


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 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 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 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.


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.


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



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


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



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


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



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



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


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


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


Fimalac / Rhénaméca 46,851 - (14,972) 31,879

Other 12 - (2) 10

Badwill 46,863 - (14,974) 31,889

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



(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:


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



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


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



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



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



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:


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




(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


(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



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



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



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

1292 0 0 3 A n n u a l R e p o r t

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


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




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 - - - - -


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


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


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



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


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


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


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)


MINERAIS & ENGRAIS S.A.R.L 243,980 168,145

97, Rue de Lille - 75007 Paris

FINANCIÈRE BOULOGNE TECHNOLOGIES SARL 29,212 8,792


LBC S.A. 63,525 67,107

5 ter, rue du Dôme - 75116 Paris

FINANCIÈRE PORTEFOIN S.A.S 32,171 17,827


RHENAMECA S.A. 22,728 3,719


SOCIÉTÉ DE CADRES FACOM SARL 2,160 1,241


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)



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.


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


In accordance with the law, we have verified that all

information concerning the identity of shareholders is

given in the Directors’ report.



CAGNAT & ASSOCIÉS XAVIER AUBRY


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)



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.


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.





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


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.





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)


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)


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


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.

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

172 2 0 0 3 A n n u a l R e p o r t


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.

1732 0 0 3 A n n u a l R e p o r t

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)


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.

174 2 0 0 3 A n n u a l R e p o r t


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)




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 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


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



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)


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



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.



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


Term renewed: June 4, 2002


Substitute Statutory Auditors

• Philippe Cagnat,


Term renewed: May 28, 1999


• PRICEWATERHOUSECOOPERS AUDIT,

32 rue Guersant, 75017 Paris


Term renewed: June 4, 2002


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”.





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


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

1832 0 0 3 A n n u a l R e p o r t

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: [email protected]

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

gb ¥quad fimalac 2003 · 2017-11-02 · consolidated debt. the total corresponds mainly to the...

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