Corporate overview of Infogrames Entertainment 2

Simplified organization chart 1 4

Management report for the year ended June 30, 2001 1 5

Consolidated financial statements

Income statements 3 2

Balance sheets 3 3

Statements of changes in stockholders’ activity 3 4

Consolidated statements of cash flows 3 5

Notes to the consolidated financial statements 3 6

Auditors’ report on the consolidated financial statements 6 8

Information concerning the parent corporation

Summurized annual financial statements of the parent corporation 7 0

Subsidiaries and Holdings 7 6

Five-year financial summary 7 7Auditors’ general report 7 8Auditors’ special report 7 9

Legal documents

General information concerning the corporation 8 2

General information concerning the company’s capital 8 5

Stock-market inform a t i o n 9 0

I n f o rmation concerning the Directors and Officers 9 6

I n f o rmation concerning employee profit sharing 9 9

Resolutions before the shareholders’ meeting 1 0 0

Parties responsible for the Report 1 2 6

Auditors’ Opinion 1 2 7

Cross-reference Table (COB Rule 98-01) 1 2 81

C o n t e n t s

2

Corpora te over v i e wCORPORATE OVERVIEWINFOGRAMES is an independent publisher of game software. INFOGRAMES produces, publishes and distributes inter-

active software for all game consoles (Sony, Nintendo, Microsoft and Sega), the PC and Macintosh, as well as other inter-

active platforms such as television, the Internet, and mobile telephone systems.

INFOGRAMES develops interactive game software for the consumer market and owns an extensive catalog of proprie-

t a ry titles (intellectual properties referred to as “franchises” in the videogame industry) with a high sales potential, inclu-

ding Driver, Unreal To u rnament, Alone in the Dark, V- Rally, Test Drive, Putt Putt and Freddy Fish. INFOGRAMES also has

exclusive licenses, such as those for NASCAR, Wa rner Bros. Looney Tunes, Mission: Impossible, Asterix, Le Mans,

B o m b a r d i e r, etc. In addition, INFOGRAMES holds worldwide interactive rights to the use of present and future Hasbro

intellectual properties in all current and future formats, under a 15-year license, extendable for an additional five years.

In addition, with its January 2001 purchase of Hasbro Inc.’s Hasbro Interactive division (now known as Infogrames

Interactive), INFOGRAMES acquired the Atari name and related propert i e s .

INFOGRAMES’ publishing business is organized into two divisions, Family and Core games, and operates development

facilities in Europe, the United States, and Asia. The catalog encompasses all market segments (Action, RPG/Strategy,

Racing, Shooter, Edutainment, Family Entertainment, Children’s Entertainment, Simulation, Fighting and Sport s ) .

INFOGRAMES sells interactive games in more than 60 countries through a worldwide network of 27 subsidiaries, bran-

ches or offices. Its distribution system gives it access to some 50,000 points of sale in Europe and the United States.

INFOGRAMES products are sold by major international retailers, including Wa l - M a rt, Toys R Us, Target, Kmart Stores,

Carrefour and Auchan, as well as by large national or regional retail chains, discount stores and specialized retailers,

convenience stores, and online retailers.

The objective of INFOGRAMES’ business strategy is to produce interactive entertainment software for all consumer plat-

f o rms, independently of the console manufacturers, and to supply all market segments worldwide while complying with

two ethical guidelines: respect for human dignity, and rejection of gratuitous violence.

CORPORATE HISTORY1 9 8 3 INFOGRAMES is founded by Bruno Bonnell and his partner Christophe Sapet.

1 9 9 3 INFOGRAMES ENTERTAINMENT is taken public, on the second market of the Paris Bourse.

1 9 9 4 - 1 9 9 5 INFOGRAMES ENTERTAINMENT sets up distribution operations in Germ a n y, the United Kingdom and

the Benelux countries.

1 9 9 6 INFOGRAMES embarks on an acquisition program by taking over Ocean, a British game publisher

specializing in software for next-generation consoles, including Sony’s PlayStation.

Trading of INFOGRAMES shares moves to the first market of the Paris Bourse.

INFOGRAMES disposes of its interactive telecomputing business in France.

1 9 9 7 INFOGRAMES continues to expand through acquisitions, by purchasing the distribution business

of PHILIPS MEDIA BV, making it Europe’s leading distributor of interactive entertainment software.

1998 INFOGRAMES extends its European distribution network to Spain and Port u g a l .

INFOGRAMES acquires 62.5% of OZISOFT, an Australian distributor.

1 9 9 9 INFOGRAMES completes a successful friendly takeover bid of GREMLIN, a British company specializing

in the simulation of sports events.

INFOGRAMES adds to its development resources in Asia and the Pacific by acquiring

BEAM SOFTWARE, an Australian software firm .

In the United States, INFOGRAMES purchases Accolade, a software publisher, then acquires a 62%

controlling interest (since raised to 89%) in GT INTERACTIVE SOFTWARE CORP., a game publisher and

d i s t r i b u t o r, boosting its development, publishing and distribution business with the addition of a port f o l i o

of titles that include the Driver, Unreal To u rnament and Deer Hunter franchises.

3

INFOGRAMES’ technical and artistic know-how enables it to make use of existing franchises and to create new ones,

as well as to take full advantage of licenses, jointly with the owners of copyrights.

INFOGRAMES has ongoing relationships with leading entertainment studios and sports specialists, including Wa rner Bros.,

Paramount Pictures, Sony Pictures, Canal+, CBS, Nickelodeon, Le Mans™, NASCAR and Bombardier, among others.

The Company operates development studios in Europe (Lyon, Sheffield, Manchester), the United States (Beverly, MA;

Los Angeles, CA; Minneapolis, MN; Seattle, WA; Dallas, TX; and Hunt Va l l e y, MD), and the Asia and Pacific region

( M e l b o u rne and Tokyo).

In order to take full advantage of the potential offered by next-generation consoles and to create innovative Gameplay

strategies and improved content, INFOGRAMES spends considerable sums on Research and Development and designs

development instruments that add to its productive assets.

• P u b l i s h i n g requires analyzing and segmenting markets, identifying consumer expectations, assembling a product line

consistent with demand, and then marketing products accordingly.

Two approaches are used in making publishing decisions:

• a “downstream” process that consists of designing an original product and adapting it to a potential market:,

• an “upstream” process that consists of assessing the market and developing titles in response to existing demand.

INFOGRAMES publishes products designed and created by in-house developers or third parties. Decisions regarding

whether to develop products in-house or through third parties are based on various factors, including the availability of

e x p e rts, and response and profitability considerations. Outsourcing development also makes it possible to find and

employ new talent.

• D i s t r i b u t i o n consists of selling and delivering products published by the Company or third parties, providing techni-

cal support for them, using expertise in logistics, and maintaining a dedicated sales force. INFOGRAMES sells its pro-

ducts worldwide in 60 countries, through major European and U.S. retail organizations (Wa l - M a rt, Toys R Us, Ta r g e t ,

K m a rt, Carrefour, Fnac, Auchan, El Corte Ingles, Electronics Boutique, Dixons, Mediamark, Karstadt, etc.) as well as

national and regional distribution networks, discount stores and specialized retailers. In Japan and other Asian coun-

tries, due to special circumstances in those regions, distribution is generally handled through licensees or wholesalers,

who then sell products to local retailers.

INFOGRAMES’ distribution network in the U.S. and Europe is among the most efficient and effective in the industry,

and is capable of reaching more than 50,000 points of sale around the world. This network is enhanced by the fact

that Infogrames owns virtually all of its distribution subsidiaries in Europe and that in the United States, the Company’s

is one of the leading suppliers of interactive software to mass retailers, maintaining direct relationships with nearly all

national distributors. The global reach and scope of Infogrames’ businesses further insures that the Company is able to

remain attuned to local market conditions and secure shelf space for its titles.54

Corporate over v i e w2 0 0 0 GT INTERACTIVE SOFTWARE CORP. changes its name to INFOGRAMES INC.

ACCOLADE is merged into INFOGRAMES, INC.

INFOGRAMES acquires PARADIGM ENTERTA I N M E N T, a U.S. company considered to be one of the

best development studios for next-generation, 128-bit consoles.

2 0 0 1 INFOGRAMES acquires the Hasbro Interactive division of HASBRO INC. and enters into an exclusive

licensing agreement with HASBRO for interactive digital versions of Hasbro games and themes.

The agreement is for 15 years and may be extended for another 5.

INFOGRAMES signs agreements with:

• Bandaï covering exclusive distribution rights for Digimon in Europe

• Square Soft for the exclusive distribution in Europe of Final Fantasy IX

• Sega concerning the publishing and distribution (outside the US and Japan) of Sega software for Xbox,

Game-Cube and Game Boy Advance.

INFOGRAMES, INC acquires U.S. publishing rights to the Dragon Ball Z franchise.

The Company disposes of EUROPRESS (development studio) and LEISURESOFT (German distributor),

acquired with the purchase of HASBRO INTERACTIVE.

BUSINESSI N F O G R A M E S p ro d u c e s, p u b l i s h e s and distributes digital entertainment software for all interactive systems on the

m a r k e t .

• P ro d u c t i o n consists of combining all factors needed to develop interactive software content, including technical deve-

lopment, the coordination of human resources, and financial management. The production and development stage

brings interactive games to life, based on original concepts by INFOGRAMES or third parties. The creation of interac-

tive game software combines several skills (scriptwriting, graphics, music, photo-realistic images, etc.) using specially

developed computer technology (programming).

INFOGRAMES’ technical and artistic know-how enables it to make use of existing franchises and to create new ones,

as well as to take full advantage of licenses, jointly with the owners of copyrights.

The table below lists some of the consoles for which INFOGRAMES has published games or will do so in the future.

Te c h n o l o g y M a n u f a c t u r e r C o n s o l e First sold in S y s t e m8-bit (port a b l e ) N i n t e n d o Game Boy 1 9 8 9 C a rt r i d g e

8-bit (port a b l e ) N i n t e n d o Game Boy 1 9 8 9 C a rt r i d g e

1 6 - b i t S e g a G e n e s i s 1 9 8 9 C a rt r i d g e

1 6 - b i t N i n t e n d o Super NESTM 1 9 9 1 C a rt r i d g e

32-bit (port a b l e ) N i n t e n d o Game Boy Advance 2 0 0 1 C a rt r i d g e

3 2 - b i t S e g a S a t u rn 1 9 9 5 C D - R O M

3 2 - b i t S o n y P l a y S t a t i o n 1 9 9 5 C D - R O M

6 4 - b i t N i n t e n d o Nintendo 64 1 9 9 6 C a rt r i d g e

1 2 8 - b i t S e g a D r e a m c a s t 1 9 9 9 C D - R O M

1 2 8 - b i t S o n y PlayStation 2 2 0 0 0 D V D

1 2 8 - b i t N i n t e n d o G a m e - C u b e 2 0 0 1 Optical m i n i d i s c

1 2 8 - b i t M i c r o s o f t X b o x 2 0 0 1 D V D

The market for game consoles is fundamentally cyclical in nature - it rises and falls with changes in technology. Until now,

each peak has represented a new high in the number of units sold. According to current estimates, the cycle now under

way can be expected to follow the same pattern.

Source : CSFB

Consoles using 8-bit technology were first sold in the 1980s. They were replaced at the start of the 1990s with 16-bit sys-

tems, which in turn were supplanted with the arrival of Sony’s PlayStation in 1995. Sales of the PlayStation began to decli-

ne in 2000 with the release of 128-bit consoles, consisting primarily of Sony’s PlayStation 2 (PS2), in Japan, the United

States and Europe,

The evolution of gaming platforms, known as next-generation consoles, continued throughout 2001 as the user base for

the PS2 continued to expand and plans for new next-generation consoles were announced by Microsoft and Nintendo.

Both Microsoft’s Xbox and Nintendo’s GameCube were launched in the United States in November 2001; the former is

scheduled to launch in Japan and Europe in the first quarter of 2002, and the latter, which launched in Japan in September

2001, is scheduled for release in Europe in the srping of 2002.

76

Corporate over v i e wIn general, Infogrames’ supply agreements are based on its general terms and conditions of sale. In some countries

where Infogrames does not own a distribution subsidiary, its products are sold through licensees.

In fiscal 2000-2001, INFOGRAMES’ revenue was generated as follows;

• 52% from sales in the United States,

• 42% from sales in Europe,

• 6% from sales in the rest of the world.

A breakdown of sales by platform can be found in the management report .

It should also be noted that sales of video games peak during the year-end holiday season and slow down between

July and September. Accordingly, revenue is generally higher during the Company’s second fiscal quarter of the year

(October 1 through December 31).

THE INTERACTIVE GAME SOFTWARE INDUSTRY

HISTORY AND DEVELOPMENTIn 1985, at a time when most consumers played on Atari, Commodore, Amstrad or IBM-compatible computers, Nintendo

bebuted its first 8-bit console in Japan, designed exclusively for videogames.

Since then, game console manufacturers, starting with Nintendo and Sega, then Sony in 1995 and Microsoft in 2001,

have offered consumers a line of consoles with features that are being continually enhanced and improved. The market

for game consoles and software has become a mass entertainment market, with global sales breaking down as follows:

• 44% in the United States

• 27% in Europe

• 29% in Japan.

Source: International Development Group (IDG)

Significant technological advances have made it possible to improve game design, graphics, streaming of animation and

the complexity of stories. Improvements have also resulted from the increase in systems’ data-storage capacity (DVDs and

interactive CD-ROMs), making for more detailed graphics and longer-lasting games.

As a result, video games are appealing to an ever-expanding consumer base.

98

Corporate overv i e wTo d a y ’s consumers can choose between several interactive systems, which in some instances are connected to the Intern e t .

They include:

• fixed or portable videogame consoles;

• personal computers (PC or Macintosh) for playing on- or off-line.

The new technology provides access to entertainment on a wide range of interactive systems, including:

• the Intern e t

• interactive television,

• cellular phones,

• personal digital assistants (PDAs).

A d d i t i o n a l l y, the next-generation consoles (Microsoft’s Xbox, Nintendo’s Game-Cube and Sony’s PS2) use a 128-bit logic

with DVD technology and do (or will) offer online playing capabilties.

Infogrames currently develops titles for each of the next-generation consoles and plans to allocate additional development

resources to take full advantage of the consoles’ technological and graphics capabilities. The Company also plans to

maintain its development of products for legacy platforms including, the PC, Macintosh and PlayStation, as well as por-

table consoles and other interactive platforms. Infogrames expects to release approximately 80 new products annually,

reaching all formats and for all market segments, including approximately 20 games for the Sony Playstation 2 and Xbox

c o n s o l e s .

KEY INDUSTRY PARTICIPANTS

Console manufacturers Console manufacturers (Sony, Nintendo, Microsoft and Sega, although the latter announced in 2001 that it intended to

stop making consoles to focus exclusively on software publishing) own patents on their hardware and control the pro-

duction of software designed for their consoles. Software publishers must submit products for prior approval and make

technical or graphic changes to bring software into compliance with manufacturers’ specifications. Console manufactu-

rers also publish interactive games for their consoles to ensure that enough software is available exclusively for them and

to provide for their long-term future.

S o n y

After it successfully broke into the market for interactive game consoles with the original PlayStation in 1995, Sony relea-

sed the PlayStation 2 (PS2) in 2000, first in Japan in March, then in the United States in October and in Europe in

N o v e m b e r. The PS2 uses 128-bit technology, is based on the DVD system, and is compatible with products made for the

original PlayStation.

In May 2001, for the first time, U.S. sales of software for the PS2 exceeded sales of software for the PlayStation (sour-

ce: NPD), despite the fact that there were four times as many PlayStations in operation as PS2 consoles.

N i n t e n d o

A pioneer in the field (with its NES, Super NES, N64 and Game Boy systems), Nintendo makes tabletop and port a b l e

game consoles. Game Boy came out in 1989 as a hand-held console with a black-and-white monitor. Game Boy Color

was introduced in 1999 and Game Boy Advance in June 2001. There is currently no real competition for this hand-held

h a r d w a r e .

In September and November 2001, Nintendo released its Game Cube console in North America and Japan, respecti-

v e l y, with the European release scheduled to follow in the spring of 2002. The Game Cube is a 128-bit console that uses

a small optical digital disk.

M i c ro s o f t

Microsoft entered the interactive gaming business in November 2001 with the North American release of its first conso-

le, the Xbox. A 128-bit console that uses a DVD system, the Xbox is scheduled to be released in Europe and Japan in the

spring of 2002.

S e g a

In 1999, Sega introduced the 128-bit Dreamcast console. In March 2001, Sega announced that it was discontinuing

production of the Dreamcast and instead would focus solely on its worldwide publishing business by extending its cata-

logue to all platforms. Sega has thus become a publisher of software for all formats.

INFOGRAMES’ competitorsINFOGRAMES’ competitors are other publishers of interactive game software, development studios and independent dis-

t r i b u t o r s .

They consist chiefly of U.S. companies including Electronic Arts Inc., Activision Inc., THQ Inc., Midway Games Inc., Ta k e

2 Interactive Software Inc. and Acclaim Entertainment Inc., amoung others, as well as Japanese firms such as Konami,

Sega, Namco, Capcom, and Square, amoung others. Leading European competitors are Ubi Soft, Eidos and Vi v e n d i

Universal Publishing, among others.

Console manufacturers also publish interactive entertainment software exclusively for their own consoles and, as such, are

frequently in competition with INFOGRAMES in this area, even though, as hardware manufacturers, they also have part-

nership agreements with the Company.

PRODUCTSINFOGRAMES’ strategy consists of publishing and distributing products for all mass-market interactive systems (game

consoles, PCs, Macintosh, PDAs, cell phones, ITV, etc.).

The backbone of the Infogrames product line consists of its “Core” and “Family” game categories. The Company’s pro-

ducts, are based on themes or characters that it either owns or is licensed to use. Intellectual property owned by the

Company with a strong recognition factor constitutes a “franchise” with its own intrinsic value and the potential for other

media spins offs (e.g. feature films, etc.).

*Source: Companies press releases.

1110

Corporat e overv i e wINFOGRAMES’ development and publishing business currently includes several original franchises, including. V- R a l l y,

D r i v e r, Alone in the Dark, Unreal To u rnament, Test Drive, and Freddi Fish, among others.

The INFOGRAMES catalog also includes games featuring licensed themes or characters from some of the world’s most

recognizable entertainment and sporting brands, including Asterix, The Smurfs, Lucky Luke, Looney Tunes, Superm a n ,

Mission: Impossible, and Te rm i n a t o r, and games such as Monopoly, Scrabble and Trivial Pursuit.

Most licenses (except the Hasbro license; see below) are for an average of three to five years and their life may be exten-

ded, sometimes subject to the certain minimum sales objectives. Infogrames always negotiates the right to continue selling

off finished products over a certain period whenever a licensed is not renewed.

Infogrames also holds the exclusive worldwide license to current and future Hasbro intellectual properties for all existing

and future interactive media; the license is for a period of 15 years and can be extended for an additional five years.

Fees paid to licensors may be fixed or vary according to sales, depending on the type of licensing agreement. Most fre-

q u e n t l y, licensors require that advances on royalties be paid over the entire life of the agreement, and that certain mini-

mum royalties be guaranteed. The general practice is to deduct advances from the overall royalties payable, in order to

enable the licensee to recoup the advances paid out before having to disburse additional sums.

The acquisition of high-quality, recognizable licenses provides INFOGRAMES added strenght in product development and

distribution because:

• during the product development stage, licenses give access to valuable, preexisting content without the need for prior

r e s e a r c h ;

• from a marketing standpoint, the popularity of an existing theme or character helps sell games. Consumer awareness

thus reduces the risk that a game will fail. Furt h e rmore, all advertising and promotion conducted on behalf of the cha-

racters or themes outside the videogame sector also benefits the products.

The Company enters into agreements with manufacturers such as Sony, Nintendo and Microsoft to secure the rights to

make games compatible with their consoles. The agreements primarily cover four areas:

• the right to use a manufacturer’s technology;

• conditions governing prior approval of a game’s concept;

• conditions pertaining to the approval of a game’s final version prior to production;

• financial and technical terms applicable to the reproduction of the game software by the manufacturer.

Contracts are master agreements for a given version of a platform, with a term of generally three to five years, automati-

cally renewable.

Licenses for both content and technology are contingent upon compliance with certain ethical, artistic and technical stan-

dards. The publishing and marketing of products is contingent upon the prior approval of copyright owners or hardware

manufacturers. Measures implemented by the Company to protect the use of licenses are described below.

MEASURES IMPLEMENTED TO PROTECT THE BUSINESSRISK FACTORSIn the course of its publishing and distribution business, INFOGRAMES enters into agreements with various firms. In an

e f f o rt to avoid becoming overly dependent on any particular third part y, the Company has entered into a large number

of individual high-quality agreements.

Working with third parties does expose INFOGRAMES to certain risks, including the following:

• Licenses for characters or themes or agreements to acquire products or concepts are not automatically extended when

they expire; INFOGRAMES reduces its exposure to this risk by making sure that the terms of its agreements are close

to or in excess of the average expected life of its products;

• Third parties may fail to uphold the terms of production and development agreements; INFOGRAMES minimizes its

exposure to this risk by entering into agreements with only reputable firms and by contracting for most of its production

with entities controlled by the Company or by selected third part i e s ;

• INFOGRAMES indemnifies console manufacturers against any claims that might be made directly by third parties . The

indemnity covers the content, marketing and sale of its products and includes infringements of copyrights held by third

p a rties on storylines and graphics. INFOGRAMES also secures similar guarantees from its subcontractors, but it remains

exposed to the credit risk or these firms fail.

To minimize its exposure to the above risks and maintain strong relationships with developers and subcontractors, INFO-

GRAMES makes sure that appropriate, binding agreements are signed for all stages in the production and development

of software.

INFOGRAMES also seeks to reduce the risk of supply shortages by diversifying its manufacturing sources.

In the case of products made for PCs (which account for 49% of Infogrames’ worldwide sales), the risk of dependency

on a manufacturer is mitigated by the large number of disc makers operating in Europe and the United States. The

Company does not have any control over manufacturing risks related to products made for other media, which is in the

hands of the console manufacturers. The exposure is minimized, however, by the fact that those manufacturers’ produc-

tion facilities are most often combined.

PROTECTION OF PRODUCTSINFOGRAMES retains the services of law firms specializing in intellectual property and copyright issues.The Company

generally registers its products’ titles and storylines with copyright organizations (INPI, SCAM, etc.) in various countries.

Infogrames works with various anti-piracy organizations around the world to protect against the counterfeiting of its pro-

ducts. In France and elsewhere in Europe, the Company works closely with the anti-piracy unit established by SELL (the

French association of video game manufacturers), the Entertainment Leisure Software Publishing Association (ELSPA), and

customs authorities. In the United States, it cooperates within the Interactive Digital Software Association (IDSA).

PERSONNELThe average number of employees worldwide was as follows, for the past three fiscal years:

1 9 9 8 - 1 9 9 9 1,186 people

1999-2000 2,150 people

2 0 0 0 - 2 0 0 1 2,271 people

The increase in the average number of employees during fiscal 2000 was attributable primarily to the acquisition of GT

Interactive in the United States and the expansion of operations in Europe.

The additions to personnel in the period ended June 30, 2001 reflected two factors, which partly offset one another:

• Hasbro Inc.’s interactive business employed 600 people in January 2001when the division was acquired; that num-

ber was fewer than 200 by June 30, 2001;

• Existing divisions were reorganized in anticipation of market developments associated with the release of next-genera-

tion consoles; the reorganization resulted in a reduction in employment of some 150 individuals.

Whenever downzizing must occur, the Company complies with the laws of the countries concerned. In France, a down-

zizing plan has been agreed to in compliance with local labor legislation.

As of June 30, 2001, the consolidated group employed 2,102 people.

1312

Corporate overv i e wWhile there is no precise calculation regarding the financial impact of piracy on the world video game industry, INFO-

GRAMES believes that it is substantial source of lost revenue. This risk is magnified when new titles are released since pira-

cy is more prevalent among new releases.

EXPOSURE TO FOREIGN-EXCHANGE RISKSE x p o rt sales account for more than 80% of the Company’s revenue; however, INFOGRAMES’ exposured to significant

currency risks from commercial transactions is minimal since overall purchases and sales in foreign currencies offset each

other in every region. Additionally, the parent corporation manages foreign-exchange risks associated with the financing

of subsidiaries, through hedges that correspond to the type of financing concern e d .

CAPITAL PROJECTSINFOGRAMES continues to set aside considerable funds for research and development, to ensure that the Company conti-

nues to develop top-quality, cutting-edge product and progresses in the field of technology.

Most research and development expenditures are included in the overall cost of individual products. The table below

shows the research and development sums invested over the past three fiscal years.

( m i l l i o n s ) June 30, 1999 June 30, 2000 June 30, 2001

In-house development 2 5 . 8 6 8 . 7 1 0 1 . 4

O u t s o u r c i n g 2 5 . 7 3 5 . 7 8 7 . 4

T O TA L 5 1 . 5 1 0 4 . 4 1 8 8 . 8

INFOGRAMES also has a 50-person research and development team that operates separately from its development stu-

dios, to monitor technological changes, fine tun development tools, and train and assistt in-house development teams,

amoung other functions.

EXTRAORDINARY EVENTS AND LITIGATIONTo the best of the Company’s knowledge, with the exception of the claim by Infogrames Entertainment against Hasbro,

Inc. described in note 2A to the Company financial statements hereunder no extraordinary event or litigation is likely to

have, or recently to have had, a material impact on the business, income, financial position or assets of Infogrames

E n t e rtainment and its affiliates.

1514

Corporat e overv i e wCORPORATE ORGANIZATION SIMPLIFIED ORGANIZATION CHART OF AFFILIATES AS OF JUNE 30, 2001

Management report1. A MARKET SWING OF UNPRECEDENTED MAGNITUDE

TO THE 128-BIT CONSOLES, PARTICULARLY IN EUROPEThe market for interactive games fluctuates as successive generations of consoles are released, each with enhanced fea-

tures that contribute to a sustained increase in sales. However, during the transition stage, namely from the announcement

that new consoles are to be released to their actual availability in stores, the gaming market can temporarily decline . This

t e m p o r a ry adverse effect, which was previously felt during transitional periods,in the1980s and 1990s, is part i c u l a r l y

strong today, especially in Europe, due to the unprecedented impact of two new next-generation consoles launching simul-

t a n e o u s l y.

THE INTRODUCTION OF THE NEW 128-BIT CONSOLES CREATES NEW PROSPECTS FORVIDEOGAMESThe current transition is the fourth that our industry endured. The 8-bit and 16-bit consoles from 15 years ago are now

considered antiques. The introduction of 32-bit consoles (led by the PlayStation, which has sold 80 million units worldwi-

de – according to International Development Group (IDG)) was a major leap forward in technology and dramatically

expanded the capabilities of videogames.

The new 128-bit consoles represent a significant technological advance. In addition to having more memory and pro-

ducing better graphics, they can be used to play games online and have features designed to expand the range of tra-

ditional users (hard disk, DVD, CD-ROM, etc.).

With Sega having ceased production of its Dreamcast console, the market for 128-bit consoles is currently divided among

three models :

• PlayStation 2 (Sony). The console is already distributed in the United States, Japan and Europe. More than 20 million

units are expected to be in operation worldwide by the end of 2001 (Source: IDG).

• X-box (Microsoft), launched in the United States stores by November 2001, with European and Japanese distribution

to follow during the first half of 2002.

• Game- Cube (Nintendo), which came out in September 2001 in Japan and in November 2001 in the United States

and is expected to arrive in Europe during the first half of 2002.

Each of the above consoles has distinctive features. According to market analysts (IDG), more than 150 million 128-bit

consoles will be sold by 2006, as compared with 100 million of the 32- and 64-bit generation. This could mean up to

200 million units in operation worldwide (IDG).

To d a y ’s advances in technology are taking place at a time when the number of videogame players is rising sharply, due

to such factors as

• he increase in the average age of players (young gamers who started out with first-generation consoles continue to play,

sometimes with their own children);

• the addition of games for the very young;

• an increase in the number of girls playing video-games,

• the distribution of consoles in new markets, such as South America.

1716

Manageme nt reportTHE POSITION OF GAME PUBLISHERS HAS BEEN ADVERSELY AFFECTED DURING TRANSITIONAL PERIODSFollowing a particularly promising period from 1995 through 1999 and the fluctuating market of 1999-2000, the video-

games industry experienced a down cycle in 2000 and 2001.

During all transitional periods, the following factors affect the market.

• In anticipation of new console releases, consumers adopt a wait-and-see purchasing attitude for hardware and soft-

ware. This attitude could already be discerned at the end of last year, when sales fell by 5-10% in the last fiscal quar-

ter (April-June 2000). The market trend continued in fiscal 2001, with overall industry sales declining nearly 17%

(Source : IDG).

• Prices drop significantly, as videogames are increasingly mass-marketed and publishers switch to aggressive pricing

p o l i c i e s .

• Distributors and retailers substantially reduce their inventories, affecting publisher’s margins.

• Development budgets are increased to provide for the acquisition of new technologies required by next-generation

consoles.

These factors had a particularly significant impact during fiscal 2001.

THE CURRENT TRANSITION IS OF UNPRECEDENTED MAGNITUDE The above-mentioned factors have also been felt during the current transitional period, which has been uncharacteristi-

cally long, as consoles are only gradually being released by manufacturers around the world.

In the United States, the three new consoles were released to stores for holliday 2001, whereas only the PS2 was avai-

lable for the 2000 holiday season. In Europe, only the PS2 was available in 2001, with the Xbox and Game-Cube sche-

duled to be available during the first half of 2002.

The staggered schedule for bringing out of the consoles has caused significant differences in market conditions.

In the United States, there has already been a sharp turnaround in sales. According to NPD, the market research firm ,

July sales of console game software were up 25% over the prior year, (for an aggregate increase of 2.8% in the seven

months ended July 2001, as compared to the same period in 2000).

In Europe, in the increase in sales has not yet occurred., as the market awaits the launch of both the Xbox and the

GameCube in 2002, when a turnaround is expected.

* * * *

While game publishers, INFOGRAMES among them, are affected by these transitional periods, the new cycle signifi-

cantly improves future prospects for the market overall and INFOGRAMES in part i c u l a r.

This view is bolstered by the fact that, over the past two years, INFOGRAMES has managed to consolidate its market

share in Europe and, has grown into the second largest independent publisher in the U.S. based on unit sales (Source:

NPD). These major corporate business initiatives have come at a considerable cost, exacerbating the adverse impact of

the transitional period. However, INFOGRAMES’ new-found strength in the sector is beginning to bear fruit, part i c u l a r l y

in the U.S., and the Company is now firmly positioned to take full advantage of the anticipated expansion of the market

in coming years.

2. A POWERFUL POSITION AS THE SECOND-RANKING INDEPENDENT PUBLISHER IN THE UNITED STATES, AND A REEXAMINATION OF WORLDWIDE PRODUCT STRATEGIES

SECOND-LARGEST INDEPENDENT PUBLISHER IN THE UNITED STATES BASED ON UNITSALES (as of October 2001 – Source: NPD)The expansion of INFOGRAMES in the United States went into high gear in 1999 with the November acquisition of a

majority interest in GT Interactive Software Corp (renamed Infogrames, Inc.). The purchase was financed with an initial

investment of $135 million, including $25 million in cash , a private stock offering of $50 million and a $60-million issue

of convertible bonds used to refinance the new subsidiary ’s operations. Since then, most U.S. INFOGRAMES operations

have been consolidated under Infogrames, Inc., whose stock is publicly traded on the NASDAQ (ticker: IFGM) despite

INFOGRAMES ENTERTA I N M E N T ’s ownership 88.7% of shares outstanding as of June 30, 2001.

The acquisition enabled the Company to establish a sizeable development, publishing and distribution operation in the

U.S. Infogrames, Inc. has provided the Company with an extensive U.S. distribution network for all of its products, as

well as software with high sales potential, including Driver, Oddworld, Unreal To u rnament, Deer Hunter, and the

Humongous franchises, among many others.

Following the acquisition, GT Interactive Software was restructured, a new management team was put in charge, the busi-

ness was refocused on publishing while the distribution of unprofitable third-party brands, was significantly reduce, ware-

housing and delivery were outsourced and European operations were closed as they overlapped with those of INFO-

GRAMES .

In January 2001, INFOGRAMES took advantage of another major opportunity in the U.S. when it bought Hasbro

Interactive, which gave the Company access to well known brands and content, as well as expertise in mass-marketing.

Through its takeover of Hasbro Interactive, INFOGRAMES has acquired:

• a catalog of titles based on popular Hasbro franchises and licenses, including Monopoly, Scrabble, Cluedo, Risk,

Boggle, Tonka, etc;

• Microprose, along with its international bestsellers such as Civilization and Roller Coaster Ty c o o n ;

• Atari, including the brand name and classic hits such as Centipede, Pac-Man, and Pong, among others;

• close to 50 titles under development, including PS2 and Xbox versions of Hasbro, Microprose and Atari franchises,

such as Monopoly, Roller-Coaster Tycoon, Grand Prix and Civilization;

• exclusive rights to Hasbro properties, under a 15-year license renewable for an additional five years, covering all exis-

ting or future interactive platform s .

1918

Manageme nt reportHasbro Interactive’s corporate management, logistic services and marketing have been drastically reorganized, as INFO-

GRAMES, INC. already possessed a strong organization in these areas, capable of handling all of its business in the

United States. Accordingly:

• fewer than 200 of Hasbro Interactive’s 600 employees were transferred to the INFOGRAMES payroll following the

acquisition; those that were kept on are mainly in production and marketing;

• the distribution of Hasbro Interactive products was immediately taken over by the INFOGRAMES INC. sales force;

• management is now based at INFOGRAMES INC.

The company has also changed its name to INFOGRAMES INTERACTIVE INC.

The price initially paid for Hasbro Interactive was $100 million, including $5 million in cash and the balance in INFO-

GRAMES ENTERTAINMENT stock and warrants (based on an agreed-upon valuation of shares and warrants).

The purchase agreement provided for a price adjustment procedure in favor of INFOGRAMES ENTERTA I N M E N T, based

on Hasbro Interactive’s net worth on December 31, 2000.

A dispute has arisen between Hasbro Inc. and INFOGRAMES concerning this price adjustment, as each party has a dif-

ferent opinion regarding the actual net worth. In accordance with the agreement, the parties have submitted the matter to

a jointly-selected independent arbitrator. As of June 30, 2001, the arbitrator had not yet reached a decision. The transfer

agreement calls for the first $4 million of any price adjustment in favor of INFOGRAMES to be settled in cash by Hasbro

Inc. and for any surplus to be paid in INFOGRAMES ENTERTAINMENT SA stock. Pursuant to the transfer agreement and

to a decision by the INFOGRAMES ENTERTAINMENT SA shareholders’ meeting, any shares that Hasbro may return

would be retired.

A REVISED GLOBAL PRODUCT STRATEGY The acquisitions of INFOGRAMES, INC. and INFOGRAMES INTERACTIVE INC. triggered a revision of INFOGRAMES’

global product strategy.

With its new-found strength in development, publishing and distribution on both sides of the Atlantic, and a clear intent to

expand its market share in Asia, the Company has broadenes its product strategy to serve a worldwide market. That stra-

tegy includes:

1 The continued development of product for all available platforms to minimize the Company’s dependence on any indi-

vidual console manufacturer;

2 The specialization of development studios by game genre (racing, action, childrens, etc.)

3 A reallocation of production resources to emphasize the most profitable market segments, where INFOGRAMES holds

a strong position.

4 The development of synergies between regions including:

• Improved communications, coordination and sharing of information and resources among development teams in the

United States and Europe

• Critical-size standard for all distribution networks, applicable to products developed either in-house or by third part i e s .

5 Closer contact with key Asian publishers, such as Sega (Sonic, Puyo Puyo, etc.), Square Soft and Bandai (Digimon, etc.),

interested in working with a global publisher with access to both the European and U.S. markets.

This strategy is based on a diversified catalog of high-quality titles, produced through the Company’s in-house develop-

ment, obtained through acquisitions, including Beam, Gremlin, Accolade and Paradigm.

3. REVIEW OF INCOME STATEMENT

In millions of € June 30, 2001 June 30, 2000 C h a n g e

Net revenues 6 7 4 . 3 521.6 + 2 9 . 3 %1 0 0 . 0 % 1 0 0 . 0 %

Gross margin 3 3 9 . 7 2 2 8 . 1 + 4 8 . 9 %5 0 . 4 % 4 3 . 7 %

Operating income (loss) ( 5 5 . 8 ) ( 4 7 . 1 ) ( 1 8 . 4 % )( 8 . 3 % ) ( 9 . 0 % )

Interest and investment income (loss) ( 9 . 0 ) 3 . 6 N / S( 1 . 3 % ) 0 . 7 %

E x t r a o r d i n a ry items ( 2 5 . 9 ) ( 4 . 1 ) N / S( 3 . 8 % ) (0 . 8 % )

Corporate income tax ( 1 2 . 9 ) 2 9 . 4 N / S( 1 . 9 % ) 5 . 6 %

Net income (loss) before ( 1 0 3 . 6 ) ( 1 8 . 2 ) N / Sa m o rtization of goodwill ( 1 5 . 4 % ) ( 3 . 5 % )

Companies consolidated by the equity method 0 . 7 ( 0 . 8 ) N / S0 . 1 % (0 . 2 % )

A m o rtization of goodwill ( 2 0 , 6 ) ( 8 . 6 ) N / S( 3 . 1 % ) ( 1 . 6 % )

Consolidated net income (loss) ( 1 2 3 . 5 ) ( 2 7 . 6 ) N / S( 1 8 . 3 % ) ( 5 . 3 % )

Net income (loss) after minority interests ( 1 2 1 . 3 ) ( 2 7 . 1 ) N / S( 1 8 . 0 % ) ( 5 . 2 % )

Income The analysis below examines the income data from the standpoint of the four management divisions of INFOGRAMES

E N T E RTAINMENT SA.

