• Annual report 2010
• Annual report 2009
• Annual report 2008
• Annual report 2007
• Annual report 2006
• Annual report 2005
• Annual report 2004
• Annual report 2003 (French GAAP)
• Annual report 2002 (French GAAP)

Close

• 2011 first-half report
• 2010 first-half report
• 2009 first-half report
• 2008 first-half report
• 2007 first-half report
• 2006 first-half report
• 2005 first-half report

Close

• 2011 third-quarter sales
• 2011 first-quarter sales
• 2010 third-quarter sales
• 2010 first-quarter sales
• 2009 third-quarter sales
• 2009 first-quarter sales
• 2008 third-quarter sales
• 2008 first-quarter sales
• 2007 third-quarter sales
• 2007 first-quarter sales
• 2006 third-quarter sales

Close

Management Committee

Mission

The purpose of the Management Committee, led by the Chairman and Chief Executive Officer, is to address operational issues related to the development of the company.

Composition as of December 31, 2011

Philippe Benacin, Chairman and Chief Executive Officer.

Philippe Santi, Executive Vice President, Chief Financial and Administrative Officer.

Frédéric Garcia-Pelayo, Executive Vice President, Chief International Officer.

Hugues de la Chevasnerie, Vice President, Burberry Fragrances.

Angèle Ory-Guénard, Vice President, Export Sales Burberry Fragrances

Jérôme Thermoz, Vice President, French Distribution.

Axel Marot, Vice President, Production & Logistics.

Conseil d'administration

Interparfums adopted the form of a société anonyme, the French equivalent of a joint stock company, when it was created in 1989. It is governed by a Board of Directors and a Management Committee.

On March 8, 2010, the Board of Directors of the company decided to refer to the Middlenext code of December 2009 designed for Small and Mid Caps, after reviewing the points requiring special attention ("points de vigilance") set forth therein, duly noting the main issues relating to effective corporate governance.

Composition of the Board of Directors

To strengthen the Board of Directors of initially four members by drawing on an expanded range of expertise and experience, new members originating from the luxury industry sector were appointed in 2004. On December 31, 2011 the Board of Directors had 10 members.

When the terms of office of the directors were up for renewal, the General Meeting of April 23, 2010 decided to set terms of office of four years to comply with recommendations of the Middlenext Code. This decision seeks to reconcile the objective of assuring the independence of the directors by preventing terms that are too long, and their commitment to the company by preventing terms that are too short.

The Board ensures that at least 30% of its members are independent directors. A director is considered to be independent according to the criteria of the Middlenext Code when there exists no material financial, contractual or family relationship that could compromise their free exercise of judgment whereby the director may not:

• Be a current employee or corporate officer (mandataire social) of the company or a company of its group or have been so within the past three years;
• Be a significant customer or supplier of the company or its group, or for which the company or its group represents a significant part of its business;
• Be the main shareholder of the company;
• Be related by close family ties to a corporate officer or a main shareholder;
• Have been an auditor of the company within the previous three years.

On the basis of these criteria, the Board includes three independent directors, Chantal Roos, Maurice Aladhève and Michel Dyens.

To date, the Board has three members having the status of employee resulting from an employment contracts predating their appointment as directors.

As a general rule, members of the Board of Directors have an in-depth or multidisciplinary experience of the business world in international markets. They are subject to conduct of business rules, specified in the Board Charter (Règlement Intérieur) that includes notably obligations of secrecy and due diligence in the performance of their duties ensuring the effective collegial work of the Board. Directors are provided not only with information before each meeting but also on a permanent basis concerning all strategic and financial matters necessary to perform their duties in the most effective manner.

The Board Charter adopted on March 3, 2009 has been revised to incorporate the recommendations of the Middlenext Code of December 2009 and is reproduced below in full.

Composition of the Board and profiles

As of December 31, 2011 the composition of the Board of Directors was as follows:

Philippe Benacin, Chairman and Chief Executive Officer of Interparfums.
Date of 1^st appointment: January 3, 1989.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: 4 rond-point des Champs Elysées, 75008 Paris, France.

Philippe Benacin, 53, a graduate of the ESSEC business school and cofounder of the company with his partner Jean Madar, has served as Chairman and Chief Executive Officer of Interparfums SA since its creation in 1989.
Other appointments: Chairman of the Board of Directors of Interparfums Holding, President and Vice Chairman of the Board of Interparfums Inc. (United States).

Jean Madar, Director.
Date of 1^st appointment: December 23, 1993.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: 4 rond-point des Champs Elysées, 75008 Paris, France.

Jean Madar, 51, a graduate of the ESSEC business school, is the cofounder of the company with his partner Philippe Benacin.
Other appointments: Chief Executive Officer of Interparfums Holding, Chief Executive Officer and Chairman of the Board of Interparfums Inc. (United States).

Maurice Alhadève, Independent director.
Date of 1^st appointment: Annual General Meeting of April 23, 2004.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: 16 rue de Molitor 75016 Paris, France.
Other appointments: none.

Patrick Choël, Director.
Date of ^1st appointment: General Meeting of December 1, 2004.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: 7 rue de Talleyrand 75007 Paris, France.
Other appointments: Director of Interparfums Inc. (United States), Director of Parfums Christian Dior, Director of Guerlain, Director of Modelabs.

