PR Newswire/Les Echos/
 
                          CHAIRMAN'S REPORT
ON INTERNAL CONTROL
The 2007 Chairman's report on internal control is partially based on the 
reference issued by the Autorité des Marchés Financiers in December 2006, in 
that it used the questionnaires concerning the internal control of accounting 
and fi nancial processes attached to the reference.

ORGANIZATION OF THE WORK OF THE BOARD OF DIRECTORS
The Board of Directors, comprising the Chairman and four Directors, meets four 
times a year: twice to examine the interim and annual fi nancial statements, 
once to review Group strategy in relation to the budget and the medium-term 
business plan, and once after the Annual Shareholders' Meeting to implement the 
decisions voted by shareholders. At each Board meeting the Directors also 
discuss the Group's business performance, major projects and the matters 
submitted to the Board for a decision. The work of the Board is supported by 
that of the Finance Committee, which meets once a month.
Compensation paid to the Chairman and Chief Executive Offi cer by Group 
companies is set by the Board of Directors. His variable compensation is tied 
to Group results and represents a percentage of his basic compensation. In view 
of the profi t reported by the Group in 2007 a bonus will be paid for that year.

INTERNAL CONTROL
DEFINITION (according to the Autorité des Marchés Financiers)
Internal control is a company's system, defi ned and implemented under my 
responsibility, which aims to ensure that:
? laws and regulations are complied with;
? the instructions and directional guidelines fi xed by Executive Management or 
the Management Board are applied;
? the company's internal processes are functioning correctly, particularly 
those implicating the security of its assets;
? fi nancial information is reliable; and generally, contributes to the control 
over its activities, to the effi ciency of its operations and to the effi cient 
utilization of its resources. By helping to anticipate and control the risks 
involved in not meeting the objectives the company has set for itself, the 
internal control system plays a key role in conducting and monitoring its 
various activities.

COMPONENTS OF THE INTERNAL CONTROL SYSTEM

An effi cient organization
The Group is organized around a lean holding company structure, its core 
businesses each with their own small holding company team and a large number of 
operating subsidiaries. Empowering the operating companies is a fundamental 
principle at Chargeurs and one that is made possible by effi cient information 
systems that provide the holding company with high-quality fi nancial 
information and the means to swiftly identify risks. In recent years, the 
rollout of the Dolly model has placed risk identifi cation and management at 
center stage.

The Dolly model is based on obtaining accurate information about risks so that 
they can be actively managed. For the Dolly fi nancial structures to operate 
effectively, it is essential for us to analyze and eliminate a large number of 
risks. The transactions, put together with risk management professionals such 
as insurers, banks and investors, automatically bring with them the controls 
that are a standard feature of securitizations.
Chargeurs is engaged in several very different businesses and has operations 
around the world. To take into account this diversity and the specifi cities of 
the Dolly model, we have implemented organizational measures designed to manage 
the risks that could have a material adverse effect on our earnings, assets and 
commitments. The cornerstones of the system are:
- empowerment and accountability-the Chairmen and Managing Directors of the 
subsidiaries have full responsibility for managing their units;
- short lines of communication;
- regular reporting on strategic issues;
- Group insurance programs covering all insurable risks;
- insurance Risk Management Committee with the participation of the Risk 
Managers of the core businesses;
- the Group Risk Manager, who reports directly to me.

A system to map and analyze the main identifi able risks Every month, the 
Executive Committee pinpoints mission-critical issues and appoints the most 
appropriate manager for each
one, regardless of his/her position relative to other managers. A specifi c 
reporting system is in place so that I am informed directly, at regular 
intervals, of the status of these managers' work. The quality of their status 
reports is one of the areas covered during their annual performance review.
The issues dealt with generally concern events that could have a material 
adverse effect on our fi nancial results and the Group's various risk exposures.
An outside consulting fi rm, specialized in economic forecasting, is used to 
help evaluate macro-economic risks specifi c to each of our host countries. The 
consultants periodically present their fi ndings to the Executive Committee and 
model certain specific risks when requested by one of our businesses.
This organization places the Executive Committee at the center of the risk 
management process.
An information system focused on accountability
Chargeurs' information system is based on the monthly income statements 
reported by each of our 79 member companies.
We have long been committed to producing high-quality fi nancial information. 
We were one of the fi rst companies in France to set up a monthly management 
reporting system based on the same accounting standards used to produce the 
consolidated fi nancial statements. Over the years, this process has been 
improved and, since 2000, management and statutory reporting data are managed 
by the same information system. With the generation of the consolidated 
accounts now simply the last phase in the process, this system ensures that we 
have constant control over the production of fi nancial information.