• Europe: This division, built around the Corporation’s original business, includes all development, publishing and distri-

bution activities in Continental Europe and the United Kingdom.

• United States: As a result of the acquisition of Accolade in May 1999 and of GT Interactive Software Corp. in

December of that same year, this division has become the Corporation’s main source of growth today, confirming the

wisdom of a global approach to the market.

• Asia: This division, centered on INFOGRAMES’ operations in Australia and Japan, was still small at the end of last

y e a r, although it is expected to expand considerably in a region that has much potential.

• Game-Nation(.com): The Game Nation division covers INFOGRAMES’ online activities (the Internet, mobile phones,

inflight entertainment, broadband networks, interactive television, PDAs and others).

REVENUEConsolidated revenue was up 29% from the previous year. The growth in sales can be broken down as follows:

In millions of € June 30, 2001 June 30, 2000 C h a n g e

E u r o p e 3 1 1 . 3 2 5 1 . 0 + 24%

United States 3 5 7 . 8 2 4 8 . 6 + 44%

A s i a 3 8 . 4 2 9 . 8 + 29%

Game Nation 2 . 9 3 . 0 N / S

E l i m i n a t i o n s - 3 6 . 1 - 1 0 . 8 N / S

To t a l 6 7 4 . 3 5 2 1 . 6 + 2 9 %

In Europe, sales were up € 60 million despite the depression of the market as it awaited the launch of the new consoles.

This increase resulted primarily from:

• he first significant sales of titles from U.S. publishing subsidiaries (particularly Driver and Unreal To u rnament), which

accounted for 32 million of the increase;

• continued distribution improvements in recently established regions (Italy, Scandinavia, Greece and Israel), which contri-

buted €14 million to the previous year’s sales;

• sales of Hasbro Interactive products (in the amount of 4 million) and some third-party products, such as Final Fantasy

IX and Digimon.

In the United States, which is a year ahead in the industry transition as a result of the November 2000 launch of the

PlayStation 2, sales were up 109 million ($97 million), mainly as a result of:

• the release of the first major products resulting from the acquisition of GT Interactive Software, which has brought about

a tenfold increase in the Corporation’s US publishing capacity by ten times.

• he impact of the consolidation of GT Interactive for the full year (instead of 7 months in fiscal 1999-2000)

• the distribution of Hasbro Interactive products, starting in February 2001, which generate sales of 37 million (U.S. $33

million) over a five-month period.

In Asia, sales rose as a result of the consolidation of INFOGRAMES’, GT Interactive’s and Hasbro’s Australian operations.

Game Nation, the division in charge of the INFOGRAMES’ online entertainment business, had revenue of _2.9 million,

v i rtually unchanged from a year ago. These revenues were derived primarily from electronic commerce, interactive TV

and inflight entertainment. The Company’s decision to act with considerable caution in the online and new media mar-

kets has been validated by the set-backs that have plagued the Internet arena in the past 12 months.

2120

Management reportIncome statement for the year ended June 30, 2001, by division

In millions of € E u ro p e United Asia and Game E l i m . To t a lS t a t e s P a c i f i c N a t i o n

Net revenues 3 1 1 . 3 3 5 7 , 8 3 8 . 4 2 . 9 - 36.1 6 7 4 . 31 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 %

Gross margin 1 2 7 . 2 2 0 6 . 6 1 1 . 7 2 . 8 - 8 . 6 3 3 9 . 74 0 . 9 % 5 7 . 7 % 3 0 . 5 % 9 7 . 4 % 5 0 . 4 %

Research and - 4 9 . 4 - 4 5 . 7 - 5 . 0 - 7 . 7 6 . 4 - 1 0 1 . 4development - 1 5 . 9 % - 1 2 . 8 % - 1 3 . 0 % N / S - 1 5 . 0 %

Marketing and sales - 7 7 . 7 - 1 1 2 . 8 - 4 . 2 - 1 . 4 2 . 6 - 1 9 3 . 5- 2 5 . 0 % - 3 1 . 5 % - 1 0 . 9 % - 4 9 . 3 % - 2 8 . 7 %

Overhead and corporate - 3 9 . 1 - 5 4 . 0 - 5 . 7 - 1 . 4 - 0 . 4 - 1 0 0 . 6- 1 2 . 6 % - 1 5 . 1 % - 1 4 . 8 % - 4 9 . 3 % - 1 4 . 9 %

Operating income (loss) - 3 9 . 0 - 5 . 9 - 3 . 2 - 7 . 7 0 . 0 - 5 5 . 8- 1 2 . 5 % - 1 . 6 % - 8 . 3 % N / S - 8 . 3 %

Income statement for the year ended June 30, 2000, by division

In millions of € E u ro p e United Asia and Game E l i m . To t a lS t a t e s P a c i f i c N a t i o n

Net revenues 2 5 1 . 0 2 4 8 . 6 2 9 . 8 3 . 0 - 10.8 5 2 1 . 61 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 %

Gross margin 1 0 3 . 6 1 1 2 . 3 9 . 4 1 . 8 1 . 0 2 2 8 . 14 1 . 3 % 4 5 . 2 % 3 1 . 5 % 6 0 % 4 3 . 7 %

Research and - 3 3 . 6 - 2 5 . 1 - 3 . 5 - 7 . 6 1 . 1 - 6 8 . 7development - 1 3 . 4 % - 1 0 . 1 % - 1 1 . 7 % N / S - 1 3 . 2 %

Marketing and sales - 5 3 . 3 - 8 3 . 0 - 4 . 7 - 0 . 4 0 . 0 - 1 4 1 . 4- 2 1 . 2 % - 3 3 . 4 % - 1 5 . 8 % - 1 3 . 3 % - 2 7 . 1 %

Overhead and corporate - 2 2 . 9 - 3 3 . 1 - 5 . 5 - 1 . 5 - 2 . 1 - 6 5 . 1- 9 . 1 % - 1 3 . 3 % - 1 8 . 5 % - 5 1 . 4 % - 1 2 . 5 %

Operating income (loss) - 6 . 2 -28 .9 - 4 . 3 - 7 . 7 0 . 0 - 4 7 . 1- 2 . 5 % - 1 1 . 6 % - 1 4 . 4 % N / S - 9 . 0 %

2322

Management reportConsolidated revenues per region can be shown graphically as follows:

Consolidated revenues by format can be shown graphically as follows:

Sales of PC titles improved over the fiscal year as a result of:

• the sharp growth in the Company’s U.S. business

• relatively strong computer sales, which were less affected by the technology transition than console sales.

In addition, sales of products for PlayStation 2 (PS2) rose significantly in the last fiscal quarter (ended June 30), and accoun-

ted for 6% of the consolidated total for the year. Key PS2 titles included Unreal To u rnament, Nascar Heat, and Le Mans.

The Company expects to release 15 new PS2 titles in fiscal 2002, which should drive on this platform even more signifi-

c a n t l y.

The year’s biggest hits were Driver 2 and Alone in the Dark for PlayStation, Unreal To u rnament and Nascar Heat for

PlayStation 2, and Desperados for PC. Leading titles accounted for 30% of annual sales, supporting Infogrames’ diverse

product strategy that insulates the Company from the failure of any individual game.

This strategy calls for INFOGRAMES to:

• release nearly 80 new titles annually, in all formats and for all market segments;

• have an outstanding catalog based on an exceptional portfolio of licenses secured in recent years (Looney Tunes, Mission:

Impossible, Tintin, The Smurfs, etc) complemented by Hasbro properties (Roller-Coaster Tycoon, Monopoly, Tonka, etc.),

enabling its sales and marketing division to continue marketing titles over a far longer life-span than in the case of common

games, thereby generating sales year after year. This is so because the licensing agreement between Hasbro Inc, and

Infogrames is for 15 years and extendable by another five years. Such terms set it clearly apart from licenses with an ave-

rage life of 3 to 5 years. Furt h e rmore, the Hasbro products for which a license has been obtained include several with a

long life expectancy, including Monopoly, Wheel of fortune, Action Man, etc.

The consolidated gross margin was 339.7 million, or 50.4% of revenue, up from 228.1 million and 43.7% of sales the

previous year.

Gross marginThe increase in gross margin can be broken down as follows:

In millions of € June 30, 2001 June 30, 2000 C h a n g e

E u r o p e 1 2 7 . 2 1 0 3 . 6 + 23%

United States 2 0 6 . 6 1 1 2 . 3 + 84%

A s i a 1 1 . 7 9 . 4 + 24%

Game Nation 2 . 8 1 . 8 + 5 6 %

E l i m i n a t i o n s ( 8 . 6 ) 1 . 0 N / S

To t a l 3 3 9 . 7 2 2 8 . 1 + 4 9 %

The improved consolidated gross margin was due primarily to the sharp increase in gross income in the United States,

resulting from the business recovery there, as well as the implementation of comprehensive corporate restructuring mea-

sures. It also reflects the success of INFOGRAMES’ publishing policies and the perf o rmance of its distribution system.

Average margins were up 12.5%, as a result of changes in marketing policy, the termination of unprofitable distribution

agreements, and the distribution of several new products by INFOGRAMES, INC. and INFOGRAMES INTERACTIVE,

INC. The impact of increases in sales volume was also highly positive, taking into consideration the changes in the scope

of consolidation and the release of several new products.

In Europe, the improvements in gross profit came primarily from increases in sales volume, as average margins remained

v i rtually unchanged (down 0.4%) despite adverse market conditions. Retail prices of new products were stable or even

slightly up in the case of product prices for new consoles. The increase was offset by a sharp decline in the prices of ori-

ginal PlayStation products currently being sold, as well as by the growing portion of total sales accounted for by Budget

or Replay lines, reflecting deteriorating conditions in Europe. Returns by distributors were inordinately high, an indication

of the magnitude of the technological swing.

In Asia, margins were largely unchanged, at slightly better than 30%. This relative weakness can be accounted for by the

lack of a significant publishing business in the region. The group is expected to release its first locally-developed and publis-

hed games in fiscal 2002.

Game Nation reported very high gross margin rates (97%) due to the low cost of sales under this type of distribution sys-

tem. However, the division only contributed marginally to consolidated income.

E u r o p e

U n i t e d - S t a t e s

As i a

Play Station One

Dr e a m c a s t

O t h e r s

Personal Computer

Play Station 2

Game Boy

Sales and marketing expenses were up 36% to €112.8 million, from €83 million a year ago, although the ratio to total

sales fell by 2.1% primarily as a result of significant cuts in per-unit logistic expenses.

Overhead and administrative expenses rose to € 54 million from € 33.1 million, reflecting the change in reporting enti-

ties as well as the creation of a corporate management structure designed to operate INFOGRAMES’ US subsidiaries in

an independent manner.

In Asia, the operating loss fell slightly, thanks to an improved gross margin. Development expenses were up €1.5 million

as a result of the growth of the Melbourne operation (release of Le Mans for PS2 during the year and Space Race for PS2

in the fall of 2001).

Game Nation reported an operating loss of €7.7 million, the same as a year earlier, with costs unchanged for the fiscal

y e a r.

Consolidated interest and investment income went from a profit of € 3.6 million to a loss of € 9 million, chiefly due to an

increase in interest expenses on convertible bonds (OCEANE), which were reported for a full year in the income state-

ment, as well as a decline in foreign-exchange gains from a year earlier.

There was a net loss from current business of €64.8 million, or 9.6% of total revenue, as compared with a loss of €4 3 . 5

million, or 8.3% of revenue, the previous year.

Tax expense for the fiscal year amounted to € 12.9 million, versus tax income of € 29.4 million the previous year. This

includes the full write-off of deferred tax debits at certain subsidiaries that reported losses for the past two fiscal years, as

provided for by Rule 99-02 of the Accounting Regulations Council, applied by the Corporation as from July 1, 2000.

E x t r a o r d i n a ry losses amounted to €25.9 million, compared with €4.1 million the previous year, and consisted of the fol-

lowing items:

In millions of € June 30, 2001 June 30, 2000

Capital gains (losses) on the sale of assets ( 1 . 1 ) 9 . 1

Closing and restructuring charges (*) ( 8 . 3 ) ( 2 . 2 )

Accelerated depreciation of prepaid royalties ( 1 1 . 2 ) ( 8 . 7 )

Other non-recurring expenses ( 5 . 3 ) ( 2 . 3 )

To t a l ( 2 5 . 9 ) ( 4 . 1 )

(*) of which 3.9 million attributable to Game Nation operations

Entities consolidated by the equity method generated income of €0.7 million, as compared with a loss of €0.8 million a

year ago.

2524

Management reportFinancial resultsThere was a consolidated operating loss of 55,8 million, or 8.3% of revenue, as compared with a loss of 47.1 million,

or 9% of revenue the previous year. The changes can be broken down as follows:

In millions of € June 30, 2001 June 30, 2000 C h a n g e

E u r o p e ( 3 9 . 0 ) ( 6 . 2 ) N / S

United States ( 5 . 9 ) ( 2 8 . 9 ) N / S

A s i a ( 3 . 2 ) ( 4 . 3 ) N / S

Game Nation ( 7 . 7 ) ( 7 . 7 ) N / S

E l i m i n a t i o n s 0 . 0 0 . 0 N / S

To t a l ( 5 5 . 8 ) ( 4 7 . 1 ) - 1 8 . 4 %

In Europe, the sharp increase in operating loss occurred despite the increase of € 23.6 million in gross margin primarily

as a result of:

• an increase in in-house development expenses, which rose to € 49.4 million (15.9% of revenue), from € 33.6 million

(13.4% of sales) a year earlier; this was the logical effect of changes in reporting entities and expenditures for next-

generation products, most of which are not yet distributed in Europe.

• an anticipated increase in marketing and sales expenses, to €77.7 million (or 25% of sales), from €53.3 million (21.2%

of sales) last year; the increase was due in part to changes in reporting entities and higher marketing budgets for mass-

market products, as well as poor market conditions that required special point-of-sale campaigns and adversely affec-

ted the distribution network (large number of small orders, unusually high volume of returns, etc.);

• a rise in overhead and administrative expenses to € 39.1 million (or 12.6% of revenue), as compared with € 2 2 . 9

million (9.1% of revenue) last year, resulting from the depreciation of data-processing equipment for the distribution net-

work over the full year, the establishment of a separate management structure for Europe and the reinforcement of local

management structures.

In an effort to reduce operating expenses, steps were taken to reassign personnel, which resulted in the elimination of 160

jobs (not counting acquisition of Hasbro Interactive). In addition, measures were initiated in France in the summer of 2001

to reduce the payroll by approximately 90 employees by the end of the calendar year.

A charge of €4.5 million was taken for the year to reflect the costs associated with these restructuring measures.

In the United States, the sharp improvement in operating loss was due primarily to the increase of €94.3 million in gross

margin, as mentioned above. Operating expenses were also up, reflecting changes in reporting entities.

Research and development expenses rose to € 45.7 million (12.8% of sales) from € 25.1 million, partly as a

result of the acquisition of Paradigm Entertainment, which accounted for expenditures of €6.9 million, as well

as the cost of developing software for the new consoles.

2726

Management reportA m o rtization of goodwill amounted to €20.6 million, up from €8.6 million the previous year. The increase is accounted

for in part by the amortization over a full year of goodwill from the acquisition of GT Interactive Software, the amort i z a-

tion over five months of goodwill from the acquisition of Hasbro Interactive and an extraordinary write-down of € 2 . 7

million on Game Nation (INFOGRAMES.COM).

The consolidated net loss was €123.5 million, as compared with a loss of €27.6 million the previous year. Net of mino-

rity interests’ share of income, the net loss attributable to the Corporation was € 121.3 million, compared with € 2 7 . 1

million a year ago.

4. CONSOLIDATED BALANCE SHEETBalance-sheet items as of June 30, 2001

(€m i l l i o n s ) June 30, 2001 June 30, 2000

Shareholders’ equity net of minority interests 2 5 3 . 9 1 8 9 . 7

Minority interests 1 2 . 0 0 . 8

Contingency and loss provisions 2 1 . 3 1 9 . 8

Debt (exclusive of convertible bond premiums) 5 6 9 . 3 5 7 2 . 9

Working capital 1 0 1 . 0 1 2 2 . 7

G o o d w i l l 2 9 3 . 6 9 8 . 6

Intangible assets 3 0 5 . 5 2 6 2 . 3

Other fixed assets 5 7 . 4 4 2 . 6

Cash and cash equivalents 9 9 . 0 2 5 6 . 8

Consolidated shareholders’ equity, net of minority interests, amounted to € 253.9 million on June 30, 2001, compared

with €189.7 million on June 30, 2000.

The increase in shareholders’ equity was the result of the following:

Shareholders’ equity, net of minority interests, on June 30, 2000 1 8 9 . 7

Exercise of stock options 0 . 6

Exercise of 1998 warrants 5 4 . 4

Bond conversions 2 . 9

Equity issue (acquisition of Paradigm Entert a i n m e n t ) 1 7 . 4

Equity issue (acquisition of Hasbro Interactive) 1 1 1 . 3

Tr e a s u ry shares ( 2 . 8 )

Unrealized foreign-exchange gain (loss) 1 . 7

Net income (loss) after minority interests ( 1 2 1 . 3 )

Shareholders’ equity, net of minority interests, on June 30, 2001 2 5 3 . 9

Debt, exclusive of redemption premiums, amounted to €569.3 million, down from €572.7 million on June 30, 2000. It

consisted at the end of the fiscal year of €599 million in convertible bonds (maturing in 2004 and 2005), €44.3 million

in short - t e rm credit facilities, and bank overdrafts of €0.3 million.

Goodwill was €293.6 million on June 30, 2001, up from €98.6 million a year earlier. Of the increase, €148.8 million

was accounted for by the acquisition of INFOGRAMES INTERACTIVE INC. Another € 36.2 million came from additio-

nal goodwill from the acquisition of INFOGRAMES, INC. and €12.8 million from the purchase of Paradigm Entert a i n m e n t ,

with foreign exchange differences contributing €21.6 million.

Intangible assets amounted to € 305.5 million as of June 30, 2001, compared with € 262.3 million a year earlier. The

increase was due in part to foreign-exchange differences, which accounted for more that €29 million of the total, as well

as the acquisition of Hasbro Interactive, which contributed €12.3 million (primarily the value of its titles).

Working capital decreased €21.7 million, primarily as a result of reductions in inventories of €14.9 million and an increa-

se of €27.5 million in trades payable, offsetting a net rise in prepaid royalties of €37 million.

Cash and cash equivalents amounted to €99 million on June 30, 2001, compared with €256.8 million a year earlier.

5. BUSINESS AND FINANCIAL RESULTS OF INFOGRAMES ENTERTAINMENT SA,THE PARENT - ENTITY - RESEARCH AND DEVELOPMENTAND NON-DEDUCTIBLE EXPENSES

Most of the revenue of INFOGRAMES ENTERTAINMENT SA, the consolidating corporation, is generated by investment

income and services perf o rmed on behalf of its subsidiaries and billed to them (cash management, human resources, com-

munications, computer network and software, information systems, general resources, financial and legal management,

corporate management). The Corporation’s business is accordingly not representative of the consolidated group as a

w h o l e .

INFOGRAMES ENTERTAINMENT SA reported revenue of € 20.5 million for the year ended June 30, 2001, up from

€13.6 million the previous year.

The Corporation posted an operating loss of €17 million for the period, compared with a loss of €20.2 million a year ear-

l i e r. The loss was accounted for primarily by the full write-off of acquisition expenses incurred with the purchases of Hasbro

Interactive and Paradigm Entertainment, as well as by financial holding expenses that could not be charged to subsidiaries.

INFOGRAMES ENTERTAINMENT SA does not engage directly in research and development. Activities in this area

condcted by the consolidated group are discussed in previous sections.

The Corporation reported a loss from investments of € 25.1 million for the year ended June 30, 2001, compared with

income of €6.8 million the previous year, due in part to a €28.1-million write-down of certain equity holdings. Excluding

the write-downs, investment income would have tataled €10 million.

• In Europe, the turnaround has yet to be felt in full force as the market penetration for the PlayStation 2 is lower than in

the U.S., and the releases of the Xbox and GameCube consoles are still to come (second half of 2002).

This outlook is subject to the consequences of the events of September 11 in the United States. Their impact on sales can-

not be assessed at this time. Under the circumstances, the Company announced on September 26, 2001, that it still anti-

cipated reporting operating income of 5 percent of total sales.

8. TRADING BY THE CORPORATION IN ITS OWN STOCKUnder the authority granted to it by the Annual Shareholders’ Meeting of December 15, 2000, the Corporation purcha-

sed 610,164 INFOGRAMES ENTERTAINMENT shares during the year ended June 30, 2001, for the purpose of main-

taining an orderly market in its stock. As of June 30, 2001, the corporation owned 149,426 shares of its own stock (or

0.17% of those outstanding), with a net value of €2.8 million.

9. STOCK PURCHASE PLANA stock purchase plan was established in fiscal 2000 for all of the Corporation’s employees in France; 85% of them par-

ticipate in the plan and they have invested a total of €0.9 million to acquire 40,000 INFOGRAMES shares, correspon-

ding to 0.05% of those outstanding as of June 30, 2001.

10. CURRENCY HEDGINGCurrency-risk managementThe parent Corporation manages currency risks on behalf of the group; it handles all currency transactions and decides,

whenever necessary, to hedge the balance of its foreign-exchange commitments. All entities outside the euro zone bill the

Corporation and are billed by it in their local currency.

The overall intercompany transactions between entities located in different currency areas are currently in balance, so that

each company’s exposure to foreign-exchange risks is limited. The largest volume of transactions involved the euro and

dollar zones, with an aggregate of some €13 million in trades in each direction during the year.

The parent Corporation provided post-acquisition financing for Infogrames Inc. through current-account advances that

were subsequently repaid with equity in that subsidiary. Now that the recapitalization has been completed, the parent

Corporation finances the operation of Infogrames, Inc. with repayable advances up to a ceiling of U.S.$50 million. This

financing did not have a material impact on net foreign-exchange gains or losses for the period ended June 30, 2001. 2928

Manageme nt reportTaxes of € 0.1 million corresponded to a tax benefit of € 0.8 million from the consolidation of INFOGRAMES EUROPE,

INFOGRAMES INTERACTIVE, INFOGRAMES FRANCE, Welcom Media, and INFOGRAMES MUSIC. The benefit was

offset by a deferred tax expense of €0.9 million resulting from additional tax assessments for fiscal 1997, 1998 and 1999.

Non-deductible expenses, as defined by section €39.4 of the General Tax Code, amounted to 47,000 for the year.

INFOGRAMES ENTERTAINMENT SA posted a loss for the year of €42.3 million, compared with a loss of €26.8 million

the previous year.

6. SIGNIFICANT EVENTS FOLLOWING THE END OF THE FISCAL YEAR

Several major agreements were entered into at the start of fiscal 2002, covering the publishing and/or distribution of new

products. They concern :

• 14 Sega titles for Game Boy Advance, Game Cube and Xbox to be published and distributed by INFOGRAMES

EUROPE during fiscal 2002 and 2003, expected to yield revenues of 100 million, before taking into account any

adverse impact of the September 11t h events, which cannot be reliably measured at this time.

• the Interplay Interactive action game Never Winter Nights to be distributed by INFOGRAMES in the United States;

• 12 Codemasters titles to be distributed by INFOGRAMES, INC. in the U.S., including the hit Operation Flash point, a

top-selling PC tittle released in September 2001.

The scope of these new agreements exemplifies the strength and reach of the INFOGRAMES distribution network, and

its strategic value for the consolidated group.

7. PROSPECTSFiscal 2002 is expected to mark the start of a turnaround in the European market for videogames, similar to that which

has occurred in the United States, and publishers should profit from this trend.

The pace at which this turnaround will occur is expected to vary between regions.

• In the United States, the improvement in market conditions during calendar 2001 has already begun to show in mar-

let sales numbers, with the latest data (for July 2001 – source: NPD) pointing to an increase over 2000. This is in large

due to the continued outstanding perf o rmance of the PlayStation 2, which has outsold the PlayStation since May 2001,

despite the fact that more than four times the number of PlayStation consoles have been sold to date. Additional mar-

ket improvements can be attributed to the November 2001 debut of the Xbox and GameCube.

3130

Foreign-exchange impact on financial statementsExisting hedging measures notwithstanding, the Group’s financial results are still affected by fluctuations in the value of the

U.S. dollar, as more than half of its annual revenue is in that currency. Sharp changes in the parity of the U.S. dollar could

therefore have material effects on the Group’s revenue, income and net worth which are reported in euros.

H o w e v e r, since all cash flow generated by business in the United States is reinvested in the same currency zone, the short -

t e rm impact in the Group’s financial results is not significant.

C o n s o l i d a t e dfinancial

s t a t e m e n t s

Manageme nt report

32

C o n s o l i d a t e dfinancial stat ements

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended June 30, (€millions, except share and per share amounts) 2 0 0 1 2000 1999

Revenue, net 6 7 4 . 3 5 2 1 . 6 3 0 6 . 1

Cost of revenue 3 3 4 . 6 2 9 3 . 5 1 7 0 . 1

G ross pro f i t 3 3 9 . 7 2 2 8 . 1 1 3 6 . 0

Research and development expenses 1 0 1 . 4 6 8 . 7 2 5 . 8

Selling and distribution expenses 1 9 3 . 5 1 4 1 . 4 5 5 . 8

General and administrative expenses 1 0 0 . 6 6 5 . 1 2 9 . 0

(Loss) income from operations ( 5 5 . 8 ) ( 4 7 . 1 ) 2 5 . 4

Financial (expense) income, net ( 9 . 0 ) 3 . 6 1 . 2

Current (loss) income before non-recurring income (expenses), taxation, share of net income (losses) of equity method investments, and amortization of goodwill ( 6 4 . 8 ) ( 4 3 . 5 ) 2 6 . 6

Non-recurring expenses, net ( 2 5 . 9 ) ( 4 . 1 ) ( 0 . 6 )

Taxation (provision) benefit ( 1 2 . 9 ) 2 9 . 4 ( 2 . 9 )

Net (loss) income before share of net income (losses) of equity method investments and amortization of goodwill ( 1 0 3 . 6 ) ( 1 8 . 2 ) 2 3 . 1

Share of net income (losses) of equity method investments 0 . 7 ( 0 . 8 ) ( 1 . 8 )

A m o rtization of goodwill ( 2 0 . 6 ) ( 8 . 6 ) ( 0 . 7 )

Net (loss) income before minority interests ( 1 2 3 . 5 ) ( 2 7 . 6 ) 2 0 . 6

Minority interests ( 2 . 2 ) ( 0 . 5 ) 0 . 3

Net (loss) income ( 1 2 1 . 3 ) ( 2 7 . 1 ) 2 0 . 3

Net (loss) income per share, not diluted ( 1 . 4 8 ) ( 0 . 3 7 ) 0 . 3 1

Net (loss) income per share, fully diluted (a) ( 1 . 4 8 ) ( 0 . 3 7 ) 0 . 2 2

Weighted average number of shares outstanding, not diluted (b) 8 1 , 9 1 2 , 2 0 8 7 2 , 9 2 5 , 3 4 7 6 4 , 4 6 5 , 2 9 5

Weighted average number of shares outstanding, fully diluted (a) (b) 1 0 5 , 9 0 1 , 3 8 5 9 3 , 4 4 8 , 2 7 6 9 2 , 2 7 2 , 7 2 7

(a) Taking into account the impact of dilutive securities (see Note 1.U to the consolidated financial statements).

(b) Numbers of shares for all periods have been restated to reflect the five-for-one stock split of IE SA Capital Stock on January 3, 2000(see Note 12 to the consolidated financial statements).

Amounts reported in euros have been restated from French francs to euros using the fixed exchange rate at January 1, 1999 of EUR 1 = FF 6.55957 (see Note 1.D to the consolidated financial statements).

CONSOLIDATED BALANCE SHEETS

June 30, (€m i l l i o n s ) 2 0 0 1 2000 1999

Goodwill, net 2 9 3 . 6 9 8 . 6 2 . 5

Intangible assets, net 3 0 5 . 5 2 6 2 . 3 4 5 . 3

P r o p e rty and equipment, net 3 3 . 1 2 6 . 6 1 1 . 8

I n v e s t m e n t s 2 4 . 3 1 6 . 0 5 . 0

Total fixed assets 6 5 6 . 5 4 0 3 . 5 6 4 . 6

I n v e n t o r i e s 6 4 . 5 7 9 . 4 2 4 . 7

Royalty advances and prepaid license fees 9 2 . 4 5 5 . 3 3 3 . 9

Trade receivables, net 1 2 5 . 6 1 0 9 . 8 7 5 . 8

Other assets 1 7 5 . 4 2 0 3 . 7 7 9 . 2

Marketable securities 4 0 . 6 2 4 3 . 5 2 0 4 . 2

C a s h 5 8 . 4 1 3 . 3 2 3 . 6

Total current assets 5 5 6 . 9 7 0 5 . 0 4 4 1 . 4

Total assets 1 , 2 1 3 . 4 1 , 1 0 8 . 5 5 0 6 . 0

Capital stock 5 4 . 0 4 8 . 2 4 1 . 5

Additional paid-in capital 4 2 3 . 5 2 4 2 . 7 1 2 3 . 3

Retained earnings (deficit) ( 2 2 3 . 6 ) ( 1 0 1 . 2 ) ( 6 6 . 5 )

Total stockholders’ equity 2 5 3 . 9 1 8 9 . 7 9 8 . 3

Minority interests 1 2 . 0 0 . 8 0 . 2

Contingency and loss provisions 2 1 . 3 1 9 . 8 4 . 5

L o n g - t e rm debt 5 9 9 . 0 6 3 6 . 9 2 6 1 . 4

Total long-term liabilities 6 2 0 . 3 6 5 6 . 7 2 6 5 . 9

P o rtion of debt maturing in less than a year 4 4 . 6 1 0 . 5 3 0 . 6

Trade accounts payable 2 3 0 . 2 2 0 2 . 8 7 7 . 5

Other short - t e rm liabilities 5 2 . 4 4 8 . 0 3 3 . 5

Total short - t e rm liabilities 3 2 7 . 2 2 6 1 . 3 1 4 1 . 6

Total minority interests, liabilities and stockholders’ equity 1 , 2 1 3 . 4 1 , 1 0 8 . 5 5 0 6 . 0

Amounts reported in euros have been restated from French francs to euros using the fixed exchange rate at January 1, 1999 of EUR 1 = FF 6.55957 (see Note 1.D to the consolidated financial statements).

33

3534

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

N u m b e rof Shares A d d i t i o n a l R e t a i n e d

of Capital Stock C a p i t a l P a i d - i n Earnings (€millions, except share amounts) Outstanding (a) S t o c k C a p i t a l ( D e f i c i t ) To t a l

July 1, 1998 5 5 , 3 9 8 , 8 0 5 3 3 . 8 1 0 0 . 6 ( 8 3 . 7 ) 5 0 . 7Comprehensive income (loss), net of tax (b):Net income - - - 2 0 . 3 2 0 . 3Other comprehensive income (loss) items:• Unrealized foreign exchange losses, net - - - ( 3 . 1 ) ( 3 . 1 )• Deduction of goodwill - - ( 9 1 . 5 ) - ( 9 1 . 5 )

Comprehensive (loss), net ( 7 4 . 3 )Exercise of stock options 7 2 , 3 0 5 - 0 . 1 - 0 . 1Conversions of bonds 3 , 4 7 7 , 8 7 5 2 . 1 1 7 . 3 - 1 9 . 4Issuance of capital stock with warrants 9 , 1 5 9 , 0 6 0 5 . 6 9 6 . 8 - 1 0 2 . 4

June 30, 1999 6 8 , 1 0 8 , 0 4 5 4 1 . 5 1 2 3 . 3 ( 6 6 . 5 ) 9 8 . 3Comprehensive income (loss), net of tax (b):Net loss - - - ( 2 7 . 1 ) ( 2 7 . 1 )Other comprehensive income (loss) items:• Unrealized foreign exchange losses, net - - - ( 7 . 6 ) ( 7 . 6 )• Deduction of goodwill - - ( 5 . 2 ) - ( 5 . 2 )

Comprehensive (loss), net ( 3 9 . 9 )Exercise of stock options 4 1 0 , 3 6 5 0 . 3 1 . 1 - 1 . 4Issuance of capital stock for purchases by the employees’ savings plan 4 0 , 0 0 0 - 0 . 8 - 0 . 8Conversions of bonds 9 , 9 3 1 , 1 6 5 6 . 0 1 1 4 . 9 - 1 2 0 . 9Exercise of warrants 5 9 4 , 8 9 0 0 . 4 7 . 8 - 8 . 2June 30, 2000 7 9 , 0 8 4 , 4 6 5 4 8 . 2 2 4 2 . 7 ( 1 0 1 . 2 ) 1 8 9 . 7

Comprehensive income (loss), net of tax (b):Net loss - - - ( 1 2 1 . 3 ) ( 1 2 1 . 3 )Other comprehensive income (loss) items:• Unrealized foreign exchange income, net - - - 1 . 7 1 . 7

Comprehensive (loss), net ( 1 1 9 . 6 )Acquisition of Hasbro Interactive 4 , 5 2 1 , 4 0 5 2 . 8 1 0 7 . 4 - 1 1 0 . 2Acquisition of Paradigm 6 5 6 , 9 1 9 0 . 4 1 7 . 0 - 1 7 . 4Exercise of stock options 1 7 3 , 6 1 0 0 . 1 0 . 5 - 0 . 6Repurchase of capital stock ( 1 4 9 , 4 2 6 ) - - ( 2 . 8 ) ( 2 . 8 )Conversion of bonds 1 5 4 , 8 9 5 0 . 1 2 . 8 - 2 . 9Exercise of warrants 3 , 9 6 9 , 0 2 5 2 . 4 5 2 . 0 - 5 4 . 4Issuance of warrants in acquisitionof Hasbro Interactive - - 1 . 1 - 1 . 1June 30, 2001 8 8 , 4 1 0 , 8 9 3 5 4 . 0 4 2 3 . 5 ( 2 2 3 . 6 ) 2 5 3 . 9

( a ) Numbers of shares for all periods have been restated to reflect the five-for-one stock split of IESA capital stock on January 3, 2000(see Note 12 to the consolidated financial statements).

( b ) Comprehensive income (loss) includes net income (loss) and other changes in equity due to transactions and events from non-ownersources (see Note 12 to the consolidated financial statements).

Amounts reported in euros have been restated from French francs to euros using the fixed exchange rate at January 1, 1999 of EUR 1 = FF 6.55957 (see Note 1.D to the consolidated financial statements).

CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended June 30,

(€ millions, except share and per share amounts) 2 0 0 1 2000 1999

O P E R ATING ACTIVITIES:Net (loss) income ( 1 2 1 . 3 ) ( 2 7 . 1 ) 2 0 . 3Share of net (income) losses of equity method investments ( 0 . 7 ) 0 . 8 1 . 8Minority interests ( 2 . 2 ) ( 0 . 5 ) 0 . 3A m o rtization of goodwill 2 0 . 6 8 . 6 0 . 7Depreciation and amortization of intangible assets 2 9 . 5 2 0 . 2 3 . 3(Gain) loss on the sale of property and equipment ( 1 . 0 ) 7 . 2 ( 0 . 1 )Loss (gain) on the sale of intangible assets and investments 2 . 1 ( 9 . 1 ) -Deferred taxation provision 1 2 . 7 ( 2 9 . 5 ) ( 1 . 8 )A m o rtization of royalty advances and prepaid license fees 3 6 . 9 2 9 . 1 9 . 9Contingency and loss provisions ( 1 . 6 ) ( 3 1 . 2 ) 6 . 9

Operating (loss) income before working capital changes ( 2 5 . 0 ) ( 3 1 . 5 ) 4 1 . 3

Changes in working capital requirements, net of the effect of acquisitionsDecrease (increase) in inventories 1 4 . 9 ( 1 2 . 1 ) ( 1 . 8 )Payments of royalty advances and license fees ( 8 7 . 4 ) ( 7 0 . 1 ) ( 2 6 . 5 )(Increase) decrease in trade receivables ( 1 3 . 4 ) ( 1 7 . 4 ) ( 8 0 . 7 )(Decrease) increase in accounts payable and other short - t e rm liabilities ( 6 4 . 0 ) ( 4 3 . 3 ) 2 8 . 3O t h e r 7 . 1 ( 1 8 . 8 ) 0 . 1Total changes in working capital ( 1 4 2 . 8 ) ( 1 6 1 . 7 ) ( 8 0 . 6 )

Net cash used in operating activities ( 1 6 7 . 8 ) ( 1 9 3 . 2 ) ( 3 9 . 3 )

INVESTING ACTIVITIES:Purchases of intangible assets ( 9 . 0 ) ( 1 3 . 9 ) ( 2 . 8 )Purchases of property and equipment ( 7 . 1 ) ( 8 . 9 ) ( 1 . 1 )Proceeds from sale of property and equipment and intangible assets 2 . 8 9 . 5 1 . 1Other investment purchases ( 5 . 3 ) ( 0 . 5 ) ( 0 . 6 )Purchases of businesses, net of cash acquired ( 1 4 . 3 ) ( 8 3 . 9 ) ( 1 0 0 . 2 )

Net cash (used in) investing activities ( 3 2 . 9 ) ( 9 7 . 7 ) ( 1 0 3 . 6 )

FINANCING ACTIVITIES:Proceeds from issuance of capital stock 5 2 . 2 1 0 . 4 1 0 2 . 5Proceeds from issuance of convertible bonds - 3 4 8 . 7 2 1 5 . 0Repayments (borrowings) of other debt, net ( 4 . 4 ) ( 1 6 . 4 ) 2 1 . 1

Net provided by financing activities 4 7 . 8 342.7 3 3 8 . 6

Foreign currency exchange rate changes on cash and cash equivalents ( 1 . 7 ) ( 7 . 6 ) ( 3 . 2 )

CHANGE IN CASH AND CASH EQUIVALENTS ( 1 5 4 . 6 ) 4 4 . 2 1 9 2 . 5

Beginning of year 2 5 0 . 4 2 0 6 . 2 1 3 . 7End of year (a) 9 5 . 8 2 5 0 . 4 2 0 6 . 2Interest paid ( 1 5 . 1 ) ( 6 . 9 ) ( 0 . 2 )Taxes paid ( 0 . 4 ) ( 8 . 2 ) ( 2 . 0 )(a) Cash and cash equivalents consist of the following:

C a s h 5 8 . 4 1 3 . 3 2 3 . 6

Marketable securities 4 0 . 6 2 4 3 . 5 2 0 4 . 2

Bank overdrafts ( 3 . 2 ) ( 6 . 4 ) ( 2 1 . 6 )

To t a l 9 5 . 8 2 5 0 . 4 2 0 6 . 2

Amounts reported in euros have been restated from French francs to euros using the fixed exchange rate at January 1, 1999 of EUR 1 = FF 6.55957 (see Note 1.D to the consolidated financial statements).