Michel Dyens, Independent director.
Date of ^1st appointment: Annual General Meeting of April 23, 2004.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: Michel Dyens & Co, Other appointments: Chairman of Michel Dyens & Co., Managing Partner of Varenne Entreprises.
Previous appointments: Director of Direct Panel.

Frédéric Garcia-Pelayo, Administrateur et Directeur Général Délégué.
Date of 1^st appointment: Annual General Meeting of April 24, 2009.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: 4 rond-point des Champs Elysées, 75008 Paris, France.

Frédéric Garcia Pelayo, 53, EPSCI international exchange program graduate of the ESSEC Business School, has been Vice President for Export Sales of Interparfums since 1994 and Executive Vice President since 2004.
Other appointments: none.

Jean Levy, Director.
Date of 1^st appointment: Annual General Meeting of April 23, 2004.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: 17 rue de Margueritte, 75017 Paris, France.
Other appointments: Director of Interparfums Inc. (United States), Director of Axcess Groupe SA, Director of Rallye SA.
Previous appointments: Director of Price Minister SA, Director of MoM SAS.

Chantal Roos, Independent director.
Date of 1^st appointment: Annual General Meeting of April 24, 2009.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: CREA, 168 avenue Charles de Gaulle, 92200 Neuilly sur seine, France.
Other appointments: Managing Partner of CREA.
Previous appointments: Chairman and Chief Executive Officer of Yves Saint Laurent Beauté.

Philippe Santi, Director and Executive Vice President.
Date of 1^st appointment: Annual General Meeting of April 23, 2004.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: 4 rond-point des Champs Elysées, 75008 Paris, France.

Philippe Santi, 50, graduate of the Ecole Supérieur de Commerce of Reims and a public accountant has served as the Chief Financial and Administrative Officer of Interparfums ^SA since 1995 and as Executive Vice President since 2004.
Other appointments: Director of the parent company Interparfums Inc.

Catherine Bénard-Lotz, Director.
Date of 1^st appointment: Annual General Meeting of April 23, 2004.
Date of last renewal: Annual General Meeting of April 23, 2010.
Professional address: 4 rond-point des Champs Elysées, 75008 Paris, France.

Catherine Bénard-Lotz, with an advanced degree in business law from the University of a Paris, has served as Interparfums' Chief Legal Officer since 1994.
Other appointments: none.

Absence of condemnations

To the best of the Company's knowledge, in the last five years none of the members of the Board of Directors have been:

• Convicted for fraud or penalties for infractions rendered by statutory or regulatory authorities;
• Been a party in a bankruptcy, receivership or liquidation proceeding as a director or officer;
• Disqualified from serving as a director or officer or participating in the management of the operations of an issuer.

Absence of potential conflicts of interest

To the best of the Company's knowledge, there exist no potential conflicts of interest between the duties towards the company and the personal interests and/or other duties of one of the members of the board.

Absence of service contracts with Board members

To the best of the Company's knowledge, none of the Board members is bound by service agreements with the company or one of its subsidiaries providing for the grant of benefits under its terms.

Chairman's report on board practices and internal control

Pursuant to the provisions of article L.225-37, of the French Commercial Code the Chairman of the Board of Directors hereby reports on the:

• Terms and conditions governing the preparation and organization of the Board's work;
• Internal control and risk management procedures implemented by the company.

This report has been produced on the basis of work undertaken by the Finance and Corporate Affairs Department, in collaboration with the operating departments of the company and exchanges with the statutory auditors.
This report was submitted for approval to the Board of Directors on March 7, 2011.

1. Preparation and organization of the board's work

1.1 The company's corporate governance code

For the development of its corporate governance policy and notably the report of the Chairman provided for by article L.225-37 of the French Commercial Code, on March 8, the Board of Directors decided to refer to the code of corporate governance of December 2009 for Small and Mid Caps developed by Middlenext and approved by the AMF as the code of reference. Board members also duly noted the points requiring special attention set forth therein highlighting the main questions that must be raised to ensure effective governance.

1.2 Composition of the Board of Directors

Under the company's bylaws, the Board of Directors may have three to eighteen members.

At December 31, 2010, corporate governance of the company was overseen by a Board that included ten directors three of which qualified as independent directors. In addition to their financial and managerial expertise, their knowledge of the luxury sector contributes to the quality and professionalism of the Board's discussions. Detailed information on the composition of the Board of Directors and their appointments is disclosed in Section 1 registration document (annual report) on corporate governance.

Following the adoption of the twenty fifth resolution of the General Meeting of April 23, 2010 that voted to reduce the terms of Directors when their appointments were renewed at this meeting, Directors are appointed for terms of office of four years.

1.3 Charter of the Board of Directors

The Board of Directors adopted a Charter defining the operating rules of the Board and the terms of a code of conduct for directors that supplement the provisions provided for by the law and the company's bylaws. The main provisions of this charter are as follows:

• The composition, role, organization and operating procedures of the Board;
• The functions of audit committee exercised by the Board of Directors in plenary session;
• The rules of conduct applicable to members of the Board of Directors;
• Compensation of Directors;
• Rules governing transactions involving the company's shares in accordance with the provisions of the French Monetary and Financial code and the AMF General Regulation.

This Board Charter is destined to regularly evolve to take account into the application of new regulations and recommendations in force and in response to proposals by directors in order to ensure the optimal effectiveness of the Board's work. Modifications were made to this Charter by the Board on March 8, 2010.

The full text of this Board Charter is published in the registration document of the company.