18

                                        Charman's Report on Internal Control


Each subsidiary's Managing Director and Finance Director send me comments on 
their monthly results, presented in a standard format. I review these results, 
together with the updated annual forecasts refl ecting the impact of any new 
developments, during monthly meetings with the Managing Directors of the core 
businesses.
Control procedures sized to address the challenges of each process
Accounting and fi nancial risks
Since 2003, the main management processes have been analyzed in order to 
document and map fi nancial statement risks, the related potential fi nancial 
impact and the internal controls in place to contain them.
As part of this exercise, each core business has identifi ed the three or four 
most sensitive processes and reviewed the highest risk transactions within each 
one. The procedures in place to manage and control these transactions have also 
been identifi ed.
These analyses serve to prioritize future measures and represent the starting 
point for the Group's drive to strengthen control over its processes.
Operational risks
Several steps were taken in 2007 to strengthen the value of Chargeurs' assets, 
with the most signifi cant transactions for each core business breaking down as 
follows:
- Chargeurs Protective Films: setting up trial derivative contracts to hedge 
price fl uctuations for the business' main commodity;
- Chargeurs Interlining: integration of marketing processes via the 
international distribution network of the production business of the Chinese 
company, Yak;
- Chargeurs Wool: sale of 50% of the Argentinean wool processing company, 
Peinaduria de Rio Chubut, in order to more effectively balance the 
manufacturing load between the two partners;
- Chargeurs Fashion: sale of 50% of Chargeurs Fashion with a view to bolstering 
the long-standing partnership between the competitive-cost manufacturing base 
in Morocco and Chargeurs Fashion's portfolio of brands, networks and creative 
concepts.
Constant supervision of the internal procedures for controlling accounting and 
fi nancial information
Supervising internal control
The subsidiaries' Finance Directors are responsible for controlling the 
accounting and reporting processes. Second-tier controls are performed by the 
Finance Directors of the core businesses as part of their oversight role with 
regard to the subsidiaries.
Internal audit
Chargeurs does not have its own internal audit department and therefore 
generally relies on local specialized fi rms in each region.
During the second half of 2007 Chargeurs set up an internal control self-
assessment system. The related process consisted of sending all subsidiaries -
except for holding companies- a copy of the regulations published by the 
Autorité des Marchés


Financiers relating to subsidiaries' compliance with internal control procedures
.
The following areas were covered:
- fi nancial reporting and the preparation of fi nancial statements;
- capital expenditure and divestments;
- property, plant and equipment and intangible assets;
- non-current fi nancial assets;
- purchases and supplies;
- production costs, inventories and work-in-progress;
- revenue from external operations and trade receivables;
- cash and cash equivalents.
Each subsidiary's Managing Director and Financial Controller duly completed the 
related questionnaires, which were signed by the Managing Director of each 
subsidiary before being sent to head offi ce. The information contained in 
these questionnaires was subsequently summarized in a business-specifi c data 
sheet, enabling us to identify any internal control weaknesses by business, 
procedure and company, and to implement any requisite corrective measures.
Specifi c assignments in 2007
The following specifi c internal control assignments were carried out in 2007 
by each of the Group's businesses:
- Protective Films: several projects were undertaken in this business in 2007, 
covering areas such as managing customer credit risk, outstanding inter-company 
receivables, inventories and business expenses.
- Interlining: an independent fi rm performed an audit of the inventories 
process applied by one of the subsidiaries.
- Wool: measures relating to foreign currency mechanisms, ranging from the 
setting up of hedges to the accounting methods used. The fi rst phase was 
focused on a pilot entity, which was assessed in depth and inspected on several 
occasions.
- Fashion: in view of the negotiations that took place during the year 
concerning the divestment of certain Fashion assets, the specifi c internal 
control assignments performed by this business in 2007 primarily concerned a 
Chinese entity that did not form part of the planned sale. The work carried out 
involved an independent fi rm controlling the entity's purchasing processes.
External audit
In addition to our internal control process, two audit fi rms share the task of 
auditing our consolidated fi nancial statements. All of the local Auditors' 
observations arising from their audits of our subsidiaries' accounts are 
reported to the subsidiaries' senior management. The Group Auditors produce a 
summary of these observations, which is presented to me during twice-yearly 
meetings.
The Group Finance Department is responsible for ensuring that the Auditors' 
recommendations involving organizational changes or changes to procedures are 
implemented without delay.
The representation letters issued by the subsidiaries' Managing Directors to 
the Auditors are centralized by Chargeurs, to emphasize each Managing 
Director's accountability for information related to his or her subsidiary 
included in the Group fi nancial statements.

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