C o n s o l i d a t e dfinancial statements

3736

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. NATURE OF BUSINESSInfogrames Entertainment S.A. (“IE SA”) and its subsidiaries (collectively, the “Group”) is a major international designer,

p r o d u c e r, publisher, and distributor of entertainment software, interactive or otherwise, for all media systems. The Group

derives its revenue primarily from the sale and licensing of its own internally-created products, from the sale and licensing

of externally-created products under publishing agreements, from the distribution of other publishers’ products, and from

the production of products for others. The Group’s customers include mass merchants, specialty software stores, computer

superstores, and other distributors and developers throughout the world.

B. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLESThe consolidated financial statements of the Group have been prepared in accordance with accounting rules and princi-

ples generally accepted under French law (“French GAAP”). Since July 1, 2000, the Group’s consolidated financial sta-

tements comply with Regulation 1999-02 of the Comite de la Reglementation Comptable (“Regulation 99-02”). In line with

this new regulation, an additional depreciation of deferred tax assets was recognized in fiscal year 2000-2001 (note 20)

C. CONSOLIDATION PRINCIPLESThe financial statements of entities in which the Group has exclusive control have been fully consolidated prospectively

from the time such control is achieved. Investments in which the Group was an equity interest of 20% to 50% and which

the Group exercises significant influence are accounted for under the equity method.

Investments in entities that the Group does not intend to hold a long-term interest are not consolidated though they are

complying with the principles mentioned here above. All transactions between fully consolidated entities have been eli-

minated. See note 25 for a list of the Group’s fully consolidated entities at June 30, 2001 and 2000.

The unconsolidated investments are reported at the lesser of historical cost or net realizable value (to reflect a ;long-term

i m p a i rment of value).

The consolidated statements of operations include the financial results of entities acquired during the year from the date

on which the Group acquired a controlling interest in them, and those of entities disposed of during the year for the per-

iod leading up to their transfer.

When the Group acquires a controlling interest in an entity, any portion of the assets and liabilities retained by minority

shareholders is recorded at its fair value in the consolidated balance sheets. Accordingly, if the Group subsequently acqui-

res the assets and liabilities considered held by minority shareholders, no additional fair value adjustment is recorded at

that time.

Note to the consolidatedfinancial statements

D. TRANSLATION OF FINANCIAL STATEMENTS AND REPORTING OF TRANSACTIONS IN FOREIGN CURRENCY

Translation of the Group’s Financial Statements

The Group’s companies in countries that are members of the European Monetary Union (“EMU”) changed their functio-

nal currencies from their local currencies to the euro on July 1, 2001. The functional currencies of the Group’s companies

outside of the EMU have retained their respective local currencies. The financial statements of the Group’s companies out-

side of the EMU are translated into euros using the following principles:

• items in the balance sheets are translated using exchange rates in effect at the end of the fiscal year;

• items in the statements of operations and statements of cash flows are translated at the average exchange rates for

the fiscal year;

• unrealized foreign exchange gains or losses are recorded to “Retained earnings (deficit)” in the consolidated statements

of stockholders’ equity for those attributable to the Group and in “Minority interests” for those attributable to minority

s t o c k h o l d e r s .

The Group’s consolidated financial statements were prepared in French francs for fiscal years 2001, 2000, and 1999

and translated into euros using the official exchange rate at January 1, 1999 of 6.55957 French francs for one euro.

Prior to the introduction of the euro throughout the EMU, the currencies of other countries fluctuated against the French franc.

The exchange rates between the EMU legacy currencies and the euro were fixed on January 1, 1999. As the euro did not

exist prior to January 1, 1999, historical exchange rates for the euro are not available. The Group’s consolidated financial

statements for fiscal year 1999 report the operations of the Group for a twelve-month period that extends across the intro-

duction of the euro (i.e., January 1, 1999). As such, its results of operations during this fiscal year include a period (July 1,

1998 to December 31, 1998) that has been translated at the official conversion rate, although this period was prior to the

introduction of the euro. As a result, the Group’s consolidated financial statements for fiscal year 1999 may not be direct-

ly comparable to the financial statements of other companies that have also been restated in the euro.

All amounts presented in these notes to the consolidated financial statements, except where otherwise indicated, are

expressed in euros (“€” ) .

Translation of Foreign Currency Tr a n s a c t i o n s

Transactions by a Group company denominated in a currency other than that company’s functional currency are trans-

lated using the exchange rate in effect at the time of the transaction or at the hedging rate if any. Assets and liabilities

denominated in a currency other than a company’s functional currency are remeasured using the exchange rate in effect

at the reporting date or the applicable hedging rate if any. Any foreign exchange gains or losses are recorded to

“Financial income (expense), net” in the statements of operations.

E. CASH FLOW STATEMENTSCash flows are split between operating, investing and financing activities. “Net income (loss)” in the consolidated state-

ments of operations is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or futu-

re operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows.

Bank overdrafts are deducted from cash and cash equivalent.

3938

F. GOODWILLWhen the Group acquires a new entity, the acquired entity’s identifiable assets and liabilities (including identifiable intan-

gible assets described in Note 1.G) are recorded in the consolidated balance sheets at their estimated fair value on the

acquisition date. Initial estimates of fair values are finalized within the fiscal year subsequent to the year of acquisition.

Any excess of the net purchase price over the net fair value of identifiable assets and liabilities is recorded to “Goodwill”

in the consolidated balance sheets and is amortized on a straight-line basis over a period not in excess of its related esti-

mated useful life. The net purchase price includes any incidental out-of-pocket fees directly related to the acquisition. The

net fair value of identifiable assets and liabilities includes certain acquisition adjustments if necessary, including provisions

for reorganizations and/or restructurings.

Prior to the Group’s adoption of Regulation 99-02 (see Note 1.B), goodwill arising from acquisitions that were financed

by equity instruments issued specifically to finance the related acquisitions was charged to “additional paid-in capital” in

the consolidated balance sheets in accordance with Approval No. 98-559 of the Commission des Operations de Bourse

(”Monthly statement N° 210 and 1997 annual report ” ) .

The balance of goodwill is reviewed regularly in order to take into account events or changes that could reduce, in a long-

t e rm basis, the carrying amount. This review is perf o rmed by analysing both external (development of the market, Group’s

market share…) and internal (historical development and business plans in terms of revenue, profitability and cash flow) fac-

tors. If this review indicates a underlying business operation and the carrying amount of the net investment is perf o rmed; if

n e c e s s a ry, the carrying amount of the net investment is reduced to its estimated fair value with a reduction of goodwill.

G. INTANGIBLE ASSETSThe Group classifies its intangible assets , other than goodwill, as either amortizable or non-amortizable.

A m o rtizable Intangible Assets

A m o rtizable intangible assets, other than goodwill, include identifiable intangible assets resulting from acquisitions (e.g.,

game catalogs) of businesses and computer software acquired for internal use. These assets are amortized to “General

and administrative expenses” or “Research and development expenses” in the consolidated statements of operations

(depending their nature) on a straight-line basis over a period not in excess of their related estimated useful lives (ranging

from 1 to 4 years).

A m o rtizable intangible assets also include certain entertainment software products purchased from external software pro-

ducers under production fund development agreements. Under these agreements, which differ from the Group’s royalty-

based development agreements (see Note 1.L), the Group agrees, in advance, to purchase products, for a set price, sub-

ject to the producers achieving contractually specified production milestones. Such products are capitalized and amort i-

zed to “Cost of revenue” in the consolidated statements of operations over the product’s expected sales life (generally one

to three years) commencing upon the product release date.

N o n - a m o rtizable intangible assets

N o n - a m o rtizable intangible assets include market share and trademarks resulting from acquisitions, to the extent that an

accurate and objective fair value can be determined for these items. These items are not amortized.

H. PROPERTY AND EQUIPMENT P r o p e rty and equipment is recorded at cost less accumulated depreciation. Depreciation is calculated on a straight-line

basis over estimated useful lives of the related assets. Leasehold improvements are depreciated over the shorter of the lease

t e rm or the estimated useful lives of the related assets (including extension periods under certain circumstances). Land is

not depreciated.

Assigned economic lives of property and equipment are as follows:

Ye a r s

• B u i l d i n g 25

• Computer equipment 1 to 3

• F u rniture and fixtures (including leasehold improvements) and other equipment 3 to 10

C e rtain leased assets are treated as if purchased on credit and are reported as capital leases on the basis of the current

value of future lease payments and are depreciated over their estimated useful lives.

I. IMPAIRMENT OF LONG-LIVED ASSETS The Group reviews, annually, intangible assets and property equipment for impairment whenever events or changes in

circumstances indicate that the carrying amount of the assets may not be recoverable. In the case of intangible assets rela-

ted to an acquired company, this review is perf o rmed by analysing both external (development of the market, Group’s

market share…) and internal (historical development and business plans in terms of revenue, profitability and cash flows)

factors. If it appears that such amounts could not be recoverable, the Group estimates the future cash flows expected to

result from the use of the asset and its eventual disposition and recognizes, if necessary, an impairment loss for the diffe-

rence between the carrying value of the asset and its fair value. After impairment is recognized, the reduced carry i n g

amount of the asset is accounted for at its new cost. For a depreciable asset, the new cost is depreciated over the asset’s

remaining useful life.

J. INVESTMENTSUnconsolidated investments that the Group does not intend to sell in the short - t e rm are recorded at their acquisition cost. A

loss provision is recorded whenever an investment’s going-concern value is estimated to be less than book value. The going

c o n c e rn value is estimated based on a number of criteria including the prospects for returns on the Group’s investment.

K. INVENTORIESThe value of inventories is calculated using the first-in, first-out method. The gross value of inventories includes their pur-

chase price and incidental expenses. Interest expenses are not included in the value of inventories. A loss provision is reco-

gnized to reduce the recorded cost to net realizable value whenever the probable market value of inventories is below

their cost and is charged to “Cost of goods sold” in the consolidated statements of operations.

Note to the consolidatedfinancial statements

E n t e rtainment Software Licensing

Under various licensing agreements, licensees are entitled to make multiple copies of entertainment software subject to the

payment of a guaranteed fee. The guaranteed fee is recognized as revenue at the time of delivery of the master softwa-

re or the first copy. Revenue is recognized for additional copies of entertainment software, which exceed the multiple

copies allowed by the guaranteed fee, as earned.

S e rvice Revenue

Revenue from development and publishing services perf o rmed for others reflect fees received for providing such serv i c e s

and are recognized as earned based on development milestones specified in the related service agreements.

P. CLASSIFICATION OF OPERATING EXPENSES Operating expenses are recorded in the statements of operations based on the nature of the expenses, including depre-

ciation and provision allowances on related assets.

Costs incurred for shipping and handling are included in “Selling and distribution expenses” in the consolidated state-

ments of operations. The Group recorded approximately €23.7 million, €17.7 million and €5.3 million of shipping and

handling costs in fiscal years 2001, 2000, and 1999, respectively.

Q. RESEARCH AND DEVELOPMENT EXPENSESIn-house production costs are charged to “Research and development expenses” in the consolidated statements of ope-

rations as incurred until technological feasibility has been established for the product. The technological feasibility crite-

rion is considered to have been met upon completion of a working model, which in practice takes place at the end of the

development period. Accordingly, since expenses incurred after completion of technical feasibility tests have not been

significant, the Group has not capitalized any significant in-house software production costs to date.

Production costs incurred in the development of products for others under production fund development agreements are

charged to “Research and Development expenses” as incurred. The to “Research and Development expenses” include

also if necessary the depreciation on royalty advances to software developers under royalty-based development agree-

ments which are described in Note 1.L.

R. ADVERTISING General advertising costs are recognized as incurred and charged to “Selling and distribution expenses” in the consoli-

dated statements of operations, with the exception of expenses directly related to the promotion of a product that has not

been released. Advertising costs for products that have not been released are capitalized in “Other assets” in the conso-

lidated balance sheets and recognized at the time of the release of the related product.

The Group recorded approximately € 46.9 million, € 44.5 million and € 20.6 million of advertising expenses in fiscal

years 2001, 2000, and 1999, respectively. 4140

L. ROYALTY ADVANCES AND PREPAID LICENSE FEESRoyalty advances to external software developers under royalty-based development agreements for certain products and

prepaid license fees to intellectual property rights holders for use of their trademarks or copyrights are capitalized and

a m o rtized to “Cost of revenue” in the consolidated statements of operations. Amortization of these assets commences

upon the product release date and is based on the agreed-upon royalty schedule.

The Group’s management evaluates the future realization of these assets on a regular basis and records a charge for any

amounts deemed unlikely to be realized through the volume of expected sales. Such charges may be recorded to

“Research and development expenses” or “Non-recurring expenses, net” in the consolidated statements of operations.

M. MARKETABLE SECURITIES“Marketable securities” in the consolidated balance sheets are highly liquid securities with an original maturity of three

months or less and are considered to be cash equivalents. The fair values of the Group’s marketable securities approxi-

mate their carrying amounts due to the short - t e rm maturity of these instruments.

N. OTHER ASSETSBond Issue and Redemption Premiums

Bonds are reported at their principal amount, inclusive of any bond issue or redemption premium. The value of the bond

issue or redemption premium is capitalized to “Other assets” in the consolidated balance sheets and amortized as inter-

est expense over the life of the bonds, except if the Group has separately hedged the redemption risk.

Bond Issue Costs

Bonds issue costs are capitalized to “Other assets” in the consolidated balance sheets over the life of the bonds and amor-

tized to “Financial income (expense)” in the consolidated statements of operations.

O. REVENUE Sales of Entertainment Software

Revenue from the sale of entertainment software is recognized at the time products are shipped to customers, inclusive of

any shipping and handling costs billed to customers. A reserve is provided for expected future returns, net of the related

cost of such items. The Group is not contractually obligated to accept returns, however, the Group may permit the exchan-

ge of products sold to certain customers. In addition, the Group may provide warranties, price protection concessions for

unsold products and other allowances to certain customers. When the Group grants such allowances, management of

the Group estimates the amount of these future credits and reserves are recorded to “Trade receivables, net” in the conso-

lidated balance sheets. The Group also perf o rms ongoing credit evaluations of its customers and reserves for potential los-

ses are recorded, as necessary, to “Trade receivables, net.”

Note to the consolidatedfinancial statements

W. PENSION AND OTHER BENEFIT PLANSAccording to the laws and customary practices of each country, the entities in the Group have obligations in terms of pen-

sion and other retirement plans, life and disability insurance plans, medical plans applicable to active employees and

other benefit plans. The Group accounts for these obligations as contributions are made and records the related expen-

ses in the consolidated statements of operations based on their nature.

Obligations with respect of retirement benefit plans are computed on a prospective actuarial method. These commitments

are not recognized in the consolidated financial statements but are reported in note 21 (off balance sheet commitments).

The Group may grant stock-based awards to certain employees. Stock-based awards are not recorded by the Group on

the date of grant, however, upon exercise of the awards, the Group records the issuance of the related shares of stock as

an equity transaction based on the amount of cash received from the employees.

X. USE OF ESTIMATES The preparation of the Group’s consolidated financial statements requires the Group’s management to make estimates

and assumptions which have an impact on the balance sheet values of assets and liabilities, any assets and liabilities refer-

red to in the notes to the consolidated financial statements, as well as revenue and expenses reported in the statements of

operations. Actual results could differ from these estimates.

Y. RECLASSIFICATIONSC e rtain reclassifications have been made to the prior years’ consolidated financial statements to conform to fiscal year

2001 classifications.

Z. RECENTLY ISSSUED FRENCH GAAP ACCOUNTING PRONOUNCEMENTSIn December 2000, the Comite de la Reglementation Comptable issued Regulation 2000-06, which requires French com-

panies to adopt new accounting rules on the recognition of liabilities for fiscal years beginning on or after January 1,

2002. The regulation requires that a liability should be recognized when, and only when an enterprise has a present obli-

gation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying eco-

nomic benefits will be required to settle the obligation. The effects of the application of these new accounting rules are not

anticipated to have a material effect on the Group’s consolidated financial statements.

4342

S. TAXATION Current taxes are calculated based on rules and rates applicable in the countries where the Group operates.

Deferred taxes are calculated using the interperiod tax allocation method for all temporary differences that may exist bet-

ween the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred taxes are

measured using the enacted tax rates in the countries where the Group operates in effect for the years in which the diffe-

rences are expected to reverse. A provision is recorded for net deferred tax assets whenever it is deemed more doubtful

than likely (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized.

A provision has been set aside for taxes payable in the event that the undistributed earnings of French and foreign sub-

sidiaries should be distributed, except when those earnings are intended to be permanently kept by the subsidiaries

c o n c e rn e d .

T. NON-RECURRING INCOME AND EXPENSES Non-recurring income and expenses consists of items that are believed by management to be exceptional in character

and one-time in nature, and therefore, are not considered part of the Group’s normal ongoing business operations.

Included with these items are capital gains and losses from the sale of fixed assets and restructuring costs.

U. NET INCOME (LOSS) PER SHARE E a rnings per share are calculated on the basis of the weighted average number of shares outstanding during the year.

“Net income (loss) per share, fully diluted” in the consolidated statements of operations takes into account potential dilu-

ting factors (e.g., convertible bonds, stock warrants and options). All such potential diluting factors would be considered

anti-dilutive for the years ended June 30, 2001 and 2000.

V. FINANCIAL INSTRUMENTS The fair values of the Group’s trade and other receivables, trade accounts payable, and other short - t e rm liabilities approxi-

mate their carrying amounts due to the short - t e rm maturity of these instruments. The disclosure of the fair value of other

financial instruments, where estimates of fair value are practicable, is provided in the related notes to the consolidated

financial statements. Significant judgment is required to develop estimates of fair value. Estimates of fair value are stated

at year-end and are not necessarily indicative of the amounts that the Group could realize in current market exchanges.

The Group's policy is to enter into derivative financial instruments to manage and reduce its exposure to fluctuations in

interest rates and foreign currency exchange rates. Derivative financial instruments are generally designated as hedges

of the underlying exposure. The reporting in the statements of operations of income and expenses from such derivative

financial instruments parallels that of the hedged instrument concerned (i.e., gains and losses on interest rate and foreign

currency agreements are generally accounted for in the same period as the item being hedged). To the extent an instru-

ment is no longer effective as a hedge due to a change in the underlying exposure, gains and losses are recognized cur-

rently in “Financial income (expenses)” in the consolidated statements of operations.

Note to the consolidatedfinancial statements

4544

2. ACQUISITIONS A. FISCAL YEAR 2001 ACQUISITIONSAcquisition of Hasbro Interactive:On December 6, 2000, the Group entered into a contribution agreement to acquire certain businesses and other assets

that had represented the interactive business of Hasbro, Inc. (“Hasbro Interactive”). The terms of the contribution agree-

ment note that the Group would also acquire a long-term licensing agreement with Hasbro, Inc. to provide exclusive rights

to develop and publish digital interactive games based on current and future Hasbro, Inc. properties. In exchange,

Hasbro, Inc. would receive fair value consideration of U.S. Dollars (“USD”) 100.0 million comprised of: USD 5.0 millions

in cash; USD 94.0 millions in shares of IE SA capital stock (based on a defined per share common stock valuation com-

putation); and USD 1.0 million in warrants to IE SA capital stock (based on a defined per warrant valuation computa-

tion). All consideration was subject to post-closing adjustment clauses in the contribution agreement that are based on the

net equity of Hasbro Interactive at December 31, 2000.

On January 26, 2001, the Group completed its acquisition of Hasbro Interactive, which the name of the main entity

Hasbro Interactive, Inc. has change to Infogrames Interactive, Inc. The acquisition has been accounted for using the pur-

chase method of accounting. At June 30, 2001, the final purchase price was under examination by a third-party arbi-

trator (per request of the Group and in accordance with available terms in the contribution agreement).

The terms of the contribution agreement require Hasbro, Inc. to remit to the Group cash for any purchase price adjustment

up to an amount of US D 4.0 millions and any excess adjustment above this amount as a refund of shares of IE SA capi-

tal stock. Per terms of the contribution agreement and the shareholders’ approval to acquire Hasbro Interactive, it was

agreed that any refund of IE SA capital stock as a result of the final purchase price determination would result in the reti-

rement of the related shares as a charge the Group’s equity. The net effect of a favorable purchase price adjustment will

be to reduce goodwill by the amount of the adjustment and to reduce consolidated shareholders’ equity by the amount

of such adjustment in excess of US D 4.0 millions.

The net purchase price of €125.4 million, inclusive of out-of-pocket fees directly related to the acquisition, has been allo-

cated, on a preliminary basis, as follows:

(€m i l l i o n s )

Net fair value of identifiable assets and liabilities acquired (1) ( 2 3 . 4 )

Goodwill (2) 1 4 8 . 8

Net purchase price 1 2 5 . 4

(1) The net fair value of identifiable assets and liabilities acquired includes the following (in millions):

Games.com (see Note 7) 4 . 3

Tr a d e m a r k s 3 . 7

Game catalogs 5 . 9

To t a l 1 3 . 9

(2) Goodwill is being amortized over 15 years on a straight-line basis. Based on the resolution of the final purchase price, recorded

goodwill may change significantly.

Acquisitions of Infogrames, Inc. Minority InterestsOn October 2, 2000, the Group increased its percentage of ownership in Infogrames, Inc by 27.8% (note 2.B) through:

• an issuance of shares of Infogrames, Inc. common stock in exchange for forgiveness of a Group loan’s and for all the

outstanding shares of a US operating wholly owned subsidiaries.

• and a cash payment of € 4.8 millions for common stock owned by minority interests.

The acquisition was accounted for using the purchase method of accounting and resulted in the recording of goodwill of

€ 25.4 millions. This goodwill is being amortized over 10 years on a straight-line basis

Acquisition of Paradigm Entert a i n m e n tOn July 28, 2000, the Group acquired Paradigm Entertainment, a game-development company in the United States. The

net purchase price of € 19.5 million consisted of € 0.5 million in cash, € 17.4 million in shares of IE SA capital stock,

and out-of-pocket fees directly related to the acquisition. The acquisition was accounted for using the purchase method of

accounting and resulted in the recording of goodwill of €12.8 million. This goodwill is being amortized over 10 years

on a straight-line basis. The Group has consolidated its investment in Paradigm Entertainment from July 28, 2000.

B. FISCAL YEAR 2000 ACQUISITIONS

Acquisition of GT Interactive Software Corp:On November 22, 1999, the Group, entered into an agreement to acquire a majority of common stock of GT Interactive

Software Corp. (“GT Interactive”), a leading distributor of interactive games software in the United States, in exchange

for cash of € 72.7. As a result of the acquisition of these shares, the Group obtained a controlling (61.2% of its then out-

standing common stock) interest in GT Interactive.

The net purchase price of € 81.2 million included out-of-pocket fees directly related to the acquisition. The acquisition was

accounted for using the purchase method of accounting and based on an initial estimate of the fair value of the identi-

fiable assets and liabilities acquired resulted in the recording of goodwill of €90.6 million. Goodwill is being amort i z e d

over 10 years on a straight-line basis.

The net purchase price of € 81.2 million was allocated as follows:

(€ in millions):

Net fair value of identifiable assets and liabilities acquired (1) ( 9 . 4 )

G o o d w i l l 9 0 . 6

Net purchase price 8 1 . 2

Note to the consolidatedfinancial statements

C. FISCAL YEAR 1999 ACQUISITIONS

Acquisition of Gremlin Group PLCOn June 30, 1999, the Group acquired Gremlin Group PLC, a writer and publisher of computer software and associa-

ted products. The net purchase price of € 38.7 million consisted of € 37.9 million in cash and out-of-pocket fees directly

related to the acquisition. The acquisition was accounted for using the purchase method of accounting and resulted in

goodwill of € 19.4 million. This goodwill was charged to “additional paid-in capital” in the consolidated balance sheets

in accordance with COB Approval No. 98-559 (see Note 1.F). The Group has consolidated its investment in Gremlin

Group PLC prospectively from June 30, 1999.

Acquisition of Accolade, Inc.On May 31, 1999, the Group acquired Accolade, Inc., a publisher and developer of interactive entertainment software

for PC and console game systems. The net purchase price of € 45.1 million consisted of € 44.7 million in cash and out-

of-pocket fees directly related to the acquisition. The acquisition was accounted for using the purchase method of accoun-

ting and resulted in goodwill of € 57.9 million. This goodwill was charged to “additional paid-in capital” in the conso-

lidated balance sheets in accordance with COB Approval No. 98-559 (see Note 1.F). The Group has consolidated its

investment in Accolade, Inc. prospectively from May 31, 1999. The Group subsequently changed the name of Accolade,

Inc. to Infogrames North America.

Acquisitions of OthersIn addition, several other relatively minor acquisitions were consummated in fiscal year 1999. All such acquisitions were

accounted for using the purchase method of accounting. The aggregate cost of these acquisitions was € 3.1 million and

resulted in goodwill of €14.2 million. This goodwill was charged to “additional paid-in capital” in the consolidated balan-

ce sheets in accordance with COB Approval No. 98-559 (see Note 1.F).

4746

(1) The net fair value of identifiable assets and liabilities acquired includes the following intangible assets (in millions):

Market share 1 6 8 . 8

Tr a d e m a r k s 1 7 . 5

Game catalogs 1 2 . 5

To t a l 1 9 8 . 8

The Group has consolidated its investment in Infogrames, Inc. prospectively from November 22, 1999.

Acquisition of Den-O-Te c hIn March 2000, the Group acquired a controlling interest in Den-O-Tech (61.1% of its then outstanding common stock),

a company specializing in software for in-flight entertainment. The net purchase price of € 5.6 million consisted of € 5 . 4

million in cash and out-of-pocket fees directly related to the acquisition. The acquisition was accounted for using the pur-

chase method of accounting. The net purchase price was allocated based on an initial estimate of the fair value of the

identifiable assets and liabilities acquired and resulted in goodwill of € 6.4 million that was being amortized over 10

years on a straight-line basis.

The Group has consolidated its investment in Den-O-Tech prospectively from March 31, 2000.

In June 2001, the Group’s management estimated that the carrying value of goodwill may not be recoverable and, based

on their evaluation, a charge of €2.7 million was recognized to write-off the remaining value of this goodwill.

Note to the consolidatedfinancial statements

4948

D. EFFECT OF ACQUISITIONS ON THE CONSOLIDATED STATEMENTS OF OPERATIONSChanges in the Group’s reporting entities as a result of acquisitions consummated in fiscal years 2001, 2000, and 1999

affected certain of the line items in the Group’s consolidated statements of operations as follows:

Year Ended June 30, 2001 Year Ended June 30, 2000 Year Ended June 30, 1999H i s t o r i c Acquired H i s t o r i c Acquired H i s t o r i c Acquired

(€ m i l l i o n s ) Entities Entities To t a l Entities Entities To t a l Entities Entities To t a l( 1 ) ( 2 ) ( 1 ) ( 2 ) ( 1 ) ( 2 )

R e v e n u e 6 7 0 . 4 3 . 9 6 7 4 . 3 3 2 7 . 0 1 9 4 . 6 5 2 1 . 6 2 9 0 . 5 1 5 . 6 3 0 6 . 1

Current (loss) income before non- recurring income (expenses), taxation, share of net income (losses) of equity method investments, and amortization of goodwill ( 5 9 . 4 ) ( 5 . 4 ) ( 6 4 . 8 ) 2 . 9 ( 4 6 . 4 ) ( 4 3 . 5 ) 2 5 . 2 1 . 4 2 6 . 6

Net (loss) income ( 1 1 4 . 0 ) ( 7 . 3 ) ( 1 2 1 . 3 ) 9 . 9 ( 3 7 . 0 ) ( 2 7 . 1 ) 2 1 . 8 ( 1 . 5 ) 2 0 . 3

(1) Historic entities represent Group companies owned as of the beginning of the respective fiscal year.(2) Acquired entities represent Group companies acquired during the respective fiscal year. This column does not include the impact ofall business acquisitions; especially the revenue from Hasbro products (42 M€) which were realized by historic entities.

Changes in the Group’s reporting entities as a result of acquisitions consummated in fiscal years 2001 and 2000 affec-

ted certain of the line items in the Group’s consolidated balance sheets as follows:

Year Ended June 30, 2001 Year Ended June 30, 2000H i s t o r i c Acquired H i s t o r i c Acquired

(€ m i l l i o n s ) Entities Entities To t a l Entities Entities To t a l( 1 ) ( 2 ) ( 1 ) ( 2 )

Goodwill, net 1 2 7 . 8 1 6 5 . 8 2 9 3 . 6 8 . 5 9 0 . 1 9 8 . 6Intangible assets, net 2 9 0 . 9 1 4 . 6 3 0 5 . 5 4 5 . 8 2 1 6 . 5 2 6 2 . 3P r o p e rty and equipment, net 2 3 . 7 9 . 4 3 3 . 1 1 3 . 4 1 3 . 2 2 6 . 6I n v e n t o r i e s 6 3 . 4 1 . 1 6 4 . 5 4 7 . 1 3 2 . 3 7 9 . 4Trade receivables, net 1 2 3 . 2 2 . 4 1 2 5 . 6 8 8 . 1 2 1 . 7 1 0 9 . 8Trade accounts payable 1 6 9 . 5 6 0 . 7 2 3 0 . 2 8 8 . 3 1 1 4 . 5 2 0 2 . 8

(1) Historic entities represent Group companies owned as of the beginning of the respective fiscal year.(2) Acquired entities represent Group companies acquired during the respective fiscal year. This column does not include all businessacquisitions effects: espcially Hasbro sales (42 M€) that were realized by historic entities.

E. PRO FORMA OPERATING RESULTSThe following unaudited pro forma operating results have been prepared as if the acquisition of Hasbro Interactive and

the step-acquisition of Infogrames, Inc. that were consummated in fiscal year 2001 had both occurred on July 1, 1999

and as if the acquisition of Infogrames, Inc. that was consummated in fiscal year 2000 had occurred on July 1, 1998.

The unaudited pro forma operating results do not reflect the Group’s other acquisitions during the periods presented, as

their inclusion would not materially affect the unaudited pro forma operating results. The unaudited pro forma operating

results are not necessarily indicative of the operating results that would have occurred had the acquisition been consum-

mated as of the dates indicated, nor are they necessarily indicative of future results.

(€ millions) Year Ended June 30: 2 0 0 1 2 0 0 0 1 9 9 9

Revenue, net 8 4 1 . 7 8 4 9 . 3 8 1 9 . 6Current loss before non-recurring expenses (income), taxation, share of net income of equity method investments, and goodwill amort i z a t i o n ( 7 4 . 0 ) ( 2 8 4 . 8 ) ( 2 6 . 3 )Net loss before minority interests ( 1 3 1 . 4 ) ( 3 4 7 . 2 ) ( 3 9 . 0 )Net loss per share, not diluted ( 1 . 5 5 ) ( 4 . 7 6 ) ( 0 . 6 1 )

3. GOODWILLGoodwill consists of the following:

(€m i l l i o n s ) June 30, 2001 June 30, 2000A c c u m u l a t e d A c c u m u l a t e d

Acquisition G ro s s A m o rt i z a t i o n N e t G ro s s A m o rt i z a t i o n N e t

Infogrames Interactive, Inc. 1 5 6 . 5 ( 3 . 5 ) 1 5 3 . 0 - - -

Paradigm Entertainment, Inc. 1 4 . 1 ( 1 . 3 ) 1 2 . 8 - - -

Infogrames, Inc. 1 4 7 . 5 ( 2 0 . 8 ) 1 2 6 . 7 9 7 . 2 ( 7 . 1 ) 9 0 . 1

D e n - O - Te c h 3 . 2 ( 3 . 2 ) - 6 . 4 ( 0 . 2 ) 6 . 2

O t h e r s 9 . 3 ( 8 . 2 ) 1 . 1 1 1 . 4 ( 9 . 1 ) 2 . 3

To t a l 3 3 0 . 6 ( 3 7 . 0 ) 2 9 3 . 6 1 1 5 . 0 ( 1 6 . 4 ) 9 8 . 6

The increase in gross goodwill related to Infogrames, Inc. in fiscal year 2001(+50.3 millions €uros) is due to the acqui-

sition of the Infogrames, Inc. minority interests (+25.4 millions €uros see Note 2.A) and adjustments related to the finali-

zation of the estimate of the fair value of the identifiable assets and liabilities acquired (+10.8 millions €uros) and foreign

currency difference (14.1 millions €u r o s ).

The Group recorded € 20.6 million, € 8.6 million and € 0.7 million of amortization expense on goodwill in the conso-

lidated statements of operations in fiscal years 2001, 2000, and 1999, respectively. Had the Group not applied COB

Approval No. 98-559 (see Note 1.F) in fiscal years 2000 and 1999, additional amortization expense on goodwill would

have been € 17.6 million, € 17.5 million, and € 8.3 million, in fiscal years 2001, 2000, and 1999, respectively.

4. INTANGIBLE ASSETSIntangible assets consist of the following:

(€m i l l i o n s ) June 30, 2001 June 30, 2000A c c u m u l a t e d A c c u m u l a t e d

Acquisition G ro s s A m o rt i z a t i o n N e t G ro s s A m o rt i z a t i o n N e t

N o n - a m o rtizable items:

Market share 2 3 8 . 0 - 2 3 8 . 0 2 1 5 . 4 - 2 1 5 . 4

Tr a d e m a r k s 2 5 . 2 - 2 5 . 2 1 8 . 8 - 1 8 . 8

Total non-amortizable items 2 6 3 . 2 - 2 6 3 . 2 2 3 4 . 2 - 2 3 4 . 2

A m o rtizable items:

Game catalogs 3 1 . 4 ( 1 3 . 1 ) 1 8 . 3 2 2 . 7 ( 4 . 4 ) 1 8 . 3

S o f t w a r e 3 3 . 5 ( 1 4 . 6 ) 1 8 . 9 8 . 4 ( 1 . 2 ) 7 . 2

O t h e r 6 . 7 ( 1 . 6 ) 5 . 1 1 0 . 8 ( 8 . 2 ) 2 . 6

Total amortizable items 7 1 . 6 ( 2 9 . 3 ) 4 2 . 3 4 1 . 9 ( 1 3 . 8 ) 2 8 . 1

To t a l 3 3 4 . 8 ( 2 9 . 3 ) 3 0 5 . 5 2 7 6 . 1 ( 1 3 . 8 ) 2 6 2 . 3

The Group recorded €16.2 million, €11.2 million and € 1.0 million of amortization expense on amortizable intangibleassets in the consolidated statements of operations in fiscal years 2001, 2000, and 1999, respectively.

Note to the consolidatedfinancial statements

5150

5. PROPERTY AND EQUIPMENTP r o p e rty and equipment consist of the following:

Activity Year Ended June 30, 2001P ro p e rt y

June 30, B u s i n e s s and Equipment Sales and June 30,(€m i l l i o n s ) 2 0 0 0 A c q u i s i t i o n s A d d i t i o n s D i s p o s a l s O t h e r 2 0 0 1

L a n d 0 . 4 0 . 7 0 . 5 - 0 . 1 1 . 7

B u i l d i n g 2 . 4 9 . 8 0 . 4 - 2 . 1 1 4 . 7

Computer equipment 1 9 . 9 1 0 . 5 3 . 1 ( 0 . 9 ) 1 . 5 3 4 . 1

F u rniture and fixtures (including leasehold improvements) and other equipment 3 0 . 1 3 . 6 3 . 1 ( 8 . 0 ) 1 . 4 3 0 . 2

Capital leases 2 . 1 - - - ( 2 . 1 ) -

Total gross value 5 4 . 9 2 4 . 6 7 . 1 ( 8 . 9 ) 3 . 0 8 0 . 7

Accumulated depreciation ( 2 8 . 3 ) ( 1 3 . 0 ) ( 1 3 . 3 ) 7 . 9 ( 0 . 9 ) ( 4 7 . 6 )

To t a l 2 6 . 6 1 1 . 6 ( 6 . 2 ) ( 1 . 0 ) 2 . 1 3 3 . 1

The Group recorded approximately €13.3 million, €9.0 million and €2.3 million of depreciation expense on propert y

and equipment in the consolidated statements of operations in fiscal years 2001, 2000, and 1999, respectively.