1.4 Board practices

Meetings

The Board may meet as often as the interests of the company require and at least five times a year at the request of the Chairman and according to a calendar jointly established that may be modified at the request of directors or when justified by unforeseen events.
The Chairman represents the Board of Directors. He organises the work of the Board and reports on this work to the General Meeting. The work of the Board is carried out in a collegial framework and in a manner that complies with the laws, regulations and recommendations. Accordingly, the Chairman of the Board of Directors ensures directors are provided with information in advance and on a regular basis, that constitutes an essential condition for the performance of their duties.

Evaluation of the Board's work

In accordance with the fifteenth recommendation of the Middlenext Code of corporate governance that is included in the Board charter, on March 7, 2011, for the first time members evaluated Board practices and the preparation of its work through a questionnaire sent to each Director on notably:

• The missions assigned to the Board;
• The functioning and composition of the Board;
• The meetings and quality of the discussions;
• Directors' access to information.

For fiscal 2010, the functioning of the Board was considered overall satisfactory. Directors emphasized the quality and exhaustive nature of discussions of the meetings and the freedom of expression that prevailed in the exchanges. Suggestions for improvements for a limited number of points were also taken into consideration for the coming year.

Powers and missions of the Board of Directors

In line with the option adopted by the Board of Directors on December 29, 2002, in light of the company's structure and the active participation of the founder in its development, the Board decided not to separate the functions of Chairman of the Board of Directors with that of Chief Executive Officer (Directeur Général). In consequence Philippe Benacin, who exercises the functions of Chairman of the Board of Directors, also serves as the Chief Executive Officer of the company. As such he is vested with all powers in respect to third parties to act under all circumstances in the name of the company and within the limitations expressly provided by law granted to the Board of Directors or shareholders meetings, and in compliance with the general and strategic orientations defined by the Board of Directors.

Decisions having a material impact on the scope of consolidation or that could materially affect the company's strategy must be submitted to the Board of Directors for approval or subject to a delegation of authority for this purpose by the Board. This limitation is specified in the Board Charter.

The Board of Directors determines strategic priorities of the company and ensures that they are implemented. Subject to the powers granted to shareholders' meetings and within the limits of the company's charter, the Board considers any matter relating to the proper management of the company.

It issues decisions concerning the holding of multiple appointments or the separation of the appointments of Chief Executive Officer (Directeur Général) and Chairman of the Board, appoints corporate officers, imposes possible limits on the authorities of the Chief Executive Officer, approves the draft report of the Chairman, performs controls and verifications it considers appropriate, in respect to management control and the fair presentation of accounts, reviews and approves the financial statements, and ensures the quality of financial information provided to shareholders and the market.

In the period ended December 31, 2010, the Board of Directors met 11 times and addressed the following items of business:

• Review of the parent company statutory and consolidated financial statements for the fiscal year ended December 31, 2009 and the interim financial statements and the notice of the Annual General Meeting;
• Review of the fiscal year 2010 budget and outlook;
• Capital increase through the capitalization of reserves;
• Setting the Chairman's remuneration;
• Authorizations concerning agreements in accordance with Articles L.225-39 et seq. of the French Commercial Code;
• Analysis of financial information disclosed by the company to shareholders and the market;
• Analysis of the major strategic, economic and financial priorities of the company;
• Analysis of the proposal to extend by one year certain contractual terms of the Burberry license agreement, and notably the term of the license agreement and the exercise of the option by Burberry to buy the license agreement;
• Examination and authorization of external growth projects, notably license agreements for brands;
• Approval of the change of the information system and the construction of a new warehouse;
• Grants of new stock options to salaried personnel as well as corporate officers.

Auditors attend Board of Directors' meetings held to consider the company's accounts or any other matters regarding which they may provide Board members an informed opinion.

The Board has not deemed it necessary to date to form special committees, and notably a nominating or remuneration committee, in part because of the nature of the organization of the company and its business model, and in part because of the extensive in-depth experience directors have in respect to the world of business and the international markets of competitors. This type of organization contributes to flexible decision-making processes. With this objective, the Board decided to apply the exemption provided for under the provisions of Article L.823-20 of the French Commercial Code for exercising the audit committee functions when operating in a plenary session. On that basis, in 2010 the Board of Directors reviewed the following points following the audit of the financial statements for the fiscal year ended December 31, 2009:

• Review of the valuation tests for the company's assets;
• Review of the accounting treatment for currency hedges;
• Review of the separate financial statements of subsidiaries;
• Review of litigation;
• Summary of the self-assessment tests of internal control procedures.

The Board of Directors improved the audit function committee capabilities in the period by appointing two members to the Board on November 15, 2011 with responsibility for leading discussions with respect to monitoring the preparation of accounting and financial information: Patrick Choël, Director, serves as the Chair and Maurice Alhadève, Independent Director.

Transmission of information to directors

Directors are provided with all relevant documents and information to effectively perform their duties. Before each Board meeting, directors receive:

• A meeting agenda established by the Chairman in coordination with General Management and, when applicable, directors proposing items to be discussed;
• An information file concerning issues to be addressed under the agenda requiring particular analysis for the purpose of an informed discussion, during which directors may ask relevant questions to ensure their adequate understanding of the matters addressed;
• And, when useful, press releases that have been published by the company as well as significant press articles and reports of financial analysts.

In addition to information provided in connection with Board meetings, directors are regularly provided with all significant information concerning the company. They may request any explanation or the issuance of additional information, and in general, formulate any requests for access to information they may consider useful.

1.5 Directors' fees

Directors' fees are allocated exclusively to outside non-executive officers of the Board of Directors, namely, Chantal Roos, Jean Levy, Patrick Choël, Maurice Alhadève and Michel Dyens. The total amount granted by the General Meeting is freely allocated by the Board of Directors to each member on the basis of their rate of attendance.

1.6 Participation in shareholders meetings

Under the terms of article 19 of the company's bylaws all shareholders have a right to participate in General Meetings, personally or through a proxy, regardless of the number of shares they hold, upon simple justification of their identity and ownership of the shares.

1.7 Disclosures provided for under article L.225-100-3 of the French Commercial Code

To the best of the company's knowledge there exist no items, and notably those relating to the structure of the share capital that could have a potential impact in the event of a public offering. The structure of the share capital as well as the equity interest that have been brought to the company's attention and any other information relating thereto are described in chapter 2 of the section on shareholder information of this registration document. Similarly, rules concerning the appointment and revocation of members of the Board of Directors are subject to the rules of common law.

2. Internal control and risk management procedures

2.1 Definition

The company's internal control procedures have in large part been based on the guidelines established by article 404 of the Sarbanes Oxley Act that applies to the US parent company because it is listed on a New York Stock Exchange. The principles determined therein are in part provided for under the AMF guidelines of January 2007 completed by the guidelines for Small and Mid Caps of January 9, 2008 and updated on June 14, 2010.

The internal control and risk management system constitutes a set of procedures defined and implemented by the company under the responsibility of General Management for the purpose of ensuring:

• Compliance with laws and regulations as well as the framework defined by the company's internal values;
• The application of instructions and priorities set by general management;
• The effective application of internal processes notably concerning the protection of corporate assets;
• The reliability of financial information.

And, more generally, it contributes to the effective management of its activities and operations and the efficient use of resources.

The aim of this system is to prevent and manage risks resulting from the activity of the company and risks of errors or fraud, particularly in areas relating to the protection of the company's assets as well as accounting and finance.

However, no system of internal control can provide an absolute guarantee of achieving these objectives. The probability of achieving such objectives is subject to limits inherent in any system of internal control, related notably to uncertainties concerning the external environment, the exercise of judgment or problems that may arise in response to human error or simple error, and the need to perform cost-benefit analysis before implementing any controls.

2.2 Components of the internal control system

The Company's internal control system is based on the following principles:

• Clearly define responsibilities in preparing, implementing and ensuring the management of internal control procedures;
• Identifying, analysing and handling risks;
• Ad hoc assessments conducted on a periodic basis of the effectiveness of internal controls.

2.2.1 The internal control environment

Organization of the company

The company is organized around two divisions. The operating division encompasses the departments for Export Sales and French Sales, Marketing and Production and Development whereas the division including the support functions is placed under the management of Finance and Corporate Affairs.

The line management departments, assisted by the technical expertise provided by the support functions, coordinate the implementation of objectives and achieving the operating results set by General Management. To this purpose, they participate in the internal control procedures when key operating processes associated with sales to distributors and the management of the company's image have an impact on assets and/or results.

Integrated into the framework of internal control, the departments for support functions cover all processes relating to the management of resources (cash management, human resources, compliance with tax obligations, settlement of trade payables and receivables, the processing and communication of accounting and financial information, monitoring legal and regulatory developments, etc.). They also have a role in defining and communicating policies and information about good practices for the Company's activity and ensure their effective application in compliance with applicable laws and regulations, maintaining a safe environment and the reliability of financial information.

This organization has demonstrated its strength and relevance based of the achievement of real synergies with the operating and functional departments. It is also based on an objective of promoting the convergence of the resources of the different divisions involved and the principle of a decentralized organization combining the advantages of flexibility and the delegation of responsibilities necessary for ensuring the optimal and coherent application of the strategic objectives set by general management.

The Company also consolidates seven foreign subsidiaries and, to this purpose, applies to them the Group's internal procedures relating to the preparation and processing of accounting and financial information.

Key components of the internal control system

These features are based on rules and procedures as well as initiatives undertaken to raise awareness among management bodies and staff about the internal control and risk management principles adopted within the Company. These rules and procedures make it possible to ensure that the instructions of General Management are concretely implemented at the level of the operating and support function activities.

The internal procedures manual

This tool formalizes a certain number of internal procedures considered essential for the effective operations of the company in a secure environment. This manual details the main operating and financial processes covering notably sales/customers, sourcing/suppliers, inventory, cash management/budget, accounting procedures, IT systems and personnel/payroll. This manual also describes the procedure for expense requests and bank accounts signature authorizations.

Code of good conduct

A priority for managing human resources is to ensure that profiles effectively match the corresponding responsibilities while adhering to the key values: prudence, pragmatism, responsiveness, high standards, transparency and loyalty. Contributing to the expertise and know-how of a team of men and women sharing a common culture of commitment to integrity and high standards that distinguish the Company thus constitutes an important part of internal control. These values are set forth in a Code of Good conduct that provides guidelines on professional conduct to be adopted, notably in the areas of compliance with laws and regulations, preventing conflicts of interest and financial transparency in order to prevent situations of fraud. This Code is signed by the recipient and remitted to all new employees who join the Company.