6. LEASESThe Group leases rental space and equipment. The Group accounts for substantially all of its leases as operating leases.

The leases expire on various dates through 2012.

The Group entered into an operating lease agreement , for its french headquarters in Lyon for a period of 9 years begin-

ning in june 2001.

Future minimum annual rental payments under the Group’s operating leases are as follows:

(€ m i l l i o n s ) Year Ending June 30:

2 0 0 2 1 2 . 6

2 0 0 3 1 0 . 7

2 0 0 4 9 . 5

2 0 0 5 8 . 5

2 0 0 6 7 . 5

T h e r e a f t e r 1 4 . 6

To t a l 6 3 . 4

Total rent expense charged to operations amounted to approximately €14.0 million, € 7.5 million, and € 2.8 million in

fiscal years 2001, 2000, and 1999, respectively.

Note to the consolidatedfinancial statements

7. INVESTMENTSInvestments consist of the following:

(€ m i l l i o n s ) June 30, 2001 June 30, 2000

Investments accounted for under the cost method of accounting (1) 2 0 . 3 1 4 . 1

Investments accounted for under the equity method of accounting (2) ( 1 . 1 ) ( 1 . 9 )

L o a n s 4 . 3 3 . 1

O t h e r 0 . 8 0 . 7

To t a l 2 4 . 3 1 6 . 0

( 1 ) Investments accounted for under the cost method of accounting - As described in Note 1.C, the Group’s unconsolidated investmentsare reported at historical cost less any provision required to reflect a long-term impairment of value.

The Group’s investments accounted for under the cost method of accounting at June 30, 2001, and 2000 are as follows:

(€m i l l i o n s ) June 30, 2001 June 30, 2000I n v e s t m e n t C o u n t ry O w n e r s h i p B o o k Fair Book

% Va l u e Value (a) Va l u e

O d d World (b) United States 0 . 0 8 . 4 N / A 7.4

Emme F r a n c e 1 1 . 2 2 . 3 2 . 5 2.4

CD & Co. F r a n c e 2 1 . 5 2 . 1 N / A 2 . 1

E d e n F r a n c e 1 9 . 8 3 . 4 N / A -

Games.com United States 1 0 0 . 0 4 . 7 -

Other Va r i o u s Va r i o u s 3 . 2 N / A 2 . 2

Advances for depreciaiton (c) 3 . 8 -

2 0 . 3 1 4 . 1

(a) Fair value is given only for quoted market prices. Investments for which fair value is not easily determinable are reported to the lesser of historical cost ornet realizable value. The Group estimates net realizable value using, total assets, stockholder’s equity, net income or any other relevant factors relatedto the companies involved.

( b ) The Group’s investment in Oddworld consists of non-voting convertible preferred stock convertible into approximately 50.0% of Oddworld’s commone q u i t y.

(c) In fiscal year 2001, the Group recognized an impairment charge of €2.1 millions or its investment in CD & Co. to reflect its estimate of the long-termi m p a i rment in value of this investment.

( 2 ) Investments accounted for under the equity method of accounting. The Group’s investments accounted for under the equity methodof accounting at June 30, 2001, 2000, and 1999 were as follows:

(€m i l l i o n s ) June 30, 2001 June 30, 2000 June 30, 1999

I n v e s t m e n t E q u i t y B o o k G ro u p E q u i t y B o o k G ro u p E q u i t y B o o k G ro u p% Va l u e Share of % Va l u e Share of % Va l u e Share of

income income income (loss) for (loss) for (loss) forthe Ye a r the Ye a r the Ye a r

I-Line (a) - - - - - - 5 0 . 0 ( 1 . 8 ) ( 0 . 3 )

Canal+ Multimedia 5 0 . 0 ( 1 . 7 ) 0 . 7 5 0 . 0 ( 2 . 5 ) ( 0 . 5 ) 5 0 . 0 ( 2 . 0 ) ( 2 . 2 )

Sunflowers 3 0 . 0 0 . 6 - 3 0 . 0 0 . 6 ( 0 . 3 ) 3 0 . 0 0 . 9 0 . 7

To t a l ( 1 . 1 ) 0 . 7 ( 1 . 9 ) ( 0 . 8 ) ( 2 . 9 ) ( 1 . 8 )

( a ) The Group sold a 35.0% ownership interest in I-Line on December 28, 1999, reducing its ownership interest to 15.0%, resulting ina gain on disposal of €1.9 million.

5352

Note to the consolidatedfinancial statements

8. INVENTORIESInventories consist of the following:

(€m i l l i o n s ) June 30, 2001 June 30, 2000

Finished goods 1 1 3 . 7 1 3 8 . 9

Raw materials and supplies 0 . 5 2 . 3

Total gross value 1 1 4 . 2 1 4 1 . 2

Less: Provisions for obsolescence reserv e ( 4 9 . 7 ) ( 6 1 . 8 )

Total 6 4 . 5 7 9 . 4

The Group’s obsolescence reserve at June 30, 2001 and 2000 are analyzed as follows:

(€ m i l l i o n s ) June 30, 2001 June 30, 2000

Balance at beginning of year 6 1 . 8 8 . 2

Additions 5 . 0 3 6 . 7

Business acquisitions - 9 2 . 0

Write-offs and recoveries ( 1 7 . 3 ) ( 8 1 . 8 )

O t h e r 0 . 2 6 . 7

Balance at end of year 4 9 . 7 6 1 . 8

9. ROYALTY ADVANCES AND PREPAID LICENSE FEES Royalty advances and prepaid license fees at June 30, 2001 and 2000 and activity during each of the respective fiscal

years is as follows:

(€m i l l i o n s ) June 30, 2001 June 30, 2000

Gross balance at beginning of year 1 1 6 . 0 3 6 . 6

Payment of royalty advances and license fees 8 7 . 4 7 0 . 1

A m o rtization of royalty advances and license fees ( 3 6 . 9 ) ( 2 9 . 1 )

Changes in reporting entities (1) 4 7 . 8 5 1 . 0

O t h e r ( 4 . 7 ) ( 1 2 . 6 )

Gross balance at end of year 2 0 9 . 6 1 1 6 . 0

Allowances at beginning of year ( 6 0 . 7 ) ( 2 . 7 )

Additions, net ( 2 . 9 ) ( 1 3 . 4 )

Changes in reporting entities (1) ( 4 0 . 1 ) ( 4 4 . 3 )

Other allowances ( 1 3 . 5 ) ( 0 . 3 )

Allowances at end of year ( 1 1 7 . 2 ) ( 6 0 . 7 )

Net balance at beginning of year 5 5 . 3 3 3 . 9

Net balance at end of year 9 2 . 4 5 5 . 3

(1) Represents additions attributed to the fair value of certain liabilities acquired as a result of acquisitions consummated in the respective periods.

10. TRADE RECEIVABLESTrade receivables consist of the following:

(€ m i l l i o n s ) June 30, 2001 June 30, 2000

Gross value 1 8 0 . 0 144.9

Less: Provisions for bad debts, sales returns, and other allowances ( 5 4 . 4 ) (35.1)

Total 1 2 5 . 6 1 0 9 . 8

Provisions for bad debts, sales returns, and other allowances at June 30, 2001 and 2000 are analyzed as follows:

(€ m i l l i o n s ) June 30, 2001 June 30, 2000

Balance at beginning of year 3 5 . 1 4 . 6

Additions 2 7 . 3 -

Business acquisitions 1 . 0 3 0 . 6

Write-offs and recoveries ( 5 . 4 ) ( 0 . 3 )

O t h e r ( 3 . 6 ) 0 . 2

Balance at end of year 5 4 . 4 3 5 . 1

Given its large number of customers, in many different countries, the Group does not consider itself exposed to significant

customer credit risk.

The Group had sales constituting 12% of net revenue to one customer in fiscal year 2001. The Group had no single cus-

tomer constituting greater than 10% of net revenue in fiscal years 2000 and 1999, respectively.

Trade receivables due from one customer was 15.2% and 16%, of trade receivables at June 30, 2001and 2000 respecti-

v e l y. Trade receivables due from two customers aggregated 27.9% and 29% of trade receivables at June 30, 2001 and

2000 r e s p e c t i v e l y. All trade receivables have maturity less than one year.

11. OTHER ASSETSOther assets consist of the following:

(€m i l l i o n s ) June 30, 2001 June 30, 2000

Bond redemption premiums (see Note 14) 7 4 . 3 7 4 . 5

Prepaid expenses 2 0 . 3 1 2 . 4

Bond issue costs 9 . 9 1 1 . 2

Receivable from the State 9 . 4 1 4 . 1

Other receivables 1 4 . 2 2 1 . 6

Deferred tax assets (see Note 20) 4 7 . 3 6 9 . 9

Total 1 7 5 . 4 2 0 3 . 7

At june 30, 2001, other assets have maturities of less than one year except for bond redemption prenium and deffered tax assets amoun-

ting to 25 millions euros.

5554

12. STOCKOLDERS’ EQUITYCapital StockAt June 30, 2001 and 2000, there were 88,560,319 (including 149,426 treasury shares) and 79,084,465 shares,

r e s p e c t i v e l y, of IE SA capital stock issued with a nominal value of € 54.0 million and € 48.2 million, respectively. Each

share is of the same class and may be in either bearer or registered form, at the holder’s option. Each share entitles its

holder to one vote on each matter submitted to a vote of stockholders. Double voting rights exist for all existing paid-up

shares held in registered form by the same stockholder for at least two years, as well as for all shares additionally acqui-

red pursuant to rights attached to these registered shares that have earned double voting rights. This double voting right

is reserved to shareholders living in European Union.

On July 17, 1998, the Group issued 1,831,812 shares of IE SA capital stock (9,159,060 shares after consideration of the

stock split discussed below) with warrants attached. One warrant was attached to each share issued. The number of outstan-

ding warrants were note affected by the stock split discussed below, rather, the exchange ratio was altered so that the exchan-

ge of two warrants together with approximately € 68.6, entitle a warrant holder to five shares of IE SA capital stock, at any

time between the date of issuance and June 30, 2001. On June 30, 2001, 6,246 warrants expired prior to their conversion.

Capital Stock SplitAll share amounts have been restated to reflect the five-for-one stock split of IE SA capital stock approved at the Combined

Shareholders’ Meeting of December 15, 1999, which became effective on January 3, 2000.

Legal ReserveUnder French law, 5.0% of IE SA’s net income, less previous net losses if any, must be transferred to a legal reserve until

the legal reserve reaches 10.0% of aggregate capital stock nominal value. At June 30, 2001, IE SA’s legal reserve was

€0.9 million and classified in “Retained earnings (deficit)” in the consolidated balance sheets.

DividendsThe Board of Directors may propose a distribution to stockholders as a dividend up to the amount of IE SA’s distributable

e q u i t y, including any net income of the latest fiscal year. The stockholders at IE SA’s annual stockholders’ meeting must

approve such dividends. There were no dividends declared in fiscal years 2001, 2000, and 1999.

Capital Stock Repurchase ProgramThe Board of Directors is authorized, through December 2001, to repurchase up to 10.0% of the outstanding shares of

IE SA capital stock. Gain or loss on repurchase of the Group’s share would be recorded to “Retained earnings (deficit)”

in the consolidated statements of stockholders’ equity. Repurchased shares may be retired or used for any strategic inten-

tion, including business acquisitions and issuances upon the exercise of capital stock rights (e.g., stock option exercises,

bond conversions). The maximum per share repurchase price has been set at € 75.0, subject to adjustments caused by

capital transactions. During fiscal year 2001, IE SA repurchased 610,164 of its shares of capital stock. At June 30, 2001,

the 149,426 shares of IE SA capital stock owned by IE SA were recorded in reduction to ”Retained earnings (deficit)” in

the consolidated statements of stcokholders’ equity for € 2.8 millions. IE SA did not purchase any of its shares of capital

stock in fiscal year 2000 and 1999.

Note to the consolidatedfinancial statements

Authorized CapitalThe Board of Directors is authorized, through February 15, 2003, to issue additional shares of IE SA capital stock or other

securities with a present or future claim on additional shares of IE SA capital stock in an amount up to a nominal value of

€ 25.0 million, for cash consideration or to offset liabilities. Such capital increases may be issued with or without consi-

deration for shareholders’ preferential subscription rights.

The Board of Directors is authorized, through February 15, 2003, to issue shares of IE SA capital stock or other securities

with a present or future claim on shares of IE SA capital stock in an amount up to a nominal value of € 75.0 million, in

consideration for shares tendered in an offer by IE SA to acquire equity in certain defined businesses. Such capital increa-

ses may be issued without consideration for shareholders’ preferential subscription rights. The maximum nominal value of

€ 75.0 million for such securities shall be € 4.5 billion if the securities issued in the exchange are debt securities.

The Board of Directors is authorized, through February 15, 2003, to increase stated capital in an amount up to a nominal

value of € 25.0 million by capitalizing reserves, earnings or premiums, and subsequently issuing capital stock for distribution.

IE SA Capital Stock Option PlanThe Board of Directors is authorized to grant, through December 31, 2005, options to subscribe or purchase shares of

IE SA capital stock to the officers and directors and certain employees of the Group, in an amount up to five percent of

IE SA capital stock outstanding. The exercise price of these options may not be less than 95.0% of the average IE SA

capital stock trading price over the twenty trading days immediately preceding the date on which the respective options

are granted and for not less than 95.0% of the average purchase price in the case of existing shares. Options vest rata-

bly over a five-year period from their date of grant, are exercisable five years from their date of grant, and expire six

years from their date of grant. No such options may be granted to any officer, director, or employee that already owns

more than 10.0% of IE SA capital stock. See Note 17 for disclosures related to IE SA capital stock options.

Comprehensive Income (Loss)Comprehensive income (loss) includes net income (loss) and changes in equity due to transactions and events from non-

owner sources (e.g., goodwill charges, foreign currency translation). It includes all changes in equity during a fiscal year

except those resulting from investments by owners and distributions to owners. The Group does not separately present the

components of the accumulated balances of other comprehensive income (loss) items in the consolidated statements of

stockholders’ equity. The accumulated balances of these items at June 30, 2001, 2000, and 1999 are as follows:

June 30,(€ m i l l i o n s ) 2 0 0 1 2000 1999

Unrealized foreign exchange income, net 9 . 0 7 . 3 1 4 . 9

Deduction of goodwill (see Note 1.F) ( 1 7 3 . 3 ) ( 1 7 3 . 3 ) ( 1 6 8 . 1 )

To t a l s ( 1 6 4 . 3 ) ( 1 6 6 . 0 ) ( 1 5 3 . 2 )

5756

13. CONTINGENCY AND LOSS PROVISIONSThe following tables reflect the Group’s contingency and loss provisions at June 30, 2001 and 2000 and activity during

each of the respective fiscal years:

Year Ended June 30, 2001

(€m i l l i o n s ) Beginning of Current Current Current O t h e r s End ofYear Balance Year Additions Year Additons Ye a r Ye a r

due to Business for new R e d u c t i o n s B a l a c eAcquisitions P ro v i s i o n s to Pro v i s i o n s

Restructuring provisions 1 9 . 1 1 . 3 3 . 9 ( 5 . 7 ) ( 3 . 4 ) 1 5 . 2

Other provisions 0 . 7 1 . 4 5 . 2 ( 6 . 4 ) 5 . 2 6 . 1

To t a l 1 9 . 8 2 . 7 9 . 1 ( 1 2 . 1 ) 1.8 2 1 . 3

Year Ended June 30, 2000

(€m i l l i o n s ) Beginning of Current Current Current O t h e r s End ofYear Balance Year Additions Year Additons Ye a r Ye a r

due to Business for new R e d u c t i o n s B a l a c eAcquisitions P ro v i s i o n s to Pro v i s i o n s

Restructuring provisions 3 . 7 4 6 . 5 - ( 3 1 . 1 ) - 1 9 . 1

Other provisions 0 . 8 - 0 . 2 ( 0 . 3 ) - 0 . 7

To t a l 4 . 5 4 6 . 5 0 . 2 ( 3 1 . 4 ) - 1 9 . 8

(1) Represents additions attributed to the fair value of certain liabilities acquired as a result of acqisitoins consummated in the respectivep e r i o d s .

14. DEBTDebt consist of the following:

(€ m i l l i o n s ) June 30, 2001 June 30, 2000

2000 Convertible Bonds 4 1 2 . 3 4 1 2 . 3

1999 Convertible Bonds 1 2 5 . 8 1 2 9 . 1

GAP Convertible Notes 5 9 . 0 5 2 . 3

Other borrowings 4 3 . 3 4 3 . 0

Bank overdrafts 3 . 2 6 . 4

Accrued interest on convertible bonds - 3 . 3

Capital lease obligations - 1 . 0

To t a l 6 4 3 . 6 6 4 7 . 4

Less: Amounts maturing in less than one year (1) ( 4 4 . 6 ) ( 1 0 . 5 )

Total long-term debt 5 9 9 . 0 6 3 6 . 9

Note to the consolidatedfinancial statements

(1) Amounts maturing in less than one year consist of the following:

(€ m i l l i o n s ) June 30, 2001 June 30, 2000

Other borrowings 4 1 . 4 4 . 1

Bank overdrafts 3 . 2 6 . 4

Total 4 4 . 6 1 0 . 5

On May 18, 2000, IE SA issued 8,941,517 par value € 39.0 subordinated convertible bonds (the “2000 Convert i b l e

Bonds”) with an aggregate principal amount of approximately € 412.3 million (inclusive of an aggregate redemption

premium of approximately € 63.6 million that was separately hedged – see Note 23). The bonds are scheduled to matu-

re on July 1, 2005 and carry interest, payable annually, at 1.5% (e.g 4.75% actuarial rate of return, redemption pre-

mium inclusive). Each bond was immediately eligible for conversion by its holders into one share of IE SA capital stock.

The bonds are redeemable, at the option of the Group, in the same ratio to which the holders are entitled, if, at any point

through maturity, the share price of IE SA’s capital stock exceeds a defined redemption value. At June 30, 2001, the bonds

were not eligible for redemption by the Group. At June 30, 2001 and 2000, 8,941,517 bonds remained outstanding.

On June 28, 1999, IE SA issued 2,500,000 per value € 86.0 subordinated convertible bonds (the “1999 Convert i b l e

Bonds”) with an aggregate principal amount of approximately € 234.5 million (inclusive of an aggregate redemption

premium of approximately € 20.0 million that was separately hedged – see Note 23). The bonds are scheduled to matu-

re on July 1, 2004 and carry interest, payable annually, at 1.0%. Each bond was immediately eligible for conversion by

its holders into five shares of IE SA capital stock (adjusted for the Group’s stock split subsequent to the date of the bond

issuance). The bonds are redeemable, at the option of the Group, in the same ratio to which the holders are entitled, if,

at any point through maturity, the share price of IE SA’s capital stock exceeds a defined redemption value. This bond

i s s u a n c e ’s was approved by the COB through the document n° 99-844 issued in June 16, 1999. At June 30, 2001, the

bonds were not eligible for redemption by the Group. At June 30, 2001, 2000, and 1999, 1,338,533, 1,373,632,

and 2,500,000 bonds, respectively, remained outstanding.

On December 16, 1999, GT Interactive Software Corp. (reappointed Infogrames, Inc.) issued non-interest bearing sub-

ordinated convertible notes with an aggregate principal amount of US D 50.0 million to General Atlantic Partners, LLC

(the ”GAP Convertible Notes”). The outstanding notes were immediately eligible for conversion (through maturity of the

notes on December 16, 2004) by their holders into common stcock of Infogrames, Inc. at US D 20.0 per share. At June

30, 2001 and 2000 more of these notes had been convert e d .

On June 24, 1997, IE SA issued 437,158 per value €139.5 subordinated convertible bonds (the “1997 Convert i b l e

Bonds”) with an aggregate principal amount of approximately € 67.3 million (inclusive of an aggregate redemption pre-

mium of approximately € 6.3 million). The bonds were scheduled to mature on July 1, 2002 and carried interest, paya-

ble annually, at 2.0%. As of January 1, 1998, each bond was eligible for conversion by its holder into 25 shares of IE

SA capital stock (adjusted for the Group’s stock splits subsequent to the date of the bond issuance). The bonds were redee-

mable, at the option of the Group, in the same ratio entitled to its holders’ conversion feature, if, at any point through matu-

r i t y, the share price of IE SA’s capital stock exceeded a defined redemption value. The Group (the share price of IE SA’s

capital stock having met the defined redemption value) exercised its option to redeem the 76,315 then outstanding bonds

on June 17, 2000, by issuing 1,907,875 shares of IE SA capital stock with a value of approximately € 10.6 million.

None of these bonds remain outstanding.

5958

The fair values of the Group’s debt were estimated based upon quoted market prices at the closing date (for subordina-

ted convertible bonds) and the current rates offered to the Group for debt with the same remaining maturities, as appli-

cable. The estimated fair values of the Group’s debt obligations are as follows:

(€ m i l l i o n s ) June 30, 2001 June 30, 2000

Fair value 4 7 7 . 8 6 2 0 . 4

C a r rying amount 6 4 3 . 6 6 4 7 . 4

The maturity dates of the Group’s debt obligations subsequent to June 30, 2001 are as follows:

(€ m i l l i o n s ) Year Ending June 30:

2 0 0 2 4 4 . 6

2 0 0 3 -

2 0 0 4 -

2 0 0 5 1 8 4 . 8

2 0 0 6 4 1 2 . 3

T h e r e a f t e r 1 . 9

To t a l 6 4 3 . 6

The currencies in which the Group's debt obligations were denominated are as follows:

(€ m i l l i o n s ) June 30, 2001 June 30, 2000

European Monetary Union currencies 5 3 8 . 9 5 5 3 . 7

U.S Dollars 1 0 0 . 1 8 9 . 3

Other currencies 4 . 6 4 . 4

To t a l 6 4 3 . 6 6 4 7 . 4

The Group has provided guarantees to bank for credit facilities made available to certain of the Group’s subsidiaries.

Guarantees to these banks reached € 44.0 and € 87.5 millions, respectively, at June 30, 2001 and 2000.

Note to the consolidatedfinancial statements

15. OTHER SHORT-TERM LIABILITIESOther short - t e rm liabilities consist of the following:

(€ m i l l i o n s ) June 30, 2001 June 30, 2000

Taxes and employee benefits payable 3 0 . 8 1 2 . 1

Deferred tax liabilities - 3 . 8

O t h e r 2 1 . 6 3 2 . 1

To t a l 5 2 . 4 4 8 . 0

16. SEGMENT AND GEOGRAPHIC INFORMATIONThe Group has two operating segments, the sales of entertainment software (both products internally and externally deve-

loped and other publisher’s products through the Group’s distribution systems) and internet operations (Infogrames.com).

The Group’s chief operating decision maker is considered to be the Group’s Chief Executive Officer (“CEO”). The CEO

reviews financial information presented on a consolidated basis accompanied by certain information about revenue by

geographic domicile of the Group’s subsidiaries for purposes of making operating decisions and assessing financial per-

f o rmance for its entertainment software operations. Sales of entertainment software represented 99.6%, 99.4%, and

100.0% of the Group’s consolidated revenue in fiscal years 2001, 2000, and 1999, respectively. Information regar-

ding the Group’s geographic locations of the Entertainment Software segments and Infogrames.com are as follows:

Entertainment Software Operations(€ m i l l i o n s ) U n i t e d Infogrames. C o n s o l i d a t i o n

S t a t e s E u ro p e A s i a c o m E l i m i n a t i o n s To t a l

Year Ended June 30, 2001:Revenue, net 3 5 7 . 8 3 1 1 . 3 3 8 . 4 2 . 9 ( 3 6 . 1 ) 6 7 4 . 3Loss from operations ( 5 . 9 ) ( 3 9 . 0 ) ( 3 . 2 ) ( 7 . 7 ) - ( 5 5 . 8 )Net loss before minority interests ( 4 7 . 1 ) ( 5 2 . 4 ) ( 9 . 4 ) ( 1 4 . 6 ) - ( 1 2 3 . 5 )Long-lived assets (1) 5 4 0 . 0 8 6 . 6 5 . 2 0 . 4 - 6 3 2 . 2

Year Ended June 30, 2000:Revenue, net 2 4 8 . 6 2 5 1 . 0 2 9 . 8 3 . 0 ( 1 0 . 8 ) 5 2 1 . 6Loss from operations ( 2 8 . 9 ) ( 6 . 2 ) ( 4 . 3 ) ( 7 . 7 ) - ( 4 7 . 1 )Net loss incomebefore minority interests ( 3 1 . 0 ) 1 1 . 3 ( 2 . 6 ) ( 5 . 3 ) - ( 2 7 . 6 )Long-lived assets (1) 3 2 4 . 9 5 1 . 4 4 . 8 6 . 4 - 3 8 7 . 5

Year Ended June 30, 1999:Revenue, net 4 5 . 9 2 5 4 . 5 1 7 . 5 - ( 1 1 . 8 ) 3 0 6 . 1Income from operations 1 . 3 2 3 . 0 1 . 1 - - 2 5 . 4Net income before minority interests 5 . 6 1 4 . 0 1 . 0 - - 2 0 . 6Long-lived assets (1) 2 . 6 5 2 . 0 5 . 0 - - 5 9 . 6

(1) Consist of net goodwill, intangible assets, and property and equipment.

6160

17. PAYROLL EXPENSE, WORKFORCE AND STOCK OPTIONS

Payroll ExpenseThe Group’s payroll expense in fiscal years 2001, 2000, and 1999 consisted of the following:

Year Ended June 30,(€ m i l l i o n s ) 2 0 0 1 2000 1999

Group officers and management 4 . 5 4 . 1 3 . 5

Other employees 1 2 6 . 0 9 1 . 1 2 8 . 1

To t a l 1 3 0 . 5 9 5 . 2 3 1 . 6

The increase in payroll expenses during each of the fiscal years is primarily due to acquisitions made during these fiscal

years. No directors’ fees were paid to members of the Board of Directors in fiscal years 2001, 2000, or 1999.

The average number of employees in the Group’s workforce in fiscal years 2001, 2000, and 1999 were 2,271,

2,150, and 1,186, respectively.

IE SA Stock-based CompensationAs described in Note 12, the Board of Directors is authorized to grant options to shares of IE SA capital stock to the offi-

cers and directors and certain employees of the Group. A summary of IE SA capital stock options outstanding at June 30,

2001 and 2000 is as follows:

Exercise Price (1) Options Outstanding (1)(per share) at June 30,

Date of Grant 2 0 0 1 2 0 0 0

December 21, 1994 2 . 1 3 - 2 8 , 5 2 5

June 30, 1995 2 . 6 9 - -

December 15, 1995 3 . 8 6 6 6 , 0 9 5 1 0 5 , 6 0 0

December 6, 1996 2 . 9 7 2 9 5 , 0 0 0 3 6 0 , 0 0 0

June 6, 1997 4 . 4 8 2 5 , 0 0 0 2 5 , 0 0 0

October 7, 1997 4 . 4 4 2 4 7 , 5 0 0 2 8 5 , 0 0 0

F e b r u a ry 3, 1998 5 . 9 2 8 5 5 , 5 0 0 8 7 7 , 0 0 0

October 16, 1998 8 . 2 0 2 6 0 , 9 6 5 2 9 8 , 9 6 5

March 15, 1999 1 1 . 6 2 6 4 , 0 0 0 8 7 , 5 0 0

October 1, 1999 1 4 . 2 0 1 , 4 9 4 , 0 0 0 1 , 8 4 5 , 0 0 0

October 30, 2000 2 1 . 9 5 1 7 3 , 7 5 0 -

To t a l 3 , 4 8 1 , 8 1 0 3 , 9 1 2 , 5 9 0

(1) Exercise prices and number of options have been restated to reflect all stock splits of IE SA capital stock to date.

Note to the consolidatedfinancial statements

A summary of the transactions involving options for IE SA capital stock during fiscal years 2001 and 2000 are as follows:

Year Ended June 30, 2001 Year Ended June 30, 2000 Year Ended June 30, 1999

Number of Number of Number of Options (1) Options (1) Options (1)

Outstanding at beginning of year 3 , 9 1 2 , 5 9 0 2 , 6 9 7 , 9 6 5 2 , 3 2 0 , 2 7 0

G r a n t e d 2 0 3 , 7 5 0 1 , 9 0 0 , 0 0 0 4 5 0 , 0 0 0

E x e r c i s e d ( 1 7 3 , 6 1 0 ) ( 4 1 0 , 3 6 5 ) ( 7 2 , 3 0 5 )

Cancelled due to departure ( 4 6 0 , 9 2 0 ) ( 2 7 5 , 0 1 0 ) -

Outstanding at end of year 3 , 4 8 1 , 8 1 0 3 , 9 1 2 , 5 9 0 2 , 6 9 7 , 9 6 5

(1) Numbers of options have been restated to reflect all stock splits of IE SA capital stock to date (see Note 12).

18. FINANCIAL INCOME AND EXPENSESThe Group’s investment income and expense in fiscal years 2001, 2000, and 1999 were as follows:

Year Ended June 30,(€ m i l l i o n s ) 2 0 0 1 2 0 0 0 1 9 9 9

Realized foreign exchange gains, net (1) 3 . 9 1 2 . 3 1 . 4

Interest income on marketable securities 6 . 8 2 . 3 3 . 2

Interest expense on convertible bonds (2) ( 1 4 . 1 ) ( 4 . 0 ) ( 1 . 0 )

Other interest expense (3) ( 5 . 3 ) ( 5 . 8 ) ( 2 . 5 )

Other investment (expense) income, net ( 0 . 3 ) ( 1 . 2 ) 0 . 1

To t a l ( 9 . 0 ) 3 . 6 1 . 2

(1) Primarily a result of the exchange effect on the Group’s cash advances (i.e., intercompany lending) to its U.S. subsidiary.

(2) Primarily annual interest expense on convertible bonds.

(3) Primarily bank fees charged to the Group’s subsidiaries.

19. NON-RECURRING INCOME AND EXPENSESThe Group’s non-recurring income and expenses in fiscal years 2001, 2000, and 1999 were as follows:

Year Ended June 30,(€ m i l l i o n s ) 2 0 0 1 2 0 0 0 1 9 9 9

(Loss) gain on sale of property and equipment and intangible assets ( 1 . 1 ) 9 . 1 -

Write-offs of royalty advances (see Note 1.L) ( 8 . 3 ) ( 8 . 7 ) -

Restructuring expenses ( 1 1 . 2 ) ( 2 . 2 ) -

O t h e r, net ( 5 . 3 ) ( 2 . 3 ) ( 0 . 6 )

Non-recurring expenses before taxation ( 2 5 . 9 ) ( 4 . 1 ) ( 0 . 6 )

Ta x a t i o n ( 0 . 6 ) 1 . 6 -

Total non-recurring expenses, net ( 2 6 . 5 ) ( 2 . 5 ) ( 0 . 6 )

6362

20. TAXATIONYear Ended June 30,

(€ m i l l i o n s ) 2 0 0 1 2 0 0 0 1 9 9 9

Net (loss) income from operations after financial result ( 6 4 . 8 ) ( 4 3 . 5 ) 2 6 . 6Non recurring (loss) income ( 2 5 . 9 ) ( 4 . 1 ) ( 0 . 6 )Net (loss) income before taxation, share of net income (losses) of equity method investments, and goodwill amort i z a t i o n ( 9 0 . 7 ) ( 4 7 . 6 ) 2 6 . 0Share of net income (losses) of equity method investments 0 . 7 ( 0 . 8 ) ( 1 . 8 )A m o rtization of goodwill ( 2 0 . 6 ) ( 8 . 6 ) ( 0 . 7 )Net (loss) income before taxation (1 10 . 6 ) ( 5 7 . 0 ) 2 3 . 5

Taxation Benefits and ProvisionsThe components of net taxation (provision) benefit are analyzed as follows:

Year Ended June 30,(€ m i l l i o n s ) 2 0 0 1 2 0 0 0 1 9 9 9

R é s u l t a t Net Net Net Net Net Net I n c o m e Ta x a t i o n I n c o m e Ta x a t i o n I n c o m e Ta x a t i o n( L o s s ) B e n e f i t ( L o s s ) B e n e f i t ( L o s s ) B e n e f i tB e f o r e ( P ro v i s i o n ) B e f o r e ( P ro v i s i o n ) B e f o r e ( P ro v i s i o n )

Ta x a t i o n Ta x a t i o n Ta x a t i o n

French companies ( 5 5 . 6 ) 1 2 . 4 ( 4 8 . 6 ) 1 8 . 7 2 2 . 2 ( 6 . 6 )

Companies in other countries ( 5 5 . 0 ) ( 2 5 . 3 ) ( 8 . 4 ) 1 0 . 7 1 . 3 3 . 7

To t a l ( 1 1 0 . 6 ) ( 1 2 . 9 ) ( 5 7 . 0 ) 2 9 . 4 2 3 . 5 ( 2 . 9 )

Net taxation (provision) benefit:Current (1) ( 0 . 2 ) ( 0 . 1 ) ( 4 . 6 )Deferred ( 1 2 . 7 ) 2 9 . 5 1 . 8To t a l ( 1 2 . 9 ) 2 9 . 4 ( 2 . 9 )

(1) Current taxation (provision) benefit represents taxes refundable or payable within one year.

The following is a reconciliation of the Group’s French statutory tax rate (36.4%, 37.7% and 40% in 2001, 2000 and

1999, respectively) with the Group’s effective tax rate:

Year Ended June 30,(€ millions, unless otherwise noted) 2 0 0 1 2 0 0 0 1 9 9 9

Net (loss) income before taxation ( 1 1 0 . 6 ) ( 5 7 . 0 ) 2 3 . 5French statutory tax rate 3 6 . 4 % 3 7 . 7 % 4 0 . 0 %Taxation benefit (provision) computed at the Group’s French statutory rate 4 0 . 3 2 1 . 5 ( 9 . 4 )A m o rtization of non-deductible goodwill ( 7 . 3 ) ( 3 . 3 ) ( 0 . 3 )Non-taxable income (permanent differences) 6 . 3 3 . 7 -Taxation in jurisdictions outside France 0 . 4 4 . 2 ( 1 . 8 )Cancellation, writte-off of deferred tax and losses not recognized ( 5 0 . 1 ) 3 . 0 5 . 7O t h e r ( 2 . 5 ) 0 . 3 ( 2 . 9 )

Net taxation (provision) benefit ( 1 2 . 9 ) 2 9 . 4 ( 2 . 9 )

Effective tax rate (in %) (1) 1 1 . 7 5 1 . 6 1 1 . 9

(1) The Group’s effective tax rate corresponds to the ratio of taxation benefit (provision) for the year to the net income (loss) for the year.

Note to the consolidatedfinancial statements

Deferred Tax Assets and Liabilities

Balance sheet classifications:

(€ m i l l i o n s ) June 30, 2001 June 30,2000

Deferred tax assets (net by subsidiary ) 3 4 5 . 7 2 4 9 . 4

Valuation allowance ( 2 9 8 . 4 ) ( 1 7 9 . 5 )

Deferred tax assets (see Note 11). net of valuation allowance 4 7 . 3 6 9 . 9

Deferred tax liabilities (see Note15) - ( 3 . 8 )

To t a l 4 7 . 3 6 6 . 1

The components of deferred tax assets and deferred tax liabilities are as follows:

(€ m i l l i o n s ) June 30, 2001 June 30,2000Tax operating loss carry f o rw a r d sTe m p o r a ry differences - assets: 3 1 1 . 8 1 9 1 . 1Allowance for inventory obsolescence 1 3 . 6 2 3 . 4Allowance for bad debts 1 8 . 2 1 3 . 2Restructuring provision 5 . 4 7 . 2O t h e r 1 7 . 8 1 6 . 7Total tempory differences 5 5 . 0 6 0 . 5G ross deferred tax assets 3 6 6 . 8 2 5 2 . 7Te m p o r a ry differences - liabilities:Capitalized bond issue costs ( 3 . 1 ) ( 3 . 8 )Capitalized royalty advances ( 1 1 . 7 ) -O t h e r ( 6 . 3 ) ( 2 . 2 )G ross deferred tax liabilities ( 2 1 . 1 ) ( 6 . 0 )Valuation allowance ( 2 9 8 . 4 ) ( 1 7 9 . 5 )Net deferred tax asset 4 7 . 3 6 6 . 1

The allowances are primarily attributed to gross deferred tax assets resulting from tax loss carry forwards at certain of theG r o u p ’s subsidiaries, in the United States (Infogrames, Inc.), in United Kingdom (Infogrames UK) and in France.

The Group had net tax operating loss carry f o rwards of approximately € 816.0 million and € 543.0 million at June 30,2001and 2000, respectively, which will expire at various dates through 2020. The net tax operating loss carry f o rw a r d smay not be used to offset income taxes in other jurisdictions.