Self-assessment questionnaire

This questionnaire has been drafted according to principles of internal control that are consistent with the Company's activities. It is reviewed annually by line management both for operating and support function departments. This questionnaire covers notably:

• Corporate governance practices: the internal control environment reflecting the general tone set by General Management, the level of awareness of the Board of Directors and the Management Committee concerning priorities for control, procedures and methods and the organization of the Company as well as the resulting actions;
• The analysis of risk: this covers the identification and analysis of major risks incurred in implementing objectives set by the Company to subsequently determine the risk management approach to be adopted;
• Information and communication systems: these systems permit the identification, input and exchange of information according to the conditions that enable management and staff concerned to exercise their responsibilities.

Information System Charter

This document defines the rights and obligations of employees, users of the information system, to ensure that the information technology resources are used in a secure environment complying with the procedures of internal control. It is signed by all users and made available to all new employees who undertake to comply with its provisions.

2.2.2 Key participants in internal control procedures

The Board of Directors

In connection with information provided to the Board, its members review all the main characteristics of the internal control procedures and system and more particularly examine them in accordance with their audit committee functions exercised in plenary session. The Board may exercise its authority to request verifications and controls it considers appropriate to ensure the transparency, effectiveness and security of the internal control environment.

General Management

This includes the Chairman and Chief Executive Officer, assisted by two Executive Vice Presidents. They define the major strategic priorities, approved by the Board of Directors, to achieve the commercial and financial objectives of the company. This is done by providing clearly defined internal procedures and an internal control system for which they are directly responsible. They define the general principles and ensure the implementation of the different components of internal control.

Management Committee

This Committee includes management from the operating and support function departments who report directly to the Chairman and Chief Executive Officer. This body focuses on strategic issues, monitoring performance and proceedings covering important issues relating to the company's organization and projects. It ensures that the policy for internal control is effectively implemented and monitors the work carried out for this purpose as well as the corresponding action plans. Each Management Committee member is responsible for ensuring that the common rules and principles comprising the framework of the internal control system are applied and understood in the departments under his or her responsibility.

The Finance and Corporate Affairs Department

Placed under the authority of General Management, this department is responsible for implementing the internal control to prevent and manage risks resulting from the Company's activities, and notably accounting and financial risks, including errors or fraud. To this purpose, it must ensure that the ongoing controls implemented are necessary and adequate and are correctly applied and effective in safeguarding the Company's assets against all potential incidents. The Finance Department also provides technical support to operating departments by establishing operating procedures, defining and promoting the use of tools, procedures and good practices essential for effective application by the latter of the objectives defined by General Management. In addition, it centralizes and consolidates financial and accounting information for all Group entities. It furthermore ensures the consistent nature of this information in relation to the budget approved by General Management and the Board of Directors and that such information is adequately supported.

It is also responsible for ensuring that General Management and the operating departments are aware of legal issues. To this purpose, it monitors legal and regulatory developments and takes measures to avoid exposure to potential criminal risks and risks related to commercial law and intellectual property rights. It is also responsible for managing litigation and disputes in close collaboration with outside legal counsel and attorneys, as well as drawing up and reviewing the main contracts of the Company.

Internal Audit

In light of the company's size and organization and in order to maintain the current flexibility of the organization of its internal control, a full-fledged internal audit department has not been established. In contrast, the Internal Control Manager, performs, with the consent of General Management, ad hoc internal audits on a periodic basis, drawing on the work carried out by an independent external audit firm. The purposes of these missions are determined on the basis of the frequency of previous audits and the context in which the line management and support departments operate with respect to controls and risks.

2.2.3 Internal control procedures

Internal control procedures, established by the Finance Department and approved by General Management, are designed to secure the different processes used to achieve the objectives set by the Company. To this purpose, controls performed at every level of responsibility, are based primarily on the application of standards and procedures. These procedures are organized around the following key areas identified as representing potential risks:

Operating processes

• Sales/trade receivables management/collection: this process ensures that all deliveries made and/or services rendered are invoiced within the specified period and invoices are properly recorded in the trade receivables accounts. It also determines procedures for issuing credits which must be justified and controlled before being booked. This procedure makes it possible to identify potential doubtful trade receivables and anticipate risks of default.
• Purchasing/management of trade payables: this process is formalized by procedures based, on the one hand, on the separation of the functions for placing orders and for authorizing orders, acceptance, the recording of the transactions in the accounts and payment of suppliers, and on the other hand a process for monitoring and reconciling purchase orders, receiving slips and invoices (quantity, price, terms of payment) supplemented by a procedure for preventing dual recognition/payment of supplier invoices. Eventually anomalies are analyzed and monitored;

Accounting and financial processes

• Cash management: controls in place are destined to ensure that bank accounts are reconciled on a regular basis with information received from the banks and reviewed periodically in order to document and explain eventual variances; The Company has also implemented a system for hedging foreign exchange risk related notably to transactions conducted in US dollars. The amount of hedges as well as the exchange rate targets are the subject of regular discussions between the Finance Department and General Management and are reported to the Board of Directors;
• Budget process: control, in this context, consists of ensuring that annual budget is established according to the instructions of General Management and that actual performances are monitored through regular reporting tools based on data obtained from the operating departments with the primary objective of analysing actual performances in relation to forecast and prior periods. This review of "forecasts versus actual" makes it possible to identify potential inconsistencies, errors or omissions and make the appropriate management decisions to correct the corresponding data (revenue, operating expenses, etc.).
• Preparing financial and accounting information: the review of the fair presentation and consistency of account closing procedures to ensure a reliable consolidation consistent with data collected and submitted to the Finance Department;
• Information systems management: this process is destined to ensure the development and maintenance of computer applications and the network, the logical and physical security of the information system, providing for a backup plan to guarantee confidentiality of information and ensure the security of systems and applications for the continuity and the resumption of activity in the event of an incident.

2.2.4. Identifying, analysing and managing risks

Risk management constitutes an integral part of the internal control process.

Risk management responsibilities are exercised at every reporting level of the Company. Staff, line management and support function management actively intervene as participants with a direct stake in an approach focused on internal controls of the processes they supervise, within the framework of missions defined by General Management, their organization and contributions to critical decisions. To this purpose, they possess the knowledge and information necessary to establish, operate and oversee the internal control procedures in relation to the objectives that have been set for them. An in-depth analysis of the separation of operational and control tasks was undertaken to effectively address the objectives of control.

The mapping of Group risks launched in 2004 and regularly updated since, has made it possible to classify risks into four categories: operating risks, risks related to international operations, environmental and employee-related risks and risks related to the financial environment that are presented in detail in Chapter 3 of the management report. As the company's activity and organization evolves, this risk mapping is regularly updated.

This mapping constitutes a basis for analysis for the purpose of verifying the validity of the measures adopted to improve and strengthen internal control procedures. This makes it possible to identify risk areas, and for each of these areas, the risks that could have a potential financial impact. Risks thus identified are then evaluated to determine their potential impact and likelihood of occurrence. Each risk identified and evaluated is monitored to ensure that all procedures destined to reduce its scope are correctly implemented. Activities of control

These controls are carried out within the framework of the plan for the self-assessment of internal procedures to contribute to a better understanding and the appropriation of internal control procedures, ensure their correct application and, if necessary, improve procedures currently in force. These periodic reviews make it possible to measure progress in implementing programmed actions, changes since the previous self-assessment and adopt new procedures that may be identified as necessary through this process.

This process of self-assessment is undertaken annually with the assistance of an outside independent audit firm. This involves identifying key assets of the company, analysing potential risks, existing or emerging, by type of task assigned to each department concerned and meetings with the operating departments concerned.

If processes and the associated controls are not formalized or are considered insufficient, a remediation plan or corrective actions are implemented and monitored by the manager concerned.

On completion of this self-assessment process, the Finance Department submits executive summaries on this work to the General Management and the Board of Directors. It also reports the results of this self-assessment to the Management Committee so its members can ensure that management of the divisions are aware of the results of the work and the issues at stake in implementing remediation plans in response to the dysfunctions identified or those that could result from inadequate controls.

The test of internal control procedures conducted in 2010 resulted in the performance of 80 controls focusing on 67 areas of risk relating notably to sales and purchasing activity, license royalties, advertising expenses, inventory, cash management, closing activities, payroll management and information systems.

This self-assessment did not identify any incidents considered material or that could potentially called to question the effectiveness of internal control procedures, even if certain weaknesses were identified, indicating the need for reinforcing upstream the formalized application of certain procedures. An effective remediation plan was immediately drawn whose implementation will be regularly monitored by the Management Committee.

This work also concerns the organization of information systems department, the evaluation of general IT controls, the management of operations, projects and security and the policy for ensuring the availability and continuity of service of systems. This audit identified weaknesses at the level of security management followed by a remediation plan that was immediately implemented.

The review of information systems highlighted in 2009 and 2010 highlighted a need to evaluate the level of security for the company's information system in response to both external (internet) and internal threats. To this purpose, intrusion tests were performed on:

• The company's new corporate website;
• Infrastructure accessible via the Internet;
• The Internet network of companies hosting company data.

These intrusion tests indicated and overall satisfactory level of security even though certain improvements are still required notably with respect to access to applications for managing human resources, placing orders and access to the internal network. Measures were immediately adopted to strengthen the level of security.

2.3 Internal control procedures relating to accounting and financial information

2.3.1. Process for managing the accounting and financial organization

Organization

Internal control procedures applicable to accounting and financial data are prepared and implemented under the responsibility of the Finance Department and the oversight of General Management in the following areas: financial communications, accounting, consolidation, management control, cash management, information systems and compliance with laws and regulations. To achieve this objective, it is supported by the managers of the different teams of the Finance Department (Finance, Accounting, Management Control, Consolidation, Human Resources, Cash Management, Information Systems and Legal Affairs).

Relations with statutory auditors

In connection with the half yearly and annual closings of the accounts, the statutory auditors organize their work by undertaking:

• A prior review of procedures and internal control tests;
• A meeting prior to the approval of the accounts to define the program of reviews and the calendar and organization of their work;
• An audit of the financial statements prepared by the Finance Department;
• A meeting presenting a summary of their work to General Management.

On this basis, the statutory auditors certify the fair presentation of the separate parent company and consolidated financial statements.

Application of accounting standards

The accounting department has a process for identifying and processing changes in accounting standards and the approval of the resulting procedures for accounting treatment. Similarly, there exist procedures to ensure the accounting department is informed of changes in Group practices that could affect the methodology or procedures for recording transactions. The scope of accounting management is constantly updated.