6564

Note to the consolidatedfinancial statements

23. FINANCIAL HEDGING INSTRUMENTS The Group makes use of financial hedging instruments to protect against the risk of fluctuations in interest and foreign-

exchange rates. Foreign-exchange and interest rate hedging for the Group’s entities is managed by the parent corpora-

tion. At June 30, 2001 and 2000, the Group had outstanding positions in the following financial hedging instruments:(€ m i l l i o n s ) June 30, 2001 June 30, 2000

L o n g - t e rm interest rate swaps 5 6 5 . 0 5 6 5 . 0

Foreign currency exchange contracts 9 8 . 8 2 3 2 . 4

Long-term interest rate swapsL o n g - t e rm interest rate swaps are used to hedge the redemption premiums on the 2000 Convertible Bonds and the 1999

C o n v e rtible Bonds (see Note 14). Per terms of these swap contracts, banks have committed to pay the redemption pre-

miums at the maturity of these bonds. In exchange, the Group pays the banks quarterly fees directly linked to interest rates

and the market value of the Group’s capital stock. These swaps contracts could be reduced in line with the conversion of

bonds. The interest-rate swap for the 2000 Convertible Bonds includes a cap that limits the interest-rate risk exposure to

the Group.

Foreign currency exchange contracts The Group hedges its exposure to foreign-exchange risks from commercial and financial transactions through both foreign

currency swaps and foreign currency options. The Group uses financial hedging instruments to protect against the risk of

fluctuations for all foreign exchange transactions. Hedgoing for companies in the Group is carried by the parent corpora-

tion. All companies within the European Monetary Union are invoiced and invoice Group in local currency. Primarily all of

the Group’s foreign currency financial instrument activity is related to contracts entered to hedge the Group’s cash advan-

ces (i.e., intercompany lending) to its U.S. subsidiary, Infogrames, Inc. At June 30, 2001 and 2000, the Group’s outstan-

ding foreign currency swap contracts are summarized as follows:

(€ m i l l i o n s ) June 30,D e s c r i p t i o n 2 0 0 1 2 0 0 0

S WAP EUR / GBP 4 . 0 3 4 . 0

S WAP EUR / USD 9 4 . 8 1 9 8 . 4

To t a l 9 8 . 8 2 3 2 . 4

The Group’s foreign currency swap contarcts, presented above, have been further hedged by the following foreign cur-

rency options :

(€ m i l l i o n s ) June 30,D e s c r i p t i o n 2 0 0 1 2 0 0 0

OPTION EUR / USD – purchase put EUR / call USD 5 9 . 0 1 2 5 . 2

OPTION EUR / USD – sales call EUR / put USD 4 1 . 3 -

All foreign currency financial instruments have maturities of less than one year. The Group is exposed to counterpart risks

inherent to the financial instruments contracts. Notwithstanding, as the Group has contracts only with leading banks and

financial institutions, the company estimates the risk is not material.

21. OFF BALANCE-SHEET COMMITMENTS The Group has provided letter-of-credit guarantees to its two leading suppliers totaling € 23.0 millions at June 30, 2001.

The Group agreed, subject to certain conditions, to buy interests of minority holders. Such purchases would not be mate-

rial to the operations of the Group.

As described in Note 1.W, the Group accounts for its benefit plan obligations as contributions are made. Management

of the Group estimated its off-balance sheet retirement benefit obligations was € 0.3 million at June 30, 2001.

As described in Note 1.G, the development of certain of the Group’s products is perf o rmed under production fund deve-

lopment agreements. At June 30, 2001, assuming that all contractually specified milestones under such production fund

development agreements are achieved, the Group was committed to make € 19.6 million, of purchases under these

agreements.

As described in Note 1.L, the Group makes advances to external software developers under royalty-based development

agreements in the normal course of business. At June 30, 2001, assuming that all contractually specified milestones under

such royalty-based development agreements are achieved, the Group was committed to make € 50.6 million of purcha-

ses under these agreements over the coming years.

22. RELATED PARTIESAt June 30, 2001 and 2000, Interactive Partners S.A. (“Interactive Partners”), an investment company controlled by cer-

tain of the Group’s founders, held 19.1 % and 21.9%, respectively, of the Group’s outstanding capital stock and 30.0%

and 33.4%, respectively, of its voting rights. Transactions between the Group and Interactive Partners in fiscal years 2001,

2000, and 1999, are summarized as follows:

• The Group paid fees to Interactive Partners under various consulting and management service agreements. Total fees paid

to Interactive Partners for such services were € 2.2 million (on which 1,014,014 euros were approved by the law on

related party transactions), €3.1 million, and €1.8 million, during fiscal years 2001, 2000, and 1999, respectively.

Management fees between Interactive Partners and the company have been approved on a standard agreement. The

Company considers these transactions are compliant with COB recommandations from ”Bulletin COB 1 9 8 0 ” .

• Fees invoiced during the year and incurred for merger and acquisition services related to certain of the Group’s acquisi-

tion have been agreed in a contact and are compliant with the law on related party transactions (French art . L. 225-38

from Commercial Code). In the same way development and publishing services provided to the Group were submitted

for approval of the related party transactions rules.

• The Group received fees from Interactive Partners for rent and administrative services of € 0.3 million, € 0.5 million,

and € 0.2 million, during fiscal years 2001, 2000, and 1999, respectively.

• Interactive Partners owns certain of production companies (the “IP Production Companies”) that have contracted with

the Group to produce products for the Group’s benefit under production fund development agreements (see Note 1.G).

The Group paid the IP Production Companies € 0.9 million during fiscal year 2001 in royalties on products developed

for the Group. The Group did not pay the IP Production Companies any royalties in fiscal years 2000 and 1999. The

Group, under separate service agreements, has provided development and publishing services to the IP Production

Companies. Revenue recognized from these companies in respect of these services were € 0.8 million and € 3.9 million

during fiscal years 2001 and 2000, respectively. The Group did not recognize any such revenue in fiscal year 1999.

6766

Note to the consolidatedfinancial statements

24. LITIGATIONAs described in Note 2.A, the Group and Hasbro, Inc. have entered into arbitration proceedings to resolve the purcha-

se price of Hasbro Interactive. In addition to this matter, the Group is involved in a number of disputes and legal cases

arising in the normal course of business. Although the final outcome of these proceedings cannot be predicted with cer-

t a i n t y, management believes that obligations that could result from them would not have a significant effect on the Group’s

consolidated financial statements.

25. FULLY CONSOLIDATED ENTITIESVoting Rights Controlled (%) Percentage of Equity

Ownership (%)C o m p a n y C o u n t ry 2 0 0 1 2 0 0 0 2 0 0 1 2 0 0 0

A+ Multimedia P o rt u g a l 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Atari Interactive, Inc. United States 1 0 0 . 0 0 - 1 0 0 . 0 0 -

C a l i f o rnia US Holdings Inc. United States 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

C u rved Logic United Kingdom 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

D e n - O - Te c h C a n a d a 6 1 . 1 0 6 1 . 1 0 6 1 . 1 0 6 1 . 1 0

Dynamic Systems Andreas Tobler KG (1) A u s t r i a - 5 0 . 1 0 5 0 . 1 0

Dynamic Systems GmbH A u s t r i a 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Europress Ltd United Kingdom 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Europress Interactive Ltd. United Kingdom 1 0 0 . 0 0 - 1 0 0 . 0 0 -

G a m e c i t y S w i t z e r l a n d 9 0 . 0 0 9 0 . 0 0 9 0 . 0 0 9 0 . 0 0

H a rtland Trefoil Ltd. United Kingdom 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Hasbro Interactive Ltd. United Kingdom 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Hasbro Direct Ltd. United Kingdom 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Hasbro Interactive Inc. United States 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Hasbro Interactive GmbH G e rm a n y 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Hasbro Interactive Asia Pacific Pty A u s t r a l i a 1 0 0 . 0 0 - 1 0 0 . 0 0 -

I - M u s i c F r a n c e 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Australia Holdings Pty A u s t r a l i a 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Benelux BV N e t h e r l a n d s 1 0 0 . 0 0 1 0 0 . 0 0 9 9 . 9 9 9 9 . 9 9

Infogrames Castlefield Ltd. United Kingdom 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Deutschland GmbH G e rm a n y 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames do Brasil Ltda B r a z i l 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Entertainment F r a n c e 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Entertainment GmbH G e rm a n y 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames España S p a i n 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Europe F r a n c e 9 9 . 9 9 9 9 . 9 9 9 9 . 9 9 9 9 . 9 9

Infogrames France F r a n c e 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Voting Rights Controlled (%) Percentage of Equity Ownership (%)

C o m p a n y C o u n t ry 2 0 0 1 2 0 0 0 2 0 0 1 2 0 0 0

Infogrames Hellas G r e e c e 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Iberica (2) S p a i n - 1 0 0 . 0 0 - 1 0 0 . 0 0

Infogrames, Inc. United States 8 8 . 7 0 6 1 . 1 9 8 8 . 7 0 6 1 . 1 9

Infogrames Interactive F r a n c e 9 9 . 9 7 9 9 . 9 7 9 9 . 9 6 9 9 . 9 6

Infogrames Interactive, Inc. United States 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Infogrames Israel I s r a e l 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Italia I t a l y 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Japan KK J a p a n 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Korea K o r e a 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Infogrames Ltd. United Kingdom 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Melbourne House Pty A u s t r a l i a 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Nordic S w e d e n 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames North America (3) United States - 1 0 0 . 0 0 - 1 0 0 . 0 0

Infogrames Studios Ltd. United Kingdom 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames UK United Kingdom 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Videogames GmbH G e rm a n y 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Infogrames Ta i w a n Ta i w a n 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Game Nation F r a n c e 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

I W W R N e t h e r l a n d s 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0 1 0 0 . 0 0

Microprose Software Ltd. United Kingdom 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Microprose Ltd. United Kingdom 1 0 0 . 0 0 - 1 0 0 . 0 0 -

M i s t i c C a n a d a 6 1 . 1 0 6 1 . 1 0 6 1 . 1 0 6 1 . 1 0

Ozisoft Pty A u s t r a l i a 6 2 . 5 0 6 2 . 5 0 6 2 . 5 0 6 2 . 5 0

Paradigm Entert a i n m e n t United States 1 0 0 . 0 0 - 1 0 0 . 0 0 -

Spectrum Holobyte Japan KK J a p a n 1 0 0 . 0 0 - 1 0 0 . 0 0 -

We l c o m ’ M e d i a F r a n c e 9 9 . 9 6 9 9 . 9 6 9 9 . 9 2 9 9 . 9 2

Canal + Multimédia F r a n c e 5 0 . 0 0 5 0 . 0 0 5 0 . 0 0 5 0 . 0 0

S u n f l o w e r s A l l e m a g n e 3 0 . 0 2 3 0 . 0 2 3 0 . 0 2 3 0 . 0 2

( 1 ) The Group sold its interest in this subsidiary during fiscal year 2001.

( 2 ) The Group closed this subsidiary during fiscal year 2001.

( 3 ) The Group merged this subsidiary with its subsidiary Infogrames, Inc., on October 2, 2000.

Informations c o n c e r n i n g

the parent c o r p o r a t i o n

69

REPORT OF INDEPENDENT AUDITORS

In accordance with our appointment as auditors by your Annual General Meeting, we have audited the accompa-

nying consolidated financial statements of INFOGRAMES ENTERTAINMENT prepared in euros for the year ended 30

June 2001.

The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opi-

nion on these financial statements, based on our audit.

We conducted our audit in accordance with professional standards applicable in France. Those standards require

that we plan and perf o rm the audit to obtain reasonable assurance about whether the consolidated financial state-

ments are free of 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 signi-

ficant estimates made by management, as well as evaluating the overall financial statement presentation. We belie-

ve that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the financial position and the assets

and liabilities of the Group as at June 30, 2001 and the results of its operations for the year then ended in accor-

dance with accounting principles generally accepted in France.

We have also perf o rmed the procedures required by law on the Group financial information given in the report of the

Board of Directors. We have no comment to make as to the fair presentation of this information nor its consistency

with the consolidated financial statements.

Lyon and Villeurbanne, 2 November 2001

The Statutory Auditors

Pin Associés Deloitte Touche To h m a t s u

Jean-François PIN Joël JULLIEN - Alain DESCOINS

68

S t a t u t o ryauditors’ report

7170

DISCLAIMERThe corporate financial statements of INFOGRAMES ENTERTA I N M E N T, the INFOGRAMES Group parent corporation,

provide only a partial picture of the financial position of the entities comprising INFOGRAMES ENTERTA I N M E N T.

I n f o rmation concerning that financial position can be found in the section on the consolidated financial statements. The

i n f o rmation hereunder includes only the data that has been deemed most pertinent and useful to readers.

All annual documents can be obtained from:

Infogrames Entert a i n m e n t

Investor Relations Depart m e n t

1 Place Ve r r a z z a n o

69252 Lyon Cedex 09

Tel.: 04 37 64 30 00

Fax: 04 37 64 30 01

SUMMARIZED ANNUAL FINANCIAL STATEMENTS OF THEPARENT CORPORATION INFOGRAMES ENTERTAINMENT Summarized income statement(€ m i l l i o n s ) June 30, 2001 June 30, 2000 June 30, 1999

Operating income (loss) ( 1 7 . 0 ) ( 2 0 . 2 ) ( 1 0 . 3 )

Investment and interest income (loss) ( 2 5 . 1 ) ( 6 . 8 ) 5 . 0

Investment income (loss) ( 0 . 1 ) ( 0 . 1 ) ( 0 . 4 )

Corporate income tax ( 0 . 1 ) 0 . 3 3 . 6

Income (loss) for the year ( 4 2 . 3 ) ( 2 6 . 8 ) ( 1 . 9 )

Revenue earned by the Company for the year ended June 30, 2001 was €20.5 million and was derived primarily from

s e rvices perf o rmed on behalf of other consolidated entities. Amounts charged for services cover most of the Company’s

operating expenses, with the exception of expenses incurred in connection with acquisitions and other capital transactions

(mergers, debt security issues, etc.).

Infogrames Entertainment SA derives most of its revenue, other than investment and interest income, from services (cash

management, human resources management, computer network and software, information systems, general resources,

financial and legal services and general management) perf o rmed on behalf of its subsidiaries and billed to them.

Infogrames Entertainment had revenue of € 20.5 million for the year ended June 30, 2001, up 51% from the previous

y e a r. The Corporation posted an operating loss of € 17 million for fiscal 2001, as compared with a loss of € 2 0 . 2

million the previous year, primarily due to the write-off of all expenses related to the acquisition of Hasbro Interactive Inc.

and Paradigm Entertainment, as well as to holding company expenses not charged to subsidiaries.

Investment and interest expenses amounted to €25.1 million for fiscal 2001, versus income of €6.8 million the previous

y e a r. The loss was due in part to the write-off of €35.1 million worth of investments. Excluding this write-off, interest and

investment income would have been € 10 million.

Information concerningthe parent corporation

Taxes of €0.1 million correspond to the impact of a tax savings from the consolidation of Infogrames Europe, Infogrames

Interactive, Infogrames France, Welcom Media and Infogrames Music. The tax debit was offset in the income statement

by a tax expense of €0.9 million resulting from additional tax assessments for the years 1997, 1998 and 1999.

The net loss for the year was € 42.3 million, compared with a net loss of €26.8 million the previous year.

SUMMARIZED BALANCE SHEET(€m i l l i o n s ) June 30, 2001 June 30, 2000 June 30, 1999

Intangible assets, property and equipment 8 . 0 4 . 9 1 . 2

Loans and investments 9 2 3 . 1 3 6 0 . 2 1 1 1 . 4

Other receivables and adjustment accounts 8 5 . 7 3 4 8 . 3 2 3 1 . 0

Cash and cash equivalents 7 7 . 4 2 3 3 . 9 1 9 9 . 3

T O TAL ASSETS 1 , 0 9 4 . 2 9 4 7 . 3 5 4 2 . 9

Shareholders’ equity 5 0 9 . 5 3 6 5 . 2 2 6 0 . 7

Contingency and risk provisions 0 . 7 0 . 1 0 . 2

D e b t 5 5 3 . 3 5 6 4 . 1 2 7 1 . 7

Other liabilities and adjustment accounts 3 0 . 7 1 7 . 9 1 0 . 3

T O TAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1 , 0 9 4 . 2 9 4 7 . 3 5 4 2 . 9

SUMMARIZED CHANGES IN FINANCIAL POSITION(€m i l l i o n s ) June 30, 2001 June 30, 2000

Net income ( 4 2 . 3 ) 2 6 . 8

Depreciation expenses 3 6 . 6 1 . 1

Change in working capital 2 5 . 8 ( 6 . 7 )

Net cash flow from operations 2 0 . 1 ( 3 2 . 4 )

L o n g - t e rm investments ( 6 . 3 ) ( 2 4 8 . 9 )

Other fixed asset purchases ( 1 1 . 4 ) ( 5 . 1 )

Proceeds from the sale of investment holdings 0 . 0 0 . 3

Proceeds from the sale of other fixed assets 0 . 0 0 . 2

Net cash flow from investments ( 1 7 . 7 ) ( 2 5 3 . 5 )

Change in Group current accounts ( 2 1 8 . 0 ) ( 4 0 . 4 )

Change in debt 1 . 3 2 2 9 . 5

Equity issues 5 8 . 0 1 3 1 . 3

Net cash flow from capital transactions ( 1 5 8 . 8 ) 3 2 0 . 4

Net cash flow for the year ( 1 5 6 . 4 ) 3 4 . 5

Cash at year’s start 2 3 3 . 8 1 9 9 . 3

Cash at year’s end 7 7 . 4 2 3 3 . 8

72

PRINCIPAL ACCOUNTING POLICIES AND METHODSThe financial statements of INFOGRAMES ENTERTAINMENT are prepared in accordance with French accounting prin-

ciples, including the following:

• Going concern

• Consistency of accounting methods

• No offsetting between periods.

The method used to calculate the value of most items reported in the accounts is the historical cost method.

The principal methods used are as follows:

• Intangible assets

Intangible assets consist exclusively of software, which is depreciated on a straight-line basis over a three-year period.

• P ro p e rty and equipment

P r o p e rty and equipment is reported at cost (purchase price and incidental expenses).

Fixed assets are depreciated on a straight-line basis over their expected useful life.

The expected useful life of assets acquired after July 1, 2000 has been adjusted.

Assets acquired before Assets acquired afterJuly 1, 2000 July 1, 2000

• M a c h i n e ry and equipment 1 to 4 years 1 to 4 years

• Improvements and fixtures 4 to 5 years 10 years

• F u rn i t u r e 4 to 5 years 10 years

• Loans and investments

The gross value of interest in subsidiaries is the acquisition cost of the corresponding securities.

A provision is set aside whenever the going concern value of the investment is less than its book value. The going concern

value is estimated based on criteria used at the time of acquisition, the portion of equity held and prospects for a return

on the investment.

• R e c e i v a b l e s

Receivables are reported at their face value. A loss provision is set aside whenever their inventory value is less than their

gross book value.

• Regulated pro v i s i o n s

There were no regulated provisions on the books as of June 30, 2001.

• Transactions in foreign currencies

Income and expenses in foreign currencies are reported at the corresponding value on the date of the transaction concer-

ned. Foreign-currency liabilities, receivables and cash balances are shown on the balance sheet after conversion on the

basis of foreign-exchange rates in effect at the end of the year. Any differences resulting from the conversion of liabilities

and receivables is reported in the balance sheet under “Unrealized foreign exchange gains (losses)”

Provisions are set aside for any unrealized foreign-exchange losses not offset by gains.

• Investment securities

The gross value of investment securities is their purchase cost, exclusive of incidental expenses. A loss provision is set aside

whenever their inventory value is less than their gross book value.

• Bond issue and redemption premiums

Debt instruments are reported at their face value. Issue and redemption premiums, if any, are reported as assets on the

balance sheet under “Adjustment accounts” and written off as interest and investment expenses over the life of the secu-

rities, unless the redemption risk has been hedged.

• Financial instruments

Infogrames Entertainment makes use of financial derivatives for the purpose of managing and reducing its risk exposure

from fluctuations in interest and foreign-exchange rates. Financial derivatives are generally intended to hedge underlying

risks. The reporting in the accounts of income and expenses related to such financial derivatives is the counterpart of the

r e p o rting of income and expenses related to the items hedged (gains and losses on hedges intended to cover interest-rate

and currency risks are generally reported in the same period as gains and losses on the hedged item). Whenever a given

derivative can no longer serve as a hedge owing to changes in the underlying risks, any gains and losses are report e d

under “Interest and investment income” in the income statement. Even though Infogrames Entertainment is in theory expo-

sed to the risk of total or partial insolvency by the other parties to financial derivatives contracts, no such insolvency has

been factored in as the parties to said contracts are major international banks and financial institutions with a high credit

r a t i n g .

73

Information concerningthe parent corporation

DEBTChanges in debt were as follows:

(€m i l l i o n s ) June 30, 2001 June 30, 2000

C o n v e rtible bonds outstanding 5 3 8 . 1 5 4 1 . 4

Bank borrowings 0 0

Accrued interest 0 1 . 8

Bank overdrafts 6 . 9 5 . 8

Accrued interest on overdrafts 0 . 1 0 . 1

Shareholders’ current accounts 8 . 2 1 5 . 0

T O TA L 5 5 3 . 3 5 6 4 . 1

The statement below shows convertible bonds issued as of June 30, 2001.

(€m i l l i o n s ) OCEANE 1999 bonds OCEANE 2000 bonds To t a l

% d’

P o rtion of bonds convert e d 4 6 . 5 % 0 %

Bonds outstanding 1 , 3 3 8 , 5 2 3 8 , 9 4 1 , 5 1 7

Face value 1 1 5 . 1 3 4 8 . 7 4 6 3 . 8

Redemption premium 1 0 . 7 6 3 . 6 7 4 . 3

Total convertible bonds 1 2 5 . 8 4 1 2 . 3 5 3 8 . 1

7574

LOANS AND INVESTMENTSThe statement below shows the situation with respect to loans and investments

June 30, June 30, June 30, June 30,2 0 0 0 2 0 0 1 2 0 0 1 2 0 0 0

(€ m i l l i o n s ) G ro s s A d d i t i o n s Disposals G ro s s N e t N e t

Titres de

Interest in subsidiaries 3 6 0 . 1 4 6 8 . 2 - 8 2 8 . 3 7 9 3 . 1 3 6 0 . 1

Receivables from subsidiaries ( a ) 7 8 1 . 9 6 5 8 . 8 1 2 3 . 1 1 2 3 . 1 ( a )

Accrued interest on receivables

from subsidiaries 0 3 . 9 - 3 . 9 3 . 9 0

L o n g - t e rm investments - - - - - -

Loans and other investments 0 . 1 0 . 1 - 0 . 2 0 . 2 0 . 1

Tr e a s u ry shares 0 3 . 2 - 3 . 2 2 . 8 0

To t a l 3 6 0 . 2 1 , 2 5 7 . 3 6 5 8 . 8 9 5 8 . 7 9 2 3 . 1 3 6 0 . 2

( a ) In the balance sheet for June 30, 2000, receivables from subsidiaries were listed under “Other receivables”; effective July 1, 2000, they have been reported separately as “Receivables from subsidiaries”.

The main transactions reported during the year that concerned equity investments were:

• the acquisition on July 28, 2000, of Paradigm Entertainment Inc., a development studio located in Dallas, Texas, paid

for with €17.4 million in Infogrames Entertainment stock and € 0.6 million in cash,

• the recapitalization of California U.S. Holding Inc. on September 20, 2000 (by the capitalization of current accounts),

• the acquisition of Hasbro Interactive Inc. (renamed Infogrames Interactive Inc.) and Games.Com Inc. on January 26,

2001, paid for with €111.3 million in Infogrames Entertainment stock and $5 million (€ 5.5 million) in cash,

• the recapitalization of Infogrames Europe SA and Infogrames Interactive SA (by the capitalization of current accounts).

In order to take into account certain restructuring measures decided during the year, a provision of € 34.8 million has

been set aside for unrealized losses on equity holdings.

SHAREHOLDERS’ EQUITYThe statement below shows changes in shareholders’ equity (in millions);

Shareholders’ equity on June 30, 2000 3 6 5 . 2

Exercise of stock options 0 . 6

Bond conversions 2 . 9

Exercise of warrants 5 4 . 4

Crossholding acquisitions 1 2 8 . 7

Income (loss) for the year ( 4 2 . 3 )

Shareholders’ equity on June 30, 2001 5 0 9 . 5

Information concerningthe parent co rporation

Infogrames Entertainment Five-year Financial Summary

(€ 0 0 0 ) 6 / 3 0 / 1 9 9 7 6 / 3 0 / 1 9 9 8 6 / 3 0 / 1 9 9 9 6 / 3 0 / 2 0 0 0 6 / 3 0 / 2 0 0 1

1-EQUITY AT YEAR’S END

• C a p i t a l , s t o c k 7 , 9 5 6 3 2 , 5 5 9 4 1 , 5 3 2 4 8 , 2 2 5 5 4 , 0 0 4

• C o m m o n , s h a r e s , o u t s t a n d i n g 52 190 925 5 3 , 3 9 4 , 0 3 0 6 8 , 1 0 8 , 0 4 5 7 9 , 0 8 4 , 4 6 5 8 8 , 5 6 0 , 3 1 9

• Preferred non-voting shares outstanding - - - - -

• Mx. number of shares to be issued

• for bond conversions 1 0 , 9 2 8 , 9 5 0 1 2 , 4 4 3 , 5 2 0 1 3 , 7 0 8 , 3 7 6 1 5 , 8 0 9 , 6 7 7 1 5 , 6 3 4 , 1 3 2

• for stock options - - 4 , 5 7 9 , 0 9 5 3 , 9 8 4 , 6 4 0 4 , 9 8 1 , 8 1 0

• for warrants 1 , 0 7 0 , 9 6 0 2 , 3 2 0 , 2 7 0 2 , 6 9 7 , 9 6 5 3 , 9 1 2 , 5 9 0 -

2 -O P E R ATIONS AND RESULT S

• Net revenue 6 , 8 1 4 7 , 7 9 1 9 , 7 8 0 1 3 , 6 2 3 2 0 , 5 2 3

• Income (loss) before tax, employee profit sharing, and depreciation and provision allowances for the year (net allowances for the year) ( 4 , 1 4 5 ) 6 , 0 1 1 ( 4 , 0 2 1 ) ( 1 8 , 0 9 1 ) ( 5 , 2 4 4 )

• Corporate income tax ( 2 , 6 3 5 ) ( 4 8 1 ) 3 , 7 0 9 3 0 7 ( 9 1 )

• Employee profit sharing for the year - - ( 6 7 ) ( 3 0 ) ( 1 8 )

• Income after tax, employee profit sharing, and depreciation and provision allowances ( 2 , 3 2 8 ) 5 , 2 4 0 ( 1 , 9 7 8 ) ( 2 6 , 7 9 7 ) ( 4 2 , 3 4 0 )

• Distributed profit - - - - -

3- EARNINGS PER SHARE

• Income after tax and empl. profit sharing,before depreciation and provision allowances ( 0 . 0 8 ) 0 . 1 1 0 . 0 6 ( 0 . 2 3 ) ( 0 . 0 6 )

• Income after tax, empl. profit sharing, depreciation and provision allowances ( 0 . 0 5 ) 0 . 1 0 ( 0 . 0 3 ) ( 0 . 3 4 ) ( 0 . 4 8 )

• Dividend per share - - - - -

4 - PERSONNEL

• Average number of employees 4 5 2 5 4 7 8 5 9 3

• Total payroll for the year 1 060 5 9 9 1 490 2 472 3 341

• Payroll taxes (social security, fringe benefits, etc.) 4 3 0 2 6 4 6 2 6 1 167 1 788

7776

Information concerningthe parent co rporation

7978

Auditors’ general reportReport on agreements involving members of the board of directors of the company(Articles L 225-38, L 225-40 of the Trade Code)

Year ended 30 June 2001

In accordance with our appointment as statutory auditors of your company, we hereby report on the agreements invol-

ving members of the board of directors of the company.

Pursuant to article 225-40 of the Trade Code, the following agreements, previously authorized by the Board of Directors

of your company, have been brought to our attention.

The terms of our engagement do not require us to identify such other agreements, if any, but to communicate to you, based

on information provided to us, the principal terms and conditions of those agreements brought to our attention, without

expressing an opinion on their usefulness and appropriateness. It is your responsibility, pursuant to article 92 of the dec-

ree of March 23, 1967, to assess the interest involved in respect of the conclusion of these agreements for the purpose

of approving them.

We conducted our procedures in accordance with professional standards applicable in France ; those standards require

that we agree the information provided to us with the relevant source documents .

INFOGRAMES ENTERTA I N E M E N T

1. Support and consulting agreement between Infogrames Entertainment andInteractive Partners relating to the acquisition of Paradigm Entertainment

A support and consulting agreement was signed following the approaches adopted and the negotiations conducted with

the video game development company, Paradigm Entertainment, specifying a minimum fixed rate professional fee in addi-

tion to a commission, in the event of success, based on the value of the transaction.

In fulfilling this agreement, the amount of professional fees and commissions assumed by your company amounted to _

1 5 5 , 8 0 8 .

Directors concerned: • M r. Bruno Bonnell

• M r. Thomas Schmider

• M r. Benoît Regnault de Maulmin

• M r. Christophe Sapet

Date of authorization: Board of Directors’ meeting of May 29, 2000

REPORT OF INDEPENDENT AUDITORSIn accordance with our appointment as auditors by your Annual General Meeting, we hereby report to you for the year

ended June 30, 2001 on :

• the audit of the accompanying financial statements of INFOGRAMES ENTERTAINMENT prepared in euros,

• the specific procedures and disclosures required by law.

These financial statements have been approved by the Board of Directors. Our role is to express an opinion on these finan-

cial statements, based on our audit.

I - Opinion on the Financial StatementsWe conducted our audit in accordance with professional standards applicable in France. Those standards require that

we plan and perf o rm the audit to obtain reasonable assurance about whether the financial statements are free of mate-

rial 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 rea-

sonable basis for our opinion.

In our opinion, the financial statements give a true and fair view of the financial position and the assets and liabilities of

the Company as at June 30, 2001, and the results of its operations for the year then ended in accordance with French

accounting regulations.

II - Specific Procedures and DisclosuresWe have also perf o rmed the other procedures required by law, in accordance with professional standards applicable in

F r a n c e .

We have no comment to make as to the fair presentation and consistency with the financial statements of the inform a t i o n

given in the report of the Board of Directors and in the documents addressed to the shareholders with respect to the finan-

cial position and the financial statements.

Pursuant to the law, we have verified that the report of the Board of Directors contains the appropriate disclosures as to

the percentage interests and votes held by shareholders.

Lyon and Villeurbanne, 2 November 2001

The Statutory Auditors

Pin Associés Deloitte Touche To h m a t s u

Jean-François PIN Joël JULLIEN - Alain DESCOINS

(1) The present general report relates to the full financial statements. The financial statements presented from page 70 to 77 are only anextract from the full financial statements.

Auditors’ special report

80

L e g a lD o c u m e n t s

81

2. Support and consulting agreements between Infogrames Entertainment andInteractive Partners relating to the approaches adopted with various compa-nies for external growth purposes

S u p p o rt and consulting agreements were signed following the approaches adopted and the negotiations conducted with

various other companies in the video games sector specifying a minimum fixed rate professional fee in addition to a com-

mission, in the event of success, based on the value of the transaction.

In fulfilling these agreements, the total amount of fixed professional fees assumed your company amounted to _103,007.

Directors concerned: • M r. Bruno Bonnell

• M r. Thomas Schmider

• M r. Benoît Regnault de Maulmin

• M r. Christophe Sapet

Date of authorization: Board of Directors’ meetings of May 29, 2000 and October 3, 2000

3 .S u p p o rt and consulting agreement between Infogrames Entertainment andInteractive Partners relating to the acquisition of the Hasbro interactived i v i s i o n

At the time of the acquisition of the Hasbro interactive division, a support and consulting agreement was signed as part

of the approaches adopted and negotiations held with the Hasbro group. The agreement specified a minimum fixed rate

professional fee in addition to a commission, in the event of success, based on the value of the transaction.

In fulfilling this agreement, the fees and commissions to be assumed your company total _ 755,199 ($ 650,000).

Directors concerned: • M r. Bruno Bonnell

• M r. Thomas Schmider

• M r. Benoît Regnault de Maulmin

• M r. Christophe Sapet

Authorization date: Board of Directors’ meeting of October 3, 2000

Prepared in Villeurbanne and Lyon,

on November 2, 2001

The Auditors

Pin Associés Deloitte Touche To h m a t s u

Jean-François PIN Joël JULLIEN - Alain DESCOINS

Auditors’ special report

Fiscal yearThe fiscal year of the Company commences on July 1st and ends on June 30th of each year.

Appropriation of earningsThe income or loss for each fiscal year is calculated by deducting from net revenue all overhead and other business expen-

ses, including allowances for depreciation and provisions.

At least 5% of the net profit, minus previous losses if any, is set aside as legal reserve. This allowance ceases to be man-

d a t o ry when the legal reserve is equal to one-tenth of the capital stock. It resumes when, for any reason whatsoever, this

ratio no longer obtains. Earnings available for distribution to shareholders as a dividend consist of the year’s income, less

accumulated losses and the above reserve allowance, plus any retained earnings from previous years.

The Shareholders’ Meeting to which the financial statements for the year are submitted may elect to pay out some or all

of the dividend in either stock or cash.

Shareholders’ Meetings Notice of meetings and attendance

Annual Shareholders’ Meeting are called in accordance with the law for the holders of fully paid-up stock, regardless of

the number of shares they own on the date of the meeting. Each share entitles its holder to one vote. No provision exists

which restricts the participation of shareholders at Shareholders’ Meeting: to be of record, holders of registered shares

must have had their shares registered on the Company’s books for more than five days and, in the case of bearer sha-

res, shareholders must produce a certificate stating that said shares are held in escrow by an authorized interm e d i a ry at

least five days prior to the date of the meeting. Shareholders may elect to be represented by another shareholder or by

their spouse. Proxies, granted in accordance with applicable regulations, must be deposited at the Company’s principal

office no later than five days prior to the Meeting. Shareholders may elect to vote by mail using a ballot form which will

be sent to them free of charge on request. Applications to the Company for mail ballot forms must be by registered letter,

r e t u rn receipt requested, no later than five days prior to the date of the shareholders’ meeting. Mail ballot forms can be

used by shareholders to vote on each resolution in the order in which they are submitted to the meeting. They include all

i n f o rmation and attachments required by law. Forms must be returned to the Company’s paying agent no later than three

days prior to the meeting, failing which they will not be recorded. They shall also be disregarded unless they include the

s h a r e h o l d e r ’s last and first name, address and signature, or the signature of the shareholder’s legal representative or guar-

dian. The Board of Directors may refuse to allow shareholders or their proxies to vote by mail or attend shareholders’ mee-

tings if they fail to comply with the articles of incorporation, bylaws and regulations. Shareholders may participate in mee-

tings by means of videoconferencing or other electronic telecommunications technology, as provided for by decree.

8382

General information concerning the CorporationName and principal office: Infogrames Entertainment S.A.

Principal Office

1 Place Ve r r a z z a n o

69252 Lyon Cedex 09, France

Form of business organization and governing lawFrench corporation (société anonyme) with a board of directors, organized under the Act of July 24, 1966 on Business

Corporations, as transposed in Livre II of the Commercial Code.

Date of incorporation and lifeThe corporation was formed for a term of 99 years commencing on July 15, 1987 with its registration in the Trade and

Company Registry and ending July 15, 2086, absent early dissolution or extension.

Corporate purposeThe corporate purpose consists of,

• designing, producing, publishing and distributing all multimedia and audiovisual products and works, including those

in the nature of entertainment, in any form including software, data processing and content – either interactive or other-

wise – for all media and by means of all present and future means of communication;

• purchasing, selling, supplying and more generally distributing all products and services related to the foregoing;

• creating, acquiring, using and managing intellectual and industrial property rights or other in rem or in personam rights,

including by means of assignment, licensing, patents, trademarks and other copyrights;

• acquiring interests in other firms, through joint ventures or by any other means, including the formation of new entities

and the issuance, subscription or transfer of securities in any business directly or indirectly related to the foregoing or to

the products and ideas developed by the Company;

• and, more generally, any transactions with a purpose similar or related to the foregoing, or otherwise likely to benefit

the Company

in France and elsewhere.

Trade and Company RegistryLyon B 341 699 106, APE Code: 8907, NAF Code: 652 E

Place where legal documents may be examinedat the Company’s principal office.

General information concerning the Corporation

GENERAL INFORMATION CONCERNING THE CORPORATION’S EQUITY

Changes in stock and rightsChanges in stock and the rights attached to shares outstanding are governed solely by the applicable laws, as the art i-

cles of incorporation and bylaws do not contain specific provisions on such changes.

Capital stockPursuant to the decision of the Annual Shareholders’ Meeting of December 15, 1998, the Company’s stock has been sta-

ted in euros since July 1, 2000 and the articles of incorporation and bylaws no longer state the par value of shares. As

of June 30, 2001 and September 30, 2001, issued and paid-up stock amounted to 51,600,665.29, euros divided into

88,560,319 shares of the same class.

Authorized capitalThe Combined Shareholders’ Meeting of December 15, 2000 authorized the Board of Directors to increase stated capi-

tal by up to 25,000,000 euros in nominal value by issuing securities with a claim on equity, with or without shareholders’

preferential subscription rights, and by capitalizing reserves, earnings or premiums, setting a ceiling of 1.5 billion on the

value of such securities outstanding.