Organization and security of information systems

The company uses an ERP application that integrates sales management, financial accounting, subsidiary accounts and cost accounting capabilities. The organization and operating of the entire information system is subject to measures that limit the conditions of access to the system, the validation of processing and closing procedures, conservation of data, and verification of entries.

To ensure continuity in processing accounting data, backup systems and a continuity plan have been implemented in the event of a sudden dysfunction. In addition, all data is backed up daily and a copy kept in a secure location. In terms of conservation and protection of data, a procedure for secure access to accounting and financial data has been developed involving the designation of individual and personal rights assigned to specific persons accompanied by passwords.

In 2009, a Business Continuity Planning (BCP) was implemented involving the use of virtualization technology on internal servers in order to ensure efficient backup system in the event of any equipment failure. In 2010 and early 2011, an IT recovery plan was deployed to strengthen these measures to secure the information system, duplicating computer data at an external "dormant site"as a precaution in the event of malfunctions.

In response to needs resulting from its growth, the company decided to revamp its information system by deploying the SAP enterprise application that will cover virtually all the operating and functional processes of its business (finance, sales, inventory and production planning). This software package will be operational in the second quarter of 2011 as soon as all the test phases have demonstrated to be fully satisfactory. The objectives of this project are as follows:

• Systematize internal procedures;
• Shorten the logistics cycle for improved customer service;
• Strict monitoring of flows for the sourcing, inventories and real-time access to physical inventory;
• Reinforce the decision-making processes and cost accounting for optimized management accounting;
• Ensure compliance with the rules of traceability and security through the harmonization of information processing tools.

2.3.2. Preparing accounting and financial information

Operating process for producing the accounting information

Internal control processes at this level have been implemented through the following measures based on previously defined procedures and approval mechanisms:

• A planned program for account closings subsequently communicated to operating departments;
• Close collaboration between the different managers of the support function and operating departments;
• Analysis of the relevance of information reported particularly concerning sales, orders and the examination of margins;
• A detailed review of the accounts by General Management in view of their approval before the final closing.

Meetings are organized to coordinate activity with the different departments concerned in order to ensure the exhaustive nature of information provided to prepare the accounts.

Process for account closings and the production of consolidated financial statements

Account cut-off procedures are subject to precise instructions provided by the Finance Department in respect to the closing process, indicating information to be entered, restatements required, the timetable of activity as well as the planning for precise tasks for each party participating in this process. These procedures are accompanied by a process for validating key items of the consolidation process and notably the reconciliation of separate financial statements with restated financial statements included in consolidation, the consistency of management data and accounting, the identification and analysis of changes in consolidated net equity.

Procedures for producing interim and annual financial consolidated financial statements are based on IFRS guidelines.

At the level of subsidiaries, local management provides detailed reporting that includes financial statements, audited by local outside auditors, and analysis of business performances. This information is in turn subject to in-depth analysis by General Management with the technical support of the Finance Department.

Financial communications

The financial communications process is subject to a clearly defined reporting schedule for information destined for financial markets and market authorities. This schedule ensures that communications complies with the requirements of applicable laws and regulations relating to financial disclosures both concerning the nature of information to be disclosed, the required deadlines and compliance with the principle of equal access to information by all shareholders.

2.4 Forecasted trends for 2011

The company assures permanent oversight of all organizational changes to anticipate, adapt and optimize internal control procedures in real time and to facilitate the appropriation of these procedures by operational teams. Its internal control procedures are also designed to respond to both regulatory requirements and future issues facing the company.

Initiatives carried out in 2009 were pursued and further developed in 2010 by strengthening the system for monitoring trade receivables and cash positions of subsidiaries and extending the security procedure to other applications of the information system.

In 2010, the company launched a major project to revamp its ERP system by selecting a SAP enterprise application solution that should contribute to creating a stronger internal control and risk management system through the rationalization and systematization of operating and support function processes.

Priorities for the Company for the year include the:

• Deployment of the SAP enterprise application system;
• Adaptation of the internal control and risk management system to the SAP new information system;
• Ongoing deployment of the IT Recovery Plan in line with an overall Business Continuity Plan.

Close

2011 in € thousands	Mazars	%
Work as statutory auditors and certification of individual and consolidated financial statements:
Of the Issuer	320	80%
Of fully consolidated subsidiaries	81	20%
Other directly related assignments	-	-
Other services rendered by members of the auditor's network to fully consolidated subsidiaries	-	-
Total	401	100%

2011 in € thousands	SFECO & Fiducia	%
Work as statutory auditors and certification of individual and consolidated financial statements:
Of the Issuer	100	98%
Of fully consolidated subsidiaries	-	-
Other directly related assignments	2	2%
Other services rendered by members of the auditor's network to fully consolidated subsidiaries	-	-
Total	102	100%

2010 in € thousands	Mazars	%
Work as statutory auditors and certification of individual and consolidated financial statements:
Of the Issuer	274	78%
Of fully consolidated subsidiaries	79	22%
Other directly related assignments	-	-
Other services rendered by members of the auditor's network to fully consolidated subsidiaries	-	-
Total	353	100%

2010 in € thousands	SFECO & Fiducia	%
Work as statutory auditors and certification of individual and consolidated financial statements:
Of the Issuer	102	97%
Of fully consolidated subsidiaries	-	-
Other directly related assignments	3	3%
Other services rendered by members of the auditor's network to fully consolidated subsidiaries	-	-
Total	105	100%

2009 in € thousands	Mazars	%
Work as statutory auditors and certification of individual and consolidated financial statements:
Of the Issuer	250	75%
Of fully consolidated subsidiaries	83	26%
Other directly related assignments	-	-
Other services rendered by members of the auditor's network to fully consolidated subsidiaries	-	-
Total	333	100%

2009 in € thousands	SFECO & Fiducia	%
Work as statutory auditors and certification of individual and consolidated financial statements:
Of the Issuer	87	97%
Of fully consolidated subsidiaries	-	-
Other directly related assignments	3	3%
Other services rendered by members of the auditor's network to fully consolidated subsidiaries	-	-
Total	90	100%

2008 in € thousands	Mazars	%
Work as statutory auditors and certification of individual and consolidated financial statements:
Of the Issuer	250	74%
Of fully consolidated subsidiaries	90	26%
Other directly related assignments	-	-
Other services rendered by members of the auditor’s network to fully consolidated subsidiaries	-	-
Total	340	100%

2008 in € thousands	SFECO & Fiducia	%
Work as statutory auditors and certification of individual and consolidated financial statements:
Of the Issuer	84	97%
Of fully consolidated subsidiaries	-	-
Other directly related assignments	3	3%
Other services rendered by members of the auditor’s network to fully consolidated subsidiaries	-	-
Total	87	100%

2007 In € thousand	Mazars	SFECO & Fiducia
Work as statutory auditors and certification of financial statements	311	87
Other assignments	-	-
Total	311	87

2006 In € thousand	Mazars	SFECO & Fiducia
Work as statutory auditors and certification of financial statements	160	84
Other assignments	-	-
Total	160	84

2005 In € thousand	Mazars	SFECO & Fiducia
Work as statutory auditors and certification of financial statements	260	86
Other assignments	-	-
Total	260	86

2004 In € thousand	KPMG	Mazars	SFECO & Fiducia	Ernst & Young
Work as statutory auditors and certification of financial statements	230	76	68	-
Other assignments	-	-	-	230
Other services (legal, tax, social)	-	-	-	-
Total	230	76	68	230

Close

• Voting rights as of 04/30/2012
• Voting rights as of 03/31/2012
• Voting rights as of 02/29/2012
• Voting rights as of 01/31/2012
• Voting rights as of 12/31/2011
• Voting rights as of 11/30/2011
• Voting rights as of 10/31/2011
• Voting rights as of 09/30/2011
• Voting rights as of 08/31/2011
• Voting rights as of 07/31/2011
• Voting rights as of 06/30/2011
• Voting rights as of 05/31/2011
• Voting rights as of 04/30/2011
• Voting rights as of 03/31/2011
• Voting rights as of 02/28/2011
• Voting rights as of 01/01/2011
• Voting rights as of 12/31/2010
• Voting rights as of 11/30/2010
• Voting rights as of 10/31/2010
• Voting rights as of 09/30/2010
• Voting rights as of 08/31/2010
• Voting rights as of 07/30/2010
• Voting rights as of 06/30/2010
• Voting rights as of 05/31/2010
• Voting rights as of 04/30/2010
• Voting rights as of 03/31/2010
• Voting rights as of 02/28/2010
• Voting rights as of 01/29/2010
• Voting rights as of 12/31/2009
• Voting rights as of 11/30/2009
• Voting rights as of 10/31/2009
• Voting rights as of 09/30/2009
• Voting rights as of 08/31/2009
• Voting rights as of 07/31/2009
• Voting rights as of 06/30/2009
• Voting rights as of 05/29/2009
• Voting rights as of 04/30/2009
• Voting rights as of 03/31/2009
• Voting rights as of 02/27/2009
• Voting rights as of 01/30/2009
• Voting rights as of 12/31/2008
• Voting rights as of 11/28/2008
• Voting rights as of 10/31/2008
• Voting rights as of 09/30/2008
• Voting rights as of 08/29/2008
• Voting rights as of 06/30/2008
• Voting rights as of 05/31/2008
• Voting rights as of 04/25/2008
• Voting rights as of 03/31/2008
• Voting rights as of 02/29/2008
• Voting rights as of 01/31/2008
• Voting rights as of 01/07/2008
• Voting rights as of 12/04/2007
• Voting rights as of 10/29/2007
• Voting rights as of 04/27/2007
• Voting rights as of 11/24/2006
• Voting rights as of 05/08/2006
• Voting rights as of 11/30/2005
• Voting rights as of 11/05/2005

Close

• 2011 2nd half liquidity agreement summary
• 2011 1st half liquidity agreement summary
• 2010 2nd half liquidity agreement summary
• 2010 1st half liquidity agreement summary
• 2009 2nd half liquidity agreement summary
• 2009 1st half liquidity agreement summary
• 2008 2nd half liquidity agreement summary
• 2008 1st half liquidity agreement summary
• 2007 2nd half liquidity agreement summary
• 2007 1st half liquidity agreement summary

Close

• 2011 share buyback program
• 2010 share buyback program
• 2009 share buyback program
• 2008 share buyback program
• 2007 share buyback program
• 2006 share buyback program
• 2005 share buyback program
• 2004 share buyback program

Close

• 2011/2012 annual information statement
• 2010/2011 annual information statement
• 2009/2010 annual information statement
• 2008/2009 annual information statement
• 2007/2008 annual information statement
• 2005/2006 annual information statement

Close