The same meeting also extended the authority granted to the Board of Directors to issue stock, up to the above ceilings,

as required in consideration of securities tendered in response to an offer by the Company.

The Shareholders’ Meeting also extended the authority granted to the Board of Directors to grant stock options and to

make use of powers delegated to it in the event of tender offers.

The Shareholders’ Meeting will be asked to approve the financial statements for the year ended June 30, 2001 and to

extend the above grants of authority.

8584

Double voting rights

Pursuant to section L. 225-123 of the Commercial Code (formerly Article 175 of the Act of July 24, 1966), the

Shareholders’ Meeting of October 26, 1993 resolved to grant double voting rights to all existing paid-up shares held in

registered form (nominatif pur) by the same shareholder for two years or more, as well as to all shares acquired furt h e r

to the exercise of rights attached to such registered shares, based on the portion of equity which such shares represent.

Said two-year period runs from the date of registration of the shares, regardless of the date on which they were acquired.

In the event of a capital increase by the capitalization of reserves, income or premiums, registered shares distributed to

shareholders as stock dividends are entitled to double voting rights from their issue date. In order to qualify for the above-

mentioned double voting rights, shareholders must at this time be French citizens or nationals of a European Union mem-

ber country. However, the Shareholders’ Meeting called to approve the financial statements for the year ended will be

asked to remove this restriction from the articles of incorporation and bylaws.

Shares converted into bearer form or which change hands lose their double voting rights. However, transfers of ownership

by inheritance, liquidation, marital community of property or inter vivos gift to a spouse or a relative that can take by intes-

tacy do not result in the loss of vested rights or toll the time periods specified in the above-cited section L. 225-123.

Should the Company be merged into another corporation, the double voting rights will not be affected and can be exer-

cised by the acquiring company, provided its articles of incorporation and bylaws so provide.

All current and future shares outstanding shall be treated equally insofar as the effect of taxation is concerned.

Reporting thresholds Pursuant to resolution 17 of the shareholders’ meeting of December 15, 1999, section 10 of the Company’s articles of

incorporation and bylaws provides that individuals or legal entities, acting alone or jointly with others, must report any

increase or decrease in their shareholding that causes their equity interest or control to rise above or fall below 2%, or

any multiple thereof. Reports must be sent to the Company’s principal office by registered letter, return receipt requested,

no later than 15 days after the transaction concerned and must state the number of securities held with a present or futu-

re claim on equity and the number of attached voting rights. Mutual fund management companies must report this infor-

mation for the aggregate number of the Company’s shares held by the funds which they manage. Failure to comply with

the foregoing obligations may, at the request of one or more shareholders owning five percent or more of the shares out-

standing or voting rights, which request shall be recorded in the minutes of the shareholders’ meeting, result in the port i o n

of shares in excess of the number that should have been reported to be barred from voting at said meeting and at any

subsequent meeting held within two years of the date on which they were properly report e d .

Identification of shareholdersThe Company has proposed to the Shareholders’ Meeting called to approve the financial statements for the year ended

June 30, 2001, to amend its articles of incorporation and bylaws in order to take into account the new section L. 228-3-

3 of the Commercial Code, which provides that shareholders who fail to comply with provisions designed to identify the

owners of shares may be disqualified from voting, failing which, the dividends on their share may be suspended or can-

c e l l e d .

General information concerning the Corporation

• Bonds convertible or exchangeable for new or existing shares (OCEANE) 1999-2004: On June 28,

1999, the Company issued convertible bonds, in the form of 2,500,000 “OCEANE” bonds with a face value of 86

each, for a total of 215 million euros, with a redemption premium of 19.95 million euros. The bonds mature five years

euros and three days from their issue date and carry interest at 1 %. Their redemption date is July 1, 2004. A preli-

m i n a ry prospectus and a final prospectus were filed in connection with this issue and approved on June 15, 1999 and

June 16, 1999, respectively, by the Commission des Opérations de Bourse (visa numbers 99-839 and 99-844).

Following the stock split of December 16, 1999, each OCEANE bond is now convertible into five Company shares.

As of June 30, 2001, 1,338,523 OCEANE 1999-2004 bonds remained outstanding; their conversion or exchange

could require the issuance of 6,692,615 shares, amounting to 6.13 % of the Company’s capital, on a fully diluted b a s i s .

• Bonds convertible or exchangeable for new or existing shares (OCEANE) 2000-2005: On May 18,

2000, the Company issued convertible bonds, in the form of 8,941,517 “OCEANE” bonds with a face value of 39

euros each, for a total of 348,719,163 million euros, and a redemption premium of 63.57 million euros. The bonds

mature five years and 32 days from their issue date and carry interest at 1.5%. Their redemption date is July 1, 2005.

A prospectus was filed in connection with this issue and approved on May 18, 2000 by the Commission des

Opérations de Bourse (visa number 00-823).

As of June 30, 2001, no applications had been received to convert any of the 2000-2005 bonds and all 8,941,517

OCEANE 2000-2005 bonds remained outstanding; their conversion or exchange could require the issuance of

8,941,517 shares, amounting to 8.18% of the Company’s capital, on a fully-diluted basis.

• Subscription warrants issued for the benefit of Hasbro Inc. As part of the acquisition of Hasbro Inc.’s inter-

active division, the Shareholders’ Meeting of January 23, 2001 authorized the issue, for the benefit of Hasbro Inc., of

1,500,000 warrants entitling their holders to subscribe for up to 1,500,000 shares of the Company at a price of 20.15

euros per share, representing 1.37% of the Company’s capital on a fully - diluted basis (assuming that all warrants are

exercised). The exercise of the foregoing warrants is contingent, however, on the occurence of certain changes in the

C o m p a n y ’s control between now and January 26, 2003 at the latest. The specific conditions governing the exercise

of the warrants are annexed to the contribution agreement pertaining to the transaction referred to above, which may

be examined at the Company’s principal office.

No other securities exist which carry a claim on the Company’s equity other than the aforementioned.

8786

Securities with a claim on equity• Stock options: Pursuant to authorizations granted by the Special Shareholders’ Meetings listed in the table below,

the Board of Directors has granted stock options to certain members of INFOGRAMES staff, as indicated.

Grant date Authorized by the O p t i o n s Shares O p t i o n O p t i o n s E x e r c i s e E x p i r a t i o npar l’Assemblée c o n s e n t i e s for which options h o l d e r s g r a n t e d p r i c e d a t e

G é n é r a l e were outstanding (of which, to directors ( e u ro s )on 6/30/2001 directors and and officers

o f f i c e r s )

December 21,1994 May 18, 1994 3 7 0 , 9 0 0 0 0 69 (1) 6 , 2 5 0 2 . 1 3 1 2 / 2 1 / 2 0 0 0

December 15, 1995 May 18, 1994 1 7 4 , 9 7 5 6 6 , 0 9 5 30 (0) 0 3 . 8 6 1 2 / 1 5 / 2 0 0 1

December 16,1996 May 18, 1994 5 6 2 , 5 0 0 2 9 5 , 0 0 0 22 (1) 1 8 , 7 5 0 2 . 9 7 1 2 / 1 6 / 2 0 0 2

June 6, 1997 May 18, 1994 6 2 , 5 0 0 2 5 , 0 0 0 1 (0) 0 4 . 4 8 6 / 6 / 2 0 0 3

October 7, 1997 May 18, 1994 2 8 5 , 0 0 0 2 4 7 , 0 0 0 3 (1) 1 1 1 , 2 5 0 4 . 4 4 1 0 / 7 / 2 0 0 3

F e b r u a ry 3, 1998 December 15, 1997 1 , 0 0 0 , 0 0 0 8 5 5 , 5 0 0 34 (3) 5 1 3 , 7 5 0 5 . 9 2 2 / 3 / 2 0 0 4

October 16, 1998 December 15, 1997 3 0 0 , 0 0 0 2 6 0 , 9 6 5 16 (1) 2 5 , 0 0 0 8 . 2 0 1 0 / 1 6 / 2 0 0 4

March 15, 1999 December 15, 1997 1 5 0 , 0 0 0 5 9 , 0 0 0 10 (0) 0 1 1 . 6 2 3 / 1 5 / 2 0 0 5

October 1, 1999 December 15, 1997 1 , 9 0 0 , 0 0 0 1 , 4 9 9 , 0 0 0 227 (4) 2 0 0 , 0 0 0 1 4 . 2 1 0 / 1 / 2 0 0 5

October 30, 2000 December 16, 1999 2 0 3 , 7 5 0 1 7 3 , 7 5 0 15 (0) 0 2 1 . 9 5 1 0 / 3 0 / 2 0 0 6

The above data takes into account the stock splits approved by the Shareholders’ Meetings of December 15, 1997 and

December 16, 1999.

As of June 30, 2001, out of 5,009,625 options granted, 3,481,810 had not been exercised and remained outstanding,

representing 3.18% – on a fully - diluted basis - of the Company’s stock on that date.

The Board of Directors, at its meeting of October 24, 2001, decided to grant an aggregate of 850,000 stock options to

42 persons, including 360,000 options to four directors or officers. The options thus granted may be exercised at a price

of 7.98 euros to October 24, 2009.

• Shares with warrants. On July 15, 1998, the Company issued 1,831,812 shares priced at FRF 375 each, with

a warrant attached (two warrants give their holder the right to subscribe for one new share at a price of FRF 450, at

any time between July 15, 1998 and June 30, 2001). The issue yielded gross proceeds of FRF 686.9 million. A pro-

spectus was filed in connection with the warrants and was approved by the Commission des Opérations de Bourse on

June 25, 1998 (visa number 98-559). Subsequent to the stock split of December 15, 1999, the parity was adjusted

to five shares for every two warrants.

In the period from July 1, 2000 to the expiration date of the warrants on June 30, 2001, a total of 1,587,610 war-

rants were exercised, requiring 3,969,025 shares to be issued, amounting to 4.48 % of the Company’s shares out-

standing on June 30, 2001.

General information concerning the Corporation’s equity

Changes in equityDate and nature Cumulative Equity issue for cash Capitalization of S t a t e dof the transaction number of shares or assets r e s e rv e s C a p i t a l

o u t s t a n d i n gPar value P r e m i u m (€)

March 24, 2000

Exercise of options 7 3 , 5 3 4 , 6 2 5 1 5 , 7 2 0 8 3 , 7 8 7 . 6 0 2 9 4 , 1 3 8 , 5 0 0

Conversion of bonds 7 3 , 5 3 9 , 2 7 5 1 8 , 6 0 0 1 5 1 , 5 9 0 2 9 4 , 1 5 7 , 1 0 0

Exercise of warrants 7 3 , 6 5 3 , 0 1 5 4 5 4 , 9 6 0 9 , 7 8 1 , 6 4 0 2 9 4 , 6 1 2 , 0 6 0

Conversion of OCEANE bonds 7 4 , 1 0 7 , 7 5 0 1 , 8 1 8 , 9 4 0 4 9 , 4 8 6 , 3 5 6 . 3 0 2 9 6 , 4 3 1 , 0 0 0

June 30, 2000

Conversion of bonds 7 4 , 7 0 1 , 4 0 0 2 , 3 7 4 , 6 0 0 1 9 , 3 5 2 , 9 9 0 2 9 8 , 8 0 5 , 6 0 0

Exercise of warrants 7 4 , 7 4 6 , 4 1 5 1 8 0 , 0 6 0 3 , 8 7 1 , 2 9 0 2 9 8 , 9 8 5 , 6 6 0

Conversion of OCEANE bonds 7 7 , 1 3 6 , 5 9 0 9 , 5 6 0 , 7 0 0 2 6 0 , 1 0 9 , 8 4 7 . 8 7 3 0 8 , 5 4 6 , 3 6 0

Issue for Employees stock purchase plan 7 7 , 1 7 6 , 5 9 0 1 6 0 , 0 0 0 5 , 4 7 5 , 9 8 2 . 5 4 3 0 8 , 7 0 6 , 3 6 0

July 1, 2000

Restatement of capital in euros € 47,061,981.20

July 28, 2000

Conversion of convertible bonds 7 7 , 4 8 3 , 3 1 5 1 8 7 , 0 4 0 1 , 5 2 4 , 3 7 3 . 5 5 € 4 7 , 2 4 9 , 0 2 0 . 9 0

Exercise of warrants 7 7 , 4 8 3 , 5 7 0 1 5 5 3 , 3 4 3 . 2 1 € 4 7 , 2 4 9 , 1 7 6 . 3 9

Equity issue (5) 7 8 , 1 4 0 , 4 8 9 4 0 0 , 5 8 7 1 7 , 0 1 1 , 7 0 8 . 3 8 € 4 7 , 6 4 9 , 7 6 3 . 0 2

J a n u a ry 26, 2001

Bond conversion (maturing in October 2000) 7 9 , 7 2 0 , 9 8 9 9 6 3 , 7 8 2 . 6 9 7 , 8 5 4 , 8 2 8 . 8 9 € 4 8 , 6 1 3 , 5 4 5 . 7 1

Exercise of warrants 7 9 , 8 3 7 , 5 4 4 7 1 , 0 7 4 . 7 8 1 , 5 2 8 , 0 6 3 . 2 5 € 48,684,620.49

Conversion of OCEANE bonds 8 0 , 0 1 3 , 0 8 9 1 0 7 , 0 4 6 . 6 5 2 , 9 1 2 , 3 2 7 . 3 5 € 48,791,667.14

Exercise of options 8 0 , 0 9 8 , 1 3 9 5 1 , 8 6 3 . 1 5 2 0 0 , 4 7 7 . 5 9 € 48,843,530.29

Equity issue (6) 8 4 , 6 1 9 , 5 4 4 2 , 7 5 7 , 1 3 4 . 9 9 1 0 7 , 3 3 9 , 0 7 6 . 8 0 € 51,600,665.29

June 30, 2001

Exercise of warrants 8 8 , 4 7 1 , 7 5 9 2 , 3 4 9 , 0 6 5 . 5 6 5 0 , 5 0 4 , 8 9 5 . 9 6 € 5 3 , 9 4 9 , 7 3 0 . 8 5

Conversion of OCEANE bonds - - - -

Exercise of options 8 8 , 5 6 0 , 3 1 9 5 4 , 0 0 3 . 5 3 3 0 6 , 4 3 1 . 6 1 € 54,003,734.39

(1) A prospectus was filed with the Commission des Opérations de Bourse and approved on May 20, 1996 (visa No. 96-178) alongwith registration form E, approved on May 31, 1996 (visa E 96-170).(2) The Shareholders’ Meeting of December 15, 1997 resolved to increase the par value of shares to FRF 100 from FRF 25 through thecapitalization of reserves, and to then replace each existing share with five new shares (see SBF notice 97-4170 of December 17, 1997).The Shareholders’ Meeting of December 15, 1998 subsequently resolved to delete any reference to the par value of shares from the art i-cles of incorporation and bylaws.(3) Issue of stock with share warrants. A prospectus was filed in connection with the issue and approved by the Commission desOpérations de Bourse on June 25, 1998 (visa No. 98-559).(4) The Shareholders’ Meeting of December 16, 1999 resolved to replace each existing share with five new shares.(5) Issue of 656,919 new shares in consideration of the contribution of Paradigm Entertainment Inc. stock to the Company (CombinedShareholders’ Meeting of July 28, 2000).(6) Issue of 4,521,405 new shares in consideration of the contribution of the interactive division of Hasbro Inc. to the Company (SpecialShareholders’ Meeting of January 23, 2001). 8988

Changes in equityDate and nature Cumulative Equity issue for cash Capitalization of S t a t e dof the transaction number of shares or assets r e s e rv e s C a p i t a l

o u t s t a n d i n gPar value P r e m i u m ( F R F )

June 1996Equity issue for cash 1 , 6 5 7 , 3 6 7 6 , 9 0 5 , 6 7 5 2 1 4 , 0 7 5 , 9 2 5 4 1 , 4 0 4 , 0 5 0

Contribution of Ocean shares (1) 2 , 0 6 1 , 9 0 7 1 0 1 , 1 3 0 , 6 2 5 4 0 8 , 1 8 5 , 9 0 5 5 1 , 5 4 7 , 6 7 5

Contribution of Infogrames GmbH shares(1) 2 , 0 8 7 , 1 3 6 6 3 0 , 7 2 5 2 5 , 4 5 6 , 0 6 1 5 2 , 1 7 8 , 4 0 0

April 1997Exercise of options 2 , 0 8 7 , 6 3 7 1 2 , 5 2 5 1 5 0 , 3 0 0 5 2 , 1 9 0 , 9 2 5

October 7, 1997Exercise of options 2 , 0 8 8 , 6 5 9 2 5 , 5 5 0 3 4 6 , 5 8 3 5 2 , 2 1 6 , 4 7 5

December 15, 1997Capitalization of reserves

and stock split (2) 1 0 , 4 4 3 , 2 9 5 1 5 6 , 6 4 9 , 4 2 5 2 0 8 , 8 6 5 , 9 0 0

June 23, 1998Exercise of options 1 0 , 4 4 9 , 4 1 1 1 2 2 , 3 2 0 4 1 9 , 7 3 5 . 8 2 0 8 , 9 8 1 , 9 8 0

Conversion of bonds 1 0 , 6 7 8 , 8 0 6 4 , 5 8 7 , 9 0 0 3 7 , 3 9 1 , 3 8 5 2 1 3 , 5 7 6 , 1 2 0

July 15, 1998Conversion of bonds 1 1 , 0 7 9 , 7 6 1 8 , 0 1 9 , 1 0 0 6 5 , 3 5 5 , 6 6 5 2 2 1 , 5 9 5 , 2 2 0

July 15, 1998Equity issue (3) 1 2 , 9 1 1 , 5 7 3 3 6 , 6 3 6 , 2 4 0 6 5 0 , 2 9 3 , 2 6 0 2 5 8 , 2 3 1 , 4 6 0

October 5, 1998Conversion of bonds 1 2 , 9 4 6 , 6 6 3 7 0 1 , 8 0 0 1 2 , 4 5 6 , 9 5 0 2 5 8 , 9 3 3 , 2 6 0

March 15, 1999Conversion of bonds 1 2 , 9 9 7 , 0 9 3 1 , 0 0 8 , 6 0 0 8 , 2 2 0 , 0 9 0 2 5 9 , 9 4 1 , 8 6 0

Exercise of options 1 3 , 0 1 1 , 1 8 2 2 8 1 , 7 8 0 9 9 6 , 9 5 8 2 6 0 , 2 2 3 , 6 4 0

June 8, 1999Conversion of bonds 1 3 , 2 3 8 , 1 3 2 4 , 5 3 9 , 0 0 0 3 6 , 9 9 2 , 8 5 0 2 6 4 , 7 6 2 , 6 4 0

Exercise of options 1 3 , 2 3 8 , 5 0 4 7 , 4 4 0 2 4 , 2 6 0 2 6 4 , 7 7 0 , 0 8 0

October 1, 1999Conversion of bonds 1 3 , 6 3 4 , 0 6 9 7 , 9 1 1 , 3 0 0 2 7 2 , 6 8 1 , 3 8 0

Exercise of warrants 1 3 , 6 3 4 , 1 5 6 1 , 7 4 0 2 7 2 , 6 8 3 , 1 2 0

December 31, 1999Exercise of options 1 3 , 7 0 9 , 7 8 0 1 , 5 1 2 , 4 8 0 7 , 0 3 0 , 2 1 3 . 4 0 2 7 4 , 1 9 5 , 6 0 0

Conversion of bonds 1 3 , 9 5 4 , 3 2 5 4 , 8 9 0 , 9 0 0 1 8 , 2 9 4 , 3 0 5 2 7 9 , 0 8 6 , 5 0 0

Exercise of warrants 1 3 , 9 9 8 , 8 7 1 8 9 0 , 9 2 0 1 9 , 1 5 4 , 7 8 0 2 7 9 , 9 7 7 , 4 2 0

Conversion of OCEANE bonds 1 4 , 1 4 9 , 4 0 7 3 , 0 1 0 , 7 2 0 8 1 , 9 1 0 , 1 0 2 . 9 4 2 8 2 , 9 8 8 , 1 4 0

J a n u a ry 3, 2000F i v e - f o r-one stock split (4) 7 0 , 7 4 7 , 0 3 5 2 8 2 , 9 8 8 , 1 4 0

F e b r u a ry 29, 2000Exercise of options 7 0 , 7 7 5 , 3 5 0 1 1 3 , 2 6 0 2 8 4 , 8 4 8 2 8 3 , 1 0 1 , 4 0 0

Conversion of bonds 7 1 , 2 8 3 , 4 7 5 2 , 0 3 2 , 5 0 0 1 6 , 5 6 4 , 8 7 5 2 8 5 , 1 3 3 , 9 0 0

Exercise of warrants 7 1 , 4 9 6 , 4 4 5 8 5 1 , 8 8 0 1 8 , 3 1 5 , 4 2 0 2 8 5 , 9 8 5 , 7 8 0

Conversion of OCEANE bonds 7 3 , 5 3 0 , 6 9 5 8 , 1 3 7 , 0 0 0 2 2 1 , 3 7 6 , 4 5 0 . 7 0 2 9 4 , 1 2 2 , 7 8 0

General information concerning the Corporation’s equity

9190

Ownership of stock and voting rightsAs of June 30, 2001, 106,233,423 voting rights were attached to INFOGRAMES ENTERTAINMENT shares. Ownership

of the stock and voting rights was as follows

Number of shares p e r c e n t a g e Number of voting p e r c e n t a g er i g h t s

Interactive Partners and Flamatis (1) 1 6 , 8 8 6 , 4 0 2 1 9 . 0 7 % 3 1 , 8 5 4 , 5 9 4 2 9 . 9 8 %

F o u n d e r s 1 7 , 0 4 5 0 . 0 2 % 3 4 , 0 9 0 0 . 0 3 %

EURAZEO (formerly Azéo) 4 , 9 4 2 , 7 5 5 5 . 5 8 % 4 , 9 4 2 , 7 5 5 4 . 6 5 %

Grey Phantom 5 4 7 , 4 1 0 0 . 6 2 % 1 , 0 9 4 , 8 2 0 1 . 0 3 %

Dassault Multimedia 1 , 8 9 5 , 5 0 0 2 . 1 4 % 3 , 7 9 1 , 0 0 0 3 . 5 7 %

Hasbro Inc. (2) 4 , 5 2 1 , 4 0 5 5 . 1 0 % 4 , 5 2 1 , 4 0 5 4 . 2 8 %

P u b l i c 5 9 , 7 4 9 , 8 0 2 6 7 . 4 7 % 5 9 , 9 9 4 , 7 5 9 5 6 . 4 8 %

To t a l 8 8 , 5 6 0 , 3 1 9 1 0 0 . 0 % 1 0 6 , 2 3 3 , 4 2 3 1 0 0 . 0 %

(1) Following a merger between these companies, Flamatis was merged into Interactive Partners on June 28, 2001. It had been fullyowned by Interactive Partners since July 10, 1998.

( 2 ) The January 26, 2001 purchase by the Company of the entire interactive division of Hasbro Inc., the holding company for the Hasbrogroup, was paid for mostly through the issue of 4,521,405 new shares

As of June 30, 2001, the Company held 149,426 of its own shares. The principal shareholder INTERACTIVE PA RT N E R S

controls 29.98% of voting rights, through their direct and indirect ownership of 19.07% of the equity and an agreement

between the founding shareholders as described below. To the best of the Company’s knowledge, no shareholder other

than the above owns more than 5% of the equity or voting rights. The founders of INFOGRAMES ENTERTAINMENT (Bruno

Bonnell, Christophe Sapet, Benoît Regnault de Maulmin, Thomas Schmider and Eric Mottet) hold a controlling interest in INTER-

ACTIVE PA RTNERS. As of June 30, 2001, the Company did not own control of its own stock (auto-contrôle).

Shareholders' AgreementOn September 25, 1995, the founding shareholders transferred the INFOGRAMES ENTERTAINMENT stock they held to

Infogrames Participations, a holding company formed by them in December 1994 that has since changed its name to

INTERACTIVE PA RTNERS. As a result of this transfer, a shareholders’ agreement was executed on November 20, 1995

between the founding shareholders and INFOGRAMES PA RT I C I PATIONS (Cote Officielle notice No. 95-3517 of

December 12, 1995); the new agreement creates an association between the signatories.

The agreement is for a term of five years, automatically extended thereafter for successive periods of three years, and its

main provisions consist of:

• An undertaking by the parties to hold prior consultations for the purpose of encouraging the development of Infogrames

E n t e rtainment and exercising their control of the corporation to make such decisions as they have agreed upon.

• An undertaking by the parties to maintain a sufficient equity interest in Infogrames Entertainment to retain joint control

of the Company.

• Recognition by each party of the other parties’ preemptive rights to shares held by them now or in the future which are

offered for sale. This preemptive right also applies in the event of a tender offer.

• A tag-along right in the event that the parties who are members of the INFOGRAMES ENTERTAINMENT Board of

Directors should decide to jointly dispose of some or all of their direct or indirect interest in the Company such that the

p a rties no longer jointly control the capital or voting rights of INFOGRAMES ENTERTA I N M E N T.

Stock market information

As of June 30, 2001, members of management and of the Board of Directors together held, either directly or indirectly

(including Interactive Partners and Grey Phantom) 19.71% of the Company’s outstanding shares and 31.04% of the

voting rights.

Changes in principal shareholders over the past three fiscal yearsDuring fiscal 1998-1999, Paribas sold all of its interest in INFOGRAMES to the public. In fiscal 2000-2001, Hasbro Inc.

became a shareholder. As of June 30, 2001, it held 5.1% of INFOGRAMES’ capital.

Stock ownership, as measured at the Company’s special shareholders’ meetings, has changed as follows in terms of per-

centage of stock held and voting rights:

At the shareholders’ At the shareholders’ At the shareholders’meeting for fiscal 1997/98 meeting for fiscal 1998/99 meeting for fiscal1999/2000

S t o c k Voting rights S t o c k Voting rights S t o c k Voting rights

Interactive Part n e r s 2 9 . 6 4 4 2 . 4 1 2 7 . 2 0 3 9 . 5 0 2 1 . 7 7 3 3 . 2 4Azéo 7 . 3 0 6 . 9 6 6 . 9 4 6 . 7 5 5 . 9 2 9 . 0 3Dassault Multimedia 4 . 5 1 4 . 9 6 4 . 3 4 . 8 2 2 . 3 7 3 . 6 2Grey Phantom 1 . 1 1 1 . 6 6 1 . 0 5 1 . 6 2 0 . 6 9 1 . 0 4P a r i b a s 1 . 4 8 1 . 1 2 - - - -Public (1) 5 5 . 9 6 4 2 . 8 9 6 0 . 5 9 4 7 . 3 1 6 9 . 2 5 5 3 . 0 7

Shares outstanding (2) 6 4 , 7 3 3 , 3 1 5 6 8 , 1 0 8 , 0 4 5 7 9 , 9 0 9 , 4 8 4

Voting rights (2) 8 5 , 9 4 4 , 7 2 5 8 8 , 5 4 4 , 0 1 5 104,727 ,027

( 1 ) including employees( 2 ) Adjusted to reflect the increase in the par value and the stock split subsequent to the Shareholders’ Meeting called to approve the

financial statements for fiscal 1996/97 and the five-for-one stock split of December 16, 1999

Authorization granted to the company to purchase its own sharesThe Combined Shareholders’ Meeting of July 28, 2000 granted authority to the Board of Directors, along with the right

to delegate said authority, to buy back up to 10% of the Company’s own shares outstanding at the time such authority

was exercised. A statement to that effect was issued and approved by the Commission des Opérations de Bourse on July

5, 2000 (visa No. 00-1227).

As the plan will expire at the annual shareholders’ meeting called to approve the financial statements for the year ended June

30, 2001, the meeting will be asked to approve a new plan for a period of 18 months, the purpose of which would be to

ensure an orderly market for the Company’s shares by placing buy orders for shares when their price falls and sell orders

when it rises; to distribute shares to employees and officers of the Company under profit-sharing, stock-option or stock pur-

chase plans, or by any other means permitted by the laws in force; holding such shares or selling or transferring same, as the

case may be, by any means whatsoever, including through exchanges of stock, notably in the case of acquisitions; paying

out shares in consideration for the exercise of rights attached to securities redeemable, convertible or otherwise exchangea-

ble for shares, or to obtain shares pursuant to warrants or in any other manner whatsoever; or to reduce the Company’s stock

by retiring all or a portion of such shares. The terms of the proposed plan are set forth in draft resolutions annexed to this

annual report and shall be included in a prospectus submitted to the Commission des Opérations de Bourse for approval.

As of June 30, 2001, INFOGRAMES ENTERTAINMENT held 149,426 shares of its own stock, acquired pursuant to the

above stock buy-back plan.

Warrants

Monthly highs and lows Trading volume Value of shares traded

H i g h L o w (in million €u ro s €u ro s €u ro s )

2 0 0 0

J a n u a ry 5 7 . 8 0 4 0 9 3 , 5 9 4 4 . 5 8

F e b r u a ry 1 0 2 4 9 . 2 0 1 3 4 , 6 7 7 1 0 . 1 8

M a r c h 1 0 5 7 0 5 3 , 0 5 2 4 . 6 4

A p r i l 7 6 . 1 5 4 5 . 3 0 3 6 , 2 4 9 6 0

M a y 5 4 . 2 0 3 3 . 7 0 4 5 , 1 5 0 4 4 . 2 4

J u n e 4 8 . 8 0 2 8 . 6 0 2 0 , 9 0 4 3 9 . 7 5

J u l y 3 7 . 9 0 2 7 . 3 0 6 2 , 6 9 0 3 2 . 2 2

A u g u s t 4 6 . 2 5 2 6 3 1 , 4 3 6 3 4 . 8 0

S e p t e m b e r 5 2 3 4 . 8 0 7 4 , 6 0 4 4 3 . 1 0

O c t o b e r 3 4 1 6 . 1 0 7 3 , 1 8 2 2 3 . 6 5

N o v e m b e r 3 0 . 7 2 2 0 . 4 8 5 7 , 3 1 8 1 . 7 6

D e c e m b e r 2 5 1 4 . 7 0 6 5 , 5 7 0 1 . 1 6

2 0 0 1

J J a n u a ry 2 1 . 2 0 1 3 . 2 0 4 1 , 5 7 8 0 . 7 2

F e b r u a ry 2 4 . 5 0 1 1 . 0 2 3 8 , 7 2 7 0 . 7 1

M a r c h 1 0 . 9 0 6 . 6 0 9 5 , 4 9 3 0 . 9 4

A p r i l 2 3 . 7 5 7 . 1 5 1 0 3 , 7 2 8 1 . 4 7

M a y 2 4 . 0 0 1 7 . 6 5 1 1 0 , 5 4 3 2 . 3 7

J u n e 2 2 . 0 2 1 0 . 9 2 1 9 3 , 2 9 3 3 . 2 2

Source : Reuters

9392

INFOGRAMES ENTERTAINMENT shares are traded on the First Market of Euronext Paris SA and qualify for the defer-

red settlement system (SRD). They form part of the SBF 120 market index.

Stock (adjusted for stock splits)

Monthly highs and lows Trading volume Value of shares traded

H i g h L o w (in million €u ro s €u ro s €u ro s )

2 0 0 0

J a n u a ry 3 7 3 0 . 4 2 1 0 , 8 7 7 , 1 4 0 3 6 6 . 6 7

F e b r u a ry 5 8 3 2 . 7 7 1 1 , 7 1 3 , 5 0 5 5 3 1 . 6 2

M a r c h 5 6 . 7 5 3 9 . 0 6 6 , 4 9 3 , 1 7 6 3 1 1 . 0 6

A p r i l 4 6 . 2 0 3 0 . 5 0 9 , 8 9 1 , 0 0 0 3 6 4 . 2 0

M a y 3 5 . 9 9 2 6 . 3 0 1 1 , 2 2 0 , 0 0 0 3 5 4 . 3 0

J u n e 3 3 . 8 0 2 4 . 3 5 7 , 7 2 5 , 0 0 0 2 2 2 . 0 0

J u l y 2 8 . 8 5 2 3 . 2 0 5 , 6 1 1 , 0 0 0 1 4 6 . 1 0

A u g u s t 3 3 . 5 0 2 4 . 1 2 6 , 8 0 4 , 0 0 0 1 9 9 . 7 0

S e p t e m b e r 3 4 . 8 0 2 6 . 0 0 5 , 9 9 0 , 0 0 0 1 8 9 . 2 0

O c t o b e r 2 7 . 5 0 1 8 . 3 0 1 1 , 4 6 9 , 4 9 4 2 5 6 . 2 2

N o v e m b e r 2 6 . 9 0 2 0 . 8 0 5 , 9 0 2 , 0 9 4 1 5 3 . 8 1

D e c e m b e r 2 4 . 3 0 1 8 . 0 0 7 , 2 5 0 , 8 0 2 1 5 2 . 2 3

2 0 0 1

J a n u a ry 2 2 . 4 0 1 6 . 6 0 7 , 7 1 2 , 5 9 1 1 5 3 . 5 6

F e b r u a ry 2 4 . 2 0 1 6 . 2 0 8 , 3 9 7 , 4 4 5 1 7 2 . 6 1

M a r c h 1 8 . 4 0 1 4 . 2 6 8 , 3 9 9 , 1 9 9 1 3 7 . 4 3

A p r i l 2 3 . 4 9 1 5 . 7 5 6 , 7 2 3 , 0 6 8 1 3 3 . 2 0

M a y 2 4 . 1 7 2 0 . 5 4 6 , 5 1 6 , 5 2 5 1 4 6 . 4 9

J u n e 2 3 . 0 4 1 7 . 8 0 5 , 6 6 6 , 7 9 5 1 2 4 . 1 8

J u l y 2 8 . 8 5 2 3 . 2 5 , 6 1 1 , 4 9 2 7 8 . 4 5

A u g u s t 3 3 . 5 2 4 . 1 2 6 , 8 0 4 , 4 4 5 1 0 1 . 4 5

S e p t e m b e r 3 4 . 8 2 6 5 , 9 9 0 , 7 7 2 1 0 4 . 8 0

Source : Reuters

Stock market information

OCEANE 2000/2005

Monthly highs and lows Trading volume Value of shares traded

H i g h L o w (in million €u ro s €u ro s €u ro s )

2 0 0 0

M a y 3 9 . 5 0 3 8 4 8 , 1 5 1 3 8 . 9 1

J u n e 4 2 3 6 . 5 0 6 6 , 0 6 7 3 9 . 8 5

J u l y 3 9 . 0 9 3 5 . 5 0 5 4 , 9 0 2 3 8 . 0 2

A u g u s t 4 1 . 5 0 3 6 7 7 , 2 6 8 4 0 . 4 6

S e p t e m b e r 4 2 . 3 5 3 8 . 5 0 7 3 , 2 8 6 4 1 . 3 2

O c t o b e r 3 9 . 5 0 3 4 . 2 1 9 8 , 0 0 0 3 7 . 3 1

N o v e m b e r 3 9 3 5 . 7 5 4 6 , 1 3 5 1 . 7 2

D e c e m b e r 3 6 . 5 0 3 4 . 1 8 8 2 1 1 , 8 9 5 7 . 4 1

2 0 0 1

J a n u a ry 3 6 . 3 3 3 3 . 2 5 6 5 2 , 2 9 1 2 2 . 7 3

F e b r u a ry 3 6 . 1 2 5 3 4 . 1 2 5 6 8 1 , 4 3 2 2 3 . 8 9

M a r c h 3 4 . 6 8 8 3 0 . 0 3 4 4 1 , 1 3 2 1 3 . 3 8

A p r i l 3 4 . 5 3 3 1 . 3 6 1 6 9 , 2 5 9 5 . 1 7

M a y 3 6 . 0 0 3 1 . 3 2 5 5 6 8 , 0 5 4 1 8 . 7 2

J u n e 3 3 3 2 . 0 3 4 3 3 , 2 6 4 1 4 . 1 4

J u l y 3 2 2 8 6 6 5 , 9 3 1 2 5 . 9

A u g u s t 3 1 . 7 5 2 7 . 1 5 3 6 6 , 2 0 0 1 4 . 2 8

S e p t e m b e r 3 0 . 4 5 1 5 . 1 3 4 0 , 7 9 8 1 0 . 3 5

Source : Reuters

Dividends

The Company has not paid any dividends for the past five fiscal years and does not anticipate that it will propose to dis-

tribute a dividend for fiscal 2000/2001.

9594

OCEANE 1999/2004

Monthly highs and lows Trading volume Value of shares traded

H i g h L o w (in million €u ro s €u ro s €u ro s )

2 0 0 0

J a n u a ry 1 9 0 1 4 4 6 3 , 1 0 1 1 0 . 5 4

F e b r u a ry 2 8 0 1 6 2 . 2 0 4 2 , 7 2 8 9 . 4 5

M a r c h 2 8 5 1 9 7 . 7 5 1 7 , 5 2 0 4 . 2 3

A p r i l 2 1 6 1 5 5 1 2 , 2 6 9 1 9 5 . 7 6

M a y 1 8 0 1 3 5 1 1 , 8 2 7 1 6 2 . 9 8

J u n e 1 6 6 1 2 8 . 6 0 1 4 , 2 3 0 1 4 5 . 1 7

J u l y 1 5 3 1 1 7 2 , 1 0 1 1 3 1 . 3 3

A u g u s t 1 6 9 1 2 5 2 , 2 4 6 1 4 1 . 5 6

S e p t e m b e r 1 7 4 1 2 8 . 6 0 8 , 0 1 2 1 6 6 . 5 2

O c t o b e r 1 4 8 9 2 . 6 5 5 6 , 7 8 8 1 1 2 . 6 5

N o v e m b e r 1 5 6 . 6 2 1 1 2 . 1 2 3 4 , 9 0 5 4 . 4 1

D e c e m b e r 1 1 8 . 3 1 9 5 . 9 1 1 7 6 , 3 8 2 1 7 . 5 1

2 0 0 1

J a n u a ry 1 1 0 . 7 5 8 6 . 0 0 3 6 , 7 7 2 3 . 8 3

F e b r u a ry 1 1 9 . 5 6 8 7 . 3 5 3 3 , 5 1 3 3 . 4 8

M a r c h 9 2 . 0 4 7 9 . 5 1 1 5 , 5 8 2 1 . 4 0

A p r i l 1 1 9 . 8 5 8 8 . 1 5 2 2 , 0 5 9 2 . 3 1

M a y 1 1 9 . 8 3 1 0 6 . 4 4 1 6 , 8 8 7 1 . 9 0

J u n e 1 1 6 . 8 5 1 0 0 . 2 9 5 2 , 4 1 1 5 . 5 5

J u l y 1 5 3 1 1 7 2 , 1 0 1 7 . 3 3

A u g u s t 1 6 9 1 2 5 2 , 2 4 6 3 . 6 9

S e p t e m b e r 1 7 4 1 2 8 . 6 8 , 0 1 2 1 . 2 9

Source : Reuters

Stock market information

9796

INFORMATION CONCERNING DIRECTORSBruno BonnellC h a i rman and Chief Executive Officer since May 24, 1987

Autres mandats

Other positions held: C h a i rman of the Board of Directors and Chief Executive Officer of Infogrames, Inc.

( f o rmerly GT Interactive Software Corp.)

C h a i rman of the Board of Directors of Interactive Part n e r s

Director of Infosources (formerly Infonie), IXO, Eurazeo, SCPS and SAOS OL

Thomas SchmiderDirector and Chief Operating Officer since June 20, 1990

Other positions held: Chief Operating Officer and/or Director of INFOGRAMES ENTERTA I N M E N T,

INFOGRAMES INC., INTERACTIVE PA RTNERS, IXO (as representative of

INTERACTIVE PA RTNERS, Exodia and S.A.O.S. A.S.S.E

Christophe SapetDirector and Chief Operating Officer since May 24, 1987

Other positions held: C h a i rman of the Board of Director of IXO

Director of INFOSOURCES

Chief Operating Officer of INTERACTIVE PA RTNERS

Eurazeo (formerly Azeo)Director since December 15, 1995 (appointed to replace Azeo)

A resolution to reelect Eurazeo is before the Annual Shareholders’ Meeting called to approve the financial statements for

the fiscal year ended June 30, 2001

Stock held: 4,942,755 shares, amounting to 5.58% of the share capital

Represented by Patrick Sayer, adviser to the Chairman (United States)

Dassault Multimedia Director since June 17, 1996

Stock held: 1,895,500 shares, amounting to 2.14% of the share capital

Represented by Thierry Dassault, Chairman and Chief Executive Officer

Jean-Claude LarueDirector since December 16, 1999

Chief Executive Officer of INFOGRAMES EUROPE

Benoît Regnault de MaulminDirector since June 17, 1996

Other positions held: C h a i rman of INSKOR ENTERTAINMENt Ltd.

Director of INTERACTIVE PA RTNERS

Information concerning corporate Officersand Directors

Pierre SissmannDirector since December 16, 1999

Other positions held: C h a i rman of the Board of Directors of Omni Ticket Network Corp.

Chief Executive Officer of Cyber Capital SA

Vi c e - C h a i rman of the Board of Directors of Disney Channel France

Member of the Board of Directors of Eurodisney SA and Walt Disney Company France

David WardDirector since June 17, 1996

Other positions held: Managing Director and member of the Board of Directors of INFOGRAMES UK

( f o rmerly Ocean)

Director of Grey Phantom

Works’ Council representativesEtienne Piquet-Gauthier (superv i s o ry staff)

Stéphane Valour (employees)

MANAGEMENTExecutive Officers:Bruno Bonnell C h a i rman and Chief Executive Officer

Thomas Schmider Chief Operating Officer

Christophe Sapet Executive Vice President

Frédéric Chesnais Executive Vice President

Executive Committee:Bruno Bonnell C h a i rman and Chief Executive Officer

Thomas Schmider Chief Operating Officer

Frédéric Chesnais Executive Vice President

Denis Guyennot President and Chief Operating Officer, United States

Jean-Claude Larue Chief Executive Officer, Europe

Franck Simon Vice President, Information Systems

Christelle Gesler Vice President, Communications

Audit Committee: P r e s i d e n t : T h i e r ry Dassault for Dassault Multimedia

M e m b e r : Christophe Sapet

The Company auditors

Compensation Committee P r e s i d e n t : Patrick Sayer for Eurazeo

M e m b e r : Christophe Sapet

9998

COMPENSATION PAID TO DIRECTORS AND OFFICERSCompensationCompensation paid to directors and officers of the Company for the fiscal year ended June 30, 2001 amounted to 4.5

million euros (1 million euros in fiscal 1999/2000). The increase was due to the expansion of the consolidated group.

No directors’ fees have been paid to the members of the Board of Directors over the past two fiscal years. Membership

on a special committee does not carry compensation.

Stock options(adjusted to take into account stock splits)

Options granted to Members of the Board of Directors A total of 625,000 stock options have been granted to members of the Board of Directors (500,000 under the

F e b r u a ry 1998 plan and 125,000 under the October 1999 plan). As of June 30, 2001, none of these options had

been exercised.

Stock options granted to members of the Board of Directors during the year ended:

Recipient and plan date N u m b e r Price € E x p i r a t i o n

Pierre Sissman

October 30, 2000 2 5 , 0 0 0 2 1 . 9 5 October 30, 2006

Stock options exercised by members of the Board of Directors during the fiscal year ended

Holder and plan date N u m b e r Price € E x p i r a t i o n

0 - -

Options granted to Members of the Executive CommitteeAs of June 30, 2001, a total of 868,750 stock options had been granted to six members of the Executive Committee, as

shown in the schedule below:

Plan date N u m b e r Price € E x p i r a t i o n Options (Number of recipient) outstanding as

of 6/30/2001

December 16, 1996(1 recipient) 1 8 , 7 5 0 2 . 9 7 December 16, 2002 1 8 , 7 5 0October 7, 1997(1 recipient) 1 1 1 , 2 5 0 4 . 4 4 October 7, 2003 1 1 1 , 2 5 0F e b r u a ry 3, 1998 (3 recipients) 5 1 3 , 7 0 0 5 . 9 2 F e b r u a ry 3, 2004 5 1 3 , 7 5 0October 16, 1998(1 recipient) 2 5 , 0 0 0 8 . 2 0 October 16 2004 2 5 , 0 0 0October 1, 1999(4 recipients) 2 0 0 , 0 0 0 1 4 . 2 0 October 1, 2005 2 0 0 , 0 0 0

The Board of Directors, at its meeting of October 24, 2001, decided to grant 360,000 stock options to four members of

the Executive Committee. These options are exercisable at a price of 7.98 euros up to October 24, 2009.

Options granted during the fiscal year to non-executive employees, within the meaning of section L. 255-184 of the

Commercial Code.

Plan date N u m b e r Price € E x p i r a t i o n

October 30, 2000 1 6 5 , 0 0 0 2 1 . 9 5 October 30, 2006

Options exercised by non-executive employees, within the meaning of section L.255-184 of the Commercial Code, during the fiscal year endedA total of 165,800 options were exercised by employees during the fiscal year, at an average price of 4.12 euros.

Loans extended and guarantees providedDuring the past fiscal year, no loans were extended or guarantees provided to members of the Board of Directors or to

corporate officers.

I N F O R M ATION CONCERNING EMPLOYEE PROFIT SHARINGMandatory profit-sharing planAn agreement on a mandatory employee profit-sharing plan concerning the Group’s French entities only, was signed on

December 15, 1999. Sums set aside for employees are calculated in accordance with the profit-sharing formula provi-

ded for by law and distributed to employees on the payroll of the INFOGRAMES’ French entities.

The profit-sharing agreement provides that employees may invest proceeds in the Group Employee Savings Plan (see

below). A total of 100,620 euros was distributed under the employee profit-sharing plan in the fiscal year ended.

There is no optional profit-sharing plan (Contrat d’intéressement).

Employee Savings Plan (Plan d’Epargne Entreprise)A corporate Employee Savings Plan was set up for INFOGRAMES’ French entities on December 15, 1999. Employees

may invest their proceeds from the group’s profit-sharing plan in the Employee Savings Plan, as well as additional sums

at their discretion. The plan’s bylaws provide that, in the event that additional sums are voluntarily deposited for invest-

ment in INFOGRAMES stock, the employer may match the first FRF 3,250 paid into the Plan by each employee. At the

e m p l o y e e ’s discretion, amounts paid into the Savings Plan may be invested either in a money-market fund or in the

Infogrames Corporate Investment Fund (FCPE Infogrames), which invests its assets in Infogrames corporate securities

(stocks, bonds, share warrants, etc.) and money-market funds.

As of August 31, 2001, the following amounts had been invested in the Plan:

(In € t h o u s a n d s ) Infogrames M o n e y - m a r k e tInvestment fund f u n d T O TA L

Profit-sharing 8 2 1 6 6 2 4 8

Additional deposits 2 6 4 4 0 3 0 4

Employer contribution - -

T O TA L 3 4 6 2 0 6 5 5 2

The Board of Directors decided, at its meeting of October 24, 2001, to issue equity for the purpose of an employee stock

offering as part of the Company Savings Plan.

Information concerning employee

profit sharing

Information concerning corporate Officersand Directors

• Delegation of authority to the Board of Directors for the purpose of issuing stock and other equity securities subject to

preemptive rights by shareholders

• Delegation of authority to the Board of Directors for the purpose of issuing stock and other equity securities not subject

to preemptive rights by shareholders

• Delegation of authority to the Board of Directors for the purpose of issuing stock and other equity securities in the event

of a tender offer for stock made by the Company

• Delegation of authority to the Board of Directors for the purpose of increasing stated capital through the capitalization

of reserves or premiums

• Grant of authority to the Board of Directors to make use of its authority to issue equity in the event of a tender offer

• Resolution on the issuing of stock options

• Delegation of authority to the Board of Directors for the purpose of issuing stock for offering to persons enrolled in a

company savings plan or a joint voluntary savings plan

• Reduction of capital by means of the retirement of shares acquired under the stock repurchase program (Resolution 4)

• Approval of the merger agreement with Interactive Partners S.A.; approval of the transferred assets’ value and

corresponding consideration, the resulting capital increase and the transactions’ retroactive effect to July 1, 2001

• Dissolution of Interactive Partners S.A.

• Reduction of capital by means of the retirement of a portion of the shares held by the Company

• Merger premium

• Amendments to the articles of incorporation and bylaws required by the merger with Interactive Partners S.A.

• Delegation of authority to the Board of Directors to reduce stated capital by retiring some of the stock transferred by

Interactive Partners S.A. in conjunction with the merger

• Revision of Resolution 4 of the Special Shareholders’ Meeting of January 23, 2001

• Other business

• P o w e r s

101100

COMBINED SHAREHOLDERS’ MEETING

AGENDA

Items before the Ordinary Shareholders’ Meeting:• Approval of the stand - alone consolidated financial statements and discharge of the directors for their

m a n a g e m e n t ;

• Appropriation of earnings for the fiscal year ended June 30, 2001;

• Regulated agreements; (convention réglementées)

• Grant of authority to the Board of Directors to trade in the Company’s shares;

• Appointment of a director;

• Delegation of authority to the Board of Directors to issue bonds and other debt securities; and

• Appointment of an alternate auditor.

Items before the Extraordinary Shareholders’ Meeting: • Amendment of Article 4 of the Articles of Incorporation and Bylaws (statuts) (principal office)

• Amendment of Article 10 of the Articles of Incorporation and Bylaws (statuts) (ownership and form of shares)

• Amendment of Articles 1 (form) and 11 of the Articles of Incorporation and Bylaws (statuts) (rights attaching to shares)

• Amendment of Article 14 of the Articles of Incorporation and Bylaws (statuts) (board of directors)

• Amendment of Article 15 of the Articles of Incorporation and Bylaws (statuts)

( c h a i rman and meetings of the board of directors )

• Amendment of Article 16 of the Articles of Incorporation and Bylaws (statuts)

(powers of the board of directors - management)

• Amendment of Article 18 of the Articles of Incorporation and Bylaws (statuts) (regulated agreements)

• Amendment of Article 19 of the Articles of Incorporation and Bylaws (statuts) (stockholders’ meetings - general rules)

• Amendment of Article 23 of the Articles of Incorporation and Bylaws (statuts)

(annual financial statement – management report )

Résolut ions before theShareholders’ Meeting

103102

RESOLUTIONS BEFORE THE ANNUAL SHAREHOLDERS’ MEETING Resolution OneApproval of the financial statements for the year ended June 30, 2001 and discharge of directors for their management.

The Shareholders, subject to the quorum and majority voting requirements applicable to annual shareholders’ meetings,

having reviewed the Board of Directors’ report on the Company’s business and financial position for the year ended June

30, 2001, and the Auditors’ reports, hereby approve the financial statements for the year ended June 30, 2001, as pre-

sented, the transactions reflected in the financial statements and summarized in the reports, as well as the non-deductible

fees and expenses governed by section 39-4 of the General Tax Code (Code Général des Impôts) in the amount of

46,787 euros, and the corresponding tax.

A c c o r d i n g l y, the Directors and the Auditors are hereby discharged for their management during the fiscal year ended.

Resolution TwoAppropriation of earnings for the year ended June 30, 2001

The Shareholders, subject to the quorum and majority voting requirements applicable to annual shareholders’ meetings,

after duly noting that a loss of 42,339,858.39 euros was reported for the year ended June 30, 2001, upon motion by

the Board of Directors, hereby resolve to allocate said loss to the appropriate equity account, which will show a negati-

ve balance of (42,339,858.39) euros as a result.

The Shareholders take note of the fact that no dividend has been distributed for the past three fiscal years.

Resolution ThreeRegulated agreements

The Shareholders, subject to the quorum and majority voting requirements applicable to annual shareholders’ meetings,

having reviewed the Auditors’ special report on agreements governed by section L225-38 of the Commercial Code (for-

merly Article 101 of the Act of July 24, 1966), hereby approve the conclusions of said report and the agreements refer-

red to therein.

Resolution FourGrant of authority to the Board of Directors to trade in shares of the Company

The Shareholders, subject to the quorum and majority voting requirements applicable to annual shareholders’ meetings,

having reviewed the Board of Directors’ report and the statement approved by the Commission des Opérations de Bourse

(visa n° 01-1341 on November 21, 2001.

• resolve that this Resolution cancels and supersedes that authority granted for the same purpose by the Combined

Shareholders’ Meeting of July 28, 2000;

• authorize the Board of Directors, pursuant to sections 225-209 et seq. of the Commercial Code, to purchase up to 10

percent of the Company’s shares outstanding at the time that the Board acts under this authority.

Resolutions before theShareholders’ Meeting

The authority granted hereunder is intended to enable the Company to

• maintain an orderly market in its shares by trading in same;

• sale and purchase shares depending upon market conditions ;

• distribute shares to employees and corporate officers further to profit-sharing plans, stock option plans or company

savings plans, or by any other method provided for by the laws and regulations in force.

• keep such shares and, as the case may be, sell or transfer such shares, by any manner, including through share exchan-

ges, in particular in the context of acquisition ;

• grant such shares in exchange for rights attached to securities with a claim on the Company’s equity exercisable by

way of redemption, conversion, exchange, exercise of a warrant or in any other manner

• retire shares, contingent on approval by the Special Shareholders’ Meeting of the resolution below, subject to the quo-

rum and majority voting requirements applicable to special shareholders’ meetings.

Shares may be bought, sold, transferred or exchanged by any means, including on official markets or over the counter

and, if applicable, through the exercise of derivatives (options, convertible bonds, etc.) and at any time, in compliance

with applicable laws and regulations. Buybacks by means of block trades may account for all of the shares repurchased

under the plan.

The Shareholders resolve that the maximum price at which shares may be purchased and the minimum price at which

they may be sold shall be as follows:

Maximum purchase price: €30 per share

Minimum selling price: € 5 per share

In order to ensure that this resolution is duly carried out, full authority is hereby granted to the Board of Directors – with

the further authority to delegate same – for the purpose of

• placing market orders and entering into agreements regarding such matters as the recording of trades in the

C o m p a n y ’s stock;

• making all declarations and fulfilling formalities with the Commission des Opérations de Bourse, the Conseil des

Marchés Financiers or other agencies;

• in the event that the Company should purchase its own shares for a price above their trading price, making all neces-

s a ry adjustments to the number of shares for which stock warrants and options – or other securities with a right to acqui-

re existing Corporate stock – may be exercised;

• completing all other formalities and, in general, doing whatever is necessary.

The authority granted hereunder is for the period decided by the Annual Shareholders’ Meeting and in any event for no

longer than eighteen months from the date of this Shareholders’ Meeting. It may also be used while a tender offer for cash

or stock is pending, subject to the applicable securities and exchange regulations.

• deciding whether the new bonds or other debt securities are to be subordinated, fixed-maturity or perpetual, with the

possibility of subordinating either the principal or the interest or both;

• deciding, based on market conditions, how the bonds shall be redeemed and/or called, if applicable, with a fixed or

variable premium, including their buy-back by the Company;

• where applicable, guaranteeing or granting a security interest in the securities to be issued and deciding the nature and

attributes thereof, as well as assembling the body of bondholders;

• in general, entering into any agreements or contracts with banks and other entities, taking all measures and comple-

ting all formalities pertaining to the issue, listing the servicing of the bonds and/or debt securities concerned, and gene-

rally perf o rming all necessary tasks.

Resolution SevenAppointment of an alternate Auditor

The Shareholders note that Resolution Seven of the Shareholders’ Meeting of December 15, 2000, pertaining to the

appointment of Thibault Chalvin, of 170 Boulevard Stalingrad, 69006 Lyon, as alternate financial auditor, contains a

typographical error and must be amended by resolving that, in accordance with the law, Mr. Chalvin’s term of office coin-

cides with the remainder of the preceding term and shall expire at the Shareholders’ Meeting called to approve the finan-

cial statements for the year ended June 30, 2004, rather than the year ended June 30, 2006, as stated in said resolu-

tion.

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Resolution FiveSelection and appointment of a Director

The Shareholders ratify the selection of Eurazeo for membership on the Board of Directors, to replace Azeo subse-

quent to the merger of Azeo into Eurazeo. As the term of Azeo is expiring, the Shareholders, acting on a motion by

the Board of Directors, resolve to extend the term of Eurazeo, represented by Patrick Sayer, for an additional six years,

to expire at the end of the annual Shareholders’ Meeting called to approve the financial statements for the year ending

June 30, 2007.

Resolution SixAuthority granted to the Board of Directors to issue bonds or other corporate debt securities

The Shareholders, subject to the quorum and majority voting requirements applicable to annual shareholders’ meetings,

having reviewed the Board of Directors’ report and pursuant to the provisions of sections L228-38 et seq. of the

Commercial Code, authorize the Board of Directors to issue, in one or more transactions and at its discretion, in France,

abroad or on the international market, bonds or equivalent securities, including subordinated debt securities, either redee-

mable or perpetual, with a fixed and/or floating rate of interest, or discounted, denominated in euros or any other cur-

rency or basket of currencies, with attached warrants for other bonds or like securities, where applicable, for up to

€ 1,500,000,000 (one billion five hundred million euros) or the equivalent thereof in said currencies or basket of cur-

rencies, with the proviso that said maximum face value applies to the aggregate of all bonds and other debt securities

issued immediately or in response to the exercise of warrants, but that said amount does not include the redemption pre-

mium, if any.

The authority granted hereunder cancels and supersedes that granted for the same purpose by the Shareholders’ Meeting

of December 15, 2000 and is for a period of five years from the date of this Meeting.

Full authority is hereby granted to the Board of Directors, which may further delegate said authority in accordance with

the law, for the purpose of carrying out these issues within the above limits and determining their characteristics and term s ,

i n c l u d i n g :

• setting the issue date or dates,

• selecting the issue currency and the face value of the securities,

• d e t e rmining the characteristics of the bonds and/or other debt securities to be issued, including:

• their face value and the date from which they earn interest;

• their issue price and the premium, if any;

• their fixed and/or floating interest rate, or discount rate, and the coupon payment date and, in the case of floating-

rate bonds or securities, the procedure for setting their interest rate;

Resolut ions before theShareholders’ Meeting

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RESOLUTIONS BEFORE THE EXTRAORDINARY SHAREHOLDERS’ MEETINGResolution EightAmendment of Article 4 of the Articles of Incorporation and Bylaws (Principal Office)

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report, resolve to ratify the Board of Directors’ decision to transfer the

C o m p a n y ’s principal office and, accordingly, to amend article 4 of the articles of incorporation and bylaws by replacing

the old language with the following, new language:

“The Company shall have its principal office at 1 Place Verrazzano, 69252 Lyon Cedex 09.”

Resolution NineAmendment of Article 10 of the Articles of Incorporation and Bylaws (Ownership and Form of Stock)

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report, resolve to replace the third paragraph of article 10 of the art i c l e s

of incorporation and bylaws with the following new language:

“For the purpose of identifying the holders of bearer shares, the Corporation is entitled to request from the transfer agent,

subject to applicable laws and regulations, at any time and at its own expense, the name of the individual or entity, the

n a t i o n a l i t y, the date of birth or of incorporation and the address, as the case may be, of the holders of securities with a

present or future right to vote at shareholders’ meetings, as well as the number of such securities held by each and the res-

trictions, if any, to which said securities may be subject.

Based on the list received by the Corporation from the transfer agent, the Corporation may ask either the transfer agent,

or such individuals and entities on said list which the Corporation may have reason to believe are acting as interm e d i a-

ries on behalf of third-party owners of securities, for the above information pertaining to the owners of said securities.

In the case of securities held in registered form, the Corporation is also entitled at any time to ask the financial interm e-

d i a ry registered as acting for the account of the securities’ owners, to disclose the identities of said owners.

In the event that the Corporation has reason to believe that the owners of either bearer or registered securities whose iden-

tity has been reported to it hold such securities on behalf of third parties who are the actual beneficial owners, it may

request that such holders disclose the identity of the owners of said securities as provided for above.

Subsequent to requesting the above information, the Corporation is entitled to ask any legal entity holding Corporation

stock in excess of one-fortieth of the Corporation’s shares or voting rights outstanding to disclose the names of the indivi-

duals and entities with a direct or indirect equity interest of more than one-third of said legal entity’s capital stock or voting

rights at stockholders’ meetings.

Whenever the individual or entity to which a request for disclosure is addressed pursuant to the provisions of this section

10 fails to supply the information requested within the time provided for by the applicable laws and regulations, or sup-

plies incomplete or erroneous information concerning its own identity or that of the securities’ beneficial owners, said indi-

vidual or entity as registered in the Corporation’s books shall be barred from voting such shares or other securities with a

present or future claim on equity at any stockholders’ meeting until such disclosure is made; dividend payments shall be

deferred until that date.

Resolutions before theShareholders’ Mee ting

F u rt h e rmore, in the event that the individual or entity whose name is in the Corporation’s books should knowingly disre-

gard the above provisions, a court in the district of the Corporation’s principal office may, at the request of the Corporation

or of one or more stockholders accounting for 5% or more of the Corporation’s equity, suspend, for up to five years, all

or some of the voting rights attached to the shares for which disclosure has been requested as well as the corresponding

dividend payment for a like period.”

Resolution TenAmendment of Article 1 (Form) and Article 11 (Rights Attaching to Shares) of the Articles of Incorporation and Bylaws

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report, resolve to amend article 1 and article 11 of the articles of incor-

poration and bylaws as follows:

A rticle 1 - Form

• the phrase “by the Act of July 24, 1966” is replaced in paragraph one with “by the Commercial Code”

• the phrase “article L 72 of the Act on Business Corporations” is replaced in paragraph two with ” section L.224-2 of

the Commercial Code”

A rticle 11 Rights Attached to Shares

• the phrase “article 175 of the Act of July 24, 1966” is replaced, in paragraphs two and five, with “section L.225-123

of the Commercial Code”

• paragraph four is deleted entirely.

Resolution ElevenAmendment of Article 14 of the Articles of Incorporation and Bylaws (Board of Directors)

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report, resolve to

• replace the first paragraph of article 14 with the following paragraph:

"1 – The Corporation is governed by a Board composed of at least three and no more than 18 members., subject to

the exemption allowed by the Commercial Code in the event of mergers”

• replace the third paragraph of the same article with the following paragraph:

" 3 – An employee of the Corporation may serve as a Director in accordance with the laws and regulations in effect.”

• delete all of paragraph five of the article concerning the requirement that Directors own at least one share of the

C o m p a n y ’s stock.

Resolution TwelveAmendment of Article 15 of the Articles of Incorporation and Bylaws (statuts) (Chairman and Meetings of the Board of Directors).

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders' mee-

tings, having reviewed the Board of Directors’ report, resolve to delete all of article 15 of the articles of incorporation and

bylaws and replace it with the following provision:

• "The Board of Directors appoints a Chairman from among those of its members who are natural persons. The Chairm a n

represents the Board of Directors and presides over its meetings. He organizes and directs the work of the board of

directors, and reports on it to the stockholders' meeting. The Chairman sees to it that the governing bodies of the

Corporation function properly, and in part i c u l a r, that the Directors are able to fulfill their duties.

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The Chairman is appointed for his full term as a Director. He may be removed by the Board of Directors at any time.

The Board of Directors elects one or more Vi c e - C h a i rmen from among those of its members who are natural persons,

if it decides that this would be useful. In addition, the Board appoints a Secretary, who need not be a Director or a sha-

r e h o l d e r. In the absence of the Chairman and the Director temporarily appointed as Acting Chairman, if any, and in

the absence of the Vi c e - C h a i rman or Vi c e - C h a i rmen, the Board shall designate one of the members present to chair the

meeting. In the absence of the secretary, the Board of Directors designates one of its members or a third party to repla-

ce the Secretary.

• The Chairman, the Vi c e - C h a i rman or Vi c e - C h a i rmen and the Secretary may be reelected at any time.

No person more than 65 years of age may be appointed Chairman of the Board of Directors. In addition, if the

C h a i rman in office reaches his or her 65th birt h d a y, he or she shall be automatically deemed to have resigned at the

close of the next meeting of the Board of Directors.

• The Board of Directors meets as often as the interests of the Corporation require, upon notice by the chairman. If the

board has not met for more than two months, no fewer than one-third of the members of the board may demand that

the Chairman call a meeting of the board, and set the order of business for the meeting. The Chief Executive Officer

m a y, where applicable, ask the Chairman to call a meeting of the Board of Directors to consider a specific order of

business.

• Any Director may attend, participate in and vote at meetings of the Board of Directors by means of any videoconfe-

rencing as permitted by the applicable regulations at the time said technology is used. The foregoing does not apply

when the Board considers the appointment or removal of the Chairman of the Board or, if applicable, the Chief

Executive Officer, the approval of the annual or consolidated financial statements and the adoption of the annual

Corporation or consolidated management report .

Directors may appoint another director as their proxy and representative at a meeting of the Board, by regular mail,

fax or cable; no Director may act at any meeting as the proxy for more than one other Director.

At least one-half of the Directors in office must be present, as defined by the law and the articles of incorporation and

bylaws , for the Board to transact business. An attendance roll shall be kept and signed by the Directors part i c i p a t i n g

in the meeting. Resolutions carry by a majority of the votes of the members present or represented, and each Director

has one vote. In the event of a tie, the Chairman has the casting vote. Directors and any person invited to attend a mee-

ting of the Board of Directors must keep confidential any and all information identified as confidential by the Chairm a n .

• The deliberations of the Board are set down in minutes kept in a special minute book and signed by the Chairman of

the meeting and at least one Director. Copies or extracts of those minutes are certified by the Chairman of the Board

of Directors, the Chief Executive Officer or an the Executive Vice-President, a director temporarily acting as Chairm a n ,

the Secretary or an attorney-in-fact empowered for that purpose.

• The Board of Directors may, if the Chairman so moves, appoint one or more advisors to the Board, responsible for ensu-

ring that the articles of incorporation and bylaws are complied with and for making recommendations to the Board.

Such advisor or advisors shall attend Board meetings in a consultative capacity and without compensation.”

Resolution Thirteen Amendment of Article 16 of the Articles of Incorporation and Bylaws (Powers of the Board of Directors - Management)

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders' mee-

tings, having reviewed the Board of Directors’ report, resolve to delete all of article 16 of the Articles of Incorporation and

Bylaws and replace it with the following provision:

Resolutions before theShareholders’ Mee ting

"The Board of Directors sets the Company's policy and sees to its implementation. Subject to the powers expressly reser-

ved to the shareholders, and acting within the scope of the corporate purpose, it addresses any matter concerning the

proper operation of the Company and resolves matters concerning the Company through its deliberations. The Board of

Directors shall make such inspections and effect such controls as it deems convenient.

Pursuant to a decision by a majority of the members of the Board of Directors present or represented, the management

of the Company is entrusted to the Chairman or some other natural person appointed by the Board of Directors as Chief

Executive Officer. The Board of Directors decides which of the two management systems is to apply and the option selec-

ted remains valid for no less than one year.

The Chairman or the Chief Executive Officer, as the case may be, represent the Company in its dealings with third part i e s .

Subject to the powers expressly reserved by law to the shareholders and those expressly reserved by law to the Board of

Directors, and acting within the scope of the Company's corporate purpose, the Chairman or the Chief Executive Officer,

as the case may be, are vested with the broadest powers to act in the Company's name, under all circumstances.

The Company is bound by any act by the Chairman or Chief Executive Officer, as the case may be, even where said act

is ultra vires, unless it can prove that the third party concerned knew that the act in question was ultra vires or could not

have failed to know this under the circumstances, provided however that mere publication of the articles of incorporation

and bylaws is not sufficient to prove this.

Provisions of the articles of incorporation and bylaws or of resolutions adopted by the Board of Directors limiting the powers

of the Chairman or those of the Chief Executive Officer, as the case may be, are unenforceable against third part i e s .

If the Chief Executive Officer is not at the same time a Director, he may attend meetings of the Board in an advisory capa-

c i t y. Where the Chief Executive Officer is a Director, his term of office shall not exceed his term as a Director.

If the Chairman or the Chief Executive Officer, as the case may be, is temporarily indisposed, the Board of Directors may

appoint a Director as acting Chief Executive Officer.

Upon motion by the Chairman or Chief Executive Officer, as the case may be, the Board of Directors may appoint one

or more Executive Vice-Presidents to assist him, who shall be chosen from among the members of the Board, but need not

be members of the Board, provided however that there shall be no more than five Executive Vice-Presidents in all.

No person may be appointed an executive vice-president who is more than 65 years of age. If an executive vice-presi-

dent should reach 65 years of age, he shall be deemed to have resigned automatically at the close of the next meeting

of the Board of Directors.

The Board of Directors, in agreement with the chairman of the Board or the Chief Executive Officer, as the case may be,

d e t e rmines the scope and duration of the powers assigned to Executive Vice-Presidents, who must give an accounting of

their management to the Chairman or the Chief Executive Officer, as the case may be.

In dealings with third parties involving the management of the Company, Executive Vice-Presidents have the same powers

as the Chairman or Chief Executive Officer, as the case may be.

If they are not Directors, they may attend meetings of the Board of Directors, purely in an advisory capacity.

The term of office of Executive Vice-Presidents shall not exceed the term of office of the Chairman or the Chief Executive

O f f i c e r, as the case may be, provided however that they may be reappointed. However, in the event of the death, resigna-

tion or removal of the Chairman or the Chief Executive Officer, as the case may be, unless otherwise decided by the Board,

the Executive Vice-Presidents shall remain in office and retain their powers until a new Chairman has been appointed.

When an Executive Vice-President is also a Director, his term of office shall not exceed his term as a Director.

The Board of Directors sets the fixed or proportional compensation of the Chairman, the Chief Executive Officer and the

Executive Vice-Presidents. The Chairman, the Chief Executive Officer and each executive Vice-President, as the case may be,

are authorized to delegate or assign authority, under their responsibility, with respect to one or more transactions or specific

categories of transaction.

111110

Resolution Fourteen Amendment of article 18 of the Articles of Incorporation and Bylaws (Regulated Agreements)

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders' mee-

tings, and having reviewed the Board of Directors’ report, resolve to delete all of article 18 of the Articles of Incorporation

and Bylaws and replace it with the following provision:

Any agreement entered into directly or indirectly by and between the Company and its Chief Executive Officer, one of its

Directors, an Executive Vice-President or a shareholder with more than 5% of the voting stock or, in the case of a share-

holder which is a legal entity, the company that controls it within the meaning of article L 233-3 of the New Commercial

Code, must be submitted in advance to the Board of Directors for approval, and reported to the auditors.

The same applies to agreements in which one of the persons identified in the previous paragraph has an indirect interest.

Agreements between the Company and another company are also subject to prior authorization if one of the Directors, the

Chief Executive Officer, or one of the Executive Vice-Presidents of the Company is an owner, name part n e r, manager, direc-

t o r, member of the superv i s o ry Board or, as a general matter, officer of that company. A Director who falls into one of the

above categories is required to file a statement to that effect with the Board of Directors, and report same to the auditors.

The foregoing provisions do not apply to agreements concerning day-to-day transactions of the Company entered into on

a rms’ length terms. The Chairman provides a list of those agreements, identifying their subject matter, to the members of

the Board of Directors and the auditors.

The shareholders are also legally entitled, in accordance with the law, to obtain a list and a description of the purpose of

those agreements.

Resolution Fifteen Amendment to Article 19 of the Articles of Incorporation and Bylaws (Shareholders' Meetings - General Rules)

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders' mee-

tings, having reviewed the Board of Directors’ report, resolve to add the following provision after article 19-4, paragraph

eight of the Articles of Incorporation and Bylaws:

"Shareholders who participate in a shareholders' meeting using videoconferencing or telecommunications technology

which enables them to be identified, the nature and conditions of which are fixed by a decree of the Conseil d’Etat, are

deemed to be present for purposes of determining a quorum and a majority. "

Resolution Sixteen Amendment to Article 23 of the Articles of Incorporation and Bylaws (Annual Financial Statements - Management Report )

The Shareholders, subject to the quorum and majority voting requirements applicable to special shareholders' meetings,

having reviewed the Board of Directors’ report, resolve to delete all of article 23 of the articles of incorporation and bylaws

and replace it with the following provision:

"At the end of each fiscal year, the Board of Directors draws up an inventory of the Company's assets and liabilities,

the annual financial statements and the consolidated financial statements in accordance with the applicable laws and

r e g u l a t i o n s .

Resolutions before theShareholde rs’ Meeting

Each year, the Board of Directors prepares a report on its management of the Company during the previous fiscal year.

The annual financial statements, the consolidated financial statements and the management report are provided to the

auditors and approved by the annual shareholders' meeting as provided for by law. "

Resolution SeventeenDelegation of authority to the Board of Directors for the purpose of issuing stock and other equity securities subject to preferential

subscription rights by shareholders

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report and pursuant to the provisions of section L225-129-III, paragraph 3,

of the Commercial Code

• hereby terminate, effective immediately, the unused portion of the authority granted by resolution nine of the extraordi-

n a ry Shareholders’ Meeting of December 15, 2000, and, noting that all capital stock has been paid up,

• grant authority to the Board of Directors, for a period of 26 months from this meeting, to issue equity, in one or more trans-

actions, in such amounts and at such times it sees fit, in France or elsewhere, in the form of stock or securities – including

share warrants issued separately either free of charge or for valuable consideration – with a present or future claim on

the Company’s equity, exercisable at any time or on a given date, by way of subscription, conversion, exchange, redemp-

tion, exercise of a warrant or in any other manner, without prejudice to shareholders’ preferential subscription rights.

Present or future equity issues pursuant to the authority granted hereunder shall not exceed €50,000,000 (fifty million

euros) in aggregate, with the further proviso that

• within the above limit,

• tissues of bonds with warrants shall not cause the nominal value of stock outstanding to increase by more than

€50,000,000 (fifty million euros);

• tthe aggregate nominal value of stock required to be issued in consideration of the exercise of warrants issued sepa-

rately shall not exceed €50,000,000 (fifty million euros);

• the aforementioned ceilings are set without taking into account the effect on increases in equity of any adjustments requi-

red by law subsequent to the issue of securities with a claim on shares of the Company pursuant to the authority gran-

ted hereunder, including straight warrants; and

• the authorization expressly excludes:

• the issuance of voting preferred stock

• the issuance of non-voting preferred stock

• the issuance of investment certificates, either preferred or otherw i s e

• the issuance of securities, including straight warrants, with a present and/or future claim on voting preferred stock,

non-voting preferred stock or investment cert i f i c a t e s .

Securities issued in this manner with a claim on a portion of the Company’s equity may consist of bonds or be attached

to bond issues or serve as interim securities leading to the issuance of bonds. They may, inter alia, be either subordina-

ted or non-subordinated securities and have a maturity date or be perpetual; they may be issued in euros, foreign cur-

rencies or in currency units composed of a basket of currencies.

The Shareholders further resolve, in accordance with the law, to grant full authority to the Board of Directors, which may

f u rther sub-delegate said authority, for the purpose of implementing this Resolution and issuing, in one or more transac-

tions, in such amount and at such time it sees fit, in France and/or, if applicable, another country and/or on the intern a-

tional financial markets, the aforementioned securities resulting in an increase in equity – as well as, if applicable, delaying

same – recording completion thereof and amending the articles of incorporation and bylaws accordingly.

The Shareholders further resolve to grant full authority to the Board of Directors, which may further sub-delegate said autho-

rity in accordance with the law, for the purpose of

•deciding, in accordance with the law, how the right of holders of securities (including warrants) so issued to obtain stock

may be adjusted and suspending, if necessary, the exercise of rights attached to such securities and warrants for up to

three months;

• taking all steps and arranging for the completion of all formalities required for the rights, shares, securities and warrants

thus issued to be traded on an official financial market;

• setting the terms on which separately-issued warrants may be distributed free of charge and exercised, as well as those

on which securities and/or subscription or share warrants may be repurchased on the market or subject to a cash or

exchange offer, or determining how securities and warrants may be redeemed;

• capitalizing, if necessary, a portion of the share premium for the purpose of rounding up the amount of capital stock.

• if necessary, charging expenses resulting from the issuance of stock and securities to the corresponding premiums and

implementing all appropriate measures, and amending the Articles of Incorporation and Bylaws accordingly.

113112

The face value of debt securities thus issued shall not exceed € 1,500,000,000 (one billion five hundred million euros)

with the further proviso that this is a common ceiling for all debt securities which this Shareholders’ Meeting authorizes the

Board of Directors to issue, but that it is not affected by the value of debt securities without a claim on shares of the

C o m p a n y, issued further to Resolution Six, which is also before this Meeting. Debt securities shall mature no more than

50 years from their issue date, or 20 years in the case of bonds or securities convertible, redeemable or otherwise trans-

f o rmable into stock. They may bear interest at fixed and/or floating rates or may be discounted, and may be called, with

or without a premium, or redeemed; the securities may be bought back on the market or be the subject of a cash or

exchange offer by the Company. In the event that debt securities are issued, the Board of Directors shall have full autho-

r i t y, including the right to further delegate such authority in accordance with the law, for such purposes as deciding whe-

ther bonds are to be subordinated or not, setting their interest rate, maturity date, fixed or variable redemption price, the

amount of the redemption premium if any, the calling procedure based on market conditions and the terms under which

said securities may entitle their holders to shares of the Company’s stock.

The Shareholders resolve that holders of existing shares shall have the right to exercise their preferential subscription r i g h t

to subscribe for a minimum number of new securities, as provided for by sections L. 225-132 et seq. of the Commercial

Code. The Board of Directors may further grant shareholders a preferential subscription right ratably to subscribe for any

excess shares or securities subject to the number stated in their application. In the event that the exercise of p r e f e r e n t i a l

subscription rights to subscribe for a minimum number of securities and for excess securities should fail to account for the

entire issue, the Board shall be authorized, in its own discretion, either to reduce the number of securities issued, in accor-

dance with the law, to the number for which applications have been received, provided that such applications are for at

least three-fourths of the intended issue, or to freely allocate or offer to the public some or all of the shares or securities not

p u r c h a s e d .

The Shareholders take note and resolve that, if necessary, the authority granted hereunder

• entails the waiver by existing shareholders of their preferential subscription rights to shares to which the securities issued

may be entitled, in favor of the holders of said securities,

• entails the express waiver by existing shareholders of their preferential subscription rights to subscribe for shares issued

for the benefit of the owners of (i) convertible bonds and (ii) straight warrants.

The Board of Directors shall set the characteristics, amount and terms of all issues of securities. In part i c u l a r, it shall deci-

de the class of shares to be issued and set their price, taking into account the information contained in its report, and the

amount of the premium, if any, as well as their dividend date, which may be retroactive and, if applicable, the exercise

period and price of warrants and the manner in which securities may entitle their holders to shares, with the further pro-

viso that:

• the issue of straight warrants, pursuant to section L.228-95 of the Commercial Code, may be carried out either through a

public offering or through the issuance and distribution of free stock to stockholders ;

• the amount of proceeds to be paid to the Company for each of the shares issued pursuant to this authority, after taking

into account - in the event of straight warrants - the issuance price of such straight warrants, shall be no less than the nomi-

nal value at the date of issuance ;

Resolut ions before theShareholders’ Meeting

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Resolution EighteenDelegation of authority to the Board of Directors for the purpose of issuing stock and other equity securities not subject to preferential

subscription rights by shareholders

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report and the Auditors’ special report, and pursuant to the provisions of

section L225-129-III, paragraph 3, of the Commercial Code

• hereby terminate, effective immediately, the unused portion of the authority granted by resolution ten of the extraordi-

n a ry Shareholders’ Meeting of December 15, 2000 and, noting that all capital stock has been paid up,

• grant the Board of Directors, for a period of 26 months from this meeting, the necessary authority to issue equity, in one

or more transactions, in such amounts and at such times it sees fit, in France or elsewhere, in the form of stock or secu-

rities without shareholders’ preferential subscription rights – including share warrants issued separately either free of

charge or for valuable consideration – with a present or future claim on the Company’s equity, exercisable at any time

or on a given date, by way of subscription, conversion, exchange, redemption, exercise of a warrant or in any other

m a n n e r.

For the purpose of the authority granted hereunder, the Shareholders resolve to waive their preferential subscription right

to subscribe for the shares and securities to be issued.

The present or future increase in the nominal value of shares outstanding caused by all issues pursuant to the authority

granted hereunder shall be included under the ceiling of €50,000,000 (fifty million euros) set by the preceding resolu-

tion, with the further proviso that

• within the above limit,

• issues of bonds with warrants shall not cause the nominal value of stock outstanding to increase by more than

€ 5 0 ,000,000 (fifty million euros); regardless of whether bonds are issued by the Company itself or by an entity in

which it holds, either directly or indirectly, an equity interest in excess of 50%;

• the aggregate nominal value of stock required to be issued in consideration of the exercise of straight warrants shall

not exceed € 5 0,000,000 (fifty million euros);

• the aforementioned ceilings are set without taking into account the effect on increases in equity of any adjustments

required by law subsequent to the issue of securities with a claim on shares of the Company pursuant to the autho-

rity granted hereunder, including straight warrants; and

• the authorization expressly excludes:

• the issuance of voting preferred stock

• the issuance of non-voting preferred stock

• the issuance of investment certificates, either preferred or otherw i s e

• the issuance of securities, including straight warrants, with a present and/or future claim on voting preferred stock,

non-voting preferred stock or investment cert i f i c a t e s .

Resolutions be fore theShareholde rs’ Meet ing

Securities issued in this manner, with a claim on shares of the Company, may consist of bonds or be attached to bond

issues or serve as interim securities leading to the issuance of bonds. They may, inter alia, be either subordinated or non-

subordinated securities and have a maturity date or be perpetual; they may be issued in euros, foreign currencies or in

currency units composed of baskets of several currencies. The face value of debt securities thus issued shall not exceed

€1,500,000,000 (one billion five hundred million euros) with the further proviso that this is a common ceiling for all debt

securities which this Shareholders’ Meeting authorizes the Board of Directors to issue pursuant to the preceding resolution

or any further resolution, but that it is independent of the value of debt securities without a claim on shares of the Company,

issued further to Resolution Six, which is also before this Meeting. Debt securities shall mature no more than 50 years from

the issue date, or 20 years in the case of bonds or securities convertible, redeemable or otherwise transformable into

stock. They may bear interest at fixed and/or floating rates or may be discounted, and may be called, with or without a

premium, or redeemed; the securities may be bought back on the market or be the subject of a cash or exchange offer

by the Company. In the event that debt securities are issued, the Board of Directors shall have full authority, including the

right to further delegate such authority in accordance with the law, for such purposes as deciding whether bonds are to

be subordinated or not, setting their interest rate, maturity date, fixed or variable redemption price, the amount of the

redemption premium if any, the calling procedure based on market conditions and the terms under which said securities

may entitle their holders to shares of the Company’s stock.

The Board of Directors shall be authorized to grant shareholders a priority right to subscribe for all or some of the shares

or securities issued, during the period and on terms which it shall decide, without such rights being transferable. Any secu-

rities not purchased further to this right shall be offered to the public.

In the event that applications received for securities issued, including from existing shareholders, should fail to account for

the entire issue, the Board shall be authorized to reduce the number of securities issued to the number for which applica-

tions have been received, provided that such applications are for at least three-fourths of the intended issue.

The Shareholders take note and resolve that, if necessary, the authority granted hereunder

• entails a waiver by existing shareholders of their preferential subscription rights to shares to which the securities issued

may be entitled, in favor of the holders of said securities

• entails an express waiver by existing shareholders of their preferential subscription rights to subscribe for shares issued

for the benefit of the owners of (i) convertible bonds issued and (ii) straight warrants

The Board of Directors shall decide – or may further delegate authority to decide - the characteristics, amount and term s

of all issues of securities. In part i c u l a r, it shall decide the class of shares to be issued and set their price, and the amount

of the premium, if any, as well as their dividend date – which may be retroactive – and, if applicable, the exercise per-

iod and price of warrants and the manner in which securities may entitle their holders to shares, with the proviso that

• the issue price of shares shall be no less than the average of the opening price of the Company’s shares on the First

Market of Euronext Paris S.A. over 10 trading days selected from among the 20 trading days immediately preceding

the start of the issue period, after adjustment of said average, if necessary, to take into account differences in dividend

d a t e s ;

Resolution NineteenAuthority granted to the Board of Directors to issue stock and securities with a claim on the Company’s equity, in the event of an offer by

the Company to acquire shares in exchange for its own.

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report and the Auditors’ special report, and pursuant to the provisions of

sections L225-148 and L225-129 of the Commercial Code

- hereby terminate, effective immediately, the unused portion of the authority granted by resolution eleven of the Special

Shareholders’ Meeting of December 15, 2000 and, noting that all of the capital stock has been paid up,

- grant authority to the Board of Directors, for a period of 26 months from this meeting, to issue, in accordance with the

t e rms of the foregoing Resolution Seventeen, corporate stock or securities – including share warrants issued separately –

with a present or future claim on shares of the Company, in consideration of shares tendered in response to an offer by

the Company to acquire equity in another corporation listed on an official exchange within the meaning of the above-

cited section L225-148 of the Commercial Code in exchange for its own shares; the Shareholders further resolve that,

whenever necessary, the preferential subscription rights of shareholders to subscribe for said stock and securities shall be

waived in favor of the holders of the tendered stock and securities.

The Shareholders take note and resolve that, if necessary, the authority granted hereunder

• entails a waiver by existing shareholders of their preferential subscription rights to shares to which the securities and

warrants issued may be entitled, in favor of the holders of said securities;

• entails an express waiver by existing shareholders of their preferential subscription rights to subscribe for shares issued

for the benefit of the owners of (i) convertible bonds and (ii) straight warrants.

The maximum nominal value of securities issued pursuant to the authority granted hereunder to the Board of Directors shall

be € 50,000,000 (fifty million euros) if no debt securities are issued and € 2,500,000,000 (two billion five hundred

m i l lion euros) if debt securities are issued, with the further proviso that the former ceiling shall be included under the

ceiling on the maximum increase resulting from the issuance of stock or securities under the authority granted by the

foregoing resolutions.

The Shareholders grant full authority to the Board of Directors, which may further sub-delegate said authority in accor-

dance with the law for the purpose of initiating the above tender offers for stock, and specifically of deciding the exchan-

ge parities and, if applicable, the amount of the cash adjustment to be paid, recording the number of shares tendered as

well as the number of shares and/or securities to be issued in consideration of those tendered, as well as increasing capi-

tal by issuing the corresponding securities in consideration of those tendered.

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• the issue price of other securities, including straight warrants, shall be such that the sum of the immediate corporate pro-

ceeds and any subsequent proceeds, for each share which said securities shall cause the Company to issue, is not less

than the foregoing adjusted average price;

• the conversion, redemption or, in general, transformation of bonds convertible, redeemable or otherwise transform a b l e

into stock shall be based on the value of said bonds and for a number of shares such that the Company shall receive

for each share no less than the foregoing adjusted average price.

The Shareholders further resolve, in accordance with the law, to grant full authority to the Board of Directors, which may

f u rther sub-delegate said authority, for the purpose of implementing this Resolution and issuing, in one or more transac-

tions, in such amounts and at such times it sees fit, in France and/or, if applicable, another country and/or on the inter-

national financial markets, the aforementioned securities resulting in an increase in equity – as well as, if applicable,

delaying same – record completion thereof and amending the Articles of Incorporation and Bylaws accordingly.

The Shareholders further resolve to grant full authority to the Board of Directors, which may further sub-delegate said autho-

rity in accordance with the law, for the purpose of

• deciding, in accordance with the law, how the right of holders of the securities (including warrants) so issued to obtain

stock may be adjusted and suspending, if necessary, the exercise of rights attached to such securities and warrants for

up to three months;

• taking all steps and arranging for the completion of all formalities required for the rights, shares, securities and/ or war-

rants thus issued to be traded on an official financial market;

• setting the terms governing the exercise, allocation, public purchasing and tender offer for cash or securities of nego-

tiable securities and/or stock warrants, as well as the redemption of securities or warrants.

• capitalizing, if necessary, a portion of the share premium for the purpose of rounding up the amount of capital stock.

• if necessary, charging expenses resulting from the issuance of stock and securities to the corresponding premiums as

well as implementing all appropriate measures, and amending the Articles of Incorporation and Bylaws accordingly.

Resolutions be fore theShareholde rs’ Meet ing

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Resolution TwentyAuthority granted to the Board of Directors to increase stated capital by capitalizing reserves, earnings or premiums

The Shareholders, having reviewed the Board of Directors’ report and subject to the quorum and majority voting requi-

rements applicable to annual shareholders’ meetings as provided for by section L225-129 (II) of the Commercial Code

• hereby terminate, effective immediately, the unused portion of the authority granted by resolution twelve of the extraor-

d i n a ry Shareholders’ Meeting of December 15, 2000;

• grant full authority to the Board of Directors, for a period of 26 months from this meeting, to increase the capital stock,

in one or more transactions, at such times and on such terms as it sees fit, by capitalizing reserves, earnings or pre-

miums, and subsequently issuing stock for distribution as a stock dividend or increasing the nominal value of shares out-

standing, or some combination of the two.

The Shareholders further authorize the Board of Directors to decide, if necessary, that fractional rights shall not be traded

and that the corresponding shares will be sold, with the proceeds of sale being allocated to the holders of said rights no

later than 30 days after the registration in their name of the whole numbers of shares to which they are entitled.

The stated capital may be increased further to the authority granted hereunder by no more than €50,000,000 (fifty million

euros) in nominal value, with the proviso that this ceiling shall be included under the ceiling on the maximum increase

resulting from the issuance of stock or securities authorized by the preceding resolutions.

Full authority is granted to the Board of Directors, which may further sub-delegate said authority in accordance with the

l a w, for the purpose of setting the dates and terms of equity issues, offering prices and terms, the size of issues and,

more generally, taking all appropriate measures to implement this resolution, taking all action and complying with all

f o rmalities required to finalize the corresponding equity issue or issues and amending the Articles of Incorporation and

Bylaws accordingly.

Resolution Twenty-oneAuthorization for the Board of Directors to make use of its authority to issue equity in the event of a tender offer for the Company’s sha-

r e s .

The Shareholders, having reviewed the Board of Directors’ report and subject to the quorum and majority voting requi-

rements applicable to extraordinary shareholders’ meetings as provided for by section L225-129-IV of the Commercial

Code, expressly authorize the Board of Directors to make use of the authority granted to it by the Resolutions of this sha-

reholders’ meeting, in whole or in part, during periods when tender offers for the Company’s stock in exchange for cash

or securities are open, to the extent that such use does not result in a restricted equity issue.

This authority is for the period from this meeting to the meeting called to approve the financial statements for the year

Resolut ions before theShareholders’ Meeting

ended June 30, 2002.

Resolution Twenty-twoResolution concerning grants of stock options

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report and the Auditors’ special report, hereby authorize the Board of

Directors, pursuant to sections L225-177 et seq. of the Commercial Code, to grant stock options to the persons referred

to hereunder, in one or more transactions, for new or existing shares of the Company.

The persons to whom said stock options may be granted consist of all or some of the Company’s employees, or some

categories of employees, and the officers and Directors, as that term is defined by law, of the Company and of its direct

or indirect affiliates, within the meaning of section L225-180 of the Commercial Code.

The aggregate number of stock options that may be granted by the Board of Directors pursuant to the authority granted

hereunder shall be limited to a number entitling their holders to purchase no more than 5% of the Company’s stock, not

including such adjustments as may be made pursuant to applicable regulations.

No stock options shall be granted to any employee or corporate officer who already owns more than 10% of the cor-

p o r a t i o n ’s stock.

The authority granted hereunder is for a period of 38 months from the date of this meeting and the stock options granted

may be exercised over a period of not more than eight years from the date they are granted.

The authority granted hereunder entails an express waiver by shareholders of their preferential rights to subscribe for sha-

res issued from time to time in consideration of the exercise of options and shall be implemented in accordance with the

applicable laws and regulations.

The exercise price of the stock options shall be set at the time the options are granted by the Board of Directors and shall

be not less than, respectively, 95% of the average of the stock’s trading price over the 20 trading days immediately pre-

ceding the date on which the options concerned are granted, and 95% of the average purchase price of shares held by

the Company pursuant to sections L225-208 and L225-209 of the Commercial Code.

Full authority is hereby granted to the Board of Directors, within the above limits, for the purpose of setting the terms and

conditions of the stock options, including

• setting the terms under which stock options are to be granted; said terms may include a prohibition against the imme-

diate resale of some or all of the stock for which options are exercised, provided however that the waiting period appli-

cable to the disposal of shares may not be more than three years from the exercise of the corresponding option;

• deciding the categories and drawing up the list of stock option recipients, as provided above, as well as the number

of shares for which options are to be granted;

• deciding the period or periods in which options may be exercised;

• d e t e rmining the conditions under which the price and number of shares may be adjusted under the various assump-

tions set out in articles 174-8 to 174-16 of Decree No. 67-236 of March 23, 1967;

• temporarily suspending, for up to three months, the exercise of stock options in the event of capital transactions invol-

ving the exercise of preferential subscription rights;

• p e rf o rming or arranging for the perf o rmance of all tasks and formalities needed to complete the equity issues that may

be required pursuant to the authority hereby granted, amending the articles of incorporation and bylaws accordingly

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and, in general, doing whatever is necessary.

The Shareholders authorize the Board of Directors to withdraw from retained earnings any sums necessary to pay the pre-

vious year’s dividend on shares acquired through the exercise of stock options prior to the dividend date, provided the

balance in that account is sufficient.

The Shareholders further authorize the Board of Directors to charge expenses incurred to issue new stock to the premiums

generated by the shares concerned and to withdraw from said premiums the sums required to bring the legal reserve up

to one-tenth of stated capital after each issue.

The Board of Directors shall report to the Annual Shareholders’ Meeting the transactions perf o rmed pursuant to this

r e s o l u t i o n .

Resolution Twenty-threeDelegation of authority to the Board of Directors for the purpose of issuing stock or other equity securities for offering to persons enrolled

in a company savings plan or a joint voluntary savings plan

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, taking note of the provisions of article 29 of Act 2001-152 of February 19, 2001 on employee savings plans and

of section L 443-5 of the Labor Code, as amended, and pursuant to sections L225-138 and L225-129 III and VII of the

Commercial Code, having reviewed the Board of Directors’ report and the Auditors’ special report, and

Having taken note of the adoption of resolutions 17 through 22,

- hereby terminate the unused portion of the authority granted by the Shareholders’ Meeting of December 15, 1999 (reso-

lution sixteen)

- grant full authority to the Board of Directors for the purpose of increasing stated capital by up to € 2,000,000, in one

or more transactions, at its own discretion, by issuing stock or other securities – including share warrants issued separa-

tely either free of charge or for valuable consideration – with a present or future claim on the Company’s equity, exerci-

sable at any time or on a given date, by way of subscription, conversion, exchange, redemption, exercise of a warrant

or in any other manner, with the proviso that such issues shall be offered exclusively to members of company or group

savings plans or joint voluntary employee plans of the Company, as the case may be, as well as of all or part of the enti-

ties or groups of entities, in France and elsewhere, that are part of the Group and meet the conditions set by the Board

of Directors in accordance with the law;

• resolve to waive the shareholders’ preferential right to subscribe for securities, in favor of the members of company or

group savings plans or joint voluntary employee plans;

• resolve that the authority granted hereunder shall be for a period of two years from the date of this Meeting;

• resolve that the Board of Directors shall also be authorized to decide the distribution of free shares or other equity secu-

rities, with the proviso that the aggregate benefits from such distributions and, if applicable, the discount at which secu-

rities may be purchased shall not exceed the limits set by applicable laws and regulations.

• the Shareholders further take note – and resolve, as necessary – that the authority hereby granted

• entails the waiver by existing shareholders of their preferential rights to shares to which the securities issued may be

entitled, in favor of the holders of said securities,

• entails the express waiver by existing shareholders of their preferential rights to subscribe for shares issued for the

benefit of the owners of (i) convertible bonds and (ii) straight warrants;

Resolutions be fore theShareholde rs’ Meet ing

• resolve that the subscription price of new shares shall neither exceed the average of opening prices over the 20 trading

days immediately preceding the decision by the Board of Directors setting the start of the offering period, nor be more

than 20% below said average, or 30% in the case of joint voluntary employee savings plans;

• resolves that the nature of other equity securities of the Corporation shall be set by the Board of Directors in accordan-

ce with applicable regulations.

The Shareholders grant full authority to the Board of Directors for the purpose of exercising the authority hereby granted,

including extending the payment terms of shares and, if applicable, other equity securities, set the terms and conditions

of offerings and decide when and how issues shall take place pursuant to the authority hereby granted, setting the ope-

ning and closing date of offering periods, the effective date of securities, the payment terms of Company shares and other

equity securities, and applying for the listing of securities issued wherever it deems appropriate.

The Board of Directors shall also be entitled to further sub-delegate authority to record the completion of capital increases

in the amount of the shares subscribed for, fulfill either directly or through an interm e d i a ry all transactions and form a l i t i e s

required by the increase in stated capital and, at its discretion and if it deems appropriate, charge expenses incurred for

such equity issues to the share premiums generated by the issues, deducting from said sums that amounts needed to bring

the legal reserve to a level equal to one-tenth of stated capital after each increase.

The Shareholders take note of the fact that the authority hereby granted is in compliance with the provisions of section L

225-129 of the Commercial Code and L 443-5 of the Labor Code pertaining to obligations resulting from capital increa-

s e s .

Resolution Twenty-fourReduction of capital by means of the retirement of shares acquired under the stock repurchase program (Resolution four)

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report, the registration statement approved by the Commission des

Opérations de Bourse (visa No. 01-1341) on November 21, 2001 and the Auditors’ special report, prepared in accor-

dance with the law,

• hereby terminate the previous authority granted by the Shareholders’ Meeting of July 28, 2000 (resolution five)

• authorize the Board of Directors, pursuant to sections L225-209 of the Commercial Code, to retire shares acquired by

the Company and/or that the Company may subsequently acquire pursuant to any current or future authority granted

by the Annual Shareholders’ Meeting pursuant to section L. 225-209 of the Commercial Code, representing up to 10%

of the Company’s shares outstanding in each 24 month period, and in compliance with all other applicable laws and

r e g u l a t i o n s ;

• authorize the Board of Directors to reduce the capital stock accordingly and to charge any difference between the pur-

chase price of shares and their nominal value to available premium and reserve accounts.

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Full authority is granted to the Board of Directors, which may further sub-delegate said authority in accordance with the

l a w, for the purpose of reducing capital in one or more transactions, including setting the final amount of the capital reduc-

tion, setting the terms and conditions and reporting the completion thereof, as well as amending the Articles of

Incorporation and Bylaws accordingly and completing all formalities, procedures and filings with any agencies and, in

general, doing all that is necessary. The authority granted hereunder is for a period of 24 months.

Resolution Twenty-fiveApproval of the merger agreement with Interactive Partners S.A.; approval of the transferred assets’ value and corresponding conside-

ration, the resultant capital increase and the transactions’ retroactive effect to July 1, 2001

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report, the notes attached thereto and the reports by the merger commis-

sioner appointed pursuant to an order issued by the Chief Judge of the Lyon Commercial Court on September 3, 2001,

• having reviewed the draft merger agreement of November 14, 2001 and the notes there to concerning the merger

into the Company of Interactive Partners, a French corporation (société anonyme) with stated capital of FRF 25,472,600

– raised to FRF 267,537,216.39 by the special shareholders’ meeting of December 17, 2001 – having its principal

office at 1 Place Verrazzano, 69009 Lyon, Lyon Trade and Company Register number 399 982 511, pursuant to

which Interactive Partners transfers all of its assets and liabilities to the Company as part of the merger;

• approve all aspects of the draft merger agreement dated November 14, 2001, including the transfers by Interactive

p a rtners to the Company further to said merger, the value thereof (the net worth having been estimated at FRF

502,604,048, or € 76,621,493.18) as well as the retroactive nature of the transaction to July 1, 2001;

• approve the method used for calculating the exchange parity, described in schedule 3 to the merger agreement;

• accordingly approve the consideration for said net assets, to wit the payment to Interactive Partners shareholders of

14,943,630 shares, fully paid up, to be issued by the Company and added to its shares outstanding, this ratio amount

to 58.6655072509284 Company shares for each share of Interactive Partners acquired;

The Company’s stated capital will accordingly be increased to € 63,116,301.22 from € 54,003,734.39.

The new shares shall be tradable as soon as the issue is completed and application shall be made for their listing on the

First Market of Euronext Paris SA. They shall earn dividends from July 1, 2001 and shall otherwise be fully fungible with

existing shares.

Pursuant to the provisions of article 11 of the Company’s articles of incorporation and bylaws and in accordance with

section L 225-124 (2) of the Commercial Code, all double voting rights attaching to shares of Interactive Partners shall

automatically enure to the new shares issued by the Company and the two-year period during which shares are required

by article 11 of the Company’s articles of incorporation and bylaws to be held in order to qualify for double voting rights

shall take into account the time during which shares of Interactive Partners have been held.

The difference of €67,508,926.35 between the net value of the transferred assets and the par value of the shares issued

in exchange for them shall be reported in the “Merger premium” account and included in the equity of old and new sha-

Resolut ions before theShareholders’ Meeting

r e h o l d e r s .

The Shareholders furt h e r

• take note of the fact that the Interactive Partners annual and special shareholders’ meetings of December 17, 2001 appro-

ved without reservations the financial statements for the period ended June 30, 2001 and approved this merger.

• take note of the fact that the Company’s Annual Shareholders’ Meeting approved without reservations the financial state-

ments for the year ended June 30, 2001 and, accordingly, that the conditions precedent for the merger have all been met.

Resolution Twenty-sixDissolution of Interactive Partners S.A.

The Shareholders, taking into consideration the adoption of the previous resolution, record the completion of the merger

of Interactive Partners into the Company and the corresponding dissolution without liquidation of Interactive Partners such

liquidation being deemed to be completed immediately following this Meeting.

Resolution Twenty-sevenReduction of capital by means of the retirement of a portion of the shares held by the Company

The Shareholders, having reviewed the Board of Directors’ report and the Auditors’ report ,

- note that the assets transferred to the Company by Interactive Partners include 16,260,113 shares of the Company, brin-

ging the number of treasury shares held by the Company to 15.71% of its common stock outstanding, when combined

with those held by the Company prior to the merger;

• resolve to retire 7,101,920 treasury shares and to accordingly reduce stated capital by €4,330,722.90 (the par value

of the retired 7,101,920 shares), the Company’s stated capital declining to €58,785,578.32 from €6 3 , 1 1 6 , 3 0 1 . 2 2

as a result;

• resolve to charge the difference of €35,013,848.35 between the par value of the retired shares and the transfer value

of said shares as estimated in the merger project, and corresponding in this case to their gross book value, to the mer-

ger premium, thereby reducing said premium to € 32,495,078 from € 6 7 , 5 0 8 , 9 2 6 . 3 5 .

Resolution Twenty-eightMerger premium

The Shareholders, having reviewed the Board of Directors’ report, expressly approve, as applicable, the provisions of the

merger project with Interactive Partners and concerning the appropriation of the balance of the resulting merger premium

remaining after the charges referred to in the previous resolution. They accordingly grant authority to the Board of Directors

or its Chairman, acting jointly or separately to

• use a portion of said merger premium balance to increase provisions or reserves that the Company must include in its

balance sheet pursuant to applicable tax regulations;

• charge to said balance, if it deems necessary, any expenses, duties, taxes and fees incurred as a result of the merger

• allocate the balance of the merger premium remaining after the above deductions to any purposes other than those

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under the authority of the Shareholders’ Meetings.

Resolution Twenty-nineBylaw amendments resulting from the approval of the merger with Interactive Part n e r s

The Shareholders resolve, further to the adoption of the previous resolutions, to accordingly amend article 7 and 8 of the

A rticles of Incorporation and Bylaws pertaining to contributions and stated capital as follows:

ARTICLE 7 – CONTRIBUTIONS

The section below is added:

“Pursuant to a decision by an extraordinary shareholders’ meeting held on December 17, 2001 to approve the merger

into the Corporation of Interactive Partners, a corporation (société anonyme)) with stated capital of FRF 267,537,216.39

having its principal office at 1 Place Verrazzano, 69009 Lyon, Lyon Trade and Company Register number 399 982 511,

net assets of said corporation valued at FRF 502,604,048 (€ 76,621,493.18) were transferred to the Corporation. As

a result of said merger, the Corporation’s stated capital rose to € 63,116,301.22 from €54,003,734.39 and was sub-

sequently reduced back to €58,785,578.32 following the retirement by the Corporation of €7,101,920 of its own sha-

res transferred by Interactive Part n e r s . ”

The remainder of the article remains unchanged.

ARTICLE 8 – STATED CAPITA L

A rticle 8 on stated capital is amended to read as follows:

“The stated capital of the Corporation is fixed at 58,785,578.32 (fifty-eight million seven hundred and eighty-five thou-

sand five hundred and seventy-eight euros and thirty-two cents).

It is divided into 96,402,029 (ninety-six million four hundred and two thousand and twenty-nine) shares, fully subscribed

and paid for. ”

Resolution ThirtyDelegation of authority to the Board of Directors to reduce stated capital by retiring some of the shares transferred by Interactive Part n e r s

S.A. and kept by the Company following the merger

The Shareholders, having reviewed to Board of Directors’ report and the Auditors’ special report, and having noted that,

as a result of the adoption of the previous resolutions, the Company held 9,158,193 of its own shares, transferred by

Interactive Partners, expressly authorizes the Board of Directors, for a period of five years,

• to reduce the Company’s stated capital, in one or more transactions of the amount and at the time it deems appro-

priate, by up to €5,584,630,09 by retiring the 9,158,193 treasury shares acquires as a result of the merger into the

Company of Interactive Partners, charging any difference between the retired shares’ par value and their transfer value,

first to the merger premium account up to the balance therein and then to available reserv e s ;

• to amend the Articles of Incorporation and Bylaws accordingly.

Authority hereby granted shall become effective only after the 20-day period allowed for objections by creditors, in com-

Resolut ions before theShareholders’ Meeting

pliance with section 225-205 of the Commercial Code and article 180 of the Decree of March 23, 1967.

Resolution Thirty-oneAmendment of Resolution Five of the extraordinary Shareholders’ Meeting of January 23, 2001

The Shareholders, subject to the quorum and majority voting requirements applicable to extraordinary shareholders’ mee-

tings, having reviewed the Board of Directors’ report and the language of resolution five of the extraordinary Shareholders’

Meeting of January 23, 2001, hereby resolve

• to amend the authority granted by said Meeting in its fifth resolution and authorize the Board of Directors to keep any

shares received by the Company and decide on the possible use thereof in accordance with the law.

Resolution Thirty-twoDelegation of authority

The Shareholders hereby grant full authority to the bearer of the minutes of this meeting or a copy or extract thereof, for

the purpose of all legal and administrative formalities, filings and registrations required under applicable laws.

127126

PARTY RESPONSIBLE FOR THE PROSPECTUSBruno Bonnell, Chairman of the Board of Directors

DeclarationTo the best of our knowledge, the information contained herein is true and fair; it includes all of the data needed by inves-

tors to form an opinion on the assets, transactions, financial position, earnings and outlook of the Company and contains

no omissions likely to affect it materially.

Bruno Bonnell

C h a i rman of the Board of Directors

PARTIES RESPONSIBLE FOR THE FINANCIAL AUDITAuditors PIN ET ASSOCIES Represented by Jean-François Pin

170 Boulevard Stalingrad, 69006 Ly o n

Initially appointed in June 1993. Te rm extended by the Shareholders’ Meeting of December 15, 1998 for an additional

six years. Te rm expires at the end of the Shareholders’ Meeting called to approve the financial statements for fiscal 2004.

DELOITTE TOUCHE TOHMAT S URepresented by Joël Jullien and Alain Descoins

185 Avenue Charles de Gaulle, 92203 Neuilly-sur- S e i n e

Initially appointed in October 1993. Te rm extended by the Shareholders’ Meeting of December 16, 1999 for an addi-

tional six years.

Te rm expires at the end of the Shareholders’ Meeting called to approve the financial statements for fiscal 2005.

Alternate auditorsThibault Chalvin170 Boulevard Stalingrad, 69006 Ly o n

Appointed by the Shareholders’ Meeting of December 15, 2000 to replace Martine Truc, who resigned, for the remainder

of her term.

Te rm expires at the end of the Shareholders’ Meeting called to approve the financial statements for fiscal 2004.

B.E.A.S. SARL

Parties responsible for the annual report

7/9 Villa Houssaye, 92200 Neuilly-sur- S e i n e

Appointed in December 1999.

Te rm expires at the end of the Shareholders’ Meeting called to approve the financial statements for fiscal 2005.

CERTIFICATION BY THE STATUTORY AUDITORSAs statutory auditors of INFOGRAMES ENTERTAINMENT and pursuant to COB regulation 98-01, we have examined

the financial and accounting information set forth in this reference document in accordance with the applicable French

professional standards.

This document was drafted under the responsibility of Chairman of the Board of INFOGRAMES ENTERTA I N M E N T. Our

responsibility is to express an opinion on the financial and accounting information contained therein.

We have perf o rmed our work in accordance with professional standards applicable in France. Those standards require

that we assess the fairness of the financial information presented relating to the financial statements and its consistency

with the financial statements on which we have issued a report. Our procedures also include reading the other inform a-

tion contained in the reference document in order to identify material inconsistencies with the information relating to finan-

cial statements and to report any apparent material misstatement of facts that we may have uncovered in reading the other

i n f o rmation based on our general knowledge of the Company obtaining during the course of our engagement. The refe-

rence document does not contain any selected prospective data collated from a structured preparation process.

The corporate and consolidated annual financial statements for the fiscal years ended June 30, 1999, June 30, 2000

and June 30, 2001, as approved by the Board of Directors, have been duly audited by us. Based on our audit, we had

no reservations or observations as to the fairness of the financial statements.

Based on the procedures perf o rmed, we have no comments to make as to the fairness of the financial and accounting

i n f o rmation set forth herein.

Lyon and Villeurbanne, November 19, 2001

The Statutory Auditors

Pin Associés Deloitte Touche To h m a t s u

Jean-François PIN Joël JULLIEN - Alain DESCOINS

(This is a free translation of the original French text for information purposes only)

PARTIES RESPONSIBLE FOR INFORMATION Thomas Schmider Frédéric Chesnais

Tel: + 33 (0) 4 37 64 30 00 Tel: + 33 (0) 4 37 64 30 00

TENTATIVE TIMETABLE (FOR INFORMATION)Annual Shareholders’ Meeting December 17, 2001

Announcement of first-half revenue F e b r u a ry 2002

Announcement of six-month financial results March 2002

Report of Independent Auditors

128

Announcement of third-quarter revenue May 2002

Announcement of annual revenue July 2002

Announcement of annual financial results September 2002

(The information above is indicative only and provided at the request of the Commission des Opérations de Bourse)

Section of the Directive concerning COB Rule 98-01 Annual report page

1 . 1 Names and positions of the parties responsible for this document p. 126

1.2 Declarations by the responsible part i e s p. 126

1.3 Names and addresses of the financial auditors p. 126

3.1 General information concerning the Company p. 82

3.2 General information concerning the capital p. 85

3.3 Current ownership of stock and voting rights p. 90

3.4 Market on which stock is traded p. 92

3.5 D i v i d e n d s p. 95

4.1 O v e rview of the corporation and consolidated group p. 2

4.3 E x t r a o r d i n a ry events and litigation p. 12

4.4 P e r s o n n e l p. 13

5.1 Financial statements p. 32

6.2 Equity interests held by the officers p. 90

7.1 Recent developments p. 28

7.2 Future prospects p. 28

This document was filed with the Commission des Opérations de Bourse on November 21, 2001 under

number R.01- 464. It may be used in connection with a transaction only if combined with an offering

prospectus approved by the Commission.

This document was prepared by the issuer and under the responsibilities of the persons who signed it.

The filing of this document, following a review of the relevance of the information and its consistency with

the financial position of the Company, does not imply the validation of the accounting and financial

information contained herein.

Cross-referenceto COB rule 98